Competition Commission gets competition wrong

Zakhele Mthembu BA Law LLB (Wits) is a legal researcher at the Free Market Foundation​ 

For interviews:

The views expressed in the article are the author's and not necessarily shared by the members of the Foundation.

This article may be republished without prior consent but with acknowledgement to the author.

The FMF is an independent, non-profit, public benefit organisation, created in 1975 by pro-free market business and civil society national bodies to work for
a non-racial, free and prosperous South Africa.
As a policy organisation it promotes sound economic policies and the principles
of good law. As a think tank it seeks and puts forward solutions to some of the country's most pressing problems: unemployment, poverty, growth, education, health care, electricity supply, and more. The FMF was instrumental in the post-apartheid negotiations and directly influenced the Constitutional Commission to include the property
rights clause: a critical cornerstone of economic freedom.

+27 11 884 0270
PO Box 4056, Cramerview 2060

This article was first published on on
17 March 2022

Competition Commission gets competition wrong

The international company Meta (which owns Facebook and WhatsApp) has been referred to the Competition Tribunal, to be fined 10% of its turnover for violating Section 8 provisions of the Competition Act, which prohibit the abuse of dominance by a company.
Meta is accused of acting contrary to the provisions of the Competition Act by seeking to exclude GovChat, a private for-profit company that describes itself as
South Africa’s official citizen - government engagement platform.
GovChat’s model seemingly relies on the use of another company’s resources and infrastructure in that it needs the WhatsApp Application Programming Interface (API) to function, hence its exclusion from using it by Meta, necessitating GovChat to bring in the state into the economic sphere again.
GovChat and the Commission contend that Meta has run foul of S8 provisions, by refusing to give it access to an essential facility (its API) when it is economically feasible to do so, or alternatively that it is engaging in an exclusionary act whose anti-competitive effect outweighs any technological, efficiency or any other pro-competitive gain.
Meta on the other hand, contend that GovChat did not comply with their terms of service. A spokesperson for the company said that they sought to off-board GovChat from their WhatsApp Business API, due to continued violations of their terms of service concerning the abuse of user’s data by GovChat.
The relief sought by GovChat- a private company- against Meta, another private company, is not only a punitive fine against them for 10% of their turnover. They also seek an interdict which would basically bar Meta from doing with its property (the API) as it deems fit, and kick  GovChat off should it deem  so. The Tribunal is directed to also declare any terms of service which seek to shield Meta from competition as argued by GovChat, null and void.
It has been
argued before that the S8 provisions which Meta has allegedly run foul of, should be interpreted differently from the current prescriptive process that will see the invalidation of perfectly legal contractual terms. The analysis of the courts should centre around the voluntariness of the parties, their property rights, and the legislative environment.
Within the context of the legislation, Meta will most likely argue that its actions of exclusion against GovChat have a technological, efficiency or a pro-competitive gain which nullifies their anti-competitive effect. If it is true that GovChat violated terms of service it willingly subjected itself to when using Meta products and services, that would be prima facie evidence of there being other reasons for exclusion, which can be said to promote efficiency or technology with regard user data privacy, that may override the anti-competitive effects of off-boarding GovChat.
GovChat is a company which would claim to be in competition with Meta on some level. As part of its argument which convinced the Commission, is that Meta’s terms of service are meant to shield it from competitors like themselves. GovChat of course claims this exclusion as being unfair and illegal against it.
One is forced to ask, is there any business out there which does not try to shield itself from competition? If there isn’t then it will not be in business long! Is there any business that would not make it so that its competitors cannot use its infrastructure to undermine their bottom line?
The main thrust of the arguments put forward by businesses that take other business to the authorities when they fail in the market, is that government must choose winners and losers. The API which GovChat wants to forcefully use, belong to WhatsApp. It is the property of Meta. There is nothing, at least on Meta’s part, which is inhibiting GovChat from creating their own social media platform that will then in turn have its own API. They are free to do this, yet they seek to use the power of law to force others to bend to their whims.
The question then arises. Is it an exercise in justice when GovChat seeks to force Meta to let it use their property instead of developing their own?
GovChat seeks to use its connection to the South African government to essentially justify why it is entitled to the use of the Meta owned API. The mentioning of grant beneficiaries communicating with the state through GovChat is meant to justify the violation of the property rights of Meta to off-board any company it wants to.
The Tribunal will be faced with a classic abuse of dominance case; one company seeking state force to help it compete against another. The Commission seems to have chosen a side in the market between competitors as is always the case. To reiterate, there is nothing stopping GovChat from competing with WhatsApp by building its own API. The provisions of the Act it violates could be interpreted to exempt the actions of Meta from sanction, as argued above.
The South African regulatory environment cannot afford to be hostile to any company. GovChat has clearly convinced the Commissioner to take its side and force its competitor to act in a way it pleases. If the Tribunal approves remedies like the interdict against off-boarding GovChat and declares void of terms of service that are an exercise in property rights, then the already dim investment prospects of the nation will only dim even further.

Help FMF promote the rule of law, personal liberty, and economic freedom become an individual member / donor HERE ... become a corporate member / donor HERE