Wednesday, 13 July 2022 18:57

Google, Takealot, UberEats and others under fire in online market inquiry.

Business Reporter.

The Competition Commission’s inquiry into e-commerce in South Africa wants Google to change how it displays its search results, and it is also proposing stricter rules for online sellers.

The inquiry investigated online retail, app stores, travel and accommodation platforms, food delivery, and online classifieds over the past 14 months. It focused on what was hindering competition, and how small businesses and black companies may be excluded.

Apple App Store, Google Play Store, Takealot, Booking.com, Airbnb, Mr Delivery, Uber Eats, Property24, Private Property, AutoTrader, and Cars.co.za, along with Google, were investigated by the inquiry.

On Wednesday, the inquiry released its provisional recommendations, which include:

°Google must label paid-for search results, which are currently being displayed at the top of its search results pages, as advertising. It must use borders and shading to make clear to consumers that the search results were paid for.

Also, the commission wants the top of Google search results pages to be reserved for "organic" results – search results based on relevance only, and not influenced by payments to Google.

The inquiry found that Google Search plays an important role in directing consumers to the different platforms, and shapes competition in South Africa. By listing paid-for search results at the top of pages, it is raising costs for sellers, and these results also often favour large, often global, platforms, the inquiry said.

°The commission is also "exploring" whether the default position of Google Search on mobile devices should end in South Africa.

°The inquiry wants price parity clauses – where platforms require that suppliers do not offer lower prices on other platforms or on their own websites – to be removed.

"Price parity clauses, evident in travel and accommodation, eCommerce and food delivery, hinder competition and create dependency."

°The inquiry recommends that large estate agencies sell their stake in the property platform Private Property. "In property classifieds and food delivery, new entrants and local delivery platforms face challenges signing up large national businesses, undermining their ability to compete. The inquiry provisionally finds in property classifieds this is a result of the investment and support of large estate agencies in Private Property and recommends the divesture of their stake."

°It wants food delivery menus to be clearer about what surcharges are levied and how much a delivery platform is getting out of a transaction.

°The commission says national restaurant chains must not be allowed to prevent franchisees from listing on local delivery platforms.

°The inquiry found that South Africa’s digital economy is far less transformed than many traditional industries. It wants all leading platforms to provide businesses owned by historically disadvantaged people with personalised onboarding, a waiver on onboarding costs and fees, free promotional credits, fees that are no higher than the best placed, and the opportunity for consumers to discover these businesses on the platform.

°It wants smaller businesses to pay lower commission fees.

°The inquiry found "extreme levels" of fee discrimination against small businesses in online classifieds, food delivery and to a lesser extent travel and accommodation. It wants a maximum cap placed on the fee differentials between large and small businesses, potentially at 10% to 15%.

°The commission wants online retailers to implement an "internal structural separation" to avoid conflicts of interest where it is selling its own products, alongside that of third parties. Currently, these businesses' own products are benefiting from preferential display ads and promotions, the inquiry found.

°The inquiry wants global app stores to recommend South Africans apps to locals and to provide free promotional credits to SA app developers to help get visibility. It found that South African apps are faces challenges in being discovered in competition to larger global app development companies.

°For in-app payments, the inquiry found that there is no effective competition for the fees charged to app developers. This drives fees and app prices higher. The commission wants apps to be able to steer consumers to external web-based payment options, or alternatively that a maximum cap is placed on application store commission fees.

The commission also found that differences in corporate tax rates between global and local companies put South African platforms at a disadvantage.

Following calls for a digital tax on online companies doing business in SA, the commission suggested that National Treasury considers competition when it looks at tax policies for the digital market but does not recommend that the changes need to happen.

Stakeholders and the public have six weeks to make submissions to the Inquiry on the provisional findings and recommendations.