The Competition Commission will proactively investigate the dominance of Takealot and other major players in South Africa’s digital market.
Speaking at the 14th Annual Competition Law, Economics, and Policy Conference, Commissioner Tembinkosi Bonakele reiterated the Commission’s commitment to actively investigating and creating new regulations that would prevent the abuse of dominance by major firms.
Takealot was singled out as a dominant force in the South African digital market, with Bonakele likening the ecommerce company to Amazon in the United States and Alibaba in China.
“It is clear that in digital markets it is easy for vertical integration to lead to what is referred to as the ‘tipping’ of the markets, which means there is a likelihood for the rapid expansion of one large dominant platform within a particular market,” Bonakele said.
“We have seen examples of this with the likes of Amazon in the US, Alibaba in China, and we are seeing the same with Takealot in South Africa. Indeed, we already have some cases we are investigating in these markets.”
Bonakele said the Commission’s approach would be a proactive one which attempts to determine any potential abuse of dominance before it can manifest.
“We intend to pursue strategic action for enforcement, including mapping the digital access landscape of South Africa to inform the proactive investigation of conduct by dominant platforms which may be excluding rivals and entrenching dominance,” Bonakele said.
“We have taken a decisive and proactive stance to ensure the balance of economic forces favour a shift to enable a more competitive digital economy.”
“This requires removing the entry barriers, including those created by dominant platforms, and preventing concentration in the online economy of South Africa,” he said.
Stakeholders and companies such as Takealot had until the end of October to make submissions to the Commission on its whitepaper regarding the digital economy in South Africa.
Bonakele said the next step is for the Commission to assess these submissions and have further engagements with key stakeholders before publishing a final report.
The final report will outline the way forward for South Africa in dealing with these markets, he said.
Takealot dominant in South Africa
Takealot is the biggest online store in South Africa by a wide margin, and for this reason, it was singled out in the Competition Commissions “Competition in the Digital Economy” whitepaper.
“The most popular digital platforms around the world are widely used in South Africa but Internet usage takes on a local flavour in financial service platforms and ecommerce, where some traditional stores with an online presence and Takealot – which is part of the Naspers group – dominate the scene,” the document said.
As a dominant market player, the online store wields a significant amount of power over the South African ecommerce market.
An example of this is evident through the process required to sell items through the Takealot Marketplace – a platform for third-party sellers to make their stock available through Takealot’s online portal.
While this marketplace has competitors, retailers have said the sales generated through Takealot completely dwarf those of other platforms.
“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.”
The company has made a significant investment in the quality of its service and its logistics network to reach this point.
However, this will be a major focus of the Competition Commission’s investigation into the local ecommerce industry as a result of its dominant position.