The Competition Commission has declared the newspaper industry an “emerging priority sector” because of growing allegations of monopolistic behaviour among the four major publishers. The release of details on the scale of its probe to Daily Maverick this week reveals why.
South Africa’s newspaper industry, which holds itself up as a champion of freedom of expression, is under investigation for a range of practices that could show it is exactly the opposite.
For the first time, details have been made available of the scope of four major investigations into alleged monopolistic practices that are currently being conducted by the Competition Commission.
The investigations, described by the commission as “ongoing”, could expose the extent to which the newspaper owners have colluded to keep other voices out of the market – and in so doing, could blow the lid on their oft-stated commitment to being custodians of freedom of expression.
In their case, it appears, freedom of expression may only have belonged to those who were part of their cartel – and their managements could have collaborated actively and across many parts of their business to ensure they were able to shut other voices out.
According to information provided by the commission to Daily Maverick this week, three of the investigations involve all four major newspaper publishers, who ostensibly compete with each other for readers and advertisers – yet, according to the allegations, have colluded on issues such as:
1. Agreeing among themselves on what kind of discount to give to advertisers who settle their accounts early. This investigation, initiated in November 2011, relates to allegations that the media owners “fixed discounts”. It involves Independent Newspapers, Caxton, Media24 and Avusa (now Times Media Group). This probe also brings black empowerment media company Kagiso Media into the mix, as the allegations also relate to a media buying agency named Radmark (renamed Mediamark in 2010), which is 50% owned by Kagiso.
2. Exchanging information on competitive data such as unaudited newspaper circulations and advertising rates – including their thinking on changes to their advertising rates. The allegations relate to the-then Avusa, Independent Newspapers, Caxton and Media24. Although no further details are provided, it could be assumed that collusion on these matters would limit advertisers’ options and inhibit competition, and allow newspapers to fix prices in a way that negatively affected those outside the cartel.
3. Dividing up the market among themselves for printing and publishing community and knock-and-drop newspapers. This investigation is based on company documents which were submitted in an earlier Competition Commission probe into a proposed merger between Natal Witness and Media24 (also ostensibly a competitor of Caxton), which showed “the national market for newspapers was most likely allocated between the four major players in the media industry”. This is potentially the most damaging of the allegations, as it creates a sense of a gentleman’s club conspiring to actively keep out start-up (or should that be upstart?) community newspapers and freesheets which could impact either on their own newspaper circulations, their printing contracts, or their advertising base.
The fourth investigation is a localised version of the third: it involves allegations that Natal Witness and Caxton (ostensibly competitors) “entered into an agreement to allocate the market for the publishing and distribution of newspapers” in Howick in KwaZulu-Natal.
Killing off the competition
The investigations follow a Competition Commission probe in 2010-11 into anti-competitive behaviour by Media24 in the Free State Goldfields, which reveals exactly how the major players literally kill off smaller, independent competitors.
In that case, the commission found Media24 had “made it impossible for Gold-Net, an independently-owned competitor, to compete for advertisers, and eventually forced it to exit the market in April 2009.”
The commission found Media24 had used one of its titles, Forum, as a “fighting brand, offering very low prices to advertisers so as to prevent competition with Media24’s larger and more lucrative title, Vista.”
“Evidence revealed that Forum had budgeted for and operated at a loss throughout the period, but was only closed down in January 2010 after Gold-Net News had been driven out of the market.”
Once Gold-Net News had been killed off, “Media24’s publications were the only community newspapers circulating in the area and would have a monopoly over advertisers,” the commission said, citing Media24 strategy documents which spelt out how to “protect its existing market share as well as potentially increase its market share, as well as increasing its market power, allowing it to increase prices once the prey has left the market”.
Coming down on horizontal practices
All the activities currently being investigated by the commission are regarded as potential violations of section 4 of the Competition Act, which is intended to deal with “restrictive horizontal practices”.
In terms of the act, this is a practice which “prevents or lessens competition in a market”. It includes “directly or indirectly fixing a purchase or selling price or any other trading condition” or “dividing markets by allocating customers, suppliers, territories, or specific types of goods or services”.
All these practices are prohibited under the act. And cartel members found guilty of contravening the act could be subject to a penalty of up to 10% of their annual turnover.
The allegations against the newspaper industry are serious, particularly in a political environment in which the ruling party is encouraging media diversity and channeling millions of rand each year to fledgling community newspapers – the very newspapers which could potentially be killed off by the type of big-player collusion that is under investigation.
Dominating the value chain
The ANC has consistently asserted that the newspaper industry is nothing less than a cartel, and adopted a resolution at its 53rd national conference in Mangaung last December in an attempt to address this, saying: “The big four companies dominate the entire value chain of the market especially printing, distribution and advertising. This integration and the very market structure is perhaps the biggest barrier to market entry and potentially shows possible anti-competitive behaviour.”
At the time, I predicted that the Competition Commission probe into the newspaper industry was likely to be “the most cold-cut of all the media battles in 2013, and is the ANC’s stealth-bomb” because “when it comes to allegations of monopolistic behaviour, you can huff and puff all you like about freedom of expression, self-regulation, the free market and a free press. But if the commission finds that freedom of the press only belongs to those who own them, and that those who own them connive to keep others from expressing themselves, we could finally see the changed print media landscape that the ANC has been looking for.”
Since then, two of the big four newspaper publishers have withdrawn from a self-started industry “transformation process” under the auspices of their parent body, Print & Digital Media South Africa (PDMSA), to focus their attention on the Competition Commission probe.
PDMSA’s board meets in Durban next week to discuss, among other things, the future of its ill-fated Print & Digital Media Transformation Task Team. Don’t be surprised if the entire “transformation process” gets put on hold while the cartel gets its head around some nagging allegations of ungentlemanly behaviour by the gentlemen’s club.
While they’re at it, they may want to revisit the PDMSA mission statement, which states that the association is “dedicated to promoting a free and independent press”, or spend some time contemplating the tickertape that runs across the PDMSA website which quotes South Africa’s constitution as saying: “Everyone has the right to freedom of expression, which includes freedom of the press and other media; and the freedom to receive or impart information or ideas.” DM
· Chris Vick runs Black, a communications consultancy
Microwave popcorn is nothing special. You can have the same effect with normal popcorn kernels and a brown paper bag.