Publishers claim victory after U-turn by OFT on distribution

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The Independent Online

The OFT, which said last year that the regional monopolies enjoyed by magazine wholesalers were anti-competitive, said yesterday it would have to look again at the issue.

The competition regulator will publish a new opinion, at the end of May, which will be "materially different" from its previous view on the issue. It was the second major U-turn within a week by the OFT. Last week it ordered an investigation of the big four supermarkets, after initially resisting the call for an inquiry, after the threat of a legal challenge from the Association of Convenience Stores.

Magazines and newspapers are distributed under an arrangement whereby a wholesaler has the exclusive right to serve a given area. Normally such monopolistic practices are against the law. The OFT said in February last year, in a "preliminary" opinion, and then repeated in a "draft" finding in May 2005, that while newspapers could continue with this system, because of the extreme time sensitivity of the product, it could not be justified for magazines. "Retailers should be free to seek better deals than those offered by the appointed wholesaler for their territory," the OFT said in May last year.

The subject was then put to consultation. However, the final statement from the regulator, which was expected later in 2005 to reiterate the OFT's position, mysteriously never appeared. Then in October, there was a change in the top leadership of the competition watchdog, with Sir John Vickers replaced by a new chairman, Philip Collins, and a new chief executive, John Fingleton, who ordered an internal review of the decision. That review culminated in a fresh inquiry yesterday, which will be followed by another consultation exercise.

Lord Heseltine, the Tory grandee and chairman of the publisher Haymarket, who led a campaign of publishers, independent news agents and wholesalers, against the original OFT position, gave a "cautious welcome" to the latest development. "The OFT has taken a step in the right direction. But I would expect ministers to demonstrably take full responsibility for the public policy aspects of this," he said.

Publishers had argued that the current distribution system meant wholesalers have to provide any newspaper or magazine to all newsagents in their area. They maintained that separating magazines would undermine the economics of distributing newspapers. By ending universal distribution, publications would be sold increasingly by supermarkets instead, which would be a danger to our democracy, they argued, and put thousands of corner shops out of business.

Industry sources said ministers seemed to become nervous of the fact the entire press appeared to be against the OFT position. It emerged in October that Tessa Jowell, the Secretary of State for Culture, told the OFT she was "worried about the potential for there to be an adverse impact on the public's ability to access the full and diverse range of publications currently available".

The OFT said yesterday new information had come to light during the consultation process, which led to the decision to look at the subject afresh. A spokeswoman said that, for instance, the watchdog had not appreciated before the variety of ways that a contract could be tended to for the wholesale rights to a territory. That might benefit the consumer, she said.

It was not clear whether the OFT will decide that press distribution arrangements should remain unchanged or if it will go for some sort of compromise.

Supermarkets and other larger retailers condemned the OFT's change of heart. John Lennon, the managing director of the Association of News Retailing, said: "I am absolutely appalled that we have spent all this time and money looking at this and we still have no decision."