Skip to content

South Africa – Competition Commission concerned about competition in the digital economy

27 October 2020
– 3 Minute Read

DOWNLOAD ARTICLE

Share on LinkedIn

The South African Competition Commission (Commission) has published a draft paper on Competition in the Digital Economy (Paper). Stakeholders have been invited to submit comments by 30 October 2020.

The Commission notes that disruptive technologies have changed the way business is conducted and competition regulators across the globe are grappling with the economic and social consequences. The Commission acknowledges the benefits of online products and services but is concerned about the ‘winner-takes-all’ nature of some of these markets, particularly for search, shopping and social media.

The Commission suggests that South Africa should apply intentional regulation in order to make sure that the digital revolution contributes to inclusive growth and transformation. Strategic action by the Commission is required in order to address these challenges effectively, which should include cooperation with other regulators (both in South Africa and abroad). This will ensure that the South African economy is able to reap the benefits of an inclusive digital economy characterised by equality, shared prosperity and meaningful participation.

The digital economy cuts across all markets in which goods and services utilise an internet base for production, distribution, trade and consumption, which runs parallel with the industrial economy. The Paper outlines the opportunities for, and threats against, competition throughout the global digital value chain. It also indicates that regulation should be approached differently given the novel features of the digital economy, including:

  • rapid and responsive innovation; 
  • well-informed consumers, coupled with the ease of entry at secondary and tertiary levels of the digital market, meaning that consumers can define their preferences with speed and accuracy; 
  • a tendency toward concentration arising from first-mover advantages, data accumulation, network effects and exclusionary conduct; and
  • a rapid rate of change.

The Commission’s view is that South African competition legislation is sufficiently broad and flexible to regulate competition law concerns in the digital economy. Some of the key competition challenges and strategic actions recommended by the Commission for addressing them can be accessed here.

The Commission also says that it will collaborate with other regulators to ensure the following:

  • Digital infrastructure becomes more affordable and widely accessible;
  • Personal information is protected, given that data is becoming an increasingly valuable asset;
  • Data sovereignty is maintained;
  • Industrial policy instruments are used effectively to enable competition in the digital economy;
  • Digitisation and the synchronisation of e-Government services achieve equitable access and enhances trade;
  • The financial services sector makes the relevant changes to allow effective competition in the market; and

Regional coordination leverages enforcement and resources and creates consistent regulation.