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ACCC submission in relation to newsagency magazine supply trial

The ACCC has proposed to authorise Magazine Publishers Australia to conduct a trial of an alternative magazine supply model.

As I wrote here in November, I think the proposed code of conduct changes are ill conceived and will not address the unfairness for newsagents compared to others with whom we compete. Earlier this month I encouraged newsagents to respond. Here is the first response I have submitted:

I make this submission on behalf of newsXpress Knox City in Wantirna South Victoria.

The ACCC proposes to authorise a trial which does nothing to address the anti competitive behaviour enshrined in the rules, processes and systems for distributing magazines to newsagents. The trial does nothing to get newsagents to closer to fair supply, to the controls over supply that supermarkets, petrol outlets and convenience outlets have in relation to magazine supply.

In proposing to authorise the trial, the ACCC is tacitly approving a continuation of behaviour which blocks newsagents from stocking magazines on terms which are fair.

The ACCC ought to hold piublic hearings into the proposed trial.

These are not new complaints for the ACCC. Newsagents have complained for years, providing examples of gross over spply in terms of volume and titles.

Unless newsagents are given control over the magazine titles they stock they will remain at a commercial disadvantage. This, in turhn would place our customers at a disadvantage.

In 1999 the ACCC oversaw the deregulation of the distribution of newspapers and magazines in Australia. At no time since has there been a review of the impact of deregulation. I call on the ACCC to consider such a review. While the ACCC could argue that such a review is outside its remit, I say it is within its remit given its direct involvement in deregulation which left newsagents competitively worse off.

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  1. Brett

    If ACCC permit this – it shows they have no regard for small business.

    2 likes

  2. Dennis Robertson

    Here is what I sent to the ACCC.

    As a South Australian Distribution Newsagent who has been heavily engaged in the magazine category over the past 12 years, I would like to make the following comments in relation to the Magazine Publishers of Australia’s Application.

    I have copied in some of the written application and then made my comments underneath each. I am hoping this will be an easy way for you to understand what I am saying.

    MPA Application in part….
    “In order to limit the cash flow issues associated with the ‘sale or return’ model many newsagents are engaging in indiscriminate early returns, sometimes without even offering the product for sale. Optimising supply and addressing cash flow issues will enable newsagents to implement more effective marketing and sales techniques for the magazine category.

    Newsagents becoming more engaged in the magazine category will result in better category management and improved access to titles for consumers.”

    My comment….

    It is utterly incorrect to say that I engage in indiscriminate early returns. The fact is I very carefully choose which magazines to early return.
    The criteria I use is to identify magazines that I have previously cancelled orders for because I have tried many, many times to sell them, to the large number of subagents I service, to no avail.
    What Bauer and Gordon & Gotch do then is to indiscriminately re-instate orders (that I have cancelled) after a small period of time has elapsed. It is those magazines that I return immediately upon receipt. I am compelled to do this because to not do so is to be completely overwhelmed in both unsaleable stock volumes and financial cash flow issues.

    The fact is that I already supply sales based figures to the Publishers via Network and Gordon & Gotch on a daily basis, so they have the data under existing arrangements, but choose to ignore it to the detriment of my business. It is a non-sense for their application to say that as a result of the pilot study that Newsagents will be enabled to implement more effective marketing and sales techniques. That is not the issue at all. I already provide a huge variety of magazines to consumers in my area, the fact is there are some titles that just don’t sell and some categories that struggle due to the demographics of the area. It is my business to know this and I have learnt the ‘hard way’ by putting all titles received ‘out there’ for consumers in my area to decide. Over the years, I have learnt which magazine titles just don’t sell and I have cancelled orders for them. The problem is Bauer & Gotch ignore my expertise and electronic sales data provided to them by continuing to supply me with magazines that consumers in my zone will not buy. My point here is that consumers are very well looked after in my area.

    So what we have currently is an ongoing series of cycles of grossly inefficient and financially harmful practices that is perpetuated by the Distributors of magazines. The reason for doing this is of course as you are aware, because they are paid per copy distributed. I say ongoing, because I am constantly and actively working their orders website in a vain attempt to cancel unsellable magazines, and have to do so again and again for the very same magazines. That is what takes up my time, more so than sending the ‘bloody things’ back as early returns.

