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CompCom to fight merger creep, cartel conduct in digital economy

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 04 Nov 2020

The Competition Commission (CompCom) today launched SA’s digital competition report, titled Competition in the Digital Economy, which outlines the commission’s ambitious strategy for the digital economy.

Tembinkosi Bonakele, CompCom commissioner, hosted the virtual launch of the report, saying it provides a review of the emerging competition issues in e-commerce and consumer empowerment, and guides businesses on the commission’s approach.

The CompCom first signalled its intentions to regulate competition in the digital economy in September, when it first published the draft report for public comments.

The competition watchdog is of the opinion that the digital economy is threatening to further marginalise vulnerable businesses, making regulation critical.

According to the report, the country’s record in assessing mergers in the digital economy, for example, suggests there has been under-enforcement in this area.

It notes that of the 87 mergers in digital markets between 2011 and 2018, 82 were approved without conditions, and the remaining five were approved with public interest conditions.

“Therefore, intentional regulation is required to avoid outcomes that could harm the development of small businesses, consumers and ultimately the economic growth so needed in South Africa’s developing economy,” reads the report.

The CompCom says the Competition in the Digital Economy report addresses how SA’s competition laws can be implemented to achieve “equitable outcomes in the digital economy and our intentions in this regard, and also takes a closer look at the leading digital disrupters and their impact on established industries”.

Competition commissioner Tembinkosi Bonakele.
Competition commissioner Tembinkosi Bonakele.

Among the disrupters cited by the CompCom are Amazon, which it says can dominate any industry it enters.

“Its reach extends far beyond books and package delivery to healthcare and media production. With its launch of Amazon Web Services, Amazon is now one of the most valuable companies in the world, valued at roughly $800 billion. Yet it started as an e-commerce site to sell books.”

Netflix, Airbnb and Uber are also included in the list of disrupters that are worrying the competition watchdog.

The CompCom says it intends to impose a more vigorous assessment of digital markets going forward. It will focus on forms of abuse in digital markets, merger creep, cartel conduct and multi-jurisdictional filing of mergers.

“We have taken a decisive and proactive stance to ensure the balance of economic forces favour a shift to facilitating entry and a more competitive digital economy,” says Bonakele.“

“This requires removing barriers of entry, including those created by dominant platforms, and preventing concentration in the development of the online economy in South Africa.”

In explaining the rationale that influenced the report, the CompCom cites the Google versus the US Department of Justice anti-trust lawsuit as the reason why SA’s digital economy needs to be regulated.

“This lawsuit strikes at the heart of Google’s grip over the Internet for millions of consumers, advertisers, small businesses and entrepreneurs. These, and other anti-competitive practices that are being investigated by competition authorities in other jurisdictions, harm competition and consumers, reducing the ability of innovative new companies to develop, compete and discipline their behaviour,” says the competition watchdog.

Additionally, the CompCom says it will cooperate with competition authorities in other jurisdictions to address the market conduct of globally-dominant digital players.

Despite its intention to regulate the digital economy, the CompCom notes overregulation of digital markets could hold back the growth of innovative local online firms and discourage the global giants from offering their services in the country.