On Tuesday last week the UK Competition and Markets Authority (CMA) outlined plans for an innovative way of regulating powerful tech firms in a way that overcomes the procedural treacle-wading implicit in competition law that had been designed for an analogue era.
The proposals emerged from an urgent investigation by the Digital Markets Taskforce, an ad-hoc body set up in March and led by the CMA with inputs from the Information Commissioner’s Office and OFCOM, the telecommunications and media regulator. The Taskforce was charged with providing advice to the government on the design and implementation of a pro-competition regime for digital markets. It was set up following the publication of the Treasury’s Furman Review on ‘Unlocking digital competition’ which reported in March 2019 and drew on evidence from the CMA’s previous market study into online platforms and digital advertising.
This is an intriguing development in many ways. First of all it seems genuinely innovative. Hitherto, competition laws have been framed to cover market domination or monopolistic abuse without mentioning any particular company, but the new UK approach for tech companies could set specific rules for named companies — Facebook and Google, say. More importantly, the approach bypasses the sterile arguments we have had for years about whether antique conceptions of ‘monopoly’ actually apply to firms which adroitly argue that they don’t meet the definition — while at the same time patently functioning as monopolies. Witness the disputes about whether Amazon really is a monopoly in retailing.
Rather than being lured down that particular rabbit-hole, the CMA proposes instead to focus attention on firms with what it calls ‘Strategic Market Status’ (SMS), i.e. firms with dominant presences in digital markets where there’s not much actual competition. That is to say, markets where difficulty of entry or expansion by potential rivals is effectively undermined by factors like network effects, economies of scale, consumer passivity (i.e. learned helplessness), the power of default settings, unequal (and possibly illegal) access to user data, lack of transparency, vertical integration and conflicts of interest.
At the heart of the new proposals is the establishment of a powerful, statutory Digital Markets Unit (DMU) located within the Competition and Markets Authority. This would have the power to impose legally-enforceable Codes of Conduct on SMS firms. The codes would, according to the proposals, be based on relatively high-level principles like ‘fair trading’, ‘open choices’ and ‘trust and transparency’ — all of which are novel ideas for tech firms. Possible remedies for specific companies (think Facebook and Google) could include mandated data access and interoperability to address Facebook’s dominance in social media or Google’s market power in general search.
It would be odd if, in due course, Amazon, Apple and Microsoft don’t also fall into the SMS category of “strategic”. Indeed it’s inconceivable that Amazon would not, given that it has morphed into critical infrastructure for many locked-down economies.
The government says that it going to consult on these radical proposals early next year and will then legislate to put the DMU on a statutory basis “when Parliamentary time allows”.
Accordingly, we can now look forward to a period of intensive corporate lobbying from Facebook & Co as they seek to derail or emasculate the proposals. Given recent history and the behaviour of which these outfits are capable, it would be prudent for journalists and civil society organisations to keep their guard up until this stuff is on the statute book.
The day after the CMA proposals were published (and after a prolonged legal battle) the Bureau of Investigative Journalists were finally able to publish the Minutes of a secret meeting that Matt Hancock had with the Facebook boss, Mark Zuckerberg, in May 2018. Hancock was at that time Secretary of State for DCMS, the department charged with combating digital harms. According to the Bureau’s report, he had sought “increased dialogue” with Zuckerberg, so he could “bring forward the message that he has support from Facebook at the highest level”. The meeting took place at the VivaTech conference in Paris. It was arranged “after several days of wrangling” by Matthew Gould, the former culture department civil servant that Hancock later made chief executive of NHS X. Civil servants had to give Zuckerberg “explicit assurances” that the meeting would be positive and Hancock would not simply demand that the Facebook boss attend the DCMS Select Committee inquiry into the Cambridge Analytica scandal (which he had refused to do).
The following month Hancock had a follow-up meeting with Elliot Schrage, Facebook’s top lobbyist, who afterwards wrote to the minister thanking him for setting out his thinking on “how we can work together on building a model for sensible co-regulation on online safety issues”.
Now that the UK government is intent on demonstrating its independence from foreign domination, perhaps the time has come to explain to tech companies a couple of novel ideas. Sovereign nations do regulation, not ‘co-regulation’; and companies obey the law.
A version of this post was published in the Observer on Sunday, 13 December, 2020.