Monday, November 12, 2018

Competition Commission rules that MultiChoice and the SABC's TV channels contract for SABC News and SABC Encore amounts to a notifiable merger and should be declared.

South Africa's Competition Commission on Friday ruled that the highly-controversial TV channels contract for SABC News (DStv 404) and SABC Encore (DStv 156) between Naspers' pay-TV arm, MultiChoice and the South African public broadcaster constitutes a merger and should be declared as such.

The Competition Commission ruled that the controversial channel distribution agreement between MultiChoice and the SABC amounting to hundreds of millions of rand first signed in 2013 constitutes a notifiable merger, and has ordered MultiChoice and the SABC to register the transaction as a merger or be in breach of South Africa's competition laws.

It recently emerged that MultiChoice allegedly placed pressure on the SABC to, as a prerequisite for signing the deal, back MultiChoice's position on the encryption standard to be used for set-top boxes (STBs) in South Africa's switch from analogue to digital terrestrial television (DTT).

After the signing of the extremely controversial deal, the SABC paid its controversial famously matricless and now fired former chief operating officer (COO) Hlaudi Motsoeneng a massive R11 million "signing bonus".

The Competition Commission's ruling comes after the Caxton media group and the public broadcasting and media freedom pressure groups SOS Coalition and Media Monitoring Africa (MMA) appealed against a ruling of the Competition Appeals Court at the Constitutional Court and won, granting the Competition Commission the right to investigate whether the channel carriage agreement constituted a notifiable merger.

The Competition Commission has now ruled that while the agreement for the TV channels provided by the SABC to MultiChoice doesn't constitute a merger between MultiChoice and the SABC, that MultiChoice's role in influencing the SABC's stance on the government and public policy regarding STB encryption does represent a notifiable merger between Naspers' MultiChoice and the South African public broadcaster.

"The commission will call upon MultiChoice and the SABC to file the transaction in terms of 13A(1) of the Act as a merger," says the Competition Commission.

"If the parties fail to notify the transaction as a merger, the commission will exercise its rights in terms of the Act to refer the matter as a contravention [of the Act]."

"The SABC categorically and unequivocally undertook in favour of MultiChoice not to encrypt all of its channel signals in respect of its free-to-air channels transmitted on its digital TV platform."

"The commission found that the encryption of SABC's free-to-air channels, including STB control, would have enabled new entrants into the market and that the agreement had the effect of protecting MultiChoice's dominance in the pay-TV market."

"In terms of the Competition Act, the ability by one company to materially influence the policy of another company through various legal instruments, including an agreement, constitutes a notifiable merger transaction which must first be approved by competition authorities before it is implemented."

"The reason why the Competition Act requires that such agreements should first be scrutinised by the competition authorities before they are implemented is because they could have a significant impact on the competitive process and raise significant public interest issues, which ought to be investigated by competition authorities."

"In this case, the SABC and MultiChoice failed to seek prior approval of the commission before implementing the agreement."

The Competition Commission has filed a report with this finding with the Competition Tribunal.

SABC 'concerned'
The SABC's spokesperson Neo Momodu on Monday in a statement in response to a written media enquiry from TVwithThinus said that "the SABC has noted with concern the Competition Commission's ruling on the SABC and MultiChoice agreement entered into in July 2013 and which has since expired".

"The SABC has since entered into a new commercial channel supply agreement with MultiChoice which in the SABC's understanding, does not constitute a merger."

"The SABC board is reviewing the Commission's recommendations in relation to the encryption part of the 2013 agreement and will respond appropriately in due course. The SABC remains committed to ensure compliance with applicable competition laws".

MultiChoice says it's not a merger
Joe Heshu, MultiChoice's group executive for corporate affairs didn't respond to a written media enquiry TVwithThinus made on Monday about the ruling.

Joe Heshu told Business Day that "we've noted the recommendation of the Competition Commission".

"Our view remains that the 2013 agreement between MultiChoice and the SABC was not a merger but a standard channel supply agreement."

"We have not been presented with the new facts to which the commission refers, nor the opportunity to refute them. We will make further representations in the process to be conducted before the Competition Tribunal."