London School of Economics and Political Science, University of London · United Kingdom
Pro-competition Regulation in the Digital Economy: The United Kingdom’s Digital Markets Unit
This article examines the UK's approach to regulating the digital economy, focusing on the proposed Digital Markets Unit (DMU). It discusses the growing international consensus that traditional competition enforcement needs to be augmented to address challenges posed by digital markets, such as high concentration and the dominance of a few large tech firms. The UK's "pro-competition" regulation aims to proactively shape the behavior of powerful digital companies by setting clear expectations for their conduct. This approach, influenced by the "Furman Report," seeks a balance between supporting competition dynamics and implementing necessary regulatory interventions.
The article traces the origins of the DMU and the pro-competition regime back to the 2019 "Unlocking Digital Competition" report. This report argued against both the idea that competition is impossible in digital sectors and the notion that existing regulations are sufficient. It proposed a more interventionist approach than traditional competition law but less prescriptive than utility-style regulation. The core idea is to enhance competition rather than replace it entirely, acknowledging the unique characteristics of digital markets like network effects and the importance of data.
The proposed regime, centered on the DMU within the Competition and Markets Authority (CMA), is designed to address specific competition issues arising in digital markets. These include concerns in online search, social media, digital advertising, app stores, and hardware markets, where a small number of major companies (GAFAM: Google, Amazon, Facebook, Apple, and Microsoft) often dominate. The article delves into the causes of this concentration, such as economies of scale, the strategic advantage of data for incumbents, and network effects.
