Competition and Cross-media Ownership Concerns

Review of Competition Guidelines

The Authority has updated two sets of competition guidelines, viz. "Guidelines to the Application of the Competition Provisions of the Broadcasting Ordinance" and "Competition Investigation Procedures". These guidelines, which were issued in 2001, serve to explain how the Authority will apply and enforce the competition provisions under the Broadcasting Ordinance which deal with anti-competitive conduct of television programme service licensees. After five years of implementation, the Authority considers it opportune to update the guidelines to take into account its implementation experiences and align with international best practices in order to provide more practical guidance and transparency to the industry.

The main revisions include:-

(a)		elaborating on how the statutory competition analysis and investigation would be conducted; and
(b)		updating the factors the Authority will take into account and the analytical framework when applying the competition provisions. The latter comprises three stages: market definition, assessment of market power or dominance of licensee; assessment of the competition effect of the conduct under examination.

Following consultation, the Authority finalised the revised competition guidelines for promulgation on 11 May 2007.

Enforcement of the TVB-TVB Pay Vision's "Firewall" Provisions

The licences of TVB and TVB Pay Vision contain a number of special conditions²⁶ in their respective licences as a safeguard to ensure an effective "firewall" between the operations of the two companies to mitigate concerns of unfair competition and media concentration and prevent cross-subsidisation or preferential treatment between the two companies. During the year under review, the Authority processed three cases alleging breaches of the firewall provisions in the licences of TVB and TVB Pay Vision. The first case was about the belated submission of annual audited accounts by TVB Pay Vision to the Authority. TVB Pay Vision was advised to observe more closely the relevant licence condition.

The second was a public complaint about the promotion of a TVB Pay Vision's channel by TVB in its domestic free television programme. After taking into account all relevant factors, including the fact that it was common for the producer or owner of a channel or programme to promote their channel or programme and TVB, as the content provider of the TVB Pay Vision's channel concerned, had a genuine interest in promoting the channel as successfully as possible, the Authority concluded that the allegation that undue preference had been given to TVB Pay Vision was unsubstantiated.

The third was a public complaint concerning the retransmission of the two free-to-air channels of TVB by TVB Pay Vision in 2004²⁷. After investigation, the Authority considered that no case had been made out regarding the allegation that TVB had granted the right to broadcast the two channels of TVB to TVB Pay Vision without complying with the firewall provisions and the allegation that TVB had given undue preference to TVB Pay Vision by not taking legal action against the latter for infringement of its copyright. The complaint was unsubstantiated.

Enforcement of "Disqualified Person" Provisions

The Broadcasting Ordinance contains disqualified person restrictions²⁸ to safeguard against the risks of media concentration and editorial uniformity. In 2007, the Authority considered a breach of disqualified person restrictions by TVB and TVB Pay Vision by allowing their principal officers and/or director to exercise control of the two companies in the capacity of disqualified persons without the requisite approval of the Chief Executive in Council from November 2004 to January 2007. These persons are disqualified persons by virtue of being the relatives of principal officers exercising control of another television programme service licensees and the relatives of a director of a proprietor of a local newspaper. Apart from imposing financial penalty, the Authority also directed TVB and TVB Pay Vision to enhance their internal monitoring systems in order to prevent similar breaches in future.

 

26		TVB and TVB Pay Vision are prohibited from including in their services any television programme wholly or substantially produced by the other if the programme has already been included in the service of the other within a period of 12 months. TVB and TVB Pay Vision are also prohibited from supplying or obtaining from each other any exclusive programmes or channels without going through an open bidding process, or on a non-exclusive basis, any programme or channel unless the same is made available to other licensees on no less favourable terms. There are also provisions governing arm's length transactions, undue preference and unfair cross-subsidization between TVB and TVB Pay Vision.
27		The complainant first lodged the complaint in late February 2005. The Broadcasting Authority Secretariat replied in June 2005 that the firewall provisions were not applicable as there was no prima facie evidence that TVB supplied any of its two free-to-air channels to TVB Pay Vision. The complainant did not further pursue the matter. In late September 2006, the complainant reactivated the complaint following BA's resumption of the processing of a copyright infringement complaint against the complainant in the light of the court's ruling on the matter.
28		Under the Broadcasting Ordinance, individuals or companies engaged in or are associated with certain types of businesses are not allowed to hold a domestic free or pay television programme service licence or exercise control of such a licensee unless the Chief Executive in Council is satisfied that public interest so requires and approves otherwise. These individuals or companies, who are defined as "disqualified persons" under the Broadcasting Ordinance, are - (a)   another television programme service licensee; (b)   a sound broadcasting licensee; (c)   an advertising agency; (d)   a proprietor of a newspaper (including magazine) printed or produced in Hong Kong; (e)   persons exercising control of (a) to (d) above; and (f)   associates of (a) to (e) above.