After the Bell: Takealot here, Takealot there - Competition Commission does make some weird findings

I wrote earlier this week about the Competition Commission’s Online Intermediation Platforms Market Inquiry released last week. As I mentioned, this is a long and complicated report, reflecting on a very long and complicated set of issues. Previously, I focused on Google and search, but I can’t resist dipping into the issue again because this is all very important stuff. This concerns the issue of Takealot.

Lots of aspects of the report are debatable, and there is quite a bit to argue about. But one aspect of the report that I think is certifiably nuts: the section examining Takealot.

Broadly speaking, what the report found is that Takealot is the biggest player in the online sales space in South Africa, and imposes something called “narrow price parity”. The agreement third parties sign when they sell on the Takealot platform enforces that they won’t sell items on their own websites for lower prices than they list them on Takealot.

The inquiry finds that this narrow price parity distorts competition and prevents third-party users from developing an alternative online channel.

But is that true? There is nothing to prevent users from developing their own exclusive channels where they can price how they want.  

Takealot is merely trying to prevent third-party retailers from using the platform as a kind of advertising mechanism while avoiding paying the platform fee by channelling buyers to their own sites.

But, I grant you, this is a debatable issue. However, there is more. 

The commission wants Takealot to separate its third-party business from the products it is selling on its own behalf, which the inquiry said demonstrated a conflict of interest.

So, it is demanding that Takealot segregate its Retail Division from its Marketplace Operations, as well as insisting that its retail services must not access seller data. This is the nuts bit.

Every supermarket in SA sells its own brands in competition with external brands. It’s a common marketplace issue and a good one from the point of view of consumers. The ability of the retailer to sell its own “yellow label” products keeps the external seller from price gouging. Generally, it’s a good thing.

In its response, Takealot makes the point that other online retailers also sell third-party products, and they are not being required to comply with these rules. 

Takealot may be a big online player locally, but it’s less than 2% of the overall retail market in SA. They compete with huge international players like Shein, Wish and AliExpress, and, by the way, they’ll soon have to contend with this tiny international player called Amazon, which is reportedly about to launch its online retail offering in SA. 

Amazon might, however, think again given that the stipulations set out for Takealot will apply to them too if they decide to go ahead. 

But the point is that in the online world, crimping local players helps the international players. I think we can all agree that helping international businesses win more business in SA is not what the Competition Commission is there for.

Takealot is also being required to give away a whole bunch of stuff; this is typical of the competition authorities, which treat established businesses like an ATM.

It is worth mentioning that the same kind of claims have been made against Amazon in the US, with far stronger grounds, since Amazon is such a huge part of the US retail market. 

But even in these circumstances – Amazon constitutes about 40% of the total retail market – the cases that have got to court on this issue have been thrown out on the basis that there is no antitrust issue.

Because the South African Competition Commission’s findings are so weird, there is going to be a series of appeals, so don’t expect any resolution of the issue anytime soon. 

But all of this takes a toll on perceptions of “ease of doing business”.

There is a reason SA’s business confidence is so low, and my sense is that the Competition Commission’s rulings are a contributing factor. BM