Category: digital economy

Market Inquiry here, Market Inquiry there, Market Inquiry everywhere! – 3 Market Inquiries in as Many Months

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By Joshua Eveleigh and Nicholas Petzwinkler

The South African Competition Commission (“SACC”) has not spared any time in demonstrating its bench strength by publishing three draft Terms of Reference for as many separate market inquiries within the first four months of 2023.

This article provides a brief overview in respect of the: Fresh Produce market inquiry (“FPMI”); Media and Digital Platforms market inquiry (“MDPMI”); and South African Steel Industry market inquiry (“SASMI”) and what this all means for firms across these varying sectors.

What is a Market Inquiry and what is its Purpose?

In brief, a market inquiry is an investigative tool used by the SACC to identify whether there are any aspects of a particular market that impedes, distorts or restricts competition by asking industry stakeholders for information regarding their business, its operations within a specific market as well as the market in general.

FPMI

On 14 February 2023, the SACC published the final Terms of Reference for the FPMI which seeks to identify and understand the state of competition within the industry, market features affecting pricing outcomes and the challenges faced by, in particular, small and emerging farmers.

The FPMI will focus on the following themes:

  1. Efficiency of the value chain, with an emphasis on the dynamics around fresh produce market facilities;
  2. Market dynamics of key inputs and its impact on producers; and
  3. Barriers to entry, expansion and participation.

The Terms of Reference also provide that the FPMI will focus on, in particular: apples, bananas, oranges / citrus, stone fruit, pears, avocados, grapes and nuts, potatoes, onions, tomatoes, sweetcorn, carrots and cabbage and will also extend to processed fruit and vegetables.

Most notably, the FPMI concerns the entire value chain, including inputs (such as fertiliser, agrochemicals and farming equipment), production, wholesalers, intermediaries, national fresh produce markets, distribution, marketing and retailers.

Given that the SACC views the fresh produce sector as a priority sector, it is foreseeable that the SACC will place increased scrutiny in its investigations across the value chain. This is particularly in light of recent and controversial Essential Food Price Monitoring Report which concluded that there were reasons to suspect that firms across the value chain may have engaged in opportunistic price increases

All Things Digital: MDPMI

On 17 March 2023, the SACC announced and published the draft Terms of Reference for the MDPMI.

The MDPMI appears to largely come off the back of several inquiries and investigations led by competition authorities globally, on the impact of digital platforms on news media publishers that use these platforms to distribute content online as well as the SACC’s recent Online Intermediation Platforms Market Inquiry (“OIPMI”) where the Publishers Support Services made submissions that the widespread shift towards digital news consumption has resulted in a substantial decline in advertising revenue.

The MDPMI will focus on whether there are any market features in digital platforms that distribute news media content which impede, distort or restrict competition, or undermine the purposes of the Competition Act, 89 of 1998 (“Competition Act”), and which have material implications for the news media sector of South Africa, which includes news publishers and broadcasters. The scope of the market inquiry will extend to the following digital platforms:

  1. Search engines (e.g. Google Search and Microsoft Bing);
  2. Social media sites (e.g. Meta);
  3. News aggregator sites and/or apps (e.g. Google News and Apple News);
  4. Video sharing platforms (e.g. YouTube and Tiktok);
  5. Generative AI services whether integrated into the above platforms or not (e.g. ChatGPT alone or integrated with Bing); and
  6. Other platforms identified in the course of the inquiry.

Evidently, the MDPMI will be far reaching and will also extend to emerging technologies, such as open AI search engines.

The draft Terms of Reference can be accessed here.

South African Steel Industry market inquiry (“Steel Industry Inquiry”)

On 07 April 2023, the SACC published the draft Terms of Reference for the Steel Industry Inquiry, and will focus particularly on inputs and raw materials (such as iron ore and coking oil) and the upstream primary steel production. The SACC notes specifically that:

Iron ore

  1. Based on 2018 estimates, the three largest market participants in the mining of iron ore account for more than 95% of total ore mined in the country with the largest participant having a market share in excess of 55% while the third-largest iron ore miner held a market share of approximately 15% which, alongside large levels of production, may result in a large degree of market power. The SACC also states that there is a need to assess the pricing mechanisms adopted by iron ore producers in South Africa to ensure the competitiveness of steel producers.
  2. It has received information that there were previously contractual arrangements in respect to allocations of capacity on the Sishen-Saldanha railway line which may result in competitive concerns. The SACC has also received complaints of differential pricing whereby larger rail customers are provided favourable rates in comparison to emerging miners.

