Britain has today joined a global pushback against the growing power of US tech giants by setting up an influential watchdog to break their stranglehold on the UK’s £149bn digital sector.
The Digital Markets Unit, which will sit within the Competition and Markets Authority (CMA), will aim to ensure the likes of Facebook and Google do not exploit data, engage in “killer” takeovers or exclude smaller competitors.
The regulator will also provide protection to the news publishing industry, which a Lords report today warned is being crippled by the “dysfunctional” online ads market driven by Facebook and Google.
Under the recommendations, it could oversee a compulsory news bargaining code – a model pioneered in Australia and France – that would force platforms to pay publishers for the right to use content.
“There is growing consensus in the UK and abroad that the concentration of power among a small number of tech companies is curtailing growth of the sector…It’s time to address that and unleash a new age of tech growth,” said Oliver Dowden, the Digital Secretary.
The regulator, which will begin work in April, will be backed by a code of conduct to give consumers more control over how their information is used, and more capability for small businesses to promote their products online.
Social network users could, for instance, transfer their data, pictures and contacts from Facebook to a new challenger. The Digital Markets Unit could also ensure users are able to opt out of personalised ads, with the threat of financial penalties for failure to follow the rules.
It comes amid mounting scrutiny of the size and power of Facebook, Google, Apple and Amazon, which have seen their fortunes rise to new heights during the pandemic.
In the US the Department of Justice has hit Google with an antitrust lawsuit, alleging that it maintains a monopoly to preserve its position as the “gatekeeper to the internet.” Meanwhile, the European Union will unveil its blockbuster Digital Services Act next month, which will, among other things, seek to open the black box of how big tech chooses the content it displays.
“The UK can absolutely be a force in this area,” said Damian Collins, the former chairman of the Digital, Culture, Media and Sport Committee (DCMS). ”Effective regulation gives British companies the chance to compete.
“People always ask, why is it that we build companies that then sell out to the big tech firms? Well, one of the reasons could be that those big tech companies stifle the market. We need someone who can stand up for the start-up companies that are trying to break through in this space.”
The unit was first proposed last year in an influential report for the Treasury, headed by President Obama’s former chief economist Jason Furman.
The report followed a study into digital advertising by the CMA which found that 80pc of the £14bn spent on digital advertising in the UK was on Google and Facebook.
Adverts seen per hour on Facebook rose from 40-50 in 2016 to 50-60 in 2019. Its average revenue per user is now more than ten times higher than competitors.
Andrea Coscelli, the CMA’s chief, today welcomed the government’s response: “Only through a new pro-competition regulatory regime can we tackle the market power of tech giants like Facebook and Google and ensure that businesses and consumers are protected.”
“We will soon be providing advice to government on how this new regime should work, as requested earlier this year, and stand ready to support the setup of the Digital Markets Unit.”
Ronan Harris, VP of Google UK and Ireland, said: “Online tools have proved to be a lifeline during the pandemic and they can help create a digital, sustainable and inclusive recovery. We support an approach that benefits people, businesses and society and we look forward to working constructively with the Digital Markets Unit so that everyone can make the most of the internet.”
The CMA, which will become Britain’s guardian on competition when the UK fully leaves the EU, has taken an increasingly tough stance on digital giants, despite criticism that too much regulation could damage the government’s attempts to attract more investment.
On Monday, it said it was considering a separate probe into Google’s planned changes to advertising data which could cause smaller media companies to lose as much as 75pc of their revenue.