In a bid to create a more competitive environment for small businesses within the online retail sector, the Competition Commission has released a set of recommendations following a twenty-five-month inquiry into websites and search engines.
The proposals, unveiled on Monday, aim to level the playing field and address unfair practices that disadvantage smaller players in the digital marketplace.
The investigation highlighted certain practices of major tech companies including Google, Apple, and Booking.com, which were found to hinder competition and impede the growth of smaller businesses.
One significant revelation from the report, according to the commission, is that Google’s search system favours large corporations often at the expense of smaller companies.
To rectify this, the commission suggested implementing a South African badge and search filter that would promote local platforms and provide training and advertising credits worth R180-million to support them.
Google would also be required to adopt changes made in Europe to address self-preferensing issues.
The inquiry also found that Booking.com is responsible for limiting competition in the travel industry through controlling hotel pricing on other websites and charging higher commission fees.
To combat this, the commission proposed that the company remove restrictive pricing clauses from its contracts, thereby creating a more level playing field for other players.
Takealot, a prominent e-commerce site on the other hand, was found to have a conflict of interest as it competed with its own sellers, which negatively impacted those sellers.
As a result, the commission suggested that Takealot separate its retail and marketplace operations to ensure its retail division could not access seller data or hinder competition for certain brands.
According to the commission, app developers have faced challenges due to high fees imposed by Google Play and Apple App stores, as well as restrictions on the visibility of certain South African apps.
To remedy this, the commission has restricted app stores from preventing apps from directing consumers to alternative payment methods.
This measure aims to create a fairer environment for app developers and enhance competition, it said.
“Google is to implement changes it makes in Europe to address self-preferensing,” says the report.
“Booking.com is required to remove the restrictive pricing clauses from its contracts, and Takealot is to segregate its retail division from its marketplace operations, preventing its retail services from accessing seller data and unilaterally stopping sellers from competing for certain brands.
“Google Play and Apple App stores are to stop preventing apps from directing consumers to pay 3 on the app’s website and to ensure continued free use by consumers of content purchased from that website, along with local app curation.”
Uber Eats and Mr D Food, two prominent food-delivery services, were found to provide unclear information on menu surcharges, hindering their competitors’ ability to compete effectively.
The commission urged these companies to improve transparency and provide clear information on additional charges to promote fair competition.
The report also highlights issues faced by smaller real estate agents and car dealers on property and car listing websites such as Property24 and Private Property.
These websites were found to charge higher prices to smaller businesses, making it challenging for them to compete with bigger national groups.
The commission suggests exploring measures to improve cooperation between these platforms to create a more equitable marketplace.
“The remedial actions should provide the following benefits to platforms, businesses, and consumers: greater visibility and opportunity for smaller South African platforms; enable more intense platform competition; level the playing field for small businesses selling through these platforms; and provide a more inclusive digital economy.
“All platforms will be given time to implement the remedial actions depending on the complexity of the remedy,” said the commission.
Acknowledging the importance of the inquiry and its findings, commissioner Doris Tshepe highlighted that the inquiry holds particular significance, as it marks the first inquiry conducted under the amended legislation and the first exploration of the rapidly growing digital economy.
“The completion of this market inquiry is a momentous occasion in itself, particularly in this case, as it is the first inquiry under the amended legislation and the first to delve into the increasingly important digital economy,” said Tshepe.
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