Government urged to strengthen digital competition law

Proposals to update the UK’s competition law to take into account the fast-growing rise of digital firms have been put forward by Weston-Super-Mare MP John Penrose.

The 'Power to the People' report notes that while digital industries are the UK’s fastest growing, there are downsides such as the trend towards monopolisation and the mass harvesting of user data which is used “to build dominant positions”.

“Bigger and deeper pools of customer data mean the largest digital firms can tailor their products and services better, which in turn draw in more users and data,” Penrose writes.

The report recommends that the Competition and Markets Authority (CMA) should work out a way that lets customers easily compare the 'price' of free online services.

The “CMA must consider how to improve transparency of the price consumers are paying through their data for digital goods and services, so they can make informed choices about whether each one represents good value or not, and whether they wish to switch to others which might be better,” the report said.

It also found that digital services typically have high fixed costs and low marginal costs, giving them huge economies of scale that allow firms to push smaller rivals out of the market. Their ability to invest faster in new developments allows them to extend their leads even further.

The “major players”, like Google, Facebook and Amazon, have “remained largely the same for the last decade”, the report states, due to this inability for smaller firms to compete. The CMA estimates that every household in the UK is paying £500 more each year due to the lack of competition. Amazon, for example, was estimated to have a market share of more than 30 per cent of the UK's entire e-commerce market by the end of 2019.

Penrose recommends the creation of a Network & Data Monopolies Unit that would serve as a branch of the CMA with the task of preventing monopolisation tactics, among other responsibilities.

Business Secretary Kwasi Kwarteng said: “the UK’s competition laws and institutions are highly regarded across the globe; however as we build back better from the pandemic and start life as an independent trading nation, we have a golden opportunity to strengthen that reputation. We will consider John’s recommendations and respond in due course.”

Chancellor Rishi Sunak said: “We must strengthen competition in our economy as we build back stronger from Covid-19, and protecting consumers will remain at the heart of this important work.”

The report also makes some non-digital recommendations, such as scrapping the so-called “loyalty penalty” which sees UK consumers lose around £3.4bn annually when they stay with their electricity or phone supplier, among others.

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