Last week the Treasury released its report from former Obama adviser David Furman’s expert panel. It was the department’s first significant contribution to recent discussion about regulation of the tech sector. The panel was asked to explore implications of market dominance by tech companies and measures to ensure consumers benefit from competition. It considered the classic argument for tech as a dynamic and competitive ecosystem which improves options for consumers.

Improving competition regulations

Furman’s contention is that the modern tech sector, and particularly its reliance on data for innovation, may entrench market leaders’ positions. While scale can drive innovation and delivery, he expresses concerns about lack of competition widely held in some quarters. So, the report calls for an enhanced role for government and pro-competition regulation. It would use existing tools (updated) to secure benefits for consumers.

A new Digital Markets Unit is at the heart of the panel’s recommendations. It would have the power to develop a code of ‘competitive conduct’ for the large tech companies. The unit would also be charged with enabling personal data mobility across systems and advancing data openness to remove barriers for market entrants. The report also sees a global leadership role for the Competition and Markets Authority (CMA) through strengthened mergers and antitrust policy.

Experts in competition law will debate these recommendations further, especially because the Treasury has not responded to the report yet. However, it has dipped its toe in the water by commissioning a CMA review of the digital advertising sector, the outcomes of which will be instructive about how interventionist the government is willing to be.

Will the UK lead the world?

However, there are two broader political issues that are raised.

First, the global marketplace. UK PLC wants to avoid being put at a competitive disadvantage through excess regulation. The Treasury will want to understand how international partners will work with it on the review’s recommendations. The emerging global consensus that something needs to be done will encourage its proponents.

Second, as techUK points out, there may be practical challenges to implementation of some recommendations. This could apply to the Furman review and other areas of regulation. It is a recurring theme. For example, despite the pace of technological development, not all players will have an equal ability to act. Regulation therefore needs to be tailored through engagement with the sector’s bigger and smaller players.

Despite these points, there is momentum behind more regulation. All players will need to work with government to shape the future. Perhaps most important, each business needs to consider evidencing how it benefits consumers and acts in a responsible manner towards the communities it impacts.

This is likely to remain one of the most challenging and closely scrutinised areas of business, despite UK politics’ well-documented Brexit distractions.

By Francis Mallinson, Associate Director

To find out more about Lexington’s tech sector work, click here.