Takealot’s dominance in South Africa to be investigated by Competition Commission

Takealot’s dominance in South Africa to be investigated by Competition Commission

The Competition Commission will launch an “Online Intermediation Platforms Market Inquiry (OIPMI)”, which will encompass companies such as Takealot, Uber Eats, and Airbnb.

The Commission published a draft for public comment outlining its plan to investigate these markets and stating that “the Commission has reason to believe that there exist market features which impede, distort or restrict competition amongst the platforms themselves, and which undermine the purposes of the [Competition] Act.”

This follows after a “Competition in the Digital Economy” whitepaper was published last year, in which the Competition Commission singled out Takealot for its dominance in South African ecommerce.

It has refined the scope of its investigation in this latest announcement, specifically naming Takealot as an important focus of its investigation regarding its share of the local ecommerce sector and the dual role played by the company as an online marketplace and a seller of products.

Takealot faces a potential conflict of interest

The Competition Commission said that the dual role played by platforms as the platform operator for the marketplace, and also as sellers, may provide companies with the incentive to favour themselves and squeeze out competitors.

“This may be facilitated by manipulating the ranking of the platform provider’s search whereby results are biased to favour own products or preferred business users,” it said.

“This can lead to a decrease in the intensity of competition and worsening of price/quality and/or simply lead consumers to make suboptimal choices for given levels of prices/qualities.”

“For instance, Takealot as the largest ecommerce platform with a large marketplace faces this potential conflict of interest,” it added.

The Commission also noted that Takealot is much bigger than any other online retailers in South Africa, warranting concern over its potential dominance of the market.

“In ecommerce, Takealot (including Superbalist) is substantially larger than other online platforms and operates a marketplace on which many business users are now dependent as a route to market,” it said.

The Commission stated that the following sectors would be investigated as part of the inquiry:

  • Ecommerce marketplaces
  • Online classifieds
  • Travel and accommodation aggregators
  • Short term accommodation intermediation
  • Food delivery
  • App stores
  • Other platforms identified in the course of the inquiry

Other platforms named explicitly in the document included Airbnb, Mr D Food, Uber Eats, TravelStart, Autotrader, Cars.co.za, Property24, Private Property, the Google Play Store, and the Apple App Store.

The draft document is open for public comments until 16:00 on 12 March 2021.

Complaints about Takealot’s dominance

MyBroadband previously spoke to local retailers who sold products online through the Takealot Marketplace.

These sellers told MyBroadband that they were at the mercy of Takealot due to its dominance in the local ecommerce market.

“Takealot is probably 95% of our turnover,” one seller told MyBroadband. “For every 30-40 orders on Takealot, we maybe do one on our own website.”

Sellers told MyBroadband that there is a cost to gain access to Takealot’s customers and logistics – a percentage of their revenue and their autonomy.

They have also expressed concern over the amount of power Takealot now wields over South African ecommerce.

“Everyone’s too scared to speak out because they’re afraid of losing their income,” one seller said.

OIPMI draft for public comment

The Competition Commission’s OIPMI draft for public comment is embedded below.

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