The pandemic has increased the power of the large tech companies, while many of their bricks and mortar rivals have been suffering
The pandemic has increased the power of the large tech companies, while many of their bricks and mortar rivals have been suffering © Reuters

The UK’s competition policy has long been ripe for an overhaul. Brexit has focused minds on the critical issue of state aid, but even bigger forces are at work; the rise of Big Tech is forcing regulators everywhere to reassess their policies. Traditional antitrust rules are not fit for purpose in a digital age. Conventional thinking on monopolies focuses on consumer pricing — but that way of looking at competition has little relevance when consumers are paying for services not with money but their personal data. 

The pandemic has increased the power of the large technology companies. People have relied on the likes of Amazon, Facebook and others to facilitate remote working, socialising and shopping. At the same time, many of their bricks and mortar rivals have been suffering amid the economic restrictions imposed to curb the spread of coronavirus, accelerating the need for action. 

The Competition and Markets Authority, Britain’s regulator, has become one of the first regulators to articulate a detailed plan. Under sweeping proposals put forward this week, the CMA wants the government to introduce a new legally binding code of conduct to stop large technology companies from harming consumers and hampering the emergence of rivals. It wants ministers to enable a new Digital Markets Unit to be able to impose “significant penalties” for breaches of the code. The proposals follow a report by Jason Furman, a former adviser to Barack Obama, into how to encourage competition in the sector. Fines could be as high as 10 per cent of a company’s global turnover.

Meanwhile in Brussels, the European Commission is putting the finishing touches to its own new regulatory approach, with the imminent publication of the Digital Markets Act. It will seek to curb Big Tech’s dominance through a broad set of rules for so-called “gatekeeper” companies. These rules will make it clear which activities are illegal so that regulators will not have to launch lengthy antitrust probes to prove damage to consumers.

There is substantial potential for over-reach, particularly in the UK. Too much intervention will sit at odds with the government’s stated ambition to attract more tech investment into the country after Brexit. The government will also need to be careful not to antagonise the US administration through a heavy-handed approach towards the country’s large tech groups.

At the heart of both initiatives, nonetheless, is a sound premise: that dominant platforms are able to impose unfair competition on companies that use their market places by offering their own competing services, or charging high prices. Takeovers by these companies will also be subject to greater scrutiny; regulators have come under fire for seemingly being too quick to approve past deals, such as Facebook’s acquisition of WhatsApp. Much still needs to be fine-tuned, but the thrust of the proposals has merit. The world has changed. Data has become a valuable commodity, raising concerns around privacy and mobility of customers’ personal details. 

The CMA’s proposals are a reminder that for the first time in decades the UK and EU are able to go different ways on competition policy, a testy topic in the post-Brexit trade talks. For the moment, though, both look set to be taking similar approaches to regulating Big Tech. Brussels, as one of the major global regulators, may have greater weight in Silicon Valley boardrooms but the CMA deserves credit for ambitious proposals. While avoiding excessive intervention, the UK government would do well to take them up.

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