CMA calls on government to introduce a new pro-competition regulatory regime to tackle “tech giants”

• United Kingdom

• Commercial and IT
• Competition, EU and Trade
• Technology, Media and Telecoms

13-07-2020

On 1^st July 2020, the Competition and Markets Authority (“CMA”) published its final report following a market study into online platforms and digital advertising.  In the report, Facebook and Google attracted the most attention on the basis that out of the £14bllion of UK digital advertising expenditure in 2019, around 80% of this was earned by these two companies.

The key concerns raised by the CMA focus on what they describe as the “unassailable market position” of companies like Google and Facebook, which means that rivals cannot compete on equal terms. The CMA see barriers to competition including:

• large user bases – for Facebook this leads to it being the “must have” network for users to remain in contact, and for Google this allows its search algorithms to be further developed in such a way that other search engines cannot;
• unmatchable access to user data – meaning targeted advertising can be achieved, and an ability to tailor services to individual users;
• the use of default settings to “nudge” users into using their services and divulge their personal data; and
• presence across many different markets.

The CMA consider that these barriers directly impact consumers. For example, the CMA considers that weak competition in search and social media undermines innovation and consumer choice, and also leads to consumers divulging more data than they would like. Broader social concerns were also raised by the CMA, including the impact on newspapers and other publishers. The CMA comments that, “…newspapers are reliant on Google and Facebook for almost 40% of all visits to their sites. This dependency potentially squeezes their share of digital advertising revenues, undermining their ability to produce valuable content”.

Against the above, the CMA is calling for a new pro-competition regulatory regime for online platforms, including a new “Digital Markets Unit” having a wide range of specific interventions to address the CMA’s concerns with the sector. These include, for example, the ability to require the opening up of “click and query data” to rival search engines, enforcement of a code of conduct to ensure platforms with market power do not engage in exploitive or exclusionary practices, and ordering the separation of platforms to ensure “healthy competition”.

The CMA has also flagged that given the concerns being raised in this report are international in nature, it intends to continue with its global role as part of its wider digital strategy.

The CMA has also formally launched its “Digital Markets Taskforce” working in partnership with the Information Commissioner’s Office and Ofcom.  The objective of the taskforce is to build on the conclusions of the market study into online platforms and digital advertising, as well as looking across all platforms to consider the functions, processes and powers which may be needed to promote competition.