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UK seeks to assist start-ups taking on tech giants through new code and watchdog

The UK Government is looking to assist start-ups in taking on the tech giants through new pro-competition rules backed by a powerful watchdog.

The Digital Markets Unit (DMU) will be given the power to designate tech firms that hold substantial and entrenched market power with ‘Strategic Market Status’ (SMS). This will require them to follow new rules of acceptable behaviour with competitors and customers in a move aimed at benefiting the public and driving growth and innovation across the economy.

The DMU watchdog, launched within the Competition and Markets Authority (CMA) in April, will work alongside businesses with the target of injecting stronger competition into the digital tech sector resulting in more innovation and fairer terms for UK businesses, including start-ups, news publishers and advertisers.

“It will bring better consumer choice and control, making it easier for people to take their business elsewhere,” a spokesperson for the Department for Culture, Media and Sport (DCMS) said in a statement.

“The proposed new powers are expected to help British start-ups and scaleups to compete more fairly against those tech giants that have powerful positions in the market.”

DCMS is consulting on the proposed changes, which include powers for the DMU to suspend, block and reverse decisions by tech giants, and issue fines of up to 10% of turnover for serious breaches.

The consultation details a new mandatory code of conduct, which will set out what is expected of firms in terms of fair trading and transparency. DCMS said this could include tech platforms not pushing their customers into using default or mandatory associated services, or ensuring third party companies that depend on them aren’t blocked from doing business with competitors.

The DMU could also be given powers to suspend, block and reverse code-breaching behaviour by tech giants – for instance unfair changes in their algorithms or T&Cs – and order them to take specific actions to comply with the code.

Following the consultation, the Government said it aims to legislate to give the DMU its new powers as soon as parliamentary time allows.

“The UK’s tech scene is thriving but we need to make sure British firms have a level playing field with the tech giants, and that the public gets the best services at fair prices,” said Oliver Dowden, Culture Secretary.

“So we will be giving our new Digital Markets Unit the powers it needs to champion competition and drive growth and innovation, with tough fines to make sure the biggest tech firms play by the rules.”

The Government will also consider whether to give the CMA greater powers to scrutinise and intervene in harmful mergers involving firms with ‘Strategic Market Status’, for example by requiring these big tech firms to report on their takeovers.

Andrea Coscelli, chief executive at the CMA, said: “Today’s consultation is an important milestone towards building a world-leading, pro-competition regime to drive technological innovation and protect consumers in the digital age.”

The proposals have been backed by consumer rights groups, with Rocio Concha, Which? director of Policy and Advocacy, saying: “Reforming the competition regime will help to build a fairer and more competitive tech sector that will work better for consumers, giving them more control and more choice – including over how their data will be collected and used.

“Which? looks forward to working alongside the government and industry leaders to ensure that consumers truly benefit from the digital products and services that are now part of their everyday lives.”

Image: Markus Spiske on Unsplash

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