SOUTH AFRICA – The Competition Tribunal found on Thursday that a 2013 deal between the SABC and MultiChoice that would give the Pay-TV company the right to air two of the public broadcaster’s channels, did not constitute a merger to be notified in terms of the Competition Act.

A complaint had been brought by Caxton, the Save Our SABC Coalition and Media Monitoring Africa. The complainants said the agreement was a merger that had not been notified. They sought an order that the SABC and MultiChoice notify the deal as a merger.

There were two main concerns raised by Caxton regarding the agreement.

Firstly, it was concerned that the agreement gave MultiChoice an exclusive license to use certain SABC 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, Caxton was concerned that the SABC 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 and whether it conferred on MultiChoice control over SABC’s television broadcast strategy in respect of its stance on the digital terrestrial policy.

The Tribunal found that Caxton’s case was weakened as the case progressed. When Caxton brought the case it was based on the interpretation of the original agreement, which was leaked and entered the public domain, according to the Tribunal.

However, the agreement was amended on three subsequent occasions and this changed the ambit of the constraints and diluted certain rights that the original agreement conferred on MultiChoice.

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 (for instance 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 that the SABC channels carried on MultiChoice would be broadcast on an unencrypted, open access format.

It was on this that the applicants relied in making their further argument that the agreement constituted a merger as they argued MultiChoice would have control of the business.

The Tribunal found the terms of the agreement were too limited in scope to justify a conclusion that MultiChoice was assuming control over SABC’s business, as the section required.

Caxton sought, in the form of alternative relief, that the Tribunal directs the Commission to investigate the matter further, should it not find that the transaction amounts to a merger.

The Tribunal, therefore, 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.

February 11, 2016;