The What, Who and How of the Competition Commission’s Market Inquiry Into Digital Markets

On 19 February 2021 the South African Competition Commission (“the Commission”) announced that it will be conducting a market inquiry into online intermediation platforms (“OIPMI”) and published the draft terms of reference for the inquiry with calls for public comment thereon to be received by no later than 16h00 on the 12th of March 2021 (“Draft Terms of Reference). In this brief explanatory note, we consider what the inquiry entails, who is likely to be affected and how they may be affected.

The What

A market inquiry is one of the tools available to the Commission to look at competition within a specific market. The Commission may initiate such an inquiry where it believes that the market in question has certain features which impede, distort or restrict competition and which undermine the purposes of the Competition Act, 89 of 1998 (“the Act”).

Digital markets have, of late, been placed under the microscope by competition authorities in various jurisdictions owing to the growth in importance of such markets (particularly in light of the COVID-19 pandemic and concomitant impact which it has had on the global economy and the ways in which business is conducted) as well as the high levels of concentration inherent therein. The Commission’s inquiry follows from its calls for public comment and stakeholder involvement in respect of its September 2020 strategic view on regulating competition in the digital economy – the report in respect hereof is due to be published this week and concludes that a market inquiry would be the most suitable means by which to consider and address potential competition concerns within the market.

The Who

As digital platforms cover a wide range of different platform types – each of which give rise to their own competition and public interest concerns – the Commission has restricted its inquiry into a particular set of digital platforms with common competition issues, namely online intermediation services. This is said to be online intermediation service platform markets which intermediate transactions between business users and consumers (or so-called “B2C” platforms), including the generation of transactions leads (such as the case with online classifieds and travel aggregators)…

The online intermediate services market includes the following platforms:

  • E-Commerce – with specific reference being made to Takealot and Superbalist being substantially larger than other online platforms, with many business users depending on them as a route to market;
  • Service delivery platforms – most of which is said to have one or two dominant players, with specific reference being made to MrD, UberEts, Airbnb and TravelStart;
  • Online classifieds – which the Commission argues typically have two platforms that dominate sales leads and market revenue such as Autotrader and cars.co.za in respect of automobile sales and Property24 and Private Property as an example of property listings;
  • Software app stores – where both Google Play and the Apple App store are said to have dominant positions.

The Commission’s Draft Terms of Reference lists the following features of the market as being of concern:

  • Price parity clauses
  • Exclusive contracts
  • Predation concerns
  • Conglomeration (such as with the Naspers Group, which is said to be involved across various platforms)
  • The Platform Provider’s “dual role” as both the platform operator for the marketplace and a seller
  • Ranking of sellers and conduct associated therewith
  • The platform’s importance to accessing online customers / route to market may result in dependency by sellers
  • Other potential barriers to entry

The How

The inquiry will focus on the areas of concern set out in the Draft Terms of Reference. The Commission will, inter alia, evaluate trends in the use of the different online intermediation platform markets; evaluate the market features, contracts and core terms of use to consider whether these raise any barriers to entry and/or reduce competition amongst the platforms domestically or could be said to be discriminatory or unfair; evaluate other barriers to entry and, where it is found to result in adverse effects, determine appropriate remedies. As such, it is important to ensure that, if a firm is likely to be impacted by the inquiry, representations are made to the Commission during the inquiry.

The Draft Terms of Reference can be accessed here: http://www.compcom.co.za/wp-content/uploads/2021/02/OIPMI-Draft-ToR-19-02-2021.pdf

Our Competition Law Team are able and willing to assist with any queries that you may have with regard to the inquiry and its potential impact on your business.

Jac Marais
Partner | Commercial Attorney
Misha van Niekerk
Senior Associate | Attorney
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