OFT Report: Doom for 1,000 magazines?

By Ian Reeves and Alyson Fixter

The Office of Fair Trading may have taken a further step towards
condemning thousands of newsagents to their doom, industry sources
fear, following its investigation into magazine and newspaper
distribution.

Although the OFT’s preliminary findings indicate that the
distribution chain for newspapers could remain untouched, its view of
the magazine sector is giving rise to grave concern among circulation
managers and publishers across the whole industry.

The OFT says
it wants to make changes to the current system – which requires an
exemption from European competition law – that enables magazine
wholesalers to operate a series of exclusive regional deals in return
for a pledge to supply all outlets within those regions.

Without
the full exemption, the magazine distribution chain will be open to
greater competition, allowing wholesalers to negotiate best terms with
the biggest retail players such as Tesco and WH Smith. The fear is that
smaller, independent retailers -particularly those in rural areas –
could be left out in the cold, because it costs so much more to make
regular deliveries to them.

According to academic research by
Professor Paul Dobson of the University of Loughbrough, a free market
in newspaper and magazine distribution could lead to between 12,000 and
20,000 of the UK’s 54,000 newspaper outlets closing.

The knock-on
effect could mean at least 1,000 magazine titles disappearing for good,
according to PPA research, and would also have a serious impact on all
newspaper circulations.

The OFT has indicated that because of the
time-sensitivity of newspaper delivery, it will approve the system of
territorial exclusivity.

But for magazines, it says, the existing
system is “likely to be anti-competitive and is unlikely to be
necessary for the efficient functioning of the distribution system.”

Industry
heads disagree. They fail to see why different rules should apply to
the distribution of magazines than for newspapers, when in reality they
are carried together in the same lorries.

Daily Mail circulation
director Mike Newman told Press Gazette : “We have some real concerns.
We will be seeking to engage with the OFT in order to understand the
issue more. Potentially it puts at risk the economics of a large number
of newsagents across the country.”

PPA chief executive Ian Locks
said: “We’ve always made it clear that without adequate protection, the
press supply chain could very easily unravel. While clearly we welcome
the acceptance of exclusive territories within the OFT’s statement, the
fact that there isn’t the same level of certainty for magazines does
leave an area of considerable concern, and it’s that that we will be
seeking clarification on, from the OFT and other government
departments.”

In December, Hilary Wainwright, editor of Red
Pepper , one of the magazines the PPA has identified as being under
threat, told a select committee: “This isn’t unleashing some free
spirit, but in fact consolidating further power with the supermarkets.
Our cultural freedoms are under threat.”

Members of the Newspaper
Publishers Association, PPA and Association of Newspaper and Magazine
Wholesalers will respond to the consultation process which the OFT has
said will take place shortly, once it has issued its draft advisory
opinion.

The OFT’s final decision is expected in May.

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