/ 12 August 2011

Media groups to be probed for collusion

Competition regulators are gearing up to investigate allegations of collusion in the newspaper printing industry.

Before the end of the year, the Competition Commission will launch an investigation into whether South Africa’s larger media houses are sharing detailed information on circulation.

The three largest newspaper-owning companies in South Africa are Media24, Avusa and Independent Newspapers, but the commission will not comment on which firms will be investigated.

This comes after the release of a report by the commission last week on the merger between Media24 and The Witness newspaper in KwaZulu-Natal.

According to Oupa Bodibe, the manager of advocacy and stakeholder relations at the commission, concern centres on printing.

“Through this merger, Media24 will have majority control over the printing company called African Web, which is currently owned by The Witness,” he told the Mail & Guardian.

“There are small, independent community newspapers also printing at African Web and Media24 may have the incentive to use its ownership of the printing facilities to exclude these independent firms from printing.

“There are a number of small Zulu newspapers coming up in KwaZulu-Natal, and they need printers,” Bodibe said.

Media diversity
As part of the same merger, Media24 will also acquire the small community and African-language newspapers owned by The Witness.

“With media diversity, we want to have as much competition as possible,” said Bodibe. “By protecting the space for small, independent newspapers, we are preventing a situation in which there are one or two dominant papers and the smaller ones don’t survive.”

Newspaper publisher Caxton has been vocal in its disapproval of the Media24 deal.

“This merger is bad for competition,” said Paul Jenkins, the non-executive chairman of Caxton.

“It’s not good for media diversity. To allow Media24 to buy up more of the same is not providing diverse voices.”

Esmaré Weideman, CEO of Media24, said “We are not aware of valid competition and/or public interest issues that outweigh the benefits of this merger.”

The commission approved the merger, which involves Media24 buying out Lexshell’s 50% share in The Witness, but with the conditions that: “Media24 divests itself of a portion of its shareholding in African Web; Media24 does not have any control over the management of African Web; and the governance structures of The Witness and African Web are kept separate at all times in that no directors of The Witness sit on the board of African Web.”

But the report went further, said Bodibe, because the commission “came across information-sharing between media groups”.

“Competition thrives when there is uncertainty,” said Bodibe, “but if I know who you are selling what to, you are killing competition,” he said.

“It won’t be good for the media houses to be colluding when they are telling government to clean up its act and get rid of corruption.”

He said the commission still needed to lay a formal complaint with its enforcement division, which it planned to do this year. After that, an investigation that could take up to 18 months would follow.

“Media power shouldn’t be concentrated in the hands of two or three big parties with massive foreign ownership,” said Jenkins. “It’s time to take stock and reflect.” But other media players think the commission will not find anything worrying in its investigation.

“I find it difficult to believe there is collusion because there is such big and healthy competition out there,” said Peta Krost Maunder, the editor of The Media magazine.

Raymond Louw, the deputy chairperson of the South African chapter of the Media Institution of Southern Africa, said: “I would have thought this unnecessary. This is a highly competitive industry. The problem is the economics of the situation. If those big media houses did not take failing newspapers under their wing, those small newspapers would be out of business.”