If one of the benefits of Brexit is regulatory flexibility, UK tech policy leaves a lot to be desired.
Three years after a respected report on how to overhaul the UK’s system of competition in the online economy recommends creating a strong digital markets sector, government hesitancy and delays have squandered an early advantage. Further delays now put the entire policy at risk.
According to reports, the legislation needed to empower the Digital Markets Unit (DMU) will not appear in next week’s Queen’s Speech.
This condemns the DMU, which the government sees fit to build, fund and work with, but has not mandated, at least another year of lameness.
In the interim, it can do as much as the Competition and Markets Authority can already do. It can observe digital markets, but has limited ability to reshape them. It cannot create a legally enforceable code of conduct to deter big tech abuses or impose fines for non-compliance. It will have to wait for someone to do something wrong and then go through the red tape of a full law enforcement case. Britain’s policy on Big Tech is not forward-looking, but remains a hodgepodge of designs for the old economy.
The government has always said it will legislate for the DMU as parliamentary time allows. However, it’s hard to believe that if it doesn’t find time to legislate this year, it will do so next year as the election looms. CMA is known for attracting the best talent. How many people in the new tech sector will remain indefinitely in organisations that ministers don’t seem to have prioritised?
Even if this doesn’t mean the death of the DMU, but just its delay, the government’s legislative inaction still matters.
The UK has an opportunity to shape the global approach to technology regulation. Yes, the UK is a small market globally. But the CMA is a well-respected regulator among its world peers and has an international presence. If Britain moves forward with the proposed reforms, other countries may follow.
But at a time when Britain is talking about creating a new tech regulator, the EU has proposed not one but two landmark legislation to rein in big tech companies. These will set the direction for the department’s obligations and relationship with the government. If Britain fails to implement its own reforms, it could end up relying more and more on EU rules in which it has no say in changing the anticompetitive behaviour of the global online elite.
The continued failure of legislation could also lead to a more aggressive and uncertain use of the tools at their disposal by UK regulators. That means increased interim enforcement by the CMA, wider scrutiny of big tech takeovers, and more deals being called up and blocked even if links to the UK are fragile, like Facebook’s attempt to buy online sticker library Giphy Same.
It should also draw wider attention to faulty regulatory approaches. If the reluctance to legislate, as one official put it, is because “conservative governments don’t pass legislation to achieve prosperity and growth”, it shows a fundamental misunderstanding of how the digital economy works and the reforms to UK competition law proposed by economists And former Obama adviser Jason Furman would do the same.
As Diane Coyle, a panelist behind the Furman report, put it, “The whole idea of the Furman report is to make markets work better”. It aims to reduce interventionism by clarifying the rules of the game up front and reducing the structural barriers that big tech companies have built to discourage small operators from innovating.
Without legislation, the government could end up creating a more intrusive antitrust regime that is not suitable for the digital economy. That doesn’t mean less red tape or an environment where companies can innovate unfettered. The UK is no longer the leader in big tech regulation. It is teetering on the brink of being a laggard.