Takealot’s dominance good news for lower prices — but there is a risk

Instead of increasing prices, dominant ecommerce players typically drive prices down to increase their market share and force competitors onto their platform.

This is the feedback from World Wide Worx MD Arthur Goldstuck, who was commenting on the Competition Commission’s online intermediation platforms market inquiry.

The inquiry is a proactive measure to get a greater understanding of the online markets operating in South Africa.

The Competition Commission is also trying to establish whether there were factors which may be hindering competition or undermining the public interest.

The inquiry will cover a range of businesses to consumer platforms, including ecommerce marketplaces where Takealot dominates.

The commission wants to ensure these markets remain contestable and competitive, which it said was in the long-term interests of South African consumers and businesses.

Arthur Goldstuck
World Wide Worx MD Arthur Goldstuck

Many people associate market dominance with higher prices. Goldstuck, however, pointed out that this is not the case in the ecommerce environment.

“The reality is that the opposite is happening in South Africa,” Goldstuck said. “The more powerful the players are, the more likely they are to force prices down”.

He pointed to the example of Amazon in the United States which dropped prices to push competitors out of the market and force them onto its own platform.

“That is an element which the Competition Commission want to avoid,” Goldstuck said.

There have not been examples in South Africa where monopoly ecommerce players pushed prices up because of their market dominance.

It is therefore unlikely that the Competition Commission’s inquiry will result in lower costs.

“In some cases, like ride services, the cost is probably too low. The consumer is almost having a free ride at the expense of the drivers and car owners,” Goldstuck said.

“The Competition Commission may therefore step in to ensure that workers are protected through higher prices.”

Arthur Goldstuck interview

Now read: Investigation into Takealot and Uber dominance kicks off

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Takealot’s dominance good news for lower prices — but there is a risk