On 8 December 2020 the CMA issued advice to Government on the design and implementation of the UK’s new pro-competition regime for digital markets. The advice was provided and produced by the Digital Markets Taskforce, commissioned in March and led by the CMA.
The new regime is designed to proactively shape the behaviour of the most powerful tech firms and ensure that consumers and businesses are treated fairly. The new regime is designed to help level the playing field for smaller rival tech firms.
If the CMA’s recommendations are implemented, the new regime will govern the most powerful tech firms, aka those with strategic market status (SMS). A new ‘Digital Markets Unit’ will ensure the ‘rules of the game’ are adhered to. The Digital Markets Unit (DMU) would sit within the CMA and become part of a wider regulatory framework for digital markets, including the new regime for harmful content online.
The three key proposed pillars of the regime for SMS firms are:
- Code of conduct: A new legally binding code of conduct will be created, which is tailed to each firm and to where the evidence demonstrates problems in competition may occur. This will be designed and overseen by the Digital Markets Unit (DMU). There will be a range of powers available to the DMU to address any concerns, including the potential for significant penalties.
- Pro-competitive interventions: Pro-competitive interventions to be used to address the sources of market power, allow competition to flourish and to unlock the potential for transformative innovation by other players in the market. For example, an example of this may be to impose interoperability requirements on tech firms, and better enabling consumers to control and share data.
- Enhanced merger rules: Enhanced merger rules would enable the CMA to apply closer scrutiny to transactions involving SMS firms. This would include it being mandatory to notify the CMA of a transaction, imposing a block on completing a deal until the CMA had investigated, and a change to more cautious legal test when looking at the likelihood of harm to consumers in order to address concerns about historic under-enforcement of mergers involving big tech firms.
Following receipt of this advice, the government has committed to consult on proposals for a new pro-competition regime in early 2021 and to legislate to put the DMU on a statutory footing when parliamentary time allows. The taskforce has urged government to move quickly in taking this legislation forward, to take advantage of the clear opportunity for the UK to lead the way in championing a modern pro-competition, pro-innovation regime.
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