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[2022] ZACAC 9
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Emedia Investments Proprietary Limited South Africa v Multichoice Proprietary Limited and Another (201/CAC/JUN22) [2022] ZACAC 9; [2022] 2 CPLR 23 (CAC) (1 August 2022)
IN
THE COMPETITION APPEAL COURT OF SOUTH AFRICA
CAC
CASE NO: 201/CAC/JUN22
In
the matter between:
EMEDIA
INVESTMENTS PROPRIETARY LIMITED Appellant
SOUTH
AFRICA
and
MULTICHOICE
PROPRIEARY LIMITED First
Respondent
THE
COMPETITION
COMMISSION Second
Respondent
Heard
virtually on 8 July 2022 by Victor J, Manoim J and Nuku J
Victor
J and Manoim J Concurring
Judgment
handed down electronically on 1 August 2022
Summary:
Competition Law – Section 8(1)(d)(ii) of the Competition
Act. Relief in abuse of dominance cases. Interim or final relief to
be contextualised within the jurisprudential and transformative
context of the purpose of the Competition Act.
ORDER
1.
The appeal is upheld
2.
Pending the final conclusion of the hearing into the complaint
initiated by the applicant or for a period of six months after the
date of this order (whichever occurs first), the first respondent
is
interdicted from removing the following channels from the bouquet of
channels on DSTv platform of which they formed part of
prior to the
Tribunal’s ruling:
1.1
eToonz; and
1.2
eMovies; and
1.3
eMovies Extra.
1.4
E.tv Extra
3.
The first respondent shall pay the costs of the appellant
costs
including the cost of two counsel.
JUDGMENT
NUKU,
J
Introduction
[1]
The
appellant, eMedia Investments Proprietary Limited (“
eMedia
”)
brings this appeal in terms of the provisions of section 49C (7) of
the Competition Act
[1]
(“
the
Act
”)
against a refusal by the Competition Tribunal (“
the
Tribunal
”)
to grant an interim order in terms of section 49C. eMedia was the
applicant before the Tribunal and MultiChoice Proprietary
Limited
(“
MultiChoice
”)
was the
first
respondent.
[2]
The relief sought by eMedia before the Tribunal was an interim
interdict
preventing MultiChoice from removing the E.tv Extra,
eToonz, eMovies and eMovies Extra channels (“
the eChannels
”)
from the bouquets of channels on MultiChoice’s DStv packages
pending the final determination of a complaint initiated
by eMedia
(“t
he complaint
”) or for a period of six months,
whichever occurred first. In the alternative, eMedia sought an order
directing MultiChoice
to continue broadcasting the eChannels on the
same terms and conditions as they were broadcast prior to 1 April
2022 pending the
final determination of the complaint or for a period
of six months, whichever occurred first.
[3]
eMedia described the conduct that is the subject of the complaint as
a
unilateral decision by MultiChoice to remove the eChannels from its
DStv platform and that such conduct constitutes abuse of dominance
in
contravention of section 8 (1) (c) and 8 (1)
(d)
(ii) of the Act.
The
parties
[4]
eMedia and its subsidiaries are a South African media group with
holdings
in a variety of broadcasting, content and production
businesses. The group operates, inter alia, as:
4.1. a
content producer, producing eNCA, a 24-hour news channel and the
eNuus bulletin,
a daily 30-minute bulletin in Afrikaans;
4.2. a
content aggregator or channel provider packaging, among others, eNCA,
eTV,
eTV Africa, eReality, news, sports, eRewind and the eChannels;
4.3. a
free-to-air (“
FTA
”) broadcaster, broadcasting (i)
the eTV channel (previously by way of analogue terrestrial signal
which is in the process
of being replaced by digital terrestrial
transmission (“
DTT
”); and (ii) the OpenView
bouquet of channels by way of direct-to-home satellite television
(“
DTH
”) which is intended to appeal to the mid- to
low- LSM groups in South Africa.
[5]
MultiChoice and its affiliated entities also operate at various
levels
of the broadcasting value chain including:
5.1
providing a subscription DTT service through M-Net,
5.2
providing a subscription DTH service known as DStv, which comprises
the following
differently-priced packages of channels, namely:
5.2.1 Premium,
with 150+ channels at a monthly subscription fee of R799;
5.2.2 Compact
Plus, with 135+ channels at a monthly subscription fee of R519;
5.2.3 Compact,
with 120+ channels at a monthly subscription fee of R409;
5.2.4 Family,
with 90+ channels at a monthly subscription fee of R299;
5.2.5 Access,
with 69+ channels at a monthly subscription fee of R99; and
5.2.6 EasyView,
with 30+ channels at a monthly subscription fee of R29;
[6]
The Competition Commission (“
the Commission
”), a
statutory body established in terms of the Act was cited as the
second respondent before the Tribunal and this Court
but no relief
was sought against it.
Factual
background
[7]
eMedia has, since 2007, supplied certain packaged television channels
to MultiChoice which are broadcast by MultiChoice as part of its DStv
service. eMedia also supplied content in the form of eNuus
bulletin
which is broadcast exclusively by MultiChoice also on its DStv
service.
[8]
On 12 May 2017, eMedia and MultiChoice concluded the Commercial and
Master
Channel agreement (‘
the 2017 agreement
”)
which would regulate the provision of content and channels by eMedia
to MultiChoice for a five-year period which was to
come to an end on
31 March 2022. The content and channels that were part of this
agreement were ENCA channel, eNuus Bulletin (in
respect of which
MultiChoice was granted exclusive rights), e.tv Africa channel and
the eChannels (in respect of which MultiChoice
enjoyed no exclusive
rights). MultiChoice paid eMedia a fee for the acquisition of the
rights over the content and the channels.
[9]
As this matter concerns the rights which were granted to MultiChoice
in
respect of the eChannels, it is necessary to reproduce that part
of the 2017 agreement which deals with the grant of these rights.
This is to be found in paragraph 3.3 of the 2017 agreement which
reads:
“
3.3 Entertainment
Channels: Subject to the terms and conditions of this Agreement,
EMEDIA hereby grants to MCA
the
non-exclusive
right in South
Africa during the term, to:
3.3.1 receive,
market and distribute the Entertainment Channels, and licence the
reception, distribution and marketing of the Entertainment Channels,
by means of: (a) any Pay TV Systems on a linear basis to Subscribers;
and any (b) OTT Systems to viewers on a linear basis to any devices,
and between devices; and
3.3.2 receive,
market and distribute the Channel Programming for the Entertainment
Channels, and licence the reception, distribution and marketing of
the Channel Programming for the Entertainment Channels on an
On
Demand basis on any On Demand Service/s to any devices, and between
devices, provided that
(i)
any of the foregoing rights are exercised either without charge to
the viewer or as
part of the subscription fee payable by Subscribers,
and…”
[10]
It was further recorded in the 2017 agreement that MultiChoice
“agrees to include …
the Entertainment Channels as part
of the package currently known as “DStv Family” for
Individual Subscribers on the
DStv Bouquet, and as part of all
packages of the DStv Bouquet that are on a higher tier that the “DStv
Family” package…”
The 2017 agreement also recorded
that MultiChoice “shall be entitled, but not obliged, to offer
the Channels (or any 1 (one)
or more of the Channels) in any other
bouquets, packages, tiers and/or platforms (including for the
avoidance of doubt any DTT
platform) offered by MCA and/or its
Affiliates in the relevant Territory (or part thereof) for which
rights are granted.”
[11]
Negotiations to conclude a replacement for the 2017 agreement, whose
term was nearing the end,
commenced during November 2021. During
these negotiations MultiChoice made it clear that it was only
interested in the acquisition
of the rights in respect of the ENCA
channel and the eNuus bulletin. MultiChoice offered no explanation to
eMedia to explain why
it was no longer interested in the acquisition
of rights in respect of the eChannels. Despite being offered the
rights in respect
of the eChannels for free, MultiChoice maintained
its position that it was not interested in acquiring them and in fact
this threatened
to derail the negotiations in respect of the
acquisition of rights in respect of the ENCA channel and the eNuus
bulletin. On 25
February 2022, the parties ultimately concluded an
agreement in respect of the acquisition of rights in respect of the
ENCA channel
and eNuus bulletin.
