According to some agency sources, Associated, which this week launched its free London Lite product a week ahead of News International's thelondonpaper, is undercutting its rival by more than 10 per cent.
One press director said: "It is offering more than 10 per cent off what thelondonpaper is delivering. This is crucial when demonstrating the cost per thousand to advertisers."
Associated is also said to be offering large discounts to Evening Standard advertisers that also buy space in its London Lite edition.
Steve Auckland, the head of Associated's free newspaper division, said: "All these things settle down, but we have deliberately priced at a position to get towards profitability."
News International has accused Associated of launching London Lite as a spoiler. Ian Clark, the general manager of News International Free Newspapers, said: "There are some very overt bits that relate very closely to what we are doing. We've had a year working on this and have had journalists in place for a month or two and it seems the better bits of London Lite are lifted directly from the Standard."
Auckland said Associated has been working on the title since April, having conceived the idea four years ago.
Some expressed disappointment with the London Lite product. Mark Gallagher, the press director at Manning Gottlieb OMD, said: "It's very much Standard Lite with a bit of a twist. I wonder whether this is written by the target market for the target market or by people reacting to competition."