By Matthew Freer

Introduction

On 12 November 2024, Lottoland South Africa (Pty) Ltd (“Lottoland”) was granted interim relief by The Competition Tribunal (“The Tribunal”) against Google Ireland Limited and Google South Africa (Pty) Ltd (collectively “Google”).

Lottoland, a licensed bookmaker as of 7 November 2017 in terms of the Western Cape Gambling and Racing Act, offers fixed-odds bets on the outcome of an array of lotteries worldwide, including the South African National Lottery and various sporting events.[1] Lottoland’s competitors include other licensed bookmakers within the country such as Hollywood Bets, World Sports Betting and Betway, among others. Google, controlled by Google LLC, is a multinational technology company specialising in internet-related services and products, including search engines, online advertising technologies and more. Google is best known for its search engine and advertising platform, Google Ads, which is a key revenue driver for the company. Google Ads allows businesses to display advertisements on Google’s search engine results pages, partner websites and other platforms using a pay-per-clicks model where advertisers bid on keywords to reach targeted audiences. Businesses utilise this service to maximise visibility with the aim of gaining more customers.

In 2020 Google terminated Lottoland’s access to Google Ads, which Lottoland argued was without justification given that the other licensed bookmakers, providing like services, still had access to Google Ad Services. This termination caused financial harm to Lottoland, and it was argued to distort the competition in this very market that Lottoland operated with detrimental effect on options available to consumers. Google’s main argument was that Lottoland’s services contravene certain sections of the Lotteries Act and by granting them access to their Google Ads services, Google’s policies and reputation could be under scrutiny in a public light.

What is an Interim Relief Application?

An Interim Relief Application, in terms of by section 49C of the Competition Act, 89 of 1998 (“Act”), is a temporary measure sought to address an alleged prohibited practice and aimed to prevent serious or irreparable harm pending the outcome of a hearing.[2] “The Tribunal will only grant such relief if it is of the opinion that it is reasonable and just, having regard to the following factors:”[3]

• The evidence relating to the alleged prohibited practice;
• the need to prevent serious or irreparable damage to the applicant; and
• the balance of convenience.

The Tribunal must make a summary assessment before granting such application and this assessment is only at a “prima facie level”.[4] The Tribunal has held that the three above steps must be applied holistically whilst balancing each factor against the other. In this regard “a weak case on say irreparable harm may be counterweighted by a very strong case on the prohibited conduct. And vice versa…”.[5]

In the event an interim relief order is granted, it operates for a period of six months from its date, or the conclusion of the hearing, whichever is earliest.

What is the prohibited practice?

The basis of Lottoland’s application was that Google had contravened sections 8(1)(d)(ii) and 8(1)(c) of the Act.[6] Section 8(1)(d)(ii) states that a firm may not engage in exclusionary acts, such as refusing to supply scarce goods or services to a competitor or customer, unless it can demonstrate that the technological, efficiency, or other pro-competitive benefits outweigh the anti-competitive impact of its actions, and providing the goods or services is economically feasible.[7] Section 8(1)(c) prohibits a dominant firm from engaging in an exclusionary act if the anti-competitive effect of that act outweighs its technological, efficiency or other pro-competitive gain.[8] The overarching element that must be proved in both instances is that there must be a showing of dominance by the firm within the market in question.

A showing of dominance

Google raised the argument that they are not dominant within the ‘advertising ecosystem’ which includes both online (Google Ads) and offline advertising (print media, billboards, television, etc.) However, The Tribunal took a more detailed approach to determine the specific market Google is operating in, while accounting for the market in which Lottoland and its competitors are advertising in. The Tribunal refused the idea that the market in issue is that of the broader ‘advertising ecosystem’ but it is rather the specific market of online advertising, and even more specifically, the market for online search and search engine marketing (“SEM”) markets. The Tribunal stated that the service of Google Ads operates within this specific market, and it was proven, prima facie, that Google is likely to be dominant in this market in South Africa. Thus, rejecting Google’s argument that they should be viewed as operating in the broader ‘advertising ecosystem’.  

