The Competition Commission says it will investigate the allegations.
Just weeks after French media giant Canal+ took control of DStv’s parent company, MultiChoice Group (MCG), the Competition Commission is preparing to investigate claims that the company is planning major cost-cutting moves in its push to return to profitability.
Allegations have surfaced that Canal+ has suspended payments to suppliers and is demanding a 20% discount. The merger between MultiChoice and Canal+ was approved by the Competition Commission, subject to strict conditions.
The French giant wants new and old suppliers, providing office essentials to production houses, to give a 20% discount, or else have their agreements terminated.
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DStv merger conditions
The allegations have landed on the commission’s desk, raising questions about whether the French media giant is in breach of the conditions under which the merger was approved.
One of the conditions under which the merger was agreed on was that Small, Medium, and Micro Enterprises (SMMES) would benefit; however, given the current state of the South African economy, many small businesses may not have the leverage to stand against the 20%. They might end up agreeing to the discount, which will put further strain on them.
Siyabulela Makunga, the commission’s spokesperson, told The Citizen they have noted the allegations with concern.
“The commission confirms that the Canal+/MCG merger was approved subject to several conditions, including a commitment to procure local content from historically disadvantaged persons (HDPs) and SMMEs and notes with concern the allegations raised.”
Competition Commission to investigate DStv’s new owner
The Competition Commission’s purpose in the Canal+ and MultiChoice merger is to make sure the deal doesn’t harm fair competition. It matters because fair competition keeps prices reasonable, encourages better quality, and helps both small businesses and consumers.
Makunga added that the commission will look into the allegations using the Competition Act which promotes fair competition and give recommendations based on the findings.
“The commission will investigate these allegations in terms of the Competition Act 89 of 1998, as amended, to establish whether there has been a breach of the conditions of approval of the Merger. The commission will then, in terms of the Competition Act, recommend a requisite penalty.”
ALSO READ: Competition Tribunal approves Canal+ and MultiChoice’s more than R50 billion deal
Randburg head offices out of toilet paper
An article by The Sunday Times, citing unnamed employees at MultiChoice and service providers to the streaming company, screams ‘Canal+’s way, or the highway’. Employees housed at MultiChoice’s headquarters in Randburg alleged that the situation became so bad that they were left short of toilet paper due to non-payment to the supplier.
Secondly, a supplier alleged the company is hostile in asking for the discount, and “basically they have a gun to your head to force you to agree; if not, they threaten to terminate your contract if you have an existing contract”.
The service provider said small businesses “don’t have leverage and will agree to this for their own survival, even though this move may force them to cut jobs and downsize their businesses”.
‘Drive to reduce costs’
The Citizen reached out to MultiChoice for a comment, and it had not been received by the time of publishing.
However, MultiChoice told The Sunday Times that it has been on a drive to reduce costs for the past two years, and this is continuing under the merger.
“As has been publicly reported over the past two years, MultiChoice has embarked on a significant drive to reduce costs in the business, with the goal of driving efficiency. This has continued following the completion of the Canal+ merger, and MultiChoice is engaging with suppliers in this regard.
“Managing spend in the business is important to ensure that MultiChoice continues to play a key role in the South African and African broadcasting ecosystem over the long term.”
DStv in difficult position
It is no secret that DStv has, for the past financial years, experienced a decline in subscribers, and it has spent a significant amount of money on the relaunch of Showmax, which Canal+ is eyeing to take full control of, as it is not included in its merger.
For Canal+ to take full control of Showmax it would need to buy the 30% stake owned by Comcast, an American multinational mass media.
In the group’s annual results released in June, MultiChoice recognised the value and importance of mutually beneficial supplier relationships and “therefore aspire to pay a fair price for services in the spirit of collaboration and mutual sharing of risks and benefits”.
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