The UK’s competition authority has unveiled more information about its approach to regulating technology giants with strategic market status (SMS) through a new reform bill currently before parliament. The authority stated that it plans to conduct 3-4 investigations within the first year of the regime being implemented to determine if these SMS players meet the threshold.
The authority has not yet revealed the names of the companies under investigation, but it’s likely that Apple and Google (also known as Alphabet) will be among the top candidates. The CMA previously found that both companies’ control over their mobile app stores poses significant competition concerns. In a mobile market study published in December 2021, the CMA stated that their initial research suggests both companies would meet the requirements for SMS designation for several of their activities within their respective ecosystems.
The CMA also confirmed that designated tech giants can expect interventions to prevent them from promoting their own products, and may be under obligation to provide competitors with greater access to data and functionality. The authority may also impose interoperability and fair trading requirements, as well as demand algorithmic transparency from these companies.
The need to equip the CMA with its own ex ante playbook to address the market power of Big Tech has been on the UK’s policy agenda for years. In November 2020, the government confirmed its plans to establish a pro-competition regime targeting tech platforms with major market power in order to address issues such as tipping in online advertising.
The new Digital Markets Unit (DMU) within the CMA will have the power to tackle specific problems with bespoke interventions for each platform. The reform also includes penalties of up to 10% of annual turnover for confirmed violations.
Three+ years ago, when the government first announced its plans to address platform power, it was seen as pioneering. However, political turmoil over the past few years has delayed progress on implementing the reform, causing the UK to fall behind its peers such as the European Union, which adopted its own digital competition reform last year. The deadline for compliance with the EU regime for in-scope tech giants is quickly approaching in early March.
Last April, under Prime Minister Rishi Sunak, the government reignited efforts to introduce the Digital Markets, Competition, and Consumers Bill to parliament. Earlier this month, ministers requested that the CMA present a roadmap for implementing the future regime. However, the detailed legislation is still under discussion by lawmakers, so the request only asked for a “high level” plan.
The CMA’s response today is an overview that provides some insight into what may be expected for a handful of tech giants operating in the UK once the regime is in place. In the document, the regulator states that the harms it will focus on will be determined by a set of “prioritisation principles.” It goes on to list 11 “operating principles” that will guide its decision-making, including a focus on pro-competition, maximum impact, and prompt resolution of issues as they arise.
“We will consider consumer benefits from a broad perspective,” the CMA elaborates on principle 2 (impact). “In addition to the price of goods and services (which can be zero in some digital markets), consumers may also value choice, security, privacy, innovation, and their overall experience (for example, the amount of advertising they are exposed to).”
The EU’s equivalent ex ante digital competition reform, the Digital Markets Act, takes a more prescriptive approach by setting out a list of “dos and don’ts” for regulated giants. So far, six tech giants (Alphabet, Amazon, Apple, Bytedance, Meta, and Microsoft) have been designated as “gatekeepers” under the EU regime, for a total of 22 “core platform services” they offer, ranging from adtech to operating systems and search engines.
Some gatekeepers, including Apple, have challenged their designation under the DMA. Nevertheless, the EU regime continues to apply for the time being.
Germany’s equivalent ex ante digital competition reform has been in place since early 2021. This reform has seen the country’s regulator designate a number of tech giants, including Amazon, Apple, Google, and Meta, as subject to a special abuse control regime for companies deemed to have “paramount significance for competition across markets.” Other major tech giants are still under investigation for market dominance.
The German regime has been the most active of the regional ex ante digital competition reboots to date. The Federal Cartel Office (FCO) can point to some noteworthy changes it has implemented with the designated giants, such as Google’s agreement to change its data policies and offer not to include publisher content that it directly licenses in its search results. This was done to mitigate self-preferencing concerns that could harm non-licensed rival publishers.
Under the scrutiny of the FCO, Meta also agreed to provide a way for users to reject cross-site tracking last summer, a victory for privacy achieved through the unconventional avenue of competitive reform. (Although the FCO has long been at the forefront of considering privacy exploitation as a competition abuse.)
It remains to be seen what impact the UK’s equivalent reform will have in the coming years. The government still needs to pass it through parliament, so it’s uncertain when it will become operational. There may also be a period of implementation and investigation before the regime can actually exert pressure on the decisions of Big Tech companies.
Nevertheless, the CMA’s overview offers a glimpse into where the DMU may direct its efforts in the years to come. One thing is clear: Big Tech is facing increased restrictions on its operational freedom.
However, greater oversight of dominant web giants may be contributing to a strategic business development tactic in which these companies invest in and partner with less regulated startups that can engage in activities that could cause regulatory concern if done directly. The links between big tech companies that own cloud computing infrastructure and startups specializing in generative AI are illustrative of this trend. Massive amounts of money and resources are being deployed in ways that could further expand the market dominance of current-generation tech giants, thanks to strategic partnerships with startups that operate at a supposedly safe distance from their business empires. Microsoft-OpenAI, anyone?
