The Corner Newsletter: April 13, 2023
Welcome to The Corner. In this issue, we review a new UK law that would help protect citizens from Big Tech predation but still lacks strong political support.
A Proposed UK Law Would Protect the Nation and Promote Innovation. Will Political Leaders Embrace the Opportunity?
Max von Thun
Later this month, the British government is expected to publish landmark competition legislation known as the Digital Markets, Competition and Consumer Bill. The most significant upgrade to the UK’s competition powers in many years, the bill mirrors similar legislation recently passed in other jurisdictions, including the EU’s Digital Markets Act (DMA). Yet despite the many benefits it will bring to British citizens, businesses, consumers, and society more broadly, its path to adoption will not be straightforward.
Until recently, the UK led efforts to understand and tackle Big Tech’s dominance, most importantly with the government-commissioned Digital Competition Expert Panel calling for dedicated digital markets legislation back in 2019. For its part, the UK’s competition authority, the Competition and Markets Authority (CMA), has been one of the most energetic, strategic, and ambitious regulators around, conducting groundbreaking studies and investigations into Big Tech’s stranglehold over different sectors of the economy, and being the first authority ever to block a Big Tech acquisition (Meta/Giphy) in 2021.
But with the EU DMA already in the implementation phase, and similar rules on the books in Germany since early 2021, the lack of clear political support for the new legislation means the UK increasingly looks like a laggard when it comes to reining in Big Tech.
So why the holdup? One big reason is the disarray in the machinery of government created by the Brexit process, and the countless changes in leadership since then. Another is elements in the cabinet and Conservative party who mistakenly see the reforms as a threat to — rather than an enabler of — the UK’s competitiveness.
A third factor is a general failure by the Labour Party to show any real interest in the bill or the larger threat posed by monopoly power more generally. Although Labour does not have any formal control over the timing of the legislation, its role as the official opposition provides it with ample opportunity to put pressure on Downing Street to move faster.
Whatever the reason, the Digital Markets, Competition and Consumer Bill had been buried in the long grass until the current Chancellor, Jeremy Hunt, unexpectedly committed late last year to publishing it in the current Parliamentary session — and possibly as soon as the end of this month.
On the face of it, based on previous indications of the government’s thinking, the bill will look rather similar to the DMA. It will give a new unit within the CMA, the Digital Markets Unit (DMU), far-reaching powers to designate Big Tech firms as having ‘Strategic Market Status’ (SMS) and reshape their behavior through ‘codes of conduct’ and ‘pro-competitive interventions’, not unlike the treatment of so-called ‘gatekeepers’ under the DMA.
But there are also important differences. Unlike the purely tech-focused DMA, the UK bill will also make wider changes to the overall competition framework, including a stricter merger control regime and beefed-up consumer protection powers for the CMA. One of the most notable areas of divergence relates to the DMU’s expected ability to create tailored rules for each Big Tech platform, as opposed to the DMA’s approach of applying a standard set of pre-defined obligations to all gatekeepers.
If used well, this flexibility could prove to be a powerful advantage for the DMU, by enabling it to target each Big Tech giant’s business model more precisely and making it easier to write new rules for emerging technologies. The big risk, however, is that the process falls prey to Big Tech’s mighty lobbying power, and industry effectively writes rules for itself.
One area where Big Tech is likely to lobby particularly aggressively is in relation to the bill’s appeal standard. While the government is in favor of allowing judicial reviews of the DMU’s decisions — whereby only the procedural aspects of a decision are examined — the tech giants could try to secure a ‘full merits’ review process, giving them the ability to challenge the substance of decisions and tie up the DMU and CMA in protracted legal battles.
Failure to resist Big Tech’s lobbying would be a huge mistake — for the UK’s tech sector and the country as a whole. If implemented effectively, the new bill would help place the UK at the vanguard of global efforts to simultaneously break the hold of concentrated corporate power over our societies, while also strengthening innovation, economic opportunity, media plurality and ultimately democracy. It is an opportunity the UK, with its struggling economy and polarized politics, cannot afford to miss.
📝 WHAT WE'VE BEEN UP TO:
The Open Markets Institute released a statement applauding Germany’s move to endow its competition authority, the Bundeskartellamt, with new powers as well as steps taken to challenge Apple’s dominance by designating it a platform of “paramount significance” for competition. “The wider reforms to the Competition Act approved today by the federal cabinet go well beyond Big Tech and will help inject much-needed competition across all sectors of the economy,” OMI Europe director Max von Thun said.
Open Markets Institute ratified its first union contract for employees, who formed a union with Nonprofit Professional Employees Union that was voluntarily recognized by Open Markets three years ago. The Open Markets Institute Management Team said, “The unionization of our workforce represents our steadfast belief that all workers should be able to exercise their rights through collective bargaining, which makes our society stronger and more democratic.”
