- The Department for Digital, Culture, Media and Sport Looks to Give the UK Digital Market a Competitive Edge
The Department for Digital, Culture, Media and Sport Looks to Give the UK Digital Market a Competitive Edge
The Department for Digital, Culture, Media and Sport Looks to Give the UK Digital Market a Competitive Edge5th November 2021 - Published by Kuits Intellectual Property Team
The Competition and Markets Authority (CMA) has recently responded to the consultation issued by the Department for Digital, Culture, Media and Sport (DCMS) and Business, Energy and Industrial Strategy (BEIS). The consultation was sought in relation to a new regime, which has the ability to boost competition in digital markets, and the establishment of the Digital Markets Unit (DMU).
In short, the CMA supported the Government’s proposals for such a pro-competition regime. The need for a new regime has arisen as it has been identified that the current regulation of competition in digital markets is not working as well as it should. This can be exemplified by the fact that between 2008 and 2018, five of the largest digital firms made 400 acquisitions globally and none of these were blocked by competition authorities. With the new regime in place the CMA will be able to properly review the acquisition of firms with Strategic Market Status (SMS) and, where there is a threat to competition, stop them. Overall, this type of regime is intended to give start-ups a better chance to grow, giving consumers and small businesses a better deal in order to further the UK economy and growth.
The Competition and Markets Authority response
Some of the CMA’s responses to the Government’s proposals which deal with the practical aspects of such a regime are as follows:
- There should be clear criteria which would enable the DMU to identify firms which fall within the scope of this regime accurately as having SMS. These would be firms which are established as a market power in at least one activity for which digital technologies are a core component. The DMU would need to consider the suitability of SMS firms by reviewing both qualitative and quantitative evidence. The DMU would then need to consult transparently on its decision to designate firms as having SMS.
- For SMS firms to comply with any codes of conduct as part of the regime, the CMA agrees that it is important to be transparent about “rules of the game”. The CMA’s view is that the power given to the DMU should include the ability to set out legally binding obligations that are tailor made to each firm and its business model. This is because general code requirements would not necessarily provide the degree of certainty required and could in fact limit the enforceability of the rules by the DMU.
- It is also the CMA’s view that a code of conduct alone would not be sufficient by the DMU to have the level of change anticipated and so along with those core values pro-competitive interventions would also be needed. Remedies of such interventions include personal data mobility (which is the legal transfer of personal data between entities) and interoperability. As such, barriers to entry and trade would be reduced and it would be easier for competitors to enter the market.
- The CMA supports the Government’s proposal that a levy funding model would be appropriate to fund this kind of regime.
- The CMA also supports the working of the DMU with other regulators such as the Information Commissioner’s Office, Ofcom and the Financial Conduct Authority in order to ensure a co-ordinated and uniform approach.
All of the above will provide a helpful toolkit for the DMU and the Government to look at when considering how to formally roll-out and enforce any regime in the future. Given the importance of the digital markets and how readily our data is being used by the companies operating in that industry, clearly there is the need for some form of regulation and monitoring whilst at the same time providing an environment for smaller businesses relying on a digital market to develop. It will be interesting to see whether the Government adopts the suggestions made by the CMA.
Get in touch with a Competition Law expert in Manchester
If you would like to discuss how the consultation issued by the Department for Digital, Culture, Media and Sport (DCMS) and Business, Energy and Industrial Strategy (BEIS) may affect your business with a Competition Law Expert call Senior Associate Humna Nadim on 0161 838 7816 or email@example.com