Cross-regulator taskforce on digital economy announced in 2020 Budget

The government has launched a cross-regulator taskforce to investigate the possible regulation of digital platforms and advertising.

As part of the 2020 Budget, the Department for Digital, Culture, Media and Sport (DCMS) announced the creation of a Digital Markets Taskforce, which will report to the government in six months’ time on a pro-competitive regime for digital platform markets.

“This will include advice on implementing a pro-competitive code of conduct for digital platforms with strategic market power,” said the Budget Red Book.

“The government will also look at existing domestic or EU-derived regulations that might hinder digital competition and entrench monopoly behaviours and will ensure that regulatory reforms applying to digital and tech businesses are pro-innovation and coherent.”

The taskforce will be housed within the Competition and Markets Authority (CMA) and headed by a senior official from the organisation. It will also include officials from the Information Commissioner’s Office (ICO) and the Office of Communications (Ofcom).

Other relevant bodies will also be consulted by the cross-regulator taskforce, such as the Centre for Data Ethics and Innovation and Intellectual Property Office.

The team of regulators will also seek to build on the work of the Digital Competition Expert Panel (DCEP), which published a review of the UK’s digital economy in March 2019 urging greater competition for tech giants such as Amazon and Google.

Headed by Jason Furman, chief economist to former US president Barack Obama, the review made six strategic recommendation, which the government has said it will accept.

This includes updating the CMA’s enforcement tools to deal with anti-competitive conduct, allowing the watchdog to conduct a market study into the digital advertising market, and encouraging closer cross-border collaboration between competition authorities in different jurisdictions.

The CMA published its interim report on the online platforms and digital advertising markets in December 2019, which found that Google accounted for more than 90% of all revenues earned from search advertising in the UK at about £6bn, while Facebook accounted for almost half of all display advertising revenues in the UK, surpassing the £2bn mark.

“In 2018, we estimated that the cost of capital for both Google and Facebook was around 9%, compared to actual returns on capital of over 40% for Google and around 50% for Facebook,” said the CMA. “This evidence is consistent with the exploitation of market power.”

Although the final report is not due until 2 July 2020, the watchdog has already started to consider “a range of potential interventions”, including an enforceable code of conduct, rules to improve transparency and give users greater control over data, as well as company-specific measures to address their distinct sources of market power.

The government has said the taskforce’s scope will complement the insights gained from the final CMA market study.

“In making final decisions on the design of a pro-competitive regime, the government will draw upon the taskforce’s advice as relevant, alongside consideration of broader policy objectives, including but not limited to those covered by the Cairncross Review and Online Harms whitepaper,” it said in its guidance.

“Across all proposals, the government is clear that any future interventions must strike the right balance between promoting competition and innovation on the one hand and avoiding disproportionate burdens on business on the other hand.”

The Online Harms whitepaper, published by the DCMS and the Home Office in April 2019, introduced the world’s first framework designed to hold internet companies accountable for the safety of their users, and set out intentions to give companies a statutory duty of care to protect their users from harm.

In its initial response to the paper, the government said Ofcom would be given clear responsibilities to protect users online.  

The regulatory taskforce will operate until September 2020, when it will publish a final report for the government.

After that, the government will consider the proposals, set out the next steps, and decide whether the taskforce should continue to operate.