UK government to establish a Digital Markets Unit in 2021 to regulate digital markets

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07 December, 2020

John Pickervance
Partner and Head of Commercial

On 1 July 2020, the Competition and Markets Authority ('CMA') published its final report [AM1] having assessed how well digital advertising platforms are working, and the role of Google and Facebook within them. The report was prompted by several calls for the CMA to review the online advertising market due to concerns that large online platforms could be restricting competition.

The CMA found that power in digital advertising is mainly concentrated between Google and Facebook, as they are overwhelmingly the largest platforms. Specifically, Google has more than a 90% share of the search advertising market in UK, whilst Facebook has over 50% of the display advertising market.

The CMA's report identified concerns that weak competition in digital advertising leads to reduced innovation and choice, as the ability of others to produce valuable content is compromised. Weak competition also increases the prices of goods and services, and "potential rivals can no longer compete on equal terms." In light of the findings, the CMA made four recommendations to establish a new regime to address and rectify the behaviour of platforms with substantial market power, and the government recently published its response [AM2] to the CMA's final report.

The CMA's recommendations and the government's responses

  • The first recommendation was to: establish an enforceable code of conduct to govern the behaviour of platforms that are designated as having strategic market status (SMS) and to enable fair trading, trust and transparency and open choices for consumers.
    The government agreed with this recommendation being implemented and noted that the code will provide clear expectations of what represents acceptable behaviour when interacting with customers, users and competitors.
  • The second recommendation was to: establish a Digital Markets Unit (DMU) to undertake SMS designation, introduce and maintain the code of conduct, and produce supporting guidance.
    The government also agreed to the formation of a DMU, which is intended to be established from April 2021.
  • The third recommendation was to: give the DMU the necessary powers to enforce the principles of the code and amend its principles in line with evolving market conditions.
    The government agreed with this recommendation, as an enforceable code would deter anti-competitive practices and ensure that those who rely on dominant platforms are fairly treated. However, the government stated that "careful consideration" will be given to the nature of the DMU's powers and the interactions between these and existing responsibilities, such as the CMA's role in promoting competition and the Information Commissioner's Office's role regarding data protection.
  • The final recommendation was to: give the DMU the necessary powers to introduce a range of pro-competitive interventions to tackle the sources of market power and promote competition.
    The government agreed in principle with this recommendation, however, considers that the recommended interventions, such as mandating access to data, are complex and more work is required to understand the benefits, risks and possible unintended consequences of the proposed interventions.

Looking forwards

Overall, the government accepts the findings of the CMA's report and supports the adoption of the recommendations, though more work is needed to iron out the finer details. The government expects to consult on proposals for the DMU in early 2021, with a view to it becoming operational on 1 April 2021. In the meantime, we await for further developments and confirmation from government about the specifics of the DMU and the extent of its' powers.

For more information contact John Pickervance in our Commercial department via email or phone on 0333 207 1134. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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