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Farrer & Co | The Furman Review: Competition in the digital market

Over the last decade, five of the world’s largest digital firms made over 400 acquisitions globally. Very few of these acquisitions were scrutinised by competition authorities or were subject to conditional approval and none were blocked.

The Furman Review, a government commissioned report on competition in the digital markets was published on 13 March. It concluded that the increasing dominance of a few companies is limiting competition and innovation and results in less consumer choice. The Review makes a number of recommendations which aim to improve competition and, as a by-product, give consumers more control over their data being held by digital companies.

In summary, the main recommendations are:

Creation of a Digital Markets Unit (DMU). The DMU would exist as a function of either the Competition and Markets Authority (CMA) or Ofcom (or an independent body linking the two). Its aims would include establishing a code of conduct to provide greater clarity on antitrust enforcement and to encourage open standards. Avoiding disparity of regulation, and general over-complication of the regime being overseen, will be a key area to keep an eye on.

Reassessment of the CMA Merger Assessment Guidelines. There should be a greater focus on the long term effects of mergers and acquisitions. Any anti-competitive increases in market share should be blocked.

More effective anti-competition tools. The current tools and frameworks, whilst considered appropriate, have rarely been used (particularly around the abuse of dominance). The Review recommends that the CMA perform a retrospective evaluation of selected cases in which infringements of competition law were suspected or complaints were received but action was not taken.

Algorithms. There has been debate regarding the use of algorithms for personalised pricing (where prices are set in accordance with a consumer’s willingness to pay). Whilst not currently a widespread issue, the Government is being recommended to monitor how artificial intelligence evolves to ensure consumers, particularly vulnerable ones, are not subject to anti-competitive activities.

Digital Advertising Market Study. There is little transparency surrounding the network of organisations involved in delivering personalised advertising. It is recommended that the CMA should conduct a study of the digital advertising market to examine whether consumers are being adequately protected.
The recommendations were well received by the Chancellor in his Spring Statement, and the Review is expected to undergo a formal consultation process.

Ultimately, the digital market is international by nature and the Review hopes that the UK will lead international co-ordination and promote effective global solutions. It envisages that international competition authorities will work together to share best practice and develop common approaches so that both businesses and consumers have more clarity. How wishful this thinking is remains to be seen.

If you require further information about anything covered in this briefing note, please contact David Morgan or Hannah Laird, or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, April 2019

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