On Tuesday, the Competition Commission announced that it has referred 28 media companies to the Competition Tribunal for prosecution on charges of price fixing and the fixing of trading conditions, which were found to be in contravention of the Competition Act.
28 media companies to be prosecuted for cartel conduct
For Immediate Release
27 February 2018 pic.twitter.com/wwDpzBiWQH
— CompComSA (@CompComSA) February 27, 2018
The Competition Act of 1998 states that prohibited practises of companies includes agreements between firms which has the effect of preventing or lessening competition in a market. Also prohibited is the practice of directly or indirectly fixing a purchase or selling price or any other trading condition.
An investigation, which was initiated in 2011 by the Commission, found that through the Media Credit Coordinators (MCC), various media companies agreed to offer similar discounts and payment terms to advertising agencies which placed advertisements with MCC members.
The investigation has found that members who were accredited with the MCC were found to be offered a 16.5% discount while companies who were not accredited with the MCC were only offered a 15% discount.
The Commission has also found that the 28 implicated companies employed the services of a intermediary company, Corex, to perform risk assessments on advertising agencies for the purposes of imposing a settlement discount structure and terms on advertising agencies.
The practises that the media companies have been undertaking of restricting competition amongst competing companies has been found to be in contravention of the Competition Act.
The Commission has stated that by referring the matter to the Tribunal for prosecution, the commission wants to seek an order which says that these companies contravened the Act and therefore should be liable to pay a penalty.
The 28 media companies who have been implicated are:
Mail & Guardian
Mtv Networks Africa
Conde Nast Independent Magazine
Carpe Diem Media
Rodale And Touchline
Continental Outdoor, and
Media Credit Coordinators.
On Friday, February 16, the Commission revealed their findings on Caxton and Independent. Independent Media, Caxton and CTP Publishers and Printers, and DStv Media Sales admitted to the charges. These companies have agreed to pay charges as administrative penalties as part of settlement agreements with the Commission.
Independent are to pay R2.2 million, while Caxton and DStv Media Sales will be paying R5.8 million, and R22. 2 million respectively. The companies will also need to contribute towards the Economic Development Fund over the next three years. The fund looks at developing black-owned small media or advertising agencies that require assistance with start-up capital, and will assist black students with bursaries to study media or advertising.
Towards the fund, Caxton will be paying R2 million, Independent will pay R799 417 and DStv Media Sales will pay R8 million.
“This is one of the legacy media practises that survived the introduction of the Competition Act in South Africa. It is a problem because it consolidates operations of a few media houses that gang up against mainly small advertising agencies,” said Competition Commissioner Tembinkosi Bonakele.
Sipho Ngwema, the head of communications at the Competition Commission said in an interview with The Daily Vox that from the 28 companies, Avusa and The Citizen has not been asked to pay the penalty as they have settled with the commision.
As for the other companies, Ngwema said if the tribunal finds them guilty, they will be penalised.
Regarding how bad these findings are for South African media, Ngwema said: “The conduct and practise is bad because it denies the smaller agencies and is a barrier to the smaller agencies. Because you must remember if they are not credited and discounts are given to the bigger ones, it means you are stifling the business of the smaller agencies. And most of those smaller agencies would be black. So they are not opening up the market and they are keeping the market to the big ones who have always dominated the market.”
Ngwema said moving forward they would like these companies to comply with the law, saying “They know the law and the Competition Act which lays down the rules on how people should compete. They should compete fairly within the rules and they must not be involved in cartels where they fix prices and fix terms of trading.”
Ngwema said for now none of the companies have officially come forward and denied the charges.
Kate Skinner, the director of the South African National Editors Forum (SANEF) said the organisation has asked the individual media companies to comment on the issue.