Big tech firms face 10% turnover fines under new competition law

The UK government has announced new legislation intended to prevent big tech firms from unduly dominating digital markets, and to hold firms more accountable to customer obligations.

Once passed, the Digital Markets, Competition, and Consumers (DMCC) Bill will grant the Digital Markets Unit (DMU) new powers to punish anti-competitive practices under consumer law.

Under the bill, companies that are found to have large market power over one or more digital activities, and whose turnover exceeds £25 billion ($20 billion) worldwide or £1 billion ($800 million) in the UK, will be designated with Strategic Market Status (SMS).

The DMU sits within the Competition and Markets Authority (CMA), and will be able to decide when companies have broken consumer law instead of going through the courts once the bill has passed.

It will have the authority to set rules for how firms with SMS operate, such as mandating more choices for consumers, which it will enforce with fines of up to 10% of global annual turnover.

In a bulletin announcing the bill, the government gave the example of large firms being asked to provide rival search engines with their data or provide greater insight into how their app store review systems operate.

Alongside its reactive powers, the DMU will work proactively to establish new routes into markets for startups and small businesses and may demand that certain services are accessible on devices and systems on which they are currently restricted.

“Today’s announcement shows we are proudly pro-growth and pro-innovation across the board in the tech sector, seeking to open up new opportunities for all firms, however small or large they are, while empowering consumers,” said Paul Scully, minister for tech and the digital economy.

“The Prime Minister has made his intention to secure growth and innovation within every corner of our economy very clear – the new Digital Markets Unit will help fulfil this important priority for the UK in the digital economy.”

Those seeking greater regulation of big tech have waited years for the DMU to receive the powers necessary to meet its founding principle. 

First announced in November 2020, it launched without statutory powers in April 2021, pending the results of a government consultation which was eventually published in May 2022.

In the years since critics have accused the UK of dragging its feet on big tech regulation while other regions pressed ahead with improved customer protections.

The EU’s Digital Markets Act was passed into law in September 2022, with regulators placing their sights on the likes of Alphabet, Microsoft, Meta, and Apple to curb uncompetitive growth.

"Holding big tech firms accountable for their actions will help promote a more level playing field and encourage new players to enter the market,” said Kim Leary, chair at Birmingham-based Birmingham Tech CIC

“It is another step towards encouraging innovation and diversity in the digital marketplace. However, excessive regulation could stifle innovation and limit the growth of companies that have contributed to significant technological advancements. 

“Nonetheless, it remains to be seen how effective this crackdown will be in promoting fair competition and diversity in the market."

Some have expressed concern that the EU’s act, which is expected to force Apple to open iOS devices to third-party app stores, may unintentionally expose users to security risks.

The CMA has stated that it’s been preparing DMU staff in anticipation of the regulator’s new powers, and published a blog post advertising vacancies within the DMU in December 2022.

The bill will be passed into law following parliamentary approval, and may change in line with further guidance.