The UK has signalled it will press ahead with an ex ante competition reform aimed at addressing the market muscle of Big Tech.
The legislation will also aim to strengthen consumer rights by targeting fake reviews and subscription traps, with the aim of making it less of a minefield for web users to shop online and extricate themselves from unwanted contracts.
The government, under current prime minister Rishi Sunak, looks to be retrieving a ball that was hoofed into the long grass by former PM Boris Johnson — when, just over a year ago, he dodged pressing ahead with the long anticipated ex ante digital competition reform in favor of dither and delay.
Today ministers at the restyled Department for Business and Trade and Department for Science, Innovation and Technology announced that new legislation would be introduced to empower the Digital Markets Unit (DMU) to oversee platforms which are deemed to have so-called strategic market status (SMS).
Commenting in a statement, business and trade minister Kevin Hollinrake said:
From abuse of power by tech giants, to fake reviews, scams and rip-offs like being caught in a subscription trap — consumers deserve better. The new laws we’re delivering today will empower the CMA to directly enforce consumer law, strengthen competition in digital markets and ensure that people across the country keep hold of their hard-earned cash.
The DMU has been operating in shadow form at the Competition and Markets Authority (CMA) for over two years in anticipation of the necessary enforcement powers which elsewhere in Europe lawmakers have been moving ahead on their own ex ante reforms.
For example, Germany updated its domestic regime at the start of 2021 and has multiple investigations and enforcements into companies including Amazon, Apple, Google and Meta ongoing at this point — with some wins it can point to.
European Union lawmakers also cinched agreement on the Digital Markets Act last year — with the proactive oversight regime set to kick in on Internet gatekeepers later this year.
So the UK is playing catch up with regional peers.
The delay has led to certain complications for the CMA, which appeared to have anticipated the DMU being empowered rather sooner — hence an initial decision not to act on a number of concerns raised in a preliminary market study of the mobile duopoly, Apple and Google. (Although it did take enforcement action in relation to Google Play Billing at that time, which led to a settlement offer by the tech giant which the CMA is now consulting on.)
The regulator later sought to reverse its decision to wait for new powers when it sought to push forward with an investigation into Apple’s mobile web browser and cloud gaming service. However, earlier this month, Apple successfully appealed the delay in opening a probe as a breach of standard legislative protocol.
The overarching issue driving the need for ex ante competition reform is classic competition powers are perceived to be too slow and reactive to respond effectively to market power in the digital sphere, which benefits from powerful concentration dynamics like network effects — leaving consumers and startups at the risk of unfair T&Cs.
The legislation will aim to cut the time it takes for competition intervention by empowering the CMA to be able to directly enforce consumer law, rather than having to go through lengthy court processes.
There will also be beefed up penalties for breaches of consumer law — with penalties that can scale up to 10% of global turnover.
The UK’s planned approach to ex ante competition reform is distinct vs the EU’s. Instead of a prescriptive list of operational ‘dos and don’ts’ set out in the law that apply to all in-scope platforms, the government intends the DMU to design bespoke conditions tailored to each tech giant in question — which it claims will ensure oversight is proportional and there’s no risk of overregulation.
“The bill establishes a new, targeted regime built for the digital age, overseen by the [DMU] in the CMA – that will use a proportionate approach to hold digital firms accountable for their actions – enabling all innovating businesses to compete fairly,” said the CMA in a press release. “It will set rules that will prevent firms with Strategic Market Status [SMS] from using their size and power to limit digital innovation or market access – ensuring the UK remains a highly attractive place to invest and do business for all.”
In a statement, its CEO Sarah Cardell added:
We welcome this flagship bill which provides the CMA with new powers to do even more to protect people, businesses and support the economy. This has the potential to be a watershed moment in the way we protect consumers in the UK and the way we ensure digital markets work for the UK economy, supporting economic growth, investment and innovation.
People rely on free and fair markets to get the best deal possible, but also expect that rules are in place to protect them when things go wrong. Proposals to give the CMA stronger enforcement powers when firms break consumer law – including the ability to directly impose fines for the first time – are crucial to ensure we can continue cracking down on rip-offs and underhand deals, helping to deter firms from taking advantage of people.
Digital markets offer huge benefits, but only if competition enables businesses of all shapes and sizes the opportunity to succeed. This bill is a legal framework fit for the digital age. It will establish a tailored, evidenced-based and proportionate approach to regulating the largest and most powerful digital firms to ensure effective competition that benefits everyone.
We look forward to supporting this bill as it passes through the legislative process and stand ready to use these new powers once approved by Parliament.
A supporting statement from startup advocacy group Coadec also welcomed the development — with exec director Dom Hallas warning of “bed-blocking incumbents in broken markets” standing in the way of startup-driven competition. “The Digital Markets Unit can become a powerful tool to help innovative companies break through,” he added.
On fake reviews, the government said the bill will ban the practice of facilitating fake reviews or advertising consumer reviews without taking reasonable steps to check they are genuine.
On subscriptions that deploy dark patterns and other trips to lock consumers in the government said the new rules will ensure web users are able to exit such contracts in “a straightforward, cost-effective, and timely way” — such as by requiring that businesses send a reminder when a free trial or introductory offer is coming to an end.
“This will help deliver one of the Government’s five priorities to grow the economy by increasing consumer choice and confidence in the products they buy and services they use,” it added.
There’s no firm timeline for when the new legislation may be in place — but minds in Sunak’s government’s are likely being concentrated by the limited time left they have to make a mark on the British public before a general election must be called (the latter must happen in January 2025 at the very latest).
In additional public remarks, the government said the new measures will come into effect “as soon as possible following parliamentary approval”. Albeit, ministers also note the new powers may be subject to secondary legislation and the publication of guidance — so, again, there could be a longer runway before GAFAM giants are forced to amend how they do business in the UK.
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Natasha Lomas