The UK government has set out its plans for how its new digital market regulator will address the anti-competitive practices of some of the world’s largest technology companies. Its new supervisory body, the Digital Markets Division (DMU), will be given legal powers to enforce competition rules and “rebalance technology giants’ relationships with consumers and businesses so that they are better protected from unfair practices”.

As part of the response to the consultation, The Ministry of Digital Technology, Culture, Media and Sport (DCMS) said it planned fines of up to 10% of global turnover for violating the rules. Senior technology chiefs can also face severe penalties if their companies fail to comply.

Facebook and Google may be under fire from the new digital competition regulator, the Digital Markets Unit (DMU), DCMS said. (Photo by iStock)

The proposals also aim to make it easier for mobile users to switch between Apple iOS and Android phones or between social media accounts without losing their data and messages, DCMS said. It can also give “smartphone users more choice of which search engines have access to” and more control over “how their data is used by companies.”

“Technology is revolutionizing the way thousands of British companies do business; helping them reach new customers and providing a range of instant online services at your fingertips, ”said Chris Philp, Minister of Digital Technology. “But the dominance of several technology giants is pushing out competition and stifling innovation.

“We want to level the playing field and arm this new technology regulator with a range of powers to generate lower prices, better choice and more control for consumers, while supporting content creators, innovators and publishers, including in our vital news industry

What is the Digital Markets Department?

The optional DMU, ​​launched last year by the Competition and Markets Authority (CMA) last year, will have the power to identify some of the world’s most powerful companies with “strategic market status”. According to the consultation response, the scope of this status will only apply to a small number of the most powerful companies, which means that smaller companies will not be bound by DMU rules on digital activities.

The regulator will impose new customized codes of conduct on how a handful of companies dominating digital markets should treat their consumers and other companies fairly, with severe sanctions for those who disregard the rules. According to these binding requirements for behavior, companies must ensure that consumers have open choices about the digital services they use, DCMS said.

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How should businesses get out of their data center?

The DMU will be able to stop companies, for example, from restricting users to pre-installed software on their devices. This is believed to make it easier for smartphone users to choose which search engine or messaging app to use, as well as gain more decision-making power over how their data is used and processed by technology companies by giving up targeted custom advertising.

To some extent, this is already being done on Apple devices, as iOS 14.5, iPadOS 14.5 and tvOS 14.5 and later require apps to ask users for permission to track them on apps and websites owned by other companies.

Why is the government fighting big technology companies?

The government says most companies in the UK now rely on technology companies to ensure that customers find their business online. However, they also control online gateways for millions of Internet users, giving preference to their own applications and browsers, and setting their own prices for the online services they provide to businesses.

The Competition Authority estimates that Google and Facebook made £ 2.4 billion in the UK in 2018. The UK’s average revenue per user in the UK rose from less than £ 5 in 2011. to more than £ 50 in 2019, with Google’s revenue from search in the UK doubling over the same period.

The government believes that tens of thousands of small and medium-sized enterprises (SMEs) in the UK will get a better deal than technology giants such as Facebook and Google, which they rely on to trade online. These technology companies may also need to warn smaller companies about changes in their algorithms that drive traffic and revenue.

Several small businesses confirmed this Technical monitor that changes in Facebook’s algorithms in particular are causing a drastic increase in the cost of an acquired customer (CAC).

One e-commerce business owner, Natalie Ormond, said her sales, commitment and reach have been affected by changes in the algorithm over the past few months: “Facebook advertising works very well for me in 2020 and early 2021. .to find new clients and my Instagram community has grown steadily, but now the reach and commitment is extreme and my regular clients tell me they don’t see my posts unless they look for them.

“I’ve worked with digital freelance marketing in the past, and she advised me that there have been a lot of changes to the algorithm since iOS due to data loss, so I ended up running ads because I spent so much money with no results.”

That’s what another business owner, Tas Rotherham, said Technical monitor that Facebook advised them to spend at least £ 100 a day just to be seen on the platform: “Before the iOS update, I was doing well with the weird Facebook ad; In general, I knew that if I spent £ 10, I would at least make a sale of around £ 30.

How does the technology industry react?

Overall, technology players and industry bodies in the UK have responded favorably to the announcement, but there are concerns about the lack of details on incoming legislation.

This was said by Simon Elliott, Senior Technical Director at Acquia Content Management Software Provider Technical monitor that while the reported scale of fines and rules should be welcomed, there is a “disappointment” about the timing: , he says.

The lack of a timeline for the introduction of DMU legal powers is a problem, Elliott said. DCMS says the new laws will be introduced “in a timely manner”, but are unlikely to be included in the Queen’s forthcoming speech, which sets out the government’s immediate legislative agenda. “Consumer demand for privacy has never been stronger; Research shows that only 58% of consumers in the UK trust brands to process their personal data, ”says Elliott. He goes on to say that the business practices of technology giants need to be subject to greater scrutiny so that we can “get rid of the non-transparent use of data”, which he warns has eroded consumer confidence and put smaller businesses in the lurch. unfair disadvantage.

The UK’s Technology Industry Association, techUK, also welcomes the “pro-competitive regime”, but wants the government to clarify its scope. Neil Ross, Associate Director of Policy at techUK, said: “The consultation’s response raises key outstanding issues regarding key terms and arbitration mechanisms. It is also unclear when the new regime will take effect. We call on the government to engage with the sector to address these issues in order to support the wider UK economy.

Will the new legislation on digital markets work?

It remains to be seen whether the incoming rules and the new DMU will make a radical change. Rob Weatherhead, an online marketing consultant and business owner of e-commerce, says that while platforms gain an edge over the competition by using the data they have, it’s just the nature of the business.

“Do the platforms use their data to gain an unfair advantage over competitors?” Absolutely yes, they do; if the DMU wants to understand that, it won’t take long, “he said. “The question is, what are they doing about it?” I’m not sure they can or will do much. “

Google and Facebook are “data collection machines and data is the fuel for their advertising,” says Weatherhead. “Every move they make in new areas is either to collect new data or to add new advertising functionality.”

Businesses need to understand that they do not have a reach from Facebook and Instagram, and if they build their business on it, they are the ones at risk, he added. “Businesses need to accept that change is happening on social media and find ways to diversify the risk that a change will erase you.

On whether these new rules will hurt the bigger technology companies, Weatherhead says: “These things have the power to harm Google and Facebook, but in practice they never seem to have the end result.

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