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Members of the Newspaper Publishers Association (NPA) 1, the Periodical Publishers Association (PPA) and the Association of Newspaper & Magazine Wholesalers (ANMW) united today to express their concerns over the provisional decision announced by the Office of Fair Trading (OFT) concerning the arrangements for UK newspaper and magazine distribution. 

The OFT has indicated that, subject to a further consultation exercise, it is minded to issue a written opinion permitting continuation of the system of exclusive wholesaler territories for the distribution of both newspapers and magazines.  In the case of newspapers, the OFT has approved the current system of absolute territorial protection.  In the case of magazines, the OFT has indicated it would wish to see some limits to the exclusivity granted to magazine wholesalers.

Newspapers and magazines are currently distributed to retailers in all parts of the UK through a system of exclusive wholesaler territories, whereby wholesalers ensure that sufficient quantities of all titles are supplied to all retailers who have customers who want them.  As part of the reform of UK competition law to bring it into line with the EC competition regime, UK publishers and wholesalers had requested that the OFT recommend approval for the present system by means of a ‘block exemption’ from competition law – in order to provide the industry, retailers and the public with legal certainty for distribution arrangements going forward. 

The OFT’s provisional ruling offers a sufficient degree of legal protection for newspapers (whose special circumstances are acknowledged), but the position on magazines is unsatisfactory – even though both products are distributed together in the same way. 

Mike Newman, a member of the NPA and Chairman of its Circulation Executive, said: “  We welcome the OFT’s specific findings on newspaper distribution, but we are concerned that the OFT’s provisional view does not recognise the inextricable link between newspaper and magazine distribution.  We will continue to press this point in our discussions with OFT over the next few weeks, prior to the OFT’s final decision. ”

Ian Locks, Chief Executive of the Periodical Publishers Association, said:

“  We note that the OFT has clearly recognised there are benefits to the system of exclusive wholesaler territories.  It would be helpful for this principle to be recognised for magazine as well as newspaper distribution: they are distributed in the same way and by the same wholesalers – it would be uneconomic to try and separate them out. ”

Members of the NPA, PPA and ANMW will be responding to the consultation process which the OFT has said will take place shortly, once it has issued its draft advisory opinion – and will also continue in discussions with the OFT and other Government Departments in the period between now and the OFT’s final decision, expected in May this year.

Note for Editors

(i) On 1^st March 2004, the Secretary of State for Trade & Industry, Patricia Hewitt MP, announced her decision to proceed with the realignment of EU and UK competition law and repeal the current exclusion for vertical agreements from the scope of the Competition Act.2 The DTI announcement stated:

“  The Government is encouraging all parties in the newspaper and magazine industries to work together and to seek advice from the OFT in considering whether to make any changes to their agreements to achieve full compliance with competition law …

“ The Government believes it would be appropriate to allow a transitional period of one year from 1^st May 2004 so that the repeal of the domestic exclusion for vertical agreements will not take effect until 1^st May 2005.  The transitional period gives a breathing space so that any changes are made in a managed way. This process will ensure the outcome that is best for the consumer whilst bringing a greater degree of certainty in the long-run for the publishers, distributors and retailers.”

(ii) On 9^th August 2004, the Secretary for State for Trade & Industry approved a revision of the newspaper wholesalers code of practice, removing restrictions on retailers “selling-on” newspaper and magazine titles to other retailers within the same wholesaler distribution region.3

The decision was in response to an Office of Fair Trading (OFT) recommendation that removing the restrictions would help promote the practice of selling on and would give retailers increased choice and flexibility.  This followed a review of the code of practice by the OFT, and consultation with the parties directly affected by it, newspaper publishers, wholesalers and retailers.

(iii) In 1993 the Monopolies and Mergers Commission (MMC) reported on the supply of national newspapers in England and Wales - including the system whereby publishers awarded exclusive geographical distribution territories to wholesalers.  The MMC report made two adverse findings in relation to the practices of certain wholesalers – mainly concerning refusal to supply retailers – but concluded that overall the operation of this system was ‘not against the public interest’.