UK’s Digital Markets Unit: referee has been appointed, now is your chance to help write rules of the game

Hogan Lovells

The UK Government has launched the much anticipated Digital Markets Unit (DMU) as a first step towards an “unashamedly pro-competition" regime focused on the position of “tech giants”.  The DMU will, however, initially lack its own enforcement powers and there is still a lot to play for in terms of scoping those powers. Now is the time to enter the debate!

Background

The Government confirmed its intention to establish the DMU in late November 2020 – one of a number of measures being pursued to regulate the digital sector. The origins and evolution of the DMU, as well as other digital market developments, were discussed in our recent webinar – see Regulating digital platforms in the UK – what can we expect?.  

Sitting within the Competition and Markets Authority (CMA), the DMU will work closely with the Office of Communications (Ofcom), the Information Commissioner's Office (ICO) and the Financial Conduct Authority (FCA). The scope of the DMU's powers are yet to be confirmed.  However, it is envisaged that its principal role will be to produce and enforce individual codes of conduct to govern the behaviour of companies designated as having "Strategic Market Status" (SMS). It is also anticipated that the DMU will work to promote online competition, including by ensuring that consumers are given choice and control over the use of their data.

Shadow launch

Although the Government has hailed this as a "major milestone for online market reform", the DMU is, at present, a shadow of its future self. It has been established on a non-statutory basis, pending legislation to put it on a statutory footing and giving it its own enforcement powers. It has long been a political ambition of the Government to respond to the rapid rise of global technology companies with appropriate regulation which balances the protection of the consumer with innovation or investment in “Global Britain”. Setting up the DMU is the easy part; striking the right balance among the many views in Parliament, and from business, is another.

The Government will consult later this year on the design of the DMU before legislating to put the DMU on a statutory footing "as soon as Parliamentary time allows." This is an important and sensible step to take given the new ground this regulation will cover and the importance of getting it right the first time around. In view of other pressing priorities, it is anticipated that the DMU will not be fully operational before 2022. 

Until then, the DMU will be preparing for the new regime, including sketching out the scope of its future operations and considering appropriate codes of conduct. The recently published 'terms of reference' indicate that the DMU will be focusing on:

  • Preparatory work necessary for implementing the statutory regime (including building teams with relevant capabilities and producing draft guidance).

  • Advising and supporting the Government on establishing the statutory regime (in particular, building on the advice provided by the Digital Markets Taskforce).

  • Gathering information and evidence on the operation of digital markets.

  • Engaging and building up relationships with relevant stakeholders in industry and academia as well as with other domestic and international regulators.

As a first series of tasks, the DMU has been asked to:

  • Examine how codes of conduct might work in practice across a range of digital markets to govern relationships between digital platforms and (for example) small businesses that rely on platforms to advertise or which use platform services to reach their own customers.

  • Work with Ofcom to consider how a code of conduct might apply between platforms and content providers, such as publishers and news organisations.

In recognition of the fact that the UK regime will be one of a patchwork of regimes, the DMU has also been tasked with liaising with “international partners" as part of the UK's presidency of the G7. The Digital Secretary will also host a meeting of digital and technology ministers in April, with the aim of facilitating greater coordination, better information sharing, and joined up regulatory and policy approaches: a sign that, although the UK wants to lead the way, it does not want to be an outlier.

Going forward

For now, the DMU will "work closely with the CMA" in relation to ongoing investigations and merger reviews involving large digital players. This reinforces the fact that, until the DMU is put on a statutory footing and given its own powers, its teeth are not its own: any enforcement activity will have to be through the CMA's existing competition or consumer law powers. 

However, we should not expect the DMU to stay in the shadows until the planned consultation on the powers of the DMU has been completed and the resulting legislation passed. A lot could happen before that point, and we should expect to see the DMU flexing its soft power in the interim period. 

As the DMU gets up and running, there is still a lot to play for in terms of scoping its eventual powers. The CMA wants the DMU to be a world-leading digital markets regulator and its remit has the potential to reach across sectors and affect any company with any interaction with a "digital market”. 

Now is the time to enter the debate! Get in touch to discuss the impact the DMU's work could have on your business and, in turn, how we can help. We have a deep understanding of the regulatory landscape and detail of what has been discussed so far. We also have extensive experience of working inside government, and advising corporations on the machinery of government and this Government’s policy priorities. Let us help you to engage with the Government and relevant stakeholders in advance of the formal consultation.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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