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Unlocking digital competition: Budget 2020

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01/04/2020

On 11 March 2020, the newly appointed Chancellor, Rishi Sunak, delivered his first budget statement. Included amongst a series of stimulus and public health measures were several brief but important comments on the future of competition law and the regulation of digital markets.

The overarching position under the new government remains much the same as under the last. Hence the background policy still reflects that:

Competition is essential to drive innovation, produce better outcomes for consumers and allow new entrants to the market to grow. The UK is at the forefront of designing smarter and more flexible regulation that allows competition to flourish and minimises unnecessary burdens for business[1].

However, in the spirit of designing smarter regulations and minimising unnecessary burden, the government committed in the budget to three new actions:

  • The government will accept all six of the Furman Review’s strategic recommendations for unlocking competition in digital markets (see below). The government will consult on these in due course.
  • A new cross-regulator taskforce based in the Competition and Markets Authority (CMA) will report to the government within six months on a pro-competitive regime for digital platform markets. This will include advice on implementing a pro-competitive code for conduct for digital platforms with strategic market power.
  • The government will also look at existing domestic or EU derived regulations that might hinder digital competition and entrench monopoly behaviour and will ensure that regulatory reforms applying to digital and tech businesses are pro-innovation and coherent.

Furman Review

The Furman Review was a government-instigated investigation into possible changes to the UK’s competition framework to address the challenges posed by digital markets. Then Chancellor Philip Hammond appointed the former Chief Economist to President Obama, Jason Furman, to chair the review and present recommendations for reform. The report [2] which was published in March 2019, made six recommendations, all of which have now been adopted:

  • Establishment of a digital markets unit, with new tools and new statutory powers to regulate digital competition
  • Development of a code of competitive conduct, to regulate competitors that have ‘strategic market status’
  • Greater personal data mobility and systems with open standards, achieved through new regulatory requirements on businesses
  • Advancement of ‘data openness’, akin to open access to non-personal or anonymised data
  • Updates to existing merger policy, particularly to take into account technological developments and updated economic assessments of technological change
  • Updates to existing antitrust policy, to tackle existing monopolies or dominant players and increase efficiencies for consumers

The overarching aim remains to achieve global leadership in competition practice and policy for digital markets and technology companies.

Regulatory Taskforce

The key change announced in the budget is the formal creation of the digital markets unit – described in the budget as a “cross-regulator taskforce”. Newly-released ‘terms of reference’ for the Digital Markets Taskforce show that the entity will be housed in the CMA, although the powers available to it will be different to those possessed by the CMA [3]. The Taskforce will be composed of officials from the CMA, the Office of Communication (Ofcom) and the Information Commissioner’s Office (ICO), and will be required to consult with other relevant bodies such as the Intellectual Property Office (IPO) and the Centre of Data Ethics and Innovation (CDEI).

Some of the key challenges for the taskforce will be:

  • Assessing how companies with ‘strategic market status’ will be designated and assessed
  • Ensuring reforms relating to data mobility and merger policy are fair on market players of all different sizes, not just the tech giants
  • Balancing the details of any code of conduct so as not to overburden the regulated, but equally to ensure it has a lasting impact on practices
  • Evaluating the necessary powers and processes required to give effect to the code of conduct
  • Developing adequate remedies to breaches relating to data access and interoperability
  • Reviewing how the new competitive regime would interact with existing regulatory regimes
  • Understanding how economic assessment can be continually developed to address the rapid change seen in technology markets

The Chancellor has formally allocated six months for the production of a final report on these issues. This is a steep deadline for tackling such a complicated list of issues. The work of the taskforce will overlap with the CMA’s own review into online platforms and digital advertising (findings due in July 2020). It is not yet clear whether/how the work of the CMA will be reflected in the final report of the taskforce.

Conclusion

The three steps announced in the budget evidence the government’s support for the competitive development of digital markets under an effective regulatory regime.  The scope of proposed changes required by the Furman Review and incorporated into the mandate of the digital markets taskforce is extensive. During the taskforce’s impending review, the existing competition law regime will be very much under the spotlight – in particular, the extent to which it is “coherent” and “pro-innovation”. The true extent of the taskforce’s ambition and the changes that we are likely to see in the next few years should become clear after the final report, due in September, is published.

 

[1] HM Treasury, ‘Policy Paper – Budget 2020’

[2] Digital Competition Expert Panel, ‘Unlocking Digital Competition – Report of the Digital Competition Expert Panel’ (HM Treasury, 13 March 2019)

[3] Competition and Markets Authority, Department for Business, Department for Digital, Culture, Media and Sport, ‘Guidance – Digital Markets Taskforce: terms of reference’ (CMA, 11 March

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