Bulgaria's Watchdog Slaps Dumping Fine on Murky Media Tycoon

Owner of the New Bulgarian Media Group Irena Krasteva (right) pictured here with US Ambassador James Warlick (middle) during a discussion about media freedom organized by the German foundation Konrad Adenauer on June 18, 2010. Photo by BGNES

Bulgaria’s Competition Protection Commission has imposed a BGN 27 150 fine on the New Bulgarian Media Group owned by murky tycoon Irena Krusteva for dumping and unfair newspaper pricing.

According to the competition watchdog, the Express BG Daily, a Bulgarian tabloid whose publication was terminated in January 2010, was deliberately sold cheaper than its cost price from 2007 until 2009, which is deemed “unfair attracting of clients” in the wording of the Commission.

The imposed sanction of BGN 27 150 is 0.5% of the total turnover of the tabloid for 2009. The watchdog has taken into account the fact that the paper was technically shut down in January 2010.

In fact, the Express BG Daily was transformed into a sports tabloid daily called “Zasada” (“Ambush”) sold for BGN 0.4 per issue.

The Competition Protection Commission, however, has not imposed a fine on the New Bulgarian Media Group for a similar practice employed for the pricing of the Telegraph Daily, another one of its newspapers.

The watchdog has ruled that the same unfair competition price dumping was used for the Telegraph Daily but only for a period of five months in 2007, and this is considered too short a period to manage to attract new clients thanks to the lower prices. Therefore, the case of the Telegraph Daily is not considered a violation of the law.

The suit against the Express BG Daily and the Telegraph Daily, both owned by the New Bulgarian Media Group known for its controversial and murky deals and alleged political connections, was filed by the 168 Chasa Weekly newspaper owned by a competitive company, the German-owned WAZ Media Group Bulgaria Holding, which also publishes the two most popular Bulgarian papers, the Trud Daily and the 24 Chasa Daily.

In its suit, the WAZ newspaper states that the papers owned by Irena Krasteva’s New Bulgarian Media Group “maintain artificially unreal market prices which must be viewed as a centralized policy for aggressive overtaking of the market by this particular economic entity.”

Over the past 2-3 years, Krasteva, who is a former head of the Bulgarian State Lottery “Toto 2”, became notorious by acquiring rather quickly a number of Bulgarian newspapers and cable TV stations.

Her “New Bulgarian Media Group” is believed to be funded by the Corporate Commercial Bank, owned by Tsvetan Vasilev, and to be politically connected with the ethnic Turkish party DPS (Movement for Rights and Freedoms). Krasteva herself has denied recently any connections to political and business circles.

After a demand by the managers of the other Bulgarian media, the Bulgarian Finance Ministry recently revealed that hundreds of millions of BGN of Bulgarian state-owned companies are deposited in the Corporate Commercial Bank, which otherwise has a negligible market share.

Krasteva’s son, Delyan Peevski is currently a Member of Parliament from the DPS party. He was a Deputy Minister of Emergency Situations in the Stanishev government in 2005-2009, and was dismissed at one point by former Prime Minister Sergey Stanishev over violations but was restored to his position with a court decision.

According to the pricing analysis presented by the WAZ Group with the filed suit against the New Bulgarian Media Group, the total income of the Express BG Daily from newspaper sales in 2008 amounted to BGN 195 000; at the same time, it got BGN 55 000 from selling the unsold issues for recycling paper.

The analysis shows that if divided by the total number of issues for 2008 – 230 issues with an average of 11 998 copies, the sales revenue of the paper was BGN 0.7 per copy. When calculating the advertising revenue, it rose to BGN 0.116 per copy.

As for the Telegraph Daily, its revenue in 2008 amounted to BGN 5.3 M. Divided by 355 issues with an average of 82 903 copies daily, the income per copy amounted to BGN 0.18. When advertising revenue of BGN 0.063 per copy is calculated, this figure rose to BGN 0.243.

According to WAZ, the minimum cost for the printing of one copy of the Express Daily was BGN 0.15, and of the Telegraph Daily – BGN 0.21.

Based on this analysis, the publishers of the 24 Chasa Daily and Trud Daily claim that the New Bulgarian Media Group papers were sold below their cost price in order to overtake the market. Express BG was sold at BGN 0.30, which Telegraph costs BGN 0.40.

At the same time, both the 24 Chasa Daily and the Trud Daily sell for BGN 0.90.

In their defense, the lawyer of the New Bulgarian Media Group described the analysis of the WAZ papers as “unproven and unfounded” and claim in turn that the German-owned company has the greatest opportunities to influence the Bulgarian media market over the last 15 years thanks to the large number of its publications, its own printing house, and distribution company, and the practice of “mirror advertising”, i.e. publishing the same ads in its both major dailies.

The company owned by Irena Krasteva has provided figures of its own about the circulation and cost of the issues of the Express BG and Telegraph. These figures, however, have not been made publicly available by the Competition Commission because they are a trade secret. This makes it impossible for outsiders to compare the two sets of figures.

The competition watchdog points out that the Express BG Daily was sold below its cost price for a period of three years, which proves “a deliberate policy” because in the case of “wrong” or “emergency” management measures, the price would be corrected within a short period of time.

The period from August till December 2007 when the Telegraph Daily was sold below its cost price is deemed insufficient in order to tilt the market in its favor. The Commission points out that the sales of the paper started growing immediately after its price was increased. Its ruling can be appealed within 14 days.

Within a very short period of time in 2007-2009, Krasteva’s New Bulgarian Media Group acquired a number of newspapers and cable TV stations – including Monitor, Telegraph, Express, Weekend, Politika, Borba, Maritsa, TV 7, BBT TV, and the IPK Rodina publishing house. The New Bulgarian Media Group is believed to have connections with the bnews media of former top bTV channel morning show host Nikolay Barekov.

According to a recent report of the Kapital Daily, all of these media outlets are immensely unprofitable and keep generating enormous losses, with 70% of their advertising revenue coming from the Corporate Commercial Bank; at the same time, Krasteva’s son, MP Peevski is reported to be the person practically running all of these media by deciding on front page articles and editorial policy.

The papers and TV stations of the New Bulgarian Media Group are generally known for not voicing any criticism of the DPS party or of the Bulgarian Socialist Party by adopting a “no mention” policy.

They appear to have recently adopted a policy of explicitly and excessively praising the government of the GERB party and Prime Minister Boyko Borisov leading to many to suspect that GERB and the ethnic Turkish party DPS have made a secret grand deal for cooperation.

Bulgarian Prime Minister Boyko Borisov has denied any such claims saying that the New Bulgarian Media Group papers and TV channels are deliberately praising him excessively in order to fuel such suspicions and to destroy his image by trying to make people believe he is secretly allied with the DPS. Borisov has constantly been portraying the DPS leader Ahmed Dogan as his political archenemy.

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