The UK will pursue ex-ante competition reform to counter Big Tech’s market power. The legislation will also target fake reviews and subscription traps to simplify online shopping and contract termination for web users.
Current prime minister Rishi Sunak appears to be picking up the ball that former PM Boris Johnson kicked into the deep grass a year ago when he delayed the long-awaited ex-ante digital competition reform.
Today, ministers at the renamed Department for Business and Trade and Department for Science, Innovation, and Technology stated that new legislation would enable the Digital Markets Unit (DMU) to regulate strategic market status (SMS) platforms. Business and trade minister Kevin Hollinrake stated:
Tech companies abusing their power, fake reviews, frauds, and subscription traps – customers deserve better. Today’s legislation empowers the CMA to enforce consumer law actively, boost digital market competition, and protect consumers’ hard-earned money.
The DMU has been working in shadow form at the Competition and Markets Authority (CMA) for over two years in anticipation of the required enforcement powers that European parliamentarians have been advancing on their ex-ante reforms. Germany amended its domestic regime in 2021 and is investigating and enforcing Amazon, Apple, Google, and Meta, with some successes.
Last year, EU legislators approved the Digital Markets Act, which would begin aggressive supervision of Internet gatekeepers this year. However, the UK is lagging behind its regional counterparts.
The CMA, which appears to have anticipated the DMU being empowered sooner, first decided not to act on many concerns revealed in a preliminary market analysis of Apple and Google due to the delay. (It initiated enforcement action against Google Play Billing, resulting in a settlement offer from the tech giant that the CMA is now consulting on.)
When it investigated Apple’s mobile web browser and cloud gaming service, the regulator reversed its decision to wait for additional powers. Apple successfully contested the delay in launching an inquiry earlier this month as a violation of the legislative process.
Ex ante competition reform is needed because classic competition powers are too slow and reactive to respond to market power in the digital sphere, which benefits from powerful concentration dynamics like network effects, leaving consumers and startups at risk of unfair T&Cs.
The measure will speed up competition intervention by allowing the CMA to enforce consumer law without court proceedings immediately.
Consumer law violations will be penalized up to 10% of worldwide revenue. UK ex-ante competition reform differs from EU reform. Instead of a prescriptive list of operational “dos and don’ts” set out in the law that applies to all in-scope platforms, the government wants the DMU to design bespoke conditions tailored to each tech giant, ensuring proportional oversight and no risk of overregulation.
“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 CMA stated in a news statement. It would “prevent firms with Strategic Market Status [SMS] from using their size and power to limit digital innovation or market access – ensuring the UK remains a highly attractive place to invest and do business for all.”
CEO Sarah Cardell stated:
We endorse this landmark law that gives the CMA greater powers to safeguard consumers, companies, and the economy. This might be a turning point in UK consumer protection and digital market support for economic development, investment, and innovation.
People trust open and fair markets to obtain the best bargain and expect regulations to safeguard them when things go wrong. Accordingly, the CMA needs broader enforcement powers to crack down on rip-offs and underhanded dealings, including the capacity to impose fines immediately.
Digital marketplaces are great if the competition allows firms of all sizes to prosper. This law is digitally appropriate. It will customize, evidence-based, and proportionately regulate the largest and most effective digital enterprises to promote successful competition that benefits everyone.
We look forward to supporting this measure and using these additional authorities whenever Parliament approves them.
Upstart advocacy organization Coadec hailed the news, with exec director Dom Hallas warning of “bed-blocking incumbents in broken markets” impeding upstart competitiveness. He noted that the Digital Markets Unit could assist innovative enterprises to succeed.
The government stated the measure would criminalize facilitating or advertising fake reviews without reasonable procedures to verify them.
The government said the new rules would ensure web users can exit subscriptions that use dark patterns and other tricks to lock them in “a straightforward, cost-effective, and timely way” by requiring businesses to send a reminder when a free trial or introductory offer ends.
“This will help deliver one of the Government’s five priorities to grow the economy by increasing consumer choice and confidence in the products and services they buy,” it said.
Sunak’s government may be focused on the short time they have to make an impression on the British public before a general election (by January 2025 at the latest).
“As soon as possible following parliamentary approval,” the government stated. However, governments warn that secondary laws and guidelines may delay GAFAM companies’ UK business changes.