Along with large global online businesses like Google and Apple, South African online classified advertising companies have also come in for scrutiny from the Competition Commission’s online market inquiry.
Classifieds made a rapid transition from print to online between 2010 and 2015 due to increased access to the internet, along with the convenience of online search and comparison tools.
Property and vehicle sales represent the biggest online classifieds categories in South Africa. In the automotive sector, AutoTrader and Cars.co.za represent the leading platforms by some distance, with over 80% share between them, according to the commission’s research.
Property24, meanwhile, is the dominant platform for online property classifieds, with Private Property the second largest.
According to the inquiry, Private Property is “uniquely placed” in that it is a partnership with the large national estate agencies through the estate agency property portal company (facilitated by the industry association Rebosa); as a result, Private Property has been able to secure, and lock-in, most of the listings.
Property24 and Private Property both provide syndication software to estate agents that list properties for sale on their platforms. The implication is that 70% of estate agents wishing to list on alternative classified platforms face considerable practical barriers in doing so, raising the cost of using those platforms. That deters use and their development as competing platforms.
The two leading property classifieds websites have also reinforced their position in “syndication software” through their charging a monthly R500 for feeding in from external syndication software.
‘Ripple effect’
“The fee means, for smaller agents especially, it will always be cheaper to use the software of the leading platforms, impeding competition at a syndication software level. As these software providers are the most likely competitors in platforms, it has a ripple effect on platform competition,” the inquiry found.
“Estate agents typically have a budget for marketing and promotion and look to optimise that budget between different marketing activities, including property classified listings. Both Property24 and Private Property have sought to lock the agents in through multi-year contracts, limiting opportunities for competing platforms to contest this spend.
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“Property24 offered a multi-year subscription package to estate agencies that would limit increases to make it attractive. Moreover, Rebosa has actively promoted Private Property as a partnership with the industry and which agents should support as a preferred provider.”
The inquiry found that these features impede competition.
To address these distortions, Property24, Private Property and PropData must provide “interoperability at no fee for estate agents to feed listings to other platforms”.
“Property24 and Private Property must cease charging for incoming listings and put an end to multi-year contracts with large agencies,” the commission said.
The inquiry requires that Rebosa – which is short for the Real Estate Business Owners of South Africa – must cease supporting Private Property as the preferred platform for the industry. An application will be made to the Competition Tribunal for the national agencies to divest of any shares they hold in Private Property.
The inquiry found that the leading platforms in both property and automotive classifieds exercise extensive price discrimination based on the volume of listings that an agency or dealer brings, both at a group and at an office level.
The commission found that the cash needed to fund the “high and discriminatory fees” of the classifieds platforms impedes competition and limits participation by black-owned agents and dealers in particular. This is because they lack historic wealth accumulation that reduces the extent of financial resources at start-up stage.
Moreover, the classifieds platform business model and fee levels are “tailored to the more established agencies and dealers operating in historically white-middle class areas with higher property and car prices”.
To address this distortion, the commission’s “remedy” is that property and automotive platforms must substantially reduce their prices for SME agents and dealers to a level closer to that of larger agents and dealers.
All the leading platforms except Private Property must introduce a programme aimed at historically disadvantaged persons
Property24 must introduce a “small independent business package” (SIBP) for business users with 30 leads or less, priced at an average per lead or listing level within 15% of the average of all other business users, reducing to 10% later. AutoTrader must also introduce an SIBP for dealers with fewer than 20 listings, with the average cost per listing to be priced within 15% of the average for dealers on other rate bands, reducing to 10% later.
To address perceived lack of support for black-owned agencies and dealers in particular, all the leading platforms except Private Property must introduce a programme aimed at HDPs, or historically disadvantaged persons.
For Property24, that programme must – at no cost – provide personalised training, including site design and support, branded listings, five value-added services per month, access to the market intelligence report, and for new HDP agents, 12 months’ free standard listing subscription.
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AutoTrader – at no cost – must provide personalised workshops with experts and events, assistance with the initial upload and photography, a 50% discount on its “Instant Offer”, free standard listings for 12 months or premium at the cost of standard, and for existing HDP dealers, a free upgrade to premium or featured dealer.
Cars.co.za must provide for free enrolment in the training programme, a mentorship and training programme, guidance on creating a professional “about us” page, an upgrade to the premium package at no additional cost for 12 months, and a rebate amounting to two months of the user’s base package.
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Competition economist and chairman of the inquiry James Hodge said those who worked on the recommendations had “tried not to interfere with general business, only where competition is limited. Hopefully, the remedies will level the playing fields.” — © 2023 NewsCentral Media
