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PN 58/02 16 September 2002
Aberdeen Journals Ltd has been fined £1.3 million for abusing a dominant market position.
The OFT's decision to impose this penalty follows a Competition Act investigation into allegations of predatory pricing by Aberdeen Journals (owned by Northcliffe Newspapers Group Ltd, which is itself a subsidiary of Daily Mail & General Trust plc). Predatory pricing occurs when a dominant undertaking incurs losses with the intention of removing a rival and/or deterring other potential competitors.
The decision follows a judgment by the Competition Commission Appeal Tribunal setting aside the OFT's previous decision in this case. The Tribunal sent the case back to the OFT for further consideration (see note 1).
The OFT originally investigated Aberdeen Journals' pricing practices following a complaint from the Aberdeen & District Independent (a free weekly newspaper) alleging that Aberdeen Journals was acting unlawfully by the particularly low pricing of advertising space in its weekly free newspaper, the Aberdeen Herald & Post.
The OFT's further analysis has confirmed the original finding that Aberdeen Journals is dominant in the market for the supply of advertising space in local newspapers (paid-for and free) within the Aberdeen area. It has also found that the company deliberately incurred losses when selling advertising in the Aberdeen Herald & Post (since relaunched as the Aberdeen Citizen) in an attempt to expel the Aberdeen & District Independent, its only direct rival, from that market. The predatory pricing started in response to the launch of the Aberdeen & District Independent in 1996 and continued after the Competition Act came into force on 1 March 2000.
The OFT has therefore decided that Aberdeen Journals has infringed the Competition Act's Chapter II prohibition, which makes the abuse of a dominant position unlawful.
John Vickers, Director General of Fair Trading, said:
'Aberdeen Journals deliberately incurred losses in a persistent campaign to remove its only direct rival from the market. This campaign continued despite the fact that the Competition Act 1998 prohibited predatory pricing from March 2000, and despite an OFT investigation already being in train. This was a serious infringement of the law, and the penalty should act as a deterrent to others.'
1. The OFT originally issued a decision fining Aberdeen Journals for this conduct on 16 July 2001. That decision was set aside by the Competition Commission Appeal Tribunal (CCAT) on 19 March 2002, on the basis that the market definition on which the OFT had relied in making that decision was not sufficiently reasoned. The CCAT sent the issue of market definition back to the OFT for further consideration.
2. Aberdeen Journals had a turnover of £33.9 million in the financial year ending 3 October 1999.
3. In calculating the level of the fine, the OFT has taken into account the fact that predation is a very serious infringement of the Competition Act 1998 (the Act) and the need for the penalty to deter similar offences. In mitigation, the OFT has taken into account Aberdeen Journals' full co-operation with the OFT throughout the initial investigation and the fact that it took rapid steps to cease its infringement (albeit in the face of an active investigation, and an explicit warning that it was at risk of infringing the Chapter II prohibition). The decision covers a period of infringement from the introduction of the Competition Act on 1 March 2000 to 29 March 2000.
4. A non-confidential version of the decision can be downloaded from the Competition Act 1998 Public Register section of the OFT website.
5. Powers under the Competition Act 1998.
The Act gives the OFT the following powers to investigate suspected infringements of the Act's prohibitions and take preventive action where it finds that infringements have taken place:
i) the Chapter I prohibition prohibits agreements between undertakings, decisions by associations of undertakings or concerted practices which have the object or effect of preventing, restricting or distorting competition within the UK (or any part of it) and which may affect trade within the UK (or any part of it)
ii) the Chapter II prohibition prohibits conduct by one or more undertakings which amounts to the abuse of a dominant position in a market which may affect trade within the UK (or any part of it).
The OFT may impose a penalty of up to 10 per cent of relevant market UK turnover for a maximum of three years for infringement of either of the above prohibitions.
6. In this press release the functions of the Director General of Fair Trading (DGFT) under the Act are for simplicity described as the functions of 'the OFT'. The Enterprise Bill proposes to replace the office of the DGFT with the OFT, to which would be transferred the DGFT's functions.
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