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UK government seeks to curb dominance of digital giants

Image credit: Dreamstime

The UK government has published its proposals to stimulate competition in the digital economy by forcing digital companies with large market shares to abide by a mandatory code. It is hoped that this will guard against the increasing domination of the market by players like Google, Apple, Facebook and Amazon.

The Digital Markets Unit (DMU) was launched within the Competition and Markets Authority in non-statutory form in April, with special responsibility for regulating the digital economy. According to the government’s plans, it will be given the power to designate technology companies with substantial, entrenched market power with 'Strategic Market Status' (SMS). SMS will require them to follow a code of conduct which lays out its responsibilities to competitors and customers.

The government hopes that the rules will result in more innovation and fairer terms for UK businesses – especially tech start-ups, news publishers and advertisers – as well as giving consumers real choice to switch to a different service provider.

The code of conduct covers acceptable behaviour as it relates to fair trading, open choices, trust and transparency. It could prevent companies from effectively forcing customers to use default or mandatory associated services or ensure that third parties which depend on them are not blocked from doing business with competitors.

“We will be giving our new [DMU] 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,” said Oliver Dowden, the digital secretary.

The government promised that the code will be underpinned by “robust investigation and enforcement powers” for the DMU. Most notably, this will give the watchdog the power to impose fines of up to 10 per cent of a company’s annual turnover for the most serious breaches of the SMS code. It will also be able to suspend, block and reverse offending behaviour, as well as order other actions to comply with the code, such as by forcing rewrites of disallowed terms and conditions.

A consultation has also been launched to consider whether the DMU should be given the power to impose measures to tackle the root causes of competition issues in digital markets. This could eventually see the DMU implementing rules to support interoperability, such as by forcing platforms to allow the public to share contacts with competitors. Another matter for consideration will be whether to give the watchdog greater powers to investigate and intervene in anti-competitive mergers involving companies with SMS, such as by requiring these companies to report on their takeovers.

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 commonsense reforms will help protect consumers, support ground-breaking new ideas and level the playing field for businesses.”

Andrea Coscelli, CEO at the CMA, added: “We welcome the government’s proposals for the [DMU], 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 [DMU] will continue to support the government as it establishes this new regime, ahead of receiving its new statutory powers.”

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