Competition Commission launches inquiry into “Digital Markets”

In the wake of the fourth industrial revolution, a “digital market” is burgeoning, with some entities growing exponentially larger than others, having benefited from first mover advantages, network effects, massive data repositories and ongoing diversification.

The COVID-19 pandemic has also turbo-charged demand for digital services, providing significant opportunities for growth while also allowing established players to consolidate their lead, with the risk that smaller players are relegated to the sidelines, if not pushed out of business. As a new and wild frontier, many feel the South African digital marketplace is in urgent need of proactive regulation to ensure that smaller but innovative businesses have space to grow. Some (including governments) are equally concerned about the increasing influence that huge digital platforms wield over our lives.

In some ways, digital markets are subject to different dynamics from traditional markets and regulators around the world have been grappling to understand the state of competition and the adequacy of existing laws and policies to protect competition in the digital era.

In light of the recent announcement by the Competition Commission to launch an inquiry into the trade practices of dominant e-commerce companies in South Africa, Chris Charter Director and National Practice head of the Competition Law practice at Cliffe Dekker Hofmeyr commends the Commission for its early intervention in shaping the industry’s regulatory framework sooner rather than later.

“The Commission has displayed foresight in addressing the need for collective intervention of regulatory and industrial policy in promoting competition in the digital economy. We’ve seen developed countries grappling with the likes of Google and Amazon dominating local markets and possibly marginalizing small to medium businesses.”

Once the Commission commences its inquiry, Charter believes platform owners, new platform developers, platform users, and those looking to enter the online market will have an opportunity to participate and help shape the process with balanced and comprehensive input.

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