Fred de Fossard is head of the British Prosperity Unit at the Legatum Institute.
After years of legislative hokey-cokey, the Government has introduced the Digital Competition Bill. It is being hailed as a measure to boost growth, innovation, and competition, but in reality it will do anything but. It is another unwelcome set of burdens that the Government insists on heaping onto the tech sector, along with the Online Safety Bill and the largest increase in Corporation Tax since the 1970s.
This Bill will give new statutory powers to the Competition and Markets Authority to regulate the tech sector, significantly reducing the evidence threshold required by the CMA to punish companies found in breach of the law. It is an astonishing regulatory power grab, and one which the increasingly hawkish CMA has been trying to achieve for many years. Any minister should be wary of offering a quango even more powers, yet there seems to be no such scepticism here.
To paraphrase Margaret Thatcher: we have not rolled back the bureaucracy of the EU only to have it reimposed in the United Kingdom. Unfortunately, this is just what the government wishes to do. The EU itself is embarking on a self-destructive regulatory drive. Its Digital Markets Act will set absurdly high requirements for new AI products and applications. EU members like Italy have already banned OpenAI’s ChatGPT, and now Germany and the EU itself are considering taking action against the tool.
This offers the United Kingdom an open goal, yet ministers are determined to score an own goal instead. The Digital Competition Bill will give the CMA almost unlimited powers to prosecute big tech companies who have supposed “strategic market status”. The Government intends to lower the threshold for prosecution below that of conventional competition law, and to remove the ability for companies charged to appeal the decision. Instead, they may only appeal on process grounds, limiting their claims to whether the prosecuting quango’s paperwork was in order. This is hardly justice, or even good law, nor even good politics. It is a signal to stop investing in Britain.
Its “strategic market status” provisions will demand that a business with such status will have to submit new products to the CMA for pre-approval, and prove that they will provide consumer benefits indisputably. This is an almost impossibly high bar, and it could apply to a huge range of features. It might well have prevented Amazon from launching its physical grocery stores, Amazon Fresh, or Google for adding new features to Fitbit.
Not only this: it may even require companies to seek pre-approval for software updates or fixing bugs. These might be inadvertent oversights, consequences of clumsy drafting, but they are plausible because ministers appear so keen to introduce such broad new regulations.
Not only are these companies barred from appealing the CMA’s cases on merits, but these proposals are out of step with the standard used by other regulators. Businesses and individuals sanctioned by the Financial Conduct Authority, Ofgem, or Ofwat are all allowed to appeal their decisions on merits. Are tech giants, which have helped build a genuine jewel in the British economy, really less deserving of full appeals than sanctioned Russian investors, Iranian nuclear energy businesses, or sewage-spewing water companies?
The Government has picked a convenient enemy, clearly. There are few advocates for big tech in British politics. MPs resent the rough and tumble of twitter or insulting comments beneath their Facebook posts. Newspaper publishers think that the tech sector has been responsible for their slimmer profit margins in the twenty-first century.
But what about the public? They use and enjoy big tech’s products every day, whether it is chatting over whatsapp, saving time driving to work with Google Maps, using YouTube to help their children with homework, or small businesses reaching new customers on Amazon’s Marketplace or using ads on Google or Instagram. New products and innovations like these could all be threatened by this Bill.
As I have written before, the problems this Bill attempts to fix are fading away thanks to market forces, and competition between tech companies themselves. E-commerce is challenging the allegedly unassailable advertising duopoly of Facebook and Google and ChatGPT is transforming how we search for new information. This Bill is not just a sledgehammer, but a sledgehammer swung late anyway.
Interventions like this bill make a mockery of any claims by ministers that the government supports supply-side reform or innovation, or even democratic accountability of regulators. Sadly, its revealed preference is now to regulate at all turns, on little evidence.
Beyond the tech sector, we are going to be treated to a new football regulator which will soon demand licences for professional footballers and will set new rules for how football clubs must operate, despite the runaway success of English football in recent years. Ministers are considering limiting driving and gambling to people over 25. Even more egregiously, the Home Office’s Martyn’s Law will force all venues with capacity to hold more than 100 people – pubs, churches, restaurants – to comply with mandatory counter-terrorism training, following the Manchester Arena attack. Readers may remember that a number of police and security failings contributed to that particular terrorist attack, rather than the lack of counter-terror training from waiters, barmaids or church wardens.
It is sad, therefore, that ministers talk a good game about growth and innovation, yet do little to allow them to happen. Whether it is the Chancellor’s paean to entrepreneurship, the Prime Minister’s well-known love of startup founders, or the Science Minister’s new strategy for Artificial Intelligence, the reality is very different to the rhetoric. Despite ample warning, the Government stubbornly supports the Digital Competition Bill and the powers within. Perhaps it is only while in opposition that Conservative MPs will realise the folly of handing such vast and unaccountable powers to a quango to do with them as it pleases.
