The Competition Commission recently published final terms of reference for an inquiry into competition among selected digital platforms, as well as its findings from an investigation into competition in public transport
In recent years, the Competition Commission (Commission) has used market inquiries as an important tool to assess the competition dynamics in several industries, such as telecommunications, healthcare and grocery retail.
Over the last few weeks, there have been key developments in two current market inquiries. In relation to the Online Intermediation Platforms Market Inquiry (OIPMI), Guidelines for Participation in the OIPMI (Participation Guidelines) and final Terms of Reference (TOR) have been published. The Commission has also released the final Public Passenger Transport Market Inquiry (PPTMI) Report. We briefly discuss the outcomes and the status of these market inquiries below.
OIPMI TOR and Participation Guidelines
The Commission has published final TOR ahead of an inquiry into any potentially anti-competitive aspects of selected digital platforms. The updated final TOR comes less than two months after the draft TOR. The Commission has adopted an expedited approach to the OIPMI, in line with the 18-month completion deadline for market inquiries introduced by the Competition Amendment Act. The OIPMI will commence in mid-May 2021 and the Commission is expected to conclude the inquiry by October 2022.
Following public and stakeholder comments on the draft TOR, the scope of the inquiry has not changed substantially in the final TOR. One change is the removal of specific industry participants and sectors within the OIPMI.
The Participation Guidelines set out the four phases of the OIPMI and parties who may participate (e.g. members of the public, government and firms who represent stakeholders). The Participation Guidelines also provide details of how relevant parties will be able to participate in the inquiry, with particular reference to written submissions and virtual public hearings for oral presentations. In addition, the Participation Guidelines highlight that the Commission may summon individuals or organisations to appear before the inquiry in terms of section 49A of the Competition Act.
The OIPMI will be the first market inquiry conducted following the extensive amendments to the Competition Act. In terms of the new market inquiry provisions, the Commission does not need to conclude that there has been a substantial lessening of competition within the relevant market. In the OIPMI (and all future market inquiries), the Commission is only required to decide whether there has been an adverse effect on competition in the market. This is arguably a much lower threshold and one of the reasons that Commission may be opting to conduct market inquiries in certain industries instead of investigations.
Once the OIPMI is concluded, the Commission may, among other things, make recommendations for new or amended policy, legislation or regulation, initiate a complaint on the basis of the information obtained during the market inquiry, or recommend that the Competition Tribunal make an order in relation to divestiture.
Given the new prescribed timelines for completing market inquiries, market participants can expect a fast-paced process, multiple stakeholder engagements and tight deadlines for responding to extensive information requests. Since the Commission's recommendations in previous market inquiries have substantially influenced operations in some industries, market participants would be well advised to understand the scope of the inquiry with the necessary proactiveness and be prepared to engage fully with the Commission.
Final PPTMI Report
The Commission also recently published the final PPTMI Report. In summary, it indicates that the public transport network lacks integration, has a skewed subsidy system, and requires policy frameworks. Some of the key findings and recommendations are set out below.
- Integration: The report indicates a lack of efficiency and co-ordination, particularly in the passenger rail sector. The Commission found that public transport systems are operating in silos with duplicated infrastructure and not as an integrated network. The Commission has recommended, among other things, that Gautrain and Metrorail operations are integrated into a single offering.
- Skewed subsidy system: The Commission indicates that the current subsidy scheme excessively favours buses and railway services, with the taxi industry receiving just 1% of the allocated government subsidy even though it carries around 66% of commuters. The Commission has recommended an equitable allocation of subsidies through a subsidy policy which recognises both the taxi industry and rural buses.
- Bus services: The Commission found that it is unreasonably difficult for new entrants to enter the bus services market due to the current moratoria on bus service operating licences. To address this difficulty, the Commission has recommended an overhaul of the system for issuing operating licences and the removal of all quantity restrictions. Another recommendation is that PRASA's Autopax operation must become structurally separate from PRASA's facility operations, to prevent price discrimination against non-PRASA bus operators.
- E-hailing and metered taxis: The Commission found that e-hailing services and metered taxis face numerous regulatory challenges. The Commission recommended that e-hailing services and metered taxis be regulated by the same legislation. This should allow metered taxis to have access to the same areas and price opportunities that e-hailing services already have.
The outcomes of the recent retail and data services market inquiries indicate that market inquiries are a powerful enforcement instrument that the competition authorities will continue to utilise. In previous years, market inquiries have taken an extensive amount of time, resources and expenditure to complete. It will be interesting to see how the recommendations of the PPTMI will be implemented and whether the OIPMI will be completed in the 18 months stipulated.
