dominance, South Africa, Telecoms

Interdict Granted in Favour of GovChat, Preventing Removal from the Whatsapp Platform

By Gina Lodolo

The South African Competition Tribunal (the “Tribunal”) has been called to consider a complaint of abuse of dominance against Whatsapp, arising out of its notice to terminate its contract with “GovChat” and off-board GovChat from the Whatsapp platform. GovChat is a chatbot service that allows the government to engage with citizens and provide government services such as health and education.

GovChat approached the Tribunal, alleging that due to the high market shares of Whatsapp in South Africa, competing platforms do not have sufficient scale (consumer numbers and reach) to provide alternatives on their own separate platform (such as WeChat in China). Smaller platforms are forced to make use of the Whatsapp network where Whatsapp’s terms of service do not allow for the expansion of the GovChat business model to become a competitor to Whatsapp. GovChat stated that its “entire existence will be materially prejudiced” if removed from the platform. It was alleged that the decision to off-board GovChat would put GovChat out of business and affect millions of citizens who benefit from the platform. CEO of GovChat, Eldrid Jordaan stated that “GovChat’s case is that Whatsapp/Facebook have abused their dominance because off-boarding GovChat has an exclusionary effect, preventing GovChat from operating in the relevant market.”Exclusionary acts are prohibited by Section 8(1)(c) of the Competition Act 89 of 1998 (“Act”) which states that a firm is prohibited from engaging in an exclusionary act if the “anti-competitive effect of that act outweighs its technological, efficiency or other pro-competitive gain”.  In this matter, Whatsapp/Facebook would have to prove that the exclusionary act has a pro-competitive gain.  The respondent has to discharge the allegation that refusing consumers access to an essential facility or a scarce service is an abuse of dominance according to sections 8(1)(b) and/or 8(1)(d)(ii) of the Act.

The alleged breach of the terms of service lies in the use of GovChat as a de facto communications platform for the government, when it is in fact not a government owned entity and WhatsApp stated of concern that “GovChat seeks to intermediate itself between government and citizens as a profit-making entity. It seems to aspire to become the official communication channel for the South African Government and effectively be the gateway through which citizens access government through Whatsapp”, where GovChat monetises confidential information of citizens through the use of the Whatsapp platform. Accordingly, citizens share confidential information which is monetized by a private entity, of which practice Whatsapp believes to be prejudicial to its platform and its terms of use, and therefore in breach of its terms of service.

GovChat logo

The competitive harm towards GovChat lies in the manner in which Whatsapp made use of its dominance through the unilateral off-board of GovChat. Whatsapp argues that its conduct cannot be anti-competitive as Whatsapp and GovChat do not provide the same facilities and are therefore not direct competitors. To this end, representing GovChat, Advocate Paul Farlam stated that “Facebook founder and CEO Mark Zuckerberg intends to introduce a payment system, as such, locking GovChat out of Whatsapp would give Whatsapp an advantage as being locked out of the market for an indefinite period would stop GovChat from entering the market first, allowing Whatsapp to keep customers away from GovChat while Whatsapp enters that market”. If this is the case,  Facebook is hiding under the guise that the offboard is due to a breach in its terms of service, in order to remove the potential competition from GovChat in the same market.

On the 25th of March 2021, the Tribunal issued an interim interdict to restrain Whatsapp from removing GovChat from its platform, pending the outcome of the complaint that GovChat has lodged against Facebook with the Competition Commission. The interim interdict has been granted in favour of GovChat as it established a prima facie case demonstrating the alleged exclusionary conduct and anticompetitive effects that the off-board would have on GovChat. Facebook failed to rebut the prima facie case by providing pro-competitive gains that outweigh the alleged anti-competitive effects of the off-board. Due to the nature of the GovChat platform being in the public interest during the COVID-19 pandemic, the Tribunal held that “the balance of convenience favours the granting of interim relief to the applicants who provide an invaluable service.”

Importantly, the relief is only interim in nature. Accordingly, the Competition Commission has not yet made a finding that Facebook has indeed contravened the Competition Act 89 of 1998  through an abuse of dominance.

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consumer protection, dominance, East Africa, financial institutions, innovation, Kenya, mobile payments, Telecoms, Uncategorized

Tech antitrust news: disrupting M-Pesa mobile payment monopoly? cashless NFC mandatory?

