British competition watchdog outlines its new regime, and powers required to govern big name tech firms in the years ahead
Big name tech firms face increasing regulation in the future, both in the United States and Europe – with the UK becoming the latest nation to clearly signal its intentions.
The UK’s competition watchdog, the Competition and Markets Authority (CMA), has (as expected) officially unveiled its plans for tougher competition rules on big name tech firms in 2021.
The move has been a long time coming. In December 2019, the CMA had warned it would consider implementing tougher rules on tech giants over competition concerns.
And now a year later the CMA has officially announced its proposals that will see the creation of a bespoke dedicated unit within the CMA (called the Digital Markets Unit – DMU).
This unit will oversee a pro-competition regime for platforms including those funded by digital advertising, such as Google and Facebook.
“The CMA has today issued advice to government on the design and implementation of the UK’s new pro-competition regime for digital markets,” it said. “It outlines a modern regulatory regime fit for the digital age – one that is forward-looking, targeted and enables quick results to harness the full potential of digital markets, driving greater competition and innovation.”
The watchdog said it the new regime is designed to “govern the most powerful tech firms – those with ‘strategic market status’ (SMS) – meaning those with substantial, entrenched market power and where the effects of that market power are particularly widespread or significant.”
But how does it propose to reign in the power of big tech?
- Firstly, a new legally binding code of conduct, tailored to each firm, will be created. This will be overseen by the DMU. “The code will help to shape the behaviour of powerful digital firms, up front, and govern elements of how they do business with other companies and treat their users,” said the government. “There will be a range of powers available to the DMU to address any concerns, including the potential for significant penalties.”
- Secondly, the DMU will be responsible for ‘pro-competitive interventions’, which can be used to address the sources of market power. For example, an intervention could see the imposing of interoperability requirements on tech firms and better enabling consumers to control and share data.
- The third and final drive will be the creation of “enhanced merger rules.” This will enable the CMA to apply closer scrutiny to transactions involving big name tech firms. For example, it would be mandatory to notify the CMA of a transaction, and it could impose a block on completing a deal until it is investigated.
The government has committed to consult on proposals for a new pro-competition regime in early 2021 and to legislate to put the DMU on a statutory footing when parliamentary time allows.
It should be noted that the new regime will have some teeth as it will be able to fine tech companies up to 10 percent of their global turnover if they do not comply with the remedies to anti-competitive behaviour it demands.
“To ensure the UK can continue to enjoy a thriving tech sector, consumers and businesses who rely on tech giants like Google and Facebook should be treated fairly, and competitors should face a level playing field – enabling them to deliver more of the innovative products and services we value so highly,” explained CMA CEO Andrea Coscelli.
“For that to happen, the UK needs new powers and a new approach,” said Coscelli. “In short, we need a modern regulatory regime that can enable innovation to thrive, while taking swift action to prevent problems.”
“To meet the new challenges of the digital age, it is essential that regulators work together,” Coscelli concluded. “In developing these proposals, we have benefited from working alongside Ofcom, the ICO and the FCA.”
The new regime has been welcomed by the Information Commissioner’s Office, which has been busy of late investigating data breaches and handing out stiff financial fines.
“We welcome the publication of the Digital Markets Taskforce Advice and we have been pleased to support the work of the Taskforce,” said Information Commissioner, Elizabeth Denham.
“The dominance of a few major players in digital market impacts on people’s data protection rights when they use these platforms,” said Denham. “Our involvement with the Taskforce reflects the importance of safeguarding these rights and ensuring individuals have greater control over their personal information.
Currently the CMA feels that there is a lack of competition in digital markets that prevents the development of new, valuable services for consumers, and results in higher prices for businesses using the platforms – which are then passed on to consumers.
And it should be noted that the UK is not alone is tightening regulations surrounding big names in the tech sector.
EU digital chief Thierry Breton recently warned tech giants of the consequences of breaking the forthcoming European Union’s Digital Services Act (DSA) and Digital Markets Act (DMA) rules.
Breton warned that tech giants that if they break the new EU rules, they could face fines, be ordered to change their practices, or even be forced to break up their European businesses.