The Competition Commission’s (CompCom’s) Online Platforms Market Inquiry has released its provisional report findings, which identify anti-competitive practices by Google, and SA’s largest e-commerce site Takealot.
According to the commission’s investigation, there are 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.
In May 2021, the CompCom officially commenced its investigation into online platforms in SA. The inquiry focuses 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.
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.
These are acts the competition watchdog believes undermine the purposes of the Act.
In the provisional report findings, 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.
“In respect of e-commerce platforms, the inquiry has found that a range of conduct by Takealot distorts competition on the marketplace in favour of Takealot Retail. This includes the use of seller data by Takealot buyers to inform their own retail offering on the marketplace, [and it] expropriates and undermines innovation and risk-taking by marketplace sellers to the detriment of competition and consumer welfare,” the report finds.
“The pressuring of suppliers where Takealot is outcompeted, resulting in the raising of price by suppliers or by sellers threatened with non-supply, distorts competition and raises prices for consumers.”
Other anti-competitive acts highlighted in the report include:
- Takealot Retail benefits from the use of unsold promotional display inventory, and has a higher acceptance rate for applications to run promotions on the platform.
- The Buy Box (product detail page) algorithm favours Takealot, as it displays the cheapest in-stock, not cheapest overall, and almost all Takealot Retail is in its warehouse and therefore in-stock, unlike marketplace sellers that have more restricted warehouse space.
- Marketplace sellers are not permitted to offer ‘unboxed deals’, which permits Takealot Retail to clear returned stock and recoup a higher portion of the value.
- Takealot raises marketplace seller rivals’ costs through the lack of a speedy dispute resolution process, resulting in cases where sellers incur the ongoing costs from a lack of resolution.
Ready to comply
The CompCom’s Online Platforms Market Inquiry findings follow 14 months of evidence-gathering, public hearings and in-camera hearings into online intermediation platforms, with the online players and all relevant stakeholders.
Representatives from Naspers, which owns Takealot, were among the participants in public hearing sessions that took place in November.
Addressing anti-competitive practice concerns raised at the hearing, Phuthi Mahanyele-Dabengwa, South Africa CEO for Naspers, pointed out at the time that the group is committed to the development of a policy that is in the best interests of all stakeholders.
“Naspers is looking to see that all its businesses comply with competition laws and follow certain ethical practices. As a group, we are certainly working to ensure that, for instance, from Takealot management there is correct implementation of policies and consistent overview of what is required of them in terms of adhering to competition laws.
“Naspers’s investment in SA and its building of sustainable ecosystems in which innovation can thrive resulted in multiple South African success stories, leading to job creation, consumer welfare and efficiencies.”
Mahanyele-Dabengwa also asserted that SA needs a policy that is fit for the fourth industrial revolution and adopting a ‘one size fits all’ approach to regulation is not appropriate.
Conglomeration takes hold
Other dominant online market players investigated in the report include AirBnB, AutoTrader, Uber Eats, Mr D Food, Apple App Store, Mr Delivery, Property24, Cars.co.za, Google (including its specialist search units Google Shopping and Google Travel). These brands are managed and controlled by only a few large companies that are accused of conglomeration.
The inquiry has provisionally found that Google Search uses tools which position preferential placement of its own specialist search units to distort competition in Google’s favour.
While Google Search plays an important role in directing consumers to the different platforms, the tech giant has also been found to have anti-competitive tactics, notes the inquiry.
The prevalence of paid search at the top of the search results page without adequate identifiers as advertising raises platform customer acquisition costs and favours large, often global, platforms over smaller local businesses.
“The inquiry is also exploring whether the default position of Google Search on mobile devices should end in South Africa.The inquiry provisionally recommends that paid search results are prominently labelled as advertising with borders and shading to be clearer to consumers, and that the top of the page is reserved for organic, or natural, search results based on relevance only, uninfluenced by payments,” says the CompCom.
The report further recommends that advertising on Google Search is clearly displayed as such and the top results are reserved for organic search results.
The provisional findings and recommendations, notes the CompCom, will now be subject to a period of public comment and stakeholder consultation before a final report is released in November.
This means the inquiry may change its views on the findings and recommendations during this period of consultation and public submissions, it says.
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