Forward-looking: The UK's competition authority will take over from the European Commission on January 1, following the Brexit transition period. This group intends to form a unit that could hold large tech firms accountable for hindering industry competition with massive fines but instead hopes to prevent such encounters through new rules and regulations.
Prior to Brexit, the European Commission would have the last say about anti-competitive behavior among tech companies in the UK, but with final agreements on Britain’s euro-exodus looming, it means to take on the responsibility itself.
A plan by the Competition and Markets Authority (CMA) aims to “level the playing field for smaller rival tech firms.” The proposed legislation would require support from Members of Parliament, but if taken up, tech giants could see up to 10% of their global turnover fined for hindering growth in smaller or competing businesses. This would equate to roughly $7bn against Facebook or a whopping $16bn for Google.
Of course, representatives from these firms are lobbying against these restrictions.
The CMA would flesh out and enforce these restrictions with a new internal group called the Digital Markets Unit (DMU). A recent announcement gave further details on the three pillars of this group’s plan:
- the authority may block mergers that stand to takeover or quash a competitive firm until the DMU is convinced consumers will not be adversely affected;
- a new set of rules will govern how large firms should treat smaller companies and consumers;
- the watchdog may step in and aid competition – such as allowing a service or device to function on a competitor’s OS ecosystem.
No tech giants have been singled out by the CMA, but the authority has stated it will focus on businesses with “strategic market status,” or companies with an ability to affect the wider industry.
Former start-ups such as Airbnb and Uber will undoubtedly fall under this category too. The modern business model for start-up companies and apps trying to make it in a new niche is to funnel money into advertising and cost-effective services, making a loss until they have market dominance. As successful start-ups try to maintain their domain, this new watchdog would monitor how they interact with the wider industry, potentially adjusting how young tech firms operate in the UK going forward.
The CMA has stated that while large fines are possible, they will ideally pre-empt untoward market behavior and interact with large firms on a more informal basis.
This is all assuming that MPs decide to pass legislation to provide the new DMU its powers.
The DMU is set to form in April, and CMA will take over from the European Commission on January 1, after the transition period of Brexit ends.