On April 19, the day the House of Commons returns after the Easter recess, we will debate and vote on the Online Safety Bill. This is a world-leading piece of legislation, that will set mandatory minimum safety standards for social media platforms, and create an independent regulator with powers to audit the companies to ensure they are complying with the law.
Now that we are seeing progress with legislation, we also need to take forward proposals to empower the new Digital Markets Unit (DMU), based at the Competition and Markets Authority, to oversee a new regulatory regime for the most powerful digital firms. This will promote greater competition and innovation in these markets, and protect consumers and businesses from unfair practices.
This reform is urgently needed, as the biggest companies are increasing their domination of different sectors of the tech economy. Google has 92 per cent of the world’s search business; Chrome, which is owned by Google, has 62 per cent of the browser market; and Facebook and Google together control more than 70 per cent of the digital display advertising market worldwide.
Mobile phones run on one of two operating systems: 70 per cent run on the Android operating system, which is owned by Google, and 30 per cent on iOS, which is owned by Apple. In both cases the app stores are not interoperable, so both systems have a monopoly on selling new apps.
As for the messaging app market in the UK, WhatsApp is used each month by 75 per cent of consumers with the next most popular messaging app, Facebook Messenger, being used by nearly 60 per cent. Of course, people have several messaging apps, but both of these are owned by the same company.
The creation of the DMU was recommended in the 2019 government-commissioned report led by the Harvard economist Jason Furman, which concluded that such a unit was essential “to sustain and promote effective competition in digital markets […] securing competition, innovation, and beneficial outcomes for consumers and businesses”.
When the government launched its white paper consultation on the DMU last year, Kwasi Kwarteng, the business secretary, acknowledged that “there is a growing international consensus that the concentration of power in a handful of the largest digital companies is crowding out competition by erecting entry barriers for other firms. That is bad for digital markets, it is bad for businesses, and it is bad for consumers.”
I agree, and this is why I believe the government bill required to empower the DMU should be included in Queen’s Speech next month, which sets out the legislative programme for the coming year.
Digital competition is also a big problem for the future of journalism. News media providers, which make money by placing ads, are between a rock and a hard place: they depend on digital ad marketplaces such as the Google Ad Exchange to sell ad-space on news websites; but they also directly compete against online services, such as Facebook, Google and YouTube, as locations where brands can place their ads.
The Australian Competition & Consumer Commission has highlighted that Google has been giving its own platforms a better deal, by withholding data from competitors, and the Texas state attorney general revealed the existence of a secret pact, called Jedi Blue, a quid pro quo deal whereby Facebook agreed not to challenge Google’s advertising business in return for a very special treatment in Google’s ad auctions.
We’re lucky in the UK to have a bold competition regulator, which isn’t afraid to investigate these shenanigans. Ultimately, our Competition and Markets Authority, and its new Digital Markets Unit, are going to need new powers to identify and act on abuses of market power.
Search engines, social networks, app stores, online shops and cloud computing are all individual marketplaces that deserve scrutiny.
The upcoming Queen’s Speech, I hope, will set the UK on the way to do this.
If the Online Safety Bill is to protect us on the existing web, digital competition laws will help create a better, freer internet for the future.