When Brexit means falling behind: The probable death of the DMU regime

Everything had started well with the excellent Furman report, which emphasized the need to adopt an ex ante regulatory regime that would apply to Big Tech firms in the UK. That report had indeed found that competition rules would not be sufficient to control these firms’ market power.  The UK had the lead and was likely to become the first nation to adopt a coherent and flexible framework to regulate Big Tech. The UK government started the work on what this regulatory regime should look like and it was decided that a Digital Markets Unit (“DMU”) would be set up within the CMA. The DMU would designate firms with Significant Market Status (“SMS”) and adopt codes of conduct, pro-competition interventions, and an enhanced merger control regime. This approach was seen by many, including me, as preferable to the more rigid Digital Markets Act (“DMA”) to be soon formally adopted by the European Union.

Yet, the DMU, which now includes 60 officials, is largely toothless as it does not hold statutory powers. Such powers need to be included in a bill to be tabled in Parliament. Many hoped that this bill would be part of the UK government’s new legislative programme to be announced in the Queen’s speech on 10 May. Yet, the Financial Times reported this morning that the Queen’s speech will not include this bill. If this is correct, that would be a huge blow for the CMA and for the many civil servants that worked tirelessly on the DMU regime. But more importantly, this would be a setback for UK consumers and business users that depend on SMS firms.

Of course, this enabling legislation could be delayed by a year and placed in next year’s Queen speech, but I have my doubts. The apparent reason for not including the DMU bill in the government’s legislative programme is not that it is not ready or sound, but that it does not seem to fit the views of Number 10. Tellingly, the FT article reports that the prime minister’s deputy chief of staff has told colleagues that “Conservative governments don’t legislate their way to prosperity and growth.” So there you have it!

If confirmed, this unfortunate development would also leave in tatters the strategy of the CMA. The CMA had decided to rely on the Government to legislate instead of using its wide-ranging market investigation powers, and it decided not to use its antitrust powers to deal with some problematic practices that require comprehensive solutions, such as Google’s monopolization of ad tech or the parallel monopolies enjoyed by Apple and Google in mobile ecosystems. In the case of mobile ecosystems, the CMA can of course reconsider this strategy as the Final report of its Market Study has not been published yet.

Now, this does not mean that problematic practices by Big Tech firms can be left unchallenged. The CMA still enjoys quasi-regulatory powers through its ability to launch market studies and then market investigations, the latter allowing it to adopt significant remedies if needed. It has also shown itself able to impose quasi-regulatory remedies after an antitrust investigation in the Google Privacy Sandbox case. One can expect the CMA to make greater use of such tools.

Photo by Jack Finnigan on Unsplash

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