    The really important point here is that there is no need for the unnecessary expense of a pilot study, the existing system of sales based data is available to the Distributors right now. Concerns are that they want to make it so that early returns are not possible so that they enjoy a further financial windfall (vastly increased positive cash-flow situation) to the detriment of Newsagents. Certainly the duopoly of Coles and Woolworths do not have to contend with such negative practices.

    MPA Application in part……
    “The MPA submits that the proposed Code of Conduct will result in an improvement in the commercial viability of newsagencies, by reducing their business costs while increasing magazine sales. It will also assist the consumer by helping to ensure that the magazines that they are seeking are being offered for sale at their local newsagent.’

    “Arresting the current decline in the newsagency channel will assist magazine publishers by maintaining or increasing sales through this sales channel an therefore assist with maintaining the viability of hard copy magazine publication.

    “The MPA submits that the public benefits of the proposed code of Conduct can only be realised if the pilot is first conducted, Therefore the public benefits of any Code of Conduct apply equally to the pilot”

    My Comment……
    I would submit that the reason for Distribution Newsagents handing back magazine deliveries to the major distributors and some Retail Newsagencies opting out of magazines and both early returning is because of the inefficient and financially harmful practices of the major distributors.

    Therefore I would contend it in the Public interest to have Major Distributors cease the practice of loading up Newsagents with unwanted and unsaleable magazine titles.

    ————-

    From Annexure B of their definition of the rules – Part 2
    “4. Early Returns
    A Distributor will not be required to accept Early Returns from Retailers, except where such Early Return is
    made by a Retailer to correct an error in allocations quantity.”

    My Comment
    If it is the intention of Publishers to have no early returns included in their ‘Code of Conduct’, then that will have a devastating impact upon Newsagents and consumers as delivery rounds are handed back to the major distributors as magazines become even less viable. This would have a devastating impact upon Consumers.

    ——————-
    MPA Application in part..
    “7. Maximum shelf life
    A Distributor will ensure that the On-sale Period for an Issue does not exceed twelve weeks unless at least
    two of the following are applied to the Issue:
    a) Delayed billing, being a process whereby the distributor invoices the newsagent one month after the
    initial on sale date if the on sale period for that Issue exceeds 12 weeks. Invoicing would then be
    delayed a further month for each additional month the Issue is on sale;”

    My Comment…..
    Delayed billing is a non-sense and does not help the Newsagent nor the consumer. This is because delayed billing is almost always associated with highly specialised or niche titles. If it doesn’t sell, then no amount of delayed billing will assist. I will point out that I will always on-sell a new title magazine to sub-agents if I am provided with it.

    All delayed billing does is unnecessarily complicate the invoicing process. It doesn’t help the Publisher, the Newsagent nor the Consumer, so why is it forced upon Newsagents.

    18 likes

  3. MARK RICHARDSON

    Can someone from the ANF please come on here and explain why they support this move

    13 likes

  4. John Fitzpatrick

    I have read the submission from the MPA and am very concerned with some of the allegations within that submission.

    I have been a Distribution Newsagent (no retail store) in South Australian for twenty five (25) years. I have held magazine accounts with Gordon & Gotch, Bauer (formerly ACP) and IPS (formerly NDS)for the entire time I have been a Newsagent.

    For the MPA to say and I quote “many Newsagents are engaging in indiscriminate early returns” displays a total lack of understanding of the magazine distribution system in Australia.

    For your information there are essentially three (3) types of Newsagents operating in Australia.
    1 Retail store only
    2 Retail store with a distribution territory
    3 Distribution territory only

    Each one of the above, regardless of the Point of Sale System, sends sales and returns figures via an industry standard platform (XchangeIT). All major distributors receive this data from newsagents.

    All distributors choice to ignore this data.

    When the MPA talks about “arresting the decline in the newsagency”, what it’s really saying is this:

    We make our money from publishers, for them we distribute and then handle any unsold copies (returns). We’re really worried, our business model is broken and if the newsagent national percentage of sales slips we may have to contend with dealing with Coles etc., on very uncomfortable terms.

