Tribunal grants Lottoland interim relief - orders Google to grant Lottoland access to its advertising platform
The Competition Tribunal (“Tribunal”) has issued an interim order directing Google Ireland Ltd and Google South Africa (Pty) Ltd (collectively, “Google”) to permit Lottoland South Africa (Pty) Ltd (“Lottoland”) to access its advertising services known as “Google Ads”, for so long as Google permits any firm in South Africa to utilise Google's Ads Services to advertise fixed-odds betting on the outcome of lotteries. The Tribunal’s order applies for a period of six months from its date, or the conclusion of a hearing into the prohibited practices alleged by Lottoland, whichever is the earlier.
This platform enables advertisers to display ads to users who utilise Google search, with Google Ireland acting as the service provider for Google Ads in South Africa.
The Tribunal’s order follows an interim relief application by Lottoland, a licensed bookmaker, which, inter alia, offers fixed-odds bets on the outcome of various lotteries around the world, including the South African national lottery, sporting events and other betting contingencies. Lottoland competes with other licensed bookmakers in South Africa such as Hollywood Bets, World Sports Betting, Betway, Betfred (which owns Lottostar), and Netbet (which trades as Sportingbet).
In summary, Lottoland alleged that Google terminated its access to Google Ads without justification while allowing access to its competitors, causing it financial harm and distorting competition in the market that Lottoland operates in, to the detriment of consumers.
Google contended that Lottoland’s offering of fixed-odds bets on the outcome of the national lottery in South Africa contravenes sections 57(1) and 57(2)(g) of the Lotteries Act. It submitted that in terms of its online advertising policies, which are designed to protect users, restrictions are placed on the promotion of certain gambling activities. Of particular relevance, the promotion of lotteries is limited to state-licensed entities and that this restriction is in place to ensure compliance with the provisions of the Lotteries Act.
REASONS FOR DECISION
A non-confidential version of the Tribunal’s reasons will be published in due course once any confidentiality claims in relation to the reasons have been finalised with the parties involved. In deciding the matter, the Tribunal considered the following three factors holistically, balancing each factor against the other to determine what is reasonable and just:
- Evidence relating to the alleged prohibited practice;
- The need to prevent serious or irreparable damage to the applicant (Lottoland); and
- The balance of convenience.
MEDIA SUMMARY
Evidence relating to the alleged prohibited practice
Lottoland alleged that Google contravened section 8(1)(d)(ii), alternatively section 8(1)(c) of the Competition Act. Section 8(1)(d)(ii) prohibits a dominant firm from refusing to supply scarce goods or services to a competitor or customer when supplying those goods or services is economically feasible. Section 8(1)(c) prohibits a dominant firm from engaging in an exclusionary act if the anti-competitive effect of that act outweighs its technological, efficiency or other pro-competitive gain. Both sections require a showing of dominance.
Google contended that other marketing channels such as offline advertising (including print media, outdoor advertising and television) comprise the broader (undefined) ‘advertising ecosystem’ that should form part of the relevant product market, such that it is not dominant. The Tribunal, however, was not persuaded by Google’s argument that the relevant product market encompasses the broader advertising ecosystem. It found that Google, on a prima facie basis, is a dominant firm in the online search and search engine marketing (“SEM”) markets in South Africa: “Google Ads is likely to be dominant (by virtue inter alia of Google’s market power in the inter-related market for search) in instances where consumers search online to identify a specific bookmaker or gambling offering… Google is the predominant search alternative in South Africa… bookmakers reviewed in South Africa generally do not have physical premises and customers interact with them primarily through the internet…”.
Refusal to supply a customer
Google claimed that supplying Lottoland with access to Google Ads carries with it the potential for criminal liability and other commercial risks. However, this argument was undermined by the fact that Google allowed Lottoland’s competitors to advertise the same or similar services which Google claimed contravenes the Lotteries Act.
