E-Trustbusters: Competition regulations of digital markets in Africa
Challenge description
Antitrust regulations for the ICT sector have not found wide recognition on the continent yet. However, the importance of data in the modern economy can allow tech giants to exert influence up to the point of ‘data colonialism’, indirectly regulating even non-digital markets, sometimes resorting to internet-for-all initiatives as a cover. Even in South Africa, a Yale University scholar argues, digital ecosystems are dominated by foreign, notably U.S., entities, which endows them with unprecedented power over key sectors, whether politics, culture or the economy. Infrastructure-wise investment and development position them to derive benefit over a long term.
This articulates the need for modifying antitrust regulations in line with the changing market rules. Digital markets have their specific features that may lead to increased concentration of the market, pre-emption of emerging markets, while complicating antitrust regulations. These include: network effects, scale and scope advantages, multi-sided platform structure, ecosystem economy, reliance on data, zero-price business models, interoperability, switching costs, and multi-homing, consumer behavioral biases (e.g. default bias and saliency bias, “nested” decision-making, status quo bias) and tipping.
Contrary to common competition laws which focus on regulating the marketing of products, antitrust regulation in the digital market concerns the product itself (such as product design) and the company’s business model. The authorities may therefore demand to redesign the product (service) or adjust a business model to make it comply with the law.
The aim of ‘promoting a favorable regulatory environment for competitive and harmonized regional and continental connectivity markets’ is outlined in the AU Digital Transformation Strategy.
The modernisation of competition legislation requires comprehensive approaches that would include non-price dimensions in defining market power and dominance and in assessing mergers. For instance, the ability to collect or generate and process big data volumes should be considered among the criteria of significant market power. Whilst assessing mergers, consequences unrelated to price should be taken into account, as mergers can affect incentives for innovation, quality of service, performance, etc.
Examples of anticompetitive practices in the digital markets are self-preferencing, refusal of data collection or data sharing, killer acquisition and exploiting consumer behavioral biases. In South Africa’s practice, as analyzed by the World Bank’s IBRD, predatory pricing and exclusivity agreements were most common when it came to abuse of market dominance.
As a case in point, the competition authority of South Africa expressed concern in July 2022 that Google’s paid search results—without being clearly labeled as advertising—were increasing the costs for platform customers and benefiting the tech giant. The preferential placement of Google’s own specialized search units is an example of unfair competition.
In 2022, five African countries – Egypt, Kenya, Nigeria, Mauritius and South Africa – held a meeting to discuss cooperation in regulating competition in the digital markets of the continent. In a joint statement, heads of the national competition authorities affirmed that digital markets present ‘considerable challenges for competition law enforcement and policy in terms of the unique competition issues that arise’.
To date, the African continent has seen several attempts of setting anti-monopoly regulations for the ICT actors. In 2018, the governments of Uganda, Zambia and Benin tried imposing taxes on social media. At that time, supporting local ICT projects was among the announced goals. In Uganda, a USH 200 tax was imposed on the use of 58 OTT services (including Facebook, Twitter, WhatsApp) as well as a 1% tax on e-money transfers. However, this resulted in a decrease in social media usage, a trend coupled with a 74% slide in revenues of companies that relied on social media for business. Therefore, a balanced approach is needed to maximize societal benefits without reversing the natural trends in the industries.
Solutions
To successfully address the problem, modernization of competition legislation is required. This includes taking into account non-price dimensions in defining market power and dominance and in assessing mergers. It is also of utmost importance to establish an entity responsible for implementation of the law and powerful enforcement mechanisms.
BRICS has been serving as a platform for collaboration and knowledge-exchange in the field of competition law since 2016. In 2018, the initiative was institutionalized in the BRICS Competition Law and Policy Centre (within the HSE-Skolkovo Institute for Law and Development) which now provides cutting-edge expertise on the antitrust regulation of digital markets.