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by Jenni Davidson
21 July 2021
Proposals set out for digital market regulation to protect smaller players and consumers

Amazon cloud package - Image credit: Jordan Kanouse from Pixabay

Proposals set out for digital market regulation to protect smaller players and consumers

Proposals for new digital market regulation to protect consumers and smaller players from tech giants wielding too much power have been set out for consultation by the UK Government.

Under the proposed new rules, the online regulator, the Digital Markets Unit (DMU), which launched within the Competition and Markets Authority (CMA) in April, will be given the power to designate tech firms that hold substantial market power with ‘strategic market status’ (SMS).

Being given SMS status will require companies to follow new rules of acceptable behaviour with competitors and customers. 

This could include tech platforms not pushing their customers into using default or mandatory associated services, or ensuring third party companies that depend on them aren’t blocked from doing business with competitors.

The aim is to help smaller businesses compete against tech giants and ensure there is fair competition.

A consultation on the proposals has been launched now and will run until 1 October.

The consultation seeks views on the objectives and powers of the DMU and sets out the new mandatory code of conduct for what is expected of large firms.

Among the questions being asked in the consultation is the criteria for deciding which firms fall with the scope of the regulation and what powers the DMU should have to make the scheme effective.

The code of conduct will be underpinned by investigation and enforcement powers.

These could include imposing fines up to a maximum of 10 per cent of a firm’s turnover for the most serious breaches.

The DMU could also be given powers to suspend, block and reverse code-breaching behaviour by tech giants, such as unfair changes in their algorithms or T&Cs, and ordering them to take specific actions to comply with the code.

As well as tackling poor behaviour by large companies, the consultation will also consider whether the DMU will be able to impose a set of measures to tackle the root causes of competition issues in digital markets.

This could see the DMU implementing measures to support interoperability: making it easier for digital platforms and services to be compatible with each other and for customers to switch between them.

For example, it could require platforms to allow the public to share contacts from one platform to another.

The UK Government will also consider whether to give the CMA greater powers to scrutinise and intervene in harmful mergers involving firms with strategic market status, for example, by requiring big tech firms to report on their takeovers. 

The consultation comes after the UK Government set out its plan earlier this month to make Britain a global leader in innovation-focused digital regulation.

Following the consultation, the government aims to legislate to give the DMU its new powers as soon as parliamentary time allows.

Commenting on the proposals, UK Government digital secretary Oliver Dowden said: “The UK's tech scene is thriving, but we need to make sure British firms have a level playing field with the tech giants and that the public gets the best services at fair prices, so we will be giving our new Digital Markets Unit the powers it needs to champion competition and drive growth and innovation, with tough fines to make sure the biggest tech firms play by the rules.”

Business secretary Kwasi Kwarteng said: “Tech has transformed our lives for the better, whether it’s helping us to stay in touch with our loved ones, share content, or access the latest news.

“Nobody wants to see an unassailable monopoly and our common sense reforms will help protect consumers, support ground-breaking new ideas and level the playing field for businesses.”

Andrea Coscelli, chief executive of the CMA, added: “We welcome the government’s proposals for the Digital Markets Unit, which build on the recommendations set out by our Digital Markets Taskforce last year.

“These proposals recognise the importance of promoting competition in digital markets and the need for a new set of tools to do this most effectively. 

“Today’s consultation is an important milestone towards building a world-leading, pro-competition regime to drive technological innovation and protect consumers in the digital age.

“The Digital Markets Unit will continue to support the Government as it establishes this new regime, ahead of receiving its new statutory powers.”

Read the most recent article written by Jenni Davidson - The Holyrood baby: More likely to live in poverty now than the day she was born

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