U.K.'s CMA mulls new regulator to tackle Big Tech

The Competition and Markets Authority (CMA) said it would consider a number of measures to increase consumer protection, including blocking technology giants from sharing data between different parts of their businesses as a way of boosting revenues through online advertising.

Such a move would mirror the approach already taken by Germany’s competition authority against Facebook earlier this year. In February the German watchdog, the Bundeskartellamt, barred the social media platform from pooling data collected from its Instagram app, other subsidiaries, and third-party Websites.

As part of its market study launched July 3, the CMA will look at whether the control that some leading digital platforms have over people’s data is making it harder for rivals and new entrants to compete for business and what impact that might have on consumer choice.

The probe will also examine concerns about how online firms generate their fee income from selling customer data—or making it “available” to developers and advertisers, as the industry likes to argue—and whether consumers genuinely have the skills, knowledge, and control to set limits or restrict how their personal information is used.

The matter is particularly pressing, says the regulator, because the European Union’s tough new privacy rules, the General Data Protection Regulation, might not give consumers the level of protection they should expect “because they are limited to certain data types, are expensive to implement and oversee, or are difficult to enforce.”

CMA Chief Executive Andrea Coscelli said in a statement that its market study will “further lift the lid” on how major online platforms work, “especially how they collect and use personal data, how they monetize their content through digital advertising, and what this means for competition.”

Coscelli added the findings will be used to influence the direction of policy and regulation in the digital sector.

Any remedies are likely to focus on “recommendations to government for the development of an ex ante regulatory regime,” which would require new legislation, says the CMA. The regulator said it would also weigh proposals for a new regulatory body with powers of enforcement, building on the broad proposals made in March this year by Jason Furman, an adviser to former U.S. President Barack Obama. The CMA added, however, that such a role could also be taken on by existing regulators.

Furman’s report concluded the U.K.’s digital ad market is “dominated by two players and suffers from a lack of transparency.” As a result, he recommended setting up a new competition regulator for the tech sector in the form of a “digital markets unit,” staffed by people with technological expertise and equipped with the powers to set and enforce greater competition.

The United Kingdom has been particularly active in adopting digital advertising, spending more on it than any other EU country: It now accounts for over half of all advertising in the country, with the digital ad market currently worth over £13 billion (U.S. $16 billion). The CMA forecasts suggest Google and Facebook will control more than 70 percent of the market by next year.

The CMA wants comments to its proposals by July 30 and will release a final report at the beginning of July 2020. There is a possibility of launching a market investigation in January if the regulator sees fit—though the CMA warns it wants to provide a “sustainable long-term framework for the sector” rather than a “one-off intervention.” The watchdog also says it is cooperating and working alongside regulators in other jurisdictions that have similar competition concerns.

The CMA’s probe comes just two weeks after a damning report from the U.K.’s data protection regulator, the Information Commissioner’s Office (ICO), into the U.S. $200 billion adtech industry, underpinned by Google, which it found had been operating illegally. The ICO found online companies were using customers’ personal data without consent in order to buy and sell ads on the Web.

“Under data protection law, using people’s sensitive personal data to serve adverts requires their explicit consent, which is not happening right now,” said the ICO.

The CMA has been increasingly targeting harm to consumers through technology. It recently investigated online hotel booking sites and cracked down on the way social media “influencers” endorse products on social media and the role of the platforms they use.

The opposition Labour Party’s shadow culture secretary, Tom Watson—a vociferous critic of Big Tech companies—has welcomed the CMA’s probe. “For far too long, the digital market has been dominated and distorted by data monopolies,” he said.

“Tech giants have thought themselves untouchable, unaccountable, and above the law. This is a necessary step towards bringing Big Tech to heel. Next, government must introduce strong safeguards and updated competition laws to ensure that online platforms work for everyone, not just the chief executives of Silicon Valley.”