Lottoland submitted that Google has a market share of more than 90% in the SEM market, measured by search volume, and states that such dominance is well-established as The Commission had stated that Google is “the monopoly provider of intent-based marketing and customer acquisition in SA…”.[9]

Section 8(1)(d)(ii) and 8(1)(c) of the Competition Act

Now that dominance is established, we can break down and analyse each element that needs to be proved in terms of this section. The first element involves a refusal to supply a customer. On the face of such scenario, Google has refused to supply Lottoland with their service of Google Ads as Google terminated Lottoland’s access. Google had argued that by allowing Lottoland access to such service there is a potential for criminal liability or other commercial risks. The Tribunal’s ultimate findings was that this argument lacked basis as Lottoland’s competitors were provided access, showing an inconsistent enforcement of Google’s “internal policies”. Furthermore, The Tribunal stated that there is insufficient evidence to suggest that Lottoland had contravened the Lotteries Act.

The second element of proof is that of scarce goods or services. It was indicated in eMedia that a scarce good or service is one that is i) impossible or prohibitively expensive to duplicate or ii) there are effective substitutes for the service.[10] In GovChat, The Tribunal explained that a ‘scarce’ good or service is one that “cannot be easily duplicated without significant capital investment.”[11] Google’s main argument rested on the fact that there are numerous alternatives to Google Ads, all of which are viable and pose significant competitive constraint on Google Ads. However, The Tribunal in this case concluded that SEM services cannot be easily duplicated without significant capital investment and there is no feasible substitute, thus, rejecting Google’s argument and establishing the scarcity of Google Ads.

Alongside the above elements, it must be shown that it is economically feasible for Google Ads to supply Lottoland with Google Ads services. Lottoland seeks nothing more than to have access to Google Ads, as do their competitors. This equitable access request, and as is the opinion of The Tribunal, would prima facie not be impractical or unfeasible, the continued access to Lottoland’s rivals being a determining factor. The fact that Google has supplied Lottoland with Google Ads for some time before terminating access also suggests that it is not economically unviable to do so again.

Once the above has been established, harm is presumed, and the onus would typically shift to the respondent to show that these harmful effects are outweighed by pro-competitive gains. The Tribunal found that Google had no competition-related rationale for their actions and thus, there conduct prima facie distorts competition in the downstream market without any pro-competitive of efficiency justification presented or argued by Google.

Our assessment above, whilst done in the context of Section 8(1)(d)(ii) is also relevant for purposes of Section 8(1)(c). The Tribunal concluded that for reason stated under the section 8(1)(d)(ii) discussion, Google has also violated the provisions of section 8(1)(c). Google’s conduct has a prima facie anti-competitive effect, distorting competition by not allowing Lottoland to expand within their market relative to their rivals. The conduct was not found to be outweighed by technological, efficiency or pro-competitive gain and Google had little to no arguments in this regard.

Application of section 49C(2) of the Act

Lottoland submitted that Google’s refusal to allow it to use Google Ads resulted in Lottoland’s customer registration rate dropping significantly. Lottoland supplemented this with a monetary amount of the revenue that they had suffered as a result of Googles refusal to supply their Google Ads service, which, up until the interim relief was ordered, was ongoing. The Tribunal concluded that this is prima facie evidence that, due to Google’s conduct, Lottoland have suffered ‘serious or irreparable damage’, meeting one of the three stages of section 49C(2) of the Act. Additionally, the preamble of the Act states the importance to “provide for markets in which consumers have access to, and can freely select, the quality and variety of goods and services they desire”, with the overarching purpose of promoting and maintain competition in the Republic for the ultimate benefit of the consumer. It is clear that Google’s conduct has limited the choice for end-consumers.

