Provisional findings of the Competition Commission’s (CompCom’s) Online Platforms Market Inquiry has found that anti-competitive behaviour by leading food delivery platforms such as Mr D Food and Uber Eats impedes competition within the industry.
The preliminary findings of the inquiry were released this week following 14 months of evidence-gathering, public hearings and in-camera hearings into online intermediation platforms, with the online players from industries such as e-commerce, app stores, travel and accommodation platforms, food delivery and online classifieds.
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.
In terms of the online delivery sector, the inquiry reveals the dominant food delivery platforms make it difficult for new and smaller local players to enter the industry. This is due to the incentives provided to their restaurant partners, as well as the nature of contractual agreements they sign with the food establishments.
It further found the leading food delivery apps’ business model is premised on high restaurant commission fees and substantial “promotions”, often resulting in customers paying hefty surcharges on meal prices.
“Predatory conduct as a result of an aggressive promotion and delivery subsidisation strategy has driven out local delivery platforms in areas where they compete.
“In respect of the business model competition with local delivery, the inquiry believes the root problem is the lack of transparency to consumers around the surcharges on the menu pricing and the share that delivery platforms take. This is because the national platforms rely on a consumer framing bias, whereby promotions are considered to hold more value and the consumer is ignorant to the fact that the menu surcharge is ultimately paying for that, and hence they should be considering the total cost, including menu surcharge,” says the report.
The commission recommends greater transparency to the consumer of either the menu surcharge for each restaurant on the platform relative to their take-away or dine-in menu, and/or the share of meal payment accruing to the delivery platform as opposed to the restaurant.
“If consumers were made aware of these hidden charges, they may find that local delivery platforms are equally cost-effective. Consumers may also be less inclined to support a delivery platform which is exploiting their favourite local restaurant with high commission fees, which would provide a basis for local delivery platforms to compete where they charge lower commissions,” it asserts.
The commission further recommends the removal and prohibition on price parity clauses, both wide (as applied to competing platforms) and narrow (as applied to the business user’s own direct online channel) from contracts with business users.
Responding to ITWeb, Takelot Group, which owns Mr D Food, says it has engaged and will continue to engage with the CompCom panel on the provisional findings, and will respond to the panel in full before the report is finalised.
“We do not agree with some of the provisional findings in the Online Intermediation Platforms Market Inquiry Provisional Summary report. We are a proudly local business that enables South African SMMEs,” says the group.
The commission says it may consider further investigation and prosecution of predatory conduct as a suitable deterrent to anti-competitive behaviour.
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