Business Maverick

‘ABUSING DOMINANCE’

Competition Commission takes on Google, Apple and other major players

Competition Commission takes on Google, Apple and other major players
Illustrative images, from left: (Photo EPA / Facundo Arrizabalaga) | (Photo: Michael Nagle / Bloomberg | (Photo: Simon Dawson / Bloomberg via Getty Images) | Takealot pick up point in Midrand. (Photo: Felix Dlangamandla)

The Competition Commission has taken aim at the big guns of the online space, demanding that Google, Apple, Uber Eats, Takealot and a range of service providers ease competition for smaller operators.

The Competition Commission has finally released its report in the Online Intermediation Platforms Market Inquiry, which was initially launched on 19 May 2021, because it suspected there were market features of these online platforms that may impede, distort or restrict competition, specifically as related to the participation of small and medium enterprises (“SMEs”) and historically disadvantaged persons (“HDPs”) in these markets. 

The platforms shaping B2C platform competition, as alleged, include ecommerce, online travel agencies, food delivery, app stores, property and automotive classifieds. 

These are the findings:

Google search

The inquiry said Google Search is a de facto monopoly, accounting for over 90% of all general searches across desktop, tablet and mobile devices. 

It found that Google Search dominance and business model distort platform competition as small and new platforms struggle for visibility and customer acquisition.

To address this, the commission wants smaller platforms to have better paid and organic result visibility. 

Google must also introduce an SA flag identifier and SA platform search filter to help consumers easily identify and support local platforms in competition with global ones.

On paid results, Google must provide R180-million in advertising credits for small platforms to use in customer acquisition along with free training to optimise advertising campaigns. 

Google must also provide a further R150-million in training, product support and other measures for SME and black-owned online firms to offset the competitive disadvantages faced on Google Search.

It also found that Google’s self-preferencing of its own shopping and travel units on its search results page distorts competition. 

Travel and accommodation 

In travel, Booking.com was identified as the world’s largest online travel agent for traditional hotel and accommodation establishments “by a huge distance”, with Airbnb only being large in alternative accommodation. 

The commission said Booking.com imposes “wide price parity” conditions on hotels and other establishments which require them to offer room prices to Booking.com that are no less favourable than the room price offered to other establishments.

Booking.com has removed wide price parity clauses in the EU but is still applying them in SA and imposing a “narrow price parity” preventing hotels and other establishments from pricing lower on their own websites for online bookings, both of which have been found to impede competition.

To address this, the inquiry wants these obligations to be removed. It says Booking.com’s lack of diversification distorts competition from black communities and wants the online travel agency to put in place substantial programmes to provide funding of initiatives in the identification, onboarding, promotion and growth of SMEs that are black-owned and/or in black communities on its platform.

Ecommerce

Takealot was identified as the biggest player in the online sales space in South Africa. As with Booking.com, Takealot imposes a “narrow price parity”, preventing them from pricing lower on their own websites, and in the same way, prevents them from reducing their dependency on Takealot by developing this alternative online channel.

The inquiry finds that these narrow price parity clauses distort competition, which Takealot must remove from its platform. Takealot, in opening its online marketplace to third-party sellers, also trades extensively through the Takealot Retail division, which the inquiry said was a conflict of interest.

To address these distortions arising from the conflict of interest, Takealot is required to segregate its Retail division from its Marketplace operations and to prevent its retail services from accessing seller data and stopping sellers from competing for certain brands.

In addition, Takealot must introduce a 60-day dispute resolution process for marketplace sellers’ complaints and its Buy Box must be re-engineered to reflect the cheapest (regardless of delivery time) and fastest options for the consumer.

Takealot is also to implement an HDP programme that provides personalised onboarding, waiving subscription fees for the first three months and at least R2,000 advertising credit for use in the first three months, offering promotional rebates and the inclusion of HDPs in HDP-specific campaigns on the platform, and a programme to support female, youth and rural HDPs.

Touching on the entry of Amazon, the inquiry said while the international giant has not entered South Africa, “were it or any other large eCommerce player to do so, they will similarly be expected to comply with similar provisions as set out for Takealot”. 

