TechCentralTechCentral
    Facebook Twitter YouTube LinkedIn
    Facebook Twitter LinkedIn YouTube
    TechCentralTechCentral
    NEWSLETTER
    • News

      Sarb tells banks they should work with crypto exchanges

      18 August 2022

      Telkom muscles into banks’ turf with business loans

      18 August 2022

      iPhone 14 launch date targeted for 7 September

      18 August 2022

      Icasa moves to license more broadband spectrum

      17 August 2022

      Eskom to impose more load shedding

      17 August 2022
    • World

      China blasts US over ‘discriminatory’ Chips Act

      18 August 2022

      Tencent reports first-ever sales decline

      17 August 2022

      Chip makers are flashing a big warning for the global economy

      17 August 2022

      Semiconductor boom turns to bust

      16 August 2022

      Tencent plans to offload R400-billion Meituan stake: sources

      16 August 2022
    • In-depth

      Are you a chronic procrastinator? Read this!

      18 August 2022

      African unicorn Flutterwave battles fires on multiple fronts

      11 August 2022

      The length of Earth’s days has been increasing – and no one knows why

      7 August 2022

      As Facebook fades, the Mad Men of advertising stage a comeback

      2 August 2022

      Crypto breaks the rules. That’s the point

      27 July 2022
    • Podcasts

      Qush on infosec: why prevention is always better than cure

      11 August 2022

      e4’s Adri Führi on encouraging more women into tech careers

      10 August 2022

      How South Africa can woo more women into tech

      4 August 2022

      Book and check-in via WhatsApp? FlySafair is on it

      28 July 2022

      Interview: Why Dell’s next-gen PowerEdge servers change the game

      28 July 2022
    • Opinion

      No reason South Africa should have a shortage of electricity: Ramaphosa

      11 July 2022

      Ntshavheni’s bias against the private sector

      8 July 2022

      South Africa can no longer rely on Eskom alone

      4 July 2022

      Has South Africa’s advertising industry lost its way?

      21 June 2022

      Rob Lith: What Icasa’s spectrum auction means for SA companies

      13 June 2022
    • Company Hubs
      • 1-grid
      • Africa Data Centres
      • Altron Document Solutions
      • Amplitude
      • Atvance Intellect
      • Axiz
      • BOATech
      • CallMiner
      • Digital Generation
      • E4
      • ESET
      • Euphoria Telecom
      • IBM
      • Kyocera Document Solutions
      • Microsoft
      • Nutanix
      • One Trust
      • Pinnacle
      • Skybox Security
      • SkyWire
      • Tarsus on Demand
      • Videri Digital
      • Zendesk
    • Sections
      • Banking
      • Broadcasting and Media
      • Cloud computing
      • Consumer electronics
      • Cryptocurrencies
      • Education and skills
      • Energy
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Motoring and transport
      • Public sector
      • Science
      • Social media
      • Talent and leadership
      • Telecoms
    • Advertise
    TechCentralTechCentral
    Home»News»Competition Commission takes aim at digital markets

    Competition Commission takes aim at digital markets

    News By Larry Claasen16 October 2020
    Facebook Twitter LinkedIn WhatsApp Telegram Email

    The Competition Commission’s recently released discussion paper on the digital economy in South Africa highlights issues around why it thinks this sector must be regulated.

    The “Competition in the Digital Economy” paper says that if the country does not set up a regulatory framework, it could soon find itself trying to govern companies that have quickly amassed a lot of power.

    The paper notes that this is likely, as digital markets are prone to extreme “winner takes all” outcomes that has seen companies such as Google, Facebook and Alibaba dominate their respective local markets and around the globe. It warns that this kind of power could be detrimental to South African businesses.

    This frequently plays out on a global interconnected and virtual stage, resulting in tech giants dominating entire areas of global commerce

    “This frequently plays out on a global interconnected and virtual stage, resulting in tech giants dominating entire areas of global commerce, such as social media, search, digital advertising, mobile operating systems and e-hailing. Digital markets, therefore, threaten a new era of global concentration and the marginalisation of developing-country businesses unless purposefully regulated.”

    The commission acknowledges that it has little sway over what happens in other jurisdictions, but says that discussing what happens in the local digital market is important because it could prevent market power abuse in sectors that are still emerging.

    Concentration of power

    It fears, for instance, that if it allows the merger of two seemingly unrelated companies, it would unintentionally concentrate power in a market by approving so-called ‘killer acquisitions’. This is where start-ups or emerging competitors are bought with the express purpose of closing them down.

