Press Distributors Call for Revising Kiosks Auction Scheme

Several firms in the press distribution business said on December 21 that ongoing removal of their kiosks in Tbilisi put them on the verge of bankruptcy and called on the Tbilisi municipality to revise the current auction scheme for leasing kiosks in the capital city.

Chief executives and representatives of Planeta Forte, Matsne and Elvaservice (this latter is the press distribution arm of Palitra media holding) said at a joint news conference, that from total of 144 kiosks, these three firms were running, now only 21 booths remain, leaving about 180 of their employees without a job.

They called on the Tbilisi municipality to launch a separate auction specifically for press distributors in which only the companies specializing in this business would compete; otherwise, they say, their companies are not able to complete with larger businesses. There have been reports in the Georgian press recently according to which several food companies won some of the auctions so far and press distributor firms say in those auctions prices for annual lease jumped so high from starting GEL 1,000 that it was impossible for them to compete. GEL 20,000 or GEL 10,000 annual lease for a kiosk selling newspapers and some other stuff like cigarettes is not commercially viable, the press distributor companies say.

“Let them announce an auction only for press distributor firms,” Merab Chanchalashvili, director of Planeta Forte said at the press conference, adding that in that case lease price would be set at “an affordable” level.

In October the Tbilisi Mayor’s Office announced about a new initiative aimed at “supporting small and medium businesses.” It said that the plan was to replace old kiosks in the capital city with new ones “designed in contemporary fashion.” Online auctions were launched for leases on new kiosks with no limitations set what should be sold. This process of removal currently applies only to those kiosks, whose permits issued by the Tbilisi Mayor’s Office years ago have already expired.

The Tbilisi Mayor’s Office says that it applies same rules to all the companies without making any exceptions so that to secure principle of equal conditions for all.

According to the Mayor’s Office so far 136 lots out of total 450 have been auctioned and in 17 lots winner was Elvaservice, part of the Palitra media holding. According to the representatives of Palitra, the company mainly won lots for new kiosks located in the Tbilisi outskirts where there was less competition, thus lease prices affordable.

“Any exception to the rule or a concession implying the issuance of a permit to certain entities without the participation in the e-auctions will be considered as a violation of the rights of those who participated in and won the auction. For the same reason, the City Hall will not be able to keep illegal kiosks in the city. Such exception would affect those entrepreneurs who won the auction and are thus paying the rent,” the Tbilisi Mayor’s Office said in a statement.

“There are no restrictions for the auction participants,” it said. “Those interested may sell a variety of products together with newspapers and magazines in their kiosks, as they did so far, which will  make them competitive. The statements according to which selling newspapers and magazines is not a competitive business, do not seem to be appropriate as press kiosks sold tobacco, refreshments and other types of products along with newspapers throughout the period of their operation. Another option for these entities is to conclude contracts with the winning companies. The auctions already held have shown that press distribution companies took part in the auction and that some of them succeeded in winning the auctions, while others have not. This is natural since the competition is fair and transparent.”

The press distribution companies have been joined in their protests against the Tbilisi Mayor’s plans by some of the largest Georgian newspapers, which on Monday ran on their front pages a slogan-type appeal in the Georgian and English languages, “President Saakashvili, Don’t Kill Press!” These newspapers say that the move poses a threat to them as it may hit a serious blow to the distribution of the print media in the country where no efficient subscription system exists. Some newspapers have also claimed that the move is part of the authorities drive to further reduce reach of the print media, which is already much smaller compared to that of broadcast media.

“The Tbilisi City Hall regards the politicization of the issue improper as it concerns fair competition, business development and job creation. It is vital to provide equal opportunities to all entrepreneurs,” the Tbilisi Mayor’s Office said.