05 July 2019 - Post by:Jessica Bowring
The UK Competition and Markets Authority (CMA) has published a document setting out its digital markets strategy and, in parallel, has launched a market study into online platforms and digital advertising. These developments follow on from a series of independent reports into the digital sector, including the Furman Report in March and the Lear Report in June. They also build on the package of reforms proposed in February by the CMA’s Chairman, Lord Tyrie, as well as statements by its Chief Executive, Andrea Coscelli.
The CMA is clear about what it is trying to achieve: to preserve innovation and benefits for consumers that can be brought about through digitalisation, and to ensure a level playing field so that businesses of all sizes can compete on the merits, new rivals can enter, and consumers can feel trust in online markets. Specifically, the strategy sets out seven priority areas of focus for the CMA in digital markets:
- Consumer and antitrust enforcement and merger assessment. The CMA acknowledges that its enforcement and merger assessment tools “were built for the analogue age, and would therefore benefit from certain reforms to future-proof their effectiveness”. This continues key themes that we saw in both the Furman and Lear reports. The CMA does not, however, elaborate in the strategy on what those changes might be, instead emphasising that it should use its existing powers to the fullest extent possible. This, it says, includes investigating fake online reviews, celebrity endorsements, the conduct of price comparison websites and online platforms, and mergers in fast moving markets. It also notes that it is increasing its efforts to “scan the horizon to anticipate and target poor practices and areas of concern in digital markets which may form the basis for future enforcement action”. More cases, therefore, seem likely to be on the cards.
- The work of the CMA’s recently established Data, Technology and Analytics (DaTa) unit. The CMA explains that the unit’s team members have been building the ability to analyse data sets, use machine learning and artificial intelligence techniques, and understand firms’ use of data and algorithms. The CMA also notes the Furman Report’s recommendation to continue to monitor the development of machine learning and artificial intelligence to ensure it does not lead to anti-competitive behaviour or consumer detriment, particularly in relation to vulnerable consumers, although it does not elaborate on the status of such monitoring or any potential enforcement action it is considering. Interestingly, as well as research and policy work, the DaTa unit is considering potential remedies in digital sectors such as interoperability or techniques for anonymous data sharing, and is “understanding the data and analytical skills, and powers, that would be needed for a digital markets unit” – perhaps giving a hint to the Government that the CMA believes such a unit would best fall under its remit (see priority 5, discussed below).
- Market study on online platforms and digital advertising. In launching this market study the CMA has answered numerous calls in recent months, from expert reports and politicians alike, for it to look more closely at the digital advertising market. The CMA describes the study as a core part of its digital markets strategy. It will look at (i) the market power of digital platforms in consumer-facing markets; (ii) any lack of consumer control over data; and (iii) competition in the supply of digital advertising. The CMA notes that the study could result in a range of outcomes, which include a fuller market investigation and/or consumer protection or competition enforcement action. If any remedies are required, the CMA thinks these are likely to focus on the development of a regulatory regime to regulate to activities of online platforms, building on the recommendations of the Furman Report. The study will take no longer than a year, so must be concluded by 2 July 2020. We can expect an interim report outlining the CMA’s provisional views by 2 January 2020.
- Review of the CMA’s approach to mergers in digital markets. The CMA has considered the Furman Report’s recommendations for a change in merger control standards but believes that the legal framework “remains largely fit for purpose”. That is not to say, however, that the CMA is not open to change – it goes on to say that evolution of its tests and frameworks may be needed, and notes it is developing its approach to assessing digital merger cases, pointing to the call for views on its merger assessment guidelines which it published alongside the Lear report. The CMA adds that it is considering further whether there might need to be closer scrutiny for acquisitions by particularly powerful companies (again, building on proposals set out in the Furman Report and Lord Tyrie’s letter) and that it will continue to consider if any legislative changes to the merger regime are required.
- Policy work to consider a possible ‘digital markets unit’. The Furman Report recommended the establishment of this unit, which it proposed would have powers to set a code of conduct for companies with “strategic market status”, and to oversee a new regime of data interoperability, mobility and open standards. In June Theresa May announced that Jason Furman would be advising the Government on how to implement the next phase of establishing the unit. But there has so far been no clarity on where the unit will sit, i.e. whether it will be housed within an existing regulator, or be independent. The CMA says that its market study into online platforms and digital advertising will “play a major part in informing the development of this regulatory framework” but that it is also carrying out a parallel and complementary piece of policy work. This, it notes, involves considering non-advertising funded business models, institutional questions and other policy issues and initiatives, which it is working with other authorities and government departments to develop. At first sight, and as noted earlier, the CMA appears to be laying the groundwork to itself house the digital markets unit.
- Proposals to reform the CMA’s enforcement tools. In his letter to Government, Lord Tyrie set out a series of proposals to reform the enforcement tools available to the CMA. This included the “sharpening-up” of the interim measures regime, to enable the CMA to take swifter action, particularly in fast moving digital markets. The Furman report made similar recommendations. The CMA is not the only regulator looking to improve or make greater use of such powers – only a week before the strategy was published, the European Commission announced its intention to impose interim measures in an antitrust enforcement case for the first time in 18 years. The CMA does not provide much of an update on these proposals except to say that they are “now for the Government to consider and take forward as appropriate” and that the CMA is working to support the government as it does so.
- International cooperation. The CMA recognises that issues relating to the digital economy are global. In that vein it says it is increasing its efforts towards international cooperation and collaboration and will capitalise on synergies between its work on digital markets and that of its international counterparts. It gives several examples of this work, including the Australian Competition and Consumer Commission’s digital platforms inquiry – the much anticipated final report in this inquiry is due to be released to the public in the coming weeks, and a number of the recommendations are expected to echo those in the Furman Report and other studies from across the globe.
The CMA’s priorities are largely consistent with the independent reports and previous CMA statements on digital markets that we have seen during first half of 2019. Now that the market study has been launched, the DaTa unit is fully up and running and the CMA, along with other regulators and government departments, is working on implementing the Furman report recommendation for a digital markets unit, it looks as though we can expect some more concrete developments in policy and a potential increase in enforcement over the next 12 months.
Authors: Jessica Bowring, associate; Louise Tolley, PSL Counsel