News wholesalers at risk of shake-up

Ministers Proposed bringing newspaper and magazine distribution agreements within the scope of UK competition law yesterday in a move that could have serious repercussions for big wholesalers such as WH Smith.

Newspaper and magazine distributors have been given 30 days to seek guidance from the Office of Fair Trading on whether their existing agreements would fall foul of the Competition Act and, if so, what they need to do to comply with the law.

Big wholesalers such as WH Smith and John Menzies in effect operate monopolies over newspaper and magazine distribution under deals that give them the exclusive right to handle supplies in defined geographic areas.

Smaller wholesalers and independent retailers have complained in the past about the stranglehold of the big distributors and this led to OFT investigations into the industry in previous years.

The Department of Trade and Industry yesterday proposed ending the exclusion from competition rules of these so-called "vertical agreements". The move is designed to bring UK competition laws into line with those in the European Union.

Gerry Sutcliffe, the Competition minister, said that if the Government decided to repeal the exemption newspaper distribution agreements currently enjoy, the move would not come into effect until May 2005. This would provide a "breathing space" so that any changes were made in a managed way.

"This process will ensure the outcome that is best for the consumer whilst bringing a greater degree of certainty in the long run for publishers, distributors and retailers," Mr Sutcliffe said.

The Government also plans to repeal the exclusion for agreements given clearance under the Restrictive Trades Practices Act. This will take effect in 2007.