Open Markets submitted a comment to the Canadian government suggesting ways to bolster its antimonopoly laws governing merger reviews, exclusive dealing, and other forms of vertical restrains and unfair competition. “[T]he injuries to consumers, workers, independent firms, and the general public do not stop at the border,” Open Markets wrote. “As essential international partners, it is important that the competition laws in Canada and the U.S. are aligned to be more effective in order to protect our respective citizens.”
Bloomberg Law quoted OMI legal director Sandeep Vaheesan on a case before the Seventh Circuit in which two former McDonalds workers accused the fast food chain of suppressing wages through no-poach agreements with franchisees. “Franchisors and other lead firms will feel comfortable using no-poach and no-hire contracts in their franchise agreements” because the court “has said they are vertical and therefore entitled to the rule of reason.” Vaheesan said.
The Food & Environmental Reporting Network reprinted an article from OMI’s influential Food & Power newsletter highlighting the harmful effects of consolidation in the seed industry. Front Porch Republic also included the seed industry story written by food systems program manager Claire Kelloway in a news round-up, saying she “provides a discouraging account of how large companies monopolize seed breeding.”
Open Markets was cited in an article by a New Zealand site Newsroom on the U.S. egg industry: “According to the Open Markets Institute, U.S. egg production is generally less consolidated than other food sectors but still led to greater supply chain instability than open markets.”
The American Prospect noted the role of OMI former senior fellow Beth Balztan, who is currently serving as senior advisor to the U.S. Trade Representative, as an advocate for “friendshoring,” which she says recognizes the reality that the world has never had a free-trade system.
A U.S. district court judge has permitted a lawsuit against Oracle filed last year by Open Markets senior fellow Johnny Ryan to move forward, according to Media Post.
🔊 ANTI-MONOPOLY RISING:
The Federal Trade Commission has ordered DNA-sequencing provider Illumina to divest the prominent cancer detection test maker Grail, which it bought in a $7 billion deal two years ago. The FTC found that this deal would hinder competition and innovation in the U.S. market for life-saving cancer tests. (FTC Gov News)
UK’s Competition and Markets Authority has officially launched an investigation into Amazon’s $1.7 billion purchase of iRobot, calling for evidence on whether the deal would give the online retail giant dominance over the nascent market for smart home devices. Earlier this year, Open Markets Europe and other antimonopoly partners formally asked the European Commission to review the deal. (The Guardian)
Last week, the Consumer Financial Protection Bureau released an analytical framework that will guide federal and state agencies investigating abusive conduct in consumer financial markets such as predatory mortgage lending. The guidelines will assist enforcers in identifying wrongdoing, as well as help firms avoid committing abusive acts or practices. (CFPB)
Senator Elizabeth Warren and three U.S. representatives called on the Department of Justice to investigate the Warner Bros.-Discovery merger that went through last year, saying the combined company has hurt workers and reduced consumer choice. The lawmakers sent a letter saying, “The company has the incentive and ability to eliminate broad swaths of its workforce,” citing the shutdown of CNN+ and layoffs over the past year. (Deadline)
European users of Facebook and Instagram can now opt out of highly targeted advertisements as Meta adheres to new privacy regulations by the European Union. Users based in the EU now have the option to choose ads based on broad categories such as age or location, instead of ads based on the content users are clicking on within Meta’s apps. (WSJ)
An investigation by UK communications regulator Ofcom into the cloud market found it was dominated by Amazon and Microsoft to the detriment of consumers and businesses and called for the competition regulator to launch a full market investigation and impose remedies. (The Guardian)
📈 VITAL STAT:
$21.4 Billion
The value of the business that would result from a merger between World Wrestling Entertainment and Ultimate Fighting Championship, which is owned by Endeavor Group Holdings. Endeavor will own a 51% stake in the new entity, while WWE shareholders will own the other 49%. (Bloomberg Law)
📚 WHAT WE'RE READING:
“Spinning Amazon’s Flywheel: How Amazon's Business Model Harms Competition - A View from Europe.” (Geradin Partners, Damien Geradin and Tom Smith). In this working paper, the authors explore the various anti-competitive practices that Amazon has deployed in Europe and propose how to activate the solutions contained in the EU’s Digital Markets Act, which is being implemented this year, and in the upcoming UK Digital Markets, Competition and Consumer Bill.
You can find the full job listings here.
🔎 TIPS? COMMENTS? SUGGESTIONS?
We would love to hear from you—just reply to this e-mail and drop us a line. Give us your feedback, alert us to competition policy news, or let us know your favorite story from this issue.