Tag: Competition Commission

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.”

 

Source: IOL

The Competition Commission is set to start its Online Intermediation Platforms Market Inquiry on Tuesday.

The commission said the inquiry would cover online markets that facilitate transactions between businesses and consumers (or so-called “B2C” platforms) for the sale of goods, services, and software.

According to the commission, online intermediation platforms include e-commerce marketplaces, online classified marketplaces, software application stores, and intermediated services such as accommodation, travel, transport, and food delivery. Examples of these include:

  • Takealot (including Superbalist)
  • Mr D
  • UberEats
  • Airbnb
  • TravelStart
  • Autotrader
  • Cars.co.za
  • Property24
  • Private Property
  • Google Play
  • Apple App Store

The aim is for the commission to get a greater understanding of the online markets operating in South Africa, and whether there are factors that may be hindering competition or undermining the public interest.

“This will ensure that these markets remain contestable and competitive, which is in the long-term best interests of South African consumers and businesses that depend on them,” the Commission, said.

It said said online markets have become an increasingly important channel for businesses to reach consumers, a trend that has accelerated under the Covid-19 pandemic and likely to continue.

“Online markets provide consumers with the convenience of comparing a wide range of options and then safely purchasing online. For businesses, the online markets offer a ready-made infrastructure to sell online and a means to reach an enormous number of consumers nationally and internationally,” it said.

The commission also stated that the shift to online commerce also meant that it was important for South African businesses to participate actively in these markets if they are to be part of the global and national economy.

“However, global experience is that a few platforms may start to dominate online commerce given the features of online markets and in some cases the conduct of the markets themselves. In those circumstances, businesses using the markets may be exploited or discriminated against, and consumers may not be presented with the optimal choices,” the commission added.

The commission said the inquiry would focus on three areas:

a) market features that may hinder competition amongst the online markets themselves,

b) market features that may give rise to the discriminatory or exploitative treatment of business users,

c) market features that may negatively impact the participation of SMEs, and firms owned and controlled by historically disadvantaged persons.

Last year, commissioner Tembinkosi Bonakele said the commission would investigate and create new regulations to prevent the abuse of dominance by big firms.

Takealot, which is part of Naspers’ South African internet properties, was pin-pointed as dominant in the South African digital market.

Naspers invested in Tencent investment and used it as a launchpad into the online industry with investments in big Internet players like Delivery Hero, Code Academy, Udemy, PayU, FlipCart, and Mail.ru.

Naspers’ South African Internet properties include Takealot, Autotrader, 24.com, OLX, Property24, and Careers24.

 

Pick n Pay to cap garlic and ginger prices

By Philippa Larkin for IOL

Pick n Pay will cap its gross profit margin for ginger and garlic, which is good news for cash-strapped consumers, following recent public complaints that fingered seven retailers for price gouging.

South Africans are struggling to afford basic foodstuffs amid rising prices.

The move follows public complaints against seven retailers about the rising cost of these items. Picture: Brendan Magaar, ANA.
In recent months, the Competition Commission has received a number of complaints from members of the public alleging that certain Food Lover’s, Spar, Shoprite Checkers and Pick n Pay stores had increased prices of ginger and garlic.

The Competition Commission said yesterday it was pleased to announce the signing of a memorandum of agreement with Pick n Pay last week – the first retailer to do so – and it hoped to formalise similar agreements with other national retailers.

“This confirms that the company has capped its gross profit margin for ginger and garlic essential food items for the period covering January 28, 2021 to April 1, 2021, which may be extended. Pick n Pay has also instructed its franchises to price no higher than the corporate store price on ginger and garlic,” it said.

The commission said it had engaged with all the affected retailers, and expressed its concerns that the alleged significant price increases of ginger and garlic in certain retail outlets could result in a contravention of Consumer Protection Regulations and other relevant provisions of the Competition Act. In terms of the Consumer Protection Regulations, ginger and garlic fall under the category of “basic food and consumer items”.

It said although the wholesale prices for these products had increased due to heightened consumer demand during the second wave of infections, the commission was of the view that this did not warrant the large increase in absolute margins seen in some instances.

The Pietermaritzburg Economic Justice and Dignity research group published its Household Affordability Index for January 2021, which showed that the cost of a basic food basket had increased drastically.

The index showed that the price of maize meal and other maize products continued to increase, with basic and core food items such as sugar beans, rice, flour and bread seeing hikes of between 31 percent and 68 percent.

It said the cost of a basic food basket in January was R4 051.20, which was way above the monthly minimum wage.

