In a development set to have a significant impact on the regulation of digital markets, on 11 March 2020 the UK government announced a series of measures designed to "empower consumers and boost competition" in digital markets, including setting up a temporary digital markets taskforce.
The announcement comes amid the ongoing government scrutiny into digital markets and the extent to which competition is working effectively to protect consumers in these markets.
With the outcome of the Competition and Markets Authority's (CMA's) market study into online platforms and digital advertising market in the UK not due until July 2020, this announcement illustrates that the government already believes there is a need for intervention in these markets, and the CMA is developing key remedies prior to the outcome of that study.
The measures reported in the budget implement the recommendations of the government commissioned review – chaired by US economist Jason Furman (the "Furman Review"). As we have previously reported, the Furman Review examined whether competition law policy and enforcement tools in the UK needed to be redrawn to meet the particular characteristics of digital markets.
The Furman Review found that reform was indeed necessary to adequately manage the challenges and opportunities posed by digital markets and set out strategic recommendations. The recommendations included more frequent and firmer action to challenge mergers in digital markets and updating the CMA's enforcement tools to deal with anti-competitive conduct more quickly, including greater and quicker use of interim measures.
The government has confirmed in the budget statement that it has accepted all six of the strategic recommendations of the Furman Review and will consult on these in due course.
Digital markets taskforce
Perhaps most significantly, the government has confirmed that it will set up a dedicated digital markets unit and will set up a temporary "new cross-regulator taskforce" based in the CMA.
The Furman recommendation stated that this digital markets unit should:
- set a code of conduct for players with "Strategic Market Status" (SMS) – those that have a position that means others in the market depend on them;
- pursue data interoperability, mobility and systems with open standards between platforms, products and services and address specific competition issues in digital platform markets; and
- pursue secure access to non-personal and anonymised data where data access represents a significant barrier to entry for smaller and newer firms, while protecting privacy and security.
SMS code of conduct
In the detailed terms of reference published on its site, the CMA has confirmed that the taskforce will produce a final report for the government in September 2020. It also reveals that a code of conduct for players designated as having SMS will be a heavy focus of the final report, which will include guidance on:
- how to designate digital platforms as having SMS; and
- the form and content of a code of conduct, including whether it should apply to platforms' relationships with businesses and consumers, and even whether separate codes are required for individual platforms.
This is interesting in the context of the ongoing market study by the CMA into digital platforms and online advertising, as it effectively confirms that one of the CMA's interim recommendations – an enforceable code of conduct for firms with SMS - will be progressed prior to the final report of the market study which is due in July 2020.
Similarly, it effectively confirms that at the conclusion of its market study, the CMA will follow the Furman Review and conclude, as set out it in its interim report, that there are a number of characteristics of digital markets that may inhibit entry and expansion by rivals, undermining effective competition.
It is clear that the government sees intervention as required to tackle the long-discussed concerns around dominance in digital markets and is not waiting for the publication of the final report of the market study to push these forward.
An increasingly interventionist CMA?
The developments are also part of a wider pattern of the CMA looking to be increasingly interventionist, not just in digital markets, in order to tackle perceived consumer harms. As we previously reported, the CMA was last year vocal in calling for greater powers – including greater consumer enforcement powers – in order to tackle harms in fast moving markets.
The CMA had requested the type of enforcement tools that the government will now move to consult on, such as an ability to more quickly and easily use interim measures, and similarly, has this year expressed its view that one advantage of Brexit is that it has the power to take a stricter approach to assessing digital mergers.
The CMA wants to be an ambitious and world-leading regulator in its post-Brexit future. This budget statement indicates that the government will grant it the powers it is seeking to achieve this.
How we can help
Any intervention by the CMA has the potential to significantly impact businesses active in digital markets, and while the scrutiny continues, this is a prime opportunity to seek to shape the outcome by engaging with the CMA.
Osborne Clarke has substantial experience in helping businesses navigate the legal and policy issues that the CMA is currently addressing as part of its digital markets strategy, including in relation to the ongoing market study. Please contact one of our experts if you would like to discuss further how we can help your business.