    Aside from primitively killing a rival, there is also the danger that an acquisition could end up entrenching dominance by expanding into related markets.

    “For instance, such strategic behaviour in merger activity has played an important role in entrenching Google’s position in search and search advertising, with acquisitions of companies such as YouTube and DoubleClick. Facebook’s acquisition of WhatsApp and Instagram could be viewed in the same light.”

    Digital services tend to lead to power concentration in markets like search, the commission argues

    The commission warns that another danger in allowing some acquisitions is the combination of datasets. This is where the merging companies seemingly don’t have overlapping datasets, but the resulting merger gives them “an advantage over competitors to improve on products in a way that cannot be matched”.

    The merged dataset concern was one of the reasons the CompCom recommended that the Competition Tribunal not approve the Naspers’ takeover of WeBuyCars. It reasoned that as Naspers controls e-classifieds OLX and Autotrader, an online vehicle listing site would have had considerable market power.

    “The commission determined that the combination of these datasets would provide WeBuyCars with an unmatchable competitive advantage over rivals in the guaranteed purchase used car marketplace.”

    Until 2019, the CompCom had investigated 87 mergers in the digital markets space, prohibiting none

    So far, vetoing proposed mergers like the Naspers/WeBuyCars have been the exception and not the rule — until 2019, the CompCom had investigated 87 mergers in the digital markets space, prohibiting none.

    Even so, the commission insists that digital markets need to be better understood by regulators, because participants are able to organise themselves in novel ways that are detrimental to competitors and customers.

    It gives the example of the US airline industry, where airline companies sent fare information daily to the Airline Tariff Publishing Company (ATPCO), a central clearinghouse. ATPCO shares all the data received in real time with travel agents, computer reservations systems, consumers and even the airline companies themselves.

    Abused

    ATPCO publishes information about prices, travel dates, origin and destination airports, ticket restrictions, as well as first and last ticket dates, which indicate the time range when the tickets at a particular fare were for sale.

    According to the US justice department, this information was abused by airliners as they were using first ticket dates to announce tariff increases many weeks in advance. “If the announcements were matched by the rivals when the first ticket date arrived, all companies would simultaneously raise the tariff.”

    The justice department said the fast data exchange mechanism used to monitor tariffs and react rapidly to price changes, “enabled companies to collude without explicitly communicating.” The US airlines showed that they were able to use computer algorithms to spot pricing patterns and collude in ways that are complex and difficult to detect.

    The Competition Commission says given the complexity of digital markets, regulators like itself need to be better resourced to be able to detect, investigate and prosecute these kinds of cartels. This is why it needs the requisite tools, skills and jurisdiction to do so. In order to achieve these outcomes, the commission intends to:

    • Develop appropriate tools for detecting digital cartels and assessing the effects of agreements among competitors;
    • Pilot a tender bid-rigging detection programme;
    • Build and staff a cartel forensic lab; and
    • Develop guidelines for establishing the commission’s jurisdiction in cases of digital collusion that have an effect in South Africa.

    The commission admits when it comes to properly regulating digital markets, it’s still finding its feet, but says that if it’s not proactive when it comes to the enforcement of competition law, there is the danger of a concentration of power in digital markets.

    This strategy is premised on the belief that digital markets have tendencies to tip towards a “winner takes all” environment, where one or a few firms dominate. It fears that reversing this position once “the markets have tipped”, as well as regulating the behaviour of dominant firms would be very difficult.

    • This article was originally published on Moneyweb and is used here with permission
    Competition Commission competition tribunal Naspers top Webuycars
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email
    Previous ArticleSouth Africa’s municipalities can now source their own electricity
    Next Article Sweeping management changes at MultiChoice

    Related Posts

    Sarb tells banks they should work with crypto exchanges

    18 August 2022

    Telkom muscles into banks’ turf with business loans

    18 August 2022

    iPhone 14 launch date targeted for 7 September

    18 August 2022
    Add A Comment

    Comments are closed.

    Promoted

    Entelek, A2pay to roll out 2 500 free Wi-Fi sites in South Africa

    18 August 2022

    Companies are drowning in data – but solutions are at hand

    18 August 2022

    Top cybersecurity challenge is inadequate identification of key risks

    17 August 2022
    Opinion

    No reason South Africa should have a shortage of electricity: Ramaphosa

    11 July 2022

    Ntshavheni’s bias against the private sector

    8 July 2022

    South Africa can no longer rely on Eskom alone

    4 July 2022

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2022 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.