Ever increasing regulatory scrutiny and complexity for tech, as the CMA publishes its refreshed Digital Markets Strategy

The CMA has this week published a “February 2021 refresh” on its Digital Markets Strategy of 2019.  The update reflects the “significant developments in the political and regulatory landscape” across digital markets internationally and builds on the CMA’s existing work in digital markets. The CMA sets itself the lofty goal of helping drive “a coherent regulatory framework internationally”. In the short term however, the refreshed strategy serves to highlight the increasingly complex and intense regulatory scrutiny tech firms need to navigate.

The CMA has been busy…

The refresh begins by listing the CMA’s work in digital markets in the 18 months since publication of its Digital Markets Strategy. It is no secret that the digital sector has been a significant focus for the CMA, but having all its activities listed in one place underscores just how much resource has been dedicated to the sector.

The CMA’s list of its achievements is long, but includes the Digital Advertising Market Study (which was launched on the same day as the original strategy) and various pieces flowing from it, most critically the Digital Taskforce Advice. The CMA also highlights the launch of the Analysing Algorithms platform and lists seven merger cases in digital markets (in three of which, the CMA’s intervention led to deal mortality).  

These initiatives demonstrate the tangible shift that has occurred from “policy papers to practice” over the last 18 months: the CMA is no longer just looking at digital markets and considering how to best regulate them – it clearly has the confidence to intervene.

Policy papers into practice: but how?

While the emphasis on better understanding digital markets from the 2019 Digital Strategy (e.g. through its Data Technology and Analytics (DaTa) unit) remains, it is clear the CMA is ready to take action. The CMA has asked the UK Government for numerous new powers and tools to enable it to do this, at least some of which it will get very soon.

Top of the agenda is unsurprisingly the establishment of the CMA’s new Digital Markets Unit (DMU)– which has funding from April. While the primary legislation giving the DMU its powers is yet to be published, the DMU is expected to work initially on the designation of firms as having “strategic market status” (SMS) and the development of codes of conduct for them. If the UK Government accepts the recommendations of the Digital Taskforce Advice, the DMU could ultimately acquire significant power to take “pro-competitive interventions”, which could include ordering structural separation of SMS platforms.

The Digital Taskforce Advice also includes proposals to establish a distinct merger control regime for SMS firms, address online content which is economically harmful (e.g. fake reviews, which the CMA has taken action against using its consumer powers – this sits separately to the forthcoming online harms regime, which will be administered by Ofcom), and to strengthen enforcement of the Platform to Business Regulation.

New powers will sit alongside the CMA’s existing competition and consumer powers, which the CMA says it will use to the “fullest extent possible in digital markets”. This is exemplified by the CMA’s investigation into the Google Sandbox.  

Challenges and cooperation 

The CMA’s overarching goal for the DMU “to build towards a proactive new pro-competition regulator for digital markets” is not without its challenges. The DMU is intended to administer a new regulatory framework that can reconcile and coordinate the sometimes divergent purposes of the various forms of regulation tech businesses face, but as the refreshed strategy recognises, this will require close work with other regulators. The CMA emphasises the importance of the newly established Digital Regulation Cooperation Forum (which brings together the CMA, the Information Commissioner’s Office and Ofcom), which will doubtless play an important role.

International cooperation will also be crucial. Regulators globally share the consensus that more should be done to address the perceived harms to consumers and competition in digital markets. In January, Germany became the first country in Europe to bring in a new regulatory regime for Big Tech. The UK reforms will see it second in line, with the European Commission’s significant Digital Markets Act reforms to follow, likely coming into force in 2023. Regulatory reforms are also on the agenda around the world, from China, to Australia, to the US. But while there is consensus that more needs to be done, what should be done and how is a question that different jurisdictions have answered differently. 

And so the burden remains on businesses

Tech businesses are subject to a multiplicity of regulations and regulators with divergent purposes spanning privacy, regulation of online content and competition. Even within a single jurisdiction, these can point in different directions and the situation gets only more difficult to navigate internationally. As for the CMA, it wants to better co-ordinate its actions with peer authorities to help drive “a coherent regulatory framework internationally”. A coherent framework would be welcome, but this feels far from reach at present. In the meantime, the burden of navigating the complex and increasingly hostile regulatory environment will remain with tech firms.