Facebook to face Competition Tribunal over market abuse

‘In the grand scheme of things it’s probably not that big for them,’ says TechCentral editor Duncan McLeod.

FIFI PETERS: South Africa’s competition authorities are going after Meta, formerly known as Facebook, accusing the social media giant of market dominance. The commission has asked the tribunal [Competition Tribunal] to impose a maximum penalty against Meta Platforms, which includes WhatsApp as well as Facebook South Africa. We know the penalty is 10% of total turnover.

We have Duncan McLeod, the editor from TechCentral, joining us for more on the story. Duncan, what is the size of the fine that we’re potentially looking at here for Meta?

DUNCAN McLEOD: Hi, Fifi. We don’t know the answer to that question because the fine that they’ve asked the tribunal to impose on Meta is for the South African operations, and those numbers are not disclosed. Facebook’s – or Meta Platforms as it’s now called – most recent annual turnover globally was in the region of $120 billion, but we don’t know what the South African figure is. It’s unlikely that that figure’s going to be disclosed through this process either, but you can assume that it’s a not inconsequential figure at all.

FIFI PETERS: All right. This is just looking at Facebook South Africa, not as the group?

DUNCAN McLEOD: That is correct. It wasn’t clear in the media statement that the Competition Commission issued on the subject last night, but I did clarify with the spokesman, Sipho Ngwema, and he confirmed that the fine is based only on the South African revenue of three entities based in South Africa. That’s Meta Platforms, WhatsApp South Africa and Facebook South Africa.

FIFI PETERS: From your understanding of the story, Duncan, what did Meta do wrong to get in our competition authorities’ bad books?

DUNCAN McLEOD: Well, just think back to complaints that GovChat and an associated business called hashtag-letstalk filed with the Competition Commission back in I think November, 2020. They complained that WhatsApp was trying to so-called ‘offboard’ them from the WhatsApp business API – a lot of technical jargon, which basically just means that WhatsApp, which is owned of course by Meta Platforms, wanted to boot them off their platform. Meta Platforms accused them of violating the terms of service associated with the WhatsApp business API – which is a computing term, Application Programming Interface. It released the hooks into the software.

It’s not entirely clear to me exactly what GovChat and hashtag-letstalk is supposed to have done here, but Facebook and Meta have accused them of violating those terms of service, which used to be suggestions that they were misrepresenting themselves in getting access to this API, and that this was in breach of the terms of service which apply equally in all markets around the world. Meta was very clearly not happy with the way that these organisations were accessing its API and wanted to kick them off Facebook or Meta, as it’s now called, accusing these companies of breaching the terms of service. But it does elude me a little bit exactly [as to] what they’re supposed to have done wrong.

FIFI PETERS: I’m wondering if you had a chance to reach out to Facebook South Africa to get their side of the story, and their response to the allegations made by the competition authorities.

DUNCAN McLEOD: I did. I asked late last night on an email to a spokesperson for Meta in South Africa, and they did issue a fairly bland statement on this. They didn’t go into any sort of detailed response to what the Competition Commission has alleged, but they did say that they had said previously that this is a commercial dispute and they don’t believe the competition authority should be involved in this at all, and they’re going to continue to pursue this line.

They have said they want to continue to work with GovChat, which is interesting, provided that GovChat complies with their ‘internationally recognised regulatory standards’. But they did also say that GovChat has ‘repeatedly refused to comply with our policies,’ which [they] said are designed to protect citizens and their information, and accused them of referring to prioritise – and I’m reading here – ‘their own commercial interests over the public’. They also state that they will ‘continue to defend WhatsApp from abuse and protect its users’. That’s kind of the gist of what they’ve said in reaction to the Competition Commission’s statement, but they didn’t go into any real detail about refuting what the commission said, or talking in detail perhaps about their legal plan of attack once this gets to the Competition Tribunal.

FIFI PETERS: Did you get a chance to find out from GovChat what they had to say about Meta’s response?

