UK must strengthen regulation in the face of big tech pressure, argues IPPR

Protecting incumbents is bad for the economy and SMEs says thinktank, citing Apple – Google app store duopoly

The UK must stand firm on regulating big tech by strengthening the hand of the Competition and Markets Authority (CMA) and refocusing its activities, according to the think tank IPPR.

Pressure to grant concessions to tech giants for political expediency should be resisted said Dr George Dibb, associate director for economic policy at IPPR and co-author of a briefing paper Fair Play: How Competition Policy can Drive Growth.

“Enforcing the UK’s competition rules isn’t anti-business – it's a pro-business, pro-worker, pro-growth agenda. If we weaken those rules, we’re letting dominant firms and tech giants hold back innovation and investment. That’s money being extracted from British businesses and workers, and funnelled to monopolistic firms, often overseas.”

The IPPR, a progressive think tank, describes competition law as a “cornerstone of shared, equitable growth.”

It says the UK’s competition regulator is going through a “crisis of legitimacy” and “struggles to articulate its mission – stuck between a past it knows is no longer possible, and not yet able to define its role in a moment of economic emergencies.”

The report argues: “Concentrated markets entrench incumbents, discourage investment and suppress market dynamism.

“The UK’s steady decline in competition has contributed to stagnant productivity and a ‘sugar-rush’ economy skewed toward short-term profits.”

It adds: “When competition policy is weak, it enables a handful of foreign-based giants to entrench their dominance, making it harder for UK-based startups to compete and grow.”

The IPPR cites the case of the app store duopoly enjoyed by Apple and Google. These vendors charge a standard commission of 30% on in-app purchases with a reduced rate of 15% for small businesses. In a more competitive market, the standard rate would be more like 12%, it argues, which would transfer an estimated £1.4 billion in annual transaction fees back to UK developers and into the UK economy, rising to an estimated £3.3 billion annually by the end of this parliament.

The Digital Markets, Competition and Consumers (DMCC) Act 2024 grants increased enforcement powers to the CMA in curbing the dominance of Big Tech in digital markets. The IPRR urged the watchdog to use them.

The UK “must reject false choices between ‘pro-business’ and ‘pro-competition’ policies,” it says, recommending the CMA, abandoning costly and likely fruitless investigations and instead seeking to emulate the recent successes of the US FTC where “antitrust enforcers reconnected with grassroots concerns”.

The Coalition for App Fairness (CAF), which sponsored the report, said it “underscores the benefits of strong enforcement of the DMCC Act to rein in Apple and Google’s anticompetitive mobile app store practices”.

Craig Beaumont, executive director at the Federation of Small Businesses, said: “At FSB we support IPPR's approach to take proactive steps on digital markets, rather than regulating 'after the fact' and after harm occurs - requiring late and often slow corrective action. In particular, we welcome the push to champion SME dynamism over incumbent protection.”

The report was also welcomed by former CMA chair Andrew Tyrie who said in a statement: “The UK’s competition authorities, led by the CMA, have failed to prevent rising concentration and declining competition in many markets, as have competition authorities in many other jurisdictions. Lower growth, less innovation and widening income differentials are the consequence. The CMA has recently been given huge new powers and tools. It now needs to deploy them, and vigorously."