Sir Bryan Carsberg, the director-general, is to undertake a preliminary inquiry to determine whether price cuts by the Times and the Daily Telegraph constitute 'predatory pricing' used in an attempt to kill off rivals.
The move is in response to calls from Andreas Whittam Smith, the Independent's editor, and leading Labour MPs.
Mr Whittam Smith said last night: 'I am delighted that our complaint has been taken so swiftly and so seriously. We are confident that the director-general will find that the Times has been engaged in predatory pricing.'
A spokeswoman for News International, which publishes the Times, said: 'We have received the OFT letter and we will respond to their questions.' Stephen Grabiner, managing director of Telegraph plc, said: 'I don't think there's a case to answer.'
This is the second preliminary inquiry into broadsheet newspaper price cuts. Last October, Sir Bryan decided there was no case to answer because the Times's price reduction the previous month - from 45p to 30p - was not predatory. Since then its sales have risen from around 360,000 to 517,575 last month.
The Daily Telegraph's decision last Thursday to drop its price from 48p to 30p has also caused the paper's sales to rise, by about 30,000. But its share price crashed, causing anger among City investors who had recently bought Telegraph shares from Hollinger, the holding company controlled by the newspaper's proprietor, Conrad Black. Cazenove, the City's most prestigious stockbroker, resigned yesterday as adviser to Telegraph plc as a result.
The Telegraph's price cut also pushed the Times into striking back the following day, reducing its price to 20p.
During Sir Bryan's six-week inquiry he will question News International and Telegraph plc managers and examine the papers' finances for evidence of rises in circulation and advertising revenue. If he decides there is a case to answer, he can refer the matter to the Monopolies and Mergers Commission. Its investigation would take about nine months. The alternative is to pursue his own investigation under the Competition Act, which would take about six months. If the OFT then decided a paper had shown anti-competitive behaviour, it could request it to stop.
Cazenove quits, page 31
View from City Road, page 33Reuse content