    BUT they still will not use the data newsagents send them!

    The majors have a financial incentive to send out as much stock as possible to as many newsagents as possible. Really, they don’t care if it doesn’t sell, they are paid by the publisher regardless – to distribute and handle any unsold copies.

    We currently service 29 retail outlets with magazines, as we do not “own” the retail space within the stores we service, store owners decide when a magazine will be removed from the magazine rack and returned to us. Yes we issue a Returns form (see attached: Subagent Returns Form), with magazines needing to be returned, BUT store owners are able to send back at anytime a magazine, they consider as “stale stock” within their store. This will result in us sending back “early returns”.

    I can see NO public benefit in the proposed Pilot.

    The majors have the data, they know the sales but continue on the path to oblivion.

    A really simple question in all of this is – why can’t Newsagents set their supply requirements, as I believe does:
    1 Coles
    2 Woolworths
    3 Coles Express P&C
    4 Woolworths Petrol P&C
    5 7 eleven
    6 OTR stores
    7 and probably many others

    The simple reason is – the majors have setup separate divisions to handle non Newsagent clients, this is always their OUT clause – oh it’s another division!

    Early Returns.
    Any decision along the lines of “a Distributor will not be required to accept Early Returns from Retailers” displays such lack of understanding of the market – as I said earlier we do not OWN the retail space allocated to magazines. The result of this will be to REDUCE the number of magazine outlets. In the simplest terms, when I say to a retailer sorry the big company in Sydney said you can’t early return – most likely result will be I am asked to remove all magazines and give a credit immediately and lose the client.

    Where’s the public benefit in that? BUT, what it will do, is concentrate the hold Coles etc have on the market.

    Our business practice is to allocate one (1) extra copy of a magazine title (see attachment: Fill orders), over the average sale of the last 3 issues, to each of our subagents. If this allocation ends with say 20 copies over – then they are early returned. The major who supplied surplus to our requirements (based on our sales and returns history supplied via XchangeIT) is to blame, (but they get paid to do this – that’s the rub!). As you can see from the example, we do not have sufficient stock to fill this order! So we could increase sales if they (majors) used the data! That’s the silly part of all of this – if they used the data correctly they could increase sales!

    If the majors used the data we send them, none of us would be wasting our time on this.

    This saga really has been going on for 25 years plus.

    How can any serious attempt at a Pilot study be conducted without a major segment (Distribution) being omitted? The recommendation of the MPA to exclude Distribution, again displays a total lack of any understanding of the magazine market in Australia.

    If the Pilot is to go ahead, I suggest the ACCC demand that Distribution be part of the study.

    Without the Distribution segment represented, the Pilot is in my view worthless.

    14 likes

  5. Adrian

    if anyone from the ANF is reading this could they please tell the MPA & the ACCC there is no way any newsagent will accept the loss of early returns

    7 likes

  6. Mark Fletcher

    John I trust you have submitted this to the ACCC.

    0 likes

  7. Carol

    I have been trying to cancel my weekly delivery for this Thursday which I usually have delivered on a Friday. I won’t get them until Wednesday next week because of Easter holidays so what is the point in me having to pay to handle them at all. During one discussion I was told to put the returns through as early returns because that would not effect my future supply as early returns are not taken into account when setting supplies. This would account for why we keep getting titles that we continually early return. I still haven’t worked out how to comment on the ACCC submission so I give up.

    0 likes

  8. Mark Fletcher

    Carol as already advised here, it is easy: Email adjudication@accc.gov.au and put
    A91472 – magazine publishers of Aust submission in the subject column.

    If you do not respond your voice will not be heard.

    0 likes

  9. John Fitzpatrick

    Mark
    Yes and made it a public document on the ACCC website

    2 likes

  10. Mark Fletcher

    Excellent. Well done on agreeing to make it public.

