Market Survey Results Suggest Big Changes for SA’s Leading Online Platforms

Source: Takealot

The Commission launched the inquiry into competition and participation in the online economy last year, in response to the growing importance of the online economy and the competition concerns in these emerging markets in other countries. The aim was to ensure that consumers and businesses that use online platforms to reach consumers benefit from competition between online platforms, and that SMEs and historically disadvantaged businesses can also participate fairly in the economy by line.

This Commission’s interim report released on Wednesday July 15 follows 14 months of evidence gathering, public hearings and closed hearings on online intermediation platforms, including e-commerce, apps, travel and accommodation platforms, food delivery and online classifieds.

The survey identified the country’s top platforms in each category, which are getting the most consumer traffic, and its findings apply to those platforms in particular. The platforms have been listed as: Takealot, Apple App Store, Google Play Store,, Airbnb, Mr Delivery, Uber Eats, Property24, Private Property, AutoTrader and as well as Google Search (including its specialist search units such as Google Shopping and Google Travel).

Potential Changes to Google Search Results

Internet giant Google was singled out in the report for its lack of transparency around paid search results.

The Commission said that Google search plays an important role in directing consumers to different platforms and thus shaping competition between platforms. “The prevalence of paid search at the top of the search results page without adequate identifiers, as advertising increases the platform’s customer acquisition costs and favors large, often global platforms. Preferential placement of their own specialized search units also distorts competition in favor of Google,” the Commission said.

The survey therefore recommends that paid results be clearly labeled as advertising with borders and shadows to be clearer to consumers and that the top of the page be reserved for organic, or natural, search results based solely on relevance. , not influenced by payments. The investigation also recommends that Google allow competitors to compete for prominence in a search by having their own specialized units and without a guaranteed position for Google’s specialized units.

The survey also examines whether the default position of Google search on mobile devices should end in South Africa.

Fair competition between platforms

In terms of competition between platforms, the investigation makes the following provisional conclusions and recommendations, among others:

• In software app stores, there is no effective competition for fees charged to app developers with in-app payments, resulting in high app fees and prices. The recommendation is that apps should be able to direct consumers to external web payment options, or alternatively, a maximum cap is placed on app store commission charges.

• Price parity clauses, evident in travel and accommodation, e-commerce and food delivery, impede competition and create dependency, and the survey therefore recommends their removal. “Broad price parity clauses prevent companies from offering lower prices on other platforms and narrow parity prevents companies from offering lower prices on their own direct online channel,” said the Commission.

• In real estate classifieds and food delivery, new entrants and local delivery platforms face difficulties in recruiting large national companies, which undermines their competitiveness. The investigation provisionally finds in the real estate classifieds that this results from the investment and support of the large real estate agencies in Private Property and recommends the sale of their participation. Facilitating registration interoperability across major platforms is another recommendation to support entrants.

• In food delivery, national restaurant chains often prevent franchisees from registering with local delivery platforms and the survey recommends that this practice cease along with any incentives provided by national delivery platforms to direct volumes in their own way.

• In the area of ​​food delivery, the survey also reveals that the business model consisting of substantial promotions to consumers as well as high commission fees for restaurants can result in significant surcharges on menu items that are not not transparent to consumers and distort competition with local delivery options. The survey recommends greater transparency either on the menu supplement or on the part taken by the delivery platforms.

Fair Consumer Choice

In terms of competition between companies on platforms and consumer choice, the survey makes the following preliminary conclusions and recommendations, among others:

• Across all platforms, there is a tendency to sell top-ranked search positions to companies, which are not the most relevant to the consumer and are a form of advertising that is not transparent. This has an impact on consumer choice and competition, especially for SMEs which cannot spend as much as large companies, the Commission said. The survey recommends that advertising be clearly displayed as such and that top results be reserved for organic (or natural) search results.

• The survey finds that extreme levels of price discrimination against SMEs in online classifieds, food delivery and, to a lesser extent, travel and accommodation, hinder their participation and have no coherent rationale. The recommendation is that a maximum cap be placed on the fee differentials between large and small companies, potentially at 10-15%. In food delivery, it is recommended that fairer treatment also occurs in terms of marketing commitments made in exchange for lower commission fees.

• In e-commerce, the survey finds that conflicts of interest arise in operating a marketplace for third-party sellers and selling your own retail products, which can lead to certain self-preference behaviors such as product blocking, retail buyer access to seller data to target successful products, preferential display ads and promotions. The lack of a quick resolution process also increases sellers’ costs. The survey recommends an internal structural separation of retail from the market in order to implement fair and competitively neutral processes.

• In software app stores, the survey tentatively concludes that SA apps struggle to be discovered in competition with the world’s largest app development companies. The survey tentatively recommends that app stores provide country-specific app recommendations and provide free promotional credits to SA app developers to help gain exposure.

Participation of historically disadvantaged people

With respect to the participation of historically disadvantaged people (HDPs), the survey found that the digital economy is much less transformed than many traditional industries and that there are significantly more challenges resulting from historical disadvantage, in particularly in terms of funding and support.

“For HDP digital entrepreneurs, general wealth inequality is a barrier to seed funding from close associates, and the venture capital industry offers little at this stage. Beyond seed funding, funds VCs only seek out HDP entrepreneurs where there is an express mandate from the investors, which is rare beyond the SA SME Fund (a joint government and CEO initiative),” the Commission said.

The survey recommends specific commitments on HDP mandates from private investors and for the government to channel funds for HDP digital entrepreneurs through mandates to the venture capital sector as well as requirements for the transformation of the sector.

As companies on the platforms, the Commission said the same lack of assets and funding hinders the integration of HDP companies and the exploitation of the opportunities offered by the platforms. The tentative recommendation from the survey is that all major platforms provide HDP companies with custom onboarding, waiving of onboarding costs and fees, free promotional credits, fees that are no higher than the best-placed, and the possibility for consumers to discover HDP companies on the platform.

Finally, the survey tentatively recommended that guidelines or regulations be considered to address new leading platforms in established or new categories in the future.

Call for public and stakeholder comments

Stakeholders and the public have six weeks to submit comments to the inquiry on the draft findings and recommendations. All submissions should be sent to [email protected] by the close of business on August 24, 2022. Submissions should be supported by evidence where applicable. The inquiry will release another version of the main report in the coming weeks once the overly broad confidentiality claims have been resolved.

The draft findings and recommendations will now be subject to a period of public comment and stakeholder consultation before the release of a final report in November 2022. This means that the Inquiry may change its mind on the findings and recommendations over the course of of this period of consultation and public submissions. .

The online platform market survey interim report is available here.

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