Free Market Foundation slams CompCom e-commerce plans

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 26 Aug 2022

Liberal think tank the Free Market Foundation has sharply criticised the Competition Commission (CompCom) for advancing the regulation of e-commerce platforms such as Takealot, suggesting the move amounts to nationalisation.

The foundation says anti-trust authorities seem to have concluded that “just because other e-commerce sites are not as successful as Takealot, then it means the operations of Takealot have an anti-competitive effect deserving of state regulation”.

This follows recent findings by the CompCom in its Online Platforms Market Inquiry that SA’s largest e-commerce site Takealot and Google use anti-competitive practices to outflank competitors.

The inquiry focused on digital platforms with intermediate online transactions between business and consumers, with the scope covering e-commerce, app stores, travel and accommodation platforms, food delivery and online classifieds.

In its recommendations, the CompCom said it had reasons to believe the two tech companies, among other online operators, have impeded or restricted fair competition among their competitors, and these actions may undermine the purpose of the Competition Act.

Also, the CompCom highlights concerns that monopoly tactics have been used by Takealot and Google to gain an unfair advantage over rivals, including the conglomeration of consumer data across numerous online platforms.

For instance, it notes, Takealot, which has a marketplace of over 5 800 sellers, distorts competition with sellers on its platform by unfairly channelling more money-making opportunities towards the e-commerce player’s own retail business.

No social control

These findings and recommendations have piqued the Free Market Foundation, and it has provided the anti-trust authority with a biting response.

“Takealot consumers do not have a problem with the preferencing exercised by Takealot. If they did, they would not patronise Takealot. As such, the recommendation that Takealot not preference its own products on its own platform, is tantamount to Takealot being nationalised and receiving its orders from the state rather than the market.”

The foundation adds: “The fact that Takealot has beaten out its competitors should not be construed as a reason for punishment. The fact that they decide to run their business by gating products, or in whatever manner, should not be penalised since these agreements that give rise to gating are entered into voluntarily.”

The organisation says the remedy suggested by the CompCom is a clear violation of the property rights of the platform in question.

“Asking Takealot not to capitalise on its own platform for its own benefit undermines the very spirit of commerce. As such, the Free Market Foundation opposes the recommendation in paragraph 168.2, as well as every other recommendation falling under this general prohibition on preferencing.”

Killing the golden goose

According to the foundation, the CompCom, with the Online Platform Market Inquiry, decided to take one of the few growing industries in the country and make it more difficult for it to function.

“The South African economy is not in a good place. From our unemployment numbers, the numbers of people on social welfare and a tax base that is shrinking thanks to low growth and emigration of high-income earners, one would think the state and regulators would do their best not to exacerbate the situation.

“The desire for regulation in a space wherein competition is possible is the thrust of the FMF opposition to the market inquiry’s provisional conclusions.

“The Free Market Foundation finds the conduct of the CompCom, in recommending things like the scrapping of certain contractual terms and the regulation of prices through ceilings, to be egregious and harmful to our economy beyond being unwarranted, since competition is possible (and flourishes) in this market.”

Instead of seeking to legislate competition, it urges the CompCom to “simply allow the market to operate freely. The online intermediation platform market is one of the few bright spots in our economy that the commission with this report seeks to harm and further hasten our march to economic ruin.”

On Google, the Free Market Foundation says its search engine does not satisfy the definition of a monopoly “as per the common law, since it holds no exclusive protection from the South African government to operate” in the search engine space.

“There is no law prohibiting any other search engine from competing with Google. Just because Google is the most patronised search engine – a result of consumer choice – does not mean it is a monopoly.”

Further, it says, it opposes the recommendation which bars Google from favouring any of its specialised search units on its own search engine and search results pages.

“This recommendation violates the right to private property, as it seeks to dictate how the rightful creator and owner of a certain piece of intellectual property in this case, should utilise their justly-held property.”