    0 likes

  11. Bill Wareham

    Annexure C
    “The MPA represents the 3 largest Australian publishers. The MPA members
    represent approximately 63% of magazine sales revenue and 7% of number of titles.
    MPA members have an estimated average sales efficiency of 67%, while all other
    publishers have an estimated sales efficiency of 41% (percentage of magazines
    distributed, versus those sold).”
    The above paragraph from their proposal says it all. 93% of all titles sold have a sales efficiency of only 41%.
    WE NEED CONTROL OVER WHAT TITLES WE STOCK AND THE DOLLAR COMMITMENT WE ARE PREPARED TO INVEST IN A CATEGORY IN CONTINUOUS DECLINE.
    I have 750 pockets yet sold 1,251 different titles in 2014, with the top 350 representing 90% of the total sales.

    6 likes

  12. MARK RICHARDSON

    Well done John Fitzpatrick for a excellent submission !

    If you haven’t yet written to the ACCC on this important issue please take some time out to put your case forward. If we get enough newsagents writing in the ACCC will take notice.

    I did ask the other day for someone from the ANF ,management or a director to respond as to why they have written to the ACCC in SUPPORT of this trial by the MPA

    I am not a ANF member and I have no data on how many newsagents the ANF represent . But from what I can gather from previous posts on this site the ANF now appears to represent the minority of newsagents not the majority ,if someone has accurate data on this please correct me.

    At the very least the ANF (who purports to be the peak industry body) should have in their letter to the ACCC, indicated how many members they represent.

    The ANF’s refusal to engage on this Blog indicates to me an arrogance which is causing harm to our industry.

    The only way to bring about change is for newsagents to stop paying their membership , this organisation appears to be disconnected from its own members and seems not to be able to grasp even the most basic issue ie magazine supply which threatens our industry

    When fellow newsagent who are ANF member tell me they haven’t seen a ANF representative in their store for over 12 months that pretty much sums up how disconnected this organisation is

    5 likes

  13. Dean

    I wonder if they make signing up to the program voluntary how many newsagents would accept?

    0 likes

  14. Bruce G

    So if this is the way it is going, would it be better for me to join a supermarket franchise, or perhaps form another buying group and negotiate a better deal with MPA, a deal with more control mechanisms.

    0 likes

  15. Mark Fletcher

    Bruce no group currently offers this to newsagency businesses. However, some can at least help you better manage supply.

    0 likes

  16. ken

    I just sent my email to the accc, now for my not so nice one to the anf

    3 likes

  17. Mark Fletcher

    I have lodged a submission on behalf of newsXpress.

    1 likes

  18. Mark Fletcher

    I have just now lodged a submission on behalf of Tower Systems.

    1 likes

  19. Dennis Robertson

    John@post4,

    Looks like Glenorchy Officemart has given you what is broadly described as the ultimate compliment by virtue of the submission on the ACCC’s Public Register.

    Doesn’t surprise me John, it’s a good one.

    0 likes

  20. Dean

    Yep, i thought it said what we needed, so thought i would try and re enforce the message.

    John, hopefully i haven’t offended, was just trying to save time

    Dean

    0 likes

  21. John Fitzpatrick

    Dean
    – I’m good
    John

    0 likes

  22. Dennis Robertson

    Info coming out of ACCC suggests some positive news. As a consequence of Marks’ newsXpress submission seems a pre-decision conference is being arranged by the ACCC.

    Well done Sir.

    5 likes

  23. Mark Fletcher

    Here is the latest fro the ACCC:

    Dear Sir or Madam,

    I write in relation to the authorisation application lodged by the Magazine Publishers of Australia (A91472). A pre-decision conference has been called by the newsXpress buying group of newsagents in relation to the application. The conference will provide the opportunity for applicants and interested parties to make oral submissions to the ACCC about the draft determination.

    The conference has been tentatively booked to be held on Thursday, 23 April 2015 from 12pm. It is hoped that video link ups will be available for interested parties to attend the conference from ACCC offices in the capital city of each state and territory.

    If you think you may wish to attend the conference, please express your interest by COB Wednesday 8 April 2015, and advise which city you would be attending from.

    I will be in touch with parties who express interest in attending with further details in due course.

    2 likes

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