Apps

The biggest players in the app space are the Apple App Store and Google Play Store, which account for most mobile users, app downloads and revenues earned in SA. 

The inquiry said these giants are unconstrained in the commission fees they charge paid app developers and that the anti-steering rule limits competition. 

It has ordered that Google Play and Apple App stores stop preventing apps from directing consumers to pay on the app’s own website, and to ensure continued free use by consumers of content purchased from that website. 

It also said given the importance of search for discoverability and the volume of apps in search results, neither stores have local curation of apps despite the hundreds of millions in revenue generated from SA each year.

It wants Google and Apple to provide a South African curation of apps on their app stores and advertising credits to local app developers. 

Online classifieds

Within the classified verticals, property and automotive represent the biggest categories, with Property24 and Private Property the biggest platforms in the former, while Autotrader and Cars.co.za have over 80% share between them in the automotive sector.

Private Property’s partnership with the Estate Agency Property Portal Company, facilitated by the industry association, Rebosa, allowed it to secure and lock in most of the listings, the inquiry said, noting that 70% of estate agents wishing to list on alternative classified platforms face considerable barriers to doing so, which increases the cost of using those platforms.

To correct these distortions, Property24, Private Property and PropData must provide interoperability at no fee for estate agents to feed listings to other platforms, and Rebosa must stop supporting Private Property as its preferred platform for the industry.

For new estate agency and auto dealer entrants, the “high and discriminatory fees” pose a barrier to entry, it said. 

As such, the inquiry wants property and automotive platforms to substantially reduce their prices to SME agents and dealers. 

For black-owned agencies and dealers in particular, all the leading platforms (except Private Property) must introduce an HDP programme. 

For Property24, that programme must provide personalised training including site design and support, branded listings, five value-added services per month, access to the market intelligence report, and for new HDP agents, 12 months free standard listing subscription. 

Autotrader must (also at no cost) provide personalised workshops with experts and events, assistance with the initial upload and photography, a 50% discount on the Instant Offer, free standard listings for 12 months or premium at the cost of standard, and for existing HDP dealers a free upgrade to Premium and/or Featured Dealer. 

Cars.co.za to provide free enrolment in the Cars.co.za dealership training programme, a mentorship and training programme, guidance on creating a professional “About Us” page, an upgrade to the premium package at no additional cost for 12 months and a rebate amounting to two months of the users base package. 

Food delivery

Uber Eats and Mr D Food, the leading platforms in restaurant food delivery, have all the restaurant chains listed, along with thousands of independent restaurants. 

The inquiry took aim at restaurant chains for prohibiting their franchisees from contracting with local or national delivery services that are not approved by the head office, so is prohibiting these national chains from restricting or dictating the choice of food delivery platform by its franchisees.

Uber Eats and Mr D Food are also required to notify consumers through a pop-up message that they charge restaurants a commission fee for their service, and restaurant in-store pricing may differ from the prices they charge on their service.

Transparent advertising

The inquiry found that the pervasiveness of unidentified advertising on intermediation platforms distorts consumer choice, so undermines competitive outcomes.

To address this, the inquiry has ordered that all South African platforms must label paid-for listings or those that have been boosted in ranking position as “promoted”, “sponsored” or “ad”, in line with the Advertising Regulatory Board’s Code of Advertising Practice. They must also commit to a responsible advertising code.

HDP funding

The lack of wealth accumulation by HDPs due to exclusion under apartheid has created a substantial barrier to such tech entrepreneurs from accessing pre-revenue funding, unlike their white counterparts, the inquiry said, which is why it is calling for transformation and a shift in resources to support and develop HDP entrepreneurs. DM

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  • Epsilon Indi says:

    Now we even have BEE on the App Stores. Perhaps for once the black online businesses should actually compete head on with other online businesses instead of being given an unfair advantage and not having to compete directly with real businesses. This is why black businesses will always remain hobbled, because they can’t play the game the way everyone else does. For heaven’s sake no-one knows the race of the developers of an app so black businesses enjoy all the benefits or drawbacks that many other developer do, so why do they need special treatment ? More anti-white racism.

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