Competition Commission to probe foreign online retailers in e-commerce inquiry

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Online retailers, classified marketplaces, software application stores and services such as accommodation, travel, transport and food delivery will be investigated.
Online retailers, classified marketplaces, software application stores and services such as accommodation, travel, transport and food delivery will be investigated.
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  • The Competition Commission has confirmed that its inquiry into e-commerce will also include foreign-based online retailers.
  • The inquiry is focused on market features that may hinder competition, give rise to exploitative treatment and impact on the participation of small and medium-sized enterprises. 
  • The commission previously singled out Takealot.

On Tuesday, the Competition Commission confirmed that foreign-based online retailers and accommodation sites will also be included in its investigation into e-commerce platforms in South Africa.

The inquiry is focused on market features that may hinder competition, give rise to exploitative treatment and impact on the participation of small and medium-sized enterprises.

Online retailers, classified marketplaces, software application stores and services such as accommodation, travel, transport and food delivery will be investigated – but not e-hailing platforms such as Uber or Bolt.

In a statement, the commission said the scope of the inquiry is not restricted to platforms that have a physical presence in South Africa only and includes foreign-based online platforms that have an economic effect in SA.

"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 business users). Their economic activities therefore have a direct effect on both business users and consumers within South Africa."

The commission then said the inquiry will require these international platforms to respond to information requests and participate in public hearings if requested to do so, or summons may be issued in the case of noncooperation.

According to the commission, metasearch engines such as those in travel and shopping verticals also fall within the scope of the inquiry, including those operated by general search engines.

Metasearch engines are specialist platforms in a particular vertical such as travel or accommodation, which are curated and marketed to consumers and charge business users for click-through referrals or sales. However, the inquiry will not focus specifically on search and social media more broadly - this is not relevant to metasearch engines, the commission said. 

Further, the commission added business-to-consumer (B2C) online intermediation platforms such as online classifieds and travel aggregators fall within the scope of the inquiry, and it is not required that the platform concludes the transaction itself to be considered a B2C platform.

The commission said that individual proprietors offering alternative accommodation fall within the scope of the inquiry.

"There are instances where an individual proprietor provides a business listing on a B2C platform but is not incorporated formally as a business.

"This occurs most frequently in cases such as alternative accommodation rentals (i.e. rooms, homes or other forms of accommodation that is rented out on a platform) and may also occur in areas such as travel experiences or even used car trading," said the commission.

For the commission, the individual proprietor is effectively operating a business and therefore falls within the scope of the inquiry, even if they are not legally incorporated and/ or formalised. Furthermore, the platforms which provide such ongoing listings fall within the inquiry's scope as a B2C platform.

The inquiry is set to take 18 months and the commission previously said it hopes to release its preliminary findings and recommendations in May 2022. 

READ | With a 10-year lead, can the leviathan that is Takealot be rivalled? 

Previously, the commission had highlighted Takealot as a point of focus for the inquiry as it is much bigger than other online retailers in SA, which warrants concern over its dominance of the market. The concern is that a big player like Takealot has the potential to squeeze out competitors and this is where the commission comes in with regulations that will even out the playing field in a fair and equitable way.

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