Competition Commission flags anti-competitive behaviour in e-commerce

The Competition Commission has released the final report into the online intermediation platforms market inquiry, flagging anti-competitive business behaviour in this space. The commission investigated online platforms including e-commerce marketplaces, classified marketplaces, transport and food delivery intermediated services amongst others.

It has found market dominance behaviour, that have over time, affected small businesses. Among the big players,Takealot has been flagged as one of the companies ordered to relook at its operations to be in line with the Competition Act.

The probe into the online sector forms part of efforts to prevent market concentration in the e-commerce space, with the commission taking aim at companies such as Google, Uber Eats and South Africa’s Takealot. The probe was initiated in 2021 and is the first report released under the amended Competition Act and the first online market inquiry on the continent.

“What the Act requires us to do and what’s important in this market inquiry is to have regard to the impact of the adverse effect of competition of small and medium enterprises on the market and firms that are owned by historically advantaged persons and should also consider features which affect the ability of national industries to compete in international markets and both of this have been particularly important to the online market inquiry,” says Doris Tshepe, Commissioner at Competition Commission.

The commission investigated a host of online platforms in South Africa with online retail giant Takealot identified as the dominant player in the e-commerce space.

“On platform competition Takealot does impose the so-called narrow price parity. While Takealot does operate a beneficial marketplace for many sellers it also trades extensively itself through Takealot retail and this does create the kind of conflict of interest much the same way as Google,” says James Hodge, Online Inquiry chairperson.

The commission presented wide-ranging recommendations.

“Firstly, Takealot is required to segregate its Retail division from its Marketplace operations and to appoint executives for both roles and furthermore to prevent its retail services from accessing seller data that provides them an advantage in competing against those that use the platform and unilaterally stopping sellers from competing for certain brands. There is also price gating. We also require them to extend their employee code of conduct and their speak up policy for market sellers,” Hodge added.

The report was handed over to the Trade Industry and Competition Minister, Ebrahim Patel with a recommendation on policies that will support small businesses operating in the digital economy. The Minister welcomed the report, promising to act.

“Across the world governments are grappling with the need for new policy frameworks appropriate to this new sector. The challenge is how to retain the dynamic benefits of competition in network industries that are often predisposed to concentration and monopolies. They are also distinguished by unusual investor proactive with lengthily period of losses and more services that monetise this space which impact on competition,” says Patel.

The report further recommends that listed companies that do not comply with the remedial actions, be brought before the Competition Tribunal to face further action.

The online market inquiry report giving the seven probed markets an opportunity to appeal the remedial action within the stipulated 20 days with the Trade Industry and Competition Minister acknowledging that overtime the country’s policies will also have to be reviewed to accommodate the fast-growing digital economies and those in the sector especially small businesses.

Video: Competition Commission releases final Online Intermediation Platforms Inquiry report:

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