FCCPC’s investigation of pay-tv providers
…and the burden of market definition in a dynamic tv broadcasting industry
On 1 September 2020, the Federal Competition and Consumer Protection Commission (FCCPC) commenced an inquiry into the activities of pay-TV providers in order to establish a possible violation of the Federal Competition and Consumer Protection Commission Act (FCCPA). According to the press release issued by the FCCPC, the scope of this inquiry will include whether any particular pay-TV provider has entered into any form of restrictive agreement and/or has abused (or is abusing) its dominant position in the TV broadcasting industry, conducts which are both anti-competitive and prohibited under the FCCPA.
In this article, I explain the intricacies of, and the fundamental issues that should guide a proper definition of the relevant market for competition law purpose in Nigeria’s dynamic TV broadcasting industry.
As a general rule in many competition frameworks, market definition is the first step for a finding of the existence of an anti-competitive conduct. Market definition for the purpose of this inquiry would enable the FCCPC to make a proper assessment as to the actual or likely effect of an existing restrictive agreement; and/or whether any pay-TV provider is dominant in a particular TV broadcasting market, and if so, whether that pay-TV provider has abused its position of dominance in the defined market. The relevant market is comprised of a product and geographic market. For the purpose of this article, I will focus on only the product market as it is assumed that the geographic market will in most cases be national in scope.
Product markets in competition law are defined after a careful and thorough consideration of multiple factors chief of which is the demand-side substitutability, that is products identified as substitutable (or interchangeable) by consumers on account of their characteristics, price, utility and convenience of use. This is consistent with Section 71 (b) of the FCCPA, thus demand-side substitutability is a function of consumer behaviour or how consumers perceive a particular product. On a conceptual level, the analytical framework proposed for product market definition by the FCCPC in the draft of both the Merger Review Regulations and Merger Review Guidelines is the hypothetical monopolist or the small but significant and non-transitory increase in price (SSNIP) test. Although this test is proposed to be applied by the FCCPC when exercising its merger review powers over notifiable merger transactions, it is unlikely that this test would change with any significant modification, and would be equally applied by the FCCPC in non-merger cases, such as in restrictive agreements and abuse of dominance cases. The SSNIP test asks whether a significant and non-transitory increase (for example between 5% – 10%) in the price of a candidate product by a hypothetical monopolist would compel consumers to switch to another product which they consider to be substitutable to the candidate product so as to render the price increase unprofitable. If such a switch were to occur then the candidate product and the substitute product belong to the same product market.
Relevant product markets in TV broadcasting
The TV broadcasting industry comprises several elements including the component parts of the value chain, the two-sided nature or otherwise of a market, extent of vertical integration of broadcasting activities at the upstream level and downstream level, trading conditions between partners, existing conditions of competition, type of media content whether films, sports, TV series, shows, live events, news, documentaries, etc, their prices and the role of advertisements. Thus, product market definition is not a clear-cut mechanical process as the boundaries of the relevant TV broadcasting market is not so precise as one would expect.
In the light of this fact, an argument (whether valid or not) can therefore be made that the relevant product market in TV broadcasting should be defined in accordance with the SSNIP test, on the basis of whether the TV services is subscription based or financed via advertisements, or according to the different modes of transmission of the TV-signals, or categorisation according to the TV viewing experience whether linear or non-linear, or whether TV channels are supplied on a wholesale basis or retailed to consumers, whether the TV content is licensed from a third party or commissioned by the TV broadcaster in which case it may be sub-divided by content type such as films, sports, etc,. In most cases, a segment of this market is complementary to another segment.
Irrespective of how the relevant TV broadcasting market is eventually defined by the FCCPC, the evidence adduced must not only be unimpeachable, it must also be factually accurate in explaining how the various products comprised within a relevant product market substitute themselves and capable of sustaining its conclusion in this regard. Such evidence could be derived from an “objective” based rigorous economic analysis or could be subjective in nature such as statements and/or conducts of firms (potentially) operating in the TV broadcasting market, although the former is more likely to be reliable and thus of more evidential value than the latter. Some examples of such economic evidence are the existence (or not) of different customer groups for the same product, switching costs arising from apparently substitutable products not belonging to the same product market, the application of statistical models to measure the extent to which the demand for a product changes in response to a change in its price, or in response to the price of another product, how steep are the barriers to entry in the relevant TV broadcasting market and previous instances (if any) of price increase and its effect on consumer consumption patterns.
It is pertinent to also mention that supply-side substitutability factors that considers the possibility or otherwise of producers currently producing another product would be deemed part of the relevant market if they are able to switch production to the candidate product in response to a price increase without incurring significant additional costs, for instance whether a telecommunications operator is able to commence the production and/or licensing of TV content for distribution through its network to consumers, whether an independent production company can acquire a TV broadcasting license in any category, or whether a TV broadcaster can easily enter the market for premium TV content, or whether an advertisement based TV provider can easily transition to a pay-TV provider, etc or vice versa, may play a role in the definition of the relevant TV broadcasting market, however it is too early to tell the extent to which this will form the basis of market definition for the purpose of this inquiry nor will be able to offset the conclusion of consumer behaviour arising from a proper application of the SSNIP test.
Undoubtedly, the TV broadcasting industry in Nigeria has changed from the legacy period (colloquially referred to as the “olden days”) when it was solely dependent on television sets and now in constant evolution due to technology convergence, that is the ability of different network platforms to carry similar kind of services or the collapsing of consumer devices such as telephones, television sets and personal computers/mobile devices into a single device capable of accessing triple play services, which in turn has affected how consumers perceive and consume media contents, especially in response to a price increase and/or quality.
Taken collectively together, these factor should form the foundational analysis of market definition in the TV broadcasting industry lest one falls into the trap of the “cellophane fallacy” where the defined relevant market is overly broad leading to the false inference that no particular TV broadcaster is dominant in the relevant market, or in the alternative, narrowly defined so as to improperly exclude substitutable products, thereby also leading to the false inference that a particular TV broadcaster exercises market power in the relevant market.
Indeed, as shown by multiple cases from several competition jurisdictions, an improperly defined product market is very fatal to a competition case, See; Ohio v. American Express Co. 138 S. Ct. 2274 (2017), United States v. E. I. du Pont de Nemours & Co., 351 U.S. 377 (1956) from courts in the US; and Case 27/76 United Brands Company and United Brands Continental BV v. Commission of the European Communities  ECR 207; C6/72 Europemballage Corporation and Continental Can Company Inc. v. Commission of the European Communities  CMLR 199 from courts in the EU.
From the foregoing, herein lies the true burden of a proper and accurate product market definition in Nigeria’s dynamic TV broadcasting industry.
Chukwuyere, formerly a Tech Policy Fellow at Mozilla Foundation, presently a Research Fellow at the African Academy Network on Internet Policy and Senior Associate at Streamsowers & Köhn.