Innovation and changeDigital TransformationUK competition framework must be up to date with the digital age

UK competition framework must be up to date with the digital age

Digital Competition Expert Panel's review on UK's digital economy proposes evaluating the competition framework for a new code of conduct

A report by the Digital Competition Expert Panel prescribes fresh guidelines for the UK’s competition framework to counter the economic challenges posed by digital markets.

The Unlocking Digital Competition report recommends updating the rules governing merger and antitrust enforcement. Further, it is proposing a bold set of pro-competition measures to open up digital markets.

The expert panel was chaired by Professor Jason Furman, former Chief Economist to President Obama. The objective of the panel was to consider the potential opportunities and challenges posed by the emerging digital economy. The report is addressed to the Chancellor of the Exchequer, Philip Hammond and Secretary of State for Business, Energy and Industrial Strategy, Greg Clark.

The panel was asked to look into:

  • The impacts of the emergence of a small number of big players in digital markets such as social media, e-commerce, search, and online advertising
  • Appropriate approaches to mergers, takeovers and anti-competitive practices in digital markets
  • Opportunities to enhance competition, to increase business innovation and expand consumer choice
  • How best to assess consumer impacts in ad-funded products and services that are free to consumers

According to the Unlocking Digital Competition report, tech giants must be confronted with more competition. This would be for the betterment of the digital economy.

Earlier this week, the House of Lords Communications Committee had recommended a new regulatory framework for digital services in the UK as part of the government’s Internet Safety Strategy.

Rationale for recommendations

The report says: “Many countries are considering policy changes in this area. The United Kingdom has the opportunity to lead by example, by helping to stimulate a global discussion that is based on the shared premise that competition is beneficial, competition is possible, but that we need to update our policies to protect and expand this competition for the sake of consumers and vibrant, dynamic economies.”

The panel felt that competition policy must be given the tools to tackle new challenges. It should not radically shift away from its established basis. A completely new approach is not needed for consumer welfare as it is an apt mindset to encourage competition policy.

Key recommendations

Central recommendations mentioned in the report are as follows:

  • Review finds that tech giants do not face enough competition
  • New markets unit needed to set and enforce rules
  • Existing rules need updating to tackle mergers and improve enforcement

The report also provides direction with six strategic recommendations out of 20 action points. These recommendations focus on a pro-competition approach and creating a function to boost competition and choice.

Jason Furman said: “The digital sector has created substantial benefits but these have come at the cost of increasing dominance of a few companies which is limiting competition and consumer choice and innovation. Some say this is inevitable or even desirable. I think the UK can do better.

“The Chancellor, Philip Hammond, was right to recognise there is a better way than just continuing with the status quo. My panel is outlining a balanced proposal to give people more control over their data, give small businesses more of a chance to enter and thrive, and create more predictability for the large digital companies.

“These recommendations will deliver an economic boost driven by UK tech start-ups and innovation that will give consumers greater choice and protection.”

Responding to Professor Furman’s Review, Philip Hammond, said: “The UK leads the world in embracing technology and the opportunities it delivers for people. Competition is fundamental to ensuring the market works in the interest of consumers, but we know some tech giants are still accumulating too much power, preventing smaller businesses from entering the market.

“The work of Jason Furman and the expert panel is invaluable in ensuring we’re at the forefront of delivering a competitive digital marketplace. I will carefully examine the proposals put forward by the panel before responding later this year, setting out how the government will implement the changes needed to ensure our digital markets are competitive and consumers get the level of choice they deserve.”

Next steps

The government is expected to formally respond to its recommendations in the summer. Considerable technicalities, like as a risk-benefit analysis, will be required by the government. Having said that, the applicability of the recommendations is huge since it will enhance the digital expertise within the regulators.

The action points require an impact assessment. Impact on future digital markets, benefits for consumers, start-ups, major platforms, and the global economy needs to be evaluated.

The panel has drawn the regulator’s expertise in competition economics and policy and engaged widely with experts and stakeholders. Impact of competition framework on the UK’s growth and productivity, wages and labour markets, and consumer outcomes have been considered.

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