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UK’s Big Tech regulator ‘to boost switching and reduce killer acquisitions’ – TechCrunch


Just over a year after launching a dedicated digital markets unit within the national competition watchdog, the UK government has put meat on the bones of what this new Big Tech regulator will focus on, including confirming that it will have the ability to impose fines of up to 10% of global annual revenue if platform giants fail to adhere to appropriate codes of conduct.

However, the government has still not confirmed exactly when it plans to legislate to empower the Digital Markets Unit (DMU) – saying only that it will introduce legislation to put it on a statutory basis “in due course”.

Responding late yesterday to a consultation on a new “pro-competitive 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 (for example by opting out of “personalized” advertising).

The DCMS also wants the scheme to ensure smartphone users have more choice over which search engine and messaging apps they use. The DMU therefore seems ready to target the preloading/bundling practices of giants like Apple and Google.

Boosting competition by establishing rules of conduct for platform giants to treat business customers fairly is another central aim of the reform, with the DCMS touting how it will support small businesses and startups.

“Tens of thousands of UK small and medium-sized businesses will get a better deal from the big tech companies they rely on to trade online. Tech companies may need to notify small businesses about changes to their algorithms that drive traffic and revenue,” DCMS said in a press release, highlighting the example of search engine algorithm changes that could drive traffic away from certain sites and businesses that could negatively affect their revenue. (Something that many Google competitors have complained about over the years.)

In a statement, Digital Minister Chris Philp said:

“Technology has revolutionized the way thousands of UK businesses do business – helping them reach new customers and putting a range of instant online services at their fingertips. But the dominance of a few tech giants crowds out competition and stifles innovation.

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

The DCMS also said the upcoming measures “will ensure that news publishers can monetize their online news content and be paid fairly for it” – saying the DMU will have the power to “step in to resolve disputes tariffs between news outlets and platforms”. , suggesting that the government is taking inspiration from Australia’s Information Negotiation Code Act targeting Facebook and Google.

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

Here, the government is likely relying on a number of international measures to force Apple and Google to relinquish full control of their respective app store rules. (However, the devil will be in the details of the codes of conduct that the DMU will enforce and we will have to wait for an unknown time to see them, as confirmed by DCMS: “The government will define digital activities and drive requirements for companies in the scope of the scheme when introducing the legislation.”)

According to the DCMS, only “a small number of companies with substantial and well-established market power in the UK” will be granted strategic market status and therefore fall within the scope of the scheme. “This will ensure that the regime will hold the most powerful companies to account for their behavior,” he suggested.

“A robust arsenal of penalties will be available to the DMU to combat 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 offense continues,” he added. further clarifying that the unit will be able to “suspend, block and reverse the behavior of companies that violate its conduct requirements, directing them to take specific actions necessary to resolve a violation.”

“Senior executives will face civil penalties if their companies fail to respond appropriately to requests for information,” the DCMS also noted.

Another dragged measure will be the requirement for the “handful” of tech giants that fall under the regime (i.e. those “with substantial and well-established market power in the UK”) to report acquisitions to the CMA before they close, ordering that the regulator may conduct an initial assessment of the merger “to determine whether further investigation is necessary”.

Last fall, the CMA ordered Facebook/Meta to reverse its (completed) acquisition of Giphy, relying on existing antitrust rules and powers for that intervention. But, going forward, the goal is for the DMU to proactively prevent a giant like Meta from buying a smaller rival in the first place if/when it identifies a key competitive issue related to a proposed merger.

This provision seems set to place great limits on Big Tech’s ability to buy and shut down/equate/otherwise crush smaller rivals – so-called “kill acquisitions” – which are widely seen as horrific to investors. consumers and competition (although some venture capitalists may be happy to get an exit).

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

“The CMA welcomes these proposals and we are delighted that the government has implemented a number of our recommendations which will enable the DMU to oversee an effective and robust digital markets regime in the UK.

“The CMA stands ready to help the government ensure that the legislation can be introduced as quickly as possible, so that consumers and businesses can benefit from it.”

UK lags behind Europe

The DMU began working in shadow form in April last year, ahead of the planned ‘pro-competition’ reform of oversight of tech giants which the government said it would introduce to regulate platforms the most powerful, that is, with the so-called “strategic market”. status”, following similar movements elsewhere in Europe.

Germany leads 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 updating the law at the start of 2021 – meaning its Federal Cartel Office is empowered to step in more quickly to address issues related to Big Tech’s market dominance.

In March, European Union lawmakers also agreed on the final details of a proposed ex ante regime at the end of 2020, which will apply across the bloc – applying a set of initial operational obligations on what the new pan-European law refers to. as the “gatekeepers” of the Internet, with fines of up to 10% of annual worldwide revenue for compliance failures.

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

This means the UK is already behind in addressing key structural competition issues with digital markets – issues that its own competition authority, the Competition and Markets Authority (CMA), has spent years examining in some cases (as the digital ad market he struck is so broken that he needs new powers to regulate ad-tech giants; he also, more recently, expressed preliminary concerns about Apple’s duopoly and Google on mobile app stores).

And while the DMU is, technically, operational, it does not yet have the powers to rein in overly powerful tech giants – leaving UK consumers and businesses to continue to suck up unfair terms and conditions.

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

In recent weeks, reports have suggested the government is cold-eyed about the plan to more proactively regulate tech giants. Although the DCMS claimed that ministers remained committed to reform – without specifying when exactly the government will take care of it.

Delayed reform cannot fix anything in the short or even medium term, given the time usually spent on regulatory regimes for procedural purposes, etc. And with Big Tech’s market power so entrenched, any delay seems costly to UK consumers and competition who are already missing out.

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