The UK has signaled that it will press ahead with competition law reform aimed at addressing Big Tech's market muscle.
The legislation will also aim to strengthen consumer rights by attacking fake reviews and subscription scams, with the aim of making it a minefield for web users to shop online and extricate themselves from unwanted contracts.
The government, under current Prime Minister Rishi Sunak, appears to be picking up a ball that former Prime Minister Boris Johnson threw when, just over a year ago, he ducked going ahead with the long-awaited digital competition overhaul in favor of a hesitation and delay.
Ministers in the Department of Business and Commerce and the Department of Science, Innovation and Technology announced that new legislation would be introduced to empower the Digital Markets Unit (DMU) to oversee platforms 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 getting caught in a subscription trap, consumers deserve something better. The new laws we are introducing will allow the CMA to directly enforce consumer law, strengthen competition in digital marketplaces, and ensure that people across the country keep their hard-earned money.”
The DMU has been operating in the shadows at the Competition and Markets Authority (CMA) for more than two years in anticipation of the necessary enforcement powers that in other parts of Europe lawmakers have been pushing for in their own reforms.
For example, Germany updated its internal regime in early 2021 and has multiple ongoing investigations and executions at companies like Amazon, Apple, Google, and Meta underway, with some victories you can point to.
European Union lawmakers also reached agreement on the Digital Markets Act last year, with the proactive supervision regime set to go into action with Internet gatekeepers later this year.
The UK is trying to catch up with its regional peers.
The delay has caused some complications for the CMA, which seemed to have anticipated that the DMU would be enabled much sooner, hence the 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 the time, leading to a settlement offer from the tech giant that the CMA is now consulting.
The regulator later sought to reverse its decision to wait for new powers when it tried to push an investigation into Apple's mobile web browser and cloud gaming service. However, earlier this month, Apple successfully appealed the delay in opening an investigation for breaches of standard legislative protocol.
The general problem driving the need for competition reform is that classic competition powers are perceived as too slow and reactive to respond effectively to market power in the digital sphere, which benefits from powerful concentration dynamics such as network effects, leaving consumers and startups in the background.
The legislation will aim to reduce the time it takes for competition to intervene by empowering the CMA to directly enforce consumer law, rather than having to go through lengthy court processes.
There will also be enhanced penalties for breaches of consumer law, with penalties that can go up to 10% of global billing.
The UK's planned approach to competition reform is different from that of the EU. Rather than a prescriptive list of 'do's and don'ts' laid out in law that apply to all platforms, the government intends for the DMU to design custom terms tailored to each tech giant in question, which it claims will ensure supervision is proportional and there is no risk of over-regulation.
“The bill establishes a new specific regime created for the digital age, overseen by the DMU in the CMA, which will use a proportionate approach to hold digital companies accountable for their actions, allowing all innovative companies to compete fairly” said the CMA in a release. “It will establish rules that will prevent companies with Strategic Market Status, SMS, from using their size and power to limit digital innovation or market access, ensuring that the UK remains a very attractive place to invest and do business for all".
In a statement, its CEO Sarah Cardell added:
We welcome this flagship bill that gives the CMA new powers to do even more to protect people, businesses and support the economy. This has the potential to be a watershed moment in how we protect consumers in the UK and how we ensure that digital markets work for the UK economy, supporting economic growth, investment and innovation.
People trust free and fair markets to get them the best possible deal, but they also expect rules to protect them when things go wrong. Proposals to give the CMA greater enforcement powers when companies break consumer law, including the ability to directly impose fines for the first time, are crucial to ensuring we can continue to crack down on scams and underhanded dealings, It helps discourage companies from taking advantage of people.
Digital marketplaces offer tremendous benefits, but only if competition gives businesses of all shapes and sizes a chance to succeed. This bill is a legal framework suitable for the digital age. It will establish a tailor-made, evidence-based and proportionate approach to regulating the largest and most powerful digital companies to ensure effective competition that benefits all.
We look forward to supporting this bill as it moves through the legislative process and we are ready to use these new powers once it is approved by Parliament.
A statement of support from startup advocacy group Coadec also welcomed the development, with chief executive Dom Hallas warning that "bed-locking incumbents in broken markets" stand in the way of startup-driven competition. . “The Digital Markets Unit can become a powerful tool to help innovative companies break through,” he added.
As for fake reviews, the government said the bill would prohibit the practice of providing fake reviews or advertising consumer reviews without taking reasonable steps to verify that they are genuine.
On subscriptions that implement dark patterns and other trips to lock consumers into indefinite subscriptions, he said the new rules will ensure that web users can opt out of such contracts in "an easy, cost-effective and timely manner," such as requiring that businesses send a reminder when a free trial or introductory offer ends.
“This will help meet one of the government's five priorities to grow the economy by increasing consumer choice and confidence in the products they buy and the services they use,” he added.
There is no firm timetable as to when the new legislation will be implemented, but the minds of the Sunak government are likely to be on the limited time they have left to make an impression on the British public before a general election is called (the latest must happen in January 2025 at the latest).
In additional public comments, the government said the new measures would take effect "as soon as possible after parliamentary approval." However, the ministers also note that the new powers may be subject to secondary legislation and guidance publication, so again, there could be a longer road before the GAFAM giants are forced to modify the form in which they do business in the United Kingdom.
