The Office of Fair Trading (OFT) has confirmed it has found no evidence that so-called "beer ties" between pub firms and landlords are harming competition.
It had ruled in October last year that landlords being forced to buy beer from pub owners was not anti-competitive.
But it reopened the investigation in February after the Campaign for Real Ale (Camra) lodged an appeal.
Big pub companies have always denied any wrongdoing. Camra says it is now considering a new appeal.
Local importanceThe watchdog said that consumers had a wide choice between pubs and that this competition prevented the beer tie from being used to inflate pub beer prices beyond competitive levels.
Pubs had not been prevented from offering a wide choice of beers to consumers, it added, saying that pub-owning firms tended to source beer from a wide range of suppliers, including smaller brewers.
"We appreciate how important local pubs are to many consumers and local communities," said Ann Pope, senior director of goods at the OFT.
"Camra's super-complaint has provided a timely opportunity to examine the pub sector, as the beer tie model has attracted considerable attention recently.
"After carrying out detailed analysis, we have found that the sector is competitive overall and that there is no need for the OFT to take further action at the moment.
"The OFT recognises that many pub lessees are concerned about issues regarding the contractual relationship with their pub-company and we note that the pub industry is taking steps to address some of these concerns. Our focus, however, has been to assess whether the market is working well for consumers."
Beer billHowever, Camra said the OFT's decision had been "based on a blinkered and selective consideration of the evidence", adding it was considering a new appeal.
It estimated that tied pub landlords paid about �20,000 more for their beer a year which they could not buy on the open market.
"A balanced and fair relationship between tied pub landlords and the large pub companies is crucial to ensuring the pub market works well for consumers," said Mike Benner, Camra's chief executive.
Since Camra first went to the OFT in July of last year, the British Beer and Pub Association has brought in a new code of practice that sets out information that must be given to prospective pub tenants by breweries.
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