Murdoch guilty in `Times' price war
Saturday 22 May 1999
The OFT also warned that News International had been put "on notice" that any future price-cutting campaign could result in fines or a referral to the Competition Commission if it was found to be anti- competitive.
News International has agreed to give the OFT a detailed justification of any future price cutting within ten days of the reductions being introduced.
John Bridgeman, Director General of Fair Trading, said: "We would then be able to come to a rapid decision about whether such price cuts were anti-competitive and advise News International. The company is now on notice. The UK has one of the most competitive newspaper markets in the world and we intend to keep it that way."
The OFT's investigation followed complaints from The Independent, The Daily Tele- graph and The Guardian that The Times was engaging in predatory pricing after cutting its cover price in 1996 to 10p on Mondays.
Mr Bridgeman concluded that the newspaper had been deliberately sold at a loss between June 1996 and January 1998, since when the cover price has been increased several times. He also ruled that price-cutting by The Times had harmed competition in the national newspaper market.
But he did not find that News International has been engaging in predatory pricing. Competition lawyers say that the test of predatory pricing is a daunting one. The definition the OFT uses is similar to that which applies in Europe and involves "the deliberate acceptance of losses in a particular market in order to eliminate a specific competitor, so that supra-normal profits can be earned in the future".
In the past nine years, the OFT has only proven three cases of predatory pricing - all of them involving bus companies - despite receiving hundreds of complaints each year.
Under present law the OFT could not have fined News International even if it had established that predatory pricing was taking place. Competition lawyers say it would also have been difficult for its competitors to have successfully sued the company.
From next March, the OFT will have wider powers under the new Competition Act, enabling it to fine companies up to 10 per cent of turnover if they are found guilty of abusing a dominant market position.
The OFT will also have the power to intervene immediately to stop any practice it deems may be anti-competitive while a full investigation is carried out. Critics of the existing laws say this will help to overcome one of the biggest drawbacks in the present system - that even when instances of predatory pricing have been proved it is too late to help the victim of the practice.
Brendan Hopkins, chief executive of Independent Newspapers UK, the owner of The Independent and The Independent on Sunday, said in response to yesterday's ruling: "We welcome the Office of Fair Trading's statement regarding the predatory pricing activities of The Times. Independent Newspapers initiated the complaint and has diligently pursued the case against The Times, both in the Lords and in the Commons, and latterly through the OFT. We also welcome the ruling because it means that no further advantage will accrue to predatory pricing activity, ensuring that the quality of editorial content, in which The Independent already excels, will once again be the only route to competitive advantage."
Leslie Hinton, News International's chief executive, told the OFT that it had no intention of cutting the price of The Times in the current trading conditions.
But if it does cut the cover price, it has undertaken to give the OFT a detailed explanation setting out the rationale for the price cut, how long it will last and what increase in sales it is designed to achieve. News International will also have to supply forecasts of revenues and profits for The Times.
Lord McNally, the Liberal Democrat peer who sought to amend the Competition Bill when it passed through Parliament, welcomed the "robust language" used by Mr Bridgeman. "The concentration of media power nationally and globally and the implications of cross- media ownership mean that there will still be the need for continuing vigilance if the diversity and independence of our press is to be guaranteed," he said.
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