Court rules for 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 - 2018

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 where a company prices its products at a low level in the short term to exclude rivals from the market, and then raises its prices in the medium to long term 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 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complainant, the commission further alleged that upon Gold-Net News’s exit from the market in 2009, the Forum title was withdrawn and a sister publication, Vista, was left to profit from its resulting market position.

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

Genesis’s involvement in the case spanned the course of the entire matter – the investigation phase; the complaint hearing before the Competition Tribunal, at which it was found that there was no evidence of Media24 pricing below marginal or average variable cost; the hearing on remedies following the tribunal’s decision that Media24 had contravened section 8(c) of the act; and, most recently, Media24’s appeal to the Competition Appeal Court regarding the tribunal’s section 8(c) finding.

In March 2018, following Media24’s appeal of the tribunal's section 8(c) ruling, the Competition Appeal Court – in a unanimous decision – ruled that the test put forward by the tribunal of pricing below ATC with predatory intent had no application under the act. The court set aside the decision of the tribunal, dismissed the commission’s original complaint dating back to 2011, and gave a cost order against the commission for the appeal proceedings.

 Full judgment

Business Day: Media predatory pricing ruling brings clarity to competition law

Full article

Search

Search for more Genesis projects

Subscribe

Sign up for Genesis News

The questions marked with an asterisk(*) must be answered.