DUNCAN McLEOD: No, I haven’t had a chance to speak to them today. I was busy with many other stories in the ICT market, so I haven’t spoken to GovChat yet. I hope to do so sometimes this week, though.

FIFI PETERS: There are a lot of stories around fines, really significant amounts of fines in the ICT market, not only here in South Africa but also globally with Tencent, and reports that its WeChat Pay didn’t follow the right rules when it comes to laws around money laundering. That’s according to the Chinese authorities.

Just your take on that story, given the continued pressure that we did see on Naspers and Prosus in today’s session?

DUNCAN McLEOD: Yeah. I think it’s not only the fine that has been pushing down Tencent in the last day or so. I think there are also the reports in the FT [Financial Times] and elsewhere regarding China possibly agreeing to supply [ammunition] to Russia and basically siding with Russia and its attack on Ukraine. And I think even that has investors spooked as well about the potential implication of sanctions by the US and other Western nations against China and the impact that could have on the Chinese stock market; and certainly the selling has been across the board, not only in tech stocks. Chinese stocks broadly have come off sharply, and I think that has contributed.

But certainly the threat of a potential fine against Tencent is also a factor, specifically to them; these shares have come down quite spectacularly in the last few days and one wonders where the bottom is.

I did notice Naspers come back a little bit towards the close today. At one stage it was down more than 10% again. I think it closed down about 4% or 5%. So it has come back a little bit.

But yeah, there’s a lot of uncertainty in the Chinese market now, and it’s not just a regulatory issue but also a global geopolitical issue. I think it’s feeding into some of these concerns that investors have got.

FIFI PETERS: Yeah. With respect to geopolitics and the sanctions, using sanctions as a tool, I wonder how far it can go in the event that the reports are true – that Russia has called on China for assistance. We do have a situation in which some Chinese companies are potentially in the line for sanctions. Today I read that now Russia has sanctioned US President Joe Biden and some of his members of cabinet, and this is in response to the sanctions from the UK on a number of its luxury goods. One wonders where this will end.

DUNCAN McLEOD: Yeah. I’m no expert on geopolitics, but it is very concerning to watch all of these developments, and certainly if China does come out strongly on Russia’s side and the US feels obliged to impose sanctions on China, one has to wonder where this ends if China starts supplying military equipment to Russia, and Russia expands its theatre of war from Ukraine into one of the Baltic states or something like that. It’s very concerning. We could be looking at a situation where we could almost be sitting on the edge of a Third World War. So one hopes that cool heads prevail and that, at the end of the day, we’re not going to end up in some sort of global conflagration. But right now it’s certainly a very concerning time to be alive.

FIFI PETERS: Certainly. Duncan, taking it back to the Facebook story, this is not the first time Meta – it’s going to take me a while to get used to its name change – it’s not the first time that Meta [faces] the firing line from regulators. We’ve seen it happening quite a number of times over in the US. But in the South African context how significant could this be for the group?

DUNCAN McLEOD: I don’t think it’s particularly significant. South Africa is a small market. Obviously it’s on their radar, and we’ve committed legal resources to fighting this. But I think they’ve faced much bigger regulatory threats elsewhere in the world, such as in the EU. You know of course that their plan to launch cryptocurrency effectively got shut down by regulators in the US and Europe. They had big plans with what [was] then called ProjectLibre, and they’ve effectively had to shut that entire project down. They’ve sold it off for a pittance, effectively, to some Californian bank, I think, if I read that correctly. So I think Mark Zuckerberg and his team are fighting fires on all fronts, whether it’s political or regulatory. I think the South African proposed fine by the commission and its referral to the tribunal, this prosecution by the commission to the tribunal I think just adds to their woes. But in the grand scheme of things it’s probably not that big for them.

FIFI PETERS: All right. Duncan, thanks so much for those insights. We’ll leave it there. Duncan McLeod, the editor at TechCentral.

 

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