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OFT announces decision on newspaper & magazine distribution sector

117/09    24 September 2009

The OFT today announced that it will not refer the newspaper and magazine distribution sector to the Competition Commission (CC).

Download Newspaper and magazine distribution in the United Kingdom (pdf 605kb)

This confirms the OFT's proposed decision not to make a reference, contained in its October 2008 consultation. A key reason for this was the developments benefiting consumers that could come about from industry parties self-assessing their distribution agreements following OFT competition guidance.

Since October 2008, many publishers have retendered their distribution arrangements and awarded new contracts. Following this, Dawson News, previously the third largest UK wholesaler, exited the sector. 

The OFT has considered the impact of this tender round, amongst other issues raised in its consultation, and believes that there remains a reasonable prospect of further market changes which could benefit consumers. In view of this, the OFT considers that it would not be feasible for the CC to obtain the requisite evidence at this point in time to properly assess how the supply chains are likely to evolve in the short term, and hence the impact and effectiveness of any remedies.

However, the OFT has not given the sector a clean bill of health - it has found that there are reasonable grounds for suspecting that some features of the newspaper and magazine distribution markets prevent, restrict or distort competition. It has identified examples of industry best-practice which, if adopted more widely, could further improve the effectiveness of competition. The OFT has specifically not ruled out the possibility of a further review of the sector in two years if it could bring further benefits for consumers.

Louis Christofides, OFT Director, said:

'A clear majority of those responding to our consultation generally supported our view that we should not make a reference to the CC during this period of change in the sector.'

'What matters to consumers is being able to get newspapers and magazines where and when they want them, at competitive prices. We understand that our decision comes at a difficult time for some newsagents. However, we would encourage firms to focus on responding to market changes and competing to bring positive developments for retailers and their customers unhampered by further investigation in the short term.'

NOTES

1. In addition to all of the responses to the consultation and other information provided to it, the OFT has taken account of developments in the sector arising from the recent tender round and particularly the increased concentration in newspaper and magazine wholesaling following the recent exit of Dawson News. It considers that, despite the increased concentration, newspaper publishers and magazine distributors remain able to use their power in the supply chains to generate effective competition between, and an effective constraint on, wholesalers.

2. Under section 131 of the Enterprise Act 2002, the OFT may make a market investigation reference (MIR) to the CC 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.

3. In December 2006, the National Federation of Retail Newsagents submitted a request to the OFT to investigate the supply chains for newspapers and magazines in the UK. It asked the OFT to consider whether the conditions for making an MIR to the CC were met, and if so, whether undertakings in lieu of a reference may be available.

4. On 22 October 2008, the OFT completed a wide-ranging analysis of competition in the newspaper and magazine distribution sector. See PN122/08. As part of this, the OFT published for consultation its proposal not to refer the newspaper and magazine supply sector to the CC. At the same time, the OFT also published an Opinion which provided competition guidance to help publishers, distributors and wholesalers assess for themselves whether their newspaper and magazine distribution agreements complied with the Competition Act 1998. In relation to the supply of newspapers, the Opinion set out a number of factors that may demonstrate that the agreements benefited from exemption under the Act. In relation to the supply of magazines, however, these factors appeared less likely to apply.

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