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Small Business Institute rebukes CompCom over e-commerce regulations

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Competition commissioner Tembinkosi Bonakele.
Competition commissioner Tembinkosi Bonakele.

The Small Business Institute (SBI) has moved swiftly to caution the Competition Commission (CompCom) against excessive regulation of the digital economy, saying the move to control the sector could be economically destructive.

The SBI, which lobbies for support for small and medium businesses through policy and legislation, says while it is supportive of digital economy regulations and sanctions, it is urging the competition watchdog to enable a more competitive digital economy rather than stifling it.

Last week, the CompCom launched SA’s digital competition report, titled Competition in the Digital Economy, which outlines the commission’s ambitious strategy for the digital economy.

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

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

According to the CompCom, the 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”.

Speaking at the 14th Annual Competition Law, Economics and Policy Conference, Bonakele revealed the CompCom 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.

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.

“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,” said Bonakele.

He singled out Takealot as a dominant force, which the commission will be investigating.

Takealot, SA’s largest online store, launched in June 2011, and the shopping site has rapidly evolved over the years, opening warehouses throughout the country, expanding its selection to over 21 departments, creating a third-party sellers’ marketplace, and most recently, adding pickup points across the country.

The move by the CompCom to investigate the e-commerce platform for market dominance has elicited a strong warning from the SBI, which says in the wake of lockdown, an “economically destructive decision by government to forbid most e-commerce and online sales, the timing of this suggestion could not be worse”.

“Online marketplaces represent a real opportunity for SMMEs to trade,” says SBI CEO John Dludlu. “They also make it easy by handling payments and logistics and removing the requirement for a small business without the right skills or infrastructure to set up their own Web sites and distribution channels, let alone to access a wider – even regional or international – market.”

The SBI says SA is on the cusp of the world’s fourth industrial revolution and risks “being a no-show, not just a latecomer” if the country does not prioritise a course of action that enables businesses to leap into the future.

The warning by the SBI to the competition authority comes on the back of a continuing e-commerce boom in SA, spurred by the COVID-19 pandemic.

The COVID-19-induced lockdown led to reduced footfall in retail stores, with the shift in consumer shopping behaviour expected to result in a permanent uptick in online shopping.

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