Business, Innovation and Skills CommitteeWritten evidence submitted by the National Federation of Retail Newsagents
Introduction
1. Founded in 1919, the National Federation of Retail Newsagents is one of Europe’s largest trade associations, representing over sixteen thousand independent retailers in the UK and Republic of Ireland. Run by a professional staff and governed by an elected National Council and National Executive and with a structure of elected local and regional committees, the NFRN publishes a public affairs “Agenda” each autumn which lays out the priorities for the following year. Copies of the current Agenda can be made available to the BIS Select Committee if required.
2. The members of the NFRN vary in size from small, traditional newsagents through to larger convenience stores that sell a range of news and magazines, confectionery, food and alcoholic. While members stores vary in size and the product range that they carry, what they have in common is that they are independent retailers providing an important service and focus to their local communities.
3. The NFRN is delighted to have this opportunity to comment on some of the problems, and opportunities, of regulation that face the independent retail sector.
Business Rates
4. While the announcement that Small Business Rate Relief would be continued in 2013–14 was extremely welcome, despite only being announced in January 2013, the NFRN has repeatedly called for business rate increases to be capped at the rate of inflation. As the Portas Review concludes, the government needs to look at whether the rates system can do more to assist small retailers. The NFRN believes that, in addition to limiting the potential increase in the rate and thereby capping the potential increase in retailers’ costs, the government should extend the Small Business Rate Relief scheme beyond 2014 and standardise the methodology used by local authorities to apply the relief, something which is currently an inconsistent mess. While the government has acknowledged that the issue of business rates needs reviewing, their failure as yet to take these relatively simple steps to assist small retailers do nothing to build essential retailer confidence in the future.
Tobacco
5. An estimated thirty to forty percent of the turnover of NFRN members comes from the sale of tobacco products. While the NFRN supports and encourages responsible retailing, including working to control the supply of cigarettes to young people, in part through involvement with and membership of the board of PASS, the government and ACPO supported age verification card scheme, and through involvement with Citizen Card, the NFRN remains concerned about the increasingly intrusive regulations being enforced on retailers selling, what remains, a legal product.
6. Smaller retailers are preparing for the introduction of the tobacco display ban. Not only will this ban impose implementation costs on small retailers, but will have a considerable impact on the operation of the shops, increasing the time taken to both serve customers and restock shelves and leaving distracted staff more open to attack or theft. Considering the impact that the display ban will have on small retailers, the NFRNs members are incredulous at the proposals, supported by the rapporteurs of the Committee on the Environment, Public Health and Food Safety and Committee on the Internal Market and Consumer Protection of the European Parliament, that plain packaging be introduced for tobacco products. Why plain packaging will have the effect of further reducing smoking when tobacco products are already or soon will be, hidden from view is something the NFRN is unable to comprehend, Rather, we tend to believe that this is regulation for regulation sake.
7. The NFRN firmly believes that all regulation should be founded on a firm evidence base, something which the argument for “plain packaging” lacks, rather than the continual ratchet of increasingly intrusive regulation aimed at making it difficult for small retailers to carry out their lawful business while having no measurable impact on levels of smoking.
8. For example the proposals in the proposed amendments to the Tobacco Products Directive to ban “slim” cigarettes (a move opposed by Malgorzata Handzlik, Rapporteur for the Committee on the Internal market and Consumer Protection at the European Parliament in a “draft opinion” on the proposed changes to the Tobacco Products Directive) and flavoured cigarettes such as menthol, are unlikely to have any impact other than to move consumers to other products or to provide an increased market for the suppliers of smuggled or counterfeit products, with the additional health risks which that latter will expose consumer to. It is suggested that one in every five cigarettes sold in the UK is either smuggled or counterfeit, a point reinforced by the seizure of 30.3 million cigarettes at Southampton container port in March 2013. Proposals to restrict the sale of electronic cigarettes, by either banning them or reclassifying them as medical products, coming ahead of the publication of research commissioned by the Medicines and Healthcare Products Regulatory Agency (MHRA), is very clearly not evidence based policy making and will have the effect of removing one pathway for those wishing to quit smoking and creating the situation where it becomes easier to purchase cigarettes than the alternatives.
