The Competition Commission of SA (CCSA) Releases its Online Intermediation Platforms (OIPMI) Report and Recognises Foreign Competition Too Late

The CCSA released its long awaited Market Inquiry on 31 July. This calls on a number of ‘intermediation platforms’ to take action to remove practices which the Commission has found to be uncompetitive. The report is here: https://www.compcom.co.za/online-intermediation-platforms-market-inquiry-final-report-launch/. [Note: this is just the report and decisions, not all the Annexes. In total there are over 500 pages]. We will be looking at it in greater detail in the August edition of the Newsletter. Some commentators, including EFSA, have warned the Commission throughout the lengthy process of the Inquiry that foreign competition will enter the market and unfairly compete with SA e-merchants. No action was taken until this March when at the bidding of the Southern African Clothing and Textile Workers Union (Sactwu) and the National Clothing Retail Federation (NCRF) the DTIC started to investigate if the Chinese ecommerce company Shein was importing large qualities of textiles but applying customs tariffs only meant for small amounts of goods. An effective end-to-end system has been created in SA for Chinese importers which is operated by the logistics and customs facilitation company, Buffalo. As the DTIC Minister pointed out, if a SA retailer imports textiles from most countries it will pay a 45% tariff, but Shein was paying far less, therefore competing unfairly.

Shein and other Chinese online textile companies use similar loopholes in customs rules to import their goods elsewhere – particularly in the USA and EU. This has led to threats from both the USA and EU that special treatment for small amounts of goods will no longer be offered to importers from other countries. EFA is currently trying to persuade the EU that thousands of SMEs in Africa depend on the customs rules (known as de minimis – for a good explanation see below) to sell online into Europe. The EU will be holding a public hearing on the issue on 31 August. We will keep readers informed.

In SA, the  DTIC Minister has stated that the investigation by his Department is now complete and that he will be making an announcement soon. There are, in addition to the issue over tariffs, allegations that Shein and other online Chinese textile importers do not pay VAT, that they fail to follow SA laws (particularly the rules related to returned goods), and that they use sweatshop labour. This issue is particularly embarrassing for the SA government as it prepares to host the BRICS Summit.

Meanwhile, in a landmark decision, the SA High Court in Pretoria reiterating that non-compliant imported Clothing, Textile, Footwear, and Leather (CTFL) goods cannot enter the Republic. The National Consumer Commission (NCC) has welcomed the ruling, pointing out that the proliferation of non-compliant imported goods destroys the SA’s textile industry. During the last financial year, the NCC issued more than 50 non-compliance notices to importers of CTFL goods. Non-compliant goods to a value of more than R18m were either returned to the country of origin or destroyed.