Anticompetitive oversight has been ramping up around the world. Lawmakers in the US and the EU have tried to counter the dominance of big tech firms, and in South Africa, too, the matter has received attention — the Competition Commission released its “Online Intermediation Platforms Market Inquiry” report on 31 July after two years of investigation of the companies’ competition behaviour on the internet.
Tech giant Google “distorts platform competition”, while e-commerce site Takealot’s marketplace for other sellers is a “conflict of interest”, the report finds. Other findings include:
- Booking.com “creates a dependency that is used to extract higher commission fees from hotels” because it restricts such establishments from offering lower pricing on their own websites or on other travel platforms;
- App stores run by Google and Apple are “unconstrained in the commission fees they charge app developers, and their global business model limits the curation and visibility of [South Africa-paid] apps”;
- Uber Eats and Mr D Food competitors are “disadvantaged by the lack of transparency on menu surcharges” while competitors to Property24 and Private Property are “hindered by the lack of interoperability in providing property listings”; and
- Property24, Auto Trader and Cars.co.za “favour large national groups”, which means small estate agents and automotive dealers are “disadvantaged by the discriminatory pricing”.
A long time coming
Google’s online dominance has been the subject of innumerable antitrust investigations by US lawmakers, its justice department and agencies such as the Federal Trade Commission. European competition watchdogs have fined Google multiple times for anticompetitive behaviours, while it has also garnered billions of euros in fines for data privacy violations.
The Competition Commission’s two-year process found similar monopolistic behaviour. “Google has an influence on platform competition because it is where most online journeys start,” says commission chair James Hodge.
He says Google gives “prominence to paid results, which means that the largest platforms with the biggest marketing budgets can dominate [its] search page”.
The report finds that “Google self-preferences its own shopping and travel units on its search results page.
“The inquiry finds that Google search’s dominance and business model distort platform competition, as small and new platforms struggle for visibility and customer acquisition.” And “Google search is a critical gateway to consumers for all platform categories, and its business model of paid search alongside free results favours large established platforms.”
The commission recommends that Google must “provide more free and paid result exposure for smaller South African platforms. This includes a new platform way to display smaller South African platforms related to the search, and R180m in advertising credits.”
Google must also provide a “further R150m in training, product support and other measures for SMEs and black-owned online firms”.
A South African flag symbol must be added to local search results so consumers can identify and support local platforms. “Google must also cease self-preferencing, and is to implement in South Africa measures taken in Europe to comply with similar provisions in the [EU’s] Digital Markets Act,” the commission says.
Google is not the only culprit
Takealot operates a marketplace for other sellers to use its infrastructure and services but has been told by the commission to separate the two operations. “Takealot faces a conflict of interest on its site as its retail division competes with marketplace sellers, leading to behaviour that has disadvantaged sellers,” the report finds.
Amazon, the US e-commerce behemoth, which is expected to launch an online store in South Africa this year, has often been criticised for the same problem, notably by US Democratic senator Elizabeth Warren. “You can be an umpire, or you can be a player. But you can’t be both,” she has said.
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Meanwhile, Booking.com is required to remove the restrictive pricing clauses from its contracts, allowing hotels to display lower prices on “different online channels, including their own”.
The Google Play and Apple App stores must “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”. The stores must also provide South African curation of apps, as well as give advertising credits to South African app developers.
It’s worth noting that many of the international companies have operations in Europe, where they conform to the EU’s privacy and competition rules, but that they until now haven’t done so in South Africa.
South African lawmakers would be wise to study Europe’s Digital Markets Act for how it updates the rights of internet users not to be the victims of surveillance capitalism and programmatic advertising.
Modern, fast-moving policy is needed to match the pace of such technological advances.
- This article was first published on Financial Mail.