Tesco's magazine deal may close newsagents

Thousands of independent newsagents will be put out of business if Tesco and WH Smith proceed with a new system of magazine distribution that favours big supermarkets and convenience stores over small shops, a report published yesterday said.

Thousands of independent newsagents will be put out of business if Tesco and WH Smith proceed with a new system of magazine distribution that favours big supermarkets and convenience stores over small shops, a report published yesterday said.

More than 20,000 small newsagents, particularly those in rural areas, will find that selling magazines will be uneconomical and between 6,000 and 8,000 could close, said Professor Paul Dobson, the author of the report.

The report, commissioned by the Newspaper Publishers' Association (NPA), says the annual loss in sales of magazines could be £53m. If the system was extended to newspapers, there would be an annual loss of up to £97m in sales of national newspapers.

Under the new system, WH Smith News is the exclusive distributor to Tesco's 659 UK stores. The WH Smith News distribution company already controls 40 per cent of the market and will have more than 50 per cent if the deal goes ahead in October as planned.

The Dobson report is the latest development in an increasingly bitter battle between Tesco and WH Smith, on one side, and publishers. Both Tesco and magazine publishers have taken the case to the Office of Fair Trading (OFT), with the latter arguing that Tesco and WH Smith are exploiting a position of market dominance.

Last week Tesco withdrewGruner Jahr magazines, including Prima and Best, from its shelves in retaliation for the German publisher's refusal to sign up to the system. A spokesman for Gruner Jahr said the company was awaiting an OFT ruling before deciding whether to take court action.

The NPA envisages the new system would soon be extended to all the leading supermarkets and convenience stores, giving them the advantage of a national network, while increasing the cost of distribution for small newsagents. It said theissue should be considered by the Government as it prepares rural and urban white papers for release in the autumn.

"This is dressed up as an efficiency exercise but it's not. It is really about control [of the market]," an NPA spokesman said. "The winners will be the big retailers and WH Smith; the losers will be everyone else, including publishers, retailers and consumers."

A spokesman for Tesco said the new system would enable popular magazine titles to be ordered automatically. He denied the system would be extended to newspapers.