EASON and Son Ltd was granted a temporary High Court order yesterday preventing the Minister for Enterprise and Employment from taking steps to enforce an order fixing maximum prices for UK magazines. The order was due to come into force tomorrow.
The court was told by the chairman of Eason, Mr Kevin Brabazon, that he would estimate that if the order came into force, Eason would sustain losses on UK magazine sales of about £1 million a year, with consequent potential to cause up to 200 job losses on the wholesale distribution side.
Mr Justice Kelly also gave leave to Eason & Son Ltd, Middle Abbey Street, Dublin, to seek a judicial review of the Maximum Prices (Magazines) Order, 1996, made last Tuesday.
The temporary injunction runs until Monday, but the judge said the Minister was entitled to apply to discharge or vary the order at 24 hours' notice.
Mr John Gordon SC, who was with Mr Bill Shipsey SC, for Eason, said that the application for the injunction was to maintain the status quo pending hearing of judicial review proceedings.
Eason claims the order constitutes a distortion of trade between Ireland and the UK and was equivalent to a quantitative restriction as prohibited by Article 30 of the EU Treaty.
It is also claimed that in so far as the order applied only to UK magazines sold here, it constituted an unlawful discrimination on grounds of nationality, contrary to Article 6 of the Treaty. The order also breached the Prices Act, it was submitted.
Mr Brabazon, in an affidavit, said Eason had about 60 per cent of the wholesale distribution of UK magazines in Ireland.
The mechanism in part of the order would cause chaos in the market for wholesale and retail newsagents.
Since the break with sterling in 1979, he said, there had been confusion because the sterling cover price appeared alongside the sales sticker indicating the Irish pound retail price.
For most of the time since the break, the pound had traded at values well below that of sterling. Therefore, apart from higher costs associated with distribution here, the pound retail selling price had exceeded the printed sterling cover price.
Magazines sold in the UK were zero rated for VAT while magazines sold here were subject to VAT, currently 21 per cent.
Between 1979 and 1983, by agreement with the Department, Eason added a "cost compensation" margin before arriving at a recommended retail selling price for UK magazines. This margin was further developed following discussions with the Prices Commission in 1983.
Agreement was reached whereby the wholesalers, in recognition of additional distribution costs here, were permitted to charge an "uplift" to ensure a reasonable cash margin.
The initial agreed "uplift" charge was determined by reference to an exchange rate of IR£1 to 78.24p sterling.
Mr Brabazon said the pound had since strengthened considerably against sterling. The cash margin available decreased considerably, resulting in lower revenue for Eason, whereas costs in distributing UK magazines increased.
In 1990, the company introduced a revised formula under which its cash margin would be fixed at a constant value, instead of a percentage.
This cash margin was included in the price of imported magazines to pay for operating and distribution costs which were unaffected by changes in exchange rates. Eason informed the then Department of Industry and Commerce of its revised proposals.
A margin was fixed by the company as representing a fair and reasonable margin on sales, determined by reference to an exchange rate of IR£1 to 85p sterling, the average exchange rate for the previous six years.
The rate of "uplift" moved inaccordance with the exchange rate.