[12]
On 8 March 2022, eMedia’s attorneys addressed a letter of
demand to MultiChoice in which
they recorded that the decision by
MultiChoice “to refuse to broadcast eMedia’s channels is
aimed at preventing eMedia
from competing effectively, as a channel
provider, with MultiChoice’s own channels. Simply put,
MultiChoice is leveraging
its dominance in the pay television market
to prevent competition with its rival channel providers such as
eMedia; with the intention
of increasing MultiChoice’s share of
television advertising spend on its own channels and ultimately with
the objective of
undermining eMedia as an actual or potential
competitive constraint to MultiChoice.” MultiChoice was urged
to reconsider
its position regarding the acquisition of the rights in
respect of the eChannels. MultiChoice, however, remained steadfast in
its
position and went further to advise eMedia that it would no
longer broadcast the eChannels from 1 April 2022. eMedia thereafter
initiated the complaint and at the same time approached the Tribunal
on an urgent basis for the relief referred to above.
eMedia’s
case before the Tribunal
[13]
eMedia identified a number of markets in which it alleged MultiChoice
to be dominant. These included
the market for the provision of basic
satellite services where eMedia, through its OpenView, competes with
MultiChoice’s
DStv. eMedia also identified the market of
provision of channels which are not premium where it also competes
with MultiChoice.
[14]
eMedia alleged that the eChannels are amongst the most popular
channels on DStv, with two of
these four channels (eExtra and eMovies
Extra) ranking in the top- ten most popular channels watched on DStv.
[15]
eMedia also alleged that the decision by MultiChoice not to acquire
the eChannels would result
in the degradation of the quality of the
DStv service and the fact that MultiChoice was willing to degrade the
quality of its offer
to customers (by removing popular channels from
the DStv platform) and was unable or unwilling to provide any reason
for its decision
at the time that the decision was taken illustrates
the extent of its market power and that it is not constrained either
by consumer
preference or supplier demands.
[16]
eMedia interpreted the decision by MultiChoice not to acquire the
eChannels as a foreclosure
which was motivated by anti-competitive
objectives including a desire to exclude some of the most popular
immediate entertainment
channels from the DStv platform and thereby
undermine eMedia’s ability to broadcast and produce rival
content in competition
with DStv’s own content channels. eMedia
also accused MultiChoice of harbouring intentions of harming eMedia’s
existing
business, and to ensure that eMedia is unable to grow its
basic satellite service (OpenView) such that it could potentially in
time become a more competitive constraint on MultiChoice’s DStv
platform.
[17]
The application by was accompanied by an affidavit deposed to by Mr
Kaylan Dasgupta (“Mr
Dasgupta”), an economist with
expertise in competition matters. Mr Dasgupta variously described
MultiChoice’s DStv
as a service or platform that is an
indispensable gateway to connecting eMedia’s channels to
eyeballs and advertisers. The
evidence of Mr Dasgupta was also that
MultiChoice is dominant as a supplier of Television services as well
as a significant content
rights owner, content producer and
aggregator of its own.
[18]
The economic theory advanced by Mr Dasgupta was that MultiChoice, as
vertically integrated (producing
its own content and providing a
distribution platform) may have an incentive to favour its content
over rival (eMedia’s)
content as there are very limited
alternatives to the platform provided by MultiChoice. He described
the denial of access to a
distribution platform as a case of what is
commonly known as “customer foreclosure” which may result
in potential reduction
or prevention of competition in a related
market, namely, the market for the supply of channels. Mr Dasgupta
also alluded to the
fact that MultiChoice may be motivated by the
strategic considerations related to protecting its position as a
dominant distribution
platform.
[19]
Mr Dasgupta dealt with the revenue that eMedia generates from
advertising associated with the
eChannels as well as the losses that
would be occasioned by the loss of access to the DStv platform. He
concluded that the loss
of access to the platform combined with the
digital migration will severely impact on eMedia’s ability to
continue investing
in both content and platform.
[20]
Mr Dasgupta also dealt with the effect on consumers and concluded
that the harm to consumers
and the market/s from the conduct by
MultiChoice are (a) harm stemming from inability to access eMedia
channels on the DStv platform,
(b) harm arising from reduction of the
quality and variety of channels available to consumers across all
platforms as a result
of reductions in the quality of content on
eMedia’s eChannels, and (c) harm to consumers and the market
from the diminution
of competition between platforms.
[21]
eMedia explained that it earns two streams of revenue when providing
the eChannels to MultiChoice.
The first was a fee that MultiChoice
pays as a consideration for the acquisition of rights. The second is
the revenue that eMedia
earns from advertisers and it is this revenue
that is central to eMedia’s case.
[22]
eMedia’s case based on section 8 (1) (d) (ii) of the Act was
that MultiChoice was providing
a broadcasting service. eMedia
described this broadcasting service as MultiChoice allowing it
(eMedia) access to the DStv platform
and it is this service that
enables eMedia to earn advertising revenue.
[23]
eMedia explained scarcity of the broadcasting service with reference
to number of DStv subscribers,
saying that the fact that MultiChoice
has almost three times the number of its subscribers makes the
service provided by MultiChoice
a scarce service. The argument went
further that the scarcity was compounded by the fact that this is a
highly concentrated market
with high barriers of entry and that
eMedia was the only competitor of significance.
[24]
Lastly, eMedia alleged that it was economically feasible for
MultiChoice to provide the service
and that the protestations by
MultiChoice to the contrary were not supported by any evidence as it
would not cost MultiChoice anything
to provide the service.
[25]
eMedia’s case based on section 8 (1) (c) was essentially that
the broadcast of eChannels
on DStv is attractive to advertisers
because of the viewership numbers of DStv. To discontinue
broadcasting the eChannels on DStv,
so the argument goes, would
result in the eChannels generating significantly less revenue, and
that in turn would result in less
budget for the acquisition of
quality content which would in the end result in elimination of
eMedia in the market of channel provision.
The other consequence of
the reduction of the revenue, so argued eMedia, was that it would
have less revenue to inject into its
OpenView platform to grow it to
the extent of being a competitive restraint on MultiChoice. The
result, it was argued, was that
this is an exclusionary act as it
would prevent eMedia from growing within the basic satellite market.
MultiChoice’s
case before the Tribunal
[26]
MultiChoice
opposed the application and filed a report prepared by Mr Stephanus
Van Niekerk Malherbe (“
Mr
Malherbe
”)
who disputed some of the factual issues underpinning the economic
analysis by Mr Dasgupta. Mr Malherbe opined that it was
erroneous of
eMedia to characterise the refusal by MultiChoice to retain the
eChannels in the DStv packages as a refusal to supply.
He explained a
refusal to supply typically involves an input foreclosure. He
referred to The Law of Economics
[2]
where
the authors state that:
“
it
has always been understood that the duty to deal under Article 102
TFEU only applies in vertical situations, that is, where there
is an
upstream market for the input in question and a downstream market in
which that input is essential
.”
[27]
Mr
Malherbe also referred to paragraph 78 of the EC Guidance
[3]
which describes an anti-competitive refusal to supply as typically
arising:
“
when
the dominant undertaking competes on the ‘downstream’
market with the buyer whom it refuses to supply. The term
‘downstream
market’ is used to refer to the market for which the refused
input is needed in order to manufacture a
product or provide a
service
.”
[28]
Mr Malherbe pointed to the fact that eMedia’s characterisation
of its case as a refusal
to supply is contradicted by its explanation
of the theories of harm it has put forward as ‘customer
foreclosure’.
He concluded by stating that eMedia is not
seeking an input (“service”) that MultiChoice supplies to
eMedia or any
other channel or content provider and that MultiChoice
does not sell access to its distribution services as an input to
third-party
channel providers and eMedia does not pay MultiChoice any
fee or consideration for access to its distribution platform.
[29]
Mr Malherbe also dealt with the claim by eMedia that the DStv
platform is a scarce service. He
stated that there is no economic
foundation for the claim the DStv is a scarce service and that eMedia
conflates the requirement
for scarcity with the separate and
antecedent requirement for dominance.
[30]
MultiChoice also dealt with its rationale for not renewing the
eChannels clause, the extent of
its available capacity to carry the
eChannels as well as the performance of the eChannels on the DStv
service.
[31]
MultiChoice explained that it is routine for broadcasters, including
eMedia, to review the commercial
desirability of channels on a
regular basis so as to discontinue channels that no longer serve
their objective. It explained that
based on its business model of
offering tiered DStv packages, it strives to offer its subscribers
the variety they seek at price
points which are attractive and
affordable and achieving the right mix in the DStv packages is an
ongoing imperative. It also explained
that as a subscription service,
DStv must provide channels which are differentiated from other
offerings and content in which subscribers
and potential subscribers
will see value for their money and in this regard content that is
available across multiple channels
in the DStv packages or available
for free on other services does not enhance the DStv’s value
proposition.
