UK kicks off review of competition in digital markets

by David Abrahams on 20 Sep 2018

Yesterday the UK Government's panel conducting a review of competition in digital markets met for the first time at the Treasury in London. The terms of reference, which were published to accompany the meeting, provide initial questions that illustrate the breadth of this review and why the tech sector needs to take it seriously.

The panel is chaired by Harvard Professor and former advisor to President Obama Jason Furman, and yesterday's meeting saw the formal appointments of Professors Diane Coyle, Amelia Fletcher, Derek McAuley and Philip Marsden. While the Government has made much of Professor Furman's service to President Obama, the other four members of the panel (with perhaps the exception of Professor McAuley) are notable for their established status amongst the 'great and good' of UK competition economics. This does not cast doubt on their credibility, but it does provoke the question of whether the membership of the panel is likely to suggest radical new approaches to regulating competition given they have been involved in the current approach for many years.

UK competition law after Brexit

One of the most politically interesting aspects of this review is that this is the first time in 40 years that the UK has been able to fully consider its approach to anti-trust regulation independently of the rules of the European Union single market and its predecessors. While the UK Government has stated that if a Brexit deal is secured with the EU then it will seek to co-operate on competition and mergers investigations, it will be the terms of any agreement on the future relationship that will set out how aligned or otherwise UK competition law may be from EU law beyond December 2020.

That said, regulating the behaviour of multinational companies that are becoming increasingly ubiquitous across every sector of the economy is a tough ask for one country, even the UK with its well-established and respected competition law regime and its large and robust digital economy. Should the UK choose to take a radically different approach to competition issues in the digital economy the results would be highly unpredictable. 

The key theme: the concentration of 'big tech'

The key theme of the terms of reference for the panel is whether the concentration of services to those provided by 'big tech' online platforms is a problem and, if so, what should be done about it. Central to this theme is how to measure the impact of providing "free" services to consumers in one market on competition in other markets. For example, what impact does Google's provision of free search products have on the online advertising market?

This is not a new question and has already been tackled by competition regulators at the European Commission in the 'Google Shopping' case. That case has already run for eight years and we are still awaiting the result of Google's appeal against the Commission's decision to fine it €2.4 billion. The length of time this has taken may well provide the obvious answer to the panel's question about whether competition authorities have the right tools to regulate in a "timely, effective and far-sighted manner".

The most interesting question?

While many of the questions in the terms of reference are quite well-established in terms of debates amongst competition economists, perhaps the more interesting question relates to how artificial intelligence and machine learning may affect competition. Interestingly though, the terms of reference do not take this question the next logical step to ask what the broader social impact might be of companies setting prices using algorithms fed by data about the consumer. Whether such consumer-impact questions can be divorced from a more general discussion about competition remains to be seen.

The full list of questions set out in the terms of reference

  1. What are the emerging benefits and harms from digital markets such as social media, e-commerce, search, and online advertising tending towards only one or a small number of big firms?
  2. What are the emerging benefits and harms of the same small number of digital firms becoming present across a broad range of digital markets?
  3. What effect can the accumulation and concentration of data within a small number of big firms be expected to have on competition?
  4. How can risks and detriment to consumers in products and services that are “free” to consumers (or paid for through their data) be assessed? And how could competition effects in other markets such as advertising be addressed?
  5. How do technologies such as artificial intelligence and machine learning affect competition and what are their implications for competition policy? Does algorithmic pricing raise novel concerns about competition?
  6. What is the appropriate approach to mergers and takeovers in digital markets – what are the key challenges and how should they be addressed?
  7. What tools does competition policy need to deal with issues in the digital economy in a sufficiently timely, effective and far-sighted manner? To what extent are these in place in the UK?
  8. What approaches are being considered and developed by governments and competition authorities in other major economies? What needs to be done internationally and what can be done at the UK level?

What happens next?

The panel is now tasked with consulting widely with industry and wider stakeholders before reporting in "early 2019", which is government-speak for some time in the first half of 2019. An open call for evidence will be published in the next month or two and is likely to have a relatively short deadline. This means that companies seeking to influence the panel's thinking need to get started as soon as possible on developing firm views on these difficult questions and drafting their submissions.

Is it worth engaging?

Something that we as public affairs consultants often hear from smaller companies is that they do not believe they can influence big political questions such as those being looked at by the panel. This could not be further from the truth. The current political and economic climate makes small and medium sized start-ups and scale-ups hugely important to this issue. If the panel do not hear from these companies independently of trade bodies, which are funded and influenced by the large platforms, then they will not have the evidence base to make informed recommendations to government.

How to engage with the panel?

If you are interested in engaging with the expert panel in-person or through a written submission then please get in touch for advice and support.

 

Topics: UK, Digital Single Market, Competition policy, Anti-trust, Artificial Intelligence, AI, Platforms, Policy and regulation, Facebook, Google, Amazon, Apple, UK business, Economy, Technology, UK politics, European Union, Europe, E-commerce, Competition and markets authority, CMA

David Abrahams

Written by David Abrahams

David’s extensive experience includes public affairs, regulation and strategic communications with a particular focus on technology, telecoms and utilities.

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