UK government sets up new Digital Markets Unit within CMA

November 30, 2020

The UK government has announced it is setting up a new Digital Markets Unit within the Competition and Markets Authority. This forms part of the government’s response to the CMA’s digital markets study, and follows the setting of up a Digital Markets Taskforce. The Taskforce is yet to report its findings. However, it will advise government on the design of the new regulatory regime before the end of 2020. It will then be for government to take action and bring forward legislation to establish the regime.

The government says that 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.

However, there is growing consensus in the UK and overseas 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 effects on the people and businesses relying on them.

The CMA has found evidence that a lack of competition in these markets leads to harms to consumers and businesses through reduced innovation, higher prices for goods and services, reduced quality of digital advertisements, lack of consumer control and broader social harm.

The main role of the new unit will be 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. 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, as well as being prevented from placing restrictions on their customers that make it hard for them to use rival platforms.

The new unit 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.

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. The measures to promote competition in digital markets will form part of wider work to reform the UK’s approach to competition policy, which will be also consulted on in 2021.

The CMA has published a statement welcoming the government’s response.