National Federation of Retail Newsagents (Hansard, 21 June 1982)

§ Mr. Tony Speller (Devon, North)
In the previous debate, the hon. Member for Down, North (Mr. Kilfedder) spoke of a sombre mood. I do not feel in the least sombre tonight when I have the great pleasure and privilege, on behalf of my constituents, to wish well Her Royal Highness the Princess of Wales on giving birth to our new heir once removed and to say that sobriety and sombreness should not this week be part of our make-up. I seek to bring to the attention of the House problems of a more mundane nature, although I suspect that news of the Royal birth will be good news for newsagents.
In villages and suburbs the newsagent and sub-post office often forms the information and social centre of the community. In many places, such as Instow in North Devon where I live, the newsagent's shop and sub-post office is run by the same person, working long hours for small reward and having very little power of his own. Such people have no industrial muscle with which to bargain with suppliers, be they newspaper proprietors or wholesalers. The proprietor or wholsaler, on the other hand, has total control over price, discount allowed and conditions of supply.
The National Federation of Retail Newsagents seeks to represent the small man or woman, but, through historical and legal precedent, it is not allowed to do this effectively. As long ago as 1956, Parliament brought in the first Restrictive Trade Practices Act, with the laudable purpose of avoiding restrictive agreements between suppliers which might be to the public detriment.
In fact, however, by protecting the public from restrictive practices by suppliers of goods, the Act also protects major manufacturers and suppliers who are in a local or national position, referred to in the Act as being a "preponderant supplier", even though it is in the interests of the public at large that monopoly suppliers should not be allowed to get away with fixing price, discount and all conditions of sale.
That Act and subsequent amending legislation sought to deal with this problem by the provision of what are colloquially known as "gateways"—provisions in the Act which allow retailers to combine together to negotiate fair terms with a "preponderant supplier". In the normal market conditions obtaining throughout the country, the Act and the escape valve supplied by the "gateways" have worked, but this is not and cannot be the case in the newspaper supply industry.
The structure of the newspaper supply and distribution industry is unique. In practice, each newspaper dictates its own supply terms, and court decisions have concluded—somewhat artificially, it may be thought—that no single newspaper is a "preponderant supplier". I stress that phrase, as it is intended to indicate one whose position is such as to override and overbear all other suppliers.
The National Federation of Retail Newsagents suffers from the fact that the "gateways" do not allow for the reality that the newspaper itself dictates the financial terms upon which the paper is made available to both wholesaler 132 and retailer. In practice, negotiations take place between wholesaler, retailer and manufacturer, but always it is the supplier "up the line" who has the power.
With the exception of multiple-outlet suppliers, such as W. H. Smith or Menzies, each newsagent receives his supplies from a wholesaler. In theory, there is competition between wholesalers, but in practice there is none at all, because some time ago the wholesalers introduced a system known as—we know the word well—"rationalisation", under which they do not compete, but each supplies a given area.
The logic is the same as that of the milk roundsman. A pint of milk or the Daily Mirror are easily recognised products and it matters not too much to the consumer from whence they come, provided he knows the product, size, quality and price. Rationalisation has meant that the newsagent, the small man at the end of the line, can obtain supplies from only one wholesaler, and each wholesaler is now a monopolist.
The newsagent has no alternative source of supply. The terms on which he is supplied are dictated by the conditions laid down by his monopoly wholesaler. He is powerless because, although in practice he has one "preponderant supplier", the courts refuse to accept this, pointing out that in theory supplies could be obtained from a number of different sources. In fact, in places such as North Devon that is not the case, because there is only one wholesaler. Therefore, the newsagent is entirely at the mercy of the monopolist.
No one newspaper is considered a monopolist, because there are many newspapers—The Times, the Daily Mirror, The Guardian, and so on. Nevertheless, each newspaper lays down its conditions of sale and they cannot be queried or moved from in any way by the wholesaler or retailer. All the way down the line there is this dictatorship or what might be termed the "patch" of each wholesaler.
This matter came to my notice by sheer chance. In my constituency there is a small firm called S and B Commercials. It operates a garage, general shop and small cafe on the Pottington trading estate, about a mile outside Barnstaple. There are no paper shops on the estate, where about 2,500 people work, but there is a demand for newspapers. The firm arranged for a local Barnstaple newsagent to supply 400 to 500 newspapers each week, at an agreed discount—not a bad sale for the newsagent and not a bad sale for the cafe-cum-garage proprietor who sought to supply his customers, my constituents, at the known price.
