Raymond Snoddy on media: OFT distribution plan will ruin small newsagents

The debating group at the Commons this week dealt with an extraordinary topic: 'The biggest threat to press diversity is the British supermarket.'

Who on earth would turn up on a Monday evening to debate a subject like that? Supermarkets may be guilty of many things, but blaming them for threatening press diversity is surely going too far. And you don't meet too many people who want to go back to the days when newspapers were sniffy about being sold through 'non-traditional' outlets. Now everyone is so grateful for every sale that they don't care whether it comes from fish and chip shops or undertakers. In fact, those would both be exceptionally good places to sell papers. In one case you wouldn't have the expense of collecting unsold copies, and the other would get obituaries where they would most be appreciated.

There is, however, a serious issue looming, involving the distribution of newspapers and magazines, supermarkets and local newsagents and - who else? - the Office of Fair Trading (OFT). Naturally, European competition legislation also plays its part.

Much of the dispute is conducted in language that only lawyers get off on, but at heart it is a very simple matter. Every decade or so the UK competition authorities question the way in which newspapers and magazines are distributed. There is something about it that sticks in their craw.

Distributors, for those who have never thought about how newspapers get all over the UK so early in the morning, have exclusive 'patches'. This is clearly an affront to competition theorists. It is an incontestable fact that in parts of the country there is no competition between distributors, and magazines ride on the back of this monopoly system. The only justification for this breach of free-market principles is that it works, increases choice and reduces costs for the consumer and keeps alive a sub-species of corner shop.

Outlaw these monopolies and you get more perfect competition, but you also get competing lorries duplicating journeys and costs. In such a case it will be easier to concentrate on supermarket dumps, either ignoring small or rural newsagents or increasing their charges.

The publishing industry is seeking a 'block exemption' from competition law, but so far the OFT has moved only partially - and in a mysterious way.

An OFT provisional ruling proposes to give legal protection to newspapers against being sued under competition legislation, but less protection for magazines. The issue revolves around 'absolute territorial protection'.

This prevents wholesalers meeting unsolicited requests to supply retailers outside their territories. So, exclusive franchises would no longer be exclusive.

This appears to miss the small point that newspapers and magazines are distributed by the same wholesalers, in the same areas and usually travel together on the same trucks.

A specialist in the economics of newspaper and magazine distribution, Professor Paul Dobson has condemned the OFT proposal as 'a charter for supermarkets to increase profits and small newsagents to be put out of business'.

Independent studies have estimated that up to 20,000 small retailers could be at risk from these proposals if wholesalers use the new freedom to seek out the largest accounts whatever the territory.

Maybe this is not an issue that excites people as much as whether Chelsea will win the Champions League, but it is a proposal produced without proper care for the consequences, and should be put back in its box for another decade.

30 SECONDS ON... PRINT DISTRIBUTION

- There are about 185 print distributors in the UK, with WH Smith controlling 39% of the market. The other big players are Menzies Distribution (27%) and Dawson News (19%).

- Opinions over the current distribution model are divided. Ian Locks, chief executive of the Periodical Publisher Association (PPA), argues it would be 'uneconomic' to separate newspaper and magazine distribution.

However, the National Federations of Retail Newsagents believes the system is inefficient and that 'magazines have merely ridden on the back of newspapers and have no case for special treatment'.

- In the UK 60% of magazine and newspaper retailers are independent.

A report by the PPA claims that up to 20,000 independent retailers could face uncertain futures under the proposed legislation.

- The OFT will report its final verdict on 1 May.

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