South Africans will suffer because of Takealot crackdown

Free Market Foundation legal researcher Zakhele Mthembu said the Competition Commission’s findings on Takealot’s anti-competitive behaviour will affect not only the online retailer but also South African consumers.

His comments come in light of the Competition Commission imposing numerous strict conditions on Naspers’ local eCommerce powerhouse, Takealot.

This came after the release 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.

He referred to the Competition Commission’s findings as “destructive interference” in South Africa’s eCommerce market that will have far-reaching consequences.

South Africa’s eCommerce sector is one of the biggest worldwide, which indicates that the country is “doing something right”. This can be seen in the success of Takealot and other South African eCommerce entities.

However, Mthembu believes the commission’s findings on Takealot punish the retailer for this success rather than for anti-competitive behaviour.

In addition, he believes the regulator’s strict conditions will fundamentally change how a company like Takealot conducts its business.

“That would definitely have an effect on revenue and subsequently a downstream effect on the size of the eCommerce sector, which is one of the few successful South African industries that we still have left given the horrible state of our economy,” he said.

Mthembu said these findings will, therefore, impact the South African economy “because how do you invest in an economy where if you get success by being patronized by customers, you will be punished by regulators?”.

Free Market Foundation researcher Zakhele Mthembu

Earlier this year, the South African Reserve Bank also called on regulators to avoid over-regulated prices and over-regulated markets, which Mthembu said he agreed with.

He explained that more regulations mean companies must spend more on compliance, and that cost will eventually be passed down to consumers.

“We are experiencing inflation that hasn’t been seen in decades, so if the government can do something to try and offset any potential rise in prices, it should,” he said.

“The government should reduce the amount of regulations that it has on businesses because that will have a direct downstream effect on those costs for complying with those regulations being passed down to consumers.”

He warned that if any other mechanism outside the market regulates prices, “you are going to run into shortages”.

He said South Africa is already experiencing this, to an extent, with Eskom’s electricity prices that Nersa regulates. 

“That has definitely created shortages because prices are a signal to the market, and if they are impacted by any other entity but those involved in making that transaction, then they will send false signals to the market, creating much bigger problems down the line.”

He said a particular way of thinking is prevalent across all antitrust or competition laws globally. 

“They think if consumers patronize a company that starts small and they choose to deal with that company or buy whatever that company sells, and that company grows to be large enough, then regulators will say that company is dominant and abusing its dominance for one reason or the other.”

This way of thinking does not only extend to eCommerce but to every sector that the Competition Commission investigates, he said.

It is also a particularly concerning mindset in an era where global competitors like Amazon and Shein have entered the South African market. 

“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.”


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