Our laws on tech companies would give too much power to regulators like the CMA
Laws for big tech are already based on outdated information where Google and Facebook are king and regulators like the CMA are expected to make sense of a changed world, writes Matthew Sinclair
No minister sat down one day and decided to hand unchecked, open-ended powers to the Competition and Markets Authority in digital markets. Sadly that is what the Digital Markets, Competition and Consumers Bill, currently passing through Parliament, would do. It’s the latest example of ill-thought out tech regulation, making even the EU’s Digital Markets Act look relatively restrained. At a time when the UK is losing its reputation as a predictable regulatory environment, we should ask: why are we so bad at regulating tech?
The most obvious problem is that no one minister has been in charge. With turnover at the top and an entire departmental restructure, there hasn’t been a chance for one person to grasp control of the agenda. Political instability has put officials in the driving seat.
Too many parliamentarians think about this in terms of whose side they are on, not whether the regulatory framework is well-designed. Their analysis often starts and ends with concerns that the major tech companies have a market position they have not earned fairly, or defend unfairly. This leads to proposals not getting the required scrutiny and policymakers brushing aside unintended consequences.
Big, American tech companies are striking a delicate balance every day between the needs of the different groups using digital markets: consumers, advertisers, creators and many more. If a regulator ploughs in there is every chance they make outcomes for some or all of those users worse. The new Bill doesn’t require a full consideration of consumer benefits: it’s all of us who are likely to pay the heaviest price over time.
Another problem is the basic fact that politicians and regulators are running years behind the reality of the markets they are seeking to regulate. The Bill is based on a 2019 review; fast-forward a mere four years and Amazon is a growing challenger to Google and Facebook, with TikTok – which didn’t even exist in 2019 – rapidly increasing its market share. In the next four years there is likely to be more businesses seeking to get into the market, including other e-commerce and media companies. Regulation based on outdated information could easily curb this dynamic innovation.
In the end, politicians will find they cannot have their cake and eat it too. You cannot be pro-tech in your rhetoric and then create a regulatory straitjacket for any business that seems too successful. If we seek to unnecessarily restrain innovation, the UK will become a less natural home in which to build new services. That will mean UK startups no longer using the best tools, collaborating with the best global players, and international start-ups not considering the UK as the best market in which to launch or expand.
The CMA may not use the new powers in the DMCC Bill to inflict the most damage, but no one in the tech sector is going to trust that their approach will be careful. Decisions like the one over the Microsoft and Activision Blizzard merger show that UK regulators take a more speculative and hawkish approach than other European regulators.
There is ultimately no substitute for proper checks and balances and keeping some decisions where they belong: with ministers passing laws in Parliament. Some of the powers in the new Bill that give the regulator the final say have been described as “quasi-legislative”. A few years down the line, ministers could find themselves unable to comprehend why they are having to live with the consequences of decisions made by an overpowered regulator.
The complexities of digital markets mean it is particularly important to intervene carefully. There are modest changes that would improve the Bill considerably, such as putting back proper appeals and ensuring consumer impacts are fully considered. Ultimately though it would be better to stick to the existing regulatory toolkit, than go ahead with this exceptional expansion of regulator power.