The Office of Fair Trading (OFT) has rejected calls from independent retailers to refer the news supply chain to the Competition Commission, but has opened the door to a possible shake-up in the supply of magazines.

After long deliberation over three separate investigations, the regulator's Opinion report recommends preserving the newspaper distribution chain's opt-out from competition law and makes the case for maintaining Absolute Territorial Protection (ATP) for wholesalers. If adopted, the recommendation would continue to deny retailers the right to choose their supplier or change suppliers if they receive poor service.

However, it suggested that the distribution of less time-sensitive magazines could work better without ATP.

The OFT said: "The Opinion provides guidance to help publishers, distributors and wholesalers assess for themselves whether their newspaper and magazine distribution agreements comply with the Competition Act."

A spokesman for the Association of News Retailing said: "This is a step forward because it will over time deliver choice for retailers in the supply of magazines.

"The report raises more questions than answers and we will be helping retailers to understand its impact over the coming weeks."

Periodical Publishers Association chief executive Ian Locks welcomed the OFT's support for exclusive wholesaler territories, but added that it would be uneconomic to try to separate newspapers and magazines.

He added: "Like trying to detach a Siamese twin, in trying to separate one you run the risk of doing serious harm, or even killing both."

The OFT also recommends that wholesalers should not be bound by some of the restrictions of the National News-papers Code of Practice, as drawn up by the industry in 1994. The OFT has passed this recommendation to the Secretary of State for Business, Lord Mandelson, who has invited representations in a 12-week consultation period.

OFT chief executive John Fingleton said he was encouraged by the efforts of publishers, wholesalers and retailers to develop a new Code. "The industry should now take a close look at its own arrangements. We hope that once it has done this, our work in this important sector will enable competition to deliver even better outcomes," he added.