[32]
MultiChoice also explained that the eChannels, although some of them
had consistently ranked
in the top ten in terms of overall DStv
viewership, the channels have not performed well in the DStv packages
for which they were
intended and this resulted in MultiChoice having
to make them available on DStv packages in lower tiers.
Tribunal’s
findings
[33]
The
Tribunal described its approach to interim relief through the prism
of three principles which it considered sacrosanct.
Firstly,
firms are entitled to decide with whom they wish to do business and
that the terms of their business dealings must be unfettered
but
subject to competition law and more specifically it acknowledged that
it is necessary to be mindful of the dominance factor.
Secondly,
it also considered that the Tribunal was not concerned with the
rights of the applicant but the effect of competition
in the market.
Thirdly,
the Tribunal referred to the dictum in
Mediclinic
where
it was necessary to make sure small and medium sized enterprises
survive and succeed.
Reliance
was also placed on the dicta in
York
Timbers
where
it considered the correct approach to be that where facts set out
contradiction of the applicant’s case, the question
is whether
they raise serious doubt or are they mere contradictions or an
unconvincing explanation.
[4]
[34]
Basically the Tribunal felt constrained without the input of a full
scale enquiry together with
the disputes of fact arising from the
different versions put up by eMedia and MultiChoice, it could not
grant the relief because
a prima facie case had not been made out by
eMedia. Consequently, it could not conclude that MultiChoice’s
conduct constituted
a prohibited practice.
[35]
Section 7 of the Competition Act defines a dominant firm in a market
if it has at least 45% share.
In this case MultiChoice enjoys a 72 %
dominance. The Tribunal after undertaking an analysis of
MultiChoice’s conduct, could
not find that despite
MultiChoice’s dominance there was prima facie evidence relating
to the alleged prohibited practice.
[36]
The Tribunal also considered MultiChoice’s refusal to supply
what eMedia describes as scarce
goods or services. eMedia argued that
MultiChoice ‘s conduct in fact amounted to an actual refusal to
supply. It considered
MultiChoice’s argument that it only
acquired the right to receive, market and distribute channels as an
input into its own
DSTV package which it retails to subscribers
whilst eMedia describes this as a purchase of eMedia’s
channels. The Tribunal
also considered the Must Carry Regulations
required by ICASA. The Tribunal also expressed concern that whilst
recognising the application
was at an interim relief stage, its
inability to definitively establish the relevant market was
particularly debilitating and it
thus felt constrained in the
circumstances.
[37]
The Tribunal also considered the economic theories of refusal to
supply and analysed the fact
patterns. It accepted that it was a
vertical refusal to supply. The Tribunal also took into account
eMedia’s case that MultiChoice’s
refusal to supply is
akin to a situation where a vertically integrated firm is dominant in
an upstream market in the field of basic
satellite services. The
Tribunal however rejected eMedia’s contention that the effect
of the refusal to supply had an anti-competitive
effect as it found
MultiChoice had partially renewed the contract in respect of ENuus
and eNCA. The Tribunal also accepted MultiChoice’s
case that it
buys content then integrates it into its own system and sells it to
its subscribers. The Tribunal rejected eMedia’s
assertion that
MultiChoice’s non-renewal of the contract to purchase eMedia’s
contract is a refusal to supply an input.
It found therefore that
without an assessment of market dynamics from a demand supply
perspective it could not even on a prima
facie basis find that
MultiChoice has contravened s 8(1)(d)(ii)
[38]
The Tribunal also assessed the various fact patterns and found that
eMedia had not prima facie
established a horizontal refusal to
supply. A further fact pattern related to the termination of the
existing supply arrangement.
It noted that the 2017 agreement did not
contain a renewal clause and therefore eMedia could not have had an
expectation to renew.
[39]
The Tribunal rejected eMedia’s contention that DStv is a
distribution platform meaning
a broadcasting service through which
its channel content can reach consumers. The tribunal rejected
eMedia’s assertion that
MultiChoice by refusing it access
inhibits competition.
[40]
The Tribunal found that eMedia had not established a prima facie
refusal by MultiChoice to supply
a service to it. Nor does it find
that MultiChoice supplies scarce goods or services. It noted that
eMedia and MultiChoice disagreed
on whether the basic satellite
service was a scarce service. The Tribunal whilst analysing whether
the service was scarce stated
that it was a fact specific analysis as
it raised difficulties on deciding about customer preferences. This
had to be dealt with
in an in-depth investigation. It also found that
there was insufficient evidence that basic satellite television
services are scarce.
It also regarded as unpersuasive eMedia’s
economic feasibility assertion that it would cost MultiChoice nothing
to run the
channels on its DStv platform and that argument the
foreclosed channels were among top viewed channel on the DStv
platform. Although
the Tribunal accepted that MultiChoice had
capacity it still could not find that it was a service and that it is
a scarce service.
[41]
The Tribunal also considered the anticompetitive effect of a dominant
firm engaging in exclusionary
conduct act by refusing to supply
scarce goods or services. It found that unless it can show that the
anticompetitive effect of
that exclusionary act outweighs its
efficiency or procompetitive gain, it could not make an interim
order. It rejected eMedia’s
contention that MultiChoice by
refusing to renew, to acquire and distribute channels on the DStv
platform was motivated by anticompetitive
objectives. It found that
because eMedia has not made out a prima facie case on services and
scarcity it was not necessary to evaluate
efficiencies.
[42]
It considered the loss of revenue argument. It rejected eMedia’s
complaint that MultiChoice’s
intention was to harm eMedia’s’
existing business and that eMedia could not grow its satellite
service and reduced
its ability to put money back into the business
thus preventing eMedia from becoming a competitor. It accepted
MultiChoice’s
argument that mere loss of revenue was not
indicative of anti-competitive conduct.
[43]
The Tribunal also accepted MultiChoice’s argument that OpenView
was growing so it can also
sell to Starsat and its own DTT and OTT
services. It found that the channels in point were not dependent on a
DStv package. It
found that there was dispute about whether the loss
of eMovies and eToonz would affect DStv’s audience. MultiChoice
argues
that abuse of dominance cannot be found where a loss of
competition arises out of facts unrelated to the conduct of the
dominant
firm.
[44]
It
found that there was no consumer harm by consumers not being able to
access eMedia channels on DStv platform.
The
Tribunal found that prima facie the non- renewal of the foreclosed
channels did not have an anti-competitive effect.
Reliance
was placed on Computicket.
[5]
The
assessment of anti-competitive effects requires comparison of an
actual and future likely situation in the relevant market and
compare
to an appropriate counterfactual.
In
the absence of a renewal clause eMedia must adapt and adjust in a
counterfactual world in which negotiations with MultiChoice
fail.
[45]
The Tribunal could not decide in interim proceedings that the loss of
revenue for eMedia would
result in harm to competition in the market
rather than financial harm to itself. The Tribunal found that in
interim proceedings
the loss of revenue could not be decided as being
anti-competitive. It could not find that the foreclosure of the
channels was
anticompetitive and best addressed in an in-depth
investigation
[46]
On
the question of irreparable harm, the Tribunal relied on the
principle in
Business
Connexion
which
looks to the damage to the competitive position that marks out the
enquiry and not the individual.
[6]
It also relied on
Normandien
Farms
that
at no point is the existence of eMedia threatened by the conduct.
It
found that there would be
commercial
harm
to
eMedia
but
could
not
determine
whether
the
harm
has
a
significant effect on competition without an enquiry. It found that
in
Gallo
Africa
all
the factors must be considered.
[7]
[47]
On the question of Balance of Convenience, the Tribunal rejected the
submission by eMedia that
it did not matter that eMedia would provide
the channels without charge, that there was no loss of opportunity
cost because MultiChoice
broadcast could continue to broadcast many
channels without constraint and that there was no harm to its
competitive position.
It also rejected the tender of payment of
damages as a reason to grant interim relief.
[48]
The Tribunal accepted MultiChoice’s argument that interim
relief would amount to an extreme
intrusion in their commercial
autonomy and their freedom of expression in terms of s16 of the
Constitution and s 25 not to be deprived
of its property. It also
accepted that the tender of damages was meaningless as damages cannot
be quantified. The Tribunal also
found it could not interfere at this
stage as without the benefit of a full investigation it could not
find that the state of competition
would be altered by the
foreclosure of the channels. The Tribunal considered its role to be
that of preventing damage to competition
as a whole and not to a
single competitor such as eMedia.
Issues
[49]
Whether the Tribunal correctly refused the interim application
brought by eMedia on the basis
that it has failed to establish the
requirements for interim relief as provided for in section 49C (2) of
the Competition Act.
