Genesis advises Media24 in seminal predatory pricing case

Project name:
Expert economic testimony in South Africa's seminal predatory pricing case

Service:
Competition economics

Sector:
Communications and Media

Area of Expertise:
Abuse of dominance and prohibited practices

Client:
Media24

Date:
2011 - present

Country:
South Africa


Genesis was retained by Media24, a large newspaper and magazine publisher, to defend predatory pricing allegations made against the group by the Competition Commission in what has proven to be South Africa’s seminal  predation case. 

Predatory pricing generally refers to a strategy whereby a company prices its products at a low level in the short term in order to exclude rivals from the market, and then raises its prices in the medium to long term in order to recoup profits. 

In South Africa, Section 8(d)(iv) of the Competition Act (No. 89 of 1998) explicitly outlaws predatory pricing. The Act also allows for claims of such conduct to be assessed using the general exclusionary clause outlined in Section 8(c). 

The commission was acting on a complaint lodged by Gold-Net News, a former community newspaper published in the Free State Goldfields  region. Gold-Net News alleged that Forum, one of Media24’s publications in that region, had been used as a “fighting brand” and its adverts priced below the production cost of the newspaper from 2004 to 2009 in order to exclude Gold-Net News from the market. 

On behalf of the complainant, the commission further alleged that, upon Gold-Net News’s exit from the market in 2009, the Forum title was withdrawn and its sister publication, Vista, was left to profit from its resulting market position. 

The firm’s involvement in this ongoing case has spanned the investigation phase; the complaint hearing before the Competition Tribunal, at which it was found that there was no evidence of Media24 pricing the publication below average or at marginal cost; and, most recently, the hearing on remedies following the tribunal’s decision that Media24 had contravened section 8(c) of the Act. 

It has encompassed detailed financial analysis of Media24’s management accounts in conjunction with careful analysis of the economic evidence. As the case has unfolded, the expert analysis undertaken by the Genesis team has traversed a number of important economic issues before the tribunal, which are likely to assist in bringing greater legal certainty in future cases.

As it stands, Media24 has appealed the Tribunal's Section 8(c) finding, and the appeal will be heard by the Competition Appeal Court in late 2017.

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