The Tribunal notes in its reasons that Google has not presented clear evidence that Lottoland is in breach of the Lotteries Act. Furthermore, that there are substantive disputes in relation to the legality or not of Lottoland’s business as it relates to fixed-odds betting on the outcome of lotteries and that it is not appropriate for it to attempt to determine these disputed issues.
Scarce goods or services
The Tribunal found that Google Ads can prima facie be considered as a scarce service: “The findings of the CMA and Commission show customer preference for Google search; that there is no feasible substitute for Google Ads… Google’s rivals likely face significant barriers to attracting advertisers; Google Ads is a service which cannot be easily replicated by [its] competitors…”
Economic feasibility
The Tribunal found that it is prima facie economically feasible for Google to supply Google Ads services to Lottoland : “Google… still provides access to Google Ads to some of Lottoland’s competitors… Lottoland seeks nothing more than equitable access with its rivals... Google has previously supplied Google Ads services to Lottoland and there is no evidence to suggest that it was not economically feasible for it to do so at the time.”
Pro-competitive gains
The Tribunal found that Google’s conduct, prima facie, distorts competition in the downstream market without any prima facie pro-competitive or efficiency justification by Google.
Tribunal’s conclusion on prohibited conduct
The Tribunal concludes that Google's conduct in this case prima facie amounts to a refusal to deal under section 8(1)(d)(ii): “Taking all the above evidence into consideration, we conclude that the termination or restriction of access in this matter prima facie constitutes a refusal to deal in the context of section 8(1)(d)(ii), given that the refusal prima facie undermines Lottoland’s participation and expansion within the market in which it operates. The conduct prima facie distorts competition by impeding the ability of a downstream firm to expand within the market relative to its rivals in the absence of any technological, efficiency or pro-competitive gain. Lottoland has provided evidence on the impact on its business, which we interpret further below in circumstances where; i) there is no clear evidence that there is a contravention of the Lotteries Act; ii) there is evidence of unfairness or inconsistency in the application of Google’s policies vis-à-vis Lottoland and its rivals; and iii) where access was previously provided (from March 2020) and subsequently revoked (in September 2020).”
Additionally, prima facie, Google contravened section 8(1)(c) of the Act i.e. its conduct has a prima facie anti-competitive effect in that it distorts competition by impeding Lottoland’s ability to expand within the market relative to its rivals. This is not outweighed by technological, efficiency or other pro-competitive gains.
Irreparable harm
Lottoland quantified the effects on it of the alleged conduct, arguing that as a direct result of Google’s refusal to allow it to utilise Google Ads, its new customer registration dropped significantly. Furthermore, based on the seven months in which Google supplied its Google Ads to Lottoland, Lottoland estimates that it has, as a result of Google's refusal to supply, suffered a significant reduction in revenue, which is ongoing.
After considering all of the evidence, the Tribunal found that Google’s conduct in this case prima facie resulted in significant commercial harm to Lottoland as well as affecting its ability to compete with its rivals for new users.
Balance of convenience
The Tribunal concluded that the balance of convenience favours the granting of interim relief: “Any prejudice which the respondents may suffer during the period of our interim order, pending the determination of the matter, must be considered against the prima facie effect on competition in the market by Google impeding Lottoland’s ability to expand within the market relative to its rivals, direct harm to Lottoland’s business and depriving end-consumers of choice.”
*Note to editors: Interim relief is a procedure to temporarily protect and maintain competition pending the conclusion of a hearing into the alleged restrictive practice(s) i.e. abuse of dominance. It is decided without the benefit of a full investigation and oral evidence. It is not the Tribunal’s function, in interim relief proceedings, to arrive at a definitive finding of a contravention. A successful applicant is only required to make out a prima facie case, not to establish its case on a balance of probabilities.
Issued by:
Gillian de Gouveia, Communications Manager
On behalf of the Competition Tribunal of South Africa
Cell: +27 (0) 82 410 1195
E-Mail: GillianD@comptrib.co.za
Twitter: @comptrib
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