CMA independent report on approaches to improving competition in digital markets

UK– COMPETITION

On 29 November 2021, the Competition and Markets Authority (“CMA”) published the independent report “Compendium of approaches to improving competition in digital markets” (the "Report"). The Report summarises how different G7 authorities are tackling competition issues in digital markets (e.g. conducting investigations, upskilling personnel, engaging in regulatory cooperation and introducing legislative reforms, such as the Digital Markets Act).

Key date(s)

• 15 December 2020 – The Digital Markets Act Commission proposal is published.
• 11-13 June 2021 – G7 47^th Summit is hosted in Carbis Bay Cornwall.
• 15 July 2021 – The CMA publishes its Annual Report for 2020 to 2021, the Promoting Competition Bulletin 2021.
• 29 November 2021 – The CMA publishes the Report.

Status

• As part of its presidency of the 47^th G7 summit, the UK asked fellow member nations to provide submissions to feed into the Report. These submissions detailed the enforcement, regulatory, and policy work carried out by each nations' competition authorities. The Report, once published, then looked to identify commonalities between approaches and diagnose challenging characteristics to be regulated in digital markets.
• The Report highlighted marketplaces and app stores, digital advertising, and algorithms as key areas for investigation by authorities examining anti-competitive behaviour. In terms of governance and monitoring, the Report also highlighted enforcement, studies, advocacy and merger control as the main methods used to oversee these areas. Strengthening institutional capabilities by upskilling staff and founding specialist digital teams, as well as reforming legislation to bolster or introduce new regulations and enforcement were also flagged as common approaches. In particular, the Report noted that there is a growing consensus that existing powers may need to be reformed for anti–competitive concerns to be properly addressed. With the proposal for the Digital Markets Act commissioned in December 2020, but not set to be implemented before 2023, the Report will likely influence the direction of drafting, with the Digital Markets Act viewed as being set to prevent large companies from abusing their market power and allow new companies a route to entry.

 What it hopes to achieve 

• The Report is intended to provide governments, policy makers, competition authorities, and industry participants with the tools to effectively regulate competition in the digital market and ensure compliance. Data aggregation has been a key component in enabling large firms to saturate the digital market and challenging such market control will require an informed and co-operative approach.
• The Report also emphasises the importance of domestic regulators co-operating both across disciplines and internationally. Using the G7 summit as a medium to engage key digital market participants across the globe, the Report aims to address competition concerns on a systemic level with the objective being to strengthen current legislation and enforcement practices and encourage reform through new legislation, such as the proposed Digital Markets Act.

Who does it impact? 

• The Report will likely steer efforts to monitor competition in digital markets globally. The G7 summit is a key global collaborative event, and this year it had even more participants as the UK extended invitations to Australia, India, South Africa and South Korea. Indeed the Digital Markets Act will likely be influenced by the Report's findings which, as a proposed EU regulation, would impact national legislation across the European Union and large digital firms operating in its jurisdiction, as well as being influential for non-EU approaches.
• In turn, competition authorities and regulators will face mounting pressure from governments and likely need to adjust enforcement practices, particularly if the Digital Markets Act comes into force.
• Industry participants, namely large corporations, will need to consider potential legislation in order to inform best practice going forward and mitigate the risk of non-compliance.

Key points 

1. Legislation and Enforcement reform

• • The Report identified a growing consensus among competition authorities across G7 member countries that legislative and enforcement reform is needed to keep up with challenges facing the digital market. The Digital Markets Act was proposed by the Commission in 2020 and looks to allow new digital firms to enter the market and reduce market saturation by larger companies, and its final form may well be influenced by the Report's findings.

2. Domestic and International Interoperable Systems

• • Domestic authorities will likely need to take an internationally-minded approach to shaping competitive policy and practices in the digital market. The collaborative nature of the Report reflects the need for cooperation between jurisdictions, particularly as large entity's practices may stretch across multiple borders.

3. Strengthening Institutions' skillsets

• • Upskilling regulatory authority staff and creating departments with expertise in digital markets and competitive practices will be key to successfully keeping up with digitally native entities for regulatory purposes, particularly as technology continues to advance.

This blog post provides an overview of a key recent or upcoming development in digital regulation in the UK or EU as part of our horizon scanning timeline which can be found below.

Contacts

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