THE issue of below cost selling is being urgently reviewed following allegations that certain British newspapers are engaging in this practice, the Minister for Enterprise and Employment, Mr Bruton, said yesterday. The review will examine what legislative changes, if necessary, may be required to combat this practice.

However, Mr Bruton, who was speaking at the formal launch of the Report of the Commission on the Newspaper Industry, stopped short of saying whether the Government would implement another of the commission's key recommendations - reduce the 12.5 per cent VAT rate on newspapers to zero.

The commission's report has already been extensively reported in The Irish Times.

Mr Bruton indicated broad support for a number of its recommendations yesterday and pledged that the Government would act on the report. He appointed the commission to examine the newspaper industry following the collapse of Irish Press Newspapers.

He said he had already met the National Newspapers of Ireland (NNI), which represents national newspaper owners, on the issue of below cost selling of British newspapers here. He said the issue seemed to be one "which needs to be urgently addressed". The Minister warned that it is a very complex issue, and one which is very difficult to define.

He pointed out that the commission and the Competition Authority had also differed on the matter.

The commission believed some British newspapers were engaging in below cost selling in Ireland, while the authority said they were not.

Mr Bruton said at present he had no powers to act, unless it could be proved that the person involved in below cost selling was dominant in the marketplace.

The commission recommended new legislation be introduced to curb below cost selling. Mr Bruton indicated that this would be considered, if found to be the case.

He said he believed that such legislation could be enacted to cater for newspapers, without it having to apply to other sectors. However, he said several other factors must be considered, including whether the EU would block it, because it could decide such legislation interfered with free movement of gods.

He did not believe that British newspapers which carry a handful of Irish news stories and say they are printed in Ireland, are fulfilling a social, political and cultural role. This was a point the commission made, adding that it was this cultural and political role which distinguishes newspapers from other industries.

Mr Bruton said he was generally supportive of a range of recommendations the commission made, including the regulation of ownership changes, merger control, concentration of ownership and no state funding for a central printing works.

He added that he was "supportive" of a working group being set up to report on changes for the industry and assistance on such changes from the Labour Relations Commission.

Programme managers from at least six different Government departments are examining the list of recommendations made by the commission and Mr Bruton says he hopes to be able to report to Cabinet in early autumn.

He said EU law precludes reducing VAT to zero, as recommended by the commission, but a reduction would be legally possible. Although pressed on the matter, he said it would be an issue which the Government partners would have to consider like all other tax matters.

He also pointed out that any VAT reductions would also benefit the British newspapers.

Last night, the NNI called on the Government to act quickly on the report. It said the key commission recommendation was for the removal of VAT on newspapers.

It said the 12.5 per cent VAT rate in Ireland - the highest in Europe - lies in stark contrast to the zero rate British papers enjoy in their domestic market.

"The result is that Irish newspapers pay VAT on practically all the sales, while British publishers pay VAT on only the Irish portion of their colossal sales," it said.

The NNI said it was within the powers of the Minister for Finance to reduce VAT to 5 per cent and it had been "given to understand" that if an Irish Minister made a case to the EU for a zero rate, "a derogation could be made in our favour".

The Fianna Fail deputy leader and spokeswoman on Enterprise and Employment, Ms Mary O'Rourke, welcomed the publication of the report. She said the Government now had several significant reports on the media. "Policy decisions should now be taken on the basis of these as a matter of urgency and a coordinated strategy for the entire media should be brought forward," she said.

Ms O'Rourke said the issues were "well signposted" but the Government should look at the media in its totality.

Ms O'Rourke and the Progressive Democrats leader, Ms Mary Harney, criticised Mr Bruton for the delay in publishing the report, as he had it for over a month.

Ms Harney said her party had already run into Government resistance in its efforts to re introduce its own Defamation Bill while the Minister for Finance, Mr Quinn, had already ruled out any reduction in VAT on newspapers.

. Mr Bruton, who was characteristically cautious at a press conference yesterday, also said issues involving changes in libel laws were not straightforward and will have to be considered in the context of the Law Reform Commission's Report on the Civil Law of Defamation.