UK government outlines plans to tackle big tech dominance | Morgan Lewis – Technology and Procurement
On May 6, 2022, the UK government presented its plans to boost competition and boost economic growth and innovation as part of major regulatory reform targeting big tech. The news follows fears that a handful of tech giants are disproportionately dominating the market, subjecting small businesses to predatory pricing and ultimately hurting consumers through higher prices and limited options and control over their online experiences.
Digital technologies are positively transforming the way we access information, socialize and do business. The emergence and exponential growth of the biggest tech companies has created an imbalance of power, with businesses around the world increasingly relying on these powerful companies to ensure customers find their business online. The lack of regulatory intervention has allowed these companies to monopolize the tech industry, making huge profits at the expense of small businesses and consumers.
Criticisms of these tech companies include favoring their own apps and browsers, exploiting their market position to set unfair prices for the online services they provide to businesses, and systematically increasing their dominance over the market by buying out the competition.
In response, the UK government launched a consultation in July 2021, seeking views on its proposal for a new pro-competitive regime for digital markets, which will actively stimulate competition and innovation by addressing the harmful effects and sources of substantial and entrenched market power. The vast majority of those polled supported the proposals and as a result the UK government has now fleshed out its plans to implement the new regime.
The proposed solutions
The UK government has confirmed that it will introduce legislation to grant statutory powers to the UK Digital Markets Unit (DMU), which was launched last year in non-statutory form within the UK Data Protection Authority. Competition and Markets (CMA), to enable it to enforce compliance with competition rules and rebalance the relationship of large technology companies with consumers and businesses. The power of the DMU will include the power to designate in-scope technology companies (those that have substantial and entrenched market power in a business, giving the company a strategic position) with “Strategic Market Status ” and the ability to do the following:
- Codes of Conduct: Enforce new bespoke codes of conduct on how these companies that dominate digital markets should treat their users fairly, ensuring that consumers have open choices about the digital services they use. For example, these companies will no longer be allowed to limit consumers to software pre-installed on their devices.
- Consumer Choice: Give consumers more decision-making power over how their data is used and processed by big tech companies, such as opting out of targeted personalized ads.
- Transparency: Require these companies to meet the regulator’s clear expectations of trust and transparency, such as informing companies using their services of significant changes that could affect them.
- Justice: Intervene to address the root causes of market dominance, including forcing these companies to share more data with smaller competitors to help them overcome the advantages of technology companies.
- Negotiate with content providers: Regulate how these companies should trade with content providers such as news publishers, including the power to resolve pricing disputes so that news providers are paid fairly for their online content.
- Market regulation: Require these companies to report takeovers before they are completed to allow the AMC to make an initial assessment of the merger to determine if further investigations are needed.
Consequences in case of violation
The DMU will be granted the power to impose severe penalties for non-compliance, including fines of up to 10% of annual worldwide turnover and additional penalties of 5% of turnover Daily Global for each day an offense continues. In addition, it will be able to suspend, block and reverse the behavior of technology companies with strategic market status that violate its conduct requirements. Additionally, senior executives can face civil penalties if their companies do not respond to requests for information.
The powers of the DMU are intended to be enshrined in law via the Digital Markets, Competition and Consumer Affairs Bill; however, the timeline for implementation remains uncertain. The bill is not expected to be introduced in the UK’s 2022-2023 parliamentary sessions despite its mention in the recent Queen’s Speech. Since the European Union is already leading the way in this area with its equivalent Digital Markets Act is expected to become law by 2023, the UK may be forced to act sooner – watch this space!
Trainee lawyer Chidi Ogbuagu contributed to this post.