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New competition regime for tech giants

by Peter Smyth Tech Journalist
27th Nov 20 9:36 am

Tech giants will be subject to a new regime to give consumers more choice and control over their data, help small businesses thrive, and ensure news outlets are not forced out by their bigger rivals.

A dedicated Digital Markets Unit, which will be set up within the Competition and Markets Authority (CMA), will work closely with regulators including Ofcom and the Information Commissioner’s Office to introduce and enforce a new code to govern the behaviour of platforms that currently dominate the market, such as Google and Facebook, to ensure consumers and small businesses aren’t disadvantaged.

Online platforms bring huge benefits for businesses and society. Their services are making work easier and quicker and help people stay in touch with one another. Millions of people share creative content or advertise their small business’ goods online.

But there is growing consensus in the UK and abroad that the concentration of power amongst a small number of tech companies is curtailing growth in the tech sector, reducing innovation, and potentially having negative impacts on the people and businesses that rely on them.

The new code will set clear expectations for platforms that have considerable market power – known as strategic market status – over what represents acceptable behaviour when interacting with competitors and users.

Under the new code, platforms including those funded by digital advertising could be required to be more transparent about the services they provide and how they are using consumers’ data, give consumers a choice over whether to receive personalised advertising, and prevented from placing restrictions on their customers that make it hard for them to use rival platforms.

The new unit, which will begin work in April, could be given powers to suspend, block and reverse decisions of tech giants, order them to take certain actions to achieve compliance with the code, and impose financial penalties for non-compliance.

Business Secretary Alok Sharma said:“Digital platforms like Google and Facebook make a significant contribution to our economy and play a massive role in our day-to-day lives – whether it’s helping us stay in touch with our loved ones, share creative content or access the latest news.

“But the dominance of just a few big tech companies is leading to less innovation, higher advertising prices and less choice and control for consumers.

“Our new, pro-competition regime for digital markets will ensure consumers have choice, and mean smaller firms aren’t pushed out.”

Digital Secretary Oliver Dowden said:“I’m unashamedly pro-tech and the services of digital platforms are positively transforming the economy – bringing huge benefits to businesses, consumers and society.

“But there is growing consensus in the UK and abroad that the concentration of power among a small number of tech companies is curtailing growth of the sector, reducing innovation and having negative impacts on the people and businesses that rely on them. It’s time to address that and unleash a new age of tech growth.”

Today’s proposals could also help give small businesses fair access to platform services including digital advertising, allowing them to grow their business’ online presence. The code could be used to ensure platforms are not applying unfair terms, conditions or policies to certain business customers, including news publishers.

Currently, dominant online platforms can impose terms on news publishers that limit their ability to monetise their content – severely impacting their ability to thrive.

The new code will govern commercial arrangements between publishers and platforms to help keep publishers in business – helping enhance the sustainability of high-quality online journalism and news publishing in the UK.

It will form a major part of the government’s work to support the sustainability of the UK’s world leading news publishing sector and make sure, as news moves ever more online, publishers get a fair deal from the platforms on which they rely.

The Government has set out its plans to take forward the development of the new unit and code of conduct in its response to the market study it asked the CMA to produce on online platforms and digital marketing.

The Unit will be informed by the work of the Digital Markets Taskforce, which was set up earlier this year to provide advice to the Government on the potential design and implementation of pro-competitive measures – including the methodology which will determine what companies should be designated as having strategic market status, and how a regime would work in practice.

The digital sector contributed nearly £150 billion to the UK economy in 2018 – driving opportunity, productivity and creativity in every corner of the UK.

Through its study, the CMA found that, among other things, a lack of competition in digital markets prevents the development of new, valuable services for consumers, and results in higher prices for businesses using the platforms – which are then passed on to consumers.

The CMA’s market study was commissioned by the Government as part of a series of steps to promote competition in this area. In 2018, the Government commissioned the Digital Competition Expert Panel, chaired by Professor Jason Furman, which proposed a new pro-competition regime for digital platform markets in its final report, the Furman Review. The Government accepted the Furman Review’s six strategic recommendations, including the establishment of a new Digital Markets Unit (DMU), earlier this year.

The government will consult on the form and function of the Digital Markets Unit in early 2021 and legislate as soon as parliamentary time allows.

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