If one of the benefits of Brexit is meant to be regulatory agility then the UK’s tech policy leaves a lot to be desired.
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.
Legislation needed to empower the Digital Markets Unit (DMU), the new watchdog that sits in shadow form within the competition regulator, will reportedly not make it into the Queen’s Speech next week.
That condemns the DMU, which the government has seen fit to set up, fund and staff but not empower, to limp on in limbo for at least another year.
During that time it can do no more than the Competition and Markets Authority can do already. It can observe digital markets, but has limited power to reshape them. It cannot set up legally enforceable codes of conduct to block big tech abuses before they happen or fine those that fail to comply. It will have to wait for someone to do something wrong, then go through the rigmarole of a full enforcement case. Instead of being forward-looking, the UK’s policy towards big tech will remain a hodgepodge of tools designed for the old economy.
The government had always said it would legislate for the DMU when parliamentary time allowed. Yet it is hard to believe that if it cannot find time to legislate this year it will manage to do so next, as an election looms. The CMA has a reputation for being able to attract good people. How many at the new tech unit will hang on indefinitely at an organisation ministers do not appear to prioritise?
Even if this does not signal the death of the DMU, but merely its delay, the government’s legislative inaction still matters.
The UK had a shot at shaping the global approach to tech regulation. Yes, the UK is a small market in global terms. But the CMA is a well-respected regulator among its world peers and is influential internationally. If the UK had pressed ahead with the reforms proposed, other countries might have followed its lead.
But in less time than the UK has been talking about setting up its new tech regulator, the EU has come up with not one but two landmark pieces of legislation to rein in Big Tech. Those will set the direction for the sector’s obligations and relations with governments. And if the UK fails to implement its own overhaul, the chances are that it will end up increasingly reliant on EU rules in which it did not have a say to alter the anti-competitive behaviour of the global online elite.
The continuing failure to legislate also risks the more aggressive — and uncertain — use by UK regulators of the tools that they do have. That means more ad hoc enforcement by the CMA, extended reviews for Big Tech takeovers, and more deals called in and blocked even when the connection to the UK is tenuous, as with Facebook’s attempted acquisition of online sticker library Giphy.
It should also be cause for broader concern about a wrong-headed approach to regulation. If the reluctance to legislate is, as one official suggested, because “Conservative governments don’t legislate their way to prosperity and growth”, that indicates a fundamental misunderstanding of how the digital economy works and what the revamp of UK competition law proposed by economist and former Obama adviser Jason Furman would have done.
As Diane Coyle, part of the panel behind the Furman report, puts it, “the whole philosophy of the Furman report was to make the market work better”. It was meant to lead to a less interventionist approach by spelling out the rules of the game upfront and reducing the structural barriers built by Big Tech that then prevent smaller operators from innovating.
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.
cat.rutterpooley@ft.com
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