Background
Following one of the most high-profile separations history has ever witnessed, the UK Competition and Markets Authority issued advice to the British Government on the new pro-competition regime for the digital and tech enterprises.
In the UK, the digital sector contributed to nearly €170 billion in 2018, with astonishing growth which has surpassed most sectors. Earlier in 2020, the UK Government commissioned the Digital Markets Taskforce, led by the Competition and Markets Authority (CMA) with the aim of making recommendations on the creation of a regulatory framework for the ever-growing digital markets in light of BREXIT. Subsequently, the CMA published a market study on online platforms and digital advertising including a number of recommendations to address competition concerns which had been identified.
Strategic Market Status
The new rules will apply to businesses and enterprises which are considered to have considerable impact on the digital scene. CMA stated that it considered companies such as Google and Facebook to be highly likely to be designated as having strategic market status in online advertising. It transpires that from the approx. €15 billion spent on digital advertising in the UK in 2019, a substantial 80% was spent on Google and Facebook.
The Recommendations
1. The CMA suggested the enactment of a Digital Markets Unit (DMU) to enforce a Code of Conduct for the major stakeholders. The DMU would be focused on pro-actively regulating the evolving digital markets to prevent harm and shape markets in a way to delivery greater competition and innovation.
2. In addition, the creation of a new pro-competition framework was advised, to incorporate the main elements:
- a legally binding Code of Conduct for businesses that are designated as having SMS,
- a pre-emptive intervention targeting SMS businesses, and
- the setting up of SMS merger rules, which impose a responsibility to report transactions to the CMA.
3. The Authority has suggested that the new Code of Conduct should be binding that the DMU is to ensure conformity, with the possibility of incurring costs for non-compliance.
4. Strengthening consumer protection laws, to ensure that they cater for scenarios brought about by the digital age.
A Global initiative
This effort to strengthen scrutiny of the digital markets does not come as a surprise. With the ever-growing use of e-commerce, other legislators have felt the need to regulate this environment. The European Parliament is expected to discuss the Commission’s Digital Markets Act later this year, whilst in the US, the House Judiciary Antitrust Subcommittee published extensive proposals relating to digital platforms.
Why Us
Chetcuti Cauchi is a commercial firm with key strengths in corporate and trust law, tax and financial services law, property and capital projects, intellectual property and technology law. Dr Maria Chetcuti Cauchi heads the intellectual property and technology law department of the firm. Dr Maria is also a Malta & European Trademarks & Patents Attorney.
This article is intended to be of a general nature and is not intended to address the specific circumstances of any individual or entity. The authors shall not be responsible for any damage which may arise from reliance on information contained in this article. Specialist advice should also be sought before any action is taken on this basis.
