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JIMMY MOYAHA: Earlier today the Competition Commission released its final report and decision on online intermediation platforms – the market inquiry put in place there. There was a preliminary report released about a year ago and the final report came out today.
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I’m joined on the line by James Hodge, a chief economist at the Competition Commission, to take a look at what this report all means. Good evening, James. Thank you so much for the time. Let’s start with exactly that. What were the findings that came out of the report, before we get to the recommendations?
JAMES HODGE: Well, the findings are quite extensive and quite difficult to summarise with a short call. But we looked at five different platform categories, which included e-commerce, software, app stores, food delivery, online classified, and even travel and accommodation. On top of that we looked at Google Search and its role as a gateway for consumers, and its impact on platform competition.
So at a very broad level we found that Google Search, as a result almost of its monetisation strategy, does influence platform competition and does favour, in a sense, large, big platforms – especially global platforms backed by venture capital that also come into our market late, but do still get a dominant position in the market.
We then looked at factors that affect platform competition in the behaviour of those platforms. That has really focused on a few areas – things like price-parity clauses that prevent other platforms that compete with them from getting lower prices in business, and seeking to compete on that basis, but also other impediments to businesses getting a listing on these platforms.
So, for instance, in Property Classified with no interoperability you can’t get listings of estate agents if you’re not one of the big platforms.
And in food delivery some of the big restaurant chains don’t allow the franchisees to list on local delivery platforms or the new entrant, Bolt. So at that level you’ve got that.
The final level is just competition on those platforms among the businesses, because one or two platforms dominate in each category. They’re invaluable to businesses in order to reach the online consumer. So the pricing practices, the sort of differential pricing practices and their sort of promotion, paid-for ranking, all affect that competition – and so there [are] findings in respect of that across a number of these platform cases.
JIMMY MOYAHA: James, from a platform perspective you mentioned that some of these sectors or some of these areas that you looked at have only one or two platform providers, and so companies almost feel like they don’t have a choice in terms of what they look at for those platforms or for listing on those platforms. Is the report focused on both the platform side of it and the users of those platforms? And, if so, are there areas where more concern was identified than in other areas? Are there certain platforms or certain companies, for example, where the Competition Commission may have felt this is more of a concern because it hampers fair competition [more] than in another area?
JAMES HODGE: Look, I think each category has certain practices that may restrict the platform competition, and, as you rightly point out, competition among the users on that [platform]. That’s predominantly the business users.
So, although those consumers stand to certainly benefit from better competition among platforms, and even among the businesses on those platforms, it may not seem as obvious to them [what] differences that will make to businesses, especially smaller businesses that list on these platforms and try to compete for customers, often with large national groups, or even international ones that have certain benefits that accrue to them.
I think the important thing is to highlight that market inquiry is not necessarily about whether the company has deliberately tried to stifle competition or not.
Market inquiry just looks at how a market functions and whether the business models and the market structure all serve to impede competition – and can we in a sense unlock that competition and improve that for the competitors’ consumers in the businesses?
That’s in essence what we’re trying to do. Some of the platforms have more remedies and are more far-reaching, just because of the range of issues. So we see, for instance in ‘classified’, around the interoperability and the like, there are fairly extensive recommendations on price differentiation for small businesses, the divestiture of estate agents out of private property, and trying to bring about interoperability. It’s in stark contrast then to say ‘automotive classified’ where we have none of those concerns – only around discrimination against new business. So there will be differences that you will see.
But the process has been a lengthy one, partly because we’ve done extensive consultations and worked with the platform and the business users to find reasonable remedies. I must commend many of them for being constructively engaged and, even where they don’t necessarily agree, looking to see whether these concerns can be addressed and we can facilitate a more competitive market.
JIMMY MOYAHA: James, can you give us a sense of some of the recommendations or actions that the report outlines in terms of remedying what has been identified?
JAMES HODGE: In the instance, for instance, of travel accommodation and e-commerce, these price-parity clauses exist, and so removal of those price-parity clauses – which means the business is free to price lower on competing platforms or on their own online channel – is one important area that highlights trying to bring about competition among different online channels in order to enhance that benefit for consumers.
In e-commerce we’ve looked in essence at segregation of the Takealot marketplace operations from the retail operations and putting Chinese walls in between, and restricting the exchange of data, etc, in order to level the playing field.
There is concern over the conflicts of interest that could arise, and how these play out in terms of fair competition on the platform.
Read: CompCom refers suspended Takealot merchants for prosecution
And similarly with Google, on the search page there have been high-profile cases globally about self-preferencing, and we are looking to implement some of those remedies in South Africa.
It’s useful for the commission, it’s easier, but it’s also preferred by some of these platforms that there is one single solution globally, similar to what has happened globally on application stores. The remedies are around removing the anti-steering and allowing apps to direct consumers to their own website to buy content and use it on their apps.
So there is a fair range of remedies, and I think it’s probably important for the businesses and the users just to take time to digest all of that.
It has been an ambitious project, given the scope. But it does mean there is a lot of detailed corrections that are taking place across the digital economy.
JIMMY MOYAHA: Yes. Well, we definitely do value the work that the Competition Commission has put in. It’s a 123-page report and very, very extensive as you have alluded. Hopefully, as you rightly mentioned, James, these recommendations and these remedies are implemented before the Competition Commission has to go and start investigations on company practices.
Thanks so much, James. That was James Hodge, the chief economist at the Competition Commission, giving us a sense of the latest report that they put out around online intermediation platforms, and the market inquiry related to them.
