OFT warns news distributors but says no competition inquiry needed

The Office of Fair Trading has warned the newspaper and magazine distribution sector that it has reasonable grounds for suspecting features of its market prevent, restrict or distort competition.

The warning came as the OFT confirmed it would not refer the newspaper and magazine distribution sector to the Competition Commission for further investigation.

The OFT ratified an earlier decision made after it had completed a wade-ranging analysis of the sector in October last year.

The body said it had decided not to refer the matter to the CC as developments benefiting consumers could come from within the industry as it self-assessed its distribution agreements following the OFT issuing competition guidance.

Since October last year, the OFT said, many publishers have already re-tendered their distribution arrangements and awarded new contracts. In addition, Dawson Holdings – previously the third largest UK news and magazine wholesaler – left the news distribution business earlier this year after it lost a string of distribution contracts, including Trinity Mirror, News International, Telegraph Media Group and Associated Newspapers, to rivals Menzies and Smiths News.

The OFT said these changes meant it would not be feasible for the CC to obtain the necessary evidence to properly assess how the supply chains are likely to evolve in the short term.

However, the OFT has not given the sector a clean bill of health and specifically refused to rule out the possibility of a further review of the sector in two years.

Louis Christofides, director of the OFT, said: “The clear majority of those responding to our consultation generally supported our view that we should not make a reference to the CC during this period of change in the sector.

“What matters to consumers is being able to get newspapers and magazines where and when they want them, at competitive prices.

“We understand that our decision comes at a difficult time for some newsagents. However, we would encourage firms to focus on responding to market changes and competing to bring positive developments for retailers and their customers unhampered by further investigation in the short term.”

The OFT brought its review after the National Federation of Retail Newsagents submitted a request in December, 2006, for it to investigate the supply chains for newspapers and magazines in the UK.

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