OPINION: Tech giants cannot be allowed to continue stifling competition
Originally published in The Times Red Box 07 April 2022. Permission to publish sought and granted on 21 April 2023.
It’s been 12 months since the Digital Markets Unit (DMU), which acts out of the Competition and Markets Authority, was launched. Its task was to further the interests of consumers by driving competition and innovation across digital markets, including addressing the market power of big digital firms.
One year on and the need for a strong DMU has not dimmed. Large companies that dominate digital markets continue to get away with being able to exploit their dominant market positions. Take, for example, concerns over the case of the highly-contentious “Jedi Blue” online advertising deal between Facebook, as it was then, and Google. Fears that it may hamper competition in markets for online display advertising services has energised both UK and EU antitrust bodies sufficiently to launch parallel probes into Google and Meta.
However, the DMU is yet to be granted the powers it needs to tackle the lack of competition in digital markets - and it would appear that, according to reports, the government - having set up the unit - is putting the brakes on those plans. There are even suggestions that a Consumer and Competition Bill, which would seek to provide the right consumer protections in a whole range of areas, both in and out of digital markets, could be shelved altogether. Holding back in these areas would be bad for both businesses and consumers.
It has been argued recently that regulating Having a Dynamic digital markets that encourage innovation and economic growth need to allow many businesses to flourish, not just a handful of very big companies tech giants risks chilling an innovation culture that allows companies to test and try new products and technologies. But such arguments ignore the enormous and entrenched market power of tech giants, which allows them to move into closely-related markets and stifle competition from smaller, innovative firms.
Think of smart speakers. In a 2021 study of smart speaker owners, market research company Mintel found that three quarters owned an Amazon Echo, and most of the rest had a Google Home or Nest, or an Apple HomePod. Amazon only moved into selling smart speakers in 2014, and now dominates the market heavily. Its only viable competitors are also tech giants exploiting their existing dominance in data and devices.
Without government intervention, the result is the continuation of digital markets being dominated by just a handful of large tech firms operating across an increasing number of markets. That would really be chilling a culture of innovation.
But there is another compelling reason why a delay to giving the DMU stronger powers would be bad: the impact it will have on all of us, as consumers.
We know that when there is less competition in markets, not only is consumer choice squeezed, but prices rise because other companies vying for a slice of the pie are locked out. Higher prices are never welcome, but at a time when household budgets are being squeezed tightly and inflation is rising, it risks pricing many consumers out of products and services altogether.
Dynamic digital markets that encourage innovation and economic growth need to allow many businesses to flourish, not just a handful of very big companies. Why invest in the next generation of innovative start-ups if their routes to success are blocked by Big Tech?
Pro-competitive regulation has the potential to inject dynamism and competitiveness into digital markets. The UK has an opportunity to be genuinely world-leading in this space, but risks being left behind by the EU, which will put an end to increasing dominance of Big Tech through the Digital Markets Act.
If properly equipped, the DMU has the potential to give powers back to consumers by allowing them a genuine choice of service or platform. Denying them that power only deepens a handful of companies’ power. Delays to giving the DMU the tools it needs mustn’t be entertained.