SABC and Multichoice
11 February 2016
Tribunal finds SABC and MultiChoice deal does not constitute a merger
A complaint had been brought by Caxton, Save Our SABC Coalition and Media Monitoring Africa regarding a deal between SABC and MultiChoice that would give the pay-tv company the right to air two of the public broadcaster’s channels. The complainants said the agreement was a merger that had not been notified.
The Tribunal today, however, found that the deal did not constitute a merger. They said Commercial and Master Channel Agreement, entered into between MultiChoice and the SABC in July 2013 (“the Agreement”) did not give rise to a notifiable merger in terms of the Competition Act.
There were two main concerns raised by Caxton regarding the Agreement. Firstly, the Agreement gave MultiChoice an exclusive license to use certain SABC (South African Broadcasting Corporation) content to broadcast on an entertainment channel on the DStv Bouquet called Encore. This channel is assembled from archive material owned by the SABC. Secondly, the SABC has agreed to broadcast its SABC 1, 2 and 3 channels, and any future channels, on an unencrypted basis and without any conditional access system.
The Tribunal was called upon to decide whether the Agreement altered the control structure of SABC’s businesses in that it provided MultiChoice with control over SABC’s archived programmes (“archive Case”), and whether it conferred on MultiChoice control over SABC’s television broadcast strategy in respect of its stance on the digital terrestrial policy (“encryption case”).
The Tribunal found that Caxton’s case was weakened as the case progressed. The simple reason for this was that when Caxton brought this case it was based on the interpretation of the original Agreement, which was leaked and entered the public domain. However, the Agreement was amended on three subsequent occasions that changed the ambit of the constraints - in respect of the archive - placed on the SABC, and diluted certain rights that the original agreement conferred on MultiChoice.
It was a major part of Caxton’s case that the SABC had given up the rights to broadcast its valuable archive to its own viewers, not to mention precluding itself from licensing it to other broadcasters. This initial view was proved incorrect, as the subsequent amendments to the Agreement granted SABC the right to re-broadcast material that had been broadcast on Encore, subject to a minimum delay, which the Tribunal held to be commercially insignificant.
The Tribunal further found that the entire archive was not barred from use by the SABC but merely the portion that related to the entertainment channel, and was then still subject to the minimum rebroadcasting delays. This content was furthermore selected by the SABC, subject to the veto right that MultiChoice enjoys relating to the standards of quality the channel needs to meet.
A further effect on the market that the Tribunal had to consider was whether the Agreement hampers a rival (e.g. Top TV) or a new entrant, by taking away a resource that may represent a market share opportunity to a rival. The Tribunal held that even if a rival might have wanted to get rights to the archive that the loss of such an opportunity does translate into a business for purposes of the Competition Act.
All of this, the Tribunal held, was not enough to allow Caxton to establish that the exclusivity granted in favour of MultiChoice constitutes a measurable and relatively permanent transfer of market share or productive capacity from SABC to MultiChoice.
There is a clause in the agreement that says the channels would be broadcast on an unencrypted, open format. (Applicants said this was contrary to the position originally taken by SABC with regard to encryption.) It was on this that the applicants relied in making their argument that MultiChoice would have control of the business.
The Tribunal found the terms of the argument were insufficiently brought to justify as control over a business as the section required.
Caxton sought, in the form of alternative relief, that the Tribunal direct the Commission to investigate the matter further, should it not find that the transaction amounts to a merger.
Thus the Tribunal found that, on the present record, the applicants have failed to make out a case that the transaction constitutes a notifiable merger, or that it justified the Commission to investigate whether it constituted a merger.
Communications: Competition Tribunal
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On Behalf Of:
Registrar: Competition Tribunal
Tel: (012) 394 3355
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