Food delivery service Uber Eats and four other e-commerce companies are challenging the Competition Commission over a ruling that outlaws exclusive agreements with major suppliers and regulates their commission fees.
In July last year, the commission published a report after an inquiry into “intermediation platforms” such as app stores, online travel agencies, food delivery services and property/automotive classifieds. It found there were market features in their business models that impeded, distorted or restricted competition.
But Uber, the parent company of Uber Eats, alongside other affected e-commerce platforms including Private Property, Booking.com and Apple, has approached the Competition Tribunal to challenge the findings.
Famous Brands, the owner of Steers, Debonairs, Wimpy and Mythos, is also aggrieved and wants the tribunal to set aside a finding that prevents it from deciding which food delivery services its franchisees can use.
Commission spokesperson Siyabulela Makunga said: “We are still engaging parties with the hope to resolve all issues raised in those appeals amicably.”
The commission found that Uber Eats and Mr D Food were charging independent restaurants much higher commissions than they were charging the big restaurant chains, because the independent restaurants were not in a position to negotiate better terms.
It said both chain and independent restaurants tended to add a menu surcharge roughly in line with the commission fees; independent restaurants had to add a higher surcharge. “This has negatively affected the relative pricing of independent restaurants to chains on the platforms, making their menu relatively less attractive to consumers and impacting on their competitiveness.”
The inquiry found that price differentiation impeded competition on and between platforms. It ordered Uber Eats to implement a standardised, tiered commission fee structure that would give independent restaurants the option of selecting from a range of commission fees associated with different levels of service.
But Uber is disputing what it terms an “imposed” pricing remedy, saying the competition watchdog failed to conduct a “fact-based assessment” of the impact its ruling would have.
In its notice of appeal lodged with the Competition Tribunal, Uber said the commission erred in law and/or fact when it found that the different commission fees charged by Uber Eats for different categories of restaurants were bad for competition.
It accused the commission of failing to take into account its submission that Uber Eats “faces material competitive constraints from alternative modes of delivery and suppliers in adjacent categories”.
Uber Eats said it had presented a detailed, evidence-based analysis of why its approach to commissions was justified in the context of the “full value exchange” that occurs on its platform. The commission “disregarded, or failed to ascribe sufficient weight to, such evidence and instead substituted its own views on the relative value exchange ... which were unsupported by evidence”.
The commission relied upon assumed theories of harm, in the absence of any compelling or reliable evidence of an adverse effect on competition in any relevant market
— Uber
“The commission relied upon assumed theories of harm, in the absence of any compelling or reliable evidence of an adverse effect on competition in any relevant market.”
Uber said the pricing remedy was “so vague that it cannot be ascertained objectively what is required of [the company] in order to comply”.
Famous Brands criticised the commission’s findings about the way major restaurant chains proscribe to franchisees which delivery services they can use. beforehand.
The commission ruled that such action was uncompetitive.
“The stance adopted by the restaurant chains is in part the result of the two leading platforms incentivising them to bring in more of their restaurants and to drive order volumes through their platforms,” the commission said in July.
The restrictions were found to impede competition in food delivery. The commission has since prohibited national chain restaurants from restricting or dictating the choice of food delivery platform by its franchisees, and to allow them to contract with local food delivery businesses if they wish.
Famous Brands said the commission failed to identify any specific market that was “adversely impacted” by such a policy.
The commission “relied on vague anecdotal claims by online platforms to substantiate its decision… and wrongly assumed that the Famous Brands approval requirement prohibits local online delivery platforms from applying to it for approval and limits franchisees to making use of national platforms only.
“The commission did not identify any instance in which Famous Brands refused a request by a franchisee to approve a food delivery platform, let alone assess the reason why Famous Brands refused the request.”
It accused the commission of disregarding the company’s submissions that the reason for the requirement that franchisees obtain approval before using a food delivery platform is because it is “commercially critical” for the restaurant group to be able to assess the ability of online platforms to perform this service.
It said the commission ought to instead have found that it was “it is probable that some individual franchisees would make a decision that serves their own interests, but not that of the franchise brand, if they were permitted to make their own decisions as to which online delivery platforms to use.”
Famous Brands complained that the commission did not order its remedies to be universally applied across all franchise restaurants and the national chains that do not operate on a franchise model; this was “arbitrary and therefore not reasonable”.
In its ruling on property sales advertisements carried by online classified sites, the commission found that the two biggest — Property24 and Private Property — sought to lock in marketing and promotion spend by estate agents through multiyear contracts, thereby limiting opportunities for competing platforms. It ordered both Property24 and Private Property to stop charging for incoming listings and put an end to multiyear contracts with large agencies.
Private Property responded in its papers before the Competition Tribunal that the commission failed to take into account that “the advertising spend that these estate agents and franchisee estate agents direct to smaller platforms is predicated on the value they derive” from doing so.
“There is no contractual restriction between Private Property and the relevant estate agents or the Estate Agency Property Portal Co members to preclude them from advertising on other platforms. The nature of the market is such that it will only support a limited number of significant platforms; it is pro-competitive for estate agency representative bodies to support smaller platforms to preclude the leading platform from becoming more dominant.”
Private Property said the commission failed to take into account the fact that the company was much smaller than Property24, which dominated the field, or that estate agents focused their advertising efforts on those platforms that offered the greatest returns.
Charl Bruyns, CEO of Private Property, said Private Property appealed the findings of the report as, amongst others, some of the remedial actions were drafted “too widely and require further refinement.” The company is currently in discussions with the Competition Commission in this regard.
“Some of the findings have financial implications for Private Property, necessitating the engagement with the commission. Certain of the findings have already been implemented,” he said.
Makunga said the commission had been monitoring compliance with the remedial actions imposed in the final report and was satisfied with how it was going.
The tribunal has not yet set a date to hear the appeals.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.