[50]
Whether eMedia has made out a prima facie case of a prohibited
practice and irreparable harm
and met the requirements of section 49C
(2) of the Act.
The
applicable legal framework
[51]
It is necessary to briefly set out the applicable legal framework
before considering the issues
for determination. The starting point
is section 49C which vests the Tribunal with discretionary power to
grant interim orders
in certain circumstances and subsection 49C (2)
which in the relevant part reads:
“
The
Competition Tribunal may grant an interim order if it is reasonable
and just to do so, having regard to the following factors:
(i) The
evidence relating to the alleged prohibited practice;
(ii) The
need to prevent serious or irreparable damage to the applicant; and
(iii)
The balance of convenience.”
Section
49C (3) of the Act deals with the required standard of proof and
states that
“
In
any proceedings in terms of this section, the standard of proof
required is the same as the standard of proof in a High Court
on a
common law application for an interim relief.”
[52]
This
requires the Tribunal firstly, to take the facts alleged by the
applicant, together with the facts alleged by the respondent
that the
applicant cannot dispute, and to consider whether having regard to
the inherent probabilities, the applicant should on
those facts
establish the existence of a prohibited practice at a hearing into
the complaint referral and secondly to consider
the ‘doubt’
leg of the enquiry, by asking whether the facts set out by the
respondent in contradiction of the applicant’s
case raise
serious doubt. If they do raise serious doubt, the applicant cannot
succeed.
[8]
[53]
The prohibited practice relied upon by eMedia is the abuse of
dominance, by MultiChoice, as contemplated
in section 8 (1) (d) (ii)
of the Act and in the alternative as contemplated in section 8 (1)
(c) of the Act. Section 8 (1) (c)
of the Act provides:
“
It
is prohibited of a dominant firm to engage in an exclusionary act,
other than an act listed in paragraph (d), if the anti-competitive
effect of that act outweighs its technological, efficiency or other
pro-competitive gain.”
‘
Exclusionary
act’ is defined in the Act to mean “an act that impedes
or prevents a firm from entering into, participating
in or expanding
within a market.”
[54]
Section 8 (1) (d) (ii) of the Act reads:
“
It
is prohibited of a dominant firm to engage in any of the following
exclusionary acts, unless the firm concerned can show technological,
efficiency or other pro-competitive gains which outweigh the
anti-competitive effect of its act- (ii) refusing to supply scarce
goods or services to a competitor or customer when supplying those
goods or services is economically feasible.”
[55]
This
Court, in
Computicket
[9]
explained that when dealing with prohibited practices, it is
necessary to first establish whether the conduct in question is
exclusive
in nature and that if the prohibited conduct in question
relates to section 8 (1) (c), such conduct must be assessed in line
with
the definition of an exclusionary act.
It
went further to explain that where the conduct in question falls
under section 8 (1) (d), such conduct does not fall to be assessed
in
line with the general definition of an exclusionary act but in line
with the requirements set out in the relevant subsection.
Thus,
where an act meets the requirements as set out in any of the
subsections, it is exclusionary.
[56]
Thus, in so far as eMedia relies on the provisions of s 8 (1) (c) of
the Act, eMedia is required
to present evidence which establishes on
a
prima facie
basis that the conduct by MultiChoice is
exclusionary in nature has anti-competitive effects that outweigh
technological, efficiency
or other pro-competitive gain.
[57]
Insofar as eMedia relies on the provisions of section 8 (1) (d) (ii)
of the Act, eMedia is required
to present evidence which establishes
on a
prima facie
basis that MultiChoice has refused to supply
scarce goods or services to it (eMedia) either competitor or customer
when supplying
those goods or services is economically feasible.
[58]
When
applying the provisions of the Act dealing with the abuse of dominant
position it is necessary to define the market as this
illuminates the
primary competitive drivers that operate in a given case and the
first step in the process entails the consideration
of the stage of
supply relevant to the inquiry sometimes referred to as the
functional dimension of the market.
[10]
From there on one defines the product dimension and lastly, the
geographic dimension with the objective of identifying the
competitors
of the firm concerned that are capable of constraining
the firm’s behavior and preventing it from behaving
independently
of competitive pressure.
[11]
Evaluation
The
Relevant Markets and Dominance
[59]
The markets most relevant to this appeal are the channel providers
and the basic satellite markets.
In the value chain, the channel
providers are upstream and provide the channels as an input to firms
in television broadcasting,
which in this application is the
broadcasting in the basic satellite market. Thus, the firms in the
basic satellite market are
downstream, in the sense that they require
an input from the channel providers. In this sense the channel
providers are the suppliers
of channels.
[60]
Arising from the same commercial relationship is an opportunity for a
channel provider to earn
revenue from advertising that is associated
with the channel so provided and it is in this sense that eMedia
alleges that MultiChoice
is a supplier of television broadcasting
services and more specifically in the basic satellite market. The
geographic market relevant
to this appeal is South Africa.
[61]
The next step is to establish dominance or market power. In this
instance, MultiChoice conceded
its dominance in the basic satellite
market for the purposes of this application, and it is MultiChoice’s
dominance in this
market that is alleged to give rise to the
prohibited conduct.
The
underlying economic theory underpinning the application
[62]
As
stated above, Mr Malherbe questioned eMedia’s characterisation
of its case as a ‘refusal to supply’. Mr Dasgupta’s
response was that he is not a lawyer and as such he is not familiar
with any economic literature that makes the distinctions that
Malherbe seeks to make. Mr Dasgupta maintained adamantly that
MultiChoice, in deciding to whether or not to carry the eChannels
and
agreeing commercial terms, including compensation, for the carriage
of the eChannels, is engaging in economic exchange with
eMedia and
that MultiChoice can be viewed as either acting as a purchaser of the
eChannels or as a distribution platform of eMedia
through which the
eChannels reach the customers and ultimately advertisers. Mr Dasgupta
also alluded to the fact that issues of
dominance and potential
foreclosure by firms which act as purchasers or distributors are
well-recognised in competition economics
and in this regard he
referred to an article by Shapiro
[12]
and example 5 of the United States Department of Justice and Federal
Trade Commission (2020), Vertical Merger Guidelines (“
the
US Guidelines
”).
[63]
In the article, Shapiro deals with a situation where a distributor of
various products
decides to acquire one of the manufacturers. The
concern then by the competition authorities would be that the said
distributer
may be inclined to prefer the products manufactured by
its own manufacturer. The factual setting, however, is completely
different
to this matter and it is not clear how the article assists
eMedia’s case. The scenario in the article by Shapiro is a
distributor
acquiring an upstream manufacturer whereas in the present
case it is a firm in the downstream market deciding not to acquire an
input. Example 5 of the US Guidelines is also about exactly the same
scenario of a distributor acquiring a manufacture of one of
the
products it distributes. In any event, Shapiro also makes the point
that the theory of harm he proposes in his paper was rejected
by the
by both the District Court and the Appeals Court.
[64]
There is also another difficulty with Mr Dasgupta’s basis on
which he asserts that MultiChoice
can be viewed as a distributor in
that he makes reference to, among others, “
agreeing
commercial terms including compensation
” which would seem
to suggest that MultiChoice was being paid compensation for
broadcasting the channels whereas that was
not the case. To the
contrary it was, in fact, eMedia who was getting paid for selling the
rights to broadcast the eChannels. At
a conceptual level, this then
presents some difficulty because the case presented by Mr Dasgupta,
appears to be that of a proper
distributer, whose business is to
distribute.
[65]
The other criticism of Mr Dasgupta’s economic analysis relates
to the to the contradiction
in explaining ‘a refusal to supply’
case with the customer foreclosure theory of harm. There is no doubt
that this
matter is not about input foreclosure and Mr Dasgupta does
not and cannot dispute. In trying to deal with this criticism, he
resorts
to the use of a very similar theory in recent cases in South
Africa and United States in relation to Facebook’s decisions
to
deny some rival access to its APIs.
[66]
The Tribunal found for various reasons that eMedia had failed to
establish a
prima facie
case of a refusal to supply. This
finding was largely based on the assessment by the Tribunal that in
the relationship between eMedia
and MultiChoice, eMedia was the
supply of the eChannels and MultiChoice was not a distribution
platform, at least in the traditional
sense. Whilst there might be
something to be said about how the Tribunal applied the test to
establish a
prima facie
case, I cannot fault the outcome as I
come to the same conclusion even on the proper application of the
test.