 

By Theto Mahlakoana for EWN

The Competition Commission said that two companies partnered to overcharge the police by over R14-million when supplying it with 10 000 units of 25-litre hand sanitisers.

In its opening remarks at the competition tribunal hearing underway virtually, the entity’s Maya Swart further claimed that the companies – Bluecollar Occupational Health and Ateltico Investments – gained excessive profits by adding a gross profit margin of 54%.

This was one of several cases which were before the commission over COVID-19 excessive pricing.

Swart said that Bluecollar’s massive overcharge was not even comparable to the Dis-Chem price gouging matter which was heard last year.

READ: Dis-Chem found guilty of contravening Competition Act over face mask prices

The company – described by its lawyers as a small business which had no prior experience in dealing with hand sanitisers – is accused of charging the police excessive prices for bulk sanitisers between March and April of last year.

The commission claims that Ateltico funded Bluecollar for the procurement of the sanitisers with a view of splitting the profits 60/40.

Swart explains: “That’s an overcharge of R1,433.69 per unit. That’s a massive overcharge when you compare it to other price gouging cases.”

The companies have disputed the commission’s version of events, saying that the prices included transportation among other costs.

 

Takealot’s dominance in SA to be investigated

By Jamie McKane for MyBroadband

The Competition Commission will proactively investigate the dominance of Takealot and other major players in South Africa’s digital market.

Speaking at the 14th Annual Competition Law, Economics, and Policy Conference, Commissioner Tembinkosi Bonakele reiterated the Commission’s commitment to actively investigating and creating new regulations that would prevent the abuse of dominance by major firms.

Takealot was singled out as a dominant force in the South African digital market, with Bonakele likening the ecommerce company to Amazon in the United States and Alibaba in China.

“It is clear that in digital markets it is easy for vertical integration to lead to what is referred to as the ‘tipping’ of the markets, which means there is a likelihood for the rapid expansion of one large dominant platform within a particular market,” Bonakele said.

“We have seen examples of this with the likes of Amazon in the US, Alibaba in China, and we are seeing the same with Takealot in South Africa. Indeed, we already have some cases we are investigating in these markets.”

Bonakele said the Commission’s approach would be a proactive one which attempts to determine any potential abuse of dominance before it can manifest.

“We intend to pursue strategic action for enforcement, including mapping the digital access landscape of South Africa to inform the proactive investigation of conduct by dominant platforms which may be excluding rivals and entrenching dominance,” Bonakele said.

“We have taken a decisive and proactive stance to ensure the balance of economic forces favour a shift to enable a more competitive digital economy.”

“This requires removing the entry barriers, including those created by dominant platforms, and preventing concentration in the online economy of South Africa,” he said.

Stakeholders and companies such as Takealot had until the end of October to make submissions to the Commission on its whitepaper regarding the digital economy in South Africa.

Bonakele said the next step is for the Commission to assess these submissions and have further engagements with key stakeholders before publishing a final report.

The final report will outline the way forward for South Africa in dealing with these markets, he said.

Takealot dominant in South Africa
Takealot is the biggest online store in South Africa by a wide margin, and for this reason, it was singled out in the Competition Commissions “Competition in the Digital Economy” whitepaper.

“The most popular digital platforms around the world are widely used in South Africa but Internet usage takes on a local flavour in financial service platforms and ecommerce, where some traditional stores with an online presence and Takealot – which is part of the Naspers group – dominate the scene,” the document said.

As a dominant market player, the online store wields a significant amount of power over the South African ecommerce market.

An example of this is evident through the process required to sell items through the Takealot Marketplace – a platform for third-party sellers to make their stock available through Takealot’s online portal.

While this marketplace has competitors, retailers have said the sales generated through Takealot completely dwarf those of other platforms.

“Takealot is probably 95% of our turnover,” one seller told MyBroadband. “For every 30-40 orders on Takealot, we maybe do one on our own website.”

The company has made a significant investment in the quality of its service and its logistics network to reach this point.

However, this will be a major focus of the Competition Commission’s investigation into the local ecommerce industry as a result of its dominant position.

 

By Thinus Ferreira for News24

South Africa’s Competition Commission has started an investigation into MultiChoice that has announced plans to add global streaming services like Netflix and Amazon Prime Video alongside its own Showmax service.

In its latest financial year results announced in mid-June, MultiChoice revealed that it plans to add Netflix and Amazon Prime Video as subscription video-on-demand (SVOD) services to a new streaming app carousel that it wants to launch for DStv subscribers.

