UK digital markets regulator to be given statutory powers

UK digital markets regulator to be given statutory powers

Digital Markets Unit will be put on statutory footing by UK government to ensure technology giants do not abuse market power, but announcement comes with no clear indication of when legislation will be introduced

Sebastian  Klovig Skelton

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Published: 06 May 2022 15:56

The UK government is to give the Digital Markets Unit (DMU) statutory powers to enforce a “pro-competition” regime, with the aim of rebalancing the relationship tech giants have with consumers and businesses.

The government’s regulatory proposals will allow the DMU to designate firms with “strategic market status” (expected to include the likes of Meta, Google, Amazon and Apple), as well as enforce new, binding codes of conduct against these firms that dominate the UK’s digital markets.

Failure to comply with the DMU and its rules could result in fines of up to 10% of annual global turnover for tech companies, with additional penalties of 5% of daily global turnover for each day the offence continues. Senior managers will also face civil penalties if their firms fail to engage properly with the DMU’s requests for information.

The government claimed this would force the biggest tech firms to treat both users and other companies more fairly.

“Technology has revolutionised the way thousands of UK firms do business – helping them reach new customers and putting a range of instant online services at people’s fingertips. But the dominance of a few tech giants is crowding out competition and stifling innovation,” said digital minister Chris Philp.

“We want to level the playing field and we are arming this new tech regulator with a range of powers to generate lower prices, better choice and more control for consumers, while backing content creators, innovators and publishers, including in our vital news industry.”

The government added that conduct requirements on the biggest tech firms would include making it easier for people to switch between phone operating systems and social media accounts; paying news publishers fairly for online news content; and reporting takeovers and mergers before completion to the Competition and Markets Authority (CMA) so it can decide whether or not to investigate.

Tech firms would also be expected to meet new obligations around trust and transparency by, for example, alerting smaller businesses that rely on their platforms and search engines to algorithm changes that could steer traffic away from their sites and drive down revenue, and giving users more control over how their data is used.

Powers the DMU will be given to intervene in the root causes of market dominance include being able to force firms with strategic market status to share data with smaller competitors to limit their advantage; resolve pricing disputes between platforms and news publishers; as well as suspend, block and reverse behaviour by firms that breach the conduct requirements.

However, the government said the exact conduct requirements for companies covered by the DMU would be defined when it brings forward the legislation.

The regime detailed in the government’s announcement was informed in part through a public consultation launched in July 2021, which received 105 written submissions from a range of technology businesses, trade associations, academics and campaign groups.

“The government’s decision to help clarify the scope of the regime and ensure codes of conduct are flexible and tailored is a welcome step forward, as is the more targeted approach to merger reform and the minimum revenue threshold which will provide smaller companies with certainty that they won’t be in scope,” said Neil Ross, associate director for policy at TechUK.

“However, the consultation response raises major outstanding questions over key terms and arbitration mechanisms. It is also not clear when the new regime will be implemented.”

No legislative timeline

Setting up a new digital markets regulator was one of the recommendations of the March 2019 Furman report, Unlocking digital competition, which said a watchdog should be established with skills across technology, economics and behavioural sciences to lay out “the rules of the game” for companies in the sector.

A later market study by the CMA in July 2020 found that a lack of competition throughout the UK’s digital markets was preventing consumers from accessing new services, as well as resulting in direct harm to smaller businesses.

Plans to establish the DMU were then unveiled in November 2020, and the unit was officially launched in non-statutory form within the CMA in April 2021, when it began work on developing legally binding codes of conduct to prevent anti-competitive behaviour in digital markets.

Since its creation, the DMU has been operating in a limited capacity and has not been able to take action against tech companies because the UK government is yet to approve legislation officially establishing its oversight powers. However, the government still has not committed to a firm timeline for the legislation, which it said would be introduced “in due course”.

“The reported scale of fines under consideration for those companies which fail to abide by these new competition rules is significant and should be welcomed”
Simon Elliott, Acquia

Philp told the House of Lords Communications and Digital Committee in February 2022 that he did not have an indication of when the DMU rules would be introduced, as there was no cross-government agreement on a legislative timetable.

Andrea Coscelli, chief executive of the CMA, said the watchdog “stands ready to assist the government to ensure that legislation can be brought forward as quickly as possible, so consumers and businesses can benefit.”

Computer Weekly asked the Department for Culture, Media and Sport if it could be more specific about a legislative timeline, but it declined to comment.  

Simon Elliott, senior technical director at software-as-a-service company Acquia, said that although these latest developments were encouraging, with no concrete plans as to when these new rules will come into fruition, frustration remains.

“Greater scrutiny of business practices is a critical measure toward preventing social media and big tech giants from exploiting their market dominance to crowd out competition and stifle innovation. The reported scale of fines under consideration for those companies which fail to abide by these new competition rules is significant and should be welcomed,” he said.

“However, frustration remains with the timing. There are still no concrete plans as to when the new rules will be introduced. Consumer demand for privacy has never been stronger – research suggests that only 58% of UK consumers trust brands to handle their personal data. The business practices of these tech giants need to be subjected to greater scrutiny so that we can steer away from opaque data usage, which has eroded consumer trust and put fledgling businesses at an unfair disadvantage against dominant market incumbents.”

Rocio Concha, director of policy and advocacy at consumer watchdog Which?, added: “The UK has the opportunity to set an international standard for promoting competition in digital markets. Having taken the step of establishing and funding the DMU last year, the government must give it the tools it needs to do its job. Next week’s Queen’s Speech [on 10 May] represents a golden opportunity to introduce the necessary legislation – and ministers must take it.”





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