Johannesburg - A four-year legal wrangle over whether Media24 forced a competitor out of business has finally been resolved, with the Competition Tribunal handing down a ground-breaking judgement against the media giant.
In October 2011, the Competition Commission laid a complaint against Media24, arguing it had used anti-competitive pricing practices to force a rival Welkom newspaper, Gold-Net-News (GNN) out of business.
The commission alleged Media24 had contravened the law through its pricing policy in the goldfields area between January 2004 and February 2009. The complainant wanted Media24 to pay a fine of 10 percent of its turnover for the period in question.
According to papers filed at the tribunal, Media24 is alleged to have used its Forum newspaper, which operated in the same area, as a “fighting brand” to ensure GNN did not survive.
Media24 had, in an affidavit signed by the then regional sales manager, Augnischa van Eck, denied the allegations. Van Eck also argued that GNN was comparable to another paper Media24 had in the area - Vista - and had, in fact, dropped its pricing to lure advertisers away from Vista.
Forum was subsequently closed a year after the privately-held GNN failed - in 2009 - and the commission also alleged Forum was kept open to force GNN’s failure, which Van Eck also denied.
However, Wian Bonthuyzen, who was Media24's senior manager for Community Publications in the Free State and Northern Cape from 1999 to 2008, testified in front of the tribunal that Forum was kept going at a loss to target GNN as it would have otherwise been closed down.
On Tuesday, the tribunal found against Media24, noting the media giant had engaged in a predatory pricing strategy to drive GNN out of the market.
According to Gildenhuys Malatji Incorporated, which represented the commission at the hearings, the decision is ground-breaking because this was the first time in the 16-year existence of the Competition Act of 1998 that a firm has been found guilty of predatory pricing.
"The essence of the complaint that the commission referred to the tribunal was that Media24 targeted GNN through its community newspapers, Vista and Forum, by lowering advertising rates to below market-related rates in an effort to exclude GNN from the market," says Zelmaine Shaw, senior associate at Gildenhuys Malatji Incorporated.
Shaw notes, in a statement, the law prohibits a “dominant firm from selling goods or services below their marginal or average variable cost, or from engaging in any exclusionary act where the anti-competitive effect of such an act outweighs its technological, efficiency, or other pro-competitive gain”.
The legal firm notes the tribunal accepted the contention that Media24 intentionally used Forum as a predatory vehicle or "fighting brand" to exclude GNN from the market. It says “this was supported by factors such as Forum's below-market advertising rates, Media24 continuing to operate Forum for a lengthy period despite its inability to post a profit, failure to perform budgetary forecasts, as well as the formulation and implementation of a business plan that was predatory in nature”.
The tribunal will now set the matter down for a further hearing to determine an appropriate remedy against Media24. Naspers was not immediately available to comment on the judgement.
Subsequent to publication, Media24 issued the following statement: "Media24 has noted the judgment handed down by the Competition Tribunal in the Goldfields predatory pricing matter, in which we have been found guilty of Section 8(c) of the Competition Act and not guilty of Section 8(d)(iv) of the Act.
"The matter is not completed yet as the Tribunal will be convening a further hearing to deal with remedies that may be imposed. We are preparing for this hearing and will only consider our options once the process at the Tribunal has been completed."
IOL