November 30, 2020
On 1 July 2020, the Competition and Markets Authority published its final report on its market study into online platforms and digital advertising, finding that competition was not working well in these markets. The CMA’s market study focused on three high-level issues:
- to what extent online platforms that are funded by digital advertising have market power in consumer-facing markets (and the sources of this market power);
- whether consumers have adequate control over the use of their data by platforms; and
- whether a lack of transparency, conflicts of interest and the leveraging of market power undermine competition in digital advertising.
The CMA found that, among other things, a lack of competition in digital markets prevents the development of new, valuable services for consumers, and results in higher prices for businesses using the platforms, which are then passed on to consumers.
The CMA made four recommendations to address both the sources of market power and the behaviour of those platforms with market power:
- establish an enforceable code of conduct to govern the behaviour of platforms funded by digital advertising that are designated as having strategic market status (SMS). The purpose of the code would be to meet three high-level objectives of fair trading, open choices, and trust and transparency;
- establish the requirement for a Digital Markets Unit (DMU) to undertake SMS designation, introduce and maintain the code based on objectives set out in legislation, and produce detailed supporting guidance;
- give the DMU the necessary powers to enforce the principles of the code on a timely basis and amend its principles in line with evolving market conditions; and
- give the DMU the necessary powers to introduce a range of pro-competitive interventions, which should include:
- data-related interventions (including consumer control over data, interoperability, data access and data separation powers);
- consumer choice and default interventions; and
- separation interventions.
The Government has now responded to the recommendations of the CMA and announced that it will set up a DMU to oversee a pro-competition regime for digital platforms, including those funded by digital advertising (see item above). The response commits the Government to:
- consider the Digital Markets Taskforce’s advice on the design and implementation of a new pro-competition regime for digital markets, which is due by the end of 2020;
- establish and resource a new Digital Markets Unit (DMU) from April 2021, housed in the CMA, to build on the work of the Taskforce and begin to operationalise the key elements of the regime;
- consult on proposals for the new pro-competition regime in early 2021; and
- legislate to put the DMU on a statutory footing when parliamentary time allows.
To read the Government’s response in full, click here.