The UK Competition & Markets Authority (CMA) has launched its Digital Markets Strategy and, linked to this, an online platforms and digital advertising market study. Please see our Client Alert, CMA launches Online Platforms and Digital Advertising Market Study, for more details.
This alert sets out the key points of the Digital Markets Strategy for our technology clients to consider.
This is recommended reading for any lawyers and other business professionals working in regulatory enforcement, data protection, competition, consumer law and particularly for lawyers working for technology companies that are active in the UK and around the world.
Digital Markets Strategy
The strategy contains information on the five Strategic Aims and seven Priority Focus Areas of the CMA going forward for its work in relation to digital markets.
Much of the thinking behind these elements of the strategy appears to follow from the findings of the digital competition expert panel in the Furman Report and the lessons from the ex-poste assessment of merger decisions in digital markets in the Lear Report. Notably, the Digital Markets Strategy takes forward a number of the most notable and potentially game changing recommendations of the Furman Report, including the establishment of a 'digital markets unit' (which was also endorsed by the Prime Minister at a London Tech Week event in June), the proposal to designate certain digital platforms as having 'strategic market status' and requiring their compliance with a code of conduct and the launch of a Market Study into online platforms and digital advertising.
It is also obvious that the CMA has been influenced by recent work carried out in other jurisdictions, such as the 'Competition Policy for the Digital Era' report produced for the European Commission, the Australian Competition Commission's Digital Platforms Inquiry, and recent papers and opinions from the French Autorité de la concurrence and the German Bundeskartellamt.
The key themes in the Digital Markets Strategy are:
- Development of new tools and new remedies such as data interoperability, data mobility/portability and data openness. These remedies seem to echo some of the regulatory thinking that we have seen in other markets such as in California (California Consumer Privacy Act) and in Australia (Consumer Data Right) suggesting increasing the powers of competition / consumer authorities and new rights for consumers around use of their 'consumer data', mobility of such data to new providers of tech services (similar to mobility requirements already in place in the energy and banking sectors) and interoperability between different providers of tech services. The proposals also suggest an openness to exploring recent proposals to foster or mandate providing access to anonymised data between businesses as a remedy to boost competition in some markets.
- Adaptation of current regulatory tools and remedies so that they can be more effectively applied to technology companies. This includes further developing competition and consumer protection rules and remedies.
- Developing the merger control assessment framework to keep pace with the challenges of the digital economy, following recommendations in the Furman Report and Lear Report and the views gathered through the ongoing consultation on the merger control in digital markets and relevant aspects of the Merger Assessment Guidelines (which will close on 12 July 2019).
- Building knowledge and capabilities in order to support the above aims. This is supported by improved knowledge, which will be gained through the Market Study, and resourcing with the scaling up of the Data, Technology and Analytics (DaTA) unit within the CMA (which we have observed to already have impacted the work of the CMA). This will be further supported by the proposed creation of a new Digital Markets Unit (DMU), a new unit focused on businesses designated as having 'strategic market status'.
- Increasing cooperation with other regulatory authorities both in the UK (e.g. the ICO, Trading Standards, Ofcom, and the FCA) and abroad (e.g. ECN, OECD, ICN and ICPEN)
Strategic Aims of the CMA Digital Markets Strategy:
- Use existing tools effectively and efficiently
- Build knowledge and capability
- Consider the case and options for regulation
- Consider potential future remedies in digital markets
Priority Focus Areas of the CMA Digital Markets Strategy:
- Consumer and antitrust enforcement and merger assessment - actions in this space include investigating fake online reviews, celebrity endorsements, the conduct of price comparison websites and online platforms, and mergers in fast moving markets.
- Work of Data, Technology and Analytics unit - this unit has brought in significant technical and industry experience, and its broad aim is to support the CMA with technical understanding of working with data and using algorithms. In practice it is responsible for advancing research and policy, understanding firms' use of data and algorithms, as well as supporting the CMA's case teams in their analysis of data sets and application of machine learning in investigations. The DaTA unit also is concerned with the continued monitoring of the development of Machine Learning and Artificial Intelligence to ensure this does not lead to anti-competitive behaviour/ adversely impact vulnerable consumers in the market, in line with recommendations of the Furman Report.
- Market study on online platforms and digital advertising - this is focused on the UK market but as the reach of many market players is global, the CMA will look for opportunities to work collaboratively with other competition agencies as work progresses. The CMA is interested in a number of areas including the perceived market power of digital platforms; the degree of consumer control over data; and competition in the supply of digital advertising.
- Review approach to mergers in digital markets as necessary - the CMA considers that the existing merger control framework is largely fit for purpose. However, it has concerns that, given that merger notifications in the UK are voluntary, there may have been under-enforcement in relation to certain acquisitions in the digital space, where it can be hard to predict companies' future prospects and potential (and potentially including so-called "killer acquisitions"). Following the conclusion later this month of the consultation on the assessment of mergers in digital markets, the CMA will continue to consider if any legislative changes to the merger regime will be required and if closer scrutiny should be given to certain acquisitions.
- Policy work to consider possible "digital markets unit" - This discusses possible implementation of the proposal by the Furman Report to set up a Digital Markets Unit, focused on regulating certain entities designated as having "strategic market status". They will work with other Government departments including BEIS and the Department for Digital, Culture, Media and Sport on the possible future development of this regulatory framework. This could include a code of conduct, and other possible remedies including data operability, data mobility, and data openness.
- Proposals to reform enforcement tools - These proposals are a combination of those from the Furman Report and those detailed by the Chairman of the CMA to the Secretary of State for BEIS (see open letter here). The CMA considers that its existing regulatory toolkit needs to be adapted, and possibly new tools adopted, to keep pace with the challenges of digital markets. An example of these proposals includes sharpening-up of the interim measures regime to enable swifter action where detriment may be developing fast.
- International cooperation - Increasing efforts are being made with regard to international cooperation and collaboration in relation to regulating digital markets. Other antitrust authorities around the world, such as Australia, Japan, the European Commission, and national competition authorities in other EU Member States, are taking stock of the regulatory tools at their disposal to ensure that digital companies continue to innovate but at the same time ensure that consumer interests are protected.
We recommend that clients take a detailed look through the strategy and study papers (linked to below), and consider any impact that the proposed developments could have on their business and engagement with the CMA. The CMA also warns that it will be putting more effort into scanning the horizon in relation to digital markets to target areas for possible enforcement. In light of this – and given that market studies tend to encourage complainants to come forward - this is clearly a good time to think about compliance with competition and consumer protection laws. We would be happy to provide further advice and assistance to those looking to update their strategies in response to these developments.See further: Link to the Digital Markets Strategy here: assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/81415 0/cma_digital_markets_strategy.pdf Link to the Press Release here: https://www.gov.uk/government/news/cma-launches-digital-markets-strategy