Media 24 (Pty) Ltd v Competition Commission

• Jurisdiction: South Africa
• Judge: Davis JP, Rogers JA and Boqwana JA
• Judgment Date: 19 March 2018
• Citation: 2018 (4) SA 278 (CAC)
• Docket Number: 146 CAC
• Hearing Date: 19 March 2018
• Counsel: D Unterhalter SC (with M Norton SC) for the appellant. R Bhana SC (with J Wilson SC and G Marriot) for the respondent.
• Court: Competition Appeal Court

Davis JP (Rogers JA and Boqwana JA concurring):

Introduction C

[1] This appeal concerns the first application by respondent under South African law of the principle of predatory pricing as provided for in s 8 of the Competition Act 89 of 1998 (the Act). Predatory pricing raises complex questions of competition economics and law, and hence represents a challenge for a competition authority. As Professor Motta D observes:

'The very nature of predatory pricing, which involves low prices for a period, makes it difficult to analyse. To distinguish low prices due to a genuine and lawful competitive response to rivals from low prices due to a predatory and unlawful behaviour is far from an easy task in practice. Furthermore, a very cautious approach by anti-trust agencies E and courts is needed to avoid the risk that firms endowed with market power keep prices high to avoid being charged with predatory behaviour.' [1]

[2] The application of predatory pricing in this case concerns three relatively small community newspapers, Forum and Vista (both owned by F Media 24, the appellant) and Gold Net News (GNN), which was independently owned, all of which were published in the area around Welkom (the Goldfields area) before and during the period January 2004 and February 2009 (the complaint period).

[3] On 31 October 2011 respondent referred a complaint to the Tribunal G in which it contended that, during the complaint period, appellant, through Forum, had engaged in predatory pricing in the relevant market for advertising in the Goldfields area, in contravention of s 8(d)(iv) alternatively s 8(c) of the Act. More specifically, the respondent contended that appellant had maintained Forum in the Goldfields market as H a 'fighting brand' to prevent and/or inhibit GNN as well as potential new entrants from entering or expanding within the Goldfields market. It contended that the operation of Forum did not make economic sense other than as a fighting brand to achieve this predatory objective.

[4] On 8 September 2015 the Tribunal held that respondent had I established that appellant had priced its publication Forum below its average total costs; had intended to predate its competitor, GNN; and had the ability subsequently to recoup what it had lost during this predation period. Hence the respondent had established that appellant

Davis JP (Rogers JA and Boqwana JA concurring)

committed an exclusionary act in terms of s 8(c) of the Act. The A Tribunal also found that appellant's actions had an anti-competitive effect and that there was no evidence of any pro-competitive gain which would outweigh this effect.

[5] In a separate decision on 6 September 2016 the Tribunal set out a series of remedies which flowed from its initial finding B on the merits. Before this court only the issue of the merits decision was debated, the question of remedies being left for later determination, if necessary.

The factual background

[6] It was common cause that Vista started publication in 1971, with one C of its founders being Mr Hans Steyl. Ownership of Vista changed several times between 1980 and 1999. What is relevant to the present dispute is that during the complaint period, Vista was operated by appellant (via the Volksblad Group) which had purchased Vista from the Caxton Group in 1999. At the time of its purchase by appellant, Vista had two weekly editions, one published on Tuesdays and the other on Thursdays. D In December 2001 the Tuesday edition was discontinued and thereafter it only published one edition a week, on Thursdays.

[7] GNN had its origins in a group called Netnuus which started in 1999, having been established by Ms Leda Joubert. In 1999 Ms Joubert appointed Mr Steyl to assist in establishing Netnuus Welkom. Although E the Netnuus group failed as a newspaper group, Mr Steyl continued to publish GNN which he did from 2000. It operated until it exited the market in April 2009.

[8] Forum was established in September 1983 by appellant and was the second community newspaper to enter the Goldfields market. It ceased F publication at the end of January 2010.

[9] During the complaint period, Forum was a free weekly newspaper distributed every Wednesday. Its editorial content covered local municipal affairs, sport and school news with a distinct focus on 'soft' human-interest issues. It featured exclusives not found in any of the other local G newspapers. It averaged 16 pages per edition in 2004, and between 8 – 12 pages after 2005.

[10] Vista averaged between 48 and 56 pages per edition and was distributed on a Thursday. Its editorial coverage included local news and sport, with the focus on 'hard news' — municipal matters, crime, sport H and the local mining industry, as well as standard weekly features focusing on motoring, entertainment and the housing market.

