Following a complaint from the owner of the Daily Express, the Office
of Fair Trading ("OFT") has acted to end the exclusive distribution
rights of the publishers of the Metro and the Evening Standard at train and
stations around London. Thus, without having to run the risks and expenses
of litigation, the Daily Express's owner were able to open up the market and
give itself an opportunity to achieve its aim of distributing a free afternoon
newspaper in London. This shows clearly the way in which competition law is
being used by both the OFT and companies as a tool to open up markets and increase
Associated Newspapers, publisher of the Metro (which is free) and the Evening
Standard (which is not) was granted exclusive rights by London Underground,
Network Rail and various train operating companies ("the stations")
to distribute its newspapers at stations in and around London. This exclusivity
operated for 24 hours a day, despite the fact that Metro was only distributed
in the morning and the Evening Standard was only distributed in the afternoon
Northern & Shell, the company that publishes the Daily Express, complained
to the OFT in 2003 that it was prevented from launching a free evening newspaper
to compete with the Evening Standard because of the agreement between Associated
Newspapers and the stations. The OFT agreed. It found there could be no objective
justification for not allowing a free afternoon and evening newspaper when
the Metro was only distributed in the morning.
The OFT has broad powers to investigate agreements that have anti-competitive
effects. Having found that the agreement in issue was potentially anti-competitive,
the OFT has sought to get binding "commitments" from Associated Newspapers
and the stations which fully address the anti-competitive effects of the agreement.
As long as the parties can provide such commitments, the OFT will close its
investigation and will not take any further action. In this case, the OFT is
requiring that Associated Newspapers gives up its afternoon/evening distribution
rights for free papers, and these rights will be put out to tender to parties
which will include – and you don't need to be Albert Einstein - Northern & Shell.
Further, the OFT has required that the new distributor will get access to Associated
Newspapers distribution racks, and that it should be allowed a reasonable amount
of room for branding.
This case illustrates a number of important points and trends. Firstly, it
shows that the OFT has teeth. Without the need for a formal court judgement,
the OFT has shown it can open up a market where it perceived a problem. In
this case and others, the threat of formal action was enough to bring everyone
Secondly, it shows that the OFT is becoming more militant. Although it does
have limited resources it will, nevertheless, take action where it feels that
competition in a market requires it.
Thirdly, it demonstrates the increasing importance of obtaining commitments
from parties rather than taking more formal action. Using this relatively informal
process allows the OFT to deal more quickly with problems, which frees up its
resources for use elsewhere.
Fourthly, it shows that competition law can be a useful weapon for businesses.
By bringing the problem to the attention of the OFT, Northern & Shell was
able to give itself the opportunity to benefit from the increased competition
which will exist after the re-tendering.
Finally, it shows that bringing a competition law complaint may not be as
expensive as it used to be. While no doubt Northern & Shell incurred some
costs while prompting the OFT, this will have been small beer in comparison
with taking formal legal action itself. Expect many similar cases to follow.