In July, South Africa’s Competition Commission, an entity established by the government to regulate business practices and promote competition, released a report detailing the findings of a two-year-long investigation. It looked at the competitive practices of “online intermediation platforms” — digital platforms that connect buyers and sellers — in the country. The 123-page report alleged that Google, alongside tech companies like Takealot and Uber Eats, were hindering fair market competition and, as a result, the growth of South Africa’s digital economy.
As defined by the World Trade Organization, online intermediation platforms are businesses that, for a fee, facilitate direct interactions between buyers and sellers. Google, for instance, is famous for its search engine that aggregates websites for people to find and visit, making it an intermediation platform between websites and visitors. Websites that want more visibility on Google usually pay for ads so that they can rank high when a user searches for particular words, and this makes up Google’s biggest revenue source .
According to the commission’s report, Google’s model disadvantages new, small, and underfunded South African businesses. The report indicates that the U.S. tech giant has not only become direct competition to its clients by offering some of the services they render (including shopping and travel), but it is also playing unfairly by prioritizing its offerings over theirs.
The commission released a set of remediations for Google to follow, including providing a South African badge and search filter to enable consumers to find and identify local platforms quickly. It also asked Google to introduce a new feature that displays smaller South African platforms relevant to consumer search, especially in travel and shopping. Google also has to provide support programs worth 330 million rand ($17.6 million) over five years, with 180 million rand ($9.6 million) of that investment going into advertising credits. The remaining amount goes to technical training, credits for other Google products, startup training, and networking, among other things.
Industry experts and analysts were divided on whether Google’s power over the digital economy needed more regulation or if the watchdog’s move was anti-market. They told Rest of World the commission’s report might begin a decade-long regulatory back-and-forth with the tech giant.
Mpumelelo Cindi, head of design at Old Mutual, one of South Africa’s most prominent financial institutions, said that Google prioritizing those who pay for ads isn’t an issue.
Forcing a company to part with its revenue… when it has not broken any contract through non-fulfillment is wholly opposed to market principles.”
“There’s somebody who paid to get into the show, and they are standing at the front of the stage — that would make sense,” Cindi told Rest of World . But it becomes “unfair and even unethical,” he said, when platforms start to participate in the market they are supposed to mediate. “[For instance], I’m privy to data that [other businesses] don’t have. They’re on my platform, so I aggregate data, and I use that to my advantage [and] to their detriment. This is where things start to fall apart. This is where policies and legislature need to step in. That’s exactly what’s happening with Google.”
Google declined to respond to Rest of World ’s questions about its plans to adhere to or contest the watchdog’s remediations. Instead, the company indicated in an emailed statement that it would continue to create choices and generate millions of free visits to South African sites and businesses. “We engaged with the South African Competition Commission throughout the Inquiry and are currently reviewing the Final Report,” the email read.
Since 2010, Google has faced back-to-back regulatory reviews in Europe and has consistently fought EU antitrust fines in the courts. In 2020, the company removed its shopping ads from search results in Turkey, following a remediation issued by the Turkish Competition Authority.
Some of the concessions required of Google might be too burdensome, and the company might discontinue specific offerings at the detriment of South African consumers, according to Zakhele Mthembu, legal researcher at Free Market Foundation, a Johannesburg-based independent think tank. “The attitude displayed in the report will send the wrong signals that the South African state will punish a business in the digital sector if it gets too successful,” he told Rest of World .
The commission asking Google to invest in businesses that he described as its competitors is “unjust and contrary” to market principles, Mthembu said. “Forcing a company to part with its revenue for whatever reason when it has not broken any contract through non-fulfillment is wholly opposed to market principles,” he said.
Most of the remediations in the report won’t fix the issues being raised, Mongezi Mtati, senior brand strategist at Cape Town-based digital marketing agency Rogerwilco, told Rest of World . The ad credits for small businesses, for example, are only effective in the short term. “Once that budget is done, if your content and SEO are weak, you’ll drop and go back to where you were — that’s where [the report] misses it,” he told Rest of World .
This is a dangerous perception to create as South Africa cannot afford to risk deterring foreign or local investment.”
Asking Google to provide training and funding for non-leading businesses and historically disadvantaged demographics, such as Black people and women, is a good step, Mtati said, but not a departure from current practices. “Google is already offering free courses for anyone who wants to learn.”
Michael-James Currie, competition law attorney and partner at law firm Primerio, believes the inquiry focuses on how the bigger players in the market can be used to assist smaller businesses. “This is a dangerous perception to create as South Africa cannot afford to risk deterring foreign or local investment,” Currie told Rest of World . He said he expects Google to fight back.
The regulator’s remediations are legally binding for concerned companies, and any party that wishes to contest them must have lodged a complaint within 20 days after the release of the report, according to Siyabulela Makunga, the commission’s spokesperson. “Generally, non-compliance with such orders can attract penalties up to 10% of a company’s annual turnover generated in South Africa,” Makunga told Rest of World . He said he’s confident that Google will implement the remedial actions due to the level of engagement and cooperation demonstrated by the company during the enquiry phase of the report. “However, the Commission is prepared for appeals that may be filed by any of the affected parties.”
Mthembu, however, fears that if other jurisdictions on the continent follow in the footsteps of South Africa’s watchdog, Google and other international companies would have to either scale back operations or wholly discontinue them. “Putting inordinate barriers on businesses that seek to operate in the continent’s various [markets] will not be a good idea,” he said.
