‘Media24’s merger aimed to crush print competitors’

If implemented, the transaction will lead to many indirect job losses, a loss of media diversity and reduced competition.

Media24’s proposed sale of its logistics business and closure of virtually all of its newspapers is a “carefully orchestrated strategy” to enhance its dominance of the South African media landscape.

This is the view of Riquadeu Jacobs, executive chair of Capital Newspapers, in court papers forming part of an application to interdict Media24 from finalising the transaction through which it would sell its distribution business On The Dot and its community newspapers to Novus Holdings, as well as closing the print editions of City Press, Rapport, Beeld and other print titles.

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Read: Media24-Novus deal faces legal review amid competition concerns

He said if the merger is implemented, it would force many competing newspapers out of business, reducing media diversity and causing significant third-party job losses. It would also limit communities’ ability to access news if they do not have internet connectivity.

Capital Newspapers and Caxton’s application follows the Competition Commission’s approval of the deal last week and Media24’s announcement that it will implement the transaction immediately.

Read: Media24 to retain all journalists of to-be-closed newspapers

In a lengthy affidavit, Jacobs states the transaction, deemed a merger in competition legislation, “is part of a carefully orchestrated strategy by Media24 and Mr Koos Bekker to fundamentally undermine competing media entities and reinforce the dominant position of the online News24/Netwerk24 brand”.

Jacobs furthermore states that the merger would have anti-competitive consequences. “Broadly speaking, there will be significant negative effects across the entire media sector, while the only entity that stands to benefit is Media24 as it tightens its grip on the online news segment.”

Media24 has not filed responding papers in defence of the application.

Additional distribution costs and job losses

In the affidavit, Jacobs states that the termination of the print editions of Media24’s newspapers would increase distribution costs by around 15%, forcing some competing publications to close.

“The closure of further newspapers will further increase the cost of distribution of the remaining newspapers and thus create a death spiral, as this causes other newspapers, which continue to be published, printed and distributed, to cease to be viable,” he states.

Read: Media24’s decision is ‘disingenuous and self-serving’

Jacobs states this will result in significantly more job losses than the 400 Media24 forecasted.

“The applicants estimate that 200 persons are employed in the newspaper publishing business at Independent, 350 at Arena, 120 at the Citizen, 15 at the Daily Maverick, 30 at the Sunday World, 39 at the Witness and 30 at Mail & Guardian. Given the fact that none of these newspaper publishers is likely to be viable in view of the large increase in distribution costs associated with the merger and rely on newspaper publishing to generate the majority of their revenue, this would mean that a further approximately 784 employees are potentially at risk as a result of the adoption of the Media24 strategy.”

Reduction of media diversity

Jacobs also states that the closure of such competing publications would result in reduced media diversity and access to news from communities without Internet access. This would, in turn, lead to Media24 entrenching its online dominance.

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Read: Media24 faces new offer amid controversial restructuring

“The merger threatens to create an environment where Media24 and its digital platforms, News24 and Netwerk24, dominate the media landscape. This would result in market concentration, giving Media24 undue influence over public discourse and access to news. Such monopolistic behaviour would limit the ability of smaller media houses to compete, reducing the overall diversity of voices in the public sphere.”

Public interest and empowerment are ignored

Jacobs also states that Media24 initially assured him that Capital Newspapers “was the preferred and only bidder” for the On The Dot business.

However, despite this, Media24 abruptly awarded the deal to Novus, “a listed company which has virtually no empowerment credentials”.

Read: Caxton sounds alarm over Media24

Jacobs argues that this decision is contrary to statutory provisions requiring that mergers promote a greater spread of ownership, in particular, to increase the levels of ownership by historically disadvantaged persons.”

Threat to constitutional rights and democratic discourse

Jacobs also stresses the importance of media diversity to democratic society, stating, “The press is vital to ensuring that citizens receive information and ideas, thus enabling responsible civic engagement.”

Read: Caxton to oppose Media24’s sale of its distribution business to Novus

He warns that the merger would curtail “the plurality of media voices in South Africa,” particularly affecting communities reliant on print media. He argues that this, in turn, undermines “constitutional rights to freedom of expression and … freedom of the press.”

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