On Wednesday, 13 July, the Competition Commission published its provisional report in the Online Intermediation Platforms Market Inquiry (the "OIPMI"). The report, which follows 14 months of intensive evidence gathering, makes several hard-hitting and potentially industry-changing recommendations.

While the report is only provisional in nature, interested and impacted parties have been invited to make submissions to the Commission regarding the findings and recommendations by 24 August 2022. The Commission intends to publish its final report in November 2022.

The OIPMI is the first market inquiry initiated under the upgraded market inquiry provisions of the Competition Act, 1998, as amended. Its goal is to identify potential market features of online intermediation platforms that may impede, distort or restrict competition, with a focus on the participation of small and medium enterprises ("SMEs") and firms owned/controlled by historically disadvantaged persons ("HDPs").

Online platforms facilitate transactions between businesses and consumers for the sale of goods and services. Such platforms include:

  • eCommerce marketplaces;
  • online classifieds and price comparator services;
  • software application stores;
  • intermediated services such as accommodation, travel, and food delivery.

The OIPMI focused on five categories of online platforms:

  • software app stores;
  • eCommerce;
  • online classifieds;
  • travel and accommodation; and
  • food delivery.

In each of these categories, the report identified so-called "leading platforms", which include the likes of the Apple and Google Play Stores, Takealot.com, Property24, and Uber Eats, among others.

The findings and recommendations in the report, which are extensive and have potentially far-reaching consequences, largely apply to the identified leading platforms. The full report is available to be read available here. Key provisional findings and recommendations are as follows:

  • Google Search, as an input to platform competition, is a de facto monopolist in search in South Africa. The prominence of paid search results and the insufficient distinction from organic search results materially restricts platform competition, as does Google's self-preferencing in respect of shopping and travel. The OIPMI proposals include improving ad identification and/or elevating organic search results.
  • In respect of online classifieds, the OIPMI flagged the lack of interoperability of the listing engines used by property classifieds as an impediment to competition. It also raised concerns with the ZAR500 fee on listings sourced from third-party engines, which the Commission determined may be the result of collusive conduct, and with the shareholding of large estate agents in. Recommendations include the removal of the fee, the requirement that leading property platforms like Property24 and Private Property must interoperate with third party platforms, and the large estate agents should divest from Private Property.
  • For food delivery, the OIPMI found that contracting restaurant chains by the leading platforms incentivises the chains to focus their support on these platforms, which results in a lack of support for competing national and local food delivery platforms. Price parity clauses and predatory conduct as a result of aggressive promotion and delivery subsidisation were also found to be problematic. Recommendations to solve these concerns include the removal of incentives that limit multi-homing by restaurants, the removal of price parity clauses, and remedial action to end predatory conduct.
  • For travel and accommodation platforms, the OIPMI flagged parity clauses and loyalty schemes as potential impediments to competition. Suggested remedies include the removal of price parity clauses) and a prohibition on exclusionary loyalty scheme design.
  • With regard to eCommerce, the OIPMI again took issue with price parity clauses as causing an impediment to competition, as well as the widespread subsidisation of products below variable cost. The removal of price parity clauses was recommended, as was remedial action in respect of the predatory pricing conduct.
  • Finally, with respect to software app stores, the OIPMI found that the complete exclusion of competing software app stores and side-loading by Apple impedes effective competition for commission fees. Similarly, the default arrangements of Google Play have impeded competition from other Android software app stores. Given concerns about the likely effectiveness of more traditional remedies, the OIPMI has taken the unusual step of recommending price regulation, or a complete end.

On the participation of HDPs, the report concludes that the digital economy is far less transformed than many traditional industries, and there are considerably more challenges resulting from historic disadvantage, especially in funding and support. The report proposes several measures to try and correct this concern.

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