Regulation proposals pave the way for multibillion-pound fines for tech giants

Written by Jenni Davidson and Sam Trendall on 23 July 2021 in News
News

Government opens consultation on new ‘pro-competition’ regime

Credit: Jacob Edward/CC BY 2.0

Proposals for new digital market regulation to protect consumers and smaller players from tech giants wielding too much power have been set out for consultation by the government.

Firms found to breach new rules could face “tough fines” of up a tenth of global turnover – a figure that would equate to tens of billions of pounds for the biggest firms.

Under the proposed new rules, the Digital Markets Unit (DMU) – which launched in April within the Competition and Markets Authority – will be given the power to designate tech firms that hold substantial market power with ‘strategic market status’.

Being given this status will require companies to follow new rules of acceptable behaviour with competitors and customers. 

This could include tech platforms not pushing their customers into using default or mandatory associated services, or ensuring third-party companies that depend on them are not blocked from doing business with competitors.


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The aim is to help smaller businesses compete against tech giants and ensure there is fair competition. 

A consultation on the proposals has been launched now and will run until 1 October.

The consultation seeks views on the objectives and powers of the DMU and sets out the new mandatory code of conduct for what is expected of large firms.

Among the issues being examined in the consultation is the criteria for deciding which firms fall with the scope of the regulation and what powers the DMU should have to make the scheme effective.

The code of conduct will be underpinned by investigation and enforcement powers.

For the most serious breaches, this could include imposing fines up to a maximum of 10% of a firm’s turnover for the most recent financial year. 

For Google, this figure would equate to more than £13bn, while Amazon could theoretically face a penalty of almost £30bn under the new regime.

The DMU could also be given powers to suspend, block and reverse code-breaching behaviour by tech giants, such as unfair changes in their algorithms or terms and conditions, and ordering them to take specific actions to comply with the code.

As well as tackling poor behaviour by large companies, the consultation will also consider whether the DMU will be able to impose a set of measures to tackle the root causes of competition issues in digital markets.

This could see the DMU implementing measures to support interoperability: making it easier for digital platforms and services to be compatible with each other and for customers to switch between them. For example, it could require platforms to allow the public to share contacts from one platform to another.

The government will also consider whether to give the CMA greater powers to scrutinise and intervene in harmful mergers involving firms with strategic market status, for example, by requiring big tech firms to report on their takeovers. 

The consultation comes after the government set out its plan earlier this month to make the UK a global leader in innovation-focused digital regulation. Following the consultation, the government aims to legislate to give the DMU its new powers as soon as parliamentary time allows.

Digital secretary Oliver Dowden said: “The UK's tech scene is thriving, but we need to make sure British firms have a level playing field with the tech giants and that the public gets the best services at fair prices, so we will be giving our new Digital Markets Unit the powers it needs to champion competition and drive growth and innovation, with tough fines to make sure the biggest tech firms play by the rules.”

Andrea Coscelli, chief executive of the CMA, added: “These proposals recognise the importance of promoting competition in digital markets and the need for a new set of tools to do this most effectively. Today’s consultation is an important milestone towards building a world-leading, pro-competition regime to drive technological innovation and protect consumers in the digital age. The Digital Markets Unit will continue to support the government as it establishes this new regime, ahead of receiving its new statutory powers.”

 

About the author

Jenni Davidson is a journalist at PublicTechnology sister publication Holyrood, where this story first appeared. She tweets as @HolyroodJenni.

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