THE Department of Enterprise and Employment is to carry out an investigation into magazine prices and distribution costs after it was forced to revoke an order to fix maximum prices for UK magazines.
In the High Court yesterday, Eason and Son Ltd, the major distributor of UK magazines in Ireland, asked for its action challenging the order to be struck out.
It is understood, however that the Department has not dropped the issue. A senior official has been appointed to oversee an investigation into a claim in court by Eason that the order would lead to it losing £1 million a year on its sales of UK magazines, with a potential loss of up to 200 jobs in its wholesale distribution business.
The other main importer of UK magazines into Ireland is Newspread, which is owned by Independent Newspapers.
The Maximum Prices (Magazines) Order aimed to fix UK magazine prices at the sterling cover price, plus the rate of exchange, plus 5 per cent and VAT. Eason and Newspread have been adding 10 per cent, double the 5 per cent which the Minister was prepared to allow for additional costs in Ireland.
Eason argued that the order constituted a distortion of trade between Ireland and the UK and thus was prohibited by the EU Treaty. Magazines sold in the UK are zero rated for VAT, while magazines sold here are subject to 21 per cent tax.
The Minister of State at the Department in charge of consumer affairs, Mr Pat Rabbitte, said on October 10th that he had decided to revoke the order on the basis of legal advice.
He said the consultancy unit in the Department would investigate "the cost structure, both wholesale and retail, and operating margins underlying the prices of home, as well as imported, magazines."
He stressed that he had not set aside the findings in a report of the Director of Consumer Affairs, Mr William Fagan, on magazine prices. Mr Fagan said yesterday that he had never been very enthusiastic about price controls and he had not recommended them in his report.
"However, there is a case to be looked into by the new director of competition enforcement as to why the only two main importers of magazines into Ireland have produced with their ready reckoners exactly the same price for the same titles in other words there's no competition between them."
No executive from Eason was available for comment yesterday.