The CMA’s Digital Market Strategy, available here, could be said to be a reaction to the Furman Report reviewed last week,  even if the official reaction took the form of a shorter and earlier letter to Government which can be found here.

s960_GOVUK-digital-strategy-image

The paper begins by describing why digital markets are different and how the CMA sees its role in their respect.

The underlying features of digital markets include substantial network effects, economies of scale and scope, the role of data and the computing power to use it, scope for personalisation, and market concentration. Most of these are not new individually, but in combination they are novel.

Combined with the pace of change, it can be hard for both consumers and public authorities to keep up. Some of these features, or their effects, raise questions, including: firms’ use of people’s data; the market power or ‘gatekeeper’ status of certain platforms; use of increasingly sophisticated technology to target advertising; or the risk of so-called ‘killer acquisitions’. The speed of change and the vast international reach of major players are particularly challenging for authorities acting unilaterally.

The CMA sees its role in digital markets as ensuring that the enormous innovation and benefits brought about by digitalisation can continue. There needs to be a level playing field so that all businesses can compete on the merits, consumers are able to trust online markets, and new competitors are be able to enter and bring additional services to the market.

Sections II and III outline the CMA’s strategic goals and focus areas as regards digital markets.

The CMA and its predecessors have always attempted to keep pace with changing markets.  It is in this context that the CMA finds it important to outline its strategic priorities. In short, the CMA identifies five strategic aims: (i) to use existing tools effectively and efficiently; (ii) to build its knowledge and capability; (iii) to adapt its tools to the digital economy; (iv) to consider the case and options for regulation; and (v) to consider potential future remedies in digital markets.

These aims are then linked to a number of priority focus areas:

  • As regards consumer and antitrust enforcement and merger assessment, the focus is on using available tools effectively and efficiently. Even though many enforcement and merger assessment tools would benefit from certain reforms to future-proof their effectiveness, it is important to use existing powers to the fullest extent possible against conduct such as fake online reviews, celebrity endorsements, the conduct of price comparison websites and online platforms, and mergers in fast moving markets.
  • The second area of focus is to finish establishing and scaling up a Data, Technology and Analytics (DaTA) unit, which would contribute to the achievement of all five strategic aims. The unit will support the CMA with technical understanding of working with data and using algorithms. It will conduct research and policy work, and support data gathering and analysis for case teams across the CMA. It will also contribute to the creation of technology remedies, such as interoperability or techniques for anonymous data sharing, and to acquiring the understanding and analytical skills required by a digital markets unit.
  • A third area of focus, which also reflects all five strategic aims, is to conclude the market study into online platforms and digital advertising. This study is looking at a number of themes: the market power of digital platforms in consumer-facing markets; lack of consumer control over data; competition in the supply of digital advertising; and Furman proposals relating to regime changes and institutional implications. A study like this could result in a range of outcomes, but it will certainly ensure that any future regulation is based on a good understanding of advertising-funded platform business models.
  • The fourth priority is to review the CMA’s mergers approach to digital markets as necessary. This relates to the strategic aims of using existing tools effectively and efficiently, and building knowledge and capability. The CMA has considered arguments for changing its merger control standards, including those advanced by the Furman Report, but believes that the legal framework remains largely fit for purpose. The possibility of under-enforcement on mergers has been, however, an increasing subject of debate. As such, the CMA is open to the possibility that current legal tests and framework as they apply to digital markets may need to evolve. In order to evaluate past approaches, the CMA launched a call for views on its approach to the assessment of digital mergers and published an independent review of past digital mergers. The CMA is also considering whether there might need to be some form of closer scrutiny for acquisitions by particularly powerful companies.
  • A fifth area of work concerns the creation of a ‘digital markets unit’, a proposal which has been accepted, in principle, by Government. The proposal is to designate certain businesses as having ‘strategic market status’, to develop a code of conduct, and to identify possible remedies not limited to data but including data interoperability, data mobility, and data openness. This work will build on the results of the market study on online platforms and digital advertising, and on parallel and complementary work on non-advertising funded business models as well as on institutional questions.
  • A sixth area of work is on potential reforming enforcement tools. Consumers should not have to suffer unduly because the regulatory frameworks intended to protect their interests are slower to develop than the markets in which they consume. That gap is to some extent inevitable in fast-moving markets. One therefore needs to be bold in using the available tools to the fullest possible extent, but also to consider new tools. One example of the CMA’s proposals is the sharpening-up of the interim measures regime to enable swifter action where detriment may be developing fast.
  • A seventh and last area of work is international cooperation. The digital economy is almost unique in its reach across international boundaries, which means that it is essential for competition authorities to work with each other and with governments. Given the global nature of the issues, the CMA is increasing our efforts towards international cooperation and collaboration.

It is worth remarking that the Digital Market Strategy unsurprisingly overlaps with the content of a letter sent by the CMA to Government outlining its reaction to the Furman Report, which can be found here.

In it, the CMA welcomed the panel’s recommendations in relation to the new digital markets unit and associated regulatory functions, even if these powers will require a legal reform setting out new competences, some of which may be assumed by the CMA. Regarding merger control, the CMA acknowledged the challenges that the current merger review regime poses when considering deals in digital markets, but considered that the current regime does not require fundamental changes. Lastly, as regards enforcement powers, the CMA welcomed the panel’s recommendations, particularly as regards interim powers, the standard of judicial review in antitrust cases and judicial review procedures.

Author Socials A weekly email with competition/antitrust updates. All opinions are mine

What do you think?

Note: Your email address will not be published