OFFICE OF FAIR
TRADING News Release (122/08) issued by COI News Distribution
Service. 22 October 2008
The OFT has today
issued three publications following a wide-ranging analysis of
competition in newspaper and magazine distribution in the United
Kingdom. It has:
* published an Opinion, providing guidance on the legality of
newspaper and magazine distribution agreements, which indicates
that current arrangements for newspapers may be better placed to
benefit from competition law exemption than those for magazines,
* recommended that wholesalers are released from the undertakings
underpinning the National Newspapers Code of Practice, and
* published for consultation its proposal not to refer the
newspaper and magazine supply sector to the Competition Commission.
1. Competition Law Guidance (the Opinion)
The OFT's Opinion provides guidance to help publishers,
distributors and wholesalers assess for themselves whether their
newspaper and magazine distribution agreements comply with the
Competition Act. These agreements provide 'absolute
territorial protection' (ATP), with wholesalers granted
exclusive territories in which other wholesalers are prevented
from selling to retailers. For the supply of newspapers, the
Opinion sets out a number of factors that may demonstrate that the
agreements benefit from exemption under the Act. For the supply
of magazines, however, these factors appear less likely to apply.
A key difference between newspapers and magazines is that
magazines sales are not subject to the same extreme time
sensitivity as newspapers. This means that there may be greater
scope for competition to develop in the distribution of magazines
in the absence of ATP. In addition, the efficiency benefits of ATP
appear less clear for magazine wholesaling. The parties are now
expected to self-assess their distribution agreements, taking the
OFT's guidance in the Opinion into account.
2. National Newspapers Code of Practice
The OFT has also published today its review of the National
Newspapers Code of Practice, introduced in 1994 following concerns
that wholesalers were refusing to supply new retail outlets if
they considered an area was already adequately served. To address
these concerns, the Code required wholesalers to supply all new
retailers who agreed to minimum weekly purchases of newspapers.
The review has found changes in the market since the Code was
introduced, and as a result the OFT considers that greater
commercial incentives to supply new retail outlets now exist. The
OFT has therefore advised the Secretary of State for Business
Enterprise and Regulatory Reform, the ultimate decision-maker
regarding the review of the Code, that wholesalers should be
released from the undertakings underpinning the Code.
3. Consultation on proposal not to refer to the Competition
Commission In its third strand of work, the OFT is minded to
decide not to refer the newspaper and magazine supply sector to
the Competition Commission. The OFT is minded to decide that,
although certain features of the sector meet the statutory test
for reference in this important sector, it should exercise its
discretion not to make a reference.
A key reason behind this is the positive market developments that
could come about from parties applying the guidance in the
OFT's Opinion in their self-assessment. Given that the sector
may evolve, it will also be difficult to assess the need for, and
the impact and effectiveness of, any remedies. The OFT will now
carry out a consultation and expects to come to a final decision
regarding referral next year.
Today's announcements follow a great deal of engagement with
the industry which the OFT has valued in undertaking a holistic
and complex review of this sector.
John Fingleton, OFT Chief Executive said:
'Being able to get newspapers and magazines where and when
they want them, at keenly competitive prices, matters hugely to
consumers. 'The OFT has brought together three strands of
work which reflect the most detailed and thorough analysis of the
sector done in recent years. We are recommending a release from
regulatory restrictions, while the industry should now take a
close look at its own arrangements. We hope that once it has done
this, our work in this important sector will enable competition to
deliver even better outcomes.'
NOTES
1. To see the documents published today go to the OFT website -
http://www.oft.gov.uk.
2. The OFT has also published today a paper that provides an
introductory overview of key elements of the operation of the
newspaper and magazine supply chains for those outside the
industry. See the OFT website for more details.
3. Section 2 of the Competition Act 1998 prohibits agreements
that have the object or effect of preventing, restricting or
distorting competition in the United Kingdom or a part of it and
which may affect trade in the United Kingdom or a part of it. An
agreement that comes within the scope of section 2 is, however,
exempt if it meets all the conditions in section 9 of the Act,
that is the agreement -
(a) contributes to -
(i) improving production or distribution, or
(ii) promoting technical or economic progress,
while allowing consumers a fair share of the resulting benefit; and
(b) does not -
(i) impose on the undertakings concerned restrictions which are
not indispensable to the attainment of those objectives; or
(ii) afford the undertakings concerned the possibility of
eliminating competition in respect of a substantial part of the
products in question.
4. Following the Monopolies and Mergers Commission report into
the supply of national newspapers in 1993, an industry code of
practice, underpinned by statutory undertakings given by
wholesalers, was accepted in October 1994 by the Secretary of
State for Trade and Industry. The OFT has a statutory duty to keep
these undertakings under review and advise the relevant Secretary
of State whether, by reason of any change of circumstances, the
undertakings are no longer appropriate and either the parties can
be released from them or the undertakings need to be varied or
superseded by new undertakings. The review of the undertakings has
been conducted under the Fair Trading Act 1973 and is limited to
the adverse effects specified in the 1993 report on the facts
found by the Monopolies and Mergers Commission.
5. Under section 131 of the Enterprise Act 2002, the OFT may make
a reference to the Competition Commission if the OFT has
reasonable grounds for suspecting that any feature, or combination
of features, of a market in the United Kingdom for goods or
services prevents, restricts or distorts competition in connection
with the supply or acquisition of any goods or services in the
United Kingdom or a part of the United Kingdom.
http://www.oft.gov.uk
PUBLIC enquiries: 0845 7224499 enquiries@oft.gov.uk
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