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Under pressure from Silicon Valley, the Government rethinks the Digital Markets, Competition and Consumers Bill

Despite strong cross-party consensus that the market dominance of Big Tech companies needs to be reined in, 10 Downing Street is reportedly considering changes to the Bill that could treat Big Tech firms more favourably in court cases.

The Digital Markets, Competition and Consumers Bill (DMCC), introduced to Parliament in April 2023, is a mammoth piece of legislation which ends subscription traps, empowers a new unit in the Competition and Markets Authority (CMA), the Digital Markets Unit (DMU), with new powers to take on tech giants, changes the scope of mergers and acquisitions in the tech sector and much more. Even the explanatory notes are over 200 pages long.

However, the main purpose of the Bill is to look at a shortlist of tech giants with strategic market status (SMS), allowing the regulator to examine these SMS companies and impose duties upon them which improve competition in the tech sector. The Bill gives the DMU a great deal of independence and scope to conduct their duties and is explicitly targeted at companies with entrenched market power, not just any and all tech companies. Like Ofcom overseeing the new online safety regime, the DMU will set standards for companies to keep digital markets free and fair and impose fines of up to 10% of global turnover if they fail to meet their obligations. Supporters of the Bill argue that the Bill is about strengthening competition within the sector and thereby improving the economic performance of a high-value slice of the economy by ensuring that small and medium-sized companies are operating on a level playing field with the Big Five: Amazon, Apple, Google, Meta and Microsoft.

Regardless of where you stand on the pros and cons of the Bill, it’s clear that Downing Street is concerned that the DMCC is too harsh against Big Tech companies and is considering watering down a key element of the legislation: judicial review (JR). JR is how a company with SMS can appeal a decision made by the DMU. The emerging concern of many in the sector is that the greater the number of appeal methods for these companies, the easier it will be for the company to fight the regulator’s decision. If you’re picturing a prolonged legal battle between an independent regulator and a tech giant, guess who has more time at their disposal and bigger pockets to fight the case. This is what has supporters of the Bill so concerned: any changes to the appeals process could incentivise tech companies to fight the DMU on its decisions, and tech giants have a great track record of winning the longer a case goes on.

The standard of review is crucial: currently, the Competition Appeal Tribunal (CAT) will only be able to overrule the DMU on grounds such as procedural fairness, error of law, and irrationality, and not on the basis that it disagrees with the DMU’s decision itself. This is crucially important: the CAT cannot overrule the DMU’s decision because it disagrees with the intention, but only on procedural grounds.

Groups such as techUK have argued in favour of a new appeals standard, JR+, which would also take accounts of the merits of a case in the case of major fines or large interventions into an SMS company’s affairs, such as a proposed acquisition of a smaller company. The Lords Communications and Digital Committee, chaired by Baroness Stowell, strongly disagreed, and wrote to Business Secretary Kemi Badenoch in July that “the balance of evidence clearly shows judicial review is the appropriate standard for appeals against CMA regulatory decisions and should not be changed to full merits appeals or Judicial Review+”.

It’s worth remembering that the introduction of the DMCC and the debate over its necessity takes place in a context where the CMA has been very active in the tech space – for example, in the proposed acquisition of Activision-Blizzard by Microsoft earlier this year, which is still ongoing – and where the legal standing of the DMU has been in limbo since last year. Some such as Matthew Sinclair, former Chief Economic Advisor to Prime Minister Liz Truss and now of the Computer & Communications Industry Association, have expressed concerns that the DMU (and the CMA by extension) has too much independent power and could abuse that authority to the detriment of economic growth and consumers who benefit from these tech companies and their activities.

The Bill has raised great questions about what the future of UK tech regulation looks like, what our standards are for growth and progress in the sector and ultimately what our shared objective really is. Through the progression of this Bill, we are playing out the debate over whether we want more government oversight of companies which are more powerful than most nation states, or fostering a friendly environment for these tech giants.

If the Government decides to move on judicial review or appeals standards, it will be perceived by many as a victory for Big Tech companies, a signal to the sector that Sunak’s Cabinet is friendly to large companies in an effort to attract their business and secure GDP from big fish in the technological ocean. Whether this decision is the right one is up for debate, and plenty will have something to say about it. For now, we await word from Downing Street on the proposed changes to appeals standards while tech giants hold their collective breath.