[11] GNN averaged between 20 and 24 pages per edition during 2004, although its pages declined later to between 16 and 24 pages. Its editorial content was very similar to that of Vista, the emphasis being on 'hard' I local news, including municipal matters, sports, crime and news relating to the mining industry. It was distributed on a Thursday even though it carried a Friday date.

[12] Advertising was crucial to the success of all three of these community newspapers. All three newspapers carried national advertisements, J

Davis JP (Rogers JA and Boqwana JA concurring)

although A Vista enjoyed a significantly greater share than both GNN and Forum. During the relevant period, the share of classified and national advertising for the three newspapers was as follows:

	Title	2005	2006	2007	2008	2009	Period advertising
	Vista	73,8%	70,7%	73%	78,1%	87,1%	74,8%
Share of classified advertising	Forum	4,7%	5,2%	6,3%	4,9%	3,8%	5,3%
	GNN	21,6%	24,1%	20,7%	17%	9,1%	19,9%
	Vista	90,3%	88,9%	84,4%	87,8%	96%	88%
Share of national advertising	Forum	2,3%	2,1%	6,7%	1,3%	1,6%	3,2%
	GNN	7,3%	9%	8,9%	10,9%	2,4%	8,8%

[13] During the relevant period the following table provides the estimated prices and differentials between Vista, Forum and GNN (rands per sccm [2] ) so far as advertising in the respective newspapers was concerned:

Title	2002/03	2003/04	2004/05	2005/06	2006/07	2007/08	Average
Vista	R12,15	R13,38	R13,83	R14,58	R14,54	R14,87	R14,02
Forum	R8,43	R9,16	R9,33	R9,60	R9,01	R9,83	R9,22
GNN	R13,81	R15,82	R17,20	R16,41	R15,85	R17,17	R15,98
Differential of Forum relative to Vista	-30,6%	-31,5%	-32,6%	-34,1%	-38%	-33,9%	-34,3%
Differential of GNN relative to Vista	19,7%	18,2%	23%	12,6%	9%	15,5%	14%

[14] G In January 2009 Berkina Twintig (Pty) Ltd, the owner of GNN, lodged a complaint against the appellant with the respondent. The essence of this complaint was that, from 2004, appellant had abused its dominant position in the Goldfields to force GNN out of business by selling advertising at 'grossly discounted rates which (were) totally H unrelated to production and normal overhead costs'.

[15] The complaint set out the following allegations:

1.

Vista and GNN were direct competitors, with Vista in a dominant position averaging 48 pages per week, while GNN averaged between I 24 and 28 per week.

2.

Vista and GNN had more or less the same staff complement, while Forum had a much smaller staff complement.

Davis JP (Rogers JA and Boqwana JA concurring)

3.

Up until 2004 GNN, Vista and Forum all sold at market-related A advertising rates, with Forum always being cheaper due to its smaller print order but 'probably also to constitute a nuisance factor in the goldfields market'.

4.

During 2005/06 GNN experienced a reduction in profit as a result of 'severe local advertising rate cutting by Vista and Forum'.

5.

This 'onslaught' by appellant intensified in the years that followed B with 'continuing rate cutting'.

6.

GNN advertisers had indicated since 2004 that Vista's local single column centimetre rate was much lower than that of GNN.

7.

GNN experienced increasing losses in 2007, 2008 and 2009.

8.

At the date of the complaint Vista was continuing to sell at local C rates comparable to its rates of 10 – 12 years earlier and 'nowhere near current market related rates elsewhere in the province or the country'.

9.

Appellant was printing Vista and Forum at or below cost and thus subsidising these publications 'in the broader corporate sense' to enable them to sell at considerably lower local-advertising rates than D GNN. [3]

[16] On 31 October 2011 respondent referred the complaint to the Tribunal, contending that appellant, through Forum, had engaged in below-cost pricing conduct in contravention of s 8(d)(iv), alternatively s 8(c) of the Act. In the founding affidavit the key elements of the E complaint were set out thus:

'The Commission contends that Media 24, through Forum, engaged in predatory pricing in the market for advertising (including run-of-press advertising and inserts) in community newspapers in the Goldfields region of South Africa during the period 2004 – 2009 in contravention of F s 8(d)(iv) of the Act. Alternatively, Media 24's conduct amounts to exclusionary below-cost pricing in contravention of s 8(c) of the Act.'

[17] Respondent developed its...