UK Big Tech Regulator ‘To Boost Switching, Cut Killer Acquisitions’

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Just over a year after launching a dedicated digital markets unit within the national competition watchdog, the UK government has put some meat into what this new Big Tech regulator will focus on, including confirming that it will be able to levy fines. . up to 10% of global annual turnover if platform giants do not comply with individual codes of conduct.

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However, the government has yet to confirm exactly when it intends to pass legislation to empower the Digital Markets Unit (DMU), saying only that it will introduce legislation to put it on a statutory basis “in due time.”

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Answering late yesterday consultation The Department of Digital, Culture, Media and Sports (DCMS) announced a new “competition support regime for digital markets” that was launched last year. markets will become more open and competitive – it will be easier for British consumers to switch between Android and iOS; between social media accounts without data loss; and have more control over your data (for example, by opting out of “personalized” advertising).

DCMS also wants the mode to give smartphone users more choice as to which search engine and messaging apps they use, which is why DMU seems to be targeting the preload/bundling practice of giants like Apple and Google.

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Increasing competition by setting rules of conduct for platform giants to treat business customers fairly is another major goal of the reform, and DCMS is touting how it will support small businesses and startups.

“Tens of thousands of UK SMEs will get a better deal from the big tech firms they rely on for online commerce. Tech companies may need to alert smaller firms to changes in their algorithms that drive traffic and revenue,” DCMS said in a press release, which provides an example of changes in search engine algorithms that could divert traffic “from certain sites and businesses, which may have a negative impact on their income.” (Something a lot of Google competitors complained aboutover the years.)

Commenting on the announcement, Digital Secretary Chris Philp said:

“Technology has revolutionized the way thousands of UK firms do business, helping them find new customers and giving people access to a range of instant online services. But the dominance of a few tech giants drives out competition and stifles innovation.

“We want to level the playing field, and we’re giving this new technology regulator a range of powers to create lower prices, better choice, and more control for consumers while supporting content creators, innovators, and publishers, including in our vital news industry.”

DCMS also said the upcoming measures will “ensure that news publishers can monetize their online news content and get paid fairly for it.” , which suggests that the government draws inspiration from Australian news code law targets Facebook and Google.

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

Here the government is likely to rely on a number of international steps. force Apple and Google relinquishes full control their respective app store policies. (Though the devil is in the details of the codes of conduct that the DMU will enforce, and we will have to wait an unknown amount of time to see them, as the DCMS confirmed: legislation”.)

According to the DCMS, only “a small number of firms with significant and established market power in the UK” will gain strategic market status and thus fall under the regime. This will allow the regime to hold the most powerful enterprises accountable for their behavior.

“An arsenal of tough sanctions will be available to the DMU to combat non-compliance, including fines of up to 10% of annual global turnover and additional fines of 5% of daily global turnover for each day the violation continues,” he added. it further specifies that the division will be able to “suspend, block and reverse the conduct of firms that violate their conduct requirements, ordering them to take the specific steps necessary to address the violation.”

“Senior managers will face civil penalties if their firms do not properly respond to requests for information,” DCMS also noted.

Another secondary measure would be an obligation for a “handful” of technology giants subject to the regime (also referred to as those with “significant and entrenched market power in the UK”) to report acquisitions to the CMA before they are closed, in order to regulate the authority could conduct an initial assessment of the merger “to determine whether further investigation is required”.

Last failure, the CMA ordered Facebook/Meta to cancel the (completed) acquisition of Giphy, based on existing competition rules and authority to interfere. But going forward, the goal of the DMU is to prevent a giant like Meta from buying a smaller competitor in advance if/when it identifies a key competition issue associated with the proposed merger.

This provision seems to place great limits on the ability of big tech companies to buy up and shut down/otherwise assimilate/crush smaller competitors – so-called “killer acquisitions” that are widely considered terrible for consumers and competition (even if some VCs might be happy get an exit).

Commenting on DCMS’ statement on DMU, ​​Andrea Coscelli, CEO of CMA, said:

“The CMA welcomes these proposals and we are pleased that the Government has put forward a number of our recommendations which will enable the DMU to oversee an efficient and reliable digital marketplace regime in the UK.

“CMA stands ready to help the government ensure that legislation is passed as quickly as possible so that consumers and businesses can benefit.”

DMU began operating in shadow form at April last yearahead of the expected “competitive” oversight reform for tech giants which the government said it would introduce to regulate the most powerful platforms, also called “strategic market status”, following similar moves elsewhere in Europe.

Germany leads the way here, having already (this year) appointed Google and Facebook/meta under his reformed competition regime for the most powerful tech giants after he updated the law in early 2021, meaning his Federal Cartel Administration is empowered to intervene more quickly to address Big Tech’s market dominance.

Back in MarchEuropean Union legislators also agreed on the final details of the ex ante regime offered at the end of 2020which will apply across the bloc, applying a series of preliminary operational obligations against what the new pan-European law refers to as Internet gatekeepers, with penalties of up to 10% of global annual turnover for compliance violations.

A preliminary EU regulation called the Digital Markets Act (DMA) is due to come into effect. next spring.

This means that the UK is already lagging behind in addressing the key structural challenges of competing with digital markets – issues that in some cases (such as digital advertising market which he concludes is so broken that it needs new powers to regulate the ad tech giants; most recently, he also expressed tentative concerns about Duopoly of Apple and Google mobile app stores).

And while the DMU is technically up and running, it does not yet have the authority to rein in the overpowered tech giants, with the result that UK consumers and businesses continue to endure unfair terms and conditions.

It is also still not clear how far the UK will fall behind.

In recent weeks reports suggested that the government has cooled off on a plan to more actively regulate the tech giants. While the DCMS said ministers remained committed to reform, it simply did not specify When exactly the government will actually deliver it.

Delayed reform can’t fix anything in the short or even medium term, given how much time is typically given to regulatory regimes for procedural purposes etc. And with big tech’s ingrained market power, any delay looks costly to UK consumers and competitors who are already missing out. .

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