9. The NFRN therefore calls for a more positive approach to tobacco regulation, with the government working with the independent retail sector to introduce measures, such as the outlawing of proxy purchasing and stepping up attempts to curtail the illicit trade in cigarettes that allow retailers to carry out their lawful business while promoting measures that are proven to help reduce smoking.
Competition
10. The NFRN has fought a long campaign against monopolistic practices within the news wholesale and publishing industry, which is dominated by two major suppliers who are awarded exclusive territory contracts by publishers which leave retail newsagents with no choice of wholesaler. The result of this has been the imposition of increasingly unfair terms of business with, for example, high and increasing delivery charges being arbitrarily imposed on the retailer, and inadequate redress for poor service. Add to this the continuous assault on retailer margins by newspaper publishers (in addition to maintaining fixed printed prices), and the financial viability of independent newsagents is under threat like never before.
11. The NFRN was unsuccessful in an attempt to have the matter referred to the Competition Commission by the Office of Fair Trading but believes that the issue is far too important to be allowed to rest and other avenues are being sought for pursing our members’ grievances
12. One of the advantages held by the large chain retailers is that they negotiate with news suppliers on behalf of all of their branches collectively and, because they own all of their own shops as a single business, they can act collectively, by destocking a title, if they believe such an action is in, or would further, their interests. As a trade association, the NFRN is not able, under competition law, to initiate or engage in collective action by its independently owned members that might have the effective of adversely affecting competition in the UK. This prohibition on collective action puts the independent retail sector, and the NFRN as its representatives, at a considerable disadvantage compared with the large chains. The NFRN may have over sixteen thousand members but, as it stands, the law does not permit the NFRN and its members to plan or undertake collective action in opposition to the monopolistic impositions of powerful suppliers, leaving a seriously unbalanced relationship between large wholesale and publishing businesses and the NFRN’s membership.
13. The NFRN is therefore exploring the possibility that the Competition Act 1998 could be amended by secondary legislation to provide limited derogations on the restrictions against collective action for enterprises representing micro-businesses, such that would establish equal and opposing force in the representations made by the NFRN (or similar such micro-business representative organisations) on behalf of its members with industry suppliers, thus achieving a more rational balance and addressing monopoly abuse.
14. With the ever increasing encroachment of “metro” supermarkets and look-alike multiples in local high streets, the micro-business independent retail sector remains as vital as it always was in providing diversity and choice for consumers. This is nowhere better typified than in the news industry where independent newsagents provide access to the 3,000+ publications printed in the UK today (rather than just a narrow fixed range found typically in multiple retailers) and the home news delivery service, that provides a vital lifeline to the elderly and infirm and those without access to private transport in rural areas, which is almost exclusively the province of independent retail newsagents and roundsmen. However, the future of independent retail newsagents and universal access to a diverse and free press is now under threat. This is partly due to the development of electronic news media and the expansion of supermarkets, but, disturbingly it is also due to the internal attack on independent newsagents from within its own industry, as publishers and wholesalers tighten their grip through monopoly supply arrangements, using independent newsagents as the cash-cow to raid with impunity to increase their revenue to meet increasing costs.
15. Whilst the NFRN does not claim that this dilemma is unique to independent retail newsagents, it is a serious threat to high streets and local communities throughout the UK, who value independent retailers for the choice and diversity of products and specialist services that they provide. However, that consumer benefit will not survive without positive government intervention, ensuring that competition legislation provides a competitively balanced playing field across the spectrum of UK business.
16. It is clear that the major supermarkets have been able to circumvent the competition laws by separating the market shares of their larger supermarkets from their smaller, convenience stores. In the view of the NFRN it is inconceivable that larger supermarkets, which often open for the same hours as the smaller convenience stores, can be considered as being separate to their smaller high street stores. The products are delivered from the same warehouses to the same supplier terms and pricing is controlled by the same head office. To ensure consumers are not disadvantaged and smaller independent stores are not forced out of the market we are seeking a reclassification of how market share is calculated. Such a change may provide sufficient cause for a referral to the Competition & Markets Authority.
Planning
17. The NFRN does not support the recommendation of the Portas Review that the “Use Class” be revised to make it easier to change the uses of properties on the high street.
