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05 May 2022

DMU Legislation Will Spur Innovation, Not Hinder It

The crucial legislation giving the Digital Markets Unit the teeth it needs to level the playing field between news publishers and the tech platforms will spur growth as other players in the digital marketplace are given the space they need to innovate, experts have said.

Following a report in the FT that the vital legislation was set to be delayed, and will not feature in the Queen’s Speech on Tuesday, experts have warned that the UK risks being left behind as other territories move forward with initiatives to regulate big tech.

Separately, the Competition and Markets Authority last week issued a fresh warning about the harm to consumers caused by the lack of competition in the digital marketplace.  In its report  'The State of UK Competition' the CMA said platforms, “are now protected by such strong incumbency advantages – including network effects, economies of scale and unmatchable access to user data – that potential rivals can no longer compete on equal terms.

"These issues matter to consumers. The evidence in our market study, and summarised above, indicates that weak competition in search and social media leads to higher prices and reduced innovation and choice compared to more competitive markets.

"Weak competition in digital advertising increases the prices of goods and services across the economy. By reducing the amount of money going to publishers in the open display market, it also undermines the ability of newspapers and others to produce valuable content, to the detriment of broader society”

Writing in the FT today, UK business writer Cat Rutter Pooley said: “Three years after a respected report into how to overhaul Britain’s competition regime for the online economy recommended the creation of a powerful Digital Markets Unit, the government’s dither and delay has already squandered an early advantage. Now further procrastination puts the whole policy at risk.” 

The revamped digital economy and UK competition law envisaged by economist and former Obama adviser Jason Furman would unlock growth by leading to a less interventionist approach by reducing the structural barriers built by big tech, Ms Rutter Pooley said.

“By not legislating, the government may end up with a more intrusive antitrust regime, ill-suited to the digital economy. It will not mean less red tape or an environment in which companies can innovate unconstrained. The UK is no longer a leader on Big Tech regulation. It teeters on the brink of becoming a laggard,” she added.

In a piece for The Times Red Box last week, News Media Assocation chief executive Owen Meredith called for the Digital Markets Unit to be given the statutory powers it needs to do the job it was set up for “as a matter of urgency” in order to lay the foundations for a sustainable future for journalism.  

Speaking on The Media Show yesterday, former DCMS Minister Margot James said she was “disappointed” by the report of the decision to delay introducing the legislation.  “The Online Harms Bill serves a different purpose to what would have been the digital markets bill which was more about the competitive antitrust situation.

She added: “Why is almost all advertising now routed through Google and Facebook? That’s not fair competition. There’s lots to do around that which is not really where the Online Harms Bill is orienting.”

Philip Marsden, professor of law and economics at the College of Europe, added: “To use the Prime Minister’s words, this is oven-baked, this is ready to go, the legislation is pretty well drafted and ready to go, the staff are there, they just need to be given that direction from government.   

 “They should just pass this and put the legislation through.”

He added: “The kind of innovation and investment into the UK that this Bill would unleash in terms of economic diversity - people able to choose different sources rather than just Google or Apple or whatever – these kinds of things can actually be really, really good.

“They are things that our little island gets right.  And so by delaying this Bill you are delaying that kind of innovation, that kind of investment.”