The Competition Commission has gazetted amendments to section 73A of the Competition Act in a move that has direct impact on South Africa’s media owners and media agencies.
Media24, on the heels of a statement issued by DStv Media Sales, announced it too would change all its rate cards – across its newspaper, magazine and online properties – to “exclude the long- established 16.5% early settlement discount or agency commission”.
In a statement, Media24 said the decision followed the gazetting last Friday [22 April 2016] of amendments to section 73A of the Competition Act.
“In terms of the amendments to the Act any conduct that is found to be collusive or cartel-like is a criminal offence. Having assessed its exposure, and without acknowledging any wrongdoing, Media24 has decided to take these precautionary measures to create certainty and avoid any regulatory and legal risk,” the company said.
“In order to avoid legal risk or regulatory exposure we have revised all our rate cards from 1 May 2016 and are in the process of communicating the changes to all media agencies. New rate cards will exclude any agency commissions or early settlement discounts,” said Media24.
Caxton Group restructures commission
The Caxton Group has also advised advertising agencies and practitioners that its advertising agency commission would be restructured with effect from 1 May 2016.
“Going forward, the fee payable to accredited advertising agencies would be 15.5% and to unaccredited advertising agencies would be 14%. Furthermore, the Caxton Group would allow an additional 1.5% discount for timely settlement. This would only apply where there are no individually negotiated arrangements to the contrary,” said Gill Randall, CEO of Caxton’s Spark Media (formerly the Newspaper Advertising Bureau of SA).
Caxton’s current rate cards would remain unchanged until further notice, Randall said.
“The Caxton Group felt that this was an opportune moment, in the light of regulatory and industry developments, to change its existing advertising agency fee structures, in the interest of fostering its relationships with its advertising agency customers,” she said.
Media24 apologised for the short notice and inconvenience the sudden decision had caused, but said given the “serious nature of the matter we believe these changes are in the best interest of all parties”.
It said all advertising bookings made prior to 1 May 2016 where the advert will be published from 1 May 2016 or thereafter, revised rate cards will apply.
DStv Media Sales addressing ‘legal uncertainty’
DStv Media Sales, in a statement issued on Thursday evening, said it had “amended the settlement discount structure for media agencies that book advertising on DStv platforms in order to address any legal uncertainty regarding our compliance with the Competition Act”.
DStv Media Sales said it had reduced its rates to reflect this amendment, which would be effective as of 1 May 2016.
A source told The Media Online that the “decision to move quickly to a net rate card, without a notice period, has been accelerated by new legal findings that consider the 16.5% commission system to be anti-competitive, tantamount to industry collusion and cartel price fixing”.
DStv said the previous structure, in which media owners paid a 16.5% commission or early settlement discount, to media agencies, was “a long established practice in many parts of the world and has been in existence for considerable time, but is currently under investigation by the Competition Commission for allegedly contravening the Competition Act”. It said it would continue to engage with the Competition Commission.
Fee system for services
Rob Smuts, CEO of RMS Media, said in response the DStv statement that DStv’s move to a net rate card would “have little impact on internationally aligned clients and larger local advertisers, as by far the bulk of these marketers have paid for media services on a fee system for some time now”.
“The change will be more onerous for agencies servicing smaller to medium sized clients, many of whom will need to put remuneration systems in place over time as other media owners follow suit,” he said.
Smuts said the move would have little impact on RMS Media. “We have transparent agreements in place with both our agency and direct clients – so the change will not impact our business,” he said.
In its statement, DStv Media Sales said in order to avoid any regulatory uncertainty and legal risk, and “without any acknowledgement of wrongdoing, it had revised its policies regarding agency settlement discounts as from 1 May 2016, and thereafter all rates will be published nett of any agency settlement discounts”.
Chris Botha, group managing director of The MediaShop, said he didn’t believe the amendments to the Act would have a major impact on agencies that “operate above board and have transparent relationships with their clients”.
Botha said some online media owners, and most of the out of home industry, had already moved to net rates without too much fuss or fanfare. “Media agencies, and DStv themselves, will have to manage contracts and schedules very carefully, to ensure that there is absolute clarity on which schedules include agency commission, and which don’t, until such time as there is no more duplication,” said Botha. “I honestly believe that in the long run, all media owners will go this way.”
Botha said ad agencies should not see this as a threat if they operated transparently. “Clients should know when they pay agency commission to an agency, and they should also know how much agency commission they pay, and how much is retained by the agency. For those who don’t, and have had the wool pulled over their eyes for the past years, the next few months will be interesting…” he added.
SABC deferred change in 2015
The SABC in April 2015 announced its intention to change to a zero-based rate card, a move that aroused a storm of protest. After extensive consultations with agencies, the public broadcaster’s group executive of commercial enterprises, Nomsa Philiso, said in December that the SABC had decided to “defer” the implementation of the net rate card. Philiso said the SABC “recognised that current trading conditions are tough and that economic forecasts for the coming months are gloomy”. She said the broadcaster was “sensitive” to the increasing pressure under which some agencies are operating.
But, she added at the time, while the SABC considered some of the negative reaction to the proposal to be “more in self interest than in a spirit [of] partnership” it nevertheless “acknowledges that it may be prudent for all parties to have more time to digest the full range of implications accompanying a change to zero-based rate cards”.
Note: This story will be updated as new information and comment is sourced from agencies and owners.