Digital markets unit launched to create pro-competition tech regime

The government is to set up a dedicated digital markets unit (DMU) to tackle what it says are unfair and uncompetitive practices used by dominant tech platforms, such as Google and Facebook

The move follows a Competition and Markets Authority (CMA) review of digital advertising and online platforms, which identified concerns that the concentration of power amongst a small number of tech companies is curtailing growth in the tech sector, reducing innovation, and potentially having negative impacts on the people and businesses that rely on them.

Around £14bn was spent on digital advertising in the UK in 2019, 80% of which went to Google and Facebook, and the CMA notes the number of adverts that consumers are exposed to on digital platforms is increasing, with adverts seen per hour on Facebook rising from 40-50 in 2016 to 50-60 in 2019. Its average revenue per user is now more than ten times higher than competitors.

In 2016, Google increased the maximum number of adverts displayed following a search query and moved these to the centre of the page above organic results. In the UK its prices for advertising on desktop and mobile are also 30% to 40% higher than Bing’s, its main competitor.

The DMU will develop and enforce a statutory code of conduct designed to give consumers more choice and control over how their data is used, and to enable small businesses to better promote their products online.

It will sit within the CMA and work closely with regulators including Ofcom and the Information Commissioner’s Office.

The new code will set clear expectations for platforms that have considerable market power - known as ‘strategic market status’ - over what represents acceptable behaviour when interacting with competitors and users.

Under the new code platforms, including those funded by digital advertising, could be required to be more transparent about the services they provide and how they are using consumers’ data, give consumers a choice over whether to receive personalised advertising, and be prevented from placing restrictions on their customers that make it hard for them to use rival platforms.

The DMU, which is set to begin work in April, could be given powers to suspend, block and reverse decisions of tech giants, order them to take certain actions to achieve compliance with the code, and impose financial penalties for non-compliance.

Business secretary Alok Sharma said: ‘Digital platforms like Google and Facebook make a significant contribution to our economy and play a massive role in our day-to-day lives - whether it’s helping us stay in touch with our loved ones, share creative content or access the latest news.

‘But the dominance of just a few big tech companies is leading to less innovation, higher advertising prices and less choice and control for consumers.’

The unit will also look at proposals to help give small businesses fair access to platform services including digital advertising, allowing them to grow their business’ online presence. The code could be used to ensure platforms are not applying unfair terms, conditions or policies to certain business customers, including news publishers.

Currently, dominant online platforms can impose terms on news publishers that limit their ability to monetise their content, which can severely impact their ability to thrive.

The DMU will be informed by the work of the digital markets taskforce, set up earlier this year to provide advice to the government on the potential design and implementation of pro-competitive measures – including the methodology which will determine what companies should be designated as having strategic market status, and how a regime would work in practice.

The taskforce is due to report later this year.

The government said it will consult on the form and function of the DMU in early 2021 and legislate as soon as parliamentary time allows.

Useful links:

Government response to the CMA digital advertising market study

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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