CMA Outlines Digital Markets Competition Regime Plans, Objectives and Challenges

the Competition and Markets Authority (CMA) is preparing to impose its new powers on the largest tech firms to ensure competitiveness in digital markets, along with more positive results for consumers.

On Tuesday 7 January, representatives from the CMA gave evidence to House of Lords Communications and Digital Committee about its readiness and plans to deploy new powers under the Digital Markets, Consumer and Competition Act (DMCC) which came into force on 1 January.

Introduced to protect consumers, promote competition, and regulate digital markets, the DMCC Bill gives the CMA tools to stop technology businesses with strategic power from abusing their position to competitors and consumers will be harmed.

Only the largest companies (eg Google and Apple) under the Act. These companies must have:

• a UK turnover exceeding £1billion or a global turnover of over £25billion
• substantial and entrenched market power in relation to digital activity
• a position of strategic significance

These businesses should provide consumers with clearer information before they start a subscription, remind consumers when their free trial is about to end, and ensure that consumers can easily exit a contract. Companies should also clearly outline any (previously hidden) unavoidable fees at the start of the buying journey.

In the House of Lords, Sarah CardellCEO of the CMA, explained that the regime represents a “critical opportunity” to improve opportunities for effective competition, and to drive growth, investment and innovation throughout the UK economy.

Ahead of the session, the CMA published details of the new regime and explained its plans. It revealed plans to launch Strategic Market Status (SMS) designation investigations in relation to two separate areas of digital activities in January – with a third due to start in about six months.

These investigations will not only establish whether a company should be designated as having an SMS, but also help the CMA to consider and consult potential ethical requirements to help introduce an initial set of requirements. .

The three Ps

Throughout the two-hour session, Cardell and Will Haytersenior director of the digital markets unit, repeatedly reiterated that the CMA aims to identify its approach to the regime in a “participatory, proportionate and predictable” manner.

To achieve this predictability, the CMA announcement before the session outlined the expectations for the activity of the first six months of the regime. As part of this, it plans to launch its first two major investigations sequentially, and not launch them at the same time, to avoid hitting milestones at the same time – giving companies more time to obtain information arising from them.

In an effort to maximize the proportionality of the approach, the CMA plans to develop a ‘tailor-made’ and tailored approach to identifying and addressing specific harms.

Finally, the CMA has placed a lot of focus on ensuring a strong participatory nature of the regime. Hayter said: “The helpful thing about our framework is the flexibility it has within it. We don’t put the rule before the law for the long term. Our approach enables us to consider the right amount in detailing any ethical requirements with stakeholders.”

“Through this participatory approach, we want to work together to try and find solutions,” Hayter added. “However, there will be a difficult backstop – which could be substantial fines – if the companies in question do not participate in the process in the way we expect them to.”

Maximizing growth and innovation

Representatives of the regulator also explained how it is reconsidering its approach to mergers and acquisitions.

Cardell commented: “In the last few months, we have improved our engagement with businesses and investors. We have had very good discussions with venture capitalist investors where we talked about the fact that we might be looking at a integration and worry if a start-up can provide a future competitive challenge and ask if it is removed from the market.

“But we know that this purchase can free up business capital and the ability to go and launch the next innovation or initiative that can create that opportunity. So we want to make sure that we are not inadvertently reinforcing a chilling effect that shuts down innovation or moves some activity outside the UK.

Hayter also explained that the CMA is looking to increase economic growth, competition and innovation by ensuring that it listens to small organizations during inquiries and that it serves different types of audience.

“We have to remember the fact that, at the small end, many stakeholders may not have activity regulation teams or lawyers who can go and talk to the competition authorities. So we have to make it as easy as possible. Recently, for guidance consultation, we released a general summary of our guidance for consultation – which is a legal requirement. We know that the original document is likely to be read by the entire legal counsel community and not by many other people.

“We also use a mix of in-person and virtual roundtables to make it accessible to people across the country and beyond.”

Overcoming operational challenges

The House of Lords Communications and Digital Committee also asked Hayter on the operational challenges expected to be encountered while implementing the new competitive powers in the digital market.

“There is a question of how the companies that participate in this choose to do it. We put our stall in terms of the participation method and want to act in a collaborative and transparent way – but it is necessary that the companies also play in that mantra.

“Regulatory failure and regulatory capture can also be dangerous. That’s why we need to think carefully about how we can make it a participatory approach. It doesn’t just mean the attractiveness of designated SMS companies. It means drawing a real range of inputs from all participants in any ecosystem. We want to hear from the candidate or nominated company itself, as well as customers, partners, consumer groups, and wider civil society.

The CMA also faces challenges in recruiting technology expertise, as the private sector is able to offer higher salaries to attract talent. However, while acknowledging this fact, the CMA remains confident that its own offer is compelling, due to the “public service ethos, positive and diverse environment, flexibility and different working standards” it offers.

However, Hayter admits, despite this approach that has enabled the CMA to build “a very strong group of tech experts”, that it is not “unstoppable” to approaches from the private sector.