Ministers come out fighting with big tech clampdown

parliament newThe Government has set out its final vision for how the new Digital Markets Unit (DMU) regulator will work, including giving consumers more decision-making power over how their data is used and handled by tech firms, including opting out of targeted personalised ads.

With the majority of UK companies now relying on tech firms to ensure customers find their business online, ministers argue these firms control key online gateways for millions of Internet users and give preference to their own apps and browsers. They are also able to set their own prices for the online services they provide businesses without challenge, which can be passed on to consumers.

The impact of weakened competition is stark – the Competition & Markets Authority (CMA) estimates that Google and Facebook-parent Meta made excess UK profits of £2.4bn in 2018 alone – harming consumers through higher prices.

In response to its consultation issued last year, the Government is to give statutory powers to the DMU to allow it to enforce pro-competition rules and rebalance the relationship tech giants have with consumers and businesses so they are better protected from unfair practices.

The proposals aim to make it easier for people to switch between Apple iOS and Android phones or between social media accounts without losing their data and messages. Smartphone users could get more choice of which search engines they have access to, more choice of social media platforms as new entrants enter the market, and more control over how their data is used by companies.

Ministers argue that tens of thousands of UK small and medium-size businesses will get a better deal from the big tech firms which they rely on to trade online. Tech firms could need to warn smaller firms about changes to their algorithms which drive traffic and revenues.

It is claimed that the measures will also ensure news publishers are able to monetise their online news content and be paid fairly for it, with the DMU given the power to step in to solve pricing disputes between news outlets and platforms. App developers would be able to sell their apps on fairer and more transparent terms.

More competition across digital markets will create incentives for Internet companies to deliver better quality services, the Government insists, with lower fees for advertisers and businesses stopping costs being passed on to consumers, leading to lower prices for the goods they buy online.

The DMU, launched in non-statutory form within the CMA last year, will have the power to designate some of the world’s most powerful firms with ‘strategic market status’.

The regulator will enforce new tailored codes of conduct for how the handful of firms dominating digital markets should treat their users and other companies fairly, with tough sanctions for those which ignore the rules.

Under these binding conduct requirements, firms must ensure consumers have open choices about the digital services they use.

For example, the DMU will be able to stop companies limiting consumers to pre-installed software on their devices, making it easier for smartphone users to choose which search engine or messaging apps they use.

Big tech firms in scope of the new regime will have to meet the regulator’s clear expectations around trust and transparency – such as informing businesses using their services of significant changes which could impact them.

For example, search engines exert huge control over which sites consumers can find. Any changes in their algorithms could mean that traffic is steered away from certain sites and businesses which could have a negative effect on their revenue.

The DMU will also intervene to tackle the root causes of market dominance. Potential interventions include forcing firms with strategic market status to share more data with smaller competitors to help them overcome the advantages of bigger firms.

The requirements will also set out how dominant firms should trade with content providers such as news publishers. The DMU will have powers to resolve pricing disputes so that news providers are paid fairly for their online content.

It could increase the bargaining power of national and regional newspapers, and force social media platforms to be more transparent on how they position publishers on their platforms, and what algorithms are being used.

An arsenal of “robust sanctions” will be available to the DMU to tackle non-compliance, including fines of up to 10% of annual global turnover and additional penalties of 5% of daily global turnover for each day an offence continues.

It will be able to suspend, block and reverse behaviour by firms that breaches their conduct requirements, ordering them to take specific steps necessary to resolve a breach. Senior managers will face civil penalties if their firms fail to engage properly with requests for information.

No time scale has been revealed for the move, with the Government simply stating it will introduce legislation to put the DMU on a statutory footing “in due course”.

Digital Minister Chris Philp said:”Technology has revolutionised the way thousands of UK firms do business – helping them reach new customers and putting a range of instant online services at people’s fingertips. But the dominance of a few tech giants is crowding out competition and stifling innovation.

“We want to level the playing field and we are arming this new tech regulator with a range of powers to generate lower prices, better choice and more control for consumers while backing content creators, innovators and publishers, including in our vital news industry.”

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