[67]
MultiChoice, through its DStv offering provides eMedia with a
platform, and I use the term platform
loosely, where the eChannels
are broadcast. Because of the sheer number of subscribers to DStv,
the channels being broadcasts are
likely to reach large numbers of
viewers, a fact which makes them attractive to advertisers as the
advertisers are also chasing
the large numbers of viewers. This in
turn results in the channel provider earning revenue from the
advertisers. So it can be accepted
that
prima facie
, the DStv
service is a distribution platform.
[68]
What casts serious doubt into the above
prima facie
case is
the fact that MultiChoice is not in the business of making its DStv
service to channel providers and the fact that it does
become
available is an incidence of MultiChoice having acquired an input
(the channels) which, includes as part of the package,
an opportunity
for a channel provider to earn revenue from advertising. The result
would be that to grant an interdict would be
akin to imposing a duty
on MultiChoice to acquire the eChannels and this makes it doubtful to
characterise the case as that of
a refusal to supply.
[69]
The issue of scarcity is also subject to a serious doubt. In this
regard it must be remembered
that the scarcity was not pleaded in
relation to the capacity of eMedia to carry more channels but in
relation to the fact that
MultiChoice has a large number of viewers
and is attractive to advertisers.
[70]
eMedia has its own platform, OpenView, and in fact the eChannels are
being broadcast on this
platform. In this regard, the point made by
Mr Malherbe about conflating scarcity and the subscribers has some
merit. The eChannels
have always been broadcast on eMedia and will
continue to be so broadcast. This is one platform that the eChannels
have to connect
with the eyeballs and so the advertisers. DStv was
thus an additional platform and in these circumstances it cannot be
said that
it is a scarce service.
[71]
Although MultiChoice equivocated in relation to economic feasibility
to continue to broadcast
the eChannels, this was nothing more than
what counsel for eMedia referred to as a ‘makeweight’.
MultiChoice has the
capacity to broadcast the eChannels but in my
view the doubt as to whether this is a refusal to supply case coupled
with the fact
that eMedia has its own distribution platform, makes it
unnecessary to deal with this aspect. In my view, the Tribunal
adopted
a correct approach when it awarded no costs to MultiChoice,
despite it having been successful.
[72]
The doubt about eMedia’s case being a refusal to supply case
has implications also for
eMedia’s case under section 8 (1) (c)
of the Act. This is because if it doubtful that MultiChoice is the
supplier in its
relationship with eMedia, and is more of an acquirer
of rights to the channels, the question is whether the act of not
acquiring
can be described as an exclusionary act. Whilst not
purchasing a product has implications for the seller of the said
product, I
am of the view that this is not an issue that the
competition policy is concerned with. It also appears that this is
not what eMedia’s
case is about.
[73]
As
I understand it, eMedia’s case under section 8 (1) (c) of the
Act is based on the effects of the revenue that it would
have
generated but for the discontinuation of the eChannels. This, the
Tribunal found to be no more than a financial loss which
would result
in harm to eMedia but not necessarily to the competitive position of
the competitors in the market. In arriving at
this conclusion, the
Tribunal took into account the judgment of this Court in BCX
[13]
and I cannot fault its
reasoning.
Irreparable
harm and balance of convenience
[74]
The fact that a serious doubt has been cast in eMedia’s case
also has some relevance in
considering the irreparable harm as well
as the balance of convenience. As already stated the Tribunal found
that the harm that
eMedia was able to demonstrate was financial harm
which did not translate to competitive harm and in my view this is
not the sort
of harm which calls for an intervention before final
determination of the complaint.
Application
to adduce new evidence on appeal
[75]
MultiChoice applied to adduce further evidence on appeal and the
application was refused. The
application was to introduce the latest
audited financial statements of eMedia, the purpose being to deal
with the quantification
of the loss alleged by eMedia. Given the
conceptual difficulties which are the basis of which I would have
dismissed the appeal,
the evidence sought to be adduced by
MultiChoice did not meet the threshold requirement for the admission
of evidence on appeal
and would also have been irrelevant.
Criticism
of the Tribunal’s approach
[76]
eMedia, has criticised the Tribunal’s approach to the matter as
being at odds with the
Constitutional imperatives as well as the Act.
In my view such criticism is unwarranted in that the Tribunal was
confronted with
a case that was presented as a refusal to supply but
which was explained by a customer foreclosure theory of harm and in
the circumstances
it had to approach the matter with great care. This
is certainly a matter that has the potential to extend the obligation
by a
dominant firm beyond the usual realm of a duty to supply as I
explain above that one of the inventible consequences of granting
an
interdict in these circumstances is to impose a duty on MultiChoice
to acquire the eChannels. eMedia must have realised this
quandary and
this might explain why it would offer the eChannels to MultiChoice
for free. Had it not been for offering the eChannels
to MultiChoice
for free, eMedia would have had more difficulties in advancing a case
of a ‘refusal to supply’. In fairness
to the Tribunal,
the matter presents novel issues in respect of which the Tribunal had
no ready precedent. This is also clear from
the evidence presented by
the economists.
Conclusion
[77]
In my view the Tribunal correctly refused the interim application
brought by eMedia on the basis
that it has failed to establish the
requirements for interim relief as provided for in section 49C (2) of
the Competition Act.
For all the reasons above, I would have
dismissed the appeal with costs.
Victor
J (Manoim J concurring)
[78]
I have had the pleasure of reading the judgment of my brother Nuku J,
the first judgment. I am
in agreement with the facts set out by him
and the description of the Tribunals findings but cannot agree with
the reasoning and
the outcome. In addition the new evidence for
admission was refused on the basis that it did not reach the
requisite threshold.
Competition
jurisprudence and the proper approach to interpretation of section 49
C (2) of the Competition Act
[79]
This appeal raises the application of the principles when granting or
refusing interim relief
in competition law. The proper approach to
interim relief in the case of dominance comes into sharp focus in
this case. Central
to our commercial era are companies trading in
fast moving, dynamic and global markets. Competition law must be
sufficiently agile
to meet the needs of our fast paced economy when
considering interim orders. If a too rigid approach is adopted by the
competition
authorities, the very interim relief may soon lose its
relevance. Currently this is about a basic satellite platform, but
with
the rapid development of digital technology this may soon become
dated hence the need to appreciate and understand the commercial
exigencies and urgency when interim relief is sought. Delaying
decisions until the main relief is decided may result in irreparable
harm. For example, the relief in the main case may be appealed and
this can take several years to reach the Constitutional Court.
Meantime if there is irreparable harm it will continue unabated.
[80]
In applying the three principles in s 49C(2) cognisance must be taken
of whether clear, non-speculative
and uncontroversial facts have been
presented by an applicant from which it could be reasonably and
logically inferred, on a balance
of probabilities, that the alleged
irreparable harm would occur. In considering the balance of
convenience at the interim stage,
the Tribunal has to consider “which
of the two parties will suffer the greater harm from the granting or
refusal of interim
relief, pending a decision on the merits. If there
is clear and non-speculative evidence regarding the general extent of
the harm
that one party would suffer if the relief requested is not
granted, then the interim relief ought to be granted.
[81]
In this regard there will inevitably be disputes of fact but that
does not prevent the Tribunal
from taking a robust approach nor is it
necessary to await the outcome of an investigation in due course. The
finality of an investigation
is perhaps best utilised when
considering final relief. In this case expert reports were filed;
facts were placed before the Tribunal
which could not seriously be
disputed and at this interim stage, this should have facilitated the
determination of interim relief.
The application of an objective
standard to the facts should facilitate an obviously fair decision.
[82]
The basis of the power to grant interim relief must also be
contextualised within the jurisprudential
framework of Competition
Act. The preamble to the Competition Act in relevant part defines:
“
the
aim and object of competition law. It recognises that apartheid and
other discriminatory laws and practices of the past resulted
in
excessive concentrations of ownership and control within the national
economy, inadequate restraints against anti-competitive
trade
practices, and unjust restrictions on full and free participation in
the economy by all South Africans. That the economy
must be open to
greater ownership by a greater number of South Africans.”
[83]
The purpose of the Competition Act is defined as promoting and
maintaining competition in order-
“
(a) to
promote the efficiency, adaptability and development of the economy;
(b) to
provide consumers with competitive prices and product choices;
…
(e) to
ensure that small and medium-sized enterprises have an equitable
opportunity
to participate in the economy; and
(f) to
promote a greater spread of ownership, in particular to increase the
ownership
stakes of historically disadvantaged persons.”
