You won't be alone if you haven't managed to keep up with the panoply of recent reports, recommendations, and proposals for reform surrounding the regulation of digital markets in the UK.
In the competition law context, there was the Chairman of the CMA's letter to BEIS on proposed reforms (see earlier post), the House of Lords' Report on Regulating in a digital world (made public on 9 March), and yesterday the release of the much anticipated Report of the Digital Competition Expert Panel, commissioned by Chancellor Philip Hammond last Autumn. The 150-page report, also known as the Furman Review after the Harvard professor and former chief economic adviser to President Obama that led the panel, made some important, if not entirely surprising, findings alongside some potentially far-reaching proposals for how the UK could better regulate tech companies in the interests of consumers.
Without trying to cover the full extent of the report, these are some quick takeaways:
A key recommendation of the Report, and in line with the HOL's recommendation for a new "Digital Authority", is the creation of a new "digital markets unit" with 3 core functions:
- To develop a code of competitive conduct for tech companies
- To enable personal data mobility and interoperability (think phone number portability or seamless current account switching)
- To force companies to hand over (non-personal, anonymised) data to new entrants in order to remove, or at least lower, the barrier to entry of big data.
With respect to merger control, the Report found that the "CMA should take more frequent and firmer action" in digital markets and suggests "a reset". In particular, it recommends:
- That all companies deemed to have "strategic market status" would be required to make the CMA aware of any acquisition. This echoes a recommendation in Andrew Tyrie's letter to BEIS, as well as the ACCC preliminary report on digital platforms. While some companies would be obvious candidates for this designation, no metric has been suggested for how to determine firms’ status;
- That the CMA give higher priority to cases in the digital sector on the basis that they "affect markets that are critically important to consumers". Given the potential influx of cases from Brexit and Tyrie's suggestion that certain transactions should be obliged to seek pre-closing approval, this would necessarily mean dedicating less resource to other sectors; and
- Changing the "substantial lessening of competition" standard to a substantial "balance of harms" test, meant to catch acquisitions by a big tech firm of "a smaller company [that] would otherwise have become a serious and innovative competitor" (where the merger would have only yielded modest efficiencies). What is unclear is how an "economically sound cost-benefit analysis" could accurately predict how successful that small player would be at innovating or how quickly consumers might adopt those innovations (when even the savviest Silicon Valley VCs often get this wrong).
To address a common complaint that enforcement in this sector is too slow to make a timely impact, the Report also recommends a streamlined process for interim measures and a more limited scope for the CAT to review antitrust cases (including interim measures imposed on those cases).
The Chancellor's immediate reaction to the report was to ask the CMA to conduct a formal market study into the digital advertising sector. The request may follow others in the queue. The CMA said it welcomes Furman's recommendations, but as the agency has previously made clear, "its ability to launch new projects is heavily dependent on" what happens with Brexit.
Our briefing on this sets out more detail.
Competition in digital markets should be sustained and promoted through a new approach, alongside the core conventional competition tools of merger control and antitrust enforcement. [This report] sets out how.