South Africa: Competition Commission investigates Google’s advertising monopoly

In a statement, the Commission said Google “raises platform customer acquisition costs and favours large, often global, platforms. Preferential placement of their own specialist search units also distorts competition in Google’s favour.”

In this way, Google has created a system that favours large companies with the financing to pay for premium advertising space regardless of relevance.

The inquiry revealed that: “Across all platforms there is a tendency to sell top ranking search positions to businesses which are not the most relevant to the consumer and constitute a form of advertising that is not transparent. This impacts on consumer choice and competition, especially for SMEs that cannot spend as much as large businesses.”

The organisation says paid-for results should be displayed clearly as advertising, with the top of the search page reserved for relevant content only.

In response to our request for comment, Nitin Gajria, Managing Director for Google Africa said, “People want easy access to information to help them get things done quickly and efficiently. That’s why we invest in products like Search, Gmail and Maps to help people in South Africa every day.”

“Our products increase choice and expand competition. They level the playing field for small businesses everywhere — enabling them to sell their products, find customers, reduce their costs and, in difficult times, get back on their feet. The competition Google faces is always increasing: there are more ways than ever that people can find information, from specialised sites for travel and shopping, or from other search engines, social media and elsewhere.”

We will now review the report and work constructively with the South African Competition Commission to answer their questions.

This begs the question of whether US tech giants are monopolising the continent’s relaxed regulations surrounding technology.

Cheaper havens

The inquiry also criticised the global giant for exploring tax competition and havens to pay lower tax rates. They said: “One concern with the tax arrangements of global digital companies is that the country where the income is sourced are denied the tax payments where global platforms use domicile arrangements to pay in another jurisdiction typically at a lower rate.”

In many countries, including the UK, high-profit companies like Amazon were found to be paying significantly lower taxes, despite making huge profits.

• In 2018, Amazon UK paid £1.7m ($2m) in tax for the previous year, despite the online giant making total UK sales of £11bn.
• In 2020, Google paid €218m ($258m) in back taxes to the Irish government after using a tax loophole in Europe that exploited the popular tax haven Bermuda where the tax rate is zero.

Tech red tape

The large US tech giants have all recently come under increasing scrutiny as the conversation around tech regulation grows.

Facebook outsourcing Sama also came under scrutiny this year after outsourcing their moderation offices to Nairobi, among other cities around the world, paying employees low wages whilst exposing them regularly to violent and traumatising content.

Laws around data protection and privacy are fairly rudimental due to the contemporary nature of companies like Google and Facebook. But in the UK and EU for example, they have been working on stricter regulations surrounding tech and fair markets online. The Digital Markets Act in the EU specifically targets companies with a value of more than €75 billion.

In May 2022, the Competition and Markets Authority (CMA) in the UK launched its second investigation into Google’s advertising practices. Like the South African Commission, the CMA believes that Google is distorting ad competition in the country and perhaps may have been favouring its own services.

In 2015, the EU Competition Commission accused Google of distorting internet searches in their favour once again.

Many critics question the power that such companies hold in modern society, with the reach and vast data collection that these organisations have access to.

Zach Meyers, a senior research fellow at The Centre for European Reform, believes to stop anti-competitive practices, we must first stop the “conglomerate effect”. He said, “firms like Google offer a range of different services which all work together seamlessly, making it the firm’s dominance in different services mutually reinforcing.”

However, Meyers says, regulators like the EU Competition Commission will struggle to come toe-to-toe with big tech firms like Google. He said, “the steps involved may involve short-term pain for consumers because a firm’s ecosystem of services may need to be made less seamless. There is not always a guarantee of long-term gains, for example, many of Europe’s past attempts to rein in Google have not achieved much.”

Google is notorious for poor data protection practices.

Analysis website “Terms of Service; Didn’t Read” which looks at the terms of service for online organisations and tech companies rates the giant E. It says the company stores data on online users even if they do not interact with the service and can even read your private emails. They said, “For example, users might provide access to their address book, after which a service might also store the phone numbers of that person’s contacts.”

Ashlin Simpson, a senior programme manager at Code for Africa, believes that strict regulation on companies like Google may not be as useful as some critics say. “I would like to see South Africa, and other African countries be more creative with tech regulation and create a regulatory environment that fosters innovation and investment while balancing fairness and the safety of consumers and businesses,” she said.

If companies are unable to invest in “the next big thing” such as the metaverse or AI, this may dissuade firms and investors from funding future technologies.