Competition Commission gets competition wrong

Meta Platforms, which owns Facebook and WhatsApp, has been referred to the Competition Tribunal, to be fined 10% of its South African turnover for violating provisions of the Competition Act that prohibit the abuse of dominance by a company.

Meta is accused of acting contrary to the provisions of the Competition Act by seeking to exclude GovChat, a private, for-profit company that describes itself as “South Africa’s official citizen/government engagement platform”.

GovChat’s model relies on the use of another company’s resources and infrastructure in that it needs the WhatsApp Business application programming interface (API) to function. It was excluded from using it by Meta, necessitating GovChat to bring the state into the economic sphere again.

GovChat and the commission contend that Meta ran foul of provisions of section 8 of the Competition Act by refusing to give it access to an essential facility (its API) when it was economically feasible to do so, or alternatively that it was engaging in an exclusionary act whose anticompetitive effect outweighs any technological efficiency or any other pro-competitive gain.

Meta on the other hand, contends that GovChat did not comply with its terms of service. A spokeswoman for the company said it sought to “offboard” GovChat from its WhatsApp Business API due to continued violations of its terms concerning the abuse of users’ data by GovChat.

The relief sought by GovChat — a private company — against Meta, another private company, is not only a punitive fine of 10% of turnover. It also seeks an interdict which would, in effect, bar Meta from doing with its property (the API) as it deems fit, and kick GovChat off should it deem it to be violating its terms of service. The Competition Tribunal is directed to declare any terms of service that seek to shield Meta from competition (as argued by GovChat) null and void.

Voluntariness

It has been argued before that the section 8 provisions that Meta has allegedly run foul of should be interpreted differently from the current prescriptive process that will see the invalidation of perfectly legal contractual terms. The analysis of the courts should centre on the voluntariness of the parties, their property rights and the legislative environment.

Within the context of the legislation, Meta will most likely argue that its actions of exclusion against GovChat have a technological, efficiency or a pro-competitive gain that nullifies their anticompetitive effect. If it is true that GovChat violated terms of service it willingly subjected itself to when using Meta products and services, that would be prima facie evidence of there being other reasons for exclusion, which can be said to promote efficiency or technology with regard user data privacy, that may override the anticompetitive effects of offboarding GovChat.

GovChat is a company that would claim to be in competition with Meta on some level. As part of its argument that convinced the commission is that Meta’s terms of service are meant to shield it from competitors. GovChat of course claims this exclusion as being unfair and illegal.

One is forced to ask, is there any business out there that does not try to shield itself from competition? If there isn’t, then it will not be in business long! Is there any business that would not make it so that its competitors cannot use its infrastructure to undermine their bottom line?

The main thrust of the arguments put forward by businesses that take other business to the authorities when they fail in the market, is that government must choose winners and losers. The API that GovChat wants to forcefully use belongs to WhatsApp. It is the property of Meta. There is nothing, at least on Meta’s part, that is inhibiting GovChat from creating its own social media platform that will then in turn have its own API. GovChat is free to do this, yet it seeks to use the power of law to force others to bend to its whims.

The question then arises: is it an exercise in justice when GovChat seeks to force Meta to let it use its property instead of developing its own?

GovChat seeks to use its connection to government to essentially justify why it is entitled to the use of the Meta-owned API. The mentioning of grant beneficiaries communicating with the state through GovChat is meant to justify the violation of the property rights of Meta to offboard any company it wants to.

GovChat has clearly convinced the commissioner to take its side and force its competitor to act in a way it pleases

The tribunal will be faced with a classic abuse of dominance case: one company seeking state force to help it compete against another. The commission has chosen a side in the market between competitors, as is always the case. To reiterate, there is nothing stopping GovChat from competing with WhatsApp by building its own API. The provisions of the act it violates could be interpreted to exempt the actions of Meta from sanction, as argued above.

The South African regulatory environment cannot afford to be hostile to any company. GovChat has clearly convinced the commissioner to take its side and force its competitor to act in a way it pleases. If the tribunal approves remedies like the interdict against offboarding GovChat and declares void  terms of service that are an exercise in property rights, then the already dim investment prospects of the nation will only dim even further.

• Zakhele Mthembu (BA Law LLB (Wits)) is a legal researcher at the Free Market Foundation
• The views expressed in the article are the author’s and not necessarily shared TechCentral or by members of the Free Market Foundation