The United Kingdom is progressing with plans to regulate major technology companies, addressing concerns about competitive imbalances and a “winner-takes-all” scenario within the digital economy.

A new Digital Market Unit (DMU) will be established to supervise a “pro-competition” framework for online platforms – including those reliant on revenue from online advertising, such as Facebook and Google – as announced today by the Department of Digital, Culture, Media and Sport (DCMS).

The implementation is moving swiftly, with the new unit scheduled to commence operations in April. However, the legislative changes necessary to grant the new regulator the authority to take action will require a longer timeframe. The government has stated it will engage in consultations regarding the unit’s structure and responsibilities in early 2021 and will enact legislation “when parliamentary schedules permit.”

A central component of this initiative is a new, legally mandated code of conduct designed to provide platform users with greater control and empower third-party businesses interacting with the platforms that host and generate revenue from them.

The government proposes that this code could compel tech companies to permit users to completely decline participation in behavioral advertising – a feature currently unavailable on platforms like Facebook.

Furthermore, the code aims to bolster the sustainability of the news industry by “rebalancing” the relationship between news publishers and large platform operators.

Growing apprehension regarding the support of high-quality, public-interest journalism in an environment dominated by ad-funded, user-generated content platforms has increased in recent years, particularly as online disinformation has been increasingly exploited to undermine democratic processes and influence electoral outcomes.

“The new code will establish clear expectations for platforms possessing substantial market power – identified as having strategic market status – regarding acceptable conduct when engaging with competitors and users,” according to a press release from DCMS.

The DMU is expected to have the authority to “suspend, block, and reverse decisions made by tech giants, direct them to take specific actions to ensure compliance with the code, and levy financial penalties for non-compliance,” with comprehensive details to be finalized next year.

A Digital Markets Taskforce, created earlier this year to advise on the development of these competition measures, will contribute to the unit’s work, including defining how the framework will function in practice, as stated by DCMS.

The taskforce will also develop the criteria used to identify which platforms and companies will be designated as having strategic market status.

It is widely anticipated that Facebook and Google will receive this designation and be subject to the code and oversight by the DMU, although official confirmation will come from the unit once it is operational. U.K. policymakers do not appear to be swayed by arguments from the tech industry suggesting that competition is readily accessible.

The establishment of a U.K. regulator for the market power of large technology companies follows a competition market review led by Professor Jason Furman, who served as chief economic advisor to former U.S. President Barack Obama. The review, published last year, concluded that existing competition policy is adequate but that new tools are needed to address the challenges arising from platform power and online network effects.

Significantly, the Furman report advocated for a comprehensive understanding of consumer welfare as the basis for competition interventions – encompassing factors such as choice, quality, and innovation, not solely price.

This is particularly relevant considering the strategic use of free-at-the-point-of-use services by big tech companies to dominate markets, gain substantial market share, and subsequently impose terms of service on consumers and anti-competitive regulations on third-party businesses, thereby solidifying their control over the digital landscape.

The U.K.’s Competition and Markets Authority (CMA) also conducted a market study of the digital advertising sector, identifying significant concerns regarding the dominance of the adtech duopoly. However, its final report deferred competitive intervention, opting to await government legislation.

In a statement accompanying the announcement of the DMU, digital secretary Oliver Dowden said: “I wholeheartedly support technology and the benefits digital platforms provide to the economy – offering substantial advantages to businesses, consumers, and society. However, there is a growing consensus in the U.K. and internationally that the concentration of power among a small number of tech companies is hindering sector growth, reducing innovation, and negatively impacting those who rely on them. It is time to address this and usher in a new era of technological advancement.”

Business secretary Alok Sharma added: “The dominance of a few large tech companies is resulting in less innovation, increased advertising costs, and reduced choice and control for consumers. Our new, pro-competition framework for digital markets will ensure consumers have options and prevent smaller firms from being disadvantaged.”

The U.K.’s move to regulate big tech aligns with a growing consensus among European lawmakers that platform power must be curbed and that competition rules require adequate resources to be effectively enforced.

A comparable digital market regime is expected to be presented by EU lawmakers next month.

The European Commission has announced that the forthcoming EU-wide regulation – known as the Digital Markets Act – will identify platforms with significant market power, referred to as internet gatekeepers, and apply a specific set of fairness and transparency rules and obligations to them, with the goal of restoring competition. Plans to provide regulatory access to algorithmic processes are also under consideration at the EU level.

A second proposed EU law, the Digital Services Act, aims to modernize regulations for online businesses by establishing clear rules and responsibilities for all stakeholders in areas such as hate speech and illegal content.

The U.K. is also developing a similar online safety framework, proposing to regulate a range of harmful online content in its Online Harms white paper last year, although draft legislation has yet to be introduced.

This summer, the BBC reported that the government has not committed to introducing a draft bill next year, suggesting that its broader internet regulation framework may not be in place until 2023 or 2024.

U.K. lawmakers appear to be prioritizing the regulation of platform power, recognizing that many of the problems associated with harmful internet content are linked to the reach and amplification capabilities of a small number of tech giants.

A more competitive social media environment could foster competition around the quality of user experience, potentially benefiting smaller platforms that effectively enforce content moderation policies and prioritize user privacy.

However, regulations enabling data portability and/or interoperability are likely to be essential for stimulating genuine innovation and competition in markets already dominated by a handful of data-intensive adtech companies.

Considering the U.K.’s swift action to address the market power of big tech, it is noteworthy to recall the numerous instances in which Facebook CEO Mark Zuckerberg declined requests to testify before the DCMS committee regarding online disinformation and digital campaigning (including issues related to the Cambridge Analytica data misuse scandal) – repeatedly refusing to appear before the committee.

It appears U.K. lawmakers have taken note of this.