OFT Examines Press Distribution

The chief executive of the Office of Fair Trading (OFT), John Fingleton, has said current arrangements for distributing newspapers and magazines, that award local monopolies to wholesalers, may harm consumers and are difficult to justify in terms of competition law.

The OFT has just published its revised draft opinion (see Newspaper Society Pushes OFT On Magazine Distribution) on newspaper and magazine agreements, and after consultation with the industry the OFT believes that the present way of doing things is not working well for customers and that it encourages wholesaler inefficiency. There is also a huge amount of waste, with over 1.7 million newspapers unsold each day and at least one million magazines returned.

As part of its efforts the OFT will review the Newspaper Code, which governs the commercial relationships between publishers, wholesalers and retailers.

The distribution system currently in place generally involves a publisher awarding wholesalers an exclusive territory in which to distribute their titles to retailers.

The wholesaler is prevented from selling to retailers located outside of its exclusive territory. This means that retailers can’t seek a better deal from rival wholesalers and the wholesaler is protected from competition.

Restrictions like this are illegal unless it can be demonstrated that they have offsetting benefits that could be passed on to consumers, such as product innovation or lower cover prices.

Mr Fingleton said: “It is important that this market, as any other, delivers choice, innovation and competitive prices for consumers. This draft opinion questions whether the current system of local monopolies provides sufficient competitive incentives to publishers and wholesalers.”

Office of Fair Trading: 020 7211 8000www.oft.gov.uk