Tech giants face tailored rules – and fines – in CMA plan

tech_giants_Faang2The Competition & Markets Authority has revealed its new plan to regulate tech giants by issuing the likes of Facebook, Google and Amazon with their own customised rules which, if broken, could result in fines of up to 10% of their global turnover – potentially running into billions of pounds.

The CMA has issued its advice to the Government on the design and implementation of the UK’s new pro-competition regime for digital markets, produced by the Digital Markets Taskforce.

Commissioned by the Government in March and led by the CMA, working with Ofcom, the Information Commissioner’s Office and the Financial Conduct Authority, the plan claims to outline a “modern regulatory regime fit for the digital age – one that is forward-looking, targeted and enables quick results to harness the full potential of digital markets, driving greater competition and innovation”.

If implemented, the new regime will govern the most powerful tech firms – those with ‘strategic market status’ – meaning those with substantial, entrenched market power and where the effects of that market power are particularly widespread or significant.

While the report fails to mention a single business by name, it has been well-documented that the rules are designed to bring the so-called FAANG group of companies – Facebook, Amazon, Apple, Netflix and Google – to heel.

A new Digital Markets Unit (DMU), revealed late last month, will ensure the rules of the game are clear up-front, and work with tech firms to ensure they comply with them.

The three key proposed pillars of the regime are:

A new, legally binding code of conduct, tailored to each firm and to where the evidence demonstrates problems might occur, designed and overseen by the DMU. The code will help to shape the behaviour of powerful digital firms, upfront, and govern elements of how they do business with other companies and treat their users. There will be a range of powers available to the DMU to address any concerns, including the potential for significant penalties.

Pro-competitive interventions, which can be used to address the sources of market power, allow competition to flourish and unlock the potential for transformative innovation by others in the market. An example of such an intervention could be imposing interoperability requirements on tech firms and better enabling consumers to control and share data.

– Enhanced merger rules, which would enable the CMA to apply closer scrutiny to transactions involving tech giants. This would include it being mandatory to notify the CMA of a transaction, imposing a block on completing a deal until the CMA had investigated, and a change to more cautious legal test when looking at the likelihood of harm to consumers in order to address concerns about historic under-enforcement of mergers involving big tech firms.

The new regime will become part of a wider regulatory framework for digital markets, including the new regime for harmful online content, and data protection laws. The CMA is now working with Ofcom, the ICO and FCA through the Digital Regulation Cooperation Forum, to consider the steps that should be taken to ensure adequate coordination, capability and clarity across all digital regulation.

Following receipt of this advice, the Government is to launch a consultation on the proposals in early 2021 and to legislate to put the DMU on a statutory footing when Parliamentary time allows. The taskforce has urged the Government to move quickly in taking this legislation forward, however, some observers believe it could be 2022 before the legislation in passed.

CMA chef executive Andrea Coscelli said: “To ensure the UK can continue to enjoy a thriving tech sector, consumers and businesses who rely on tech giants like Google and Facebook should be treated fairly, and competitors should face a level playing field – enabling them to deliver more of the innovative products and services we value so highly.

“For that to happen, the UK needs new powers and a new approach. In short, we need a modern regulatory regime that can enable innovation to thrive, while taking swift action to prevent problems.

“To meet the new challenges of the digital age, it is essential that regulators work together. In developing these proposals, we have benefited from working alongside Ofcom, the ICO and the FCA.”

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