COMPETITION IN THE DIGITAL ECONOMY VERSION 2 a growing, deconcentrated and inclusive economy 1 TABLE OF CHAPTER 5: CONTENTS INDUSTRIAL POLICY IN THE DIGITAL ECONOMY ...........................................................................................58 CHAPTER 6: IMPACT OF COVID-19 ON THE DIGITAL ECONOMY ......................................................................................61 ABBREVIATIONS AND ACRONYMS ...................................................................................................................04 CONCLUSION ........................................................................................................................................................64 EXECUTIVE SUMMARY .........................................................................................................................................06 CHAPTER 1: INTRODUCTION LIST OF TABLES, FIGURES AND BOXES 1.1 Who Is This Publication For? ..................................................................................................................11 1.2 Why The Need For This Publication? ...................................................................................................12 1.3 What Is The Digital Economy? ...............................................................................................................12 Table 1: Key indicators of digital connectivity in BRICS countries ...............................................................16 1.4 Structure Of This Publication .................................................................................................................16 Table 2: Examples of two-sided digital platforms ..........................................................................................19 1.5 Basic Features Of The Digital Economy ................................................................................................17 Table 3: Digital platforms active in South Africa ..............................................................................................20 CHAPTER 2: Table 4: Trends in notified mergers in digital markets, 2011 – 2018 ...........................................................27 DIGITAL PLATFORMS IN SOUTH AFRICA Table 5: Summary of the Commission’s previous cases in digital markets ................................................45 2.1 What Is A Digital Platform? ....................................................................................................................18 Table 6: List of stakeholder submissions received ........................................................................................67 2.2 Digital Platforms In South Africa ...........................................................................................................20 2.3 Big Data, Data-Rich Markets And Cloud Computing .........................................................................22 2.4 Financial Technology And Banking ......................................................................................................23 Figure 1: Digital usage around the world in 2020 ..........................................................................................14 Figure 2: Digital penetration in South Africa in 2020 .....................................................................................15 CHAPTER 3: Figure 3: Growth of digital penetration in South Africa in one year ..........................................................15 COMPETITION LAW IN DIGITAL MARKETS Figure 4: Internet usage predictions for South Africa ...................................................................................16 3.1 Merger Control ........................................................................................................................................27 Figure 5: The Fintech Value Chain ....................................................................................................................23 3.2 Cartel Conduct ........................................................................................................................................33 3.3 Abuse Of Dominance And Vertical Restraints .....................................................................................35 Figure 6: Shares in Zoom, Netflix and Amazon on the rise......................................................................... 62 3.4 Commission’s Previous Interventions In Digital Markets ...................................................................44 CHAPTER 4: Box 1: Big tech disruptions in banking ..........................................................................................................25 REGULATORY ISSUES IN THE DIGITAL ECONOMY Box 2: The Naspers/WeBuyCars Merger .........................................................................................................29 4.1 Promoting Access & Connectivity: Infrastructure & Digital Penetration ...........................................47 Box 3: The US Airline Case ...............................................................................................................................33 4.2 Regulatory Responses To Tech Disruptions In Markets .......................................................................48 Box 4: The Microsoft case: foreclosure of access to essential facilities ..................................................39 4.3 Consumer Protection: Data Privacy And Sovereignty ........................................................................48 Box 5: The Google Search (Shopping) Case: Abuse of Market Power ..................................................39 4.4 Digitalising Government Services .........................................................................................................52 Box 6: The European Commission’s Google Android Case and Microsoft Windows Player case: Tying...40 4.5 Promoting Inclusion In Financial Services ............................................................................................53 4.6 A Role For Regional Coordination ......................................................................................................56 Box 7: Bundeskartellamt & Facebook ...............................................................................................................50 2 Competition In The Digital Economy • Last updated 7 September 2020 Competition Commission South Africa • www.compcom.co.za 3 FTA Free to air FTTH Fibre to the home ABBREVIATIONS AND ACRONYMS GPS Global positioning system HDI’s Historically disadvantaged individuals ICASA Independent Communications Authority of South Africa ICT Information and communication technology IFWG Inter-Governmental Fintech Working Group IMF International Monetary Fund ACCC Australian Competition and Consumer Commission IoT Internet of things ACF African Competition Forum LTE Long term evolution AfCFTA African Continental Free Trade Area MFN Most favoured nation AI Artificial intelligence NPS National Payments System B2B Business to business OECD Organisation of Economic Cooperation and Development BRICS Brazil Russia India China and South Africa OTT Over the top CAC Competition Appeal Court PoPI Act Protection of Personal Information Act of 2013 CADE Brazil’s competition authority REC Regional Economic Community CCBG Committee of Central Bank Governors RTC Real-time clearing CMA Competition and Markets Authority SA South Africa COFI Conduct of Financial Institutions SADC Southern African Development Community COMESA Common Market for Eastern and Southern Africa SAPO South African Post Office Commission Competition Commission of South Africa SARB South African Reserve Bank CT Competition Tribunal SME’s Small and medium-sized enterprises DGIC Discussion group on international cooperation SMS firms Firms with a strategic market status DMU Digital Markets Unit The Act or The Competition Act The Competition Act 89 of 1998, as amended DSMI Data services market inquiry UK United Kingdom DTIC Department of Trade, Industry and Competition UNCTAD United Nations Conference on Trade and Development EU European Union USA United States of America FAS Russia’s Federal Anti-monopoly Services USDOJ United States Department of Justice Fintech Financial technology WOAN Wholesale open access network FSCA Financial Sector Conduct Authority WTO World Trade Organisation FSRA Financial Sector Regulation Act 4 Competition In The Digital Economy • Last updated 7 September 2020 Competition Commission South Africa • www.compcom.co.za 5 SOUTH AFRICA’S DIGITAL LANDSCAPE More than a market, the digital economy cuts across all South Africans participate in many digital platforms EXECUTIVE SUMMARY markets in which goods and services utilise an internet including search platforms, share-economy platforms base for production, distribution, trade and consumption and financial services. The most popular digital platforms by different agents. South Africa’s level of participation in around the world are widely used in South Africa but the digital economy is reflected in several key indicators internet usage takes on a local flavour in financial service set out in Table 1. For context, these numbers are platforms and e-commerce, where some traditional compared with those of other developing economies stores with an online presence and Takealot – which is in the BRICS network. The numbers reflect that South part of the Naspers group - dominate the scene. Africa has a 62% internet penetration rate, compared to South Africa’s financial technology platforms