British Government introduces digital markets legislation in attempt to clamp down on big tech dominance

Derek du Preez Profile picture for user ddpreez April 25, 2023
The Digital Markets Unit has been operating in earnest in recent months, but with the legislation going ahead, will be given teeth.

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(Image by Gerd Altmann from Pixabay )

The British Government is introducing its long awaited Digital Markets, Competition and Consumers (DMCC) Bill to parliament this week, giving legal backing to its plans to clamp down on ‘big tech dominance’ and help smaller firms compete. 

The proposed legislation also includes additional powers for the existing Competition and Markets Authority (CMA) to help protect consumers online, allowing it to directly enforce consumer law, rather than having to go through lengthy court processes. The Bill aims to give the CMA powers to ban the practice of facilitating online fake reviews or advertising consumer reviews that aren’t genuine, as well as stopping businesses from offering subscriptions that are difficult to get out of. 

But whilst the consumer protection powers for the CMA are noteworthy, the primary interest that’s being given to the DMCC Bill is the statutory powers that will be provided to the Digital Markets Unit (DMU), which was established in ‘shadow form’ in 2021. 

The DMU has been recruiting staff and preparing for the legislation to be introduced, as it now looks set to ‘tackle the market dominance’ of some of the largest technology companies in the world - including the likes of Google, Apple, Amazon, Meta and Microsoft. 

The Bill is being introduced to the House of Commons by Kevin Hollinrake MP, Minister for Enterprise, Markets and Small Business at the Department of Business and Trade. 

DMU powers

diginomica has been covering the potential implications of the DMU in recent months, including the legal and economic challenges, and whether or not such a regulatory unit is even necessary

But the government believes that a dedicated unit is needed to take the fight to big tech, stating that digital markets hold unique characteristics, such as network effects and use of AI and data. Given the dominance of some of the largest technology companies in the market already, and how they have shaped industries over the past two decades, questions have been raised as to whether or not the DMU can make much change at this point in time. Or whether the UK can take on such market dominance in isolation. 

However, it’s also true that the UK’s aims are rooted in global concerns about how tech firms have the ability to influence and shape markets, as well as their tendency to scoop up any potential competition. In short, their perceived market power is arguably too strong. 

The government said today that the Bill establishes “a new, targeted regime built for the digital age, overseen by the DMU in the CMA - that will use a proportionate approach to hold digital firms accountable for their actions - enabling all innovating businesses to compete fairly”. 

The DMU says that it will set rules that will prevent firms with ‘Strategic Market Status’ - a designation that will be reserved for the largest digital firms in the market - from using their “size and power to limit digital innovation and market access”.

Sarah Cardell, Chief Executive of the CMA, said:

We welcome this flagship bill which provides the CMA with new powers to do even more to protect people, businesses and support the economy. This has the potential to be a watershed moment in the way we protect consumers in the UK and the way we ensure digital markets work for the UK economy, supporting economic growth, investment and innovation.

Digital markets offer huge benefits, but only if competition enables businesses of all shapes and sizes the opportunity to succeed. This bill is a legal framework fit for the digital age. It will establish a tailored, evidenced-based and proportionate approach to regulating the largest and most powerful digital firms to ensure effective competition that benefits everyone.

We look forward to supporting this bill as it passes through the legislative process and stand ready to use these new powers once approved by Parliament.

The government’s proposals will see the DMU given the power to impose fines on firms with Strategic Market Status of up to 10% of their global turnover. The threshold for Strategic Market Status will include firms with over £25 billion global turnover, or UK turnover above £1 billion. 

Paul Scully, Minister for Tech and the Digital Economy, said:

Today’s announcement shows we are proudly pro-growth and pro-innovation across the board in the tech sector, seeking to open up new opportunities for all firms, however small or large they are, while empowering consumers.

The Prime Minister has made his intention to secure growth and innovation within every corner of our economy very clear – the new Digital Markets Unit will help fulfill this important priority for the UK in the digital economy.

My take

Too little too late? It’s hard to see a world in which the UK in isolation takes on ‘big tech’ at this point in the game - their dominance in certain markets is already pretty entrenched. And with the recent AI announcements, it’s hard to see how this dominance won’t become even more apparent. However, who knows, the UK may be able to start a movement towards inter-country collaboration that could well see some change (particularly if you look at the global efforts to tax digital companies more effectively). But I’d argue that the British Government should be focusing its efforts on creating an environment, and investing in, the future of digital technologies - as well as preparing organizations and the workforce for these. Less of the political nonsense we’ve seen in recent years and more strategic policy making that sets the UK up for a successful future. But that may well be wishful thinking…

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