[84]
It follows therefore that these are the guidelines this Court and
indeed the Tribunal must follow
when applying the provisions of the
Competition Act. The approach calls for a transformative
constitutional approach and must be
consistent with the scheme of the
Competition and apply a context-sensitive approach. This is a
striking feature that must be considered
in this application. Unless
this transformative approach is applied even at an interim stage of
proceedings, then the historical
and insidious unequal distribution
of wealth in South Africa will continue. Guidance can be gleaned on
the proper jurisprudential
application of the Competition Act by
following the dictum by Jafta J in
Matatiele
where he
explained the principles of constitutional interpretation which
involves a combination of a textual approach and a structural
approach.
“
Any
construction of a provision in a constitution must be consistent with
the structure or scheme of the Constitution. This provides
the
context within which a provision in the Constitution must be
construed.'
[14]
[85]
It
follows therefore that in granting or refusing interim relief or
indeed any relief the jurisprudential and transformative context
of
the Competition Act must be considered.
Professor
Fox draws attention to the dictum of Moseneke J in
Minister
of Finance v Van Heerden,
where
he states that the achievement of equality goes to the bedrock of our
constitutional architecture.
It
informs all law and against which all law must be tested for
constitutional consonance.
[15]
When
interpreting any legislation, and when developing the common law or
customary law, every court, tribunal, or forum must promote
the
spirit, purport, and objects of the Bill of Rights.
[86]
eMedia correctly submits that a scrutiny of the reasons given by the
Tribunal at this interim
stage shows its failure to pay sufficient
attention to the context and purpose of the Competition Act.
Particularly when it is
evident that there are high levels of
economic concentration in this basic satellite platform which can
easily result in economic
exclusion. MultiChoice’s market share
in the markets defined in the founding affidavit (including in the
premium and basic
satellite markets) provide clear evidence of the
excessive concentration of ownership which prevail in the
broadcasting industry.
This point is highlighted in the 2019 article
by Professor Eleanor M Fox titled, “
SOUTH AFRICA,
COMPETITION LAW AND EQUALITY Restoring Equity by Antitrust in a Land
where Markets were Brutally Skewed”.
The abstract to
the article provides s follows:
“
In
South Africa, the question is not whether to incorporate “equality”
into the competition law, but how. In view of
the history of heinous
exclusion of all black South Africans, South Africa has long
recognized inclusiveness as a competition law
value. Recent
amendments seek to further the equality goal. This essay argues that,
within a significant space, the goals of an
equitable and efficient
competition law overlap. Maximizing this space requires a greater
appreciation of exclusionary conduct
and its harmful effects.
The
author next singles out the amendments that contemplate
“transformation” obligations on parties to some big
mergers
and contracts who are seeking clearance or exemption. She
highlights the special challenges to transparency, predictability,
equal
opportunity, and rule of law. She argues that with hard work
(which is being done) the system can be administrable, with due
process,
and likely to engage the creative talents of the left-out
majority
[16]
”
[87]
In the recent case of
Mediclinic
, the Constitutional Court set
out in very clear terms the approach to competition jurisprudence as
follows:
“
[3]
It ought never to be acceptable for any of us, including the
corporate citizens of this land, to indulge, talk less of
over-indulge,
in the unconscionable practice of seeking to record the
highest profit margin possible by any means necessary, in wanton
disregard
for what that would do to the rest of humanity. Neither
should the historic exclusion of some from meaningful participation,
particularly
in the mainstream economy, be normalised. For, this
seems to be one of the most stubborn injustices of our past that
require a
more deliberate, intentional and systematic confrontation
appropriately enabled by independent, incorruptible, efficient and
effective
law enforcement and justice-dispensing institutions.”
“
[7]
Institutions
created to breathe life into these critical provisions of the Act
must therefore never allow what the Act exists to
undo and to do, to
somehow elude them in their decision-making process. The equalisation
and enhancement of opportunities to enter
the mainstream economic
space, to stay there and operate in an environment that permits the
previously excluded as well as small
and medium-sized enterprises to
survive, succeed and compete freely or favourably must always be
allowed to enjoy their pre-ordained
and necessary pre-eminence. The
legitimisation through legal sophistry or some right-sounding and yet
effectively inhibitive jurisprudential
innovations must be vigilantly
guarded against and deliberately flushed out of our justice and
economic system.”
[17]
eMedia’s
case on dominance and interim relief
[88]
eMedia essentially complains that Multichoice is abusing its
undisputed and overwhelming dominant
position. eMedia asserts that
the conduct contravenes section 8(1)(d)(ii), alternatively section
8(1)(c) of the Competition Act.
[89]
In relevant parts 8(1) of the Competition Act provides that it is
prohibited for a dominant firm
to:
(
c) engage in an
exclusionary act, other than an act listed in paragraph (d), if
the
anti-competitive effect of that act outweighs its technological,
efficiency or other pro-competitive gain; or engage in any
of the
following exclusionary acts, unless the firm concerned can show
technological, efficiency or other pro-competitive gains
which
outweigh the anti-competitive effect of its act—
(i) …;
(ii) refusing
to supply scarce goods or services to a competitor or customer when
supplying those goods or services is economically feasible;
…
[90]
An
amendment to the Competition Act in 2018 introduced various
definitions making them wider and ensuring closer consistency with
the transformative goals of the Competition Act.
The
word “exclusionary act” is defined in s 1( c) to mean an
act that impedes or prevents a firm from entering into,
participating
in or expanding within a market.
[18]
A further amendment in section 1(h) of the Act defined “participate”
as referring to the ability of or opportunity
for firms to
sustain
themselves in the market. An amendment to the words “prohibited
practice” means a practice prohibited in terms of Chapter
2;
[19]
[91]
It
is against these wider definitions that MultiChoice’s
undisputed dominant position must be analysed.
eMedia
submits that by refusing to renew the commercial relationship that
has been in existence for 15 years results in an anti-
competition
effect. It is recognised worldwide that interim measures can
accelerate competition procedures and ensure efficacy
in competition
law.
The
uncontroversial facts in this case point toward interim stage relief
being granted to preserve an existing situation and to
temporarily
safeguard a situation where interests are at risk.
[20]
[92]
In South Africa s 49 C (2) of the Competition Act provides in
relevant part as follows:
(a) must
give the respondent a reasonable opportunity to be heard, having
regard
to the urgency of the proceedings; and “
(b)
may grant an interim order if it is reasonable and just to do so,
having regard
to the following factors:
(i) The
evidence relating to the alleged prohibited practice;
(ii) the
need to prevent serious or irreparable damage to the applicant; and
(iii) the
balance of convenience.
[93]
This really means that the Tribunal must make a summary assessment
before granting the interim
relief. This assessment is only at a
prima face level. It must consider the evidence as to the alleged
practice. There is usually
no time to delve too deeply in serious or
irreparable harm but at the very least it must be assessed in the
context of whether
there is a prima facie right at the interim level.
As long as there is clear and non-speculative evidence about possible
anti-competitive
effects, then serious consideration must be given to
the grant of the relief. In addition, the proper consideration of the
balance
of convenience applied to the facts also provides further
checks and balances to ensure an equitable result.
[94]
Unterhalter
J in
Business
Connexion
explained
that the power to grant interim relief “has effects upon the
state of competition in the market.”
[21]
Although
the facts in that case were different, it remains necessary at this
interim stage of the proceedings to consider the non-speculative
evidence on the state of competition at least at a prima facie level.
Evaluation
of the Tribunal’s findings
[95]
The Tribunal whilst identifying the correct competition principles
erred in applying them to
the facts in this case. It also failed to
take into account the context of the Competition Act requirement at
this stage. The jurisprudential
and transformative principles apply
both at interim relief stage and at final relief stage. Section 49C
(3) of the Competition
Act equates the standard of proof as the same
standard as in High Court common law interim relief. The principles
are trite. If
there is a prima facie right, even one open to some
doubt and a well-grounded apprehension of irreparable harm if the
relief is
not granted and ultimately granted at final relief stage,
then the balance of convenience favours the grant of the relief. The
Tribunal instead in considering the prima facie right conflated this
aspect with the grant of final relief. The non-speculative
and
objective evidence strongly pointed to a prima facie right. In
applying the prima facie right in cases of dominance an objective
test quickly reveals the dynamics at play. Here there was no
immediate threat or prejudice to MultiChoice in the interim.
[96]
The Tribunal failed to properly consider the extent of the prejudice
and harm to eMedia. The
balance between competition harm and
commercial harm to eMedia in the interim requires an objective
approach. Competition jurisprudence
requires an approach that looks
beyond the entitlement of a dominant firm to decide with whom they
wish to do business and that
the terms of their business dealings
must be unfettered. This is where the Tribunal erred.
