Newspaper industry facing losses of £100m a year in distribution shake-up

Gerry Sutcliffe, the competition minister, is this week expected to tear up the rule book governing newspaper distribution, in a move publishers claim could cost the industry £100m a year.

It is understood that the Government will signal the end to a ban on distributing publications on a national basis, to bring British law in line with Europe.

At present, wholesalers deliver newspapers and magazines on a regional basis. This ensures that every newsagent, however small, is covered by the deliveries. Senior figures in the publishing industry claim that allowing national distribution would make it uneconomic for wholesalers to deliver to small newsagents.

Mike Newman, chairman of the Newspaper Publishers Association's circulation executive committee, said: "If the system unravelled then the implications for newspapers, retailers and consumers would be very bad. In the worst-case scenario, if the system was abolished there would be parts of the country where retailers would not be able to get newspapers. Wholesalers could refuse to supply a newsagent altogether. This may mean that the newsagents drop out of the market. This could lead to an annual loss in sales to the newspaper industry of around £100m."

In a letter to Patricia Hewitt, the Trade and Industry Secretary, Ian Locks, chief executive of the Periodical Publishers Association, the trade body for magazine publishers, warned that lifting the so-called exclusion to vertical agreements could lead to the closure of 15,000 newsagents.

Three years ago WH Smith's wholesale arm tried to introduce a national distribution system with an exclusive deal with Tesco. But after a lengthy battle with the publishers, WH Smith backed down. It now supports regional distribution. A spokesman said that changing the law "might have serious consequences... leading to increased costs that will be to the detriment of the public and the industry as a whole".