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The UK\u2019s competition authority has fleshed out new details of how it plans to wield long anticipated powers, incoming under a reform bill that\u2019s still in front of parliament, to proactively regulate digital giants with so-called strategic market status (SMS) \u2014 saying today that, in the first year of the regime coming into force, it expects to undertake 3-4 investigations of tech giants to determine if they meet the bar.<\/p>\n
Of course the regulator isn\u2019t naming any names as yet but it\u2019s a fair guess that Apple and Google (aka Alphabet) will be towards the top of this investigation list.<\/p>\n
The CMA previously found<\/a> the pair\u2019s gatekeeping of their respective mobile app stores creates substantial competition concerns. And, publishing a mobile market study on the duopoly back in December 2021<\/a>, it wrote that its work \u201cso far\u201d suggests both would meet the incoming criteria for SMS designation for several of their ecosystem activities.<\/p>\n Tech giants that end up being subject to the UK\u2019s special abuse regime can expect to face interventions that prevent them from preferencing their own products, the CMA also confirmed today.<\/p>\n Additionally, it said they may be required to provide competitors with greater access to \u201cdata and functionality\u201d than their commercial interest might prefer.\u00a0 Interoperability could also be imposed on designated tech giants, the CMA suggested, as well as mandates that they\u00a0trade on fairer terms. Algorithmic transparency could be another demand made of them by the new digital markets regulator.<\/p>\n The need to arm the Competition and Markets Authority (CMA) with its own<\/span>\u00a0ex ante playbook to tackle the market muscle of Big Tech<\/a> has been on the policymaking agenda in the UK for years. In <\/span>November 2020<\/a> ministers confirmed their plan to set up a \u201cpro-competition\u201d regime targeting tech platforms with major market power with the goal of tackling some of the tipping seen in digital spaces, such as online advertising. <\/span><\/p>\n A key component of the plan for the new Digital Markets Unit (DMU), set up within the CMA<\/a>, was that it would be empowered to tackle specific problems with bespoke interventions tailored to each platform. The reform also contained teeth, allowing for penalties of up to 10% of annual turnover for confirmed violations. <\/span><\/p>\n Three+ years ago, when the government first committed to the plan to tackle platform power, it looked pioneering. However t<\/span>he turmoil in UK politics of the past several years contributed to delaying progress on enacting the reform<\/a>. As a consequence the UK has slipped behind peers like the European Union \u2014 which adopted its own flagship digital competition reform last year<\/a>. The deadline for in-scope tech giants\u2019 compliance with that regime is looming in early March.<\/p>\n Returning to the UK, the domestic mood music changed again last April<\/a> when the government, under prime minister Rishi Sunak, picked the ball back up and introduced the Digital Markets, Competition and Consumers Bill to parliament. Then, earlier this month, ministers wrote to the CMA asking it to set out a roadmap for implementing the future regime. Albeit, given the detail of the legislation remains under discussion by lawmakers, the ask was only for a \u201chigh level\u201d plan.<\/p>\n The CMA\u2019s response today takes the form of an overview that gives some steerage of what may be coming down the pipe for a handful of tech giants operating in the UK once the regime is up and running.<\/p>\n In the overview document<\/a>, the regulator writes that the harms it will choose to focus on will be driven by a set of \u201cprioritisation principles\u201d. The text goes on to set out a list of 11 \u201coperating principles\u201d (see graphic below) it says will feed its decision-making on which of the myriad possible Big Tech abuse battles to pick \u2014 including saying it will have a focus on always applying a pro-competition lens; selecting for maximum impact; and seeking to move quickly (and repair harms, to coin a phrase) as issues develop.<\/p>\n \u201cWe will think broadly about consumer benefits,\u201d the CMA also writes, fleshing out its thinking on principle 2 (aka impact). \u201cAs well as the price of goods and services (which in some digital markets is zero), consumers may also value choice, security, privacy, innovation, and their overall experience (for example, how much advertising they are exposed to).\u201d<\/p>\n Image credits: CMA<\/p>\n<\/div>\n A similar ex ante digital competition reform that came into force in the EU last year \u2014 aka, the Digital Markets Act <\/a>\u2014 takes a more prescriptive approach to prohibitions and obligations, by literally setting out a list of \u2018dos and don\u2019ts\u2019 for regulated giants. Six tech giants have been designated as so called \u201cgatekeepers\u201d under the bloc\u2019s regime so far (Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft), for a total of 22 \u201ccore platform services\u201d they provide, which range from adtech and operating systems to search engines and messaging platforms.<\/p>\n Some of the gatekeepers, including Apple, have filed legal challenges to the DMA designations. But the EU regime applies regardless in the meanwhile.<\/p>\n A German ex ante digital competition reform has also been operating since early 2021. This update has seen the country\u2019s regulator designate a number of tech giants, including Amazon, Apple, Google and Meta, as subject to a special abuse control regime for firms deemed to have \u201cparamount significance for competition across markets\u201d. Other tech giants remain under market power probe there.<\/p>\n The German regime has clocked up the most mileage of the regional ex ante reboots so far. And the Federal Cartel Office (FCO) can point to some notable shifts it\u2019s extracted from in-scope giants since then \u2014 including Google agreeing to reform its data terms<\/a>; and\u00a0offering not to inject publisher content it\u2019s directly licensing into search results<\/a>, which the regulator was concerned would amount to a self-preferencing risk which could harm rival publishers who weren\u2019t licensing their content to Google.<\/p>\n Under the FCO\u2019s watch, Meta also agreed to provide users with a way to refuse its cross-site tracking<\/a> last summer, in a win for privacy driven via the perhaps unlikely avenue of competition reform. (Although the FCO has long been a pioneer at reading privacy exploitation as a competition abuse<\/a>.)<\/p>\n What impact the UK\u2019s equivalent reform might have in the coming years remains to be seen. The government still needs to get on and get it through parliament. So it\u2019s not clear when exactly it might be operational.<\/p>\n For one thing there will need to be enough parliamentary time left before the UK General Election that\u2019s expected later this year to pass the bill. Once the legislation is in place there may be an implementation period \u2014 plus the CMA\/DMU will have to undertake investigations to designate SMSes. So the regime may still be years, plural, out from actually being able to exert pressure on Big Tech decisions.<\/p>\n In the meanwhile, the CMA\u2019s overview offers some interesting hints of where the DMU\u2019s hammer could fall in the coming years. And one overarching trend at least is clear: Big Tech is facing increasing curbs on its operational freedom.<\/p>\n That said, rising oversight of market-dominating web giants may be contributing to a strategic quasi-outsourcing biz dev tactic whereby Big Tech firms seek to invest in and partner with less tightly regulated startups that can be involved in activities which, if they were doing the stuff directly, could ruffle regulators\u2019 feathers.<\/p>\n The links between cloud-computing infrastructure-owning Big Tech and generative AI startups look instructive here. Vast amounts of money<\/a> and compute resource are being deployed in a way that threatens to enable current-gen tech giants to further extend their market dominance, via strategic tie-ups to startups operating at a claimed arm\u2019s length distance from their own business empires, in spite of amped up competition oversight of their own core platform services. Microsoft-OpenAI anyone?<\/a><\/p>\n<\/p><\/div>\n