CompCom goes after foreign-based online players in SA

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Competition commissioner Tembinkosi Bonakele.
Competition commissioner Tembinkosi Bonakele.

The Competition Commission (CompCom) is targeting foreign-based online platforms such as Trivago, Google Shopping and Airbnb, as it ramps up efforts to promote fair competition in South Africa’s e-commerce sector.

This, after the regulator, in May, started its investigations into the country’s online platforms, in a move aimed at curbing anti-competitive behaviour among the players.

While the scope of digital platforms is extremely wide, the inquiry seeks to focus on those that intermediate online transactions between business and consumers, and will cover e-commerce players, infrastructure developers, fintech players and payment platforms.

Today, the CompCom said the Online Platform Markets Inquiry released a further statement of issues (FSOI) following a review of public submissions and responses by online platforms to information requests sent out in May.

Speaking at the virtual launch of the probe, competition commissioner Tembinkosi Bonakele explained the inquiry takes place at a time when online businesses have become increasingly important, as a driver of economic growth in SA and the rest of the world.

In releasing this FSOI, the CompComm invites market participants and other interested parties to provide views and information on the additional issues identified.

The deadline for submissions is 23 September.

According to the commission, the scope of the inquiry is on business-to-consumer online platforms, and in particular features that may restrict platform competition, or which relate to competition among, and fair treatment of, the businesses that use these platforms to list and sell products, in particular SMEs and businesses owned by historically disadvantaged persons.

According to the CompCom, the market inquiry has been initiated in terms of section 43B(1)(a) of the Competition Act 89 of 1998 (as amended), given that the commission has reason to believe there exist market features which impede, distort or restrict competition among the platforms, and which undermine the purposes of the Act.

The commission points out that a clarification note has been issued on the scope of the inquiry following queries from a number of online platforms.

“The note confirms that foreign-based online platforms that facilitate transactions with South African consumers or businesses fall within the scope of the inquiry even if they have no physical presence in South Africa,” it says.

“Metasearch engines such as comparative accommodation (eg, Trivago) and shopping sites (eg, Google Shopping) that direct consumers to businesses to make purchases also fall within the inquiry scope, as do alternative accommodation platforms (eg, Airbnb) where individual listings may not always be incorporated as a business,” it says.

Further, the inquiry would like to hear from more businesses that make use of these platforms to understand their experience, in particular the extent of platform dependency, the restrictions placed on their business by platforms; the perceived fairness of search algorithms, platform terms and conditions, and platform commission fees; as well as the impact on their business of any unfair treatment, the CompCom notes.

The FSOI highlights areas for more focused investigation in five online platform categories, namely e-commerce, delivery platforms, travel and accommodation, online classifieds, and app stores.

Some of the common issues related to businesses using the platforms include:

  • The extensive and growing use of sponsored ranking (ie, payments to appear higher up on consumer search results), and its impact on consumer choice and the discoverability of SME/HDP businesses on these platforms.
  • The rationale for, and impact of, higher commissions and listing fees charged to small restaurants, auto dealers and estate agents relative to larger national chains on food delivery platforms and online classifieds (automotive and property).
  • The necessity for businesses to discount or offer promotions on the platforms in order to get consumer visibility, and the pressure from platforms to do so.
  • The fairness of platform terms and conditions, including payment terms, liability for loss and termination on the platform.
  • The general lack of platform initiatives to support the transformation of the online economy and the increased involvement by South African businesses on global platforms.
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