In a bid to drive dynamism and competition among digital platforms, the UK Government has announced that it will establish a dedicated Digital Markets Unit (the DMU) within the Competition and Markets Authority (the CMA) from April 2021. The announcement is one of several made in direct response to a July 2020 CMA market study into online platforms and digital advertising. The study reached the conclusion that lack of competition across digital platforms leads to reduced innovation, higher prices, reduced quality, lack of consumer control and broader social harm. As a result of its study, the CMA essentially made two recommendations: that there be a mandatory code of conduct and that there be a DMU to enforce it.
The code of conduct
The content of the code has not yet been determined, although it will be designed to meet the three high-level objectives of fair trading, open choices and trust and transparency. Notably, the code of conduct would not necessarily apply to all digital platforms. Rather, it will apply to “platforms funded by digital advertising that are designated as having strategic market status”.
We don’t yet know what exactly is meant by “strategic market status”. Both the market study and the Government’s response to it expressly refer to the market power of Google and Facebook. It is highly probable that these two undertakings will be considered to have strategic market status. It will be interesting to see how wide the “strategic market status” label will be cast for other operators, but one could make an educated guess as to other digital platforms which could be considered to have “substantial and enduring market power” and would be likely candidates for the code.
The DMU will come into operation in April 2021 and will fit within the existing regulatory landscape, including in respect of competition generally, data privacy and communications. The Government is considering the appropriate powers which will be exercisable by the DMU, but has agreed in principle with the CMA in that it should have pro-competition powers, such as mandating access to data, enforcing greater interoperability, changing choices or default settings and imposing separation remedies. The full extent of the powers will be informed by further consultation and stakeholder views.
The DMU will also be able to maintain and enforce the code of conduct. The extent of the enforcement powers also remains to be seen, but may include the power to suspend, block and reverse decisions of platforms with strategic market status, mandate compliant conduct and impose financial penalties for non-compliance.
We are unlikely to have to wait long for clarity as to what the code of conduct will entail and how the DMU will be able to give effect to it. The Government has stated that it will consult on the DMU’s form and function in early 2021 and will legislate for it and the code as soon as parliamentary time allows.