The UK government has announced that it is giving statutory powers to the new Digital Markets Unit (DMU) regulator to enforce pro-competition rules and protect users from the “unfair practices” of big tech companies.
New Watchdog To Prevent Abuse of Market Power
Following a consultation in July 2021, the government says that it is giving statutory powers to its new DMU tech watchdog, launched in non-statutory form within the Competition and Markets Authority (CMA) last year, to make sure tech companies don’t abuse their market power.
Armed with its new powers, the DMU will be able to enforce new tailored codes of conduct for how the handful of firms dominating digital markets should treat their users and other companies fairly. Sanctions for those companies who ignore the new rules could include a fine of up to 10 per cent of their global turnover.
The government says that the DMUs job will be:
– To help boost competition across digital markets by tackling the harmful effects and sources of substantial and entrenched market power.
– To protect smaller businesses from predatory practices and to protect consumers and competition by governing the relationship between users and key ‘gateway’ digital firms.
– To ensure fair prices for content in disputes between powerful platforms and content providers such as news publishers and advertisers. As part of this role, the DMU will have the power to step in to solve pricing disputes between news outlets and platforms. Also, the DMU could help ensure that app developers can sell their apps on fairer and more transparent terms.
– To make it easier for people to switch between Apple iOS and Android phone operating systems or between social media accounts without losing their data and messages. The DMU, for example, will be able to stop companies limiting consumers to pre-installed software on their devices. This could also give users more choice of which search engines they have access to, and of social media platforms as new entrants enter the market, as well as giving more control over how their data is used by companies.
– To make sure that smaller firms are alerted to any algorithm changes which affect the driving traffic and revenues.
Those With ‘Strategic Market’ Status To Report Takeovers
The government also says that a small number of companies with substantial and entrenched market power will be designated with ‘strategic market’ status and will have to report takeovers before they complete so the CMA can conduct an initial assessment of the merger to determine whether further investigation is needed.
Should Mean Greater Choice and Lower Prices For Consumers
Consumer Minister, Paul Scully, said that with the new powers for the DMU: “We’re ensuring our modern, digitised economy gives consumers better products, greater choice and lower prices by having companies compete for customers on a level playing field”.
What Does This Mean For Your Business?
It would be difficult to deny that there are essentially just a handful of big gateway tech companies that are entrenched, and able to exert a lot of control over the market with their power. The move with the consultation and the threat to give the DMU statutory powers (which may not actually happen) is an attempt to try and create a more favourable competitive environment where smaller entrants have more of a chance and aren’t simply bought up before they become a threat, where end users have more choice, and where big tech firms are less able to charge higher prices because they can. This move by the UK government is also part of a wider strategy to hold big tech companies to account in many ways, including improving safety, e.g. with the Online Safety Bill. The announcement about possible powers for the DMU is also likely to be good news for publishers, advertisers and app developers. For the big tech companies, it is likely to be preferable to avoid too much more external scrutiny and regulation than they already have, so this latest announcement and its implications for profits is likely to be unwelcome news for them.