Coking oil

  1. The SACC highlights that South African steel manufacturers rely heavily on imported coking oil which could negatively impact the sustainability of the local steel manufacturing market due to import taxes and which may allow local producers to set their prices at import parity levels.
  2. The SACC considers it important to determine whether, inter alia, there are any policy interventions to encourage the local production of coking oil and the entering of new market participants.

Upstream Primary Steel Production

  1. In its Terms of Reference, the SACC notes that there is a considerable degree of market concentration with there only being three blast furnace plants in South Africa (of which are all owned by one company). Additionally, there are six electric arc furnaces which are owned by six different companies.
  2. The SACC also notes that he pricing behaviour of upstream suppliers, in relation to the supply of long and flat steel, may have a direct impact on the ability of downstream metal fabricators to be competitive in their respective markets. Additionally, the SACC also identified that there may be high barriers to entry in the upstream level of steel production which has the ability to increase the capital requirements for entry and sustainability in various markets in the upstream level.

The Terms of Reference are open for public comment until 05 May 2023 and can be accessed here.

What do market inquiries mean for industry stakeholders?

As is evident from the scopes of the above market inquiries, market inquiries provide the SACC with broad and seemingly unfettered powers to investigate competitive dynamics within a particular sector.

More importantly, the Competition Act affords the SACC with the powers to publish binding recommendations to specifically redress any anticompetitive effects that it identifies within a market during the course of a market inquiry. In this respect, companies which may be approached by the SACC during the course of its investigations are encouraged to seek specialised competition law advice to ensure that the proper information and legal safeguards are provided to mitigate against the imposition of onerous industry recommendations.

SACC’s take on its #DigitalMarkets oversight & regulation

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The South African Competition Commission recently contributed the following summary of its activities regarding the ‘hot topic’ of so-called Digital Markets and antitrust law to the “Compendium” (not AAT’s, the actual government enforcers’ compendium document resulting from the multilateral G7 meeting organized by the Bundeskartellamt in Germany).


Whether and how you have sought to use enforcement or non-enforcement tools, law
enforcement or regulatory action to address such issues. You may wish to highlight any
particularly relevant cases.

Recent cases
The Competition Commission of South Africa (CCSA) uses various competition enforcement tools to resolve concerns in digital markets, including unilateral conduct enforcement, merger regulation, market inquiries and advocacy. In November 2021, the CCSA referred an abuse of dominance case against Facebook Inc. (now Meta Platforms Inc) to the Competition Tribunal (Tribunal), for adjudication. The CCSA’s investigation found that Facebook enforced unduly restrictive access terms and conditions to its WhatsApp platform, against GovChat. This was to remove GovChat’s threat to Facebook’s own social networking position and WhatsApp’s monetisation strategies.


GovChat is a start-up online platform through which the South Africa government communicates with its citizens through mass push notifications on the WhatsApp platform. The GovChat platform also allows citizens to access information or services pertaining to various government services or programmes such as social grants, COVID19 services or to respond to surveys / polls to rate government services / performance. Thus, GovChat plays a very important role in the lives of South African citizens and is an important interface between the government and citizens. The CCSA found that Facebook’s conducts likely contravenes the following abuse of dominance provisions contained in section 8(1) of the Competition Act No. 89 of 1998 (as amended) –


a. refusal to give a competitor access to an essential facility when economically feasible to do so (section 8(1)(b)).
b. engaging in exclusionary conduct whose anticompetitive effect is not outweighed by any efficiencies or technological gains (section 8(c)).
c. refusal to supply scarce goods or services to a competitor or customer when economically feasible to do so (section 8(1)(d)(ii)).
At the time of writing, the Tribunal had not yet allocated a hearing date for this matter.

Market inquiries
In May 2021, the CCSA launched its online intermediation platforms market inquiry (the “Inquiry”). The Inquiry is focused on digital platforms in the areas of e-Commerce marketplaces, online classifieds, software application stores, travel and accommodation aggregators, and food delivery services platforms. The inquiry has focused on three areas of competition and public interest, namely (a) market features that may hinder competition amongst the platforms themselves; (b) market features that may give rise to discriminatory or exploitative treatment of business users; and (c) market features that may negatively impact the ability of SMEs and/or historically disadvantaged firms to participate in the economy.


