The Competition Commission has published draft Terms of Reference ahead of an 18-month inquiry into any potentially anti-competitive aspects of selected digital platforms
The Competition Commission (Commission) has published draft
Terms of Reference (TOR) for its Online Intermediation Platforms Market Inquiry (OIPMI). Comments on the draft TOR are due before
16:00 on 12 March 2021. The OIPMI will focus on whether there are any digital platform market features which may impede, distort or restrict competition amongst the platforms themselves, and which undermine the purposes of the Competition Act.
The OIPMI follows the publication of the Commission's paper on
Competition in the Digital Economy in September 2020, which has now been finalised. The paper detailed competition and regulatory issues in the South African digital economy and set out the Commission's intended strategic actions in relation to competition law issues, including its intention to initiate a market inquiry.
Which platforms are being assessed in terms of the OIPMI?
The OIPMI applies to:
- eCommerce marketplaces
- Online classifieds
- Travel and accommodation aggregators
- Short term accommodation intermediation
- Food delivery
- App stores
- Other platforms identified during the inquiry.
In the Commission's view, an inquiry covering all digital platforms is not achievable within the 18-month period prescribed by the Competition Act. Accordingly, the Commission has decided to narrow the scope of the inquiry to a particular set of digital platforms with common competition issues. The scope of the inquiry will specifically exclude e-hailing services, search and social media, fintech platforms, and the broader digital advertising ecosystem (except where that digital advertising may pose a barrier to the expansion of competing platforms or to business users from participating in the online economy).
Key proposed focus areas of the OIPMI
The inquiry is broadly focused on three areas of competition and public interest:
- market features that may hinder competition amongst the platforms themselves
- market features that give rise to discriminatory or exploitative treatment of business users
- market features that may negatively impact the participation of small and medium enterprises (SMEs) and/or historically disadvantaged individual (HDI) owned firms
Issues identified and objectives of the OIPMI
The Commission has flagged issues several issues in the online intermediation platform market, such as: conduct which may create barriers to entry; self-preferencing; unfair trading terms; potential distortions from ranking algorithms; and discrimination against SMEs / HDI-owned firms.
Among other things, the OIPMI will evaluate whether any market features, core platform conduct and/or contracts and terms of use with business users and consumers are likely to have the effect of raising barriers to entry and reducing competition among platforms domestically. The OIPMI will also carefully assess whether platform conduct, contracts, prices and terms of use with business users are discriminatory or unfair, and if there are any other barriers to entry into online commerce for SMEs and HDI-owned firms.
Next steps
After the commentary period has closed, all submissions will be reviewed, and a final TOR will be published by the Commission. The OIPMI will commence 20 days after the publication of the final TOR and the final report will be completed within 18 months, in line with the statutory requirements. In terms of the Competition Act, the Commission must determine appropriate remedies where it finds an adverse effect on competition or the purposes of the Competition Act.
Although the initiation of the market inquiry is unsurprising, it was anticipated that the Commission would have held further stakeholder engagements and released a final version of its digital economy paper first. In the past, market inquiries have taken several years to conclude and, given the Commission's commitment to complete this inquiry in 18 months, market participants can expect a fast-paced process, multiple stakeholder engagements and tight deadlines for responding to extensive information requests. While many of the issues identified are similar to competition concerns raised in this space globally, it remains to be seen if these problems exist in South Africa, especially given current economic and socio-economic dynamics.
