Caxton responds to media reports about being fined by the Competition Commission

Paul Jenkins: Group Chairman, Caxton

On Friday, 16 February 2018, there was large scale media coverage around the fact that Caxton and Independent Media had paid an administrative penalty to the Competition Commission.

The matter related to Caxton settling a dispute that has been ongoing since 2011. It related to a structural mechanism between the advertising and media industries that has been in existence for over 100 years internationally. It concerns the custom of media owners paying a set commission for services rendered, based on the value of advertising placed. In South Africa, the commission was either 16.5% for accredited agencies or 15% for un-accredited agencies.

The Competition Commission formed the view that this custom was anti-competitive because there was an agreement or concerted practice between media owners to always apply those traditional commissions. The practice has since ceased and the media and advertising industry now negotiate commissions individually. Whilst Caxton believed the matter was contestable, it chose to accept the Competition Commission’s position and pay an administrative penalty rather than enter into lengthy legal proceedings. The settlement agreement was confirmed by the Competition Tribunal on 16 February 2017, in terms of which Caxton will pay a once-off administrative penalty of R5.8m, as well as contribute an amount of R700k per year for three years towards a bursary and development fund for previously disadvantaged persons in the media and advertising industries. It will also provide a 25% advertising space bonus benefit to small advertising agencies for three years, subject to certain rules and limits.

The Competition Commission has now reached settlement agreements on the similar terms with Multichoice/ DSTV Media Sales, Independent Newspapers and Caxton, and is instituting proceedings against another 25 large and small media owners, or is in the process of concluding similar settlements with them.

Subsequently, the media industry has implemented the required changes, with most companies choosing to operate on nett rate cards.

Caxton has decided, in certain instances, to continue with the commission system for now and has actually increased the commission rate to registered advertising practitioners by ½%.