Final report on Online Intermediation Platforms Market Inquiry released

online intermediation
22 Aug 2023

The Final Report on the Online Intermediation Platforms Market Inquiry has been released.

The trade, industry and competition department announced the release of the report in Government Gazette 49028 in terms of the Competition Act of 1998.

The economic development department announced the Competition Commission’s plan to launch the Inquiry in Gazette 44432 in April 2021.

The Inquiry got underway 20 business days after the date of publication of the Terms of Reference.

The plan was to produce a final report within 18 months.

According to the Commission, the Inquiry was launched “given that the Commission has reason to believe that there exist market features which impede, distort or restrict competition amongst the platforms themselves, and which undermine the purposes of the Act”.

The Commission also pointed out that complaints alleging anticompetitive conduct in some of the platform markets have also been received.

The Commission emphasised that an Inquiry is important in the “context where online commerce has accelerated under the Covid-19 pandemic and is fast becoming an essential route to market for many South African businesses”.

The Inquiry focused on online intermediation service platform markets which intermediate transactions between business users and consumers including the generation of transactions leads.

Platforms under the spotlight include eCommerce marketplaces; online classifieds; travel and accommodation aggregators; short term accommodation intermediation; food delivery and application stores.

Key objectives of the Inquiry include evaluating trends in adoption and use of the different online intermediation platform markets; evaluating whether any market features, platform conduct and/or contracts and terms of use with business users and consumers are likely to have the effect of raising barriers to entry and reducing competition amongst platforms domestically; evaluating other barriers to entry and expansion by rival platforms, including but not limited to network effects, capital costs and consumer marketing costs; evaluating whether ranking algorithms used by platforms, including any pay for position or promotional opportunities, negatively impact competition on the merits, consumer choice and/or the participation of SMEs and HDP owned business users and drawing up appropriate remedies where an adverse effect on competition or the purposes of the act are found.

In November 2022 the department extended the Inquiry for a further 3 months ending on 18 February 2022.

In February the Inquiry was further extended until 18 April 2023 and subsequently extended until 19 May 2023.

In May, the Inquiry was further extended until the end of June 2023.

Findings include that the Google Search dominance and business model distorts platform competition as small and new platforms struggle for visibility and customer acquisition; Google self-preferencing of its own shopping and travel units on its search results page distorts competition;’s wide and narrow price parity clauses impede competition; the business model in eCommerce currently provides additional restrictions to the participation of historically disadvantaged businesses, amongst them that onboarding favours established businesses along with other promotional features; Google Play and Apple App Store are unconstrained in the commission fees they charge paid app developers and the anti-steering rule limits competition; the global business model of the application stores limit curation and visibility of local SA paid app developers; discrimination on listing and promotion fees impede and distort competition in online classifieds, particularly to the detriment of SME and HDP agencies and dealers; restrictions by national restaurant chains impede competition in food delivery; and the pervasiveness of unidentified advertising on intermediation platforms distorts consumer choice, and therefore undermines competitive outcomes.

According to the Commission, benefits to platforms, businesses listing on the platforms and consumers arising from remedial actions should include greater visibility and opportunity for smaller South African platforms to acquire customers through Google Search, enabling growth and greater platform competition with larger, sometimes global, rivals; enabling more intense platform competition which, in turn, will offer businesses that list on the platforms and consumers more choice and innovation resulting in lower prices for the businesses listing on the platforms, and for consumers where they currently pay for the service; providing a level playing field for small businesses selling through the platforms, including fairer pricing and opportunities for gaining visibility and customer acquisition relative to the large national businesses they compete with; and providing a more inclusive digital economy through overcoming impediments for participation and fair competition by black-owned South African businesses on online platforms and funding opportunities for black entrepreneurs.

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(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
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