On 8 September 2015, the Competition Tribunal (Tribunal) found that Media 24 has engaged in an exclusionary act in contravention of the abuse of dominance provisions of the Competition Act 89 of 1998 (Competition Act). The Competition Commission (Commission) alleged that Media 24 has engaged in predatory pricing behaviour in contravention of section 8(d)(iv), alternatively section 8(c), of the Competition Act. The case represented the first opportunity for the Tribunal to consider a predatory pricing case on its merits with the benefit of a complete trial and expert evidence.

Media 24 owned two community newspaper titles in Welkom, Forum and Vista. The Tribunal found that Media 24 intentionally used Forum to exclude a competing newspaper, Gold Net News (GNN), from the market by pricing Forum's advertising excessively low. GNN closed down in 2009. Forum closed down nine months later. Vista was thus the only remaining community newspaper in the market. Media 24 denies any causal link between the fates of the two papers and denies that Forum was used as a predatory vehicle to exclude GNN. Media 24 contends that Forum always earned revenues that exceeded any legally acceptable measure of cost and that external factors, such as the 2008 recession and internal factors related to its pricing and its distribution efficiency, contributed to GNN‘s demise.

The Tribunal found that the Commission has not proved on a balance of probabilities that Media 24 priced below the relevant cost measures required for a contravention of section 8(d)(iv), the so-called "express predation" contravention of the Competition Act, which prohibits a dominant firm from selling below its marginal or average variable costs unless the firm can show that the pro-competitive effects of such pricing outweigh its anti-competitive effects. The Tribunal did, however, find that Media 24 has contravened the provisions of section 8(c) of the Competition Act, which prohibits a dominant firm from engaging in an exclusionary act unless the pro-competitive effects of such pricing outweigh its anti-competitive effects. In concluding that Media 24 has engaged in an exclusionary act, the Tribunal found that Media 24 priced below its average total cost, that evidence exists of direct and indirect intent to predate its competitors, and that Media 24 was subsequently able to recoup what it lost during the predation period.

In terms of the Competition Act, a section 8(c) contravention carries no penalty for a first contravention. As this is Media 24's first contravention no fine will, therefore, be imposed. The matter will, however, proceed at a later stage in order to determine whether alternative remedies should be imposed.

This decision provides useful guidance on the economic and other types of evidence required to establish a predatory pricing contravention, which will be of some assistance in distinguishing between predatory pricing and pro-competitive aggressive pricing by an efficient firm.

The Tribunal's decision is available here.

Prepared by Janine Simpson, Webber Wentzel.