UK government ramps up efforts to regulate tech giants

The government has unveiled plans to establish a new tech regulator under the Competitions and Markets Authority (CMA), to write and enforce a new code of practice on tech giants.

There has been growing concern in the government and across industry about the unfair advantage the tech giants have.

In July, the CMA formally created the Digital Markets Taskforce (DMT) to advise the government on whether a new approach is needed to ensure effective competition in digital markets.

Setting up a new regulator was one of the recommendations of the March 2019 Furman report, Unlocking digital competition. The report recommended that the digital markets unit should be charged with enabling greater personal data mobility and systems with open standards where these tools will increase competition and consumer choice.

The report also recommended that the digital markets unit should be able to advance data openness where access to non-personal or anonymised data will tackle the key barrier to entry in a digital market, while protecting privacy.

The government said the dedicated Digital Markets Unit will work closely with regulators including Ofcom and the Information Commissioner’s Office to introduce and enforce a new code to govern the behaviour of platforms that currently dominate the market.

“Digital platforms like Google and Facebook make a significant contribution to our economy and play a massive role in our day-to-day lives – whether it’s helping us stay in touch with our loved ones, share creative content or access the latest news,” said business secretary Alok Sharma. “But the dominance of just a few big tech companies is leading to less innovation, higher advertising prices and less choice and control for consumers.”

The CMA said that a lack of competition in digital markets prevents the development of new, valuable services for consumers, and results in higher prices for businesses using the platforms – which are then passed on to consumers.

Digital Secretary Oliver Dowden said: “There is growing consensus in the UK and abroad that the concentration of power among a small number of tech companies is curtailing growth of the sector, reducing innovation and having negative impacts on the people and businesses that rely on them. It’s time to address that and unleash a new age of tech growth.”

While the Furman report found that there have been a number of efforts between the tech giants to support interoperability, giving consumers greater freedom and flexibility, these can be hampered by technical challenges and a lack of coordination. The report’s authors wrote that, in some cases,  lack of interoperability are due to misaligned incentives.

“Email standards emerged due to co-operation but phone number portability only came about when it was required by regulators. Private efforts by digital platforms will be similarly hampered by misaligned incentives. Open Banking provides an instructive example of how policy intervention can overcome technical and coordination challenges and misaligned incentives.”

In July, when the DMT was setup, law firm Osborne Clarke warn about the disruption to businesses increased regulations could bring.

“Although the amount of regulation on digital businesses is steadily increasing, the move to regulate some digital market players on an ex ante basis remains a radical one. Typically, codes of conduct and formal designations of businesses as having market power are seen in markets where competition has been introduced after a historic monopoly (the telecoms sector is the obvious example), not in relation to businesses which have won their market status through game-changing innovation and disruptive creativity.”

It said this new approach would be business-model-changing for some and create a significant new regulatory compliance burden.