The Inquiry released its provisional report in July 2022 and aims to conclude its work by the end of 2022. Amongst others, the Inquiry has provisionally found that Google Search plays an important role in directing consumers to the different platforms, and in this way shapes platform competition. The prevalence of paid search at the top of the search results page without adequate identifiers as advertising raises platform customer acquisition costs and favours large, often global, platforms. Preferential placement of their own specialist search units also distorts competition in Google’s favour. The Inquiry provisionally recommends that paid results are prominently labelled as advertising with borders and shading to be clearer to consumers and that the top of the page is reserved for organic, or natural, search results based on relevance only, uninfluenced by payments. The Inquiry further provisionally recommends that Google allows competitors to compete for prominence in a search by having their own specialist units and with no guaranteed positions for Google specialist units. The Inquiry is also exploring whether the default position of Google Search on mobile devices should end in South Africa. In terms of competition amongst platforms, the Inquiry makes the following provisional findings and recommendations, amongst others:


a. In software application stores, there is no effective competition for the fees charged to app developers with in-app payments, resulting in high fees and app prices. The Inquiry’s provisional recommendation is that apps should be able to steer consumers to external web-based payment options, or alternatively a maximum cap is placed on application store commission fees.
b. Price parity clauses, evident in travel & accommodation, e-commerce and food delivery, hinder competition and create dependency, and the Inquiry therefore recommends their removal. Wide price parity clauses prevent businesses offering
lower prices on other platforms and narrow parity prevents businesses from offering lower prices on their own direct online channel.
c. 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. Facilitating the interoperability of listings on the leading platforms is a further recommendation to support entrants. In food delivery, national restaurant chains often prevent franchisees listing on local delivery platforms and the Inquiry recommends this practice ceases along with any incentives provided by national delivery platforms to steer volumes their way.
d. In food delivery, the Inquiry also finds that the business model of substantial eater promotions alongside high restaurant commission fees can result in large surcharges on menu items which is not transparent to consumers and distorts competition with local delivery options. The Inquiry provisionally recommends greater transparency on either the menu surcharge or the share taken by the delivery platforms.
In terms of competition amongst businesses on the platforms and consumer choice, the Inquiry makes the following provisional findings and recommendations, amongst others:

a. Across all platforms there is a tendency to sell top ranking search positions to businesses which are not the most relevant to the consumer and constitute a form of advertising that is not transparent. This impacts on consumer choice and competition, especially for SMEs that cannot spend as much as large businesses. The Inquiry recommends that advertising is clearly displayed as such and that the top results are reserved for organic (or natural) search results.
b. The Inquiry provisionally finds that the extreme levels of fee discrimination against SMEs in online classifieds, food delivery and to a lesser extent travel & accommodation, hinders their participation and has no coherent justification. The Inquiry provisionally recommends that a maximum cap is placed on the fee differentials between large and small businesses, potentially at 10-15%. In food delivery it is recommended that more equitable treatment also occurs in terms of marketing commitments made in exchange for lower commission fees.
c. In e-commerce, the Inquiry provisionally finds that conflicts of interest arise in operating a marketplace for third party sellers and selling one’s own retail products. This may result in self-preferencing conduct such as product gating, retail buyers given access to seller data to target successful products, preferential display ads and promotions. The lack of a speedy resolution process also adds to the costs borne by sellers. The Inquiry provisionally recommends an internal structural separation of retail from the marketplace to implement equitable and competitively neutral processes.
d. In software application stores, the Inquiry provisionally finds that South African applications (“Apps”) face challenges to their
larger global App development companies. The Inquiry provisionally recommends that App stores provide country-specific curation of App recommendations and provide free promotional credits to South African App developers to enhance
their visibility.

Regarding the participation by historically disadvantaged persons (HDPs), the Inquiry has provisionally found that the digital economy is far less inclusive to HDPs than many traditional industries. In addition, there are considerably more challenges faced by HDPs, especially as regards funding and support. These are as follows:
a. For HDP digital entrepreneurs, general wealth inequality presents a hurdle to seed funding from close associates, and the venture capital industry offers little at this stage. Beyond seed funding, venture capital funds only seek out HDP entrepreneurs where those funds have an express mandate to that effect. Such mandates are rare beyond the SA SME Fund (a joint government and CEO initiative). The Inquiry provisionally recommends specific commitments on HDP mandates from private investors and for government to channel funds for HDP digital entrepreneurs through mandates to the venture capital sector along with requirements for transformation of the sector.
b. A lack of assets and funding hinder HDP business’ ability to onboard and exploit the opportunities provided by digital platforms.
recommendation is that all leading platforms provide HDP businesses 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 HDP businesses on the platform.