With reference to ‘the balance of convenience’, The Tribunal weighed up the harm suffered by each party if they were to grant/refuse the application for interim relief, pending a decision on merits and stated that if there is clear and non-speculative evidence that suggest, and to what extent, a party will suffer harm if the relief was not given, then such relief should be given. It was stated in eMedia that “whilst there will inevitably be disputes of fact”, the Tribunal should still take a robust approach on the evidence before it, and that “if there is a prima facie right, even one open to some doubt and well-grounded apprehension of irreparable harm if the relief is not granted and ultimately granted at a final relief stage, then the balance of convenience favours the grant of the relief.”[12]

The Tribunal concluded that Lottoland had made out a prima facie case of restrictive practices and well as the irreparable harm it has suffered, therefore the balance of convenience, as shown, favours granting of interim relief. The requirements of section 49C of the Act have been satisfied and there is a case for interim relief.

Key takeaways

This case highlights critical elements that The Tribunal considers when assessing prohibited practices and granting interim relief under the Act. For a prohibited practice, The Tribunal focuses on determining market dominance, the exclusionary nature of the conduct, and whether the anti-competitive effects outweigh any pro-competitive justifications. The Tribunal’s approach to market dominance was particularly noteworthy. Instead of accepting Google’s broad definition of the market as the ‘advertising ecosystem,’ The Tribunal adopted a narrower definition focusing on the specific market for SEM services. This refined approach allowed for a more precise assessment of competition dynamics, underscoring Google’s overwhelming dominance in the SEM market.

The Tribunal further scrutinised Google’s refusal to supply Lottoland and its inconsistent application of internal policies, emphasising the scarcity of Google Ads as a service and its critical role for businesses reliant on digital advertising. Regarding interim relief, the Tribunal assesses whether there is prima facie evidence of a prohibited practice, serious or irreparable harm to the applicant, and whether the balance of convenience favours granting relief. Notably, the Tribunal’s robust and detailed approach to evaluating dominance and harm provides a roadmap for future cases, emphasizing the importance of context-specific market definitions and balancing the interests of all parties involved. This case underscores the Tribunal’s commitment to protecting competition and consumer choice while maintaining fairness in digital markets.

Joshua Eveleigh, Managing Associate at Primerio International says:

“At its crux, this matter dealt with the weighing up of the alleged risks and reputational harm to Google against the claimed foreclosure of Lottoland in the downstream market. Importantly, the Tribunal clarified that its mandate is to pronounce on how conduct may distort competition in a market.

Hence, if there is prima facie proof of anti-competitive conduct which cannot be outweighed on a balance of convenience, an application for interim relief must succeed. This is a particularly noteworthy judgement for firms operating within regulated environments. In effect, a dominant firm will be hard placed to cut-off services to a customer if, for example, it does not have clear evidence that the customer engaged in unlawful conduct.”

[1] Western Cape Gambling and Racing Act 4 of 1996.

[2] Competition Act 89 of 1998 (the “Act”), sec 49C.

[3] The Act, sec 49C(2).

[4] eMedia Investments (Pty) Ltd SA v MultiChoice (Pty) Ltd and Another, Case No. 201/CAC/Jun22 (“eMedia”), para 93.

[5] GovChat (Pty) Ltd and Hashtag Letstalk (Pty) Ltd v Facebook, Inc and Others, Case No. IR165Nov20 (“GovChat”), para 160.

[6] The Act, sec 8(1)(d)(ii) and 8(1)(c).

[7] The Act, sec 8(1)(d)(ii).

[8] The Act, sec 8(1)(c).

[9] Competition Tribunal of South Africa, Lottoland South Africa (Pty) Ltd v Google Ireland Limited and Google South Africa (Pty) Ltd, Case No: IR191Mar23 (Reasons for Decision and Order), para 78.1.

[10] eMedia, para 129.

[11] GovChat, para 113.

[12] eMedia, para 83 and 95.