[97]
This is not a case where a court must apply deference to a
specialised body such as the Tribunal
when applying the provisions of
S49(3). It requires an application of the facts to the law. Despite
the more recent approach to
judicial deference the relevant Body must
still apply the principles correctly to the facts. It did not do so
in this case.
[98]
It overlooked several undisputed and uncontroversial facts that were
presented by eMedia. MultiChoice
and eMedia had been competitors in
the upstream market. It is clear that by excluding the channels in
question it is MultiChoice
that benefits from the content aggregation
provider market. It is undisputed that MultiChoice has been a
dominant firm in the market
for decades and that its dominance will
not change in the near future. This fact does satisfy the first
enquiry into an abuse of
dominance case. The exclusionary conduct can
at least at this interim stage be interpretated as MultiChoice
exercising its market
power. It is also undisputed that MultiChoice
does not have capacity constraints and can easily carry the
foreclosed channels.
Cognisance is taken of the incorrectly claim in
its answering affidavit but it wisely conceded that there were no
capacity constraints
in argument.
[99]
It is also clear that the Must Carry Regulations do not affect
Multichoice’s capacity at
this stage. On the other hand, it
cannot be disputed that eMedia’s OpenView ability to grow is
significantly constrained
by its platform size and cannot grow by
adding channels. The Tribunal did not balance the nature of the
prejudice if final relief
were to be granted in due course. In this
regard the balance of convenience clearly favoured eMedia. The
Tribunal also failed to
take into account that at this stage it is
only through the Multichoice platform that a channel can gain access
to sufficient customers.
Multichoice could not provide a plausible
explanation as to why a channel that is performing well should be
removed bearing in
mind that the eChannels were in the top 10 on its
platform. It is an objective fact that OpenView has one transponder
and its capacity
is severely constrained.
[100]
Multichoice claims that the eMedia channels do not drive
subscriptions
and it wants to enhance its own channels. Somehow at a
completely speculative level MultiChoice claims that if the channels
can
be viewed free of charge on OpenView, this distracts from its
business imperatives. MultiChoice does not say how this can be
prejudicial
to it in the interim. The Tribunals overlooks the
question of the necessity to acquire a Top Box to view the eMedia
Channels and
this is a burden for a customer to have both the DSTV
decoder and a Top Box. MultiChoice has not dealt with this aspect
when insisting
that an eMedia product does not accord with its
imperatives. In any event MultiChoice does not explain what these
strategic imperatives
are and this in the face of Mr Hamburg
admitting that eChannels have some appeal among viewers in the lower
DSTv packages.
[101]
The Tribunal failed to take into account that viewers prefer to
watch
channels on the same platform. The assertion by MultiChoice wanting
to focus on local channels is incorrect as EMovies and
Extra are
locally curated channels which include some programmes being dubbed
into Afrikaans. Multichoice claims to want to empower
black owned
business in South Africa but excludes eMedia despite it being a
majority black-owned business. MultiChoice claims that
eMedia can
distribute its channels to its OTT service and EVOD but does to deal
with why streaming services are a viable alternative
to the DSTv
broadcasting platform.
[102]
MultiChoice in its well-entrenched dominant position loses sight
of
the fact that its position will remain entrenched. It does not have
to preserve this position at the expense of a black-owned,
medium-sized competitor like eMedia that was just gaining traction in
the basic satellite market.
[103]
MultiChoice’s abrupt step, in cutting off an important
source
of eMedia’s ability to benefit from its advertising revenue, on
a platform such as MultiChoice results not only in
a commercial blow
to it but leads to other anticompetitive considerations affecting
eMedia. This is not a case of cross subsidisation
by a dominant firm.
In this case there are no other broadcasting services that can be
utilised by smaller firms. By excluding eMedia
from the broadcasting
platform amounts to exclusionary conduct at this stage. This is
particularly noteworthy in the context of
a long and profitable
relationship. Multichoice has not shown that eMedia has resulted in
financial loss to it.
[104]
At this stage eMedia is unable to self-provide sufficient satellite
broadcasting capacity in order to compete in any meaningful way with
Multichoice. In the short term a further consideration is
the fact
that the setbox is an added barrier to expansion for eMedia. eMedia's
contention that switching is unlikely because consumers
who already
have a Multichoice set top box will be averse to making the outlay
for a new one at additional expense for the sake
of viewing the
foreclosed channels. If the test for an exclusionary act now includes
consideration of the ability for a firm to
sustain itself in the
market these facts show that prima facie eMedia has made out such a
case.
[105]
The Tribunal did not balance eMedia’s estimated losses against
MultiChoice’s future intention to try other channels in place
of the foreclosed channels. The success of MultiChoice’s
intention remains untested. The Tribunal also failed to take into
account that the analogue switch off will favour a move by viewers
to
move to MultiChoice and eMedia will lose out when this happens.
[106]
Multichoice’s overwhelming dominant position and the lack
of
realistic alternatives means there is a limitation on broadcasting
services available to channel and content providers.
[107]
From an assessment of the statistics it cannot be seen at this
stage
that inclusion of the foreclosed channels can be detrimental to
MultiChoice’s growth strategy. The foreclosed channels
are
successful and are at no cost to MultiChoice and thus cannot be
prejudicial. eMedia contends that by foreclosing eMedia’s
channels it is trying to undermine competition. Considered within the
context of the absence of serious prejudice to MultiChoice,
this
submission does gain traction in considering the anti- competitive
effect.
Anti-competitive
effect.
[108]
The Tribunal accepted Multichoice’s submission that the
foreclosure of the channels has a non-trivial anti-competitive
effect. Anti-competitive effects do not have to be significant or
substantial. Once there is an anti-competitive effect and no
justification for it, then the exclusionary aspect has to be
carefully
balanced. Revenue loss to eMedia means it cannot invest and
grow its OpenView platform and thereby improve its competitive
constraint
on Multichoice. It also results in it not being able to
buy additional satellite capacity and to subsidise the cost on other
services
[109]
In assessing the anti-competitive effects on MultiChoice’s
counterfactual exercise there are no clear realistic alternatives for
eMedia. The channel rankings on the DSTv platform right up
to
December 2021 provided from the Niels TAMS shows a good ranking for
the eChannels MultiChoice is excluding eMedia’s channels
that
have attraction to its subscribers. eMedia argues that the
counterfactual put up by MultiChoice is based on a misreading of
what
it actually said. eMedia posited a position where it
may
close
two channels eMovies and Extra whilst MultiChoice based its
counterfactual that eMedia
would definitely
close those
channels MultiChoice by foreclosing eChannels, eMedia has no way to
mitigate its loss. Its revenue on that section
of its business is
extinguished and eMedia is deprived source of revenue thereby
containing its expansion. Looking to other sources
of funding and
raising money also costs money. In any event currently the satellite
broadcasting platform is dominated by DSTv
and in the short term that
technical situation will not change.
Is
what MultiChoice supplied a service and a scarce service?
[110]
In essence therefore the question to be determined at this interim
stage is the effect of a foreclosure by an overwhelmingly dominant
firm. Section 8(1)(d)(ii) prohibits a dominant firm from refusing
to
supply scarce goods or services. The Tribunal upheld Multichoice’s
assertion that it is not in the business of supplying
distribution or
broadcasting services via its DSTv packages. MultiChoice claim to
deal with eMedia as a channel provider and as
a purchaser of its
content. It claimed not to provide broadcasting services to eMedia.
It argues therefore that it cannot be forced
to a acquire the right
to broadcast content and does not in return have a duty to supply
broadcasting services.
[111]
eMedia submits that at the core of Multichoice’s business
is it
broadcasting licence that enables it to supply broadcasting services
to customers and suppliers alike. It is providing a
distribution
platform. It would be illogical to purchase content and not choose to
broadcast the content. This would obviously
prejudice the providers
who wish to benefit from the advertising revenue to cover the cost of
packaging the channels. This was
acknowledged by Genesis,
MultiChoice’s expert. eMedia argued that it would not offer the
channels at no cost if there would
be no advertising revenue spin
off.
[112]
The obligation to broadcast the eMedia’s channels was an
obligation
in terms of the 2017 agreement. The agreement
itself properly construed required MultiChoice to use the channels
and not to pack
them away. The only way MultiChoice can comply with
the 2017 agreement is to distribute them and this distribution
amounts to a
service as rendered by Multichoice.
[113]
Mr Dasgupta the expert on behalf of eMedia described this as an
economic exchange with eMedia whereby the content reaches the
consumer. In providing a “mechanism” by which the content
reaches the consumer, a service is the mostly accurate and logical
description. In our view MultiChoice has the platform and is
providing a service by distributing the channels. Channel providers
do not have another firm that can supply the service nor can
it
self-supply the services of distributing the channels at this stage.
