OFT close to deal in magazines dispute

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The Office of Fair Trading may be preparing to moderate its opposition to the distribution arrangements for magazines, industry sources believe, as it prepares to complete its long-running investigation into the sector.

The OFT may permit "time-sensitive" magazines - probably weekly titles - to continue with the current system which sees magazine wholesalers run monopolies in their designated areas of the country. The regulator, in a draft verdict last year, had come out strongly against magazines remaining within this monopoly distribution system, as it is seen as anti-competitive. Newspapers were allowed to continue with the arrangement because of the extreme time-sensitivity of the product. However, there has been a change at the top of the OFT since that opinion was announced, with John Fingleton taking over as chief executive late last year.

Another proposal that has been floated, which the OFT would find harder to swallow, would be for the wholesale industry to keep its system but set up self-regulation mechanisms. This would involve a code of conduct and an ombudsman to preside over disputes, with the power to replace wholesalers that do not behave and award compensation to any retailer that has been unfairly treated.

The magazine publishers have argued that the existing distribution system ensures that even the smallest retailer can receive all titles, at the same price as the biggest stores. The Periodical Publishers Association has also said that the end of the current system would give supermarkets chains more power, which may be used to influence editorial content. The PPA is hoping to be granted an exemption to rules that would otherwise deem illegal business agreements such as that used by magazine wholesalers.

Mr Fingleton, who took over from Sir John Vickers, delayed a final decision on the magazine inquiry while officials took a fresh look at it. The OFT is expected to give its verdict by early March.

If the magazine publishers are not satisfied with the decision, they are hoping that the Government will intervene.

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