Watchdog: MultiChoice, SABC deal is a merger

The Competition Commission has ruled that a 2013 channel distribution agreement between the SABC and MultiChoice constitutes a notifiable merger.

The watchdog 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 Motsoeneng got an R11m “bonus” for negotiating the deal.

The ruling has taken MultiChoice and the SABC by surprise as it contradicted two previous rulings by the Competition Tribunal and the Competition Appeal 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 Competition 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 Appeal Court gave the go-ahead for a limited investigation by the commission. The commission had sought to interview SABC and MultiChoice executives who had entered into the agreement, but this was not 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 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.

“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 they 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 ministers of communication and the ANC wrangling over policy.

Asked why they had gone against previous rulings by the tribunal and the Competition Appeal 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.

MultiChoice group executive for corporate affairs Joe Heshu said: “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 they did not agree the MultiChoice deal 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.”