Tech giants do not face enough competition

Tech giants have become increasingly dominant and ministers must open the market up to increase consumer choice and give people greater control over their data, an independent review said today.

Harvard professor Jason Furman has warned that UK competition rules must be updated to be fit for the digital age. He cited the benefits brought by technology firms but said the rules needed to evolve to keep pace with the market.

He has urged the government to increase competition in the digital sector by setting up a new competition unit and strengthening outdated laws. He believes more companies would then be able to join the market on a more equal footing – ushering in a new wave of innovation and the creation of new social media and online search platforms.

The review was led by an independent panel of experts led by Professor Furman who was chief economic adviser to President Barack Obama’s White House. Today they made the following recommendations to address the issues so that Britain can lead the way in technological revolution:

  • a new digital markets unit should be set up with expertise in technology, economics and behavioural science and the legal powers to back it up;
  • the new unit should give people more control over their data by enabling people to switch between platforms more easily;
  • it should also develop a code of conduct so the largest digital companies know the competitive rules of the game;
  • regulators’ existing powers for tackling illegal anti-competitive practices need to be strengthened – making it quicker and simpler to prosecute breaches, such as bullying tactics by market leaders;
  • changes to merger rules are needed so the Competition and Markets Authority (CMA) can better stop digital mergers that are likely to damage future competition, innovation and consumer choice;
  • the CMA should launch a formal market study into the digital advertising market which is dominated by two players and suffers from a lack of transparency;
  • powers to force the largest companies to open up to smaller firms through providing access to key data sets, when doing so does not affect privacy; and
  • the UK should engage internationally on all of these issues.

Furman said: “The digital sector has created substantial benefits but these have come at the cost of increasing dominance of a few companies which is limiting competition and consumer choice and innovation. Some say this is inevitable or even desirable. I think the UK can do better.

“The Chancellor, Philip Hammond, was right to recognise there is a better way than just continuing with the status quo. My panel is outlining a balanced proposal to give people more control over their data, give small businesses more of a chance to enter and thrive, and create more predictability for the large digital companies.

“These recommendations will deliver an economic boost driven by UK tech startups and innovation that will give consumers greater choice and protection.”

Responding to the review, Chancellor of the Exchequer Philip Hammond, said: “The UK leads the world in embracing technology and the opportunities it delivers for people. Competition is fundamental to ensuring the market works in the interest of consumers, but we know some tech giants are still accumulating too much power, preventing smaller businesses from entering the market.

“The work of Jason Furman and the expert panel is invaluable in ensuring we’re at the forefront of delivering a competitive digital marketplace. I will carefully examine the proposals put forward by the panel before responding later this year, setting out how the government will implement the changes needed to ensure our digital markets are competitive and consumers get the level of choice they deserve.”

The government is expected to formally respond to the review’s recommendations in the summer.

Serge Acker, CEO of OCL, said: “Greater restrictions on the data that online companies are able to hoover up from consumers can only be a good thing.

“Almost everything you do online today requires a level of data to be provided to a third-party – even simply verifying that you’re human. We’ve reached a point where privacy has become a privilege, rather than a right and we absolutely need to turn the clock back.

“People need to be given more choice about what data they provide and to which companies, while not being restricted online. With this study, I hope that we can move towards a state where an individual’s data belongs to them and giving up personal data is not a condition of accessing online services.”

Russ Shaw, founder of Tech London Advocates & Global Tech Advocates said: “There can be no disputing that we need answers to big questions surrounding taxation, use of personal data and keeping a check on increasingly powerful companies.

“The creation of a new digital markets unit will supply the level of expertise that these challenges demand and ensure we have the knowledge in place to build effective policy for the digital age.

“Yet, going it alone with a tax on tech giants is the wrong move for Britain. At a time when despite Brexit, the tech community is thriving, sentiments from the Chancellor today sends all the wrong signals internationally.

“A word of warning, my recommendation is that we work with tech companies and not against them. We cannot fall into the habit of bashing big tech as a political game but find workable solutions that avoid damaging the UK’s position as a burgeoning, international tech hub.”