That system worked happily from December 1980 to July 1981 when the newsagent who was supplying S and B Commercials—quite properly, being paid in cash, with no problem and increasing his sales—was told by the local wholesaler, Surridge Dawson—a monopoly wholesaler to boot—that if he did not stop the supply he would get no papers at all. He would be put out of business for carrying on what anyone else would consider a normal trading practice. The wholesaler apparently is entitled to make that disgraceful threat. It is legal and has the sanction of various Government Departments. It has the sanction of the Office of Fair Trading. It means that if I, as a wholesaler, do not like the newsagent, it is hard luck. He can be put out of business tomorrow if I so desire.
My constituent then asked whether the wholesaler could supply him direct. He had no axe to grind. He was 133 happy as a sub-agent. But he was turned down absolutely flat. In a letter dated 23 August 1981 Surridge Dawson stated: All decisions regarding new selling points for newspapers and/or periodicals and magazines rest entirely with the wholesale newspaper distributor concerned. I ask the House to note the words, rest entirely with the wholesaler newspaper distributor concerned"— not distributors, but distributor. The monopolist controls the market. In other words, no matter how good one is, one may not buy and sell newspapers or magazines by order of the monopolist in charge of the area. Newspaper sales are falling nationally, yet here is a wholesaler making it harder to buy a paper near one's place of work.
Surprised by that somewhat terse letter, on 17 September 1981 I wrote to Surridge Dawson pointing out that there are no newsagents on the industrial estate and that, even if it was not prepared to supply direct, Surely a sub-sale at split discount is logical even if your firm is unwilling to appoint a new newsagent". I understand the wholesaler's position. There may be a plenitude of newsagents, but here is a person prepared to buy, pay for and distribute newspapers. Yet the answer to my letter by the general manager at Surridge Dawson's regional office in Southampton, dated 1 October 1981, was as curt as it was impolite: Thank you for your letter dated 17 September, 1981, in regard to S & B Commercials of Barnstaple. I have read your letter with interest. Yours sincerely. The House will understand why I felt that the small man seeking to sell newspapers was being treated unfairly. That is the head office reaction of a powerful, pompous business to a Member of this House seeking information. Its attitude to firms forced to deal with it can well be imagined.
Furthermore, there is another point, which I discovered only this evening when reading the federation's weekly publication. Many magazines such as that advertise trade businesses for sale. If a newsagent seeks to sell his business, he sells it as a going concern, yet the monopoly wholesaler for his area has the absolute legal right the day after he sells it to stop supplying papers to the new owner. He also has the absolute right to say to the potential buyer "I am sorry, I shall no longer supply papers to your outlet." In other words, he can beggar that firm before a sale by reducing its value—because no newspapers mean no newsagent—or after a sale when some poor person, perhaps investing his redundancy money, savings or gratuity, has merely sought to make a small living. That power is not so much reprehensible as totally immoral. Unfortunately, it is legal, but I cannot support it.
Having heard from my constituent about his problem with selling newpapers and from an estate agent about the problem of buying and selling newsagents' firms, I contacted the retail newsagents trading organisation to see how it managed to carry out its negotiations with both hands tied behind its back. It turns out that, because of section 8 of the Restrictive Trade Practices Act, the federation has problems negotiating terms with either publisher or wholesaler. If it succeeds, it cannot suggest to its members that the terms are fair or unfair, because the Office of Fair Trading is quick to presume that any suggestion or recommendation is an implied restrictive recommendation that the newagents should not handle on any other terms.
134 We are seeking to promote fair trading, but in this case we are impeding it. Although I feel stongly about this, I seek only two things. I do not seek carte blanche for the newsagents' federation. No trade union or association of employers has any right to carte blanche. I seek equity.
The "gateways" within the Act should be redefined to allow the federation to negotiate fair terms for its members and to inform its members of those terms. There are about 30,000 small newsagents. They should be allowed enough muscle at least to prevent the publishers and wholesalers from obtaining a position that is totally in favour of those up the line to the total detriment of those at the bottom of the pack.
Secondly, the federation should be freed from the artificial shackles of the "implied contract" under section 8, whereby any recommendation by it is deemed as a matter of course to have been accepted by its members. The public interest has not suffered in the past from the habit of many manufacturers recommending a maximum retail price which, frankly, many retailers ignore or use as a guideline. However, in the newspaper and printed paper industry that is not permitted by law. There is no reason to believe that the public interest would suffer in any way if newsagents had the same rights as, for example, a small shopkeeper in the drawing office supply industry. Competition is the enemy of monopoly, and monopoly is the prime cause of high prices.
