UK's CMA fires warning shot for further probes into tech

As we anticipated, the CMA has confirmed that it will continue its scrutiny of digital markets while it awaits legislation to place its Digital Markets Unit (DMU) on a statutory footing. And given that legislation has been kicked into the long grass by the UK government, after it was not included in the upcoming Queen’s Speech, the CMA needs to make use of its existing tools. Therefore, while the delay to the legislation will undoubtedly be a blow to the CMA, tech companies should anticipate further action under the CMA's market investigation and competition enforcement powers on the immediate horizon.  

Letter on further action

The UK Competition and Markets Authority (CMA) has written a letter to the House of Lords’ Communications and Digital Committee (the Committee) to confirm that it will be taking further action in digital markets in the coming months. The letter from the CMA’s Chief Executive, Dr Andrea Coscelli, is in response to the Committee’s letter to the CMA in February, which we previously wrote about.

The CMA’s work so far

The CMA says that its strategy in digital markets involves two elements: (i) preparing to put the proposed new digital markets legislation into action through the DMU; and (ii) using the CMA’s ‘imperfectly suited’ current powers to address perceived problems in digital markets. Given the delay to the former, those imperfect powers will be used as a stop gap in the interim.

Online advertising

Dr Coscelli says that the CMA has identified online advertising as a key area in which the CMA has gathered evidence of competition problems - it announced in March the launch of a new competition enforcement investigation focused on Google and Meta’s ‘Jedi Blue’ agreement and Google's conduct in relation to intermediation services for online advertising. 

That investigation, which builds on the CMA's market study into online platforms and digital advertising, will run in parallel with a European Commission (EC) investigation into the same matter and an ongoing lawsuit by the Attorney Generals of many US States, and the CMA says it will work closely with the EC and US agencies. 

Existing caseload

The CMA is also keen to highlight its “busy existing caseload” in digital markets and points to other live investigations / appeals on its books, including its investigation into Google’s Privacy Sandbox, which resulted in commitments from Google in relation to its third party cookies and its decision to block Meta’s acquisition of Giphy (currently subject to appeal).

Mobile ecosystems

Further, the CMA stresses that it continues to make progress on its mobile ecosystems market study “which is examining in detail a market which touches the lives of virtually all UK households.” The study is due to conclude in June of this year and the CMA has flagged that it will provide evidence as a precursor to action by the DMU once the legislation is (eventually) in place. 

The CMA also warns that the market study may present opportunities to take further targeted action under its existing powers.

The need to legislate – the UK falls behind the EU

Dr Coscelli firmly reiterates the need to legislate for the new powers under the DMU regime, which in the CMA’s view “remain essential”. He says that the problems the CMA sees in digital markets are extremely difficult to solve using its existing toolkit, and only an ex-ante regulator that can (i) regulate digital firms’ behaviour before it happens, (ii) implement remedies and (iii) monitor M&A activity closely, can address these problems effectively.

As we previously discussed, the EU’s Digital Markets Act (DMA), which has since been provisionally agreed, will almost certainly become law ahead of its UK counterpart and companies may well focus their compliance efforts on the EU regulatory environment. 

The CMA similarly flags that the DMA has moved ahead of the DMU and, therefore, it is important that the UK legislation is advanced as soon as possible. However, given the apparent lack of government appetite to progress the legislation, it is now inevitable that the CMA will lag behind the EC. 

On the horizon 

Importantly, Dr Coscelli confirms to the Committee that the CMA Board’s latest discussion identified options for taking further action in digital markets under the CMA’s current market investigation and competition enforcement tools, ahead of the DMU receiving its powers. He advises that the CMA will scope these potential investigations with a view to launching new ones in the coming months. 

While government appetite to reign in tech companies may be waning for now, the CMA looks set to press ahead as far as possible (but whether its efforts stand up to judicial scrutiny remains to be seen).

Such action could involve market studies in relation to digital markets that the CMA has not yet considered in detail  (for example, the EC conducted a competition sector inquiry into the Internet of Things but the CMA has not yet conducted a market study on this) or further competition enforcement investigations arising from its mobile ecosystems market study. Watch this space!