The DMCC Bill: an appeal to common sense
The Digital Markets, Competition and Consumer (DMCC) Bill may not get many headlines, but it is a fantastic reflection of the government’s positive and supportive stance towards the UK tech sector. It also happens to be a genuine example of something we couldn’t have done if we were still a member of the European Union, and we have been delighted to support the government as it has brought the Bill through parliament.
However, in what is becoming an increasingly familiar turn of events, the government is reportedly preparing to row back on the ambitions of this flagship policy in response to pressure from a powerful lobby group.
It has been reported that the government has been swayed by the arguments of the US tech giants that giving a regulator the power to regulate them effectively is going a bit too far for their liking. An amendment is apparently in the pipeline to tack on an additional grounds of appeal by big tech against CMA interventions into their monopoly markets. As well as appealing against the procedure that has been followed by the CMA, it is widely reported that they will also be able to appeal on the basis that the interventions are disproportionate.
This is as unhelpful as it is unnecessary, and could undermine the very essence of the agile and participative new regime.
What is the DMCC Bill?
The government is legislating to introduce a new pro-competition regulatory regime for digital markets in the UK, giving the CMA additional powers to control the conduct of powerful tech giants, and to intervene in markets to address the sources of their market power.
The Digital Markets, Competition and Consumer (DMCC) Bill has been long in the making, first proposed in 2019 by an independent panel of experts led by Professor Jason Furman. While the avoidable delays to the Bill have undoubtedly caused harm to UK challengers and consumers, they have also ensured the Bill is extremely well-evidenced and tightly drafted, applauded throughout the sector and with widespread support on both sides of the House.
Now reluctantly accepting the direction of travel, the GAMMA firms (Google-Apple-Meta-Microsoft-Amazon) expecting to be captured by the new regime have honed in on a small number of areas where they could undermine its effectiveness. Incredibly, with a palpable dose of irony, their arguments have focused on the concern that the Bill will give one organisation (the CMA) too much unchecked power over the fate of their businesses. This is the reality that hundreds of thousands of dependent web developers, app developers, advertisers, publishers, and retailers have faced with big tech for well over a decade, yet the gatekeepers have consistently argued against the need for any checks and balances to be put in place.
One specific change they have been lobbying hard on is the appeals standard, arguing that they should be able to appeal the CMA’s decisions on the full merits of the case with the Competition Appeals Tribunal (CAT), rather than having their appeals limited to grounds of procedure.
While the relevant government department and ministers have appeared unmoved, recent media coverage suggests it is No.10 that is eager to appease big tech on this issue.
JR v Full Merits – does it really matter?
It may not sound very exciting, but it is critical to whether the new regime has any teeth and can move at pace. The Judicial Review standard will allow big tech to appeal to the CAT if it thinks the CMA hasn’t acted reasonably or followed due process in reaching its decisions. At the other end of the spectrum, they would be able to appeal the ‘full merits’ of the case, meaning the facts of the decision being reconsidered by the CAT.
There have been lots of arguments put forward on both sides about why the two standards are better or worse in this context. Big tech (and the advisory companies circling for work) raise concerns about giving too much power to the CMA without appropriate accountability or checks and balances in place. Others argue that this is a necessary step to shift the balance of power between regulator and big tech. Here are just a handful of examples of such arguments:
- Challenger tech firm Kelkoo said ‘The Big Tech playbook of delay and obfuscation has been well honed in Europe where we have seen almost one and a half decades of delay in the Google Shopping case alone. This must not be repeated in the UK or in any other jurisdiction.’
- In evidence from the Furman Review expert panel, Professor Amelia Fletcher said ‘I strongly support the JR appeals standard because if we went for a full merit standard, it would be too far and would become inadministrable’, while Professor Philip Marsden said ‘if there were a full appeal standard, we might as well move to a prosecutorial approach, where the DMU is a prosecutor and everything is adversarial, and takes 18 years in court.’
- The CMA said ‘the prospect of a full-merits review turns even the administrative phase of the CMA’s investigation into a much more contested and lengthy process. This means that every action taken by the CMA will be longer and more complex, and overall that the CMA will be able to tackle fewer concerns at any point in time.’
- In a letter to the Secretary of State for Business and Trade, the Chair of the House of Lords Communications and Digital Committee stated ‘The judicial review standard is appropriate and must be maintained. The Government should resist any move towards a full merits appeal, including a time-limited full merits appeal.’
- Consumer group Which? reasoned that the ‘full merits’ standard ‘would lead to far more protracted court proceedings and allow big tech firms the opportunity to throw money at lengthy legal cases, tying up the DMU’s resources and potentially disincentivising the DMU from taking important regulatory interventions. This could fundamentally undermine the proportionality and flexibility of this pro-competition regime.’
