We must uphold online competition at home, or we risk lagging behind the EU

Right now in the European Union, law-makers are putting the finishing touches on the Digital Markets Act – a landmark law which will upend big tech firms’ business models to improve competition online. In the UK, on the other hand, regulators, ministers and many lawmakers are frustrated. UK regulators are convinced dominant big tech firms are fleecing users and stifling innovation. In this year’s Queen’s speech, the government again delayed its own long-promised reforms to improve competition online.

If the UK falls behind in tech competition, its tech start-ups may prefer to grow in the EU, where the Digital Markets Act will make their lives easier. This would also mean a considerable loss in global influence, as the US will probably adopt reforms that look closer to the EU’s than the UK’s. However, if the UK’s competition regulator acts quickly and boldly, these concerns may prove too pessimistic.

The Competition and Markets Authority – or CMA – has done much to tackle big tech already. It is supervising Google’s advertising practices, investigating big tech firms’ practices, and recently blocked Facebook’s acquisition of the small firm Giphy. The problem for the CMA and its EU counterparts is that individual cases take years and focus on specific practices. As a consequence, they haven’t led to noticeable, long-term improvements in competition. As one competition problem is solved, dozens more emerge.

The EU and the UK must end this whack-a-mole game and implement broader digital markets reforms. The EU’s Digital Markets Act does this by setting new rules for all big tech firms – for example, forcing Apple and Google to allow users to easily use independent app stores, not just their own. But the Digital Market Act is inflexible and directed towards a motley collection of existing problems – so it might over-regulate in some areas, and lack the flexibility to address emerging difficulties.

The delayed UK reforms would take a better approach. The competition watchdog could use codes of conduct to nudge big tech firms towards fairer practices – for example, forcing them to be more transparent, consultative and predictable. The CMA could also impose more drastic rules, but these could be designed to be carefully targeted at competition problems, unlike the EU’s blunter approach which requires all big platforms to follow the same rules regardless of the circumstances.

Commentators are disappointed about the government’s ongoing dilly-dallying in enacting these reforms. The delays on our side could give the EU a global lead in defining what open, competitive digital markets look like.

But the CMA can remain ahead. It has an unused weapon in its arsenal:  market investigations. These are in-depth studies to identify whether competition is working well in a market. If the CMA finds problems, it can design tailored reforms to change the market dynamics – and these reforms can be profound. For example, after a market investigation, the firm which owned Heathrow, Gatwick and Stansted airports had to sell some of those airports, to force them to compete. And, contrary to the CMA’s claims, interventions are not resigned to being one-off. For example, in 2016, the CMA used a market investigation to create ‘open banking’, pro-competition banking reforms which became enduring.

Using market investigations, the CMA can keep pace with the EU. Market investigations normally take 18 months – one commenced now could finish by the end of 2023. In the EU, tech firms have until 2024 to comply with the Digital Markets Act. This timing would allow UK and EU regulators to work together, ensuring that their market reforms are enforced in sensible and consistent ways.

Boris Johnson has dropped the ball on digital competition. If the CMA keeps waiting for Westminster to pass new laws, the UK will inevitably fall behind. Consumers and start-ups would then be left jealous onlookers as Europeans secure a fairer deal from big tech. The CMA still has time to maintain the UK’s global tech leadership – and to adopt nimbler and better targeted regulation than the EU.

Zach Meyers is a senior research fellow at the Centre for European Reform.