Media advertising: OFT sent back to the drawing board

Bringing a complaint to the OFT, and in particular defending it, is a very expensive business. Should the OFT actually take a decision condemning something as serious as predatory pricing, the worst outcome from everyone’s point of view (including the tax payer) is that its decision should be remitted to it by the Competition Appeals Tribunal on the basis that it suffered from a procedural flaw. This is what happened as a result of the judgment of the Competition Appeal Tribunals yesterday in the Aberdeen Journals case.

The case involved the aggressive pricing reaction of the most powerful local newspaper group in Aberdeen, Aberdeen Journals (ultimately owned by the Daily Mail), to the entry of a new title – the Aberdeen Independent.

The Tribunal decided that the OFT’s decision completely failed to describe the nature of the local advertising market in Aberdeen and (crucially) did not draw to the Daily Mail’s attention (and incorporate in its decision) the best available evidence on the market – ironically provided to the OFT by the Daily Mail itself. This evidence, namely that a new free newspaper threatened advertising revenues of both paid-for and free titles, would probably have been sufficient for the OFT to win its case that the market in which the cut-price strategy took place (and which the Daily Mail’s titles dominated) embraced both free and paid-for titles. The OFT’s failure to put the Daily Mail’s own evidence to it for a response led the Tribunal to quash the decision which had imposed a penalty of over £1 million.

What happens now in this particular case remains to be seen. But certain lessons can already be drawn.

The first is that the advertising industry will have to wait even longer for an authoritative ruling under the Competition Act on whether free and paid-for advertising are in the same market and whether these markets are distinct from other media (such as the internet).

The second is that the OFT’s second major reverse before the Tribunal (the other was the insurance agents’ case which was also remitted) shows that the OFT has yet to achieve an acceptable level of competence in the exercise of its existing powers. The government’s current proposal that it should have even more powers under the Enterprise Bill (fiercely criticised by the CBI) is likely to come under further attack.

The third is that complainants may simply be better off in the long run (despite the extra expense) in going to court for an immediate remedy (for example the injunction recently granted in the Jobserve case involving IT recruitment advertising) rather than complaining to the OFT and awaiting a decision that just doesn’t stand scrutiny.

Bulletins are for general guidance only. Legal advice should be sought before taking action in relation to specific matters. Where reference is made to Court decisions facts referred to are those reported as found by the Court. Please note that past bulletins included in the Archive have not been updated by any subsequent changes in statute or case law.