The Competition Commission (CompCom) has ordered e-tailer Takealot.com to separate its retail division from its marketplace operations, to avoid anti-competitive practices against the sellers listed on its platform.
This is according to the CompCom’s Online Platforms Market Inquiry. The watchdog yesterday released its final report findings, which reveal Takealot has a conflict of interest on its site, as its retail division competes with marketplace sellers, leading to behaviour that has disadvantaged sellers.
The report is a culmination of almost two years of investigations into local and international business-to-consumer online platform markets and identifies features that adversely impact competition in these markets.
The investigation was initiated in terms of section 43B(1)(a) of the Competition Act 89 of 1998 (as amended), to identify market features that have adverse effects on healthy competition, and display areas of manipulation, exploitation or distortions within SA’s online retail sector.
The competition watchdog believes these undermine the purposes of the Act.
In the final report findings, the CompCom highlights concerns that monopoly tactics have been used by Takealot to gain an unfair advantage over the sellers listed on its platform, including the unfair use of seller data by the e-commerce giant’s buyers (employees) to inform decisions around Takealot’s retail offering.
Takealot currently hasover 8 000 SME sellers listed on its platform.
“The inquiry investigated numerous complaints from marketplace sellers on Takealot around self-preferencing, or other conduct which distorts competition with marketplace sellers.
“Whilst Takealot opens its online marketplace to third-party sellers, it also trades extensively itself through the Takealot Retail division. This creates a conflict of interest, as it sets the rules for the marketplace and at the same time competes with the marketplace sellers. Takealot too has incentives to favour itself,” according to the report.
The findings were made by the inquiry in respect of several concerns, including:
- Takealot does impose on sellers “narrow price parity”, preventing them from pricing lower on their own websites, and in the same way prevents them from reducing their dependency on Takealot by developing this alternative online channel.
- The Takealot “Buy Box” for branded items with multiple sellers, selects the cheapest price of those in-stock in the warehouse, rather than the cheapest price regardless of lead time. As consumers mostly select the Buy Box item, this favours Takealot Retail as its own products are generally in the warehouse.
- Marketplace seller applications for promotional participation are materially less likely to be successful than Takealot’s own retail buyers’ campaigns.
- The failure to resolve numerous disputes within a reasonable time frame results in the marketplace seller left bearing the cost of the dispute in the interim.
In its recommendation, the CompCom states: “To address these distortions arising from the conflict of interest, Takealot is required to segregate its retail division from its marketplace operations, and to prevent its retail services from accessing seller data and unilaterally stopping sellers from competing for certain brands.
“Further, to address this distortion, Takealot is to implement an historically disadvantagedperson (HDP) programme that provides: (i) personalised on-boarding, the waiver of subscription fees for the first three months and at least R2 000 advertising credit for use in the first three months; (ii) offering promotional rebates and the inclusion of HDPs in HDP-specific campaigns on the platform,” among other recommendations.
Other platforms found wanting and required to implement remedial actions in the report are Google, Booking.com, Apple, Uber Eats, Mr D Food, Property24, Private Property, AutoTrader and Cars.co.za.
With regards to travel, the report states Booking.com’s restrictions on hotel pricing on other online channels limits competition and creates a dependency that is used to extract higher commission fees.
“In addition, Booking.com imposes so-called ‘narrow price parity’ which prevents hotels and other establishments from pricing lower on their own websites for online bookings. This dependency on Booking. com enables it to extract higher commission fees directly, or through loyalty programmes and other schemes that provide greater visibility and customer acquisition,” notes the report.