CompCom to investigate Showmax shutdown

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JIMMY MOYAHA: The Competition Commission has announced that it will potentially be looking to investigate the shutdown of Showmax. This was announced recently by Canal+, the company that purchased MultiChoice.

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And we’re going to be looking at this in more detail with the spokesperson at the Competition Commission, Siyabulela Makunga, who joins me on the line now to see what to make of it.

Siya, lovely having you on the show, as  always. Thanks so much for taking the time. Why is the Competition Commission interested in investigating this at this point?

SIYABULELA MAKUNGA: I must put this into perspective. This is not a matter of a fresh investigation. In the normal course, the commission would monitor each and every measure where conditions have been recommended and approved by the Competition Tribunal for implementation.

This, of course, seeks to ensure that there’s transparency, there is clarity in terms of the commitments that the parties would have undertook and put before the commission as part of the merger agreement – and, in layman’s terms, an order to say we approve and/or apply for this measure to proceed.

We are making this commitment to do one, two, three and four.

It’s in the normal course that the commission would monitor implementation of such undertakings. In this case, a matter that has been raised and put before the commission [is the] terms of the closure and discontinuation of Showmax.

But we must also state that in the normal course of events, the parties are not obliged to get approval from the competition authorities in terms of this particular close of business, especially if it was put before the commission that it would consider discontinuing this subsidiary, a company called Showmax.

However, the commission has said it appropriate that it investigates the discontinuation to see if there are any material effects and/or substantive issues that arise as a result of this particular discontinuation.

I’m talking about issues of retrenchment, issues of really looking into how this will impact the landscape in the audiovisual space or broadcast industry.

JIMMY MOYAHA: Siya,  before we look at the potential impact of the discontinuation, can we recap on the conditions that were set precedent to the transaction initially?

We know that this went all the way to the Competition Tribunal, and there were conditions for the transaction to be approved. Can we just recap on those and perhaps get an understanding of what the ongoing due diligence relates to?

SIYABULELA MAKUNGA: Thank you very much for raising this question, because it’s important for our listeners to understand what conditions were there before the news frenzy, in terms of this discontinuation. The commission had approved this deal subject to the following conditions.

One, there will be no major specific retrenchments for a period of three years, and there will be a focus of expenditure on local content.

This would obviously look at benefitting local suppliers that are operating –  the small, medium and obviously historically disadvantaged persons –  but that the parties would also ensure that there will be greater access to international content on sporting events involving South Africa.

I’m talking about the Bafana Bafana games, I’m talking about the rugby games and all other games that would be viewed as games that are in the interest of all South Africans to view.

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[It was also] to say while we had noted that this deal was investing about R15 billion into our economy, which was a significant and positive contribution to our economy, we make sure that the deal is approved with conditions that we’re looking at in the public interest – issues that arose as a result of this merger.

JIMMY MOYAHA: Now, Siya, let’s take a look at some of the potential impact that you allude to. How would this be dealt with from a Competition Commission perspective in the event that the investigation results in an adverse finding of some breaches on the part of Canal+ or MultiChoice?

How does the Competition Commission typically deal with these after a transaction has been approved?

SIYABULELA MAKUNGA: This is in the normal course of the work that we, the commission, do. It should define any entity that is in contravention or in breach of the conditions and undertakings that would have been imposed by the Competition Tribunal.

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And you would understand that an order of the Competition Tribunal is really an enforceable decision where, if not adhered to, there will be administrative penalties that would go up to 10% of the entity’s annual turnover.

This obviously would be referred back to the Competition Tribunal to consider.

As you are aware, the Competition Tribunal is the only competent entity that would help to relook at the matter, because the order was in the first instance issued by the Commission Tribunal.

JIMMY MOYAHA: Now, Siya, a part of the conditions you alluded to is that jobs need to be secured and guaranteed for that three-year period. But we’ve also seen in the reports that have circulated in the media that local content producers are part of the groups of people concerned around their futures here.

Given that we are dealing with jobs and the potential for jobs to be disrupted, does this mean that the tribunal might consider alternative measures in the event that something is found to be amiss in this regard?

SIYABULELA MAKUNGA: Well, we will not pre-empt the decision of the Competition Tribunal; but we are quite comfortable that, in the course of [regulating] competition law, where there seems to have been a breach of a Tribunal order, the tribunal may, in addition to the 10% that the commission would have asked for as an administrative penalty, [consider any wrongdoing regarding the implementation of key conditions].

If the entity is found guilty of any wrongdoing as far as the implementation of major conditions is concerned, the tribunal is within its right to look at what would then, going forward, be a more feasible and practical condition.

So what I’m trying to say is that it [Competition Commission] may subtract from or add a condition to the initial order of the tribunal in as far as the conditions that are imposed are concerned.

But at this stage we will not be able to pre-empt that decision if the matter, after investigation, is found to have been really calling for the referral of any transgression or breach to the Commission Tribunal for adjudication.

JIMMY MOYAHA: We will certainly keep an eye on this and see how it develops.

The Competition Commission is doing the work that it is charged with doing, actively monitoring a previous transaction that it had approved and conducting investigations as a part of that mandate.

Read: Canal+ to list in SA in R54.92bn deal plan

We will leave the conversation on that note. Thanks so much to the spokesperson for the Competition Commission, who joined us to look at the announcement by Canal+ that it would be looking to shut down Showmax.