Minister defends digital economy legislation before Lords

UK approach to regulating digital markets “superior” to that of European Union (EU), which “runs the risk of stifling innovation”, digital minister Chris Philp tells Lords committee.

The EU is currently in the process of simultaneously introducing both a Digital Markets Act (DMA, which will introduce new competition rules for digital companies) and a Digital Services Act (DSA, which will introduce new rules on internet safety).

Although the UK is attempting create similar legislation – by setting up a Digital Markets Unit (DMU) within a pro-competition legislative framework and introducing a separate Online Safety Bill (OSB) – the Lords expressed concern that it was falling behind its European neighbours.

Addressing the House of Lords Communications and Digital Committee about the government’s forthcoming pro-competition regime for digital markets, Philp said “what we believe, strongly, is the superiority of the approach that we’re taking here compared to the European one”.

“We think our approach is more flexible, it’s more proportionate, it will better enable innovation, it’ll avoid the risk of squashing developing tech businesses,” he added. “We think it’s better than the EU approach, which runs the risk of stifling innovation being rather blunt in its approach.”

He said that the UK’s approach is “more pro-innovation, more pro-growth” and that “we are keen to get it onto the statute books as quickly as possible”.

However, while the EU is nearing the adoption of both its DMA and DSA, the UK government has not yet even introduced its DMU legislation to Parliament, and its OSB is still undergoing pre-legislative scrutiny in its draft form.

According to the UK Competition and Market Authority’s (CMA) digital markets strategy (published early February 2021), the DMU will “oversee and enforce the new pro-competition regime for digital firms with Strategic Market Status [SMS]”, which is expected to include the likes of Facebook, Google, Amazon and Apple.

Although the DMU has already begun its work on developing legally binding codes of conduct to prevent anti-competitive behaviour in digital markets, it is currently operating in a limited capacity and will not be able to take action against tech companies until legislation has been approved to officially establish its oversight powers.

On bringing the bills before Parliament, Philp said that while the OSB will be introduced before the end of the current session, he did not have an indication of when the DMU rules would be introduced, as there is currently no cross-government agreement on a legislative timetable.

“The government has to look at parliamentary time and things like OPC [Office of the Parliamentary Counsel] capacity…so it’s simply a question of prioritising among different departments the various bills they want to take forward. DCMS are very strongly making the case this needs to be done as quickly as possible,” he said.

A consultation on the pro-competition regime was opened in July 2021, but the government has yet to issue a formal response. Philp told Lords that the government would publish its response to the consultation in “the fairly near” future.

Citing the CMA’s July 2020 market study – which found that a lack of competition throughout the UK’s digital markets was preventing consumers from accessing new services and resulting in direct harm to smaller businesses – Philp added that companies, particularly Google and Facebook, do have the power to take action to address the issues in the digital economy.

“I would strongly urge them to do so, it certainly isn’t too late. But I do take the view in this area, as with online safety, that where there is evidence that they are not taking appropriate action to remedy the mischief – and as far as I can see, they are not – then legislative intervention and regulatory intervention is both desirable and, in fact, necessary,” he said.