On 7th April 2021 the Department of Business Energy and Industrial Strategy (“BEIS”), Department of Culture, Media and Sport (“DCMS”) and the Competition & Markets Authority (“CMA”) announced the establishment of a new Digital Markets Unit (“DMU”), established within the CMA, to enforce the UK’s new digital regulatory regime. The DMU has begun work in a shadow, non-statutory form. The Unit is to be headed by Will Hayter of the Cabinet Office who previously worked as a senior CMA official. He has been appointed as interim head of the DMU from May 2021. Its principal role will be to regulate online marketplaces and platforms. The Unit will oversee plans to give consumers more choice and control over their data, promote online competition and crack down on unfair practices which can often leave businesses and consumers with less choice and more expensive goods and services. Once legislation has been passed, probably in late 2021/2022, the DMU will be provided with full statutory powers to enforce the new online digital markets regulatory regime.
The DMU Commences Work
The DMU will oversee plans to give consumers more choice and control over their data, promote online competition and crack down on unfair practices which can often leave businesses and consumers with less choice and more expensive goods and services. Explaining the reasoning behind the establishment of the DMU, the Government stated that online platforms can bring huge benefits for businesses and society. They make work easier and quicker and help people stay in touch. But there are downsides. The concentration of power among a small number of firms is curtailing growth and having a negative impact on consumers and businesses which rely on them. Therefore, an ex-ante regulatory regime is needed to supplement existing competition powers to invigorate competition in online markets and to stop abuses of market power by digital platforms.
The Government announced the terms of reference for the DMU albeit in its non-statutory form which will be as follows:
- Carrying out preparatory work to implement the statutory regime. This is likely to include building teams with the relevant capabilities and preparing draft guidance (closer to the statutory DMU's launch and once decisions on the shape of the regime have been taken), to maximise operational readiness of the DMU in time for the implementation of legislation.
- Supporting and advising Government on establishing the statutory regime. Advice will provide key insights to inform decisions about the shape of the regime. The content of this workstream will be agreed in collaboration with Government. The DMU is to look at how codes of conduct could work in practice to govern the relationship between digital platforms and groups such as small businesses which rely on them to advertise or use their services to reach their customers. The DMU will also take a sector neutral approach in examining the role of platforms across a range of digital markets, with a view to promoting competition. In addition, Ofcom will also have a role in liaising with the DMU as to how the code would govern the relationships between platforms and content providers such as news publishers, including to ensure they are as fair and reasonable as possible.
- Evidence-gathering on digital markets. The CMA will continue to use its existing powers, where appropriate, to investigate harm to competition in digital markets. The CMA has recently opened cases against Apple and Google. This will ultimately inform the work of the statutory Digital Markets Unit.
- Engaging stakeholders across industry, academia, other regulators and government. Building close relationships with other experts in the UK and abroad will ensure diverse insights underpin the new regime and will build the foundations for international regulatory coordination. The non-statutory Digital Markets Unit will also work closely with industry to prepare for a smooth transition following legislation.
The Government will set up a forum for the DMU to update government on its work. It will bring together officials from the CMA, DCMS, BEIS and HM Treasury, to agree a work programme for the non-statutory Digital DMU on its advice to government, and monitor progress against this. The Information Commissioner’s Office, Ofcom and the Financial Conduct Authority will also join this forum to inform the work programme in their relevant areas of expertise as required.
The Government’s clear message is that the DMU’s response is a holistic response to the problems of online platforms and involves many different regulators and the Government itself. This is not just a CMA play.
The recent cases against Google and Apple started by the CMA under competition powers would greatly benefit from the presence of a probably resourced online platform regulator with appropriately wide ex-ante statutory powers. The CMA’s competition powers can take it only so far in regulating alleged abusive and anti-competitive conduct of platforms. But a DMU with full statutory powers will greatly assist in a more comprehensive and effective response to these types of cases. The Government has committed itself to make rapid progress to establish the new, pro-competition regime to boost competition and innovation in digital markets. If Parliamentary time permits it is likely that once the final form and the function of the DMU has been agreed in the first half of 2021, legislation is likely to be forthcoming in late 2021/early 2022.