Technology companies that intentionally abuse a new code of conduct will be liable for fines of up to 10 per cent of their global revenue, under competition plans proposed by the UK on Tuesday, raising the prospect of billions of dollars of potential penalties.
The head of the UK’s competition authority suggested that the UK should have specific rules for the world’s biggest tech companies, potentially starting with Facebook and Google before moving on to Apple and Amazon.
If they deliberately breach these rules, the companies would be liable for the full extent of penalties available under UK competition law, he added.
Andrea Coscelli, chief executive of the Competition and Markets Authority, said: “For the system to be enforceable . . . you need a carrot and a stick and the stick needs to be serious penalties that make it into the boardroom of large companies.”
He spoke as the CMA made its recommendations for a new UK Digital Markets Unit, a task force that the government hopes to create as soon as next year to tackle the market power of Big Tech. The Financial Times first reported the proposals last week.
Under the plans, the UK will decide on a case-by-case basis to class some tech companies as having “strategic market status” if they have “substantial, entrenched market power in at least one digital activity” or if they serve as an online “gateway” for other businesses.
Businesses could qualify as “strategic” on a range of metrics including revenues, market capitalisation, user numbers or time spent using a given product or service, the CMA said, giving the new regulator wide-ranging powers to constrain both existing companies and new entrants. A new designation would take up to a year to determine then last for five years, the CMA said.
These strategic companies would be held to specific, individual rules as well as a broader merger regime designed for the tech sector. They will be subject to “pro competitive interventions” to address the root of their market dominance, such as orders to share their data with third parties.
The CMA’s proposals would give the new regulator significant flexibility in responding to changes in the market. “The concept of future proofing is very important,” said Mr Coscelli, pointing to the potential growth of large Chinese internet companies who are not yet a significant presence in the UK.
The CMA said Google and Facebook would likely be forced to adhere to codes of conduct governing search and social media respectively, following on from a study it has already done on competition in digital advertising.
Mr Coscelli said Amazon and Apple could in the future be designated as “strategic” but only if the CMA’s research threw up issues in the markets they operate in.
The UK is taking a different approach to the EU, with individual rules rather than a broader set of rules for all “gatekeeper” companies to follow.
The CMA recommended that even acquisitions of digital companies that fall below the usual threshold of at least £70m in UK revenues should be investigated if they allow tech companies to take substantial market power.
The CMA said it considered the risk of a “chilling effect” on M&A — a key concern among tech investors — was “limited” and “in any event does not outweigh the potential risk of harm”.
In response to the plans, Google said the rules should only apply to specific markets where a company has demonstrable market power. It pointed out that Big Tech platforms may be dominant in some sectors, but marginal players in others.
Facebook said some of the options under discussion would “significantly rewrite the regulatory framework” and encouraged the UK “to carefully weigh the potential trade-offs of intervention and ensure that the value created by Facebook is not destroyed, to the detriment of users and innovation.”