Competition Commission to investigate Amazon

By Hanno Labuschagne for MyBroadband

The Competition Commission’s enquiry into South Africa’s digital market will include international platforms, which means the Amazon Store, the Apple App Store, and the Google Play Store would form part of its investigation.

The Commission announced it would be launching the Online Intermediation Platforms Market Inquiry (OIPMI) in February 2021, a few months after it published its “Competition in the Digital Economy” whitepaper.

The Commission said it had reasons to believe that market features exist that impeded, distorted or restricted competition amongst the platforms and undermined the Competition Act’s purposes.

South Africa’s biggest online retailer Takealot was singled out for its dominance in e-commerce.

Responding to recent requests for clarification on the scope of the inquiry, the Commission said the OIPMI was not restricted to only platforms that had a physical presence in South Africa.

“The scope of the OIPMI includes foreign-based online intermediation platforms that have an economic effect in South Africa even if such platforms do not have a physical presence in the country,” the CC said.

“Foreign-based or international platforms that lack a physical presence — for instance through an incorporated entity in South Africa — still fall within the jurisdiction of the Act and hence the Inquiry itself.”

“The inquiry is whether the platform has an effect within the Republic, not whether it has a physical presence,” it added.

The Commission said some international platforms might be market leaders domestically in areas such as app stores and online travel and accommodation platforms, which is why they form part of the investigation.

“Whilst some types of online intermediation platform may require a physical presence, it is apparent from the nature of digital markets that services can still be provided to consumers and business users domestically without a physical presence.”

“Foreign-based platforms contract directly with South African business users to be present on their platforms and facilitate transactions with South African consumers, as well as with foreign consumers using South African businesses.”

“Their economic activities, therefore, have a direct effect on both business users and consumers within South Africa.”

Although the Commission did not name specific platforms, its statement implies it will likely be looking into the role of Amazon.com, the world’s biggest e-commerce store, which also ships products to South Africa and last year started allowing South African businesses to sell on its platform.

Given that Android and iOS are the two leading smartphone platforms in the country, the Google Play Store and Apple App Store are the dominant mobile stores in South Africa, and would be subject to investigation.

Under travel and accommodation, leading players likely include Airbnb and Booking.com.

The Commission said while certain international platforms raised the issue of whether their economic effect within South Africa was substantial or not, the Inquiry would determine this.

“Substantiality cannot be determined simply by reference to the share of South Africa in the overall business of the platform or to the number of transactions taking place,” the Commission said.

“The determination needs to be properly assessed within a context which cannot occur if there is no co-operation around information which provides the Inquiry with a better understanding of the context.”

“For this reason, the Inquiry will require that any international platforms which have an economic effect within South Africa respond to information requests and participate in public hearings if requested to do so.”

 

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