Fred de Fossard is head of the British Prosperity Unit at the Legatum Institute.
After years of legislative hokey-cokey, the Government has introduced the Digital Competition Bill. It is being hailed as a measure to boost growth, innovation, and competition, but in reality it will do anything but. It is another unwelcome set of burdens that the Government insists on heaping onto the tech sector, along with the Online Safety Bill and the largest increase in Corporation Tax since the 1970s.
This Bill will give new statutory powers to the Competition and Markets Authority to regulate the tech sector, significantly reducing the evidence threshold required by the CMA to punish companies found in breach of the law. It is an astonishing regulatory power grab, and one which the increasingly hawkish CMA has been trying to achieve for many years. Any minister should be wary of offering a quango even more powers, yet there seems to be no such scepticism here.
To paraphrase Margaret Thatcher: we have not rolled back the bureaucracy of the EU only to have it reimposed in the United Kingdom. Unfortunately, this is just what the government wishes to do. The EU itself is embarking on a self-destructive regulatory drive. Its Digital Markets Act will set absurdly high requirements for new AI products and applications. EU members like Italy have already banned OpenAI’s ChatGPT, and now Germany and the EU itself are considering taking action against the tool.
This offers the United Kingdom an open goal, yet ministers are determined to score an own goal instead. The Digital Competition Bill will give the CMA almost unlimited powers to prosecute big tech companies who have supposed “strategic market status”. The Government intends to lower the threshold for prosecution below that of conventional competition law, and to remove the ability for companies charged to appeal the decision. Instead, they may only appeal on process grounds, limiting their claims to whether the prosecuting quango’s paperwork was in order. This is hardly justice, or even good law, nor even good politics. It is a signal to stop investing in Britain.
Its “strategic market status” provisions will demand that a business with such status will have to submit new products to the CMA for pre-approval, and prove that they will provide consumer benefits indisputably. This is an almost impossibly high bar, and it could apply to a huge range of features. It might well have prevented Amazon from launching its physical grocery stores, Amazon Fresh, or Google for adding new features to Fitbit.
Not only this: it may even require companies to seek pre-approval for software updates or fixing bugs. These might be inadvertent oversights, consequences of clumsy drafting, but they are plausible because ministers appear so keen to introduce such broad new regulations.
Not only are these companies barred from appealing the CMA’s cases on merits, but these proposals are out of step with the standard used by other regulators. Businesses and individuals sanctioned by the Financial Conduct Authority, Ofgem, or Ofwat are all allowed to appeal their decisions on merits. Are tech giants, which have helped build a genuine jewel in the British economy, really less deserving of full appeals than sanctioned Russian investors, Iranian nuclear energy businesses, or sewage-spewing water companies?
The Government has picked a convenient enemy, clearly. There are few advocates for big tech in British politics. MPs resent the rough and tumble of twitter or insulting comments beneath their Facebook posts. Newspaper publishers think that the tech sector has been responsible for their slimmer profit margins in the twenty-first century.
But what about the public? They use and enjoy big tech’s products every day, whether it is chatting over whatsapp, saving time driving to work with Google Maps, using YouTube to help their children with homework, or small businesses reaching new customers on Amazon’s Marketplace or using ads on Google or Instagram. New products and innovations like these could all be threatened by this Bill.
As I have written before, the problems this Bill attempts to fix are fading away thanks to market forces, and competition between tech companies themselves. E-commerce is challenging the allegedly unassailable advertising duopoly of Facebook and Google and ChatGPT is transforming how we search for new information. This Bill is not just a sledgehammer, but a sledgehammer swung late anyway.
Interventions like this bill make a mockery of any claims by ministers that the government supports supply-side reform or innovation, or even democratic accountability of regulators. Sadly, its revealed preference is now to regulate at all turns, on little evidence.
Beyond the tech sector, we are going to be treated to a new football regulator which will soon demand licences for professional footballers and will set new rules for how football clubs must operate, despite the runaway success of English football in recent years. Ministers are considering limiting driving and gambling to people over 25. Even more egregiously, the Home Office’s Martyn’s Law will force all venues with capacity to hold more than 100 people – pubs, churches, restaurants – to comply with mandatory counter-terrorism training, following the Manchester Arena attack. Readers may remember that a number of police and security failings contributed to that particular terrorist attack, rather than the lack of counter-terror training from waiters, barmaids or church wardens.
It is sad, therefore, that ministers talk a good game about growth and innovation, yet do little to allow them to happen. Whether it is the Chancellor’s paean to entrepreneurship, the Prime Minister’s well-known love of startup founders, or the Science Minister’s new strategy for Artificial Intelligence, the reality is very different to the rhetoric. Despite ample warning, the Government stubbornly supports the Digital Competition Bill and the powers within. Perhaps it is only while in opposition that Conservative MPs will realise the folly of handing such vast and unaccountable powers to a quango to do with them as it pleases.