On April 15, at the meeting of the National Security and Defense Council, President Volodymyr Zelensky announced the development of the law that would define the ‘status of an oligarch’ and turn them into businessmen. This is a risky legal game with guaranteed harmful consequences and populist motives.
At the same time, the Anti-Monopoly Committee of Ukraine (AMCU) can reduce the influence of oligarchs on the government and economy without any legislative spam. For instance, it is sufficient to stop the anti-competitive practices of large media groups, through which the oligarchs run the country. There is such an opportunity now – there are unprecedented proceedings initiated by one of the cable providers and its consumers against the oligarchic media quartet.
Will the Anti-Monopoly Committee dare to stop the abuse of monopoly position by large media groups, thus making de-oligarchization processes irreversible?
A silver bullet for Zelensky
These days, the media groups of Rinat Akhmetov (Media Group Ukraine), Ihor Kolomoisky (1+1 Media), Victor Pinchuk (StarLightMedia), and Dmytro Firtash (Inter Media Group) simultaneously, prematurely and without giving reasons began to withdraw their TV channels from retransmission of one of the largest providers in the country. Considering that common ratings of the media oligopoly reach 70%, most consumers of this provider will change the provider already in May, and it will have to leave the market. In some eastern regions of the country, it is the only provider, thus residents may be left without Ukrainian TV content at all.
In fact, it is a punishment from the media oligopoly for the provider’s refusal to participate in a cartel conspiracy over the price and filling of TV packages for viewers.
This is a textbook abuse of a collective monopoly position, and the provider for the first time dared to go the legal way and filed an application to the Anti-Monopoly Committee.
For Zelensky, these proceedings could be the silver bullet against the oligarchs. If the AMCU does its job, the influence of oligarchic TV channels on Ukrainian voters will quickly and significantly decline, along with the need for politicians to ‘thank’ the oligarchs for appearing on their TV channels.
Oligarchs’ TV consensus
If there are periodic competitions between oligarchs for money and influence in other segments, TV consensus and concerted behavior remain on the media market for a long time. This confirms that it is more correct and easier to break the vicious circle of oligarchs-TV channels-voters-politicians-privileges-oligarchs, where the TV channels are the weakest link.
The advertising business model and economic relations of the oligarchic TV quartet with the providers are synchronized and identical. For example, none of the providers can get the right to retransmit the channels of one, two, or three media groups – it must buy from all four or from no one. The same applies to the choice of TV channels – the provider either buys everything from the menu of all media groups or does not receive any. That is, in addition to the flagship 1+1, ICTV, TRK Ukraina, dozens of unpopular and uninteresting channels, that the provider is forced to buy and impose on viewers are included in the package.
The media groups also put pressure on providers in order to redistribute funds in the TV market (to reduce the profitability of unrelated providers and TV channels, and to increase their own), withdraw their providers, and occupy dominant positions.
A similar synchronization takes place in the advertising market, where “punitive damages” are applied to advertisers, who buy airtime not on media channels of the media oligopoly, in order to maximize the profits of the TV quartet and to minimize the income of others.
The purpose of such synchronous behavior of the media oligopoly is, on the one hand, to achieve formal compliance with the requirements for break-even and transparency of financing, on the other hand, to leave other TV channels without legal income in two single segments where they can receive them (advertising and provider).
Such coordinated behavior provides the media oligopoly with preserving and strengthening market power on television. For decades, they occupy absolutely dominant positions on views – a total rating of about 70%. However, new players, especially foreign ones, with their understanding of freedom of speech and competition, have not come to the Ukrainian media market during this time.
Also, the control over the TV market (market power) is the country’s remote control in the oligarchs’ hands.
What should the AMCU do on the TV market to turn oligarchs into businessmen?
For starters, launch an investigation initiated by the provider before the outflow of the customers and the company’s exit from the market. For another, make a preliminary decision or recommendations on four media groups in which to condemn the described anti-competitive practices and to emphasize the need to refrain from their continued application.
As a result of the investigation, to apply lawful, fair, and severe punishment, and take comprehensive measures in order to stop anti-monopoly law infringements.
Even the implementation of only the first or second paragraphs on the AMCU’s part will launch inevitable de-oligarchic processes on the TV market. Providers and small TV channels, having received from the AMCU a signal about the end of the immunity era, will begin to defend their rights, borders, and income. At the same time, oligarchic media groups under the AMCU’s investigation will be limited in their market management capabilities, which means they will lose the oligopoly market power.
There are three more years before the next election. I believe that if the Anti-Monopoly Committee protects against monopoly abuses of oligarchic media groups, small TV channels will have time to grow up; and the providers, freed from the pressure of the media oligopoly, will gladly help them in this.
Of course, the attention of the top public officials to the non-oligarchic media would significantly affect the ratings of the last ones. After all, only the oligarchic TV quartet was admitted to the last press conference of Zelensky. The president and prime minister consecrated their presence exclusively by their presence during the year. This greatly affects the maintenance and strengthening of the media oligopoly influence and with it the oligarchs.
Agiya Zagrebelska is the founder of the Antitrust League and was a state commissioner of the Anti-Monopoly Committee of Ukraine from 2015-2019. She is a prominent expert on oligarchic and monopoly markets in Ukraine.