This new streaming app vertical will house separate blocks or apps, incorporating DStv Now, Showmax, Joox, Netflix, Amazon Prime Video – and in future even more global streaming services like possibly Disney+, HBO Max, Spotify and others – as MultiChoice evolves to become what in the pay-TV industry is termed a “super-aggregator” of video content.

How it will work, and already works elsewhere in the world, is that consumers can still subscribe separately and directly with these streaming services, but can also do so through their traditional pay-TV service that gives access to their rivals in win-win “frenemy” content distribution agreements.

MultiChoice wants to provide DStv subscribers who sign up for one or more of these SVOD services – for however long – the convenience of one monthly bill paid in rand and the streaming service amount(s) just showing up as an additional invoice line-item.

How MultiChoice benefits is that by offering DStv subscribers seamless access to streaming service competitors but through its interface and platform, MultiChoice gets to keep a DStv subscriber within its own eco-system. MultiChoice also gets paid a commission by a SVOD service for every subscriber who signs up to each of these services.

How the pay-TV subscriber benefits is that the tacked-on streaming service subscription, paid in local currency, is usually a bit cheaper than going direct as part of a promotion to entice them to try and use it, and because the pay-TV operator because of scale gets a “wholesale” price.

The streaming service benefits by getting additional revenue and new subscribers through leveraging the scale of the pay-TV operator and piggybacking on the more trusted local brand. It lowers what is called “product friction” – potential customers to scared to try something new or unwilling to complete a new registration and sign-up and cumbersome login process.

Traditional pay-TV operators in the United States like Comcast, in the United Kingdom like Sky, Canal+ in France and several others worldwide have already taken the leap to integrate and offer streaming services like Netflix, Disney+, HBO Max and others that are actually competitors, into their existing services and making them available through their platforms and user interfaces.

MultiChoice plans to take the wrapping off its latest DStv Explora decoder next Wednesday in a media launch that it will broadcast on one of its own DStv channels, with the decoder that will likely be 4K-resolution capable.

It will likely also come with a DStv remote control that will have a dedicated Netflix or video streaming button, similar to elsewhere in the world, taking DStv subscribers directly to the streaming app carousel where DStv Now, Showmax, Netflix, Amazon Prime Video and future streaming services will all appear stacked next to each other.

It’s unclear how the new Competition Commission investigation might scupper or alter MultiChoice’s showcase plans for next week.

MultiChoice was asked for comment regarding the Competition Commission investigation into MultiChoice’s SVOD expansion plans, and how the investigation will impact the Randburg-based pay-TV operator’s plans for the consumer roll-out of these rival services on its platform.

Joe Heshu, MultiChoice’s group executive for corporate affairs, told Channel24 on Wednesday in response to the media enquiry that MultiChoice is unable to comment at this stage.

Siyabulela Makunga, Competition Commission spokesperson, told Channel24 about its investigation of MultiChoice wanting to add Netflix and Amazon Prime Video that “we’re not commenting on the issue because it is still at a very sensitive stage”.

He couldn’t say when the investigation started, or when it might be finished. “It’s still very early,” he said.

We know this was a long read and your time is precious. Did you know you can now listen to articles? Subscribe to News24 for access to this exciting feature and more.

 

Dis-Chem fined R1.2m for hiking prices

By Sifiso Zulu for EWN 

The Competition Tribunal has found Dis-Chem pharmacies guilty of contravening the Competition Act by selling surgical face masks at excessive prices during the Covid-19 pandemic.

The retail group has been ordered to pay an administrative penalty of over R1 million.

Dis-Chem is alleged to have hiked the price by between 43% and 261%.

The tribunal said that the company abused its dominance when it hiked the prices.

Dis-Chem is appealing the ruling.

Source: IOL

South Africa’s Competition Commission told the Portfolio Committee on Trade and Industry that since the national disaster was declared in March, it had received a total of 1 354 complaints and tip offs from the public regarding inflated prices.

The committee was told that these complaints concern allegations that retailers, traders, suppliers and pharmacies are charging excessive prices for Covid-19-related products, including masks and sanitisers, personal protective equipment (PPE) and other essential goods and basic food items.

The complaints have been investigated in terms of Section 8 of the Competition Act, which prohibits excessive pricing.

According to parliament, some of the complaints relate to price increases of 1 000%.

“In two instances, firms pleaded guilty and agreed to pay a fine after the matter was handed over to the Competition Tribunal. Covid-19-related pricing investigations by the tribunal have so far led to 13 settlements through consent orders. The total value of the settlements is R12 854 694. Special Tribunal Rules for Covid-19 price-gouging matters to be heard on an expedited basis were also published,” a statement from parliament read.

