SOUTH AFRICA: COMPETITION COMMISSION INITIATES INQUIRY INTO ONLINE INTERMEDIATION PLATFORMS

By Heather Irvine Monday, February 22, 2021
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The South African Competition Commission (Commission) has published draft Terms of Reference (ToR) for its Online Intermediation Platforms Market Inquiry (Inquiry). The Commission is of the view that there may be features in various online intermediation platforms markets which impede, distort or restrict competition, hamper new entrants or otherwise undermine the purposes of the Competition Act 89 of 1998, as amended (Act).

The Commission proposes to conduct an inquiry which focusses on the online intermediaries between goods/services providers and customers. They include for example, eCommerce marketplaces, software app stores, accommodation and food services platforms, as well as aggregation services such as travel or similar classifieds. The ToR note that local digital markets are becoming more concentrated, with a number of ‘clear market leaders and dominant platforms’ in markets like online retail and food delivery. These large platforms are critical for reaching consumers, and business users are dependent on them, particularly small-and-medium enterprises and businesses owned and controlled by historically disadvantaged persons. The Commission will investigate whether there may be self-preferencing, unfair trading terms, extraction of business data and potential distortion of competition by ranking algorithms.

The ToR indicate that although digital advertising markets remain a concern for the Commission given the potential negative outcomes for domestic consumers, content publishers and businesses using digital advertising, the interventions required to improve the contestability of these markets most likely need to occur on a global scale. The Commission suggests that a collaborative approach is therefore preferred, and says it will determine the best course of action after further consultations, which may include a further market inquiry, targeted abuse of dominance investigations or over-arching regulation.

The Commission notes that in Fintech markets, concerns may arise as a result of the “gatekeeper” role of traditional financial institutions, which have access to consumers and their data, which provides rich information on consumers' spending levels and patterns of use, and credit assessment. This data is important for new entrants to be able to challenge incumbents. However, the Commission suggests that both the competition and public interest aspects of fintech markets may be best addressed through a collaborative approach with other regulators, such as for example, the Intergovernmental Fintech Working Group, which is constituted of (among others), the Commission itself; the Financial Services Conduct Authority; the Prudential Authority; and the South African Reserve Bank. However, the Commission says it may focus on the role of payment services in facilitating transactions on the online intermediation platforms.

The Commission says that at this stage, it will not focus on e-hailing services (which were the subject of a previous inquiry, and which intermediate between consumers and gig economy workers rather than business users), or other pure gig economy platforms. The inquiry will also not focus on search and social media, or the broader digital advertising ecosystem, except insofar as digital advertising may pose a barrier to competing platforms expanding, or prevent business users from participating in the online economy.

The Commission invites the public to comment on its ToR by 12 March 2020.