UK’s Big Tech regulator ‘to boost switching, cut killer acquisitions’

Just over a year after launching a dedicated unit focused on digital markets inside the national competition watchdog, the UK government has put some meat on the bones of what this new Big Tech regulator will focus on — including confirming it will have the ability to levy fines of up to 10% of global annual turnover if platform giants fail to comply with tailored codes of conduct.

However the government still hasn’t confirmed exactly when it expects to legislate to empower the Digital Markets Unit (DMU) — saying only that it will introduce legislation to put it on a statutory footing “in due course.”

Responding late yesterday to a consultation on a new “pro-competition regime for digital markets” which it launched last year, the Department for Digital, Culture, Media and Sport (DCMS) said 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 to have more choice over which search engine and messaging apps they use — so the DMU looks set to target the pre-loading/bundling practices of giants like Apple and Google.

Boosting competition by setting out rules of the road for platform giants so they deal fairly with business customers is another core aim for the reform, with DCMS touting how it will support small businesses and startups.

“Tens of thousands of UK small and medium-size businesses will get a better deal from the big tech firms which they rely on to trade online. Tech firms could need to warn smaller firms about changes to their algorithms which drive traffic and revenues,” DCMS said in a press release, highlighting the example of changes to search engine algorithms that could steer traffic “away from certain sites and businesses which could have a negative effect on their revenue”. (Something plenty of Google competitors have complained about, over the years.)

Commenting in a statement, digital minister Chris Philp said:

“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.

“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.”

DCMS also said the incoming measures will “make sure news publishers are able to monetise their online news content and be paid fairly for it” — saying the DMU will be given the power to “step in to solve pricing disputes between news outlets and platforms”, which suggests the government is taking inspiration from Australia’s news bargaining code law targeted at Facebook and Google.

App developers will also be able to sell their apps on “fairer and more transparent terms”, per DCMS.

Here the government is likely drawing on a number of international moves to force Apple and Google to give up total control of their respective app store rules. (Albeit, the devil will be in the detail of the codes of conduct the DMU will be applying and we’ll have to wait an unknown amount of time to see those, as DCMS confirmed: “The government will define the digital activities and conduct requirements for firms in scope of the regime when it brings forward the legislation.”)

Per DCMS, only “a small number of firms with substantial and entrenched market power in the UK” will be designated with strategic market status and thus fall in scope of the regime. “This will make sure the regime holds the most-powerful businesses to account for their behaviour,” it suggested.

“An arsenal of robust sanctions will be available to the DMU to tackle non-compliance, including fines of up to 10% of annual global turnover and additional penalties of 5% of daily global turnover for each day an offence continues,” it added, further specifying that the unit will be able to “suspend, block and reverse behaviour by firms that breaches their conduct requirements, ordering them to take specific steps necessary to resolve a breach”.

“Senior managers will face civil penalties if their firms fail to engage properly with requests for information,” DCMS also noted.

Another trailed measure will be an obligation for the “handful” of tech giants who fall in scope of the regime (aka, those “with substantial and entrenched market power in the UK”) to report acquisitions to the CMA before they have closed, in order that the regulator can conduct an initial assessment of the merger “to determine whether further investigation is needed”.

Last fall, the CMA ordered Facebook/Meta to undo its (completed) acquisition of Giphy — relying on existing competition rules and powers for that intervention. But, in the future, the aim is for the DMU to proactively prevent a giant like Meta from buying a smaller rival in the first place if/when it identifies key competition concern attached to a proposed merger.

That provision looks set to put big limits on Big Tech’s ability to buy up and close down/otherwise assimilate/crush smaller rivals — so called ‘killer acquisitions’ — which are widely considered to be horrible for consumers and competition (even if certain venture capitalists may be happy to get an exit).

Commenting on DCMS’ DMU announcement in a statement, Andrea Coscelli, CEO of the CMA, said:

“The CMA welcomes these proposals and we’re pleased that the government has taken forward a number of our recommendations that will allow the DMU to oversee an effective and robust digital markets regime in the UK.

“The CMA stands ready to assist the government to ensure that legislation can be brought forward as quickly as possible, so consumers and businesses can benefit.”

The DMU started work in shadow form in April last year, ahead of the anticipated “pro-competition” reform of oversight of tech giants which the government has said it will introduce to regulate the most powerful platforms, aka with so-called “strategic market status”, following similar moves elsewhere in Europe.

Germany is leading the pack here — having already (this year) designated Google and Facebook/Meta as subject to its reformed competition regime for the most powerful tech giants, after it updated the law at the start of 2021 — meaning its Federal Cartel Office is empowered to intervene more quickly to address problems linked to Big Tech’s market dominance.

Back in March, European Union lawmakers also agreed the final details of an ex ante regime proposed at the end of 2020, which will apply across the bloc — applying a set of up-front operational obligations on what the incoming pan-EU law refers to as Internet “gatekeepers”, with fines of up to 10% of global annual turnover for compliance breaches.

The EU ex ante regulation, called the Digital Markets Act (DMA), is due to come into force next Spring.

This means the UK is already lagging on addressing key structural competition problems with digital markets — problems which its own competition authority, the Competition and Markets Authority (CMA), has spent years looking into in some cases (such as the digital advertising market which it concluded is so broken it needs new powers to regulate adtech giants; it has also, more recently, set out preliminary concerns with Apple’s and Google’s duopoly of mobile app stores).

And while the DMU is, technically, up and running, it does not yet have powers to be able to rein in too-powerful tech giants — leaving UK consumers and businesses to continue sucking up unfair T&Cs.

It is also still not 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. Although DCMS has claimed ministers remain committed to the reform — just without specifying when exactly the government will actually deliver it.

A reform that’s delayed can’t fix anything in the short or even medium term, given how much time is typically baked into regulatory regimes for procedural purposes etc. And with Big Tech market power so entrenched any delay looks costly for UK consumers and competition who are already missing out.