On Monday 20 November, the Digital Markets, Competition and Consumers bill (“DMCC Bill”) was presented before the Commons for report stage and third reading, which allowed MPs to debate and vote on proposed amendments. In particular, the amendments sought to provide greater clarity to parties interacting with regime, enhanced regulator accountability, and ensure legislation is drafted effectively and meets its aims. However, it is clear that the bill suffers from a number of defects which, if left unaddressed, will undermine competition, innovation and growth.
We set out our comments below.
Comments on Amendments from the Third Reading
The amendments from the third reading broadly fall into three categories: conduct requirements for parties interacting with the regime, regulator accountability, and effective legislative drafting.
- The Digital Markets Unit in the CMA (“DMU”) is now required to explain the consumer benefits it expects to result from a conduct requirement, ensuring transparent decisions.
- The wording of the countervailing benefits exemption has been simplified, whilst maintaining a high threshold.
- Amendments were made to clarify how and when third parties can make collective submissions in relation to the Final Offer Mechanism. Collective bargaining rights are vital in mitigating power imbalances and facilitating the negotiation of payment terms.
Predictability and Proportionality of CMAs actions:
- Any party subject to a penalty is to appeal it based on merits rather than judicial review principles. Merits-based appeals allow the CAT to consider whether it was right to impose a penalty and the penalty amount.
- Enforcement decisions, including the imposition of penalties, are to be reserved to the CMA board or its committee.
Effective Legislative Drafting:
- Amendments clarify that a conduct requirement is permitted if it is for the purpose of preventing an undertaking from carrying on activities in a way that is likely to materially strengthen its position of strategic significance in relation to the relevant digital activity.
Broader Review of the DMCC Bill
- The DMCC Bill ignores Big Tech’s Monopolization of Data – The DMCC Bill fails to address platforms’ domination of current data gathering – preventing the use of the Open Web and limiting interoperability. Crucially, this creates a barrier to trade for AdTech stakeholders, as it restricts their ability to serve relevant ads to match user interests. Competing advertisers and publishers rely on ‘Match Keys’ to operate their businesses, as provides insight into consumption patterns and forms an integral part of their supply channels. However, in recent years, Big Tech platforms have withdrawn access to match keys for their own benefit. Consequently, we have seen the AdTech market become increasingly concentrated, with each platform building their own walled gardens and restricting data sharing across the Web.
There is a clear solution: the DMCC Bill should clarify that the promotion of competition obligation applies to the DMU, and that competition being promoted is not between platforms but between all products sold online – including open and interoperable match keys.
- Myopic Test of “Entrenched and Substantial Market Power” in Respect of Digital Activity – Designation requires the CMA/DMU to assess whether an SMS undertaking has “entrenched and substantial market power”, and to do so it must carry out “a forward-looking assessment of at least five years”. This five-year period requires current evidence of the undertaking’s market position. However, as digital markets are dynamic, it is likely that no evidence exists today to indicate a platform’s position in five years. This would inhibit the CMA’s ability to carry out its designation function.
One simple solution to this would be to reduce the timeframe from five years to one or two years. This would enable evidenced findings of market power in shorter, foreseeable time periods.
- Countervailing Benefits Exemption Provides a Scapegoat for Abuse of Dominance – Section 29(a) of the DMCC Bill gives the CMA the power to close a conduct investigation into an undertaking where the “countervailing benefits exemption applies”. It applies where:
- the benefit to actual or potential users outweighs any impact on competition; and
- platforms can show that their conduct is proportionate to the realisation of those benefits; and
- they can show that their conduct does not eliminate or prevent effective competition.
This exemption could severely undermine competition. As such, tech monopolists would be able to argue that their products and services provide a consumer benefit and as such, should excuse their abuse of dominance in other markets.
We propose that the DMCC Bill be amended, whereby there is an obligation on the CMA to expressly consider “plurality of the media” as part of its objective to promote competition in the interest of consumers. This would help counterweight a narrow focus on the benefits of only consumers, ensuring that online competitors are able to promote and display their products without discrimination. This should be reinforced with a requirement for those seeking to rely on the S29 exemption to pre-notify the CMA on product updates, so that the CMA can take an ex-ante approach to prevent anticompetitive practices.
In summary, whilst there have been some welcome developments to ensure the predictability and proportionality of the CMA’s decisions, the current DMCC bill leaves much to be desired. Without addressing issues around Big Tech’s monopolization of data, the timeframe for evidenced findings of market power, and the countervailing benefits exemption, the UK’s competitive landscape will continue to be distorted.
The DMCC Bill is due to be presented in the House of Lords for the Committee Stage before the end of the year, and further readings are likely to be extended into early 2024.
Please contact Tim Cowen if you have any questions regarding the above.
The material contained in this article is only for general review of the topics covered and does not constitute any legal advice. No legal or business decision should be based on its content.
This article is written in English language. Preiskel & Co LLP is not responsible for any translation of all or part of its content into any language.