Competition regulators must intervene to break up the newspaper and magazine supply monopoly that harms retailers and consumers, says the Association of News Retailing (ANR). Publishers and wholesalers are currently granted special treatment under competition law for their supply of product to retailers, and the OFT is considering whether to conduct an in-depth review of this decision.
Shane Brennan, ACS public affairs director, commenting for ANR, said: “Customers across the UK are losing out as publishers and wholesalers prop up an inefficient and wasteful supply chain that means stores do not have enough stock of leading magazine titles, yet are flooded with copies of magazines nobody wants to buy. This monopoly supply chain is particularly harmful to retailers who, without any choice over where they get their supplies, suffer from unjustified increases in delivery costs and summary reductions in margin. This means a continuing decline in sales and profitability for local news retailers.”
In a submission made today, ANR calls on the OFT to undertake a review of its decision reached in 2009 not to allow a full Competition Commission Investigation of the news and magazine supply chain. The submission shows evidence of the continued abuse of retailers and of consumer detriment caused by the current system, including:
Retailers receiving only 60% of on-promotion magazines they ordered.
Typical retail gross margins of as little as 15.73% when the rising cost of carriage and declining margins are taken into account.
Wholesalers significantly increasing their own profits on the back of carriage charge increases far above the rate of increasing haulage costs.
Prices of other products being increased to subsidise the declining profitability of newspapers and magazines.
Newspaper and magazine availability being worryingly low – between 68% and 76%.
Magazines receving a declining share of space in store, and being displayed in less high profile locations in store.
Brennan continued: “Two years ago, the OFT hoped that the industry would change to address these problems. Unfortunately their trust was misplaced. Passive selling, where a retailer requests supply from a different wholesaler, has not taken hold, with wholesalers in some cases stating they would be unable to fulfil these requests. Ninety eight per cent of UK postcodes are served exclusively by one magazine wholesaler. Instead of more choice, the past two years have seen retailers pay higher carriage charges for a poor service while wholesalers cream off more profit.”
ANR has worked with the National Federation of Retail Newsagents (NFRN) and other retailers to gather evidence for its submission. ANR’s initial aim is to persuade the OFT to conduct a more detailed investigation of the market, and to refer the industry to the Competition Commission. Ultimately, ANR is pressing for removal of the exemption that publishers and wholesalers enjoy from UK competition law that allows them to operate this monopoly supply chain.