Free Market Foundation legal researcher Zakhele Mthembu said the Competition Commission’s crackdown on Takealot punishes the online retailer for its success rather than anti-competitive behaviour.
His comments come in light of the Competition Commission imposing numerous strict conditions on Naspers’ local eCommerce powerhouse, Takealot.
The restrictions formed part of the commission’s Online Intermediation Platforms Market Inquiry Report.
This report concluded that Takealot is the dominant eCommerce market leader in South Africa, with a strong position in providing online marketplace services to sellers.
It found that Takelaot’s market dominance and business practices are anti-competitive, and some of the company’s practices harm smaller businesses and consumers by limiting choice and innovation in the South African eCommerce market.
However, Mthembu told eNCA that the Competition Commission and global antitrust policies have missed a fundamental aspect of what makes a free market a free market – the ability to contest in a market.
“The Competition Commission thinks that if a company grows to be big enough as is chosen by consumers, it can then be said to be dominant even though a competitor can still contest that market uninhibited by the supposedly dominant company,” he said.
“It is a way of punishing successful businesses because companies like Takealot have been willingly chosen by South African consumers.”
Mthembu said the commission’s findings are paternalistic and undermine South African consumers.
“If a company grows large enough given the inherently subjective standards that competition law in South Africa and all across the globe uses, the company will be found to have abused its dominance,” he said.
This conclusion is made despite the company not doing anything differently than when it started operating – “just the difference is that it has succeeded”.
“It has been chosen by consumers, and now the state is coming to punish it.”
In addition, the findings also effectively undermine the country’s economic growth “because how do you invest in an economy where if you get success by being patronized by customers, you will be punished by regulators?”.
Mthembu said the commission’s decisions will have a far-reaching effect, as it will impact the ability of local online retailers to compete in the highly competitive online retail field.
The ability to compete in that space will become increasingly important considering the growth of international retailers like Shein and Amazon and their expansion into South Africa.
“If our South African regulators are going to undermine our South African companies, it does not bode well,” said Mthembu.
“Takealot is being undercut by our own South African regulators instead of trying to remove as many barriers as possible to make their success that much easier to attain.”
Aside from affecting Takealot’s operations, Mthembu said the commission’s findings will have a downstream impact on South African consumers.
He explained that more regulations mean companies must spend more on compliance, and that cost will eventually be passed down to consumers.
Mthembu’s comments echo those of former Naspers CEO Bob van Dijk.
Following the release of the Competition Commission’s report, Van Dijk said the regulator’s demands would constrain businesses like Takealot, which have grown locally and positively impacted the local economy.
He said he is concerned that authorities are targeting local businesses, not international companies like Amazon and Shein.
“What bothers me most is that Takealot is built by South Africans, run by South Africans,” Van Dijk said.
“There is a lot of employment, and the regulation hits a business like Takealot while Amazon gets an advantage.”
He added that Amazon has a thousand times more financial muscle than Takealot, which gives it a considerable advantage.
“If Amazon makes a profit, I can assure you, you will see very little of it in South Africa,” Van Dijk highlighted.