Just over a year after the launch of a special unit focused on digital markets within the national competition watchdog, the UK government has put some meat on the bones of what this new Big Tech overseer will focus on – including confirming that they will pay fines. can impose up to 10% of global annual revenue if platform giants fail to adhere to custom codes of conduct.
However, the government still hasn’t confirmed exactly when it expects legislation to empower the Digital Markets Unit (DMU) – it just says it will introduce legislation to make it legally mandatory “in due course”.
The Department for Digital, Culture, Media and Sport (DCMS) responded late yesterday to a consultation on a new “pro-competition regime for digital markets” launched last year, saying that incoming “fair play” rules for Big Tech – which the government wants to make digital markets more open and competitive — will make it easier for UK consumers to switch between Android and iOS; between social media accounts without losing their data; and to have more control over their data (such as by opting out of “personalized” advertising).
DCMS also wants the regime to ensure smartphone users have more choice about which search engine and messaging apps they use – so the DMU appears to be targeting the pre-loading/bundling practices of giants like Apple and Google.
Boosting competition by drafting traffic regulations for platform giants so they deal fairly with corporate customers is another core goal of the reform, with DCMS outlining how it will support small businesses and startups.
“Tens of thousands of small and medium-sized businesses in the UK will get a better deal from the big tech companies they rely on to trade online. Tech companies should warn smaller companies about changes to their algorithms that drive traffic and revenue,” DCMS said in a press release, highlighting the example of changes to search engine algorithms that could “direct traffic away from certain sites.” and businesses that may have a negative impact on their revenues”. (Something many Google competitors have complained about over the years.)
In a statement, digital minister Chris Philp said:
“Technology has revolutionized the way thousands of UK companies do business, helping them reach new customers and bring a range of instant online services at their fingertips. But the dominance of a few tech giants crowds out competition and stifles innovation.
“We want to level the playing field and arm this new tech regulator with a range of powers to drive lower prices, better choice and greater control for consumers, while supporting content creators, innovators and publishers, including in our vital news industry.”
DCMS also said the inbound measures “will ensure that news publishers can monetize and be fairly paid for their online news content” — saying the DMU will be empowered to “step in to settle price disputes between news outlets and platforms.” unloading”, suggesting the government is taking inspiration from Australia’s News Negotiation Act Act, targeting Facebook and Google.
In advice to the government, published today by the Competition and Markets Authority (CMA), it writes:
“Before any code is introduced, further analysis of the concerns and consultation with the parties should take place through a participatory approach. However, our analysis to date shows that there is an imbalance in bargaining power between platforms and publishers, which affects the publishers’ ability to negotiate terms, and that this imbalance could be addressed through a code .”
App developers will also be able to sell their apps on “fairer and more transparent terms,” per DCMS.
Here, the government is likely using some international moves to force Apple and Google to relinquish total control over their respective app store rules. (Although, the devil will be in the details of the codes of conduct that the DMU will adopt and we will have to wait an unknown amount of time to see those, as DCMS confirmed: “Government will define the digital activities and behavior requirements for companies that fall under the regime when it puts forward the legislation.”)
Per DCMS, only “a small number of companies with substantial and entrenched market power in the UK” will be designated with strategic market status and thus be subject to the regime. “This will ensure that the regime holds the most powerful companies to account for their behavior,” it suggested.
“The DMU will have an arsenal of robust sanctions available to address non-compliance, including fines of up to 10% of global annual turnover and additional penalties of 5% of daily global turnover for each day that a violation continues. it added, further specifying that the unit will be able to “suspend, block and reverse conduct of companies that violate their conduct requirements, and order them to take specific steps necessary to prevent a breach.” to solve”.
“Senior managers will face civil penalties if their companies fail to properly handle requests for information,” DCMS also noted.
Another outdated measure is requiring the “handful” of tech giants under the regime (known as those “with significant and entrenched market power in the UK”) to notify the CMA before commissioning any acquisitions. that the regulator can conduct an initial assessment of the merger “to determine whether further investigation is necessary”.
Last fall, the CMA ordered Facebook/Meta to undo the (completed) acquisition of Giphy – based on existing competition rules and powers for that intervention. But going forward, the goal for the DMU is to proactively prevent a giant like Meta from buying a smaller rival if/when it identifies significant competition concerns associated with a proposed merger.
That provision appears to place large limits on Big Tech’s ability to buy up and close/otherwise assimilate/crush smaller rivals – so-called “killer acquisitions” – that are widely regarded as terrible for consumers and competition (even if certain venture capitalists may be happy to get an exit).
Commenting on DCMS’s DMU announcement, Andrea Cocelli, CEO of the CMA, said in a statement:
“The CMA welcomes these proposals and we are pleased that the Government has adopted some of our recommendations that will enable the DMU to oversee an effective and robust regime for digital markets in the UK.
“The CMA stands ready to assist the government to ensure that legislation can move forward as quickly as possible so that consumers and businesses can benefit.”
UK behind Europe
The DMU began operating in shadow last April, ahead of the expected “pro-competition” reform of the oversight of tech giants, which the government has announced it will introduce to regulate the most powerful platforms, known as the so-called “strategic market”. status”, following similar movements elsewhere in Europe.
Germany is leading the way here — having already (this year) designating Google and Facebook/Meta as subject to its reformed competition regime for the most powerful tech giants, after it updated the law in early 2021 — meaning the Federal Cartel Office empowered to act more quickly. to address issues related to Big Tech’s market dominance.
In March, European Union legislators also agreed on the final details of an ex ante settlement proposed by the end of 2020 that will apply to the entire bloc — applying a series of pre-operational obligations to what the Incoming pan-EU legislation refers as “gatekeepers” to the internet, with fines of up to 10% of global annual turnover for breaches of compliance.
The EU ex-ante regulation, called the Digital Markets Act (DMA), will come into force next spring.
This means that the UK is already lagging behind in addressing major structural competition problems with digital markets – problems that its own competition authority, the CMA, has looked at for years in some cases (such as the digital advertising market which it concluded is so broken it needs has new powers to regulate adtech giants; it has also, more recently, raised preliminary concerns with Apple’s and Google’s duopoly of mobile app stores).
And while the DMU is technically up and running, it doesn’t yet have the powers to rein in too powerful tech giants, leaving UK consumers and businesses to suck up unfair terms and conditions.
It is also not yet clear how much further the UK will fall behind.
In recent weeks, reports have suggested the government is getting cold feet over the plan to more proactively regulate tech giants. While DCMS has claimed that ministers remain committed to reform – only without specifying when exactly the government will actually provide it.
A reform that has been delayed cannot solve anything in the short or even medium term, given the amount of time typically baked into regulatory regimes for procedural purposes etc. And with the Big Tech market power so entrenched, any delay seems costly to UK consumers and competition – who are already missing something.
This report was updated after the CMA published its advice to the government