SABC, MultiChoice deal ruled a merger
Competition Commission finds the 2013 transaction amounted to a merger
The Competition Commission has ruled that a channel distribution agreement between the SABC and MultiChoice signed in 2013 constitutes a notifiable merger.
It wants the public broadcaster and Africa’s largest pay-TV operator to register the transaction as a merger, failing which they will be in violation of competition laws. The five-year agreement worth R500m, gave MultiChoice the right to broadcast SABC’s 24-hour news channel and an entertainment channel, SABC Encore.
In 2015 it emerged that as part of the deal the SABC undertook to back MultiChoice’s position on digital migration, which was that set-top boxes to convert the digital signal to analogue after migration would not be encrypted. Then SABC COO Hlaudi Motsoneng got an R11m “bonus” for negotiating the contract.
The ruling by the commission has taken both MultiChoice and the SABC by surprise as it contradicted two previous rulings by the Competition Tribunal and the Competition Appeals Court that the agreement was not a merger. MultiChoice has indicated it will appeal.
The unexpected turn of events comes after a ruling by the Constitutional Court in October in a case brought by Caxton and lobby group Save our SABC (SOS) to appeal against the Competitions Appeal Court decision. Caxton and SOS argued that the agreement was a notifiable merger and that MultiChoice and the SABC had contravened the Competition Act by not notifying the commission.
In 2016 the Competition Appeals Court gave the go-ahead for a limited investigation by the commission. The commission had sought to interview executives at both the SABC and MultiChoice who entered into the agreement but this had not been allowed. Caxton and SOS appealed against the decision at the Constitutional Court, with the commission as an interested party. The court ruled in October that the scope of the investigation could not be restricted, allowing the commission to investigate further and interview executives who signed the agreement.
On Friday the commission concluded that while the entertainment channel agreement did not constitute a merger, MultiChoice’s role in influencing the SABC’s policy on the encryption of set-top boxes made this a notifiable merger between the public broadcaster and the Naspers-owned operator.
“The commission will call upon MultiChoice and the SABC to file the transaction in terms of 13A(1) of the Act as a merger. 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].”
Policy uncertainty has frustrated efforts at digital migration, leaving SA years behind other countries in the region. The upshot has been a delay in the release of high-value spectrum required for broadband services that is still occupied by broadcasters. The encryption policy debate has been at the centre of the controversy with successive ANC ministers of communication and the ANC wrangling over policy.
Asked why they had gone against previous rulings by the tribunal and the Competition Appeals Court, commission spokesperson Sipho Ngwema said their decision was based on new facts, which outlined the role MultiChoice played in influencing the SABC’s decision on the encryption of set top boxes.
“The decisions of both the Tribunal and CAC [Competition Appeals Court] were based on the information before them. Subsequently, the Constitutional Court ruled that the commission could and should conduct an investigation into the transaction. This duly happened and new facts have emerged that MultiChoice did influence the SABC,” Ngwema said.
MultiChoice group executive for corporate affairs Joe Heshu said they disagreed with the commission’s recommendation.
“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,” Heshu said.
SABC spokesperson Neo Momodu said in a statement that they had taken note of the commission’s ruling but they also did not agree that the agreement with MultiChoice constituted 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.”