Predatory EMMA? ACCC suggests discounting could be 'pro-competition'

By Brendan Coyne | 6 September 2013
 
Roy Morgan chief executive Michele Levine.

Roy Morgan's CEO has suggested that the heavy discounting of the EMMA readership metric may be predatory pricing. However the ACCC told AdNews that price cutting or underselling competitors is “not necessarily predatory pricing and in many cases lowering prices is pro-competitive”.

Levine made the comments in relation to this article, where a media buyer flagged that EMMA could be given away for a year and then heavily discounted. AdNews also flagged that issue last month.

Mal Dale, Readership Works managing director, admitted the product would be heavily discounted at the launch of the metric in August. “In return for your consideration [Ipsos will offer] favourable terms,” he said.

Roy Morgan circulated Levine's statement yesterday. She noted it was “not absolutely clear to us who will be held legally responsible if the proposed ‘giving away’ of the research is held to breach the Cartel Conduct provisions of the Competition and Consumer Law: News Corp as the major source of funding for the research; Newspaper Works, the newspaper industry body responsible for commissioning and controlling the research; or Ipsos the research company commissioned to conduct the survey and apparently now responsible for marketing and selling”.

Levine noted that the “consequences of ‘predatory pricing’ are very serious. For instance a finding against News Corp would have ramifications both in Australia and in the US. A finding against Ipsos would have consequences in Australia and potentially in France”.

“A further point is whether there is other cartel conduct involved. We do not know whether or not newspapers have sought to increase their advertising rates as a result of the higher readership levels reported in their survey.”

The ACCC  told AdNews it would not comment on individual cases but has suggested that discounting could actually be pro-competitive. However, its statement does leave some ground for Roy Morgan to explore.

“It is the presence of sustained very low pricing combined with an anti-competitive purpose that may turn price cutting by a business with substantial market power or market share into predatory pricing under the Competition and Consumer Act 2010,” a spokesperson said.

In a statment, the ACCC added that predatory pricing occurs when a company with substantial market power or share of a market sets its prices at a sufficiently low level with the purpose of:

  • eliminating or substantially damaging a competitor
  • preventing the entry of a competitor into that or any other market
  • deterring or preventing a competitor from engaging in competitive

The ACCC added that: "The specific predatory pricing prohibition prevents businesses with a substantial share of a market, having regards to the number and size of its competitors in the market, from selling goods or services for a sustained period at a price below their relevant cost of supply. A business must still act with an anti-competitive purpose. One key element in this consideration is that the ‘relevant cost’ is the cost of the business discounting, not the business who is raising the concerns."

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