The South African Competition Commission probes Google ads and the distortion of competition on social media platforms.
Back in 2021, the South African Competition Commission launched a market inquiry into the online intermediation platforms market. The aim of the still-ongoing inquiry is to determine the distribution channels of media content on various digital platforms and the practices that may distort and prohibit fair competition in South African online media and marketing platforms.
If the Competition Commission (Commission) has reasons to believe that there are market features, in any specific market, that may entrench an uncompetitive and exclusionary market structure, the Commission may initiate a market inquiry in terms of the Competition Act, Act 89 of 1998, as amended (The Act). The Act thus empowers the Commission to investigate and address any uncompetitive and exclusionary practices in a specific market, and if necessary, recommend legislative or regulatory changes.
When the Commission initiated the market inquiry into the South African Online Intermediation Platforms Market in mid-2021 it had reason to believe that there are market features and practices in the online intermediation platforms market that impede, distort, or restrict competition and undermine the purposes of the Act. Digital platforms that distribute news and media content have a material impact on the local news and media sector.
The inquiry involves the broader news media and sector, which includes news publishers, broadcasters (given the integration of video into search and social media), and digital platforms like search engines (e.g., Google Search, Microsoft Bing); social media sites (e.g., Meta); news aggregator sites and apps (e.g., Google News and Apple News); video sharing platforms (e.g., YouTube and TikTok); generative artificial intelligence services (e.g., ChatGPT); and other platforms identified by the Commission.
In February 2022, the Commission received submissions from the Publishers Support Services (PSS), representing the largest news publishers in the country. The submissions covered a range of issues that negatively impact competition in the news publishing sector. According to the PSS, the transition to digital news consumption and advertising resulted in a massive decline in advertising revenue, paired with an increase in costs as publishers must now devote all resources to their digital presence. This leaves the publishers in a precarious financial position despite cutting costs.
Since the commencement of its inquiry, the Commission has identified various trends and market features in the online intermediation platforms market that distort competition for advertising revenue, consumer data, and subscription fees between news media companies; and for the distribution, display, and monetisation of news content online (between news media competitors) by market features such as ranking algorithms, paid results, search engine optimisation, consumer preferences, and social network preferences.
Then, in mid-2022, the Commission released a provisional report on its interim findings (the Report). The Commission made several preliminary findings regarding factors that affect competition in the South African online intermediation platforms market, including certain recommended corrective actions. The Report included findings and some strapping interventions to curb the distortion of competition in the concerned market.
In summary, the Report concluded the following:
- The prominence of paid results as well as their lack of sufficient distinction from organic results restricts competition across most categories and favours leading digital platforms. Competition is impeded by larger role players self-preferencing their own platforms in shopping, travel, and local search. The Preliminary Report recommends that, paid results integrated into a search, should be clearly distinguished and labelled as advertising.
- For example, ‘Takealot’ within the e-commerce space, has ‘narrow price parity clauses’ in its agreements with manufacturers which impede potential competition and the widespread subsidisation of products through pricing below the variable costs. The Report proposes such clauses to be removed and prohibited in order curb the exploitation by marketing and booking platforms in the e-commerce space.
- The Report further states that ‘Apple App Store’ and ‘Google Play Store’ have become predominant within its category, partly due to them excluding rival software application stores, with practices such as ‘side loading’ and excessive commission fees charged to software application developers.
- The Report further states that the default arrangement of ‘Google Play’ impedes competition from other ‘Android‘ software application stores, making ‘Google Play’ the monopoly on the market. The Report recommended to put an end to anti-steering provisions for all software applications.
- Further, it is stated by the Report that the contracting of restaurant chains by ‘Uber Eats’ and ‘Mr D’ incentivises the chains to focus their support on these platforms, thus exploiting conduct such as aggressive promotion and delivery subsidisation, excluding smaller competitors. It is recommended that these leading platforms should not contract with national restaurant chains in a manner that incentivises restaurant chains and franchisees to limit volumes to these leading food order online platforms only.
- The Report further requires an end to ‘Google’s’ preference for its own specialist shopping, travel and local search tools, as it limits consumers access to other smaller sites and online travel agencies.
The Minister of Trade, Industry, and Competition extended the period for the completion of the Online Intermediation Platforms Market Inquiry to 30 June 2023, which will allow the Commission ample time to process the public’s feedback. We are still awaiting the final report and will publish a follow up article once the final report has been submitted and published.
In the interim, it is important for smaller competitors in the online market to take note of the possible practices and market features that may limit or prohibit them from attaining market share and to negotiate the exclusion or removal of such clauses in agreements concluded with online marketing platforms.
Article by
Nerishka Pillay & Khotso Mokitimi
Candidates Attorney at Barnard
Reviewed by: Derek Brits | Senior Associate