Abstract
This paper investigates the alleged predatory behaviour in the UK quality newspaper industry in the 1990s in terms of product repositioning using a horizontal differentiation model and industry data. It supports the call for an “effects based” approach to competition law by showing that non-price conduct can be a critical and less visible, complementary means to achieve a predatory goal than mere price cuts.
Highlights
Open AccessIn this paper, I investigate a case of alleged predatory behaviour in the UK which has received much attention in the 1990s, namely the “price war” in the weekly quality broadsheet newspaper industry
Whereas this rule served as the simple standard test for predatory behaviour in the courtroom it has been noted that the rule is insufficient for two-sided markets such as newspapers
In order to distinguish illegal from competitive behaviour, Gual et al [4] on page 23 of their guidelines for interpretation of EU law claim that modern legal analysis, incorporating the findings of economic theory, should “carefully identify a precise story of competitive harm and the restrictions on the facts that need to be established in order to substantiate it”
Summary
I investigate a case of alleged predatory behaviour in the UK which has received much attention in the 1990s, namely the “price war” in the weekly quality broadsheet newspaper industry. I argue instead that the newspaper industry is a prima facie case for an analysis that should be conducted in terms of the standard Hotelling location model of horizontal product differentiation The adequacy of this model implies that there is an important non-price dimension to this case which a predator may use as an instrument to adversely affect a potential prey. Much of the legal focus in actual cases has traditionally been on pricing conduct and in particular the Areeda-Turner pricing rule of “ pricing below cost” Whereas this rule served as the simple standard test for predatory behaviour in the courtroom it has been noted that the rule is insufficient for two-sided markets such as newspapers (e.g. see Wright [6] or Anderson and Gabszewicz [7]). Looking at circulation and pricing data from the period I am able to “bring data to the model” and find that this second, non-price dimension explains much of the damage done to the prey’s profit in this period
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