Competition and Cross-media Ownership Concerns
Competition Complaint
In January 2006, the Broadcasting Authority concluded an investigation into a competition complaint lodged by a member of the public on the collective subscription fees charged by HKCTV for provision of a general entertainment television channel. The complainant alleged that HKCTV had engaged in predatory and discriminatory pricing thereby in breach of section 14 of the Broadcasting Ordinance. The grounds for the complaint were that the collective subscription fee charged by the licensee to a housing estate for the provision of the channel for 12 months worked out at less than $2 per month per household. At the same time, the same channel was offered to individual subscribers as a stand-alone premium service at $30 per month.
After conducting a preliminary investigation, the Authority found that HKCTV had not breached section 14 of the Broadcasting Ordinance because the programmes in the general entertainment channel were duplicates of those in the licensee's basic service and thus the cost of the channel was lower than that for an "ordinary" channel. The low subscription fee was collectively offered to housing estates and it amounted to a volume discount which could be justified in cost terms and did not contribute discriminatory or predatory pricing. There was no evidence that the conduct of HKCTV has a substantial foreclosing effect against competition as competitors were not excluded from acquiring customers in the same housing estates to which the channel concerned from HKCTV was made available.
Review of Competition Guidelines
In order to provide more practical guidance and transparency to the industry on how the Authority would perform its statutory functions in respect of competition provisions of sections 13 and 14 in the Broadcasting Ordinance, the Authority updated the two sets of competition guidelines, viz., the "Guidelines to the Application of the Competition Provisions of the Broadcasting Ordinance" and "Competition Investigation Procedures" for industry consultation in September 2006. After five years of implementation, the Authority found it opportune to update the guidelines issued in 2001 to take into account its implementation experiences and international best practices. The Authority planned to finalise the guidelines and promulgate them around the second quarter of 2007.
Enforcement of the TVB-TVB Pay Vision's "Firewall" Provisions
The licences of TVB and TVB Pay Vision contain a number of special conditions21 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-subsidization or preferential treatment between the two companies. During the year under review, the Authority processed three complaint cases alleging breaches of the firewall provisions in the licences of TVB and TVB Pay Vision.
The first case concerned the failure of TVB, as required under its licence conditions, to notify other licensees in a timely manner and provide adequate details of six transactions relating to TVB's provision of different services to TVB Pay Vision in 2004 and 2005. TVB was advised to observe more closely the relevant licence condition and to re-issue the notifications with adequate details of these transactions. The Authority also took the opportunity to approve a notification form which would provide clearer guidance to TVB on the information required. The second case was about the belated submission of general meeting documents by TVB Pay Vision to the Authority. TVB Pay Vision was accordingly advised to observe more closely the relevant licence condition.
The third case was about an open tender exercise involving the non-exclusive supply of two television channels by TVB. Having examined the details of TVB's offer to other licensees, the Authority considered that TVB had given TVB Pay Vision more negotiation time and lead time for the launch of the channels than that offered to other licensees. The Authority therefore decided that the allegation of undue preference on the non-exclusive supply of two channels was justified. Taking into account the mitigating factor that none of the other licensees had shown any interest in the offer or initiated any discussion with TVB, TVB and TVB Pay Vision were each given a warning to observe more closely the relevant licence conditions.
Enforcement of "Disqualified Person" Provisions
The Broadcasting Ordinance contains disqualified person restrictions22 to safeguard against the risks of media concentration and editorial uniformity. In 2006, the Authority considered a breach of disqualified person restrictions by ATV in allowing nine disqualified persons by virtue of their association with a newspaper as defined in Section 2(1) of the Broadcasting Ordinance, viz Phoenix Weekly Magazine, to exercise control of ATV without approval of the Chief Executive in Council during the period from 7 July 2000 to 1 June 2005. Apart from imposing financial penalty, the Authority also directed ATV to enhance its internal monitoring system in order to prevent similar breaches in future.
The Authority drew up an accounting manual in order to assist television programme service licensees to comply with the accounting separation provision under section 17 of the Broadcasting Ordinance. The manual sought to give guidance to television programme service licensees, which also held telecommunications licences under the Telecommunications Ordinance, to facilitate the separation of accounts for their television broadcasting and telecommunications businesses so as to provide transparency in their operations and guard against anti-competitive practices (such as cross-subsidisation or discriminatory pricing). The manual was promulgated by the Authority in August 2006, following industry consultation held in February 2006.
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.
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.