Finally, when giving evidence to the Lords Communications and Digital Committee (pictured below), I gave Gener8’s view that ‘it would be the definition of insanity in this context to take the appeal standard from the existing [competition law enforcement] framework, apply it to the new approach and then expect different results.’
But if we cut to the chase, the difference between the two options is simple. If you increase the number of potential grounds for appeal, then there will be more appeals, appeals will be more complicated, take longer, and more CMA decisions will be overturned.
This arithmetical certainty is aggravated by three further facts:
- Big tech has an army of well paid lawyers – the CMA will be outgunned.
- The CAT is not the best qualified body to be making decisions about interventions into digital markets. It could be more prone to error than the CMA.
- The higher the volume of appeals, the more resources the CMA will have to be spread across multiple appeals, with less remaining to commit to the real job in hand.
Most importantly of all, if the CMA knows all of its decisions will be appealed on the merits, it will be more cautious, taking fewer cases and steering towards those it is most confident of winning at the CAT. This is very obviously the outcome big tech is trying to achieve.
So this is no more a debate about the fine technicalities of two appeals standards than it is an attempt to undermine the principles of free market economics. It is simply a choice between a bold and empowered CMA, with a risk of overenforcement, or a timid and cautious CMA, with a guarantee of underenforcement.
The latter is the status quo. The ‘do nothing’ option. The counterfactual. The baseline.
There will be no great unlocking of digital competition if we take that path.
How about JR + proportionality?
In an attempt to appease big tech, we understand the government is seeking a middle ground, or a fudge as the wider world would know it. This fudge is expected to be an amendment to introduce a proportionality grounds for appeal, on top of the JR standard. Instead of adopting the well-established legal processes that already exist, the government would be inventing something new.
The one thing we know about compromises, is that you usually end up upsetting everyone.
On the face of it, including an amendment that retains the JR standard but adds a proportionality test doesn’t sound controversial. Of course the CMA’s interventions should be proportionate, and the CMA should have sound evidence and analysis to demonstrate that they are.
But asking the CAT to opine on whether a CMA intervention is proportionate will surely require it to evaluate in some respect the CMA’s assessment of the problem, the harm, the effectiveness and likely impact of any remedy, and the potential alternatives that were available. Depending on the drafting of the amendment, and importantly how that drafting is then interpreted by the CAT, this could surely start to look quite a bit like an assessment on the merits? Alternatively, if it isn’t intended to make much difference, then why create confusion or expectation by adding it in the first place?!
As will be the case with any additional grounds for appeal, introducing a proportionality test will inevitably lead to more appeals. Perhaps not as many as if the standard were Full Merits, but certainly more than with the JR standard, and the CMA will as a result be more cautious, more bogged down, and less effective.
The reported amendment will lead to direct harm to UK businesses and challengers, and benefits to US tech giants.
Discouraging global leadership
Aside from unhelpfully tilting the balance towards companies that certainly don’t need any encouragement to litigate, a proportionality test could also discourage the CMA from adopting the global leadership role it has grown into in recent years.
If the CMA leads the way in a market not yet scrutinised in another jurisdiction, as it has shown a willingness to do, it could find itself introducing interventions at the UK level that have global costs to the companies involved, while the firms might restrict the competition benefits to the UK. The CMA could find itself losing such cases on proportionality grounds, and wrongly in my opinion, unless the CMA and/or CAT were explicitly allowed to factor in the likelihood of global benefits being achieved as a result of the CMA’s leadership (as other jurisdictions typically follow in behind once the precedent has been set).
Leave it to the experts
Aside from guarding against cautious underenforcement, I also believe on principle that the CMA – stacked full of data scientists, economists and policy experts – is best-placed to be making decisions about competition problems in digital markets than the CAT.
Rather than wanting to have my cake and eat it, I would rather this principle was applied consistently throughout the Bill. However, when it comes to private enforcement, it seems that individual complainants may be able to bypass the CMA and bring complaints directly to the CAT where they feel there has been a breach of the rules.
While this sounds like an attractive option to have up our challenger business sleeves, I can’t support it on principle. I don’t believe the CMA should be bypassable to go to a less-informed decision maker – not by big tech, and not by their challengers.
On this basis I am, for once, finding myself agreeing with Meta that ‘where there is private enforcement, it should be routed through the DMU’.
A big moment for the UK tech sector
With the Bill expected to return to the House in early November, we will soon see whether the current government is pro tech, or pro big tech.
Depending on the outcome of the next election, we may see decisions on climate policy quickly reversed, or high-speed rail schemes brought back from the dead. But the decisions currently being made regarding the shape of the new digital markets regime are likely to endure a little longer, and will undoubtedly have serious implications for UK businesses for many years to come.