Competition Commission of South Africa v Media 24 (Pty) Limited

The Competition Commission investigated a complaint by Gold Net News (GNN) that Media24 (through its community newspapers Vista and Forum in Welkom) abused its dominant position by engaging in predatory pricing between 2004-2009. GNN alleged Media24 drastically cut advertising rates below market price, forcing GNN to close in April 2009. Media24 closed Forum nine months later in January 2010. The Commission referred the matter to the Competition Tribunal in 2011, alleging contraventions of section 8(c) and alternatively section 8(d)(iv) of the Competition Act. The Tribunal found that Media24 had not priced below average avoidable cost (thus no violation of section 8(d)(iv)), but had priced below average total cost with intention to predate, violated section 8(c). Media24 appealed successfully to the Competition Appeal Court, which held that subjective intention was irrelevant to predatory pricing analysis and that average total cost was not an appropriate cost standard under section 8(c). The Commission then sought leave to appeal directly to the Constitutional Court without first seeking leave from the Competition Appeal Court or approaching the Supreme Court of Appeal.

• Whether this Court has jurisdiction to hear the matter as it raises a constitutional issue or arguable point of law of general public importance
• Whether the Commission was required to first seek leave to appeal from the Competition Appeal Court before approaching the Constitutional Court
• Whether the Commission should have first appealed to the Supreme Court of Appeal
• Whether pricing below average total cost coupled with evidence of predatory intent constitutes predatory pricing under section 8(c) of the Competition Act
• What is the appropriate cost standard for determining predatory pricing under section 8(c)
• Whether subjective intention to predate is relevant to determining predatory pricing under section 8(c)
• The interpretation and application of section 8(c) read with section 8(d)(iv) of the Competition Act

1. Leave to appeal is granted. 2. The appeal is dismissed with costs, including the costs of two counsel.

A majority of the Court held that: 1. The Constitutional Court has jurisdiction to hear competition matters that raise arguable points of law of general public importance, even though section 62 of the Competition Act gives the Competition Appeal Court exclusive and final jurisdiction, because section 167(3)(b)(ii) of the Constitution cannot be limited by statute. 2. Where it is in the interests of justice, litigants may appeal directly to the Constitutional Court from the Competition Appeal Court without first seeking leave from that Court, as section 167(6)(b) of the Constitution permits direct appeals and prevails over section 63(2) of the Competition Act. 3. Under section 8(c) of the Competition Act, the test for predatory pricing is objective and effects-based, requiring proof that: (a) the pricing conduct constitutes an exclusionary act (impeding or preventing market entry/expansion); and (b) the anti-competitive effects outweigh any pro-competitive gains. 4. Average total cost is not an appropriate cost standard for determining predatory pricing under section 8(c) because: (a) firms can legitimately price below average total cost while still competing on merits; (b) it creates a de facto price floor that undermines competitive pricing; (c) it is easily manipulated in multi-product firms; and (d) it prevents firms from exploiting economies of scale. 5. Subjective intention to predate is not a relevant consideration under section 8(c), as all competitive firms intend to gain market share from rivals, and intention does not assist in evaluating the likely economic effects of pricing decisions.

Goliath AJ observed (in the minority on merits) that: (1) there may be circumstances where pricing above average avoidable cost but below average total cost could constitute predatory pricing, particularly where a multi-product dominant firm competes against an equally efficient single-product firm, or where the predation occurs over a long period affecting the competitor's ability to recover fixed and sunk costs; (2) while subjective evidence of intention alone is insufficient, objective evidence of a predatory scheme (including indirect evidence of intent, recoupment, and the equally efficient competitor test) may be relevant when combined with pricing below average total cost; (3) the appropriate cost standard should depend on the specific facts of each case rather than rigid application of any single standard; (4) protection under competition law should not be limited only to equally efficient competitors, as less efficient competitors may enhance consumer welfare in monopolistic markets; (5) the investigatory and prosecutorial powers of the Competition Commission should not be unduly restricted. Theron J observed that: (1) this Court has jurisdiction over mixed questions of fact and law where application of a legal rule is required; (2) determining the appropriate benchmark for predatory pricing involves examining policy and normative implications, making it a legal rather than purely factual question; (3) the question whether the Supreme Court of Appeal retains jurisdiction over competition matters following the 17th Constitutional Amendment should be left open.

This is the first Constitutional Court case dealing comprehensively with predatory pricing under South African competition law. The case establishes important principles regarding: (1) the Constitutional Court's jurisdiction over competition matters (confirming jurisdiction over arguable points of law of general public importance, not just constitutional matters); (2) the procedure for appealing competition matters to the Constitutional Court (clarifying that section 167(6)(b) of the Constitution allows direct appeals when in the interests of justice, without necessarily first seeking leave from the Competition Appeal Court); and (3) the appropriate legal and evidentiary standards for proving predatory pricing under section 8(c) of the Competition Act. While the Court was divided on the substantive test for predatory pricing, the majority rejected the use of average total cost plus intention as an appropriate standard, emphasizing that section 8(c) requires an objective, effects-based analysis focused on exclusionary impact and balancing anti-competitive versus pro-competitive effects. The case highlights the tension in competition law between protecting price competition (which benefits consumers) and preventing exclusionary conduct by dominant firms that harms long-term competition.