Whether consciously or unconsciously, the European Union (EU) influences how South African competition regulators formulate policy, guided by what is usually termed “international best practice.”
This influence is not beneficial for the domestic economy, as EU policies stem from the context of the larger economies of EU member states, many of which are significantly more productive and wealthier than South Africa.
South Africa’s relationship with the EU is characterised by it being our largest trading partner. Yet, this relationship extends beyond trade to policy, particularly in competition policy, as demonstrated by the highly publicised Online Intermediation Platform Market Inquiry (OIPMI) released by the Competition Commission in 2023.
The OIPMI is an inquiry with a set of recommendations that, under section 43D of the Competition Act, are binding and carry the force of law to a degree.
Certain market features
The OIPMI was initiated because the Commission believed that certain market features of online intermediation platforms could impede, distort, or restrict competition, hindering the participation of small and medium enterprises (SMEs) and historically disadvantaged persons (HDPs) in these markets.
It is clear that the Commission has been influenced by the EU’s regulatory dispensation when it came to its recommendations aimed at correcting impediments to competition.
The EU Digital Markets Act (DMA) is in fact explicitly cited in the OIPMI final report, indicating the influence Brussels had. The DMA is a regulation designed to ensure fair competition and contestability in digital markets and the digital economy, targeting large online platforms acting as so-called “gatekeepers”.
The similarity in the purpose of the DMA and the OIPMI is evident, even before considering the recommendation against Google’s self-preferencing, which simply requires Google to adopt the same measures as those in compliance with the DMA in Europe. This demonstrates a willingness on the part of South African regulators to follow the EU’s lead.
This replication of economic policy is concerning.
Much healthier
The economies of EU member states are much healthier than South Africa’s economy, and applying policies from the European context without considering the South African reality is short-sighted. An economy with high unemployment, poverty, and reliance on state assistance cannot adopt the same policies as a more developed economy. Whereas Europe can afford the trade-off, South Africa requires a greater degree of economic dynamism and freedom.
While these policies may not harm EU economies as much, the impact on smaller economies like South Africa or other developing countries that copy regulations from Brussels could be substantial. You end up having a regulatory environment that is not tailored to the economy of a particular country like South Africa, thus leading to economic inefficiencies emanating from these out-of-place regulations.
The OIPMI’s overall theme draws inspiration from the EU Platform-to-Business (P2B) Regulation, which mandates transparency around self-preferencing on online platforms.
The recommendations of the OIPMI in e-commerce and search engines, particularly focusing on digital platforms in general – what the OIPMI calls intermediate platforms – reflect concerns about self-preferencing, like the P2B Regulation. The general theme of the OIPMI final report in its entirety is an opposition to the practice of self-preferencing.
Key difference
The key difference between the OIPMI and the P2B Regulation is that the EU regulation only requires transparency around self-preferencing, while the OIPMI recommendations, such as those against Takealot and Google, seem to prohibit self-preferencing outright. In the EU, companies are only expected to publicise how exactly they go about self-preferencing, whereas according to the recommendations of the OIPMI, self-preferencing is prohibited.
The influences of the DMA and P2B on the OIPMI demonstrate what has come to be called the “Brussels effect” in South African competition policy. The Competition Commission sought to incorporate aspects of EU policy into our competition legal regime, and succeeded in doing so.
The South African economy and policy environment require solutions tailored to their specific context. Empowering South Africans, through individual economic liberty, to develop their solutions to problems is the best approach in addressing these challenges. Adopting the policy stance of larger foreign economies like the EU is not the solution in South Africa’s unique circumstances.
The views of the writers are not necessarily the views of the Daily Friend or the IRR.
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