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DStv Found Guilty of Price Fixing: What Does It Mean For You?

Author: Megan Ellis
Date: 2017-06-02
DStv was found guilty of price fixing in its media sales division. While this affected advertisers mostly, what does it mean for consumers?
DStv was in hot water for uncompetitive practices again when it was found guilty of and fined for price fixing. So what did the major pay-TV service do? We take a look at price fixing, what DStv did and what its implications are for consumers.

What is Price Fixing?

DStv Media Sales admitted to price fixing as part of the settlement agreement between it and the Competition Commission. An investigation had been launched into the company in 2011, but the admission of guilt and final ruling were made recently But what exactly is price fixing? It is essentially an agreement between competitors in an industry to hold prices at certain levels and offer the same discounts. In the commercial world, it is illegal collusion. In DStv's case, its Media Sales Division and certain members of the Media Credit Co-Ordinators (MCC) agreed to similar prices and discounts for advertising agencies. These actions, according to the Competition Commission, restrict competition in the industry.
"The Commission found that the practices restricted competition among the competing companies as they did not independently determine an element of a price in the form of discount or trading terms," the commission said in a statement. "This amounts to price fixing and the fixing of trading conditions in contravention of the Competition Act."
As a result, DStv Media Sales will be paying a total "remedy" of R180million. This includes a R22 million administrative fine. There is also an R8million payment to the Economic Development Fund. Along with this, there's a 25% in bonus airtime of every Rand of airtime bought by small agencies who qualify under the agreement. Did you know that you can stand to save up to 35% on your monthly premiums by combining your car and home insurance? CLICK BELOW to get multiple quotes!

What Does This Mean For Consumers?

DSTV's price-fixing of advertising does not affect consumers directly. However, it is a symptom of an industry that lacks competitiveness and stifles competition. The price-fixing in advertising further strengthens DStv as a company. This is not necessarily in the interests of consumers in the pay-TV market. MultiChoice is the group behind many of South Africa's top television brands. These include DStv, Mnet, SuperSport and GOtv. When it comes to video-on-demand services, MultiChoice's parent company Naspers also owns ShowMax. The pay-TV market is mostly dominated by Naspers subsidiaries, which has led to criticism for many years. Other entries into the market have either failed or hold only a small portion. It has been estimated that Naspers companies hold 90% of the payTV market. Other mainstream television networks are currently free. These include our public broadcaster SABC and eTV (which is private, but free-to-air). But DStv does hold certain rights for broadcasting SABC content as part of some of their packages. In 2016, Icasa was set to investigate competition in the industry. However, this investigation was ultimately delayed. Despite this, it hasn't stifled the complaints of consumers, who have criticised the lack of competition for years.

Customers Criticise Lack of Competition

Forums on certain South African sites host many complaints from local consumers. Some consumers have even gone so far as to publish articles on sites like MyNews24 bemoaning a perceived lack of quality due to DStv's market dominance. We are all familiar with complaints about decades-old reruns on 'new' channels. Add to this the price increases over the years, and consumers have fumed. In 2016, Fin24 published an article which showed that many of the site's users were considering dumping DStv for Netflix.
"I have DStv – unfortunately, they have become just too expensive at R799p/m for a premium subscription. I will most definitely be cancelling my subscription to that (DStv) and go over to Netflix.  DStv have ripped people off for far too long now and I think that they will face a huge decline in their premium subscription in the coming months," one user said. "As the news broke I ended my relationship with Repeat TV ( also known as DStv) and created my Netflix account," another said.
Netflix's local introduction excited consumers. Many wondered if this could be the solution to the lack of competition.

Could Video Streaming Help Consumer Choice?

In terms of video-on-demand services, more competition arrived through the local introduction of Netflix and Amazon Prime. However, even Netflix's local rollout was hamstrung by the Naspers monopoly. This became painfully evident when the local version of Netflix didn't have the rights to some of its own original shows at launch, but ShowMax and M-Net did. Rights for hit HBO shows like Game of Thrones also belong to ShowMax. This meant that Netflix couldn't show fan favourites like Orange is the New Black and House of Cards. It even led to some referring to the local version of Netflix as "neutered". The limited show lineup was a significant deterrent for new customers. It is this kind of market dominance that prevents consumers for getting the best deals and services possible. It is not uncommon to see DStv subscribers bemoan having to subscribe to dozens of channels they never watch just so that they can see SuperSport matches. Some consumers have welcomed ShowMax as an alternative - but it still falls under Naspers. For those who would like to stream SuperSports online, you still need a DStv account number. Some users have moved to services like Google Play Movies to rent out movies online, while others use VPN services to access the US version of Netflix. However, many continue to use pirating as an alternative. There are a multitude of online sites that allow you to download or view pirated series and movies. Despite this, it is not uncommon to hear people say they would pay for a service that gave them access to the content they wanted for an affordable price. In the end, it all comes down to competition. Do you think that there is a lack of quality in the payTV industry due to limited competition? Let us know in the comments below...  

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