Authorities probe dirt in horseracing

2011-10-01 15:31

The Competition Commission is set to probe the horseracing industry after it received a complaint from an Eastern Cape horse breeder.

Complainant Phindi Kema, executive chairperson of Africa Race International, has accused the country’s leading horseracing and betting companies Gold Circle and Phumelela of colluding to keep potential competitors out of the market.

Her complaint follows the souring of negotiations to buy the loss-making Arlington Racecourse in Port Elizabeth, Eastern Cape, from Phumelela.

Soon after the deal collapsed, Kema approached the competition authorities to complain that Phumelela tried to impose “unacceptable terms” on the transaction that would have forced her company to use the JSE-listed horseracing and betting firm’s licence.

According to Kema, one of the bones of contention was Phumelela’s alleged insistence on moving 36 horserace-meetings from Arlington to the nearby Fairview course, which is also owned by Phumelela.

Kema believes the exclusion of the race meetings from the deal was intended to shut her out of horseracing, which generates revenue from betting.

Phumelela denies this claim.

Phumelela and Gold Circle are the only two operators in the industry and they control the market through a joint-venture entity known as Phumelela-Gold, which owns the country’s exclusive horseracing channel, Tellytrack.

Tellytrack broadcasts live local and international horse races on pay-TV channel, DStv, and coordinates betting at outlets owned by both Phumelela and Gold Circle.

City Press understands that the Competition Commission will zoom in on Phumelela-Gold as it is seen as facilitating collusion between the two.

Thembinkosi Bonakele, the deputy commissioner of the Competition Commission, confirmed that the two companies will be investigated for collusion and price-fixing. However, he made it clear that the probe did not mean Gold Circle and Phumelela were already guilty of breaking the competition laws.

Bonakele told City Press: “We have a reason to believe that contravention of the Competition Act may have taken place or is taking place.”

He said they would investigate a possible division of the market by the two companies, where they appeared to have deliberately carved up the market among themselves. For instance, Gold Circle operates racecourses in Western Cape and KwaZulu-Natal while Phumelela owns racecourses in Eastern Cape, Gauteng and Northern Cape.

“The two (entities) are meant to be competitors but are not competing head-on in different regions across the country.

“For example, there is not a single province where they have both applied for licences,” Bonakele said, adding that Phumelela-Gold sold TV rights and coordinated races and betting on behalf of the two companies, leaving consumers with no alternative choices.

“The coordination is done by companies that are supposed to be competing. This amounts to collusion . . . There will have to be a fundamental change in how the horseracing business is conducted in this country.

We are not happy with what we are seeing,” Bonakele said.

A study done by the University of Johannesburg in 2007 found that the local horseracing industry was an “oligopoly” because of the existence of the two racecourse operators, which generate an yearly turnover of R5 billion from betting activities.

In his response to the allegation, Phumelela chief executive Rian du Plessis said his company’s lawyers had responded to Kema’s initial complaint and have since not heard anything from the Competition Commission.

Patrick Loker, commercial director at Gold Circle, said the matter was being dealt with by the company’s attorneys and would not comment further.

Du Plessis said he disagreed with the view that local horseracing was an oligopoly. “Horseracing is a sport and happens to be South Africa’s fourth most popular sport.

“The owners of horses have their horses compete. The operators of race tracks do not compete with one another. We provide the stage and the owners provide the actors.”

He also denied allegations that Phumelela wanted to force Kema to use their licence after the Arlington deal had been concluded, saying his company never discussed race meetings with Kema and that Phumelela’s intention has always been to move all of its races to Fairview.

“We are loss-making in the Eastern Cape and we need to reduce our costs. We are planning to install a synthetic racing surface at Fairview and upgrade the infrastructure.

“We have committed to our stakeholders (the horse owners, trainers, jockeys and the Eastern Cape Gambling Board) that we will continue to stage the same number of races and race meetings in Port Elizabeth as before, but at a single, better quality racing venue, being Fairview,” he said.

Du Plessis said he did not understand why Kema lodged a complaint . “She was negotiating with us and the next thing she lays a complaint with the Competition Commission.”

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