OFT announces provisional conclusions on newspaper and magazine distribution

35/05 23 February 2005

The OFT has today announced its provisional conclusions on the compatibility with competition law of exclusive distribution arrangements between newspaper and magazine publishers and wholesalers.

The OFT has provisionally concluded that current distribution agreements for newspapers are likely to be compatible with the Competition Act. The OFT has also provisionally concluded that, without 'absolute territorial protection' restrictions, distribution agreements for magazines would be likely to be compatible with the Competition Act (see note 1).

'Absolute territorial protection' prevents wholesalers from meeting unsolicited requests to supply retailers outside their allocated territories. The OFT has found that this restriction is likely to be anti-competitive and is unlikely to be necessary for the efficient functioning of the distribution system for magazines.

The OFT will shortly issue a draft advisory opinion for consultation. The OFT has decided to give this opinion following an industry request for a block exemption (see note 2), in light of the repeal of the Vertical Exclusion Order (see note 3). In making its assessment the OFT has considered in particular whether the agreements for newspaper and magazine wholesale distribution meet the conditions in section 9 of the Competition Act.

The draft advisory opinion will set out further details of the OFT's analysis and the basis for its provisional conclusions. The OFT aims to issue a final opinion by 1 May.

NOTES

1. Agreements that come within section 2 of the Competition Act 1998 are compatible with competition law if they meet all the conditions in section 9 of the Act i.e. if they:

(a) contribute to

improving production or distribution, or
promoting technical or economic progress

while allowing consumers a fair share of the resulting benefit but:

(b) do not

impose on the undertakings concerned restrictions which are not indispensable to the attainment of those objectives, or
afford the undertakings concerned the possibility of eliminating competition in respect of a substantial part of the products in question.

2. The OFT has decided not to recommend to the Secretary of State for Trade and Industry that a block exemption be made for newspaper and magazine distribution.

3. The Vertical Exclusion Order, which excluded most vertical agreements from the Chapter I prohibition of the Competition Act 1998, was repealed in light of the Modernisation of rules relating to enforcement of EC competition law. The provisions of the Competition Act 1998 were re-aligned to reflect the changes to the EC competition law regime which had taken place. It was no longer considered necessary to retain a UK block exemption for vertical agreements when there was already a block exemption in existence for vertical agreements in EC competition law from which UK agreements could benefit. See DTI press notice announcing repeal of the Order.

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