/ 18 May 2012

Media24-Witness merger has onerous small print

This is the view of Caxton chairperson Paul Jenkins, who commented  on the tribunal’s judgment this week.

Caxton acted as an intervening party in the merger after insisting that the deal would dampen competition in the independent community newspaper sectors of KwaZulu-Natal and northern Eastern Cape.

“The proposed conditions are more extensive than those originally proposed by the Competition Commission,” said Jenkins this week.

“These merger conditions confirm our views on the public interest and competition concerns around this merger.”

<strong>Tribunal’s decision</strong>
Jenkins said Caxton was awaiting the tribunal’s reasons for the judgment, which should be released within a month.

“The findings will be more telling. Then we will understand the reasons for the tribunal’s decision,” said Jenkins.

Media 24 may have won the battle by getting the Competition Tribunal to approve its acquisition of the Witness newspaper this week, but not everything went its way. The “onerous” conditions applied to the merger by the tribunal are aimed at protecting small, independent community newspapers in KwaZulu-Natal and the northern parts of the Eastern Cape.

Asked about the tribunal’s judgment this week, Media24 chief executive Esmaré Weideman said the media conglomerate welcomed the tribunal’s approval of the merger.

“We are studying the conditions imposed, some of which are quite onerous, and we are taking advice on this from our legal team,” said Weideman.

At the heart of the tribunal’s concerns is the printing business Africa Web in which both <em>The Witness</em> and Media24 have a shareholding.

Now that the merger has been approved, Media24 will acquire 100% of <em>The Witness</em> and a majority stake in Africa Web.

The Competition Commission had argued that Media24 would have an incentive to raise printing costs for independent publishers making use of Africa Web, thus forcing them to raise the costs of their advertising.

It was also argued that if Media24 lowered its own advertising rates at the same time it could lead to community newspapers’ exclusion from the market, followed by a rise in rates once they had been eliminated.

To combat this proposition, the tribunal has imposed a number of conditions on the merger. They are:
The merging parties’ community newspaper operations in KwaZulu-Natal and northern Eastern Cape can have no influence over Africa Web;

<strong>Price and quality</strong>
No printing asset of Africa Web can be sold without tribunal approval;

Media24 must notify the commission of all future small mergers with independent printers in KwaZulu-Natal and northern Eastern Cape;

Africa Web’s printing capacity must be maintained according to the minimum-expenditure guidelines that have been set by the tribunal;

The merging parties must make 1000 tonnes of printing-press capacity from an additional <em>Witness</em> printing press, to be installed within six months, available to small independent publishers on certain terms relating to price and quality; and

The merging parties must ensure that Africa Web continues to offer print services at certain terms relating to price and quality.

The tribunal also ordered that all shareholders and board members of <em>The Witness</em> and Africa Web must be given copies of the tribunal’s order within 10 days and all new board members and shareholders must be given the order within 10 days.

The tribunal also ruled that Africa Web must submit an annual report to it about all matters relating to compliance with its order.