The committee heard that government regulations relating to the national disaster prohibit dominant suppliers from charging excessive prices for certain specified goods and services, mainly basic food and consumer items, medical and hygiene supplies, and other emergency products and services.

“The Block Exemption regulations exempt categories of anticompetitive agreements or practices in some industries from applying Sections 4 and 5 of the Competition Act. The Commission said that authorities should be on high alert as the economy opens up, as some companies, such as airlines, may be planning to increase prices by up to 50%. Regarding the National Consumer Commission (NCC), the committee heard that from 23 March to 12 May, the NCC received 2 900 calls on its Covid-19 toll-free hotline.”

A total of 2 533 (87,3%) calls were answered and 367 (12,7%) were lost/abandoned. Of the 2 533 complaints received to date, 1 618 complaints alleged price gouging relating to regulated essential products. The remaining 915 complaints were not related to the regulation. These complainants were referred to the relevant platforms.

Committee Chairperson Duma Nkosi, said, “The committee will continue to engage with all its entities and the department in order to monitor their work, progress and support provided to South Africans, especially during the national disaster period.”

Pioneer Foods, PepsiCo in R24bn deal

Source: Fin24

The Competition Commission has recommended that the Competition Tribunal give the green light to a R24bn transaction that will see PepsiCo take over Pioneer Foods, the Commission said in a statement on Monday.

The deal’s benefits are “significant”, the Commission said, while recommending that it be approved subject to conditions including job creation, local investment and a minimum R1.6 billion B-BBEE transaction.

In 2019, New York-headquartered PepsiCo offered R110 per share – a premium of around 56% – to acquire Pioneer Foods, which manufactures brands including Weet-Bix, Sasko, Pro-Nutro and Spekko rice.

Global giant PepsiCo consists of six divisions which manufacture and distribute snacks and beverages that are already available in South Africa including Simba, Nik Naks, Lays, Doritos and Pepsi soft drinks.

According to the Commission, the proposed deal will result in “significant public interest benefit for South Africa”, and is unlikely to result in a substantial prevention of lessening of competition in any relevant markets.

It recommended that the Tribunal approve the merger, subject to several public interest commitments including a moratorium on retrenchments for a certain period, as well as the creation of jobs at the merged entity.

Further recommended conditions include a significant investment in the operations of the merged entity, the agricultural sector and the establishment of an enterprise development fund; as well as a B-BBEE transaction to the value of at least R1.6 billion that will promote a greater spread of ownership and participation by workers and historically disadvantaged South Africans.

MTN, Vodacom urged to lower data prices

By Sihle Mavuso for IOL

In the wake of the Competition Commission ordering Vodacom and MTN to lower their exorbitant data prices, the ruling party says the two must voluntarily do so now than later.

MTN and Vodacom lost R22-billion of their combined value on Monday after the competition watchdog gave the two dominant mobile phone operators two months to slash internet connectivity prices or face prosecution.

The ANC, in response to the two mobile giants’ reasoning that data was so expensive because of the lack of spectrum, said that would be sorted in the near future and that should not be an excuse.

Joining the chorus of those welcoming the news that on the side battered the values of the companies, the ruling party said the current steep prices of data have a negative impact not only on the growth of the information and communication technology (ICT) sector.

“We reiterate our call that operators must demonstrate goodwill by voluntarily lowering data prices and allow government to resolve the allocation of new spectrum. The release of spectrum, which the ANC supports, will resolve the network capacity constraints experienced by Mobile Network Operators and accelerate the roll-out of broadband networks in rural areas,” the party said in a statement issued on Tuesday.

On the high data costs, the party said the working class poor, youth, students and women are robbed of their income as they spend more than 25% on the telecommunications services including data services.

It said the majority of the country’s people, due to the widening digital divide, are unable to enjoy the benefits of a digital economy, which deprive the poor of full participation in the democracy of our country. It added that this further stifles development and growth of small businesses.

“The ANC further urges government to activate all regulatory mechanisms, i.e. Independent Communications Authority of South Africa (ICASA) to ensure the implementation of the findings and recommendations of the Competition Commission, with the necessary speed. Access to data in the 21st century is important because it facilitates the realisation of many rights enshrined in our Bill of Rights, as well as, enhancing economic participation and the strengthening of our democracy.”

Among its findings, the Competition Commission said while conducting its inquiry it started in 2017, it found that current comparisons of the prices charged by Vodacom and MTN in other African markets in which they operate also reveal that South African prices are higher than most countries by some distance.

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