18. The NFRN, along with organisations such as the Save the Pub All Party Parliamentary Group, has been concerned at the number of pubs being converted into chain convenience stores. These conversions require no planning permission and impose “Metro” and “Local” type stores on local areas with no consultation with local residents and no consideration of the existing provision of stores by the independent sector. A tightening up of the change of use rules would require planning permission to be obtained, giving local residents the opportunity to express their views of the proposed new store through the normal planning process, which already provides the opportunity for affected parties to raise or consider objections. The increasingly aggressive expansion of these stores, with the national chains investing significant amounts in the creation and development of their own “convenience” brands, makes such a change particularly important.
19. The provision of parking places, and the enthusiasm of parking enforcement officers, is another area of regulatory tension in the high street. The insufficient provision or overzealous policing of parking places can do disproportionate damage to small local retailers, most of whom do not have their own dedicated car park. The NFRN welcomed the call from Eric Pickles, Secretary of State for Communities and Local Government, for greater leniency in a bid to boost local economies and for councils to allow the creation of more off street parking.
Primary Authority
20. The NFRN does see some positive aspects of the UKs regulatory landscape.
21. The NFRN has been keen to get involved with the Primary Authority scheme when it is extended to cover trade associations later in 2013 and has been actively working with the Better Regulation Delivery Office of the Department of Business, Innovation and Skills to identify the areas of regulation where the adoption of primary authority would benefit our members and to understand how the implementation will work in practice.
22. The NFRN believes that the standardisation of inspection regimes for our members is in principle an extremely good thing, although the NFRN acknowledges that the devil is in the detail. By providing conformity and certainty in members’ understanding of what regulators require, the NFRN believes that costs to both the small retailer and the local authority can be reduced and standards of compliance can be increased, leading local authorities to have greater confidence in individual NFRN members when scheduling and carrying out inspections.
23. The NFRN hopes that the Primary Authority scheme will continue to develop and expand over time.
Alcohol Pricing
24. The NFRN has also supported the idea of the introduction of a minimum unit price for alcohol. For some time large chains have attempted to gain market share by “loss leading” on alcohol. In too many cases the result has been supermarket subsidised binge drinking, with the social and economic consequences with which we have all become, sadly, all too familiar.
25. Small independent retailers have suffered particularly badly from the impact of alcohol fuelled anti social behaviour as they open late into the evening, with fewer members of staff on duty.
26. The case for a minimum unit price for alcohol rests on more than the fear of crime and anti social behaviour. The cross subsidising of alcohol sales that supermarkets undertake cannot be matched by the independent retailer, to the detriment of their businesses. A healthy high street requires a mix of chain or multiple stores and a strong independent sector. This cannot happen on a high street when supermarkets are prepared to charge more for a bottle of water than for a can of beer in the pursuit of market share.
27. As this is seen as one area where regulatory intervention would be welcome, the NFRN has been disappointed by speculation that the UK government was considering dropping proposals for a minimum price of alcohol and hopes that Ministers will be persuaded of the importance of such a measure.
Conclusions
28. The NFRN’s concerns about regulation in the retail sector are about more than just providing our members with the opportunity to sell more. Our members are all businessmen and women, running small business. They are recognised and appreciated by a public that sees them as an important part of their local community whether or not they actually shop there. They provide an alternative to the identikit stores of the major chains and the kinds of services, such as home news delivery, that the public want.
29. The NFRN welcomed the publication of the Department of Business, Innovation and Skills Retail Strategy as recognition from government of the importance to the UK economy of the retail sector. However, few of the key issues identified in this submission feature in the BIS strategy. Working with stakeholders to “disseminate findings” or “share best practice” or promoting other policies, such as the Local Enterprise Partnerships, does nothing in itself to tackle the genuine issues faced by those who literally work on the shop floor.
30. While the NFRN applauds the government’s policy of “one in, one out” for regulation, there are still many instances where regulation has the propensity to make life difficult for independent retailers who already have to work hard to cope with the current difficult economic climate and the often unfair competition of the large chains.
31. The NFRN and its members recognise that some products, notably tobacco and alcohol, need to be regulated, but the regulation must be set realistic, achievable objectives. Regulation for the sake of it or in the untested hope that more regulation will achieve the policy goals is at best unhelpful and is often detrimental to the independent retail sector and the customers they serve.
32. The NFRN hopes that the Department of Business, Innovation and Skills will take note of the real world impact of the government’s actions, or in some cases inaction, and will seek to pursue its aims with the minimum of regulation in the next session of parliament.
15 April 2013