Abstract
The digital economy has been on the rise, revolutionising the way consumers and businesses interact and transact with one another. Though digitalisation has been widely welcomed, its emergence has presented challenges for competition policy and competition authorities. There are concerns of high levels of market concentration, weak contestability of digital platform markets and increasing market power of a selected few technology firms. Despite an increase in enforcement cases and market studies by competition authorities as an ex-post approach to curbing anticompetitive conduct, recent international developments indicate that there is a shift towards regulating dominant digital platforms as an ex-ante measure to set up the rules of the game upfront.
This dissertation identifies the competition issues emerging from the market power of digital platforms in South Africa, focusing on the search engine and the eCommerce market segments. Drawing from the Competition Commission of South Africa’s Online Intermediation Platforms Market Inquiry (OIPMI), the study evaluates whether these competition issues can be adequately and effectively addressed by the existing ex post regulatory and enforcement provisions of the Competition Act, or if there is a need for ex-ante regulation. The dissertation reviews the literature on industrial organisation to understand the main factors that contribute to market power in digital markets. The key findings of the study include that Google’s dominant firm status with substantial market power in the search engine market has been perpetuated by its conduct of favouring its own products and services, including the use of its ecosystem to further strengthen its market power. This impacts South African consumers and businesses. Given Amazon’s recent entry in the eCommerce market, a duopoly market structure made up of Amazon and Takealot now exists. Self-preferencing, restrictive pricing obligations on resellers, and brand gating are already concerns that have emerged from the conduct of Takealot, but it is too early to tell whether these concerns will be alleviated with Amazon’s entry which is expected to intensify competition.
This dissertation argues that the existing regulatory framework may provide scope for some of these issues to be addressed, particularly in the online marketplace market which is yet to fully scale and reach tipping point. In the search market, however, the underlying competition issues are structural, and as such, the existing regulatory framework does not effectively address the emerging competition issues. There is a case here to adopt pro-competition, ex-ante regulation that will impose obligations on large global dominant firms such as Google to proactively ensure that consumers and businesses that depend on these platforms are shielded from, exploitative and exclusionary conduct and treated fairly and equally.