UK government launches new tech watchdog – because the digital sales tax went so well

Digital Markets Unit takes aim at giants' conduct with users and advertisers


The UK's Department for Digital, Culture, Media and Sport (DCMS) today launched its Digital Markets Unit (DMU) watchdog, which aims to regulate large online platforms like Google and Facebook, and create rules governing their conduct with users and advertisers.

First announced last November, the DMU is based in the Competition and Markets Authority (CMA), which already regulates the activities of the tech sector, particularly with respect to mergers and acquisitions. DCMS described the body as part of a "pro-competition" regulatory regime, and has been tasked with improving competition, giving customers "more choice and control" over their data, and intervening in unfair practices.

The DMU has already started operations while it waits to be granted statutory powers by law. Or, put plainly, it's toothless until Parliament says otherwise.

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Its first task assigned by government is to consider how codes of conduct could work with respect to the relationship between large market-dominating platforms (like Facebook and Google) and their advertisers, many of which are small independent businesses.

It has also been instructed to work alongside Ofcom to draw up rules governing how platforms work with news publishers. DCMS didn't go into specifics here (is it eyeing up an Australia-style "Facebook Tax"?), although said these would be "as fair and reasonable as possible," and have an aim to ensure the news media remains sustainable in the coming years.

The shift to digital hasn't been kind to journalism. Over the past two decades, print circulations have plummeted. Between 2000 and 2021, The Guardian saw its print readership decline from over 400,000 to 108,000. Less high-brow papers have been similarly affected by this phenomenon, with The Sun losing nearly two million print sales during that period.

Compounding matters, the share of advertising revenue taken by the news media has contracted, with over 70 per cent of ad spending going to Google, Facebook, and Amazon in 2019 alone. Other money-spinners, like classifieds and dating services, are now held by firms like Gumtree and Tinder.

The government has said it plans to give the Digital Markets Unit legal powers as soon as the parliamentary schedule allows. Digital Secretary Oliver Dowden described the launch of the DMU as a "major milestone" in creating a competitive online market.

"The Digital Markets Unit has launched and I've asked it to begin by looking at the relationships between platforms and content providers, and platforms and digital advertisers," he said.

"This will pave the way for the development of new digital services and lower prices, give consumers more choice and control over their data, and support our news industry, which is vital to freedom of expression and our democratic values."

Business Secretary Kwasi Kwarteng was similarly gushing, and said the DMU was a "significant step" towards improving consumer choice and lowering prices.

"The UK has built an enviable reputation as a global tech hub and we want that to continue – but I'm clear that the system needs to be fair for our smaller businesses, new entrepreneurs and the wider British public," he said.

"Our new, unashamedly pro-competition regime will help to curb the dominance of tech giants, unleash a wave of innovation throughout the market and ensure smaller firms aren't pushed out."

Others are less convinced, however. LSE academic Dr Damian Tambini bemoaned the DMU as failing to address the more nefarious parts of surveillance capitalism, where user behaviour is aggressively analysed and monetised by digital platforms.

"In theory, a regime that aims to intensify competition but not fundamentally alter incentives may make the model of surveillance capitalism worse," he wrote. "Put bluntly, if there are grave concerns about a model of data extraction and behaviour modification, is the answer to have more companies competing harder for smaller margins in the data economy?"

Any reform will be strenuously fought, not just by the platforms themselves, but also by the long arm of the US government, which vociferously protects American firms from foreign regulations. When the UK imposed a Digital Services Tax in response to widespread tax avoidance by the tech sector, Google and Amazon responded by hiking prices for UK consumers. ®


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