OFT stays tough on distribution agreements

The Office of Fair Trading (OFT) has reiterated its tough stance on
current arrangements for distributing newspapers and magazines, saying
they may harm consumer choice and will be difficult to justify in terms of
competition law.

In its second draft opinion released today, the
OFT set out a framework for assessing whether newspaper and magazine
agreements comply with competition law, likely to be completed by early
2007. The consultation process ends on September 1.

Its original
draft, a full year ago, suggested that regional monopolies and their
connected universal distribution system should end, but pressure groups
warned that thousands of niche magazines and small newsagents could
close as a result, allowing supermarkets too much say in which
publications reached the shelves.

The watchdog today said it had
examined some evidence that the current system "encourages wholesaler
inefficiency and is not working well for customers" with complaints of
excessive wholesaler carriage charges, late or insufficient deliveries
and unnecessary waste from unsold newspapers and magazines. It added
that in over half of all distribution territories, there is only one
bidder for the distribution contract, "suggesting that competition for
the market, as well as competition within the market, is limited".

The
OFT has provided a framework for assessment that applies to both
newspapers and magazines, which would "vary according to the factual
circumstances in which the agreement operates". It added that to avoid
conflict with aspects of the Newspaper Code it would launch "a fresh
review of the Code to establish whether the newspaper industry
undertakings are still appropriate". The original draft was heavily
criticised for proposing to treat both newspapers and magazines
differently.

 

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