Overview
On March 11, 2020, the Chancellor of the Exchequer delivered the Spring 2020 Budget (the Budget),[1] which includes measures relating to the digital market. The UK government announced that, in order to empower consumers and ensure a dynamic and competitive regulatory environment, it will implement the Furman Review’s strategic recommendations for unlocking digital competition.
The Furman Review,[2] a government commissioned report on reforms to competition rules and regulation in the digital sector, was published on March 13, 2019. In line with a number of proposals made by the Competition and Markets Authority (CMA),[3] the central conclusion of the review was that competition in digital markets should be sustained and promoted through a new approach, alongside the core conventional competition tools of merger control and antitrust enforcement. In summary, the report recommended: (i) creating a pro-competition digital markets unit; (ii) strengthening the CMA’s enforcement powers against anti-competitive conduct; (iii) adapting the merger control rules so that the CMA can more effectively challenge mergers that could be detrimental to consumer welfare; (iv) launching a formal CMA market study into the digital advertising market; (v) monitoring of developments in relation to machine learning algorithms and artificial intelligence by the government, the CMA and the Centre of Data Ethics and Innovation; and (vi) international engagement by the government on the measures it chooses to adopt from the review, in order to increase cross-border cooperation.
According to the Budget, the UK government will consult on the strategic recommendations in due course. In addition, it will take steps to create a new cross-regulator taskforce, based in the CMA, which 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 of 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 behaviours and will ensure that regulatory reforms applying to digital and tech businesses are pro-innovation and coherent.
The announcement by the United Kingdom heralds major competition policy changes for digital enforcement and purports to stimulate a global debate in this area.
Digital-related measures are being taken simultaneously across EU Member States and at the European Commission (EC) level.
The EC is considering, as part of its future Digital Services Act package, ex ante regulation to address "systemic issues related to platforms and data."[4] The importance of allowing regulators to impose measures without finding a competition law infringement has been repeatedly highlighted by the EC Executive Vice-President for "A Europe Fit for the Digital Age," Executive Vice-President Vestager, who has recently cited the CMA’s existing market investigation model as a possible influence on an ex ante regime.[5]
At a recent executive seminar organised by the Centre on Regulation in Europe to contribute to the debate launched by the EC on how Europe should address gatekeeping platforms, Marieke Scholz, Deputy Head of Unit "Antitrust Case Support & Policy" at DG Comp, welcomed the idea of UK-like market investigation powers. However, she also explained that the EC’s room for manoeuvre is limited as it cannot legally discharge the burden of proof. Professor Amelia Fletcher, a Non-Executive Director of the CMA, cautioned that market investigation powers for DG Comp might not in fact go far enough, saying that they are slow and not sufficiently flexible.
At EU Member States' level, a German bill providing for an ex ante tool was approved by the Cabinet in Berlin earlier this year and is expected to be made law by parliament before February 2021. The draft new ex ante provision foresees putting the burden of proof onto companies to demonstrate that they are not infringing.
On October 10, 2019, the Belgian, Dutch, and Luxembourg competition authorities published a joint memorandum on "challenges faced by competition authorities in a digital world."[6] Among the main issues identified for further consideration in the EC's report on competition in the digital era, the three agencies recommended the introduction of a non-punitive, ex ante instrument providing for binding commitments without the establishment of an infringement. According to the Benelux authorities, this tool would allow the EC and Member State regulators to impose proportionate remedies on dominant companies to prevent competition problems, rather than relying on ex post enforcement, which could be too late to keep the fast-moving digital markets competitive.
The initiatives emerging in response to the challenges posed by digitalisation at both the European Union (EU) and national levels appear different in some respects.
Although the United Kingdom will be leaving the EU, it has been noted that it would be risky for its digital enforcement not to develop along similar lines to the EU's.[7] The pressures of Brexit on the CMA's functions have been publicly acknowledged by the UK government, who asked for conclusions in connection with its market study to be reached as soon as possible.
In response to a European Parliamentary question, Executive Vice-President Vestager replied on April 6:
"The Commission's responses to the challenges posed by digitisation will have to be multi-faceted. This means timely adoption of prohibition decisions but also, in the context of a given case, it could mean the use of tools such as interim measures or remedies that go beyond the traditional cease-and-desist, by requiring undertakings in markets that have tipped to neutralise the harmful effects their conduct has had on competition.
It may also mean the development of appropriate ex-ante tools to intervene even before an infringement takes place, or the design of regulations to set out clear rules about what dominant platforms can do and what they cannot."
We will be closely monitoring how the UK's digital proposals will be further implemented as well as considering international developments, and remain at your disposal should you have any questions.
[1] Available at https://www.gov.uk/government/publications/budget-2020-documents/budget-2020.
[2] Available at https://www.gov.uk/government/publications/unlocking-digital-competition-report-of-the-digital-competition-expert-panel.
[3] In a letter from The Rt Hon Lord Andrew Tyrie, CMA Chairman, to the Secretary of State for Business, Energy and Industrial Strategy, dated 21 February 2019.
[4] Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions “A European strategy for data”, COM(2020) 66.
[5] Press conference announcing “A New Industrial Strategy for Europe” (Brussels, 10 March 2020)
[6] Available at https://www.belgiancompetition.be/en/about-us/publications/joint-memorandum-belgian-dutch-and-luxembourg-competition-authorities.
[7] From Belgian telco regulator Axel Desmedt’s speech at the CERRE Executive Seminar held in Brussels on 4 March 2020, where he also flagged the need to implement EU harmonised rules in order to ensure internal coherence.
