Magazines are not baked beans, industry tells OFT

The PPA (Periodical Publishers Association) is to take its concerns at the growing influence of supermarkets over newspaper and magazine distribution to the Competition Commission.

The move follows the Office of Fair Trading's second draft opinion on the future of press distribution last month, which recommended giving more control to supermarkets within the supply chain and which did nothing to allay industry concerns about opening up newspaper and magazine distribution to the market rules of competition.

The commission is investigating the effects of supermarket influence on the non-food part of the grocery sector, following a referral from the OFT.

The current terms of reference of the commission's inquiry do not include newspapers and magazines, but the PPA is hoping these will be widened.

The move follows in the wake of the OFT draft opinion, which took the industry aback with its tough stance on current conditions. Many expected a Uturn after last year's opinion was criticised, but new chief executive John Fingleton has said the industry has been guilty of "scaremongering".

Presently, wholesalers have exclusive rights to distribute newspapers and magazines in a certain region. The OFT has warned in its draft opinion that this could fall foul of competition law because it potentially keeps prices artificially high. The industry claims that insulating the wholesaler from competition is necessary to ensure the efficient distribution of titles. The question is whether opening up wholesalers to competition will affect this system.

Part of the industry's argument suggests opening up wholesalers to competition will lead to supermarkets dominating the market, driving down prices, but also only stocking a certain number of titles and not distributing where it isn't economically viable. One of Fingleton's suggestions in the draft was that supermarkets should supply magazines to independent retailers.

A spokesman for the PPA said: "The PPA argues that the magazine industry's reliance on supermarkets means its products should be considered, especially when they've [the supermarkets] taken over so many convenience stores.

"The PPA has argued that supermarkets will demand to pay lower prices than small retailers and play off wholesalers off against each other. Cost considerations for wholesalers will prevent them going into non-economically viable territories."

The PPA spokesman added: "Also, what the OFT has failed to consider is that magazines and newspapers carry advertising, unlike a can of beans.

Advertisers buy space within a magazine under the guarantee that there'll be 50,000 copies out there."

The OFT's final opinion is expected early next year, with the deadline for submissions as part of the consultation period on 1 September.

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