Competition Markets Authority
Format
Fireside chat with Sharis Pozen, Regional Managing Partner, Americas, Chair Emeritus Global Antitrust Group at Clifford Chance.
Introduction
Q1: For anyone whos less familiar with the UKs Competition and Markets Authority, could we begin with an overview of what the CMA is and how you approach your work?
The CMA is the UKs principal competition and consumer protection authority. We have a range of legal powers and responsibilities that include merger control, enforcing against breaches of competition law and consumer protection law, and conducting wider ranging market studies and investigations. In many respects our remit is similar to that of the US Federal Trade Commission and the Antitrust Division of the US Department of Justice; although there are some differences in our powers and how they are executed.
Since the UK left the European Union, the international profile of our antitrust and merger casework has increased. This reflects the fact that we now have direct responsibility for reviewing the UK impact of many global deals and anti-competitive conduct cases where that UK element would previously have been reviewed by the European Commission. As a result, weve become a more significant agency for US companies doing business in the UK. Likewise close working with other agencies internationally has become more important than ever for the CMA.
An increasingly important part of our portfolio of work relates to digital markets and that includes for merger control, antitrust cases and the new digital markets competition powers were expecting to be given. Draft legislation for those powers is currently going through the UK parliament. So its particularly timely for us to be here in the US West Coast this week to deepen our engagement with many of the tech firms that have an interest in our work. This direct engagement has already proven immensely constructive, offering opportunities to connect with emerging firms and key industry players. Were also here to engage with events like this, which provide us with an invaluable platform to share insights about our work and our current perspectives, exchange ideas, and expand our understanding of the digital markets landscape.
The UKs new competition regime for digital markets
Q2: The UK is setting up a new competition regime for digital markets. What is the reason for that, and what will it look like?
The pace and scale of digital transformation has been incredible, bringing enormous benefits for people, businesses and economies across the globe. In the UK, the digital sector is growing rapidly, attracting substantial investment, contributing billions of pounds to the economy, and creating millions of jobs.
At the same time, weve seen the concentration of market power in the hands of a small number of tech firms across a number of digital markets. There have been widely aired concerns, in many jurisdictions globally, that existing competition law regimes may not be sufficient to address the impact of that concentration of power in a timely and effective way. Thats led several jurisdictions to introduce new powers to tackle competition concerns in digital markets for example in the EU and Germany. In the UK, back in 2018, the government commissioned a Digital Competition Expert Panel, chaired by Professor Jason Furman, to make recommendations for changes to the UKs competition framework to address the economic challenges posed by digital markets. That review recommended updating the rules governing merger and antitrust enforcement, as well as proposing a new set of pro-competition measures to open up digital markets.
In response to that recommendation, and recognising the many benefits digital markets bring to people and businesses, the UK government is introducing a new pro-competition digital markets regime to address the market power of a small number of technology firms. The legislation to deliver this new regime is set out in the Digital Markets, Competition and Consumers Bill (the DMCC Bill) which is currently being considered by the UK Parliament. It will enable the CMA to prevent harmful practices that hold back innovation and growth. The new regime is specifically designed to keep pace with developments in fast-moving digital markets, complementing our existing competition and consumer protection powers.
The DMCC Bill will establish a very targeted approach to address the substantial and entrenched market power of a small number of firms. This will ensure that challenger firms can bring forward genuinely disruptive and exciting new innovations that will create great new products for consumers.
The new regime will be focused on firms we designate as having Strategic Market Status (SMS) in relation to one or more digital activities. We expect to designate a very small number of firms as having SMS. As currently drafted, the DMCC Bill stipulates that a firm must have substantial and entrenched market power in a digital activity which is linked to the UK, a position of strategic significance, and a global turnover of more than 25 billion or UK turnover of more than 1 billion.
Once we designate a firm with SMS, we will then have two key tools: Conduct Requirements and Pro-Competition Interventions. Through Conduct Requirements we will be able to guide the behaviour of SMS firms and through Pro-Competition Interventions we will be able to address factors underpinning these firms market power in a particular activity.
Some examples of what we could do to tackle market power in digital markets and associated harms under the new regime include:
- ensuring markets stay open. For example, by (where appropriate and proportionate) preventing SMS firms from engaging in anti-competitive tying, bundling or self-preferencing of products and services, or by mandating SMS firms to provide competitors with greater access to data or functionality controlled by SMS firms
- seeking ways to increase competition in the core platform markets where this is feasible. For example, by (where appropriate and proportionate) requiring SMS firms to allow the products and services of other firms to interoperate with their own, or ensuring SMS firms provide their users with effective choice screens
- tackling misuse of market power more directly where competition does not provide an adequate constraint. For example, by (where appropriate and proportionate) requiring SMS firms to trade on fairer terms or requiring them to increase transparency with respect to aspects of their algorithms
CMAs approach to digital markets regulation
Q3: Can you tell us a bit more about how the new regime will operate in practice?
Competitive digital markets are a key driver for investment and innovation, supporting the growth of the UK economy, and bringing huge benefits to UK businesses and consumers. The new Digital Markets competition regime will help ensure that tech challenger firms can bring forward genuinely disruptive and exciting new innovations that will create great new products for consumers. The new powers it will grant the CMA are substantial and we are committed to taking a targeted, evidence-based and proportionate approach to implementing them.
This morning we published a document setting out an overview of how we will operate the new regime. The full document is available on the CMA website so, do please take a look for more details.
Whilst our thinking on how best to carry out the new functions will continue to develop; we have set out 11 proposed principles to inform our approach and these can be grouped under the following four broad themes:
First, the CMA is committed to taking a targeted, evidence-based and proportionate approach to implementing the new digital markets regime. We will be responsive to market developments and prioritise where we can have the most impact.
Second, where possible, we will promote competition as the route to deliver better outcomes for users. Where improved competition alone wont deliver the necessary changes or wont do so sufficiently quickly we will take direct action to prevent the abuse of market power. We will ensure that we intervene in a way that is future-proofed to avoid creating dependencies on particular technologies or supply chains.
Third, to promote coherence, we will ensure that the new Digital Markets competition regime complements the CMAs existing tools. We will coordinate with both domestic and international partners to maximise synergies and minimise duplication where possible.
Finally, to ensure the new regime operates as effectively as possible, its crucial that we continue to engage widely with a range of stakeholders, from the major tech players to challengers and users.
Todays overview document not only provides clarity for UK parliamentarians, but also for tech firms and wider stakeholders about the approach the CMA intends to take.
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