South Africa’s Competition Commission (the “Commission”) has published the finalised Terms of Reference for its Online Intermediation Platforms Market Inquiry (“OIPMI”). The OIPMI follows the Commission’s release of its “Competition in the Digital Economy” paper wherein it notes the benefits of online products and services but expressed concerns about the ‘winner-takes-all’ nature of some of these markets, particularly for search, shopping and social media.
The OIPMI seeks to examine and potentially address the features of online intermediation platform markets which may hinder competition. The Commission has noted that the “normal” competition enforcement tools may be insufficient to address issues within digital markets, particularly the ability of first-movers to entrench their positions as well as the dominance of certain platforms, resulting in an inability for new players to enter the market. The Commission notes that in addition to platform competition concerns, the dependency of business users, and in particular small and medium sized enterprises (“SMEs”), on these platforms creates the opportunity for exploitative and/or exclusionary conduct.
The Commission notes that the Covid-19 pandemic has accelerated the growth of the online economy and access thereto for local online business will be critical for economic recovery.
The Commission has sought a narrow, focused scope of the OIPMI to deal with platforms intermediating goods and services between businesses and customers, which are typically monetised on commission/sales business models. This includes online classifieds, travel and accommodation aggregators, short-term accommodation intermediation, food delivery, application stores; and any other platforms the Commission may identify in the course of the inquiry.
The OIPMI will broadly focus on three areas of competition and public interest: a) market features that may hinder competition amongst the platforms themselves; b) market features that give rise to discriminatory or exploitative treatment of business users; and c) market features that may negatively impact on the participation of SMEs and/or firms owned by historically disadvantaged persons (“HDPs”). More specifically, some of the objectives of the inquiry include evaluating:
- trends in adoption and use of the different online intermediation platform markets, including the identification of leading platforms across each market.
- whether conduct or contracts are likely to have the effect of raising barriers to entry and reducing competition amongst platforms. Price parity clauses, exclusive contracting, and loyalty incentives have been identified as potential issues.
- whether particular conduct is discriminatory or unfair, and the likely effect on consumer choice, competition amongst business users and the participation of SMEs and HDPs. Self-preferencing conduct, discriminatory pricing, promotional or pricing restrictions, inflated access pricing and access to business user transaction data have been flagged as potential issues.
- whether the 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 HDPs.
The OIPMI will commence on 10 May 2021, whereafter the Commission will have 18 months to complete the inquiry (i.e. October 2022, although this period can be extended). The Commission envisages gathering information through a range of mechanisms, including questionnaires, stakeholder meetings and public hearings. Firms wishing to make submissions to the Commission on the OIPMI should notify the Commission in the prescribed form. Further details of the administrative phases of the inquiry will be published at the commencement of the inquiry.
The information and guidance provided in this blog post does not constitute legal advice and should not be relied on as such. If legal advice is required, please contact a member of Fasken’s Competition Marketing and Foreign Investment Group.