The UK government has published a draft of its Digital Markets, Competition and Consumers Bill (DMCCB), which aims to establish a new regulator to challenge the growing dominance of big tech firms.
The Bill will place the Digital Markets Unit (DMU) – a new division of the Competition and Markets Authority (CMA) which was first announced in December 2020 – on a statutory footing, and give it powers to challenge “excessive dominance”.
This includes allowing the DMU to set tailored rules for how firms with “strategic market status” behave and operate, as well as carry out “targeted interventions” to help open up paths for startups and other smaller firms that have previously struggled to compete in key digital markets.
As an example, the government said the DMU may instruct the biggest tech firms to provide more choice and transparency for their users, which could include ordering them to break down any restrictive technical barriers they have put up to prevent people from using different devices and systems.
The DMU could also instruct firms to open up their data to rival search engines, or increase the transparency of how their app store or marketplace review systems work. In May 2022, then digital minister Chris Philp confirmed this pro-competition data sharing will not include users’ personal information.
If firms do not abide by the DMU’s rules, it will also have the power to fine them up to 10% of their global turnover.
However, the DMU’s role is limited to policing those firms with strategic market status, which is defined as any tech company that generates at least £25bn in global turnover, or £1bn in the UK.
Codes of conduct
All of these measures will come into effect as soon as possible, following parliamentary approval and subject to the publication of guidance. At the request of the government, the DMU started pre-emptively drafting legally binding codes of conduct to prevent anti-competitive behaviour in digital markets in April 2021.
“Today’s announcement shows we are proudly pro-growth and pro-innovation across the board in the tech sector, seeking to open up new opportunities for all firms, however small or large they are, while empowering consumers,” said Paul Scully, minister for tech and the digital economy.
“The Prime Minister has made his intention to secure growth and innovation within every corner of our economy very clear – the new Digital Markets Unit will help fulfil this important priority for the UK in the digital economy.”
Under the DMCCB, the CMA itself will also receive new powers and tools so it can investigate competition problems and take action faster.
This includes allowing it to enforce consumer law directly rather than have it go through lengthy court processes, as well as reward compensation to consumers or issue financial penalties for non-compliance with either the law or notices from the CMA, which could also reach up to 10% of their global turnover.
Reactions to the Bill
CMA chief executive Sarah Cardell welcomed the Bill and the powers it granted to the competition regulator. “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,” she said.
“Digital markets offer huge benefits, but only if competition enables businesses of all shapes and sizes the opportunity to succeed,” said Cardell. “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.”
She added that the CMA will support the Bill through the legislative process, and that it stands ready to use these powers once it has been approved by Parliament.
Baroness Stowell, chair of the House of Lords Communications and Digital Committee, which called for the creation of a new digital regulator like the DMU in March 2019, said the Bill is about ensuring a level playing field in digital markets.
“We have been calling for this legislation for a long time because the concentration of power amongst a small number of big tech firms isn’t good for British business,” she said.
“The UK’s approach is considered more flexible than that of the EU and others, who are ahead of us in regulating this space. It is good news that the Bill has now arrived and we can get on with scrutinising it in detail. My committee will be holding a series of public evidence sessions in the near future.”
Alex Haffner, a partner and competition lawyer at law firm Fladgate, said if the Bill becomes law, it will “up the ante significantly” by requiring large tech firms to actively demonstrate to the CMA how they are complying with the new competition rules. “To that extent, it marks a major shift in the way in which the UK government makes good on its promise to create the conditions for tech companies of all shapes and sizes to innovate and grow,” he said.
Neil Ross, associate director for policy at TechUK, said the Bill is a “vital piece of legislation”, and welcomed the placement of the DMU on a statutory footing.
“However, it is imperative the legislation provides a clear mandate for the DMU to engage with a wide range of companies and consumers, and set out clearly how the regime will operate in practice,” he said. “Additionally, the Bill must include robust checks and balances, including supporting an appeals process that enables quick resolutions to disputes while allowing the full facts of a case to be taken into account for the most significant regulatory decisions.”
Rick VanMeter, executive director of the Coalition for App Fairness – an independent non-profit set up in September 2020 to challenge the “monopolistic control” of tech giants over the app ecosystem – said the introduction of the Bill is a “significant step forward” in creating a fair and open mobile apps ecosystem in the UK.
He further claimed that tech giants have been using their “excessive dominance and unchecked power over mobile devices to stifle competition, slow innovation and impose high fees” on both developers and consumers.
“This legislation will enable the Digital Markets Unit to enact the CMA’s recommendations from its 2022 report, including opening mobile app stores to competition in app distribution and in-app payments,” said VanMeter.
“An empowered DMU will level the playing field for UK businesses and developers, ending the entrenched market power of mobile app monopolists and boosting the international growth of UK-born businesses,” he said. “As the Bill advances through the legislative process, we look forward to working with policymakers and regulators in the UK to ensure the DMU can effectively protect consumers and promote competition.”