Google Search dominance and business model distort platform competition as small and new platforms struggle for visibility and customer acquisition, according to the much anticipated Online Intermediation Platforms Market Inquiry report.
The report, released by the Competition Commission yesterday is a culmination of almost two years of investigations into local and international business-to-consumer (B2C) online platform markets, and identifies features that adversely affect competition in these markets.
The Commission investigated, and required remedial action from leading platforms such as Google, Booking.com, Takealot, Apple, Uber Eats, Mr D Food, Property24, Private Property, AutoTrader, and Cars.co.za. Other businesses included national restaurant chains, Bolt Food, and Prop Data.
The report said Google Search was a de facto monopoly, accounting for more than 90% of all general searches across desktop, tablet, and mobile devices.
"Given its importance for customer acquisition, visibility on the Google search is critical and impacts on discoverability and website traffic," it said.
The report said as a remedial, the technology company must introduce a new platform sites unit, or carousel, to display smaller South African (SA) platforms relevant to the search, such as travel platforms in a travel search, for free and augment organic results with a content-rich display.
"Google must also introduce an SA flag identifier and SA platform search filter to aid consumers to easily identify and support local platforms in competition to global ones.
"On paid results, Google must provide R180m in advertising credits for small platforms to use in customer acquisition along with free training to optimise advertising campaigns. Google must also provide a further R150 million in training, product support, and other measures for SME and black-owned online firms to offset the competitive disadvantages faced on Google Search," it said.
The report said the inquiry found that Google's self-preferencing of its own shopping and travel units on its search results page distorted competition.
"To address this distortion, the remedial actions focus on changes to Google Search to cease self-preferencing its products. In the interests of both regulatory compliance for Google and oversight by the Commission," it said.
In travel, the inquiry found that Booking.com was the largest online travel agent (OTA) for traditional hotel and accommodation establishments by a huge margin.
Booking.com imposed so-called ‘wide price parity’ conditions on hotels and other establishments, which required them to offer room prices to Booking.com that were no less favourable than the room price offered to other OTAs.
"Wide price parity is now generally accepted to be a hardcore restraint of trade, and Booking.com has removed these clauses in the EU but persists in applying them in SA.
"In essence, the clause prevents other platforms from competing with Booking.com on price, which not only harms consumers but impedes other OTAs from charging a lower booking commission to hotels in exchange for lower prices, hurting competition on platform commissions and prices too," the report said.
In addition, it said, Booking.com imposed so-called ‘narrow price parity’, which prevented hotels and other establishments from pricing lower on their websites for online bookings.
"The inquiry finds that Booking.com’s wide and narrow price parity clauses impede competition. To address this, the remedial action is to remove these obligations and inform all hotels and accommodation providers in South Africa that are listed on its platform.
"Booking.com has increasing influence on bookings by both foreign and domestic travellers, as ranking high on the search results drives bookings. Whilst black communities struggle to compete in the tourism sector due to a historical lack of tourism infrastructure development, the OTAs have predominately focused on established tourism and travel destinations and establishments, reinforcing historical advantages and disadvantages," the report said.
In e-commerce, the report found that Takealot had an even stronger position in providing online marketplace services to sellers.
"In essence, they allow businesses to trade within the Takealot platform by listing products on their customer website and using their warehouse and logistics services to fulfil orders for a fee," it said.
The report revealed that as with Booking.com, Takealot imposed ‘narrow price parity’ on sellers, preventing them from pricing lower on their websites, and in the same way prevented them from reducing their dependency on Takealot by developing this alternative online channel.
To address these distortions arising from the conflict of interest, the report said Takealot was required to segregate its Retail division from its Marketplace operations, and prevent its retail services from accessing seller data and unilaterally stopping sellers from competing for certain brands.
The report stated that during the inquiry, rumours had persisted about the entry of a technology company focusing on e-commerce, Amazon.
"Whilst it has not entered South Africa, were it or any other large eCommerce player to do so, they will similarly be expected to comply with similar provisions, as set out for Takealot," it said.
The report found that UberEats and Mr D Food were the leading platforms in restaurant food delivery, and Bolt Food was the only other ‘national’ food delivery company operating a similar business model, with a small share but global backing.
The inquiry found that many, but not all, restaurant chains prohibited their franchisees from contracting with local or national delivery services that were not approved by the head office.
"The inquiry finds these restrictions by national restaurant chains impede competition in food delivery. To address this distortion, national restaurant chains are prohibited from restricting or dictating the choice of food delivery platform by its franchisees,' the report said.
The inquiry reported that leading platforms in property and automotive classifieds exercised extensive price discrimination based on the volume of listings that an agency or dealer brought, both at a group and at an office level.