Small businesses will be protected from predatory practices and consumers will have more choice and control over their online experiences as the UK government sets out its final vision for how the new digital markets regulator will boost competition to drive growth economy and innovation.
The majority of UK businesses now rely on powerful tech companies to ensure customers find their business online. These companies control the main online gateways for millions of Internet users and favor their own applications and browsers. They are also able to set their own prices for the online services they provide to businesses without dispute, which can be passed on to consumers.
The impact of weakened competition is stark – the Competition and Markets Authority estimates that Google and Facebook made UK excess profits of £2.4bn in 2018 alone – harming consumers due to rising prices.
In response to its consultation published last year, the government outlines its intention to give statutory powers to the Digital Markets Unit (DMU) to enable it to apply pro-competitive rules and rebalance the relationship that Tech giants are talking to consumers and businesses so that they are better protected against unfair practices. The DMU is a new watchdog to make sure tech companies don’t abuse their market power.
The proposals aim to make it easier for people to switch between Apple iOS and Android phones or between social media accounts without losing their data and messages. Smartphone users could have more choice over which search engines they access, more choice of social media platforms as new entrants enter the market, and more control over how their data is used by businesses.
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 might need to notify small businesses about changes to their algorithms that drive traffic and revenue.
The measures will also ensure that news publishers are able to monetize their online news content and be paid fairly for it, with the DMU having the power to intervene to resolve pricing disputes between news outlets. and platforms. App developers could sell their apps on fairer and more transparent terms.
Increased competition in digital markets will encourage Internet companies to provide higher quality services. Lower fees for advertisers and businesses will prevent costs from being passed on to consumers, leading to lower prices for the goods they buy online.
The government will in due course introduce a bill to give the Digital Markets Unit a statutory footing.
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 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 information industry.
The DMU, launched in a non-statutory form within the Competition and Markets Authority (CMA) last year, will have the power to designate some of the world’s most powerful companies with “market status”. strategic”.
The regulator will enforce new bespoke codes of conduct on how the handful of companies dominating digital markets should treat their users and other businesses fairly, with stiff penalties for those who ignore the rules.
Under these binding conduct requirements, companies must ensure that consumers can freely choose the digital services they use.
For example, the DMU will be able to prevent companies from limiting consumers to software pre-installed on their devices, making it easier for smartphone users to choose which search engine or messaging apps they use. People will have more decision-making power over how their data is used and managed by tech companies – for example, opting out of targeted personalized ads.
Big tech companies covered by the new regime will have to meet the regulator’s clear expectations of trust and transparency, such as informing companies using their services of material changes that could affect them.
For example, search engines exert enormous control over the sites that consumers can find. Any changes to their algorithms could mean that traffic is diverted from certain sites and businesses, which could negatively affect their revenue.
The DMU will also step in to address the root causes of market dominance. Potential interventions are to force companies with strategic status in the market to share more data with smaller competitors to help them overcome the advantages of larger companies.
The requirements will also define how dominant companies must negotiate with content providers such as news publishers. The DMU will have the power to resolve pricing disputes so that information providers are paid fairly for their online content.
This could increase the bargaining power of national and regional newspapers and force social media platforms to be more transparent about how they position publishers on their platforms and the algorithms used.
A robust arsenal of penalties will be made 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 that an offense continues.
It will be able to suspend, block and reverse the behavior of companies that violate its conduct requirements, ordering them to take specific actions necessary to resolve a violation. Senior executives will face civil penalties if their companies do not properly respond to requests for information.
Consumer Affairs Minister Paul Scully said:
We are ensuring that our modern, digitized economy provides consumers with better products, greater choice and lower prices by ensuring businesses compete for customers on a level playing field.
The customer is always right but sometimes he has no choice. We will prevent companies from using their power to harm customers, whether they limit buyers’ choices to certain software on their devices or make it difficult for people to decide how their data is used.
Under new “lightweight” rules, companies designated with strategic market status will have to report takeovers before they are finalized so that the AMC can conduct an initial merger assessment to determine whether a further investigation is needed.
Only a small number of companies with substantial and well-established market power in the UK will be awarded strategic market status. This will ensure that the regime will hold the most powerful companies to account for their behavior. The government will set out the digital activities and conduct requirements for businesses under the scheme when it introduces the legislation.
Andrea Coscelli, Chief Executive Officer of CMA, 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.
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.