Hewitt's threat to end paper stalemate

Patricia Hewitt will this week give newspaper publishers 30 days to resolve a long-standing row with newsagents or face draconian new laws which could cost the industry £100m a year.

The trade and industry secretary is stepping into the battle over the way newspaper and magazines are distributed, after claims that up to 15,000 newsagents could be forced out of business.

At present, newspaper wholesalers deliver on a regional basis, through exclusive contracts. Wholesalers and publishers argue that this ensures that every newsagent, however small, is covered by deliveries. Retailers, on the other hand, believe that this keeps wholesalers' charges artificially high.

The Government is under pressure to end the exclusive arrangements to bring British law in line with European legislation. It was due to announce new laws in November, but Ms Hewitt intervened at the 11th hour to allow further industry discussion.

This culminated on Thursday, when publishers, wholesalers and retailers met with officials from the DTI, Downing Street, the Treasury and the Office of Fair Trading. Chaired by Roger Sharp, special advisor to Ms Hewitt and attended by Geoffrey Norris, senior advisor to Tony Blair, the meeting concluded that more time was needed to thrash out an agreement, insiders said.

Ms Hewitt, who was in China last week, is reviewing the minutes of the meeting this weekend, and is due to announce the 30-day deadline tomorrow.

The DTI has told the parties that new laws on distribution can be avoided if an industry solution can be reached out. This might be difficult, as the sides have already dug in. The publishers and the wholesalers claim that ending exclusive distribution could threaten 15,000 rural newsagents and cost the industry £100m a year. The newsagents have rubbished these claims and say that the current laws on distribution give wholesalers too strong a grip on the market.

The National Federation of Retail Newsagents wrote to the Newspaper Publishers Association last year with a shopping list of demands. At the top was the abolition of carriage charges - wholesalers' fees for delivering newspapers. The NPA wants the appointment of an independent chairman to mediate between the sides.

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