What is the latest OFT position?
The new draft opinion states that the distribution arrangements of both newspapers and magazines contravene current competition law and are detrimental to the consumer. In particular they are questioning whether the system of local monopolies “provide sufficient competitive incentives to publishers and wholesalers”
How is this different to the last opinion?
This is significantly different to the previously published view which exempted newspapers due to the complexities of the overnight distribution system. It is a much harder line than was previously the case and goes as far as calling into question the Newspaper Code which obliges wholesalers to supply any newsagent with the required range of newspapers and magazines.
The OFT have ignored the overwhelming evidence that the publishing industry presented in defence of the current arrangements.
As a guide to the misconceived rationale behind this change, the CEO of the OFT was quoted as referring to a future where supermarkets could become wholesalers and therefore distributing to other retailers. Such a scenario is about as bleak as is possible in the opinion of most expert observers.
What are the possible consequences if this opinion prevails?
That in itself is a matter of some debate. Doom mongers refer to the mass closure of small retailers who become uneconomic for wholesalers to serve, and the inevitable development of national distribution agreements with large retail multiples. Even those with a more optimistic view see an uncertain future for the publishing industry in general. A key question will be how the newspaper publishers respond as they, above all, have a vested interest in maintaining as many news outlets as possible.
What happens next?
More consultation will now take place with “the industry” – until Sept 1. A final OFT opinion is the due in Spring 2007. MMC will take a full part in this process, in conjunction with industry colleagues, via the PPA. We will keep you informed of any further developments.