OFT to review newspaper supply code

PN 02/02 14 January 2002

The OFT is to review the Industry Code of Practice for the Supply of Newspapers.

The Code was introduced by statutory undertakings given to the Government by newspaper wholesalers. It was developed to remedy adverse effects identified in the 1993 report on the supply of newspapers by the then Monopolies and Mergers Commission (now Competition Commission).

The Code was intended to provide simple, transparent and objective criteria to determine whether a retailer has the right of access to supplies of newspapers from a wholesaler.

The OFT review will examine a number of issues including:

exclusive territories awarded by publishers to wholesalers – as reinforced by the Code
minimum entry levels – the calculation for allowing a retailer to sell newspapers (see Note 2)
carriage charges – levied by wholesalers on retailers to meet delivery costs
retail margins – allowed by wholesalers to retailers and expressed as a number of pence per copy
sub-retailing – arrangements between retailers to obtain supplies from each other
disputes and complaints relating to the Code.

The OFT has a duty to review undertakings to ensure that they remain appropriate, and will consider whether there has been any change of circumstances in the industry that makes it necessary to vary the undertakings, or to supersede the undertakings by new undertakings, or to release the parties from them.

The Code was last reviewed in 1997 when it was found to be working effectively in providing a clear basis on which new entrants to the newspaper retail trade should be supplied.

The OFT has today published a consultation paper OFT review of undertakings given by newspaper wholesalers (pdf file 99 kb). It can also be ordered from: OFT, PO Box 355, Hayes UB3 1XB. Tel: 0870 60 60 321. Anyone wishing to comment is invited to do so by 11 April 2002.

NOTES

1. The MMC report, 'The supply of national newspapers: a report on the supply of national newspapers in England and Wales', Cm 2422 (£23.50), was published in December 1993 and is available from the Stationary Office. The MMC found that the wholesalers' practices of refusing to supply applicants when, in their opinion, an area was adequately served, and of requiring retailers to sell only by retail and only from specified outlets, were against the public interest and to the detriment of consumers.

2. To remedy these adverse effects a Code of Practice was introduced on 1 October 1994. It provides simple and objective criteria to determine whether a retailer has the right of access to supplies of newspapers from a wholesaler. Applicants who can meet a specified Minimum Entry Level (MEL) and pay a deposit are guaranteed supplies of national newspapers. MELs are calculated at 50 per cent of the average invoice value in a wholesaler's area for the six months ending 31 March 1994. Newspaper wholesalers gave undertakings to the Secretary of State to comply with the Code. The calculation of the MELs is also reviewed annually and was last reviewed in March 2001. At that time the MEL was found to be working effectively.

3. The current review is being carried out under section 88(4) of the Fair Trading Act 1973. That section confers a duty upon the Director General of Fair Trading to keep under review the carrying out of any undertakings given and from time to time consider whether, by reason of any change of circumstances, the undertakings should be removed, varied or superseded.

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