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The UK’s competition watchdog set up a new unit this month that will focus on how tech giants affect digital markets. The director of this new unit has been giving hints about how it might work once it has legal standing and the power to punish bad platforms and possibly even order structural separation.
In November of last year, the government said it wanted to regulate big tech. It said it would set up a “pro-competition” system to deal with problems in digital markets, such as “winner takes all” network-effect dynamics. It’s not clear when that will happen; the government has only said it will do it as soon as parliamentary time allows.
Since the UK is no longer part of the European Union, it is coming up with its own rules for digital services. EU lawmakers recently proposed a major new set of rules for digital services (the Digital Services Act) and ex ante requirements for the biggest tech companies (the Digital Markets Act).
EU lawmakers have also proposed draft rules for high-risk AI applications, and the UK is working on an online safety bill (a legislative proposal is due this year). This means that a lot of new digital rules are being written right now, and if lawmakers don’t get on the same page, there could be confusing and counterproductive regulatory overlap.
Still, it is likely that the UK and the EU will continue to take different approaches, even though UK lawmakers say they want to work with the rest of the world as they write rules to make sure that a British digital rulebook is similar in spirit, if not in letter, to requirements being made for Internet platforms elsewhere.
The UK’s Digital Markets Unit (DMU) started up earlier this month to help the government as it writes laws to make it official and so that the unit can act as the British watchdog for big tech.
Catherine Batchelor, who is in charge of the DMU, talked about how she wants the unit to work at a conference on Friday. She also talked about some of the powers the unit has told the government it needs to help ministers reach their goal of increasing competition in digital markets that are prone to tipping.
She gave an overview of the issues and said that a new way of regulating digital markets is needed because the way they work has changed. She said that companies that “were once garage startups or started on university campuses [and] are now the most powerful firms in the world.” She also said that tech giants have been able to gain so much market power because digital markets have features like access to data, network effects, and economies of scale that come with platforms.
“You might wonder, ‘What’s wrong with that?’ But I think we see every day how dangerous that is, because firms can take advantage of customers and other businesses that rely on them,” she said.”From a business point of view, that could be the price you pay to sell your goods and services on the marketplace, the price you pay to list your app in an app store, or the price you pay to advertise your goods and services.”
She told consumers that they may be “paying” with their attention or data for free digital goods and services. This raised questions about whether the amount of data users are giving up is a “fair exchange” for what they are getting in return.
On the business side, Batchelor said that “self-preferencing” is one of the “exclusive” practices that tech giants use that is a problem and that the unit will try to fix it. “That will make the digital economy less vibrant as a whole,” she said. “You don’t have new tech companies coming up that can grow like the old ones did.”
She said that the problem with trying to stop unfair (digital) market behaviours with current competition law is that it can’t be “proactive and preventative.” This is why DMU has suggested making rules that stop companies from doing these things in the first place.
She also said that the unit wants to avoid the risk of being too strict. So, unlike the EU’s DMA proposal, it hasn’t backed a list of “dos and don’ts” that would apply to all platforms covered by the regulation.
Instead, she said that it wants more freedom to tailor requirements to specific platforms so that it can take into account each platform’s unique qualities and any changes in the market or how it works.
On the question of who would be covered by the new pro-competition regime, the unit has suggested an “evidence-based assessment” to decide if a company has “strategic market status,” which means they are “in a position that is unlikely to be temporary,” as she put it.
“Our recommendations were that for this regime to apply to a company, the DMU should have to look at whether the company has substantial, stable market power and whether that power gives the company a strategic position,” she said. “We’ll look at the things that might have led to that strong position, like barriers to entry and growth,” he said.
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