OFT repeats £1.3m fine for predatory pricing

At the second attempt, the UK Office of Fair Trading (OFT) made its first decision on predatory pricing under the 1998 Competition Act.

A four-year tug-of-war between the OFT and Aberdeen Journals, a division of the Daily Mail and General Trust Group, has returned an identical result to an earlier decision, fining Aberdeen Journals £1.3m.

The original decision was overturned on appeal to the Competition Commission Appeal Tribunal, and this may go the same way. "You can be sure we'll be appealing," asserted Herbert Smith partner Craig Pouncey, who is advising Aberdeen Journals.

Pouncey and his client are particularly upset with the size of the fine, considering that the period of abusive behaviour stretches to just 28 days.

The OFT is determined to show that this is a regime with teeth. While the decision only covers the period from 1 March 2000, when the Competition Act was introduced, to 29 March 2000, the OFT claims that the predatory pricing began in 1996.

The original OFT decision, which was successfully appealed in March 2002, fell down on its poor definition of the relevant product market. That original definition ran to just 10 pages, but it has now been stretched to 45, making it longer than the entire original decision.

Apart from this, the new decision is identical to the original. Aberdeen Journals is bound to argue that there is insufficient evidence that it was dominant. And, as the Appeal Tribunal stated, the evidence of a dominant position must be compelling.

An independent economic report by RBB Economics was commissioned. It concluded that there was a lack of evidence to show there was a switch in advertisers as a result of the predatory pricing.

The OFT has summarily dismissed the report, stating that: "The economic evidence presented by RBB Economics is not sufficient to cast significant doubt on the director's conclusion on market definition and, as a result, that the RBB report has no material impact on his conclusions in this case."

Due to the lack of economic evidence, the OFT has turned to statements from Aberdeen Journals' management and from the complainant, Aberdeen & District Independent, for proof.

Herbert Smith has instructed Nicholas Green QC of Brick Court Chambers. Shoosmiths, with Fergus Randolph, also of Brick Court, is representing the complainant.