UK competition watchdog proposes tailored rules to regulate tech giants

Harsh turnover-based financial penalties for companies that fail to follow the rules

UK's Competition and Markets Authority (CMA) has advised the government to introduce new tailored competition rules to 'proactively shape' the behaviour of the most powerful tech firms.

The CMA said that the new, legally binding code of conduct will be enforced through a new Digital Markets Unit (DMU), announced last month.

The new code will include rules for harmful online content and data protection, and will be backed up by financial penalties for firms that fail to obey the rules.

The CMA wants to establish DMU within itself to draft the rules and to ensure that companies follow them properly. The DMU is expected to have powers to fine offenders up to 10 per cent of their annual turnover.

The proposed regime will form part of a wider regulatory framework for digital markets, driving competition and innovation in the market and enabling the government to harness the full potential of digital markets, the CMA said.

However, it will require government legislation to come into effect.

CMA chief Andrea Coscelli said businesses and consumers who rely on Google and Facebook should be treated fairly, and there should be a level playing field for competitors.

He said that the UK needs "a modern regulatory regime that can enable innovation to thrive, while taking swift action to prevent problems".

In March, the government asked the CMA to lead a Digital Markets Taskforce in order to give advice on how a new pro-competition approach could be designed for digital markets.

In its final report, published in July, the CMA outlined a number of factors that undermine competition and entrench the market power of major tech companies.

The watchdog proposed three key pillars of the regime for tech firms with 'strategic market status' (SMS): pro-competitive interventions; enhanced merger rules; and new code of conduct, tailored to each firm.

Last month, the government accepted the findings of the CMA's study in principle, and promised to create a new pro-competition regulatory regime - the DMU - to regulate the market power of companies like Google and Facebook.

The DMU will be set up in April next year, although the legislation is not expected to come until 2022.

The CMA is currently working with the ICO, Ofcom and FCA through the Digital Regulation Cooperation Forum, to consider measures that should be taken to ensure adequate coordination and clarity across all digital regulation.

A global issue

Governments around the world are looking at various measures to strengthen the regulation of big tech firms, which are accused of abusing their market dominance to kill competition in the market.

Last month, the Marketers for an Open Web (MOW) - an alliance of technology and publishing firms - filed a complaint with the CMA, urging the regulator to delay the rollout of Google's 'Privacy Sandbox' technology that is scheduled to launch early next year.

Critics of the technology warn that the scheme would remove advertising, login, and many other features from the open web and place them under the control of Google.

The MOW said that 'Privacy Sandbox' would eliminate third-party cookies used to store user information on devices, and would replace them with tools owned by Google.

The group also argued that the changes will move the digital advertising business "into the walled garden of [Google's] Chrome browser, where it would be beyond the reach of regulators."

In October, the US House Judiciary Committee's Antitrust Subcommittee released the findings of its investigation into the challenges posed by the immense power of tech giants in the digital economy.

The report concluded that companies like Google and Facebook are effectively monopolies, and are abusing their dominance to control access to markets and pick winners and losers.