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The covid-19 lockdown has made us all more reliant on digital marketplaces and services. This has created opportunities for the tech sector but has also drawn further attention to the alleged imbalances within online marketplaces and challenges they pose to high-street retail. Before the crisis, the UK Government was considering its approach to digital competition and other forms of tech regulation. Could this approach be watered down as the government plans for economic recovery?

 

Tighter regulation, pre-crisis?

Prior to covid-19, the UK was set to tighten up tech regulation in a number of areas. Details of online harms legislation were expected this spring, while a new Digital Services Tax on the largest tech companies was implemented in April. The tax was introduced despite protests from the US Government. Ministers had recognised concerns about technological developments running far ahead of policy and regulation, and were taking action.

On digital competition regulation, the die was cast by Rishi Sunak MP. Having hardly warmed his seat last March, the new Chancellor confirmed the Government would accept recommendations from Jason Furman’s digital competition expert panel. This included a ‘code of competitive conduct’ for the largest tech platforms and a Digital Markets Unit to implement it. There were also measures to open up markets and promote consumer choice through access to data and interoperability of systems. A Digital Markets Taskforce is due to advise on implementation later in the year.

This is not all. Working under (recently departed) chair Andrew Tyrie, the Competition and Markets Authority (CMA) had been outspoken on the tech platforms. It adopted an interventionist tone through its digital advertising market study, which has expressed concern at the market share of Facebook and Google, suggesting remedies including separating advertising businesses from the platforms. A final report is due this week, which will give ministers more to consider, and a nudge to get on with it.

 

Covid-19 has changed everything. What happens now?

Within the Government, the tensions are playing out between those favouring a more free market approach and those preferring an interventionist stance. Early on in Boris Johnson’s premiership, speculation about a new low-regulation strategy was rife, as post-Brexit Britain prepared to compete on the global stage. Despite this, ministers set a clear direction by accepting Furman’s recommendations. And covid-19 has set a whole new level for government intervention in the economy.

The question now is what form will new regulation take? Reforms need government support and – in some cases – parliamentary consent. As minds turn to the reopening the economy, could the need to recover from covid-19 trump plans for regulation?

The economy contracted by a record 20% in April and ministers could be nervous about choking off investment. So it was no surprise to hear Culture Secretary Oliver Dowden highlight the tech sector’s role in growth last week. Announcing another Digital Strategy, he said: “… right now, our clear priority must be growth. Using tech to power us out of the recession, to drive productivity and create jobs in all parts of the industry, region by region.” Although Dowden referred to the importance of safety online, which was a focus of the 2017 Strategy, it was a notable change in tone. Perhaps this is an indication about what will happen next?

Tech businesses will play a role in a solution to the pandemic. They have also kept us connected, working and fed during lockdown. Next, they will help us adapt to the new normal. But despite its vital role in our lives, the sector is coming under additional scrutiny. The most prominent example right now is not a political development (though there are many we could point to), but direct pressure on Facebook from its US advertising partners over hate speech on the platform.

The CMA is currently due to publish its final report on digital advertising this week. Although competition law is never likely to be the talk of the town, recent developments show how the public and economic pressures on government and industry have changed significantly. We should expect a renewed discussion about what constitutes healthy competition on and offline, and how the economy should be rebuilt. The Government’s response to the CMA’s recommendations will be a test of how far the covid-19 crisis has changed priorities in Whitehall.

 

Webinar this Thursday: Digital markets – time to re-set the balance?

Lexington and FIPRA International are hosting a webinar discussing the government’s approach to digital competition regulation at 11.30am on Thursday 2nd July. Click here to register.

Speakers include:

  • Baroness Lucy Neville-Rolfe, former BEIS, DCMS and Treasury minister
  • Professor Philip Marsden, Member of the Furman Review, former CMA Director
  • Rocio Concha, Chief Economist and Head of Strategic Insight, Which?

Francis Mallinson is an Associate Director at Lexington Communications.

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