The most logical conclusion therefore is that MultiChoice
is
providing a broadcasting service in the basic satellite market.
[114]
In
the absence broadcasting facilities other than the OpenView service
that has capacity limitations, having one transponder, the
distributions facilities to channel providers is scarce as asserted
by eMedia.
The
Tribunal in
Govchat
in
fact found in that case when considering whether a good was scarce in
terms of s 8(1)(d)(ii) the following fact was taken into
account:
“the services cannot be easily duplicated without significant
capital investment and therefore can be considered
as scarce”.
[22]
[115]
It also follows from the above analysis that MultiChoice is engaged
in an exclusionary act in refusing to allow eMedia’s channels
to be broadcasted on its platform and therefor this provides
a
further ground to uphold the appeal. The Tribunal in
Bulb Man
stated the legal position in applying s 8(1)(d)(ii) to a refusal
to deal situation. This is the important issue to be determined
in
this case since it cannot MultiChoice has not been able to
objectively justify its stance.
“
[55]
The crucial question here is: does the respondent’s refusal to
deal advantage its alleged market power? In
York Timbers Ltd v SA
Forestry Company Ltd
, we cited the following page from Areeda and
Hovenkamp’s treatise, which we suggest is apposite:
“
An
arbitrary refusal to deal by a monopolist cannot be unlawful unless
it extends, preserves or creates, or threatens to create
significant
market power in some market, which could be either the primary market
in which the monopoly firms sells or a vertically
related or even
collateral market. Refusals that do not accomplish at least one of
these results do not violate section 2 (of the
Sherman Act), no
matter how much they might harm the person or class of persons
declined service. Nor are such refusals an ‘abuse’
of
monopoly power in the sense of using power in one market as
‘leverage’ to increase one’s advantage in another
market.”
[56]
We can look at the anti-competitive effect from another perspective.
Why is the dominant firm refusing to deal?
As
the authorities show, even dominant firms are entitled to refuse to
deal. However, if the dominant firm lacked a proper explanation
for
its conduct, this might shift the probabilities in favour of the
applicant. “ Faul and Nickpay observe in relation to
European
jurisprudence that: A refusal to deal by a dominant undertaking will
not be considered an abuse under Article 82 of the
EC Treaty if it is
objectively justified. This will be the case if the refusal can be
justified on business grounds other than
the intention to eliminate a
competitor from the market.”
[23]
Conclusion
[116]
eMedia correctly submits that the approach by the Tribunal,
in
allowing MultiChoice to shut down some of its channels leads to a
result which the Competition Act seeks to guard against. It
is
necessary at this interim stage for the Tribunal to take into account
the spectre of a dominant firm acting in a manner which
can cause
irreparable harm to a smaller firm and in particular where it is
clear that eMedia and indeed even smaller firms such
as StarSat
cannot access sufficient satellite space. The access to subscribers
which DSTV provides to channel providers such as
eMedia plainly
cannot be duplicated, thereby making it scarce. It is uncontroversial
at this stage that satellite capacity is scarce
because eMedia cannot
or even the smaller players cannot duplicate the number of channels
DSTV has. The ex post facto reasons presented
by MultiChoice were
unpersuasive at this interim stage and point in the direction of a
dominant firm warding off external competition.
MultiChoice engaged
in an exclusionary act and could not demonstrate any technological
efficiency or other pro- competitive gain
which outweighed the
anti-competitive effect of its conduct.
[117]
It follows therefore that eMedia only has to make out a prima facie
case and it has succeeded in doing so.
For
these reasons, the appeal must be upheld.
ORDER
1.
The appeal is upheld
2.
Pending the final conclusion of the hearing into the complaint
initiated by the applicant or for a period of six months after the
date of this order (whichever occurs first), the first respondent
is
interdicted from removing the following channels from the bouquet of
channels on DSTv platform of which they formed part of
prior to the
Tribunal’s ruling:
2.1
eToonz; and
2.2
eMovies; and
2.3
eMovies Extra.
2.4
E.tv Extra
3.
The first respondent shall pay the costs of the appellant
costs
including the cost of two counsel.
M
Victor
Judge
of Appeal
Competition
Appeal Court
of
South Africa
concur
pp
Judge N Manoim
N
Manoim
Judge
of Appeal Competition Appeal Court
Of
South Africa
dissent
pp Nuku J
L
Nuku
Acting
Judge of Appeal Competition Appeal Court
of
South Africa
Counsel
for Appellant: Adv
T Ngcukaitobi SC
Adv
Max du Plessis SC
Adv
G Marriott
Adv
Sarah Pudifin-Jones
Instructed
by: Nortons
Inc
Counsel
for First Respondent: Adv
M Norton SC
Adv
J Wilson SC
Adv
M Mbikiwa
Instructed
by: Webber
Wentzel
[1]
89 of 1998
[2]
QC O’Donoghue, R, and Padilla, J, The Law of Economics of
Article 102TFEU, Bloomsbury Publishing, p335
[3]
European Commission, 2009, Guidance on the Commission’s
enforcement priorities in applying Article 82 of the EC Treaty
to
abusive exclusionary conduct by dominant undertakings, OJ C 45,
24.2.2009
[4]
York
Timbers Ltd v SA Forestry Ltd
(09/CAC/May01)
[2001] ZACAC 3
;
[2001-2002] CPLR 94
(CAC) (18 September 2001) paras
64-65
[5]
Computicket (Pty) Ltd v Competition Commission of South Africa
(170/CAC/Feb19 [20100 ZACAC 4 para 18
[6]
Business
Connexion (Pty) Ltd. v Vexall (Pty) Ltd. and another
,
Case Number: 182/CAC/Mar20
[7]
Normandien
Farms (Pty) Limited v South African Agency for Promotion of
Petroleum Exportation and Exploitation (SOC) Limited and
Others
(CCT195/19)
[2020] ZACC 5
;
2020 (6) BCLR 748
(CC);
2020 (4) SA 409
(CC) (24
March 2020)
[8]
York
Timbers Ltd v SA Forestry Company Ltd
(2001-2002)
[CT]
[9]
Computicket
(Pty) Ltd v Competition Commission of South Africa
170/CAC/Feb
19 at para [16]
[10]
Kelly, Principles of Competition Law in South Africa, 2016 at p27
[11]
Whish, Competition Law 9
th
ed at p27
[12]
Shapiro,
Carl
(2021),
“Vertical
Mergers
and
Input
foreclosure:
Lessons
from
AT&T/Time
Warner
Case”,
Review of Industrial Organization, Volume 59, pp 303-341
[13]
Business Connexion (Pty) Ltd. v Vexall (Pty) Ltd. and another, Case
Number: 182/CAC/Mar20
[14]
Matatiele
Municipality and Others v President of the Republic of South Africa
and Others
[2006] ZACC 12
;
2007
(6) SA 477
(CC)
(2007 (1) BCLR 47
;
[2006] ZACC 12)
paras 36 – 37, which read:
[15]
Minister
of Finance and Other v Van Heerden
(CCT
63/03)
[2004] ZACC 3
;
2004 (6) SA 121
(CC);
2004 (11) BCLR 1125
(CC)
;
[2004] 12 BLLR 1181
(CC) (29 July 2004), paras 22-25.
[16]
Fox, Eleanor, “South Africa, Competition Law and Equality.
Restoring Equity by Antitrust in a Land where Markets were Brutally
Skewed” page 1. First published in CPI Antitrust Chronicle,
Fall 2019 (Vol. 3, No. 1)
[17]
Competition
Commission of South Africa v Mediclinic Southern Africa (Pty) Ltd
and Another
(CCT
31/20)
[2021]
ZACC 35
(15 October 2021) (“Mediclinic”). at paras 3 and
7
[18]
(Definition of “exclusionary act” substituted by section
1(c) of Act 18 of 2018)
[19]
(Definition of “prohibited practice” substituted by
section 1(j) of Act 18 of 2018)
[20]
Interim Measures in Competition Law – Curse or blessing Marcel
Meinhardt Simon Suslu Interim measures
in
competition law 1 December 2021 Kluwer Competition Law Blog
[21]
Business
Connexion (Pty) Ltd v Vexall (Pty) Ltd and Another
(182/CAC/Mar20)
[2020] ZACAC 4
(15 July 2020)
[22]
GovChat & others v WhatsApp and others Case no.: IR165Nov20 para
12
[23]
The Bulb Man (SA) (Pty) Ltd and Hadeco (Pty) Ltd (81/IR/Apr06)
[2006] ZACT 86
(28 November 2006) paras 55 and 56