Takealot must make significant changes to its website and operations to address market distortions caused by its dominance in South Africa, the Competition Commission has ordered.
These findings and remedial actions were in the commission’s Online Intermediation Platforms Market Inquiry report, released on Monday.
“In e-commerce, the clear market leader is Takealot which has a dominant share of even overall online sales in South Africa, including other e-commerce platforms and direct retailer or manufacturer sales channels,” the report states.
“Takealot has an even stronger position in providing online marketplace services to sellers.”
It explained that Takealot allows businesses to trade within its platform by listing products on their customer website and using their warehouse and logistics services to fulfil orders for a fee.
The inquiry found that smaller businesses wishing to trade on online marketplaces in South Africa are highly dependent on Takealot.
Like Booking.com, which the commission also imposed restrictions on, the inquiry found Takealot imposes “narrow price parity” on sellers, blocking them from offering lower prices on their own websites.
It said this prevents sellers from reducing their dependency on Takealot by developing their own alternative online channel, distorting competition.
Secondly, although Takealot opens its online marketplace to third-party sellers, it also trades extensively on its own platform through the Takealot Retail division.
According to the commission, this creates a conflict of interest in the same way as Google, which it also imposed restrictions on.
It said Takealot has incentives to favour itself, and its retail buyers have strong incentives to tilt the balance in their favour.
The inquiry also found that historically disadvantaged businesses face additional restrictions when trying to break into e-commerce.
Among these is that onboarding favours established businesses along with other promotional features, the report stated.
The inquiry imposed the following remedial actions:
- Takealot must remove its “narrow price parity” clause from its contracts.
- Takealot must segregate its retail division from its marketplace operations.
- It must prevent its retail services from accessing seller data.
- It must stop blocking sellers from offering competing products for certain brands.
- Takealot must introduce a 60-day dispute resolution process for marketplace seller complaints on returns and stock loss, which will be deemed resolved in the seller’s favour if not resolved within 60 days.
- The Buy Box must be re-engineered to reflect the cheapest (regardless of delivery time) and fastest options for the consumer.
Competition Commission acting deputy commissioner and chairman of the inquiry, James Hodge, explained that Takealot’s Buy Box is programmed to favour the item that will get delivered in the shortest time.
They want Takealot to show consumers the offers with the lowest price and the fastest delivery times.
In addition, Takealot must implement a historically disadvantaged person (HDP) programme that provides:
- Personalised onboarding, the waiver of subscription fees for the first three months and at least R2,000 advertising credit for use in the first three months.
- Promotional rebates and the inclusion of HDPs in HDP-specific campaigns on the platform.
- A programme to specifically support targeted groups within HDPs such as female, youth and rural enterprises with business mentoring and funding support.
Warning for Amazon
Hodge also had a warning for global e-commerce titan Amazon.
“During the inquiry, rumours have persisted about the entry of Amazon [into the South African market],” he said.
“Whilst it has not entered South Africa, were it or any other large e-commerce player to do so, they will similarly be expected to comply with similar provisions as set out for Takealot.”
MyBroadband first reported that Amazon was shopping for warehouse space in South Africa in January 2022, following years of rumours that the e-commerce giant was looking to enter the market.
Confirmation of the online retail giant’s plans to launch in South Africa then surfaced in June 2022, when leaked documents revealed Amazon’s plans to expand to five new countries in Africa, South America, and Europe.
The African plan — codenamed “Project Fela” — included an anticipated February 2023 launch date for a South African marketplace.
Plans included offering the Fulfilment by Amazon service for third-party sellers and Amazon’s Prime membership programme in the country. However, Amazon delayed the launch due to the tech industry slump.
In late May 2023, a document on Amazon’s Carrier Central webpage for South Africa revealed that Amazon plans on having at least one fulfilment centre in Johannesburg and another in Cape Town.
The company has also been on a hiring spree in South Africa for marketplace-related roles.
These include a general manager, strategic accounts manager, head of marketing, B-BBEE programme manager, catalogue specialist, ER and HR compliance manager, and vendor managers.
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