Advocacy interventions

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The CCSA has continued its work with the Intergovernmental Fintech Working Group (“IFWG”), which includes financial services regulators as well as the information regulator. The IFWG has produced several position papers. These include Regulating Open Finance Consultation and Research Paper, FinTech platform activity in South Africa and its regulatory implications; and the position paper on crypto assets. These papers seek to understand the growing role of FinTech’s and innovation in the South African financial sector and explore how regulators can more proactively assess emerging risks and opportunities in the market. The next steps for the IFWG include dealing with customer data ownership and data standards and engaging with the information regulator, exposition of potential competition aspects related to open finance and how to mitigate anti competition behaviours. This showcases that the regulation of digital markets requires a multidisciplinary approach.


Any steps your agency has taken to strengthen its institutional capabilities to better equip it to deal with digital competition issues (for example, by forming a special unit, recruiting more data specialists, building new investigative tools, or gathering new/different evidence).

The CCSA has prioritised strengthening its institutional capacity in digital markets by targeting the training of investigators and economists in international courses and conferences to upgrade skills. However, the CCSA has used an active enforcement approach as the prime vehicle for deepening its understanding of these markets and to upgrade toolkits at the same time. The CCSA had initiated a project to use digital tools in the detection and investigation of collusion and assist generally on digital market cases. The CCSA has partnered with academic institutions to bring in their artificial intelligence expertise rather than seeking to hire and build internal capacity.

Following engagements with national and provincial governments to understand the extent and format of tender information, the Commission has begun a process of designing algorithmic programmes to detect collusion. This has been greatly aided by engagements with other competition agencies globally to discuss their experience as to what has worked and what has not. Similarly, for data specialists the CCSA has not sought to hire in those skills yet but rather to put together a panel of local experts that may be drawn on in enforcement or research. This approach was adopted as the best means to establish what the use case is for such skills, what specific skills are most valuable and the frequency of data specialist requirements. It is only if there is an ongoing demand in investigation across different enforcement areas and the ability to sustainable source the right skillsets that the CCSA will invest in hiring. The panel approach is also a means to interest data scientists in competition law enforcement and potentially establish career paths in this area. The CCSA together with the competition authorities of Egypt, Kenya, Nigeria and Mauritius, launched a digital markets enforcement initiative, given the greater shared challenges that digital markets pose for African countries. The aforementioned jurisdictions recognize that these challenges necessitate closer co-operation in order to share knowledge, develop effective strategies in digital markets and provide a stronger united front in dealing with global tech companies. The initiative has agreed to enhance strategic collaboration between the authorities by: (i) Scoping the conduct in digital markets, that has been the subject of investigation in other jurisdictions, on African consumers, businesses and economies with the purpose of fair regulation and enforcement in Africa (where applicable); (b) Researching the barriers to the emergence and expansion of African digital platforms and firms that may contribute to enhanced competition and inclusion in these markets for the benefit of African consumers and economies; (c) Cooperating in the assessment of global, continental, and regional mergers and acquisitions in digital markets, including harmonizing the notification framework; without prejudice to confidentiality commitments; (d) To share information in accordance with existing laws and applicable protocols; and (e) Sharing knowledge and build capacity to deal with digital markets. As part of this initiative, a series of technical workshops are forthcoming in 2022 to commence the collaborative baseline research mapping the digital landscape in all participating countries. This research will assist in obtaining a deeper understanding of the extent of consumer adoption and emerging market structure across the main types of digital markets in a country. Country-specific factors across Africa will impact on the extent of adoption by consumers and the emergence of domestic digital firms alongside global ones.

The CCSA has continued its engagement with the European Union (EU) to provide an opportunity for mutual learning using the SA/EU Dialogue Facility to host a series of workshops in partnership with the Directorate-General of Competition in the European Commission (DG Comp). The Dialogue has been extended and will examine issues of remedial action and data protection issues in a forthcoming workshop in 2022.

