CMA and Ofcom joint statement on competition in digital markets

In July 2022, the CMA and Ofcom published a joint statement on the interaction between the regulation of competition and safety in digital markets. This comes as part of the Digital Regulation Cooperation Forum's ("DRCF") efforts to improve collaborative action and understanding across regulatory bodies relevant to the digital world. The joint statement covers the challenges and benefits of taking this double-sided approach.

Key date(s)

• 10 March 2021: The DRCF publishes it Plan of Work for 2021 to 2022
• 28 April 2022: The DRCF publishes its Annual Report for 2021 to 2022
• 28 April 2022: The DRCF publishes its Plan of Work for 2022 to 2023
• 14 July 2022: The CMA and Ofcom publish joint statement setting out their views on the interaction between online safety and competition in digital markets

Status

In July 2020, the DRCF was formed by Ofcom, the CMA and the ICO following Ofcom's new role as regulator of the UK's online harms framework. Having previously been an observer member, the FCA joined as a full member in April 2021. In order to strategically guide these collaborative efforts, the DRCF publishes Annual Reports and Plans of Work.

The DRCF's first Plan of Work for the year 2021 to 2022, published on 10 March 2021, set out its three priority areas to which it would dedicate its efforts over the coming year:

• responding strategically to industry and technological developments;
• joined up regulatory approaches; and
• building skills and capabilities.

In its Annual Report for 2021 to 2022, the DRCF announced that the Secretary of State for the Department for Digital, Culture, Media and Sport ("DCMS") had asked the CMA and Ofcom in April 2021 to investigate how a code of conduct could govern a new pro-competition regime for digital markets. The CMA and Ofcom provided their advice to the DCMS in November 2021, with the aim to ensure platform and publisher trading terms would be reasonable and fair.

Published on 28 April 2022, the DRCF's Plan of Work for 2022 to 2023 announced that the body would continue to develop its understanding of the interaction between data protection and competition regulation. This builds on the joint CMA and ICO statement released in May 2021. As addressed by the Online Safety Bill, online fraud and scams pose an increasing threat to consumers' online safety. Accordingly, the DRCF announced in this latest Plan of Work that Ofcom would investigate possible interactions with CMA regimes, just as the ICO had done in the previous year.

On 14 July 2022 the CMA and Ofcom published a joint statement in furtherance of this promised cooperation. This joint statement tackles concerns regarding the interaction between competition and online safety.

 What it hopes to achieve 

• In the joint statement, the CMA and Ofcom recognise that the variety and choice available to consumers online provides the market with significant benefits. However, there is the potential to create harm where competition is weak and there is a lack of investment in user safety. Both bodies aim to use their existing and new powers to tackle these issues.
• Algorithms, data and user interfaces are identified as key aspects for the CMA and Ofcom to monitor. Also listed are platforms which determine the content and people that users can encounter. These platforms tend to hold dominant positions in the digital marketplace and therefore pose a potential threat to fair competition. Ofcom and the CMA aim to improve safety requirements across large and small platforms. The regulatory bodies claim that consumers will therefore have more reason to switch to new entrants or smaller competitors for their digital services. As consumers will have more alternatives platforms available with quality protective measures, the regulatory bodies hope to incentivise larger platforms to further strengthen their own security.
• However, the joint statement also recognises that online safety and competition regimes may clash in their objectives. For example, interventions to enhance consumers' online safety may hinder smaller firms' ability to compete with larger, well-established market players. Where these incompatibilities are unavoidable, the regulators plan to create trade-offs to resolve stalemates in the most proportionate way possible.

Who does it impact?

• Although the joint statement does not command the implementation of any measures for the time-being, it does represent the policy direction which Ofcom and the CMA will take over the coming year. The joint statement foreshadows a closer relationship between online consumer safety regulations and competition laws.
• For online platforms, this will create different obstacles according to the firm's size. Larger firms will face more strenuous obligations in order to retain their market position, whereas smaller firms and market entrants will be confronted with significant requirements in order to enter the market in the first place.
• For consumers and platform users, this new policy direction will hopefully provide better protection from online scams and other dangers in the digital sphere. Uniform protective measures could provide users with more affordable choices across service providers, as small firms will have the same standards as their larger counterparts. However, there may prove to be less variety in choice if these obligations are too taxing for smaller firms to execute.

Key points 

1. Collaborative efforts

• • This joint statement from Ofcom and the CMA is indicative of the DRCF's growing influence. As the online world provides more services and through a wider variety of means, the regulatory world needs to play catch-up. Co-operation between regulatory bodies is key to ensuring that the market can efficiently flourish without impinging on the safety of its users and vice versa.

2. Competition vs safety: a trade-off?

• • Competition and online safety regimes have different objectives. Finding a middle ground which allows for the achievement of both aims is not always possible. Ofcom and the CMA announced in their joint statement that future regulations will need to accommodate for these conflicting needs and provide transparent trade-offs for industry players to follow.

3. Small and large firms

• • Depending on their size, firms will encounter different challenges in the face of potential regulatory changes. Smaller providers of online services may not be able to absorb the costs and time that compliance with new regulations would require. In comparison, larger firms may see customers exit to smaller, more affordable platform providers if safety measures are standardised.

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.

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