Vol. 454 No. 5
3 Miss Harney asked the Minister for Enterprise and Employment his views on whether the current pricing policy of some British newspapers represents a predatory assault on the Irish newspaper industry; and the measures, if any, he proposes to take to deal with this situation. [11109/95]
16 Mr. E. Byrne asked the Minister for Enterprise and Employment if he is examining the implications of the Sunday Tribune's decision to reduce its cover price in Cork, Donegal and Northern Ireland; his views on the decision by The Sun newspaper to slash its cover price in the week when the proposed liquidation of the Irish Press was announced; his further views on the effects of below cost selling on the wider print media market; and if he will make a statement on the matter. [10971/95]
I propose to take Questions Nos. 3 and 16 together.
I refer the Deputies to the conclusions of the Competition Authority in its interim report on the newspaper industry, in particular, the conclusions in regard to predatory pricing. As the authority pointed out, this has a specific meaning. In order to sustain a claim of predatory pricing, it is first essential to establish that the alleged predator is dominant. The authority concluded that none of the UK newspapers could be said to have a dominant position in any newspaper market within the State. It was, therefore, of the view that there is no evidence to support claims that UK newspaper groups have engaged in predatory pricing of newspapers within the State. It said that in order to establish that predatory pricing has taken, or is taking, place the strict criteria which are required had not been met in the case of UK newspapers.
Predatory pricing has a precise definition. It is a policy of price cutting by a firm in a dominant position which is designed to reduce or eliminate the competition which it faces so that it can reap higher profits at a later stage as a result of the elimination of its competition. In order for pricing to be regarded as predatory profits are reduced for a period of time in order that the long term effect on the market will ensure that these profits can be higher at a later stage when competition is eliminated. To demonstrate predatory pricing it is necessary to show that the objective of price cutting is to reduce the number of competitors by eliminating one or more of them or to weaken them to a point that they can no longer offer effective competition. Another criteria in order to benefit from a predatory pricing policy is that the firm should be able to earn supra-normal profits in the future arising from the elimination of competition. However, where there are low barriers of entry to a market the elimination of competition may only serve to attract other competition into the market, rendering the business of predatory pricing pointless.
The Competition Authority distinguished between predatory pricing and aggressive price competition and its conclusion was that Irish newspapers may have suffered due to aggressive competition from UK newspapers. However, aggressive competition in the market place is not illegal. The authority was of the view that predatory pricing was not taking place in the Irish market in regard to UK newspapers since the objective of the pricing policy of the UK newspapers was not to eliminate competitors or to defer them from competing aggressively.
The Competition Authority indicated that given the nature of the Irish newspaper industry and the large number of titles on the market, predatory pricing by one foreign newspaper could not ensure with certainty that consumers would switch to its titles. Therefore, the title accused of predatory pricing would not be able to earn the supra-normal profits necessary to make predatory pricing worthwhile and it would not also eliminate the competition. Arising from this, therefore, the Competition Authority was of the view that predatory pricing by UK newspapers was not taking place. I have accepted the Competition Authority conclusions. Therefore, there is no action to be taken in regard to the pricing policy of UK newspapers.
As regards the Sunday Tribune, it may well be that their recent decision to reduce its cover price selectively in certain areas of the country is part of a strategy to improve market share. It has the appearance to date of a short term strategy. It remains to be seen whether this policy is to be sustained or widened for a longer period. The action to date appears to be a marketing drive in selective areas and I will monitor the position in the medium term to establish whether, in the light of their actions this may constitute anti-competitive behaviour. I note that this selective action runs counter to the trend in Irish newspapers and the fact that three Irish Sunday newspapers increased their prices to consumers last December.
Deputies will be aware that the Competition Authority dealt with the cost structure of the Tribune Group in its recent report and the Independent Group's continued involvement in the Sunday Tribune. This question will be considered in the context of my overall response to the Competition Authority's report.
Section 6 of the Competition Act, 1991, allows firms who are aggrieved by alleged anti-competitive action to initiate action in the courts should they so wish. Ultimately decisions in such matters are for the courts to determine.
The Minister's response is extraordinary. First, he quotes the Competition Authority's report which was produced before The Sun engaged recently in what I can only describe as the beginning of a price war. Now two newspapers in the News International Group have scratch cards which are in contravention of the Gaming and Lotteries Act, 1956, yet the Government had not done anything about it. Will the Minister accept that if we have a price war here none of the Irish newspapers will be able to withstand it, with the possible exception of the Independent group? Second, will the Minister accept there is no control here on below cost selling except in the grocery trade? Has the Minister any plans to introduce legislation to prohibit below cost selling in this market?
The existing law is precise as to what predatory pricing means. The basis of the Competition Authority report is that price cutting by a newspaper, such as the one referred to by the Deputy, would not constitute a breach of competition law. Certainly, I would be concerned about a price war and its impact on newspapers. This issue was raised in the course of the discussions I had in this regard. The Deputy is right in saying there are no controls on below cost selling, except in the grocery trade. The National Newspapers of Ireland are examining the question of whether there should be a below cost selling provision in relation to newspapers. I will assess any proposals put to me in that area.
The Minister seems to be adopting the position that if other people think it is necessary he might do something but he does not appear to have any initiative of his own in mind. Does the Minister believe there is a need to introduce legislation to ban below cost selling?
That is one of the issues we have to assess carefully. The Deputy is probably aware that a number of Governments, including the Government of which the Deputy was a member, was of the view that the Grocery Order was not a satisfactory vehicle and that the existing controls on below cost selling effectively were not operable.
We never got rid of it.
I am examining the issue of below cost selling. It would raise considerable problems in an administrative sense in that one would have to define prices which would be quite difficult. There is no simple straightforward answer; I could respond to a parliamentary question indicating that I am or am not in favour. This would be a significant change in relation to Irish competition law and would need to be considered further before I would be in a position to say whether I would support such legislation.
I hope the Minister does not sit by, as he did in the case of the Irish Press group, and wait until all the newspapers cease publication before considering introducing legislation when it is too late. The Minister should give serious consideration to the urgent implementation of legislation in this area which many people feel is necessary. Will the Minister accept that the scratch cards in the News of the World last Sunday and in The Sun yesterday are directly in contravention of the Gaming and Lotteries Act, 1956? Why has the Government not taken action on this matter?
That Act does not come within the responsibility of my Department. I do not know the answer to that question. It is a separate issue and I am sure the Minister responsible would be in a position to respond if a question was put to him.
