EU rules on ‘gatekeepers’ affecting SA
• The SA Competition Commission recommends ‘remedial actions’ to be taken by some businesses
The EU has embarked on an unprecedented, ambitious experiment to regulate digital markets, in the form of the Digital Markets Act (DMA).
The SA Competition Commission has recommended a series of “remedial actions” be implemented by certain firms which act as intermediaries between businesses and consumers in SA. However, the jury is still out on whether these interventions will be effective in achieving their aims, and what the impact will be on the quality and accessibility of digital services, as well as on future innovation and competitiveness.
The DMA introduced a set of obligations and restrictions that will apply to companies designated by the European Commission (EC) as “gatekeepers”. To be designated as a gatekeeper, a company must provide one or more of the “core platform services” listed in article 2(2) of the DMA, and meet three qualitative criteria set out in article 3(1). The final list of core services comprises online intermediation services, online search engines, online social networking services, videosharing platform services, number-independent interpersonal communications services, operating systems, web browsers, virtual assistants, cloud computing services, and online advertising services. The DMA also provides for certain quantitative thresholds which, if met, give rise to a rebuttable presumption that the qualitative gatekeeper criteria are fulfilled.
Gatekeepers had until March 2024 to ensure compliance with these obligations, which relate to conduct such as self-preferencing, bundling and the use of customer data. Google reported that this required “intensive work over many months from engineers, researchers, product managers and product designers from across the company”. Consumers in Europe are already starting to feel the effects for example, European users of Google Maps will now find they can no longer access maps via a single click on the search page. Disputes about whether the gatekeepers have complied with the DMA have already begun: at the time of writing, the EC had already opened five investigations into potential noncompliance by Apple, Google and Meta.
The SA Competition Commission’s intervention in digital markets, in the form of its final report on the Online Intermediary Platforms Market Inquiry (OIPMI), is different in a number of respects to the new regulatory regime created by the DMA.
First, the commission’s recommendations are not legislation, and they do not create permanent legal obligations on any firms as part of an ex ante regulatory regime. Second, these recommendations do not apply to all providers of particular kinds of digital services, or to all providers which meet particular legislated criteria. Instead, the OIPMI focuses only on particular kinds of platforms which the commission identified as “intermediaries” between certain suppliers of products or services (such as hotels, App developers and restaurants) and SA consumers.
Within the particular kinds of intermediary platform selected for investigation, the commission’s recommendations were targeted only at “leading firms”. One of these, Booking.com, is not designated as a gatekeeper in Europe, and 10 others, which the commission targeted on the basis that they are “national restaurants chains”, are not leading providers of a platform service at all. The inquiry recommended these firms (and only these firms and potentially Amazon, should it establish an SA store) should implement a series of “remedial actions”.
In some cases, the commission has recommended the transplantation of the DMA requirements. However, in many instances, the commission’s recommendations extend well beyond the requirements imposed by the DMA, which primarily address concerns about competition and consumer protection. For example, the commission recommended that Takealot offer historically disadvantaged sellers advertising credits and promotional rebates, personalised onboarding on its site and waive its subscription fees.
It recommended that Autotrader, Cars.co.za, Property24 and Private Property reduce their prices to small customers, and that Google make R180m in advertising credits available to small platforms, and spend a further R150m in training and product support for small firms and historically disadvantaged people. It recommended that Booking.com and Apple make “substantial investments” into programs to support historically disadvantaged accommodation providers and software developers.
The commission noted that for Apple and Google, the trigger for its recommendations was the “lack of a more robust and vibrant ecosystem in SA for paid apps” , though its report did not identify that this was caused by the conduct of these firms. Instead, the report focused on that these firms don’t offer “local curation”, “despite the hundreds of millions in revenues generated from SA each year”. This echoed the commission’s finding in the preliminary report that lower taxation rates for global platforms disadvantages SA platforms. This suggests an exercise in taxation, rather than market regulation.
Unlike the DMA, these remedial actions are not permanent — in most cases, they were required to be implemented only for four years after July 2023. Some firms, such as Google and Takealot, have apparently complied. However, appeals to the Competition Tribunal by Apple, Booking.com, Private Property, Famous Brands and UberEats, and review applications to the high court by Apple and Booking.com, have yet to be heard.
It is accordingly too early to assess how effective these interventions in digital markets will be. The great shift to digital has already offered huge benefits to SA consumers and businesses — especially small ones — who are now able to use highly accessible, cost-effective and efficient online services to access critical products and services, such as healthcare and education. This has brought big benefits to SA consumers and businesses, including lower prices, greater accessibility, more convenience and variety.
The competitive dynamics in SA digital markets and, accordingly, the rationale for intervention, may be very different to European ones. In addition, SA already has competition legislation which addresses its unique context as a developing economy — in particular, to offer special protection to small businesses and those owned by historically disadvantaged persons.
SA online markets are evolving rapidly — as the rapid expansion in SA by online retailers Shein and Temu demonstrates. Neither of these retailers was scrutinised by the OIPMI, despite the significant effects they are already having on shopping patterns in SA. This provides a good illustration of how temporary remedial actions which are applied only to some firms, in certain SA digital markets, may not appropriately address changes which are happening across entire ecosystems, as the world digitalises.
Unpredictable, ad hoc regulation may hamper the evolution of these markets, especially those that are nascent, or rapidly changing in response to consumer preferences. It may also damage SA’s efforts to attract foreign direct investment, and the roll-out of new technologies.
In the US, while there has recently been an increased focus in antitrust circles on how corporate power is amassed and wielded, and what its consequences may be, not only for consumers, but also for workers, democracy and the environment, there has not yet been any advance towards DMA-style regulation. The home of the global tech giants seems far more concerned that adding layers of regulatory red tape may undermine the incentives of companies to innovate, and harm their competitiveness in fast-growing industries such as AI.
IT THAT RECOMMENDED AUTOTRADER, CARS.CO.ZA, PROPERTY24 AND PRIVATE PROPERTY REDUCE THEIR PRICES TO SMALL CUSTOMERS THE GREAT SHIFT TO DIGITAL HAS ALREADY OFFERED HUGE BENEFITS TO SA CONSUMERS AND BUSINESSES — ESPECIALLY SMALL ONES