Aberdeen Journals v DGFT, 2003 CAT 11
Citation: Aberdeen Journals v DGFT, 2003 CAT 11
Rule of thumb: Can an organisation put their prices super-low, eliminate competition, and then raise them super-high once the competition is eliminated? No, this is predatory pricing & is an illegal strategy.
Judgment:
the basic facts of this case were that Abderdeen Journals had a strategy whereby they operated super cheap advertising, and then once their competitors were removed, they then raised the prices and made massive profits. The massive profits which they gained also allowed them to outlast any new competition which emerged and made it extremely difficult for any start-up to come in compete with them for advertising. The Court held that Aberdeen Journals occupied a dominant position in the local market and that this constituted predatory pricing which was a breach of competition law. The Court further confirmed that the underlying aim and purpose of the 1998 Act, to secure conditions of undistorted and effective competition, always had to be borne in mind in all decisions arrived at, ‘Nonetheless, it does seem to us that if a dominant undertaking is able to exclude from its computations significant elements of cost which have to be borne one way or another, and which any equally efficient competitor would have to bear, there is a risk that the dominant firm will always be able, sooner or later, to undercut an equally efficient competitor and drive it from the market. That, in our view, is a particular risk where the marginal cost of a particular strategy, such as the use of a “fighting title” or “fighting ship” may well be very low. In our view, the cost based rules set out in Akzo and Teetra Pak II, while providing guidance, are not an end in themselves and should not be applied mechanistically. The ultimate aim of the 1998 Act is to secure conditions of undistorted and effective competition. With that primary aim in view, a principal role of the Chapter II prohibition is to prevent dominant forms from defending or strengthening their in ways that are unreasonable and disproportionate, particularly by using methods different from those found under normal conditions’, (paragraph 378-380).
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