Whether, in your jurisdiction, (a) there have been any national reforms or new laws or regulations to better address digital competition issues, or (b) there are any significant proposed reforms pending before national legislative or regulatory bodies to better address digital competition issues.

The Inquiry has provisionally identified the potential need for proactive regulations or guidelines in respect of a few categories of circumstances in addition to the remedial action proposed in the provisional report. First, to bring potentially new leading platforms within the ambit of the current proposed remedies that would be imposed on existing leading platforms. Second, to proactively prevent certain conduct in intermediation platforms that are still maturing and where the conduct is likely to emerge in the future, but where there is clear potential for harm. The provisional proposal for regulations or guidelines would cover the following areas: a. A process for the identification and review of leading platform status b. Prohibition of the following conduct which has an adverse effect on intermediation platform competition (1) The use of price parity clauses (wide or narrow) or achievement of the same outcome through price quality factors in the SERP ranking algorithm; (2) Restrictions or frictions on multi-homing by business users including exclusivity arrangements, interoperability limitations and multi-year contracting; (3) Loyalty schemes that leverage the leading position of the platform, including visibility on the platform, to get business users to fund the scheme in whole or part. c. Prohibition of the following conduct which distorts competition amongst business users and/or results in their exploitation (1) Self-preferencing conduct of any sort; (2) Discrimination in listing, commission or promotional fees against SMEs/HDPs beyond a maximum cap; (3) A lack of adequate transparency over promoted listings as advertising; (4) The excessive sale of visibility through demoting organic results; and (5) Permitting algorithm biases that favour one group or another.

Any law enforcement, regulatory, or policy work by your agency concerning digital competition issues that has involved interaction with non-competition agencies or other laws or policy areas—such as privacy, consumer protection, or media sustainability—and how it was or is being handled.

Work in the fintech area is being done through the IFWG as outlined above. The CCSA has also put together a workshop with the Information Regulator of South Africa to discuss the interface of the two agencies around data privacy and data access for competition.

FTC and USAID launch Africa-focussed digital competition initiative

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USAID AND THE FEDERAL TRADE COMMISSION LAUNCH TRUST AND COMPETITION IN DIGITAL ECONOMIES INITIATIVE TO PROMOTE CONSUMER PROTECTION AND COMPETITION IN AFRICA’S DIGITAL ECONOMY

From the USAID/FTC Press Release dated Oct. 3, 2022:

USAID announced it will partner with the Federal Trade Commission (FTC) to launch a new initiative that will help protect consumers and increase competition in countries across Africa. This initiative will strengthen legal and regulatory frameworks and the institutional capacity to ensure that the benefits of the digital economy are not undermined by anti-competitive, unfair, or deceptive practices.

Robust frameworks for competition and consumer protection are indispensable foundations for partner countries seeking to promote inclusive economic growth, sustain economic competitiveness, promote gender equality and equity, support resilient democratic institutions, and strengthen the rule of law.  

Where these foundations are weak or non-existent, a country’s digital economy can become vulnerable to a range of risks and harms, including online fraud, scams, cyber attacks, data misuse, algorithmic bias, gender-based discrimination, corruption, and abuses of market power. While each of these are damaging in their own right, they can collectively contribute to deeper economic and governance concerns if left unchecked, including economic inequality, reduced local and foreign investment, reduced competitiveness, and weakened democratic institutions.  

The FTC will use its technical expertise, capacity-building programs, convening power, and relationships across the region to help authorities adopt and implement policy, legal, regulatory, and enforcement frameworks. The FTC will pursue these lines of engagement in concert with other U.S. Government counterparts, regional bodies on the African continent, and country-level counterpart authorities.

This initiative advances USAID priorities outlined in the USAID Digital Strategy to strengthen inclusive, open, and secure digital ecosystems in countries where USAID works. This initiative also aligns with and advances broader U.S. Government strategies, programs, and initiatives, including the Digital Connectivity and Cybersecurity Partnership (DCCP), Declaration for the Future of the Internet, U.S. Strategy Toward Sub-Saharan Africa, and National Strategy on Gender Equity and Equality.  

The Trust and Competition in Digital Economies initiative is managed by USAID’s Innovation, Technology, and Research Hub and Center for Economics and Market Development.  

Further information on this initiative is available at this page.