The Competition Commission is preparing to investigate the distribution of media content on South Africa’s digital platforms, including search, social media and news aggregation platforms, and the Advertising technology (Adtech) markets that connect buyers and sellers of digital advertising inventory.

The Competition Commission will formally start the inquiry within 20 days, following the publication, on Friday, of the final terms of reference (ToRs) for the Media and Digital Platforms Market Inquiry (MDPMI).

“The Commission has reason to believe that there exist market features in digital platforms that distribute news media content which impede, distort or restrict competition, or undermine the purposes of the Act, and which have material implications for the news media sector of South Africa,” the Competition Commission said in the ToRs.

The main digital platforms that the inquiry will focus on include search engines, such as Google Search and Microsoft Bing; social media sites, such as Meta; news aggregator sites and applications, such as Google News and Apple News; and video sharing platforms, such as YouTube and Tiktok.

The inquiry will also examine Adtech market participants on the supply-side, demand-side, and Ad exchanges, as well as new technologies integrated into digital platforms, including generative artificial search support such as ChatGPT, and the impact these may have on the operations of businesses in the South African news media sector.

The inquiry will focus only on businesses within the South African news media sector including news publishers and broadcasters, but will exclude non-news publishers such as magazines, books and journals.

Also excluded are application store commission fees and terms and conditions for South African news media’s own applications, which were the subject of the Online Intermediation Platforms Market Inquiry completed earlier this year.

According to the ToRs, the main objectives of the inquiry are to evaluate the trends, adoption and use of the relevant digital platforms to aggregate and display news content online and the importance of digital revenue sources for news media organisations, as well as evaluate whether market features distort competition for advertising revenue, consumer data and subscription fees between news media organisations and the relevant digital platforms that display and distribute news media content as intermediaries to consumers, including news aggregators.

Further, the probe will examine whether the commercial relationship between news media and relevant digital platforms is characterised by imbalances in bargaining power and the impact of such imbalances on competitive outcomes affecting the news media industry, including pricing and non-price outcomes and whether competition for the distribution, display and monetisation of news content online between news media organisations through relevant digital platforms is distorted by market features including ranking algorithms, paid results, search engine optimisation, consumer and social network preferences and commercial relationships with news media organisations; and the effects of this on public access to credible news content as a public good.

The MDPMI follows several inquiries and investigations led by competition authorities globally on the impact of digital platforms on news media publishers that use these platforms to distribute their content online.

“These global inquiries and investigations have found that large digital platforms, such as search engines and social media sites, are important gateways for news content to reach consumers. This can create an imbalance in the trading relationship between the news media and digital platforms that can have implications for the level of referral traffic and fair payment for content. Collectively this may affect the sustainability of independent journalism,” the Competition Commission commented.

“There have similarly been investigations across numerous jurisdictions into the Adtech markets which sell the publisher’s display advertising inventory, purchase inventory on behalf of advertisers, and the Ad exchanges which connect these two groups,” it explained, noting that these investigations sought to determine whether concentration or conflicts of interest result in competition concerns, which may in turn impact the volume of advertising, the size of bids for a publisher’s inventory and their share of the advertising spend.

In South Africa, there is a growing shift in the consumption of digital news sources, owing to the increasing adoption and use of smartphones and more affordable access to the Internet, which has created a greater reliance on these platforms over time as the distribution of news content over digital becomes an effective way in which news media businesses can reach consumers.

According to the Commission, the change in consumer behaviour and distribution model has impacted the cost and revenue of South African news media businesses, with a loss of traditional classifieds and print advertising revenue, as well as additional costs in providing digital news feeds and ensuring visibility on these digital platforms.

“While digital advertising revenue has increased and there is potential for aggregator content revenues, the features of digital platforms and Adtech markets can influence competition for these revenue streams, which is what the inquiry intends to consider,” the Competition Commission said.

“This includes the revenue share on video-sharing sites for broadcasters, including the public broadcaster. In so doing, the inquiry will specifically consider how these markets impact the digital visibility and competitiveness of smaller news organisations, including community and African language news media and the diversity of news available to consumers.”