The Government, who have done so much to help small businesses and free enterprise, should be aware that in the newspaper supply sector freedom to trade exists only in theory and seldom in practice. It is the small business men that we in this House should seek to protect and aid, not to dominate. It is shameful that, with the best motives in the world, we have allowed the ordinary small newsagent to become the least powerful of any trader in the country. I hope that my hon. Friend will tell me that it will stop.

§ The Minister for Consumer Affairs (Dr. Gerard Vaughan)
I listened carefully to the speech of my hon. Friend the Member for Devon, North (Mr. Speller). I congratulate him on securing this debate and on setting out clearly the difficulties faced by the National Federation of Retail Newsagents and by S & B Commercials of Barnstaple, which I found worrying. I shall examine the position and bear those remarks in mind.
I understand and sympathise with what my hon. Friend said. He is right to say that we are not talking about just one person, although it would be wrong if one person were faced with injustice. We are talking about 30,000 small shopkeeping newsagents, who belong to the federation and who must trade within the general legal requirements referred to by my hon. Friend. Those 30,000 are an important section of our local shopping community. It is my job not only to encourage more local services for the public but to ensure that local traders, shopkeepers and newsagents can trade more, not less, easily. I take what my hon. Friend says very much to heart.
I am clear that, wherever it makes sense—it does if ore is elderly or has young children—there should be more and not fewer corner shops. The newsagent-sweet seller is very much a local shop. Newsagents see the present legal requirements as putting them in a weak position. It prevents them from taking collective action to protect themselves against the large publishers and suppliers, which are far fewer, much larger and in a stronger 135 negotiating position than the individual newsagent. I understand how they feel, but I must also—as my hon. Friend realises—keep in mind the viability of the larger suppliers and publishers.
Under the Restrictive Trade Practices Act 1956 any agreement for trading restrictions of the sort affecting newsagents must be furnished to the Director General of Fair Trading. It is then referred to the restrictive practices court and the agreement will be considered against the public interest if it does not pass certain criteria, which are the gateways mentioned by my hon. Friend. The court can then make an order forbidding the agreement or similar agreements. The procedure was considered by the Labour Government, who published a Green Paper in 1979 entitled the Liesner report. It considered that the Act had contributed to economic efficiency, but said that there might be some scope for more flexibility in some areas.
I have much sympathy with the federation, but it has proved difficult to find a way of helping it that does not either shift the balance so far in the opposite direction that it creates fresh injustice or opens up undesirable practices in other trades. I make that latter point because it is an important aspect that must be considered when dealing with any possible changes in the legislation.
This is a complicated and difficult area. My hon. Friend made two suggestions. Firstly, he said that one of the gateways should be redefined. That was examined in the investigation leading to the Liesner report, but no change was recommended. Secondly, he suggests that what he calls the shackles of the implied contract be lifted or that section 8 of the Act be amended. Under that section, recommendations of the federation are treated as if they are agreements entered into by all the federation's members. I appreciate the problems that those members could experience in that regard. It has always been a cardinal feature of the legislation that recommendations by a trade association should be treated as registrable agreements and I do not see a sufficiently strong case for the federation to be exempted.
136 My hon. Friend is aware that the Monopolies and Mergers Commission has reported that it is not against the public interest for wholesalers to limit the numbers of retailers supplied and to select them on the basis of their location and the standard of service that they can provide. The commission reported in 1978 and it is possible that there have been changes since then.

§ Mr. Speller
Does not my hon. Friend think it unreasonable that, by sheer chance and rationalisation, there is only one wholesaler in each area—he is a monopolist—and that he should hold the power of commercial life and death over the many newsagents in the area? That is the key to the whole problem. It is monopoly almost by accident, and not by Government intent. The prospects of any firm can be ruined almost at the whim of a bad-tempered manager.

§ Dr. Vaughan
I understand that, but the matter was looked into carefully by the monopolies commission and it reported that the procedure was in the public interest. However, if my hon. Friend feels strongly about the matter I shall discuss it with the Director General of Fair Trading, who has the task of watching what is going on in this area, but I do not want to raise hopes. The situation may not have changed radically or sufficiently for us to consider amending the law.
The federation has been invited to suggest possible changes to the legislation, but so far all the suggestions have had serious drawbacks. If my hon. Friend or the federation bring forward suggestions I shall be willing to consider changes in the Act, but the suggestions must not create major injustices elsewhere.
Once again, I congratulate my hon. Friend on bringing the matter before the House and on putting the position so clearly and forcefully on behalf of the newsagents.