Disruption & entry — mandatory cashlessness — and alleged collective dominance

Perhaps they don’t realise it themselves, but the journalists at ITWeb Africa have written antitrust/competition law strories in three of their recent reports, covering the rapidly growing and lucrative tech world in Africa: their stories range (in antitrust terms) from collective dominance in Africa’s tech sphere, to a challenger’s new entry in mobile payments, to a mandatory government-backed mobile NFC system for Kenyan transit commuters that allegedly causes more consumer harm than benefit by going cashless and giving the spoils all to one monopolist.

We take each in turn.

Disruption to M-Pesa’s mobile payment crown?

It looks as though the M-Pesa crown may be taken through the competitive process (and without active intervention by the competition authority) after all:

Equity Bank is about to join Airtel’s challenge to the leading position of Safaricom Limited’s M-Pesa service (on which AAT has written extensively before).  The magazine reports that an ultra-thin SIM card technology and the Kenyan bank have reached a pact that will allow them to compete with M-Pesa’s service, on top of existing user SIM cards.

Equity Bank is “determined to challenge” Safaricom’s M-Pesa mobile money service with the help of Taiwanese headquartered Taisys, which claims that the Communications Authority of Kenya “last month tentatively gave Equity Bank the go-ahead to use thin SIMs for one year.”  Equity is reported to be the “largest bank in East Africa with almost 9 million bank accounts.”

The new technology of a “stick-on” slim-SIM card allows the user “to execute mobile banking transactions, releasing the bank from the limitations of a telco-issued banking SIM.”  Safaricom had previously complained to the authority, arguing that PIN theft and denial of service are real risks that counsel against use of new SIMs.

In other related news, second M-Pesa challenger Airtel has secured a contract with the Kenyan Revenue Service that allows Kenyan citizens to pay their taxes using Airtel’s mobile money service.
The cashless economy: is the imminent Kenyan My1963 NFC payment system anti-competitive?

In this story about Nairobi’s public transport system’s much-derided effort to go entirely cashless – dubbed “My1963” -, the magazine reports that the Consumer Federation of Kenya (Cofek) claims that the digital payment system benefits “all except the consumer”.  In Cofek’s statement (“7 reasons why Cofek will fight to stop the #My1963 PSV’s cashless payment fraud“), the federation makes seven distinct arguments against the legality of the scheme.  Two relevant criticisms from the competition-law perspective are the following:

  1. no competitive bidding process: the body alleges that, due to politicians’ ties to banking and other interests, the correct process for entertaining competitive bids was not followed in accordance with proper public procurement rules.
  2. supra-competitive (monopolistic) pricing: an “exorbitant” 3% commission is being charged by the service provider of the system, as agreed between the Kenyan National Transport Safety Authority and the banks.

Cofek also urges the Competition Authority of Kenya (CAK) to “investigate the #My1963 and entire cashless payment system with a view to finding it uncompetitive, predatory and anti-consumer and market interest” [sic].

Viber, WhatsApp, YouTube: dominant in Africa?

In its report on alleged dominance by three tech companies, the paper begins by pointing out the (some more and some less) startling statistics:

WhatsApp is the leading third-party messaging application, Viber has overtaken Skype as the leading VoIP service on several networks and YouTube is the top video streaming app. … on Africa’s mobile networks WhatsApp accounts for 7% of total traffic, while Viber has overtaken Skype as a VoIP service. Streaming video accounts for just over 6% of downstream traffic – significantly lower than North America and Europe where it accounts for more than 30%.

WAP Browsing has seen a significant decline in traffic share thanks to increased adoption of smartphones throughout the region [–Ed.: on the latter point, the journal also has an interesting separate piece, discussing the new era of WiFi connectivity in Africa].

Being called “dominant” may be a badge of honor to the sales staff, but it is a dangerous moniker when viewed by the competition-law enforcers through their monopolisation lens.  WhatsApp, Viber and YouTube (whose parent is, of course, the already dominant Google) may therefore have to begin thinking about treading more lightly in terms of their dealings with competitors on the African continent, lest they wish to prompt governmental scrutiny from the likes of the South African Competition Commission, the Kenyan Competition Authority, or COMESA’s CCC.

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