Competition Commission levels playing field for online platforms

The Competition Commission has taken its first step to level the playing field for online platforms when it launched its Online Intermediation Platforms Market Inquiry report.

Online platforms such as Takealot, Google, Bookings.com and Mr Delivery will now have to make changes to their operations to ensure that all businesses have equal access to their services.

The report includes a range of remedial actions that will provide greater visibility for smaller South African platforms, enable more intense platform competition and level the playing field for small businesses selling through online platforms to provide a more inclusive digital economy for platforms, businesses and consumers.

The report is a culmination of almost two years of investigations into local and international business-to-consumer online platform markets and identifies features that adversely affect competition in these markets.

The report includes a set of remedial actions that platforms and some businesses must implement to remedy the identified market features that adversely affect competition. This includes outcomes stemming from the business models digital platforms use, rather than necessarily deliberate efforts to stifle competition.

The report also makes recommendations to the department on entrepreneurial funding for historically disadvantaged people.

The inquiry started in May 2021 to assess whether features in business-to-consumer online platform markets adversely affect competition between platforms and between businesses using these platforms.

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These platforms were investigated

The platforms include eCommerce, online travel agencies, food delivery, app stores and property or automotive classifieds, along with the role of Google Search in shaping business-to-consumer platform competition.

The platforms required to implement remedial actions are leading platforms such as Google, Booking.com, Takealot, Apple, Uber Eats, Mr D Food, Property24, Private Property, AutoTrader and Cars.co.za, as well as other businesses that include national restaurant chains, Bolt Food and Prop Data.

The inquiry gathered evidence and held public hearings in November 2021 and in-camera hearings in February 2022 before releasing its Provisional Report in July 2022.

Since then, the inquiry gathered more evidence and had more in-depth engagements with all relevant stakeholders about the provisional findings, reasonable and practical remedial actions and comprehensive solutions required to address any identified harm.

In addition, the Inquiry released a summary of findings and remedial actions along with the report to help the public and businesses that list on these platforms to understand the implications of the findings and remedial actions and how they will be affected.

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Findings of inequality

Some of the findings include:

• Google Search is a critical gateway to consumers for all platforms and its business model of paid search alongside free results favours large established platforms
• Booking.com’s restrictions on hotel pricing on other online channels limits competition and creates a dependency that is used to extract higher commission fees.
• Takealot faces a conflict of interest on its site as its retail division competes with marketplace sellers leading to behaviour that has disadvantaged sellers.
• Google Play and Apple App stores are unconstrained in the commission fees they charge app developers and their global business model limits the curation and visibility of local-paid apps.
• Competitors to Uber Eats and Mr D Food are disadvantaged by the lack of transparency on menu surcharges across platforms and restrictions placed on franchisees by national restaurant chains.
• Competitors to Property24 and Private Property are hindered by the lack of interoperability in providing property listings and small estate agents and automotive dealers are disadvantaged by the discriminatory pricing of Property24, AutoTrader and Cars.co.za that favours large national groups.

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Remedial steps to be inplemented

The report also includes remedial actions that include:

• Google must provide a South African badge and search filter to aid consumer support for local platforms and introduce a new platform sites unit to display smaller South African platforms relevant to the search, along with training and R180 million in advertising credits. Google must implement changes similar to those it made in Europe to address self-preferencing.
• Booking.com must remove the restrictive pricing clauses from its contracts.
• Takealot must separate its retail division from its marketplace operations, prevent its retail services from accessing seller data and unilaterally stopping sellers from competing for certain brands.
• Google Play and Apple App stores must stop preventing apps from directing consumers to pay on the app’s website and ensure continued free use by consumers of content bought from that website, along with local app curation.
• Uber Eats and Mr D Food must inform consumers that they charge restaurants a commission fee and that menu items may be priced differently to takeaway menus, while restaurant chains may not unreasonably restrict the choice of food delivery service by franchisees.
• Property classifieds must enable estate agencies to share their listings with other classifieds and Property24, AutoTrader and Cars.co.za must substantially reduce the price of listings to small and medium independent agencies and dealers.

The remedial actions must offer platforms, businesses and consumers greater visibility and opportunity for smaller South African platforms, enable more intense platform competition, level the playing field for small businesses selling through these platforms and provide a more inclusive digital economy.

All platforms will have time to implement the remedial actions depending on the complexity of the remedy.

Patel said during question time that Amazon will be subject to the same rules when it starts to operate in South Africa, while the department is still investigating international fashion giant, Shein, because it seems to be using tax concessions for individuals buying clothing from overseas instead of paying the same tax as other fashion retailers.