Out-Law News 2 min. read

Digital firms should be mindful of UK regulators’ focus on algorithms

Digital firms should pay close attention to the UK Digital Regulation Cooperation Forum’s (DRCF) focus on algorithms, according to one legal expert, after the regulatory body published its work plan for the year ahead.

The DCRF is formed of the major UK regulators tasked with regulating digital services: the Competition and Markets Authority (CMA), the Financial Conduct Authority (FCA), the Information Commissioners Office (ICO), and the Office of Communications (Ofcom).

According to its plan (15 pages / 526KB), the DRCF’s key priorities for 2022-23 are supporting improvements in algorithmic transparency to promote benefits and reduce risks to consumers and competition, and enabling innovation in the industries it regulates.

The forum said it is particularly concerned that algorithmic systems used in online advertising - especially those that use machine learning or artificial intelligence - may potentially mislead consumers and distort competition.

Alan Davis, competition law expert at Pinsent Masons, said: “The DRCF’s work plan recognises that effective digital regulation requires the joined-up effort of key UK regulators to deliver a coherent, holistic approach and that builds on and leverages each authority’s relevant expertise. Businesses active in the digital economy face growing compliance burdens as they navigate an increasingly complex regulatory landscape and active enforcement.”

“Digital firms should be particularly mindful of the DRCF’s focus on competition and privacy issues involving online advertising, as well as algorithms and the potential harms and benefits to competition and consumers that could result from their use,” Davis said.

Last month the DRCF published research on the benefits and harms of algorithms that highlights the forum’s concerns over the current lack of visibility in algorithmic processing which may cause risks to consumers both intentionally and inadvertently. Announcing its latest work plan, the forum also said it will review the use of algorithms in online advertising and asked interested parties to submit their views by 8 June 2022.

The DRCF said it will also support work to drive best practice across the regulators, looking at how to enable responsible innovation within industry and better understand and anticipate what new technological developments will be made in future.

Later this year a joint memorandum of understating will be published setting out how DRCF member regulators work together and reach collective decisions.

Angelique Bret, competition law expert at Pinsent Masons, said: “Regulators around the world are grappling with the multitude and complexity of legal and regulatory issues – ranging from competition and consumer protection to privacy and data - that arise in rapidly changing digital markets. The UK Competition and Markets Authority recently published its own research in relation to online choice architecture, identifying the types of digital tools being used for online platforms which may cause harm to competition and consumers, for example, in relation to the ranking of options and search results.”

She added: “European authorities are taking the lead through the proposed development of specific regulatory regimes, such as the EU’s Digital Markets Act and the UK’s Digital Markets Unit, aimed primarily at the major platforms. They are also engaging in a close merger review of ‘killer acquisitions’ and conducting various market inquiries and antitrust investigations involving large technology firms.”

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