The Office of Fair Trading has fined Aberdeen Journals, publisher of the Press and Journal, Evening Express and free Herald & Post, £1.3m for abusing its dominant market position.
The penalty follows an investigation into predatory advertising pricing after a series of complaints, dating from 1996, from the Aberdeen &District Independent.
The latest, from Independent managing director Paul Robins in 1999, claimed Aberdeen Journals, owned by Northcliffe Newspapers and, ultimately, by the Daily Mail & General Trust, had deliberately lost money on the Herald & Post advertisements in the hope of closing down the Independent.
But a spokesman for Northcliffe Newspapers said the company would be appealing to the Competition Commission on both the decision and on the penalty imposed. Northcliffe is said to feel strongly about the outcome and is prepared to fight it vigorously.
The battle between the two groups began in 1996 with a failed legal bid by Aberdeen Journals to stop the Independent launching. Six months later, the Independent first complained to the OFT that Aberdeen Journals was offering free advertising in the Herald & Post, provided advertisers agreed not to advertise in any other free newspaper.
In 1997, Aberdeen Journals gave a written assurance to the OFT that it would discontinue the practice. But a year later, the OFT found the company had breached those assurances.
John Bridgeman, then the OFT’s director general, warned that in March 2000 he would be able to impose penalties of up to 10 per cent of UK turnover for each year of infringement. Aberdeen Journals had a turnover of £33.9m.
This week, the OFT decided Aberdeen Journals had incurred losses on the Herald & Post in an attempt to expel the Independent from the market.
John Vickers, OFT director general, said: "Aberdeen Journals engaged in a persistent campaign of predatory conduct against the Aberdeen & District Independent. Despite an OFT investigation already being in train, this anti-competitive conduct did not stop when the Competition Act came into force last year.
"Predatory behaviour undermines competition. It is a serious infringement and the penalty has been set to act as an adequate deterrent." Vickers took into account Aberdeen Journals’ full co-operation throughout the investigation, and that it had taken rapid steps to cease its infringement – "albeit in the face of an active investigation, and an explicit warning that it was at risk".
Robins said his reaction was mixed. "I am pleased that the OFT has agreed with us and fined them but I am disappointed that Aberdeen Journals had to take these steps.
"After the second time, they might have thought, ‘Hold on, we just have to react lustily but not illegally’. It seems strange to me they have continued. Hopefully this is the end of the matter."
By Jean Morgan