This matter involved a review of the Competition Tribunal's decision to unconditionally approve the acquisition of an indirect 24.9% management interest and maximum 18% financial interest by Primedia Ltd (fourth respondent) in Kaya FM (Pty) Ltd, a radio station that was a potential competitor of radio stations operated by Primedia Broadcasting (Pty) Ltd, a subsidiary of Primedia. The acquisition occurred through the purchase by Primedia and Capricorn Capital Partners of all equity in New Africa Investments Ltd (Nail), which held the 24.9% interest in Kaya. The transaction was notified as an intermediate merger on 29 July 2005. The Competition Commission initially approved it with conditions, but later argued it should be prohibited. The Tribunal unconditionally approved the transaction in February 2007 (the "first approval"). African Media Entertainment Ltd (AME), a rival bidder, brought a review which was upheld, and the matter was remitted to the Tribunal. The Tribunal again unconditionally approved the transaction on 9 May 2008 (the "second approval"). AME brought this second review application. The Commission did not join this review.
The review application was dismissed with costs, including costs of two counsel, awarded against the applicant (AME).
The binding legal principles established are: (1) Section 12 of the Competition Act establishes jurisdictional facts that determine whether a transaction constitutes a merger; once jurisdiction is established, the enquiry must proceed entirely under section 12A for substantive competitive assessment and should not revert to section 12 considerations; (2) In differentiated product markets, particularly dual-sided markets, market definition must be sensitive to the degree of product differentiation - differentiation in one side of the market (listeners) translates into differentiation in the other side (advertising); (3) Under section 55 of the Competition Act, the Tribunal may accept as evidence any relevant document whether or not it is given under oath or would be admissible in court, in keeping with the Tribunal's mandate to conduct hearings expeditiously and exercise inquisitorial jurisdiction; (4) On review of Tribunal decisions, courts must apply the principle of deference to the Tribunal's expertise in complex economic matters; the test is whether the Tribunal properly exercised its powers and whether the outcome is rationally justifiable, not whether the court would have reached the same conclusion; (5) MHHI assessments are designed to measure unilateral effects in homogeneous product markets and will grossly overstate merger effects in differentiated product markets, though they may serve as a crude starting point where better tools (like diversion flow analysis) are unavailable.
The Court made several non-binding observations: (1) It noted that intervening parties in merger proceedings are not recognized as sufficiently "affected" to be granted a right of appeal, but they do have a right to review; (2) The Court acknowledged the difficulty and complexity of analyzing radio markets, noting that no consensus could be reached among three expert economists due to the nuanced nature of such markets; (3) The Court observed that requiring the Tribunal to expressly deal with every single point of evidence or argument would "paralyse the exercise of its merger control functions and undermine the policies of the Act"; (4) The Court commented on the practical realities of radio advertising, noting that rate cards are rarely utilized in reality and what is charged is highly negotiable; (5) The Court expressed that the theory of a unilateral price increase by Highveld post-merger based on diversion to Kaya "sounds so devoid of commercial reality as to not require further contemplation" - adopting the Tribunal's characterization.
This case is significant in South African competition law for: (1) Clarifying the relationship between section 12 (merger definition based on jurisdictional facts) and section 12A (substantive competitive assessment) of the Competition Act - once jurisdiction is established under section 12, the enquiry moves entirely to section 12A and should not revert to section 12 considerations; (2) Establishing the proper approach to market definition in differentiated product markets, particularly in dual-sided markets like radio broadcasting where there is both a listener market and an advertising market; (3) Confirming the broad evidentiary powers of the Competition Tribunal under section 55 of the Act, which allows the Tribunal to accept relevant documents whether or not they would be admissible in court; (4) Reinforcing the principle of deference to the Tribunal's expertise in complex economic and competition matters on review, distinguishing review from appeal; (5) Providing guidance on the use and limitations of MHHI (Modified Herfindahl-Hirschman Index) assessments in differentiated product markets versus homogeneous product markets.