On 8 December, the Competition Markets Authority (CMA) presented its proposal to the UK government for a new regulatory regime to shape the behaviour of large tech firms, with the objective of driving greater competition and innovation.
Under the framework, tech companies will be classed as having “strategic market status” (SMS) if they have a strategic position in at least one digital activity and meet the proposed revenue threshold: GBP 1 billion of domestic annual revenue and GBP 25 billion global annual revenue. Designated firms will need to comply with three sets of rules:
- A Code of Conduct – the legally binding code which seeks to prevent practices by tech firms which undermine fair competition. The principles of the code – to be determined at a later stage – will seek to meet three objectives: fair trading, open choices, and trust and transparency. Breaching the code of conduct could lead to fines of up to 10% of global turnover.
- Pro-Competitive Interventions – the interventions (PCIs) would help drive long-term changes and address the root cause of unfair competition in the sector. The PCIs will likely range from interoperability standards and mandated third-party access to data to obligations to provide access to a platform on fair terms. These will be developed in consultation with the data protection authority and following a PCI investigation.
- Merger Rules – the rules would help ensure closer scrutiny of transactions within the tech sector. SMS-designated firms would be required to report all transactions to the competition watchdog and transactions meeting specific thresholds would be subject to mandatory notification, with completion prohibited prior to clearance.
The contents of these rules will be refined by a designated Digital Markets Unit (DMU), to be created in April 2021. Working closely with the telecommunications regulator, Ofcom, data protection authority, ICO and Financial Conduct Authority, the DMU will act as the central regulator within the CMA and monitor the conduct of SMS firms and digital markets more widely to cover activities outside of the proposed competition regime.
The Department for Business, Energy & Industrial Strategy will consider the proposals before launching a consultation on a new pro-competition regulatory regime in early 2021. The announcement came as the UK government is expected to unveil legislation on tackling illegal content – the Online Harms Bill – this week. Across the channel, the European Commission will present its own rulebook for the digital economy – known as the Digital Services Act and Digital Markets Act – on 15 December.