CAMPAIGNS: What The Media Say - Superstores and OFT joy as RPM axed

Organisation: Office of Fair Trading



Issue: End of RPM system on over-the-counter drug sales



The Office of Fair Trading (OFT) and supermarket chains have been

celebrating as the High Court destroyed the last bastion of Retail Price

Maintenance (RPM).



The 14 May ruling ended 38 years of artificial price protection of

over-the-counter (OTC) branded pharmaceutical products, which had been

exempted in the 1964 Resale Prices Act. John Vickers, OFT director

general, said: 'This is excellent news for consumers' (The Times,

16/5).



Supermarket heads were exuberant. Sainsbury's CEO Peter Davis asserted:

'We have been waiting for a quarter of a century for an end to RPM',

while Safeway categories manager Stephen Painter stated: 'We are

delighted this ridiculous law has finally ended' (The Mirror, 16/5).



Supermarkets and high street chemists responded immediately with price

reductions of up to 50 per cent on some branded pharmaceutical products,

giving rise to estimates that the reversal of RPM legislation could save

consumers pounds 300m a year.



However, not all parties welcomed the news. The Community Pharmacy

Action Group (CPAG) claimed that the abolition could endanger the

business of 3,000 pharmacies, which would find themselves unable to

compete against the purchasing and pricing power of the supermarket

chains. Highlighting the customer service and advice offered by local

pharmacies, the group's spokesperson claimed: 'It's a sad day for

Britain as this outcome threatens yet another community service on the

high street' (Daily Express, 16/5).



Boots, which had supported RPM legislation, was immediately affected by

the law's abolition. Its share price slumped 6.25 per cent following the

news, as analysts voiced concern about the company's ability to recoup

the estimated pounds 15m to pounds 20m that would be wiped off its

profits. 'Boots needs anti-depressant,' headlined internet-based

uk-invest.com (18/5).



However, Boots responded quickly with a game plan involving aggressive

advertising, price cuts and growth in market share. Its spokesperson Ken

Piggot conceded that smaller pharmacists may consider that their former

ally had changed sides, but stated: 'This is a whole new ball game ...

We don't intend to let anyone steal our sales' (The Guardian, 17/5).



Feature, p13



Analysis and commentary by Echo Research. More information can be found

at: www.echoResearch.com.



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