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DISTRIBUTION

8th October 1992, Page 40
8th October 1992
Page 40
Page 41
Page 40, 8th October 1992 — DISTRIBUTION
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Which of the following most accurately describes the problem?

NEWSPAPERS

IN TNT and Exel Logistics have cornered more than 90% of the national newspaper distribution business since publishers began switching from rail to road five years ago. But now the Monopolies and Mergers Commission has launched an investigation which may open the market to new operators.

On 18 October TNT Newsfast will begin to deliver The Financial Times to wholesalers in the north of England, Acorn Freight Corporation, which has handled the work for the past three years, estimates that TNT undercut its tender by more than Elm. "We quoted 22.5m for the five-year contract at existing rates," says Acorn's deputy managing director Philip Lockwood. "A lot of people could say that we're bitter, but when someone almost halves your price like that I don't think that it's fair."

Acorn, based in Bailey, West Yorks, had an unblemished record with the FT, says Lockwood — he believes a regulatory board should be set up to monitor national newspaper distribution.

"Multi-nationals should not be allowed to go in and railroad the small haulier out of business," he says.

DETAILS

Not surprisingly, TNT Newsfast takes a different view. Managing director Steve Lay points out that TNT already covers the south of England for the FT "I would never comment on the details of an individual contract," he says, "other than to say that we had traded with the FT for three years and I would assume they decided on questions of service, contract record and the overall package we offered."

But Acorn's claim about the tender is supported by Nightfreight (Holdings), the Liverpool-based operator which also tendered for the work. Russell Black, Nightfreight's managing director, says: "My understanding is that TNT came in at an impossible price pertaining to their costs. I was told that we had been undercut by a percentage and that percentage was unbelievable."

He does not believe that there is anything untoward about the way the market has become dominated by two companies, however: "It's a matter of getting into the marketplace and offering the publishers the best combination of price and service. There is no evidence of a 'sweetheart' agreement between NFC and TNT, for example." Whatever the rights and wrongs of the case, Acorn will have plenty of opportunity to air its grievances over the coming months.

A Monopolies & Mergers Commission investigation into national newspaper distribution is due to report to Trade and Industry Secretary Michael Heseltine. According to the Fair Trading Act 1973, a monopoly exists where a company supplies at least 25% of a particular type of goods or service in the UK.

Apart from Nightfreight, which delivers The Independent, and Acorn which distributes The Guardian in the north of England and The Observer, there are no rivals to TNT and NFC's Exel Logistics in national newspaper distribution. David Buck, Exel's head of UK marketing, says his company accounts for about 60% of the titles, including those owned by Mirror Group Newspapers (MGN), TNT has bigger volumes, however, delivering for News International which owns Britain's best selling daily the Sun. Buck estimates that the total value of any prime national newspaper distribution is about £60m a year; this figure includes delivery of some large regional newspapers. Neither News International

or MGN have any financial stake in TNT or Exel.

The M&MC will have to decide whether anything done by TNT or Exel constitutes an uncompetitive practice which acts against the public interest. If so, Heseltine could decide to restrict the area of business they operate in. The main focus of the investigation is on the supply of newspapers from wholesalers to newsagents, rather than from publishers to wholesalers. This follows complaints that some wholesalers refuse to supply retailers who wish to start selling newspapers. Since primary distribution switched from rail to road, some publishers have awarded exclusive contracts to wholesalers which has left some retailers with only one source of supply in their area.

CONTRACTS

Buck says he does not see how the M&MC can be interested in either Exel or TNT, "The two of us happen to have been awarded the contracts individually by the newspapers," he says. "You have to remember that we only carry as far as the wholesalers; they arrange for distribution to the newsagents."

Acorn's Lockwood argues that if TNT and Exel extend their domination further it will be extremely difficult for other operators to break into the market. This is partly because contracts usually last for five years and are expensive to break out of. Another obstacle to new entrants is the loyalty that builds up

between' publishers and distributors. Because their product is so time sensitive, few publishers are prepared to risk changing contractors if the existing one does a good job.

Nightfreight's Black says: It is often said that newspapers are more perishable than lettuces — nobody wants to read yesterday's newspaper. It is quite a momentous step for anybody to change contractors in such a business."

Even if the market was opened up, the rigorous demands of delivering national newspapers would put off many hauliers. Jim Gilchrist, operations director of Exel's Newsflow, says extensive back-up resources are necessary because deadlines must be met at all costs: "If we have 20 vehicles at a print centre and the publisher decides to hold the presses for an hour, those vehicles can only do one drop instead of three within the allotted time. That means we have to find 40 vehicles and 40 drivers in the middle of the night."

Lockwood argues that the need for


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