UK regulators confirm focus on digital markets

Out-Law News | 26 Mar 2015 | 11:45 am | 3 min. read

The Competition and Markets Authority (CMA) will scrutinise competition and consumer protection issues in digital markets over the next 12 months, it has confirmed.

The authority's focus on "online markets and the digital economy" was confirmed in its newly published annual plan for 2015/16 (44-page / 631KB PDF).

"We will aim to launch at least two to four new market studies, calls for information or market investigations in the coming financial year," the CMA's annual plan said. "In line with the findings of the strategic assessment, we anticipate that the CMA’s new markets work will be particularly focused on issues relating to the digital economy."

David Currie, CMA chairman, added in a statement that the CMA would be "looking closely at emerging digital opportunities and risks" in the coming year.

Competition law specialist Guy Lougher of Pinsent Masons, the law firm behind, said: It will be a challenge for the CMA to initiate this scale of new workload on top of its existing portfolio of antitrust cases, ongoing market studies and investigations, merger work and regulatory appeals. In particular, the energy and banking market investigations are extremely demanding for the CMA. Nevertheless, it now has the resources and expertise to be ambitious in its workload and the digital economy is very clearly an important CMA priority. We can therefore expect the CMA to be true to its word, and anticipate significant intervention over the next 12 months in this area, from the CMA and other regulators."

Pinsent Masons' Sammy Kalmanowicz said the CMA's interest in online markets is part of a more joined-up approach by a range of UK regulators on consumer protection issues.

"The CMA has set online markets high on its agenda and with this report confirmed previous public statements that it will be giving increased focus to this area," Kalmanowicz said. "Of particular interest is the emphasis the CMA has given to the consumer protection element of its work, in addition to the competition powers at its disposal."

"The CMA's work plan must be viewed in the context of priorities set by the Consumer Protection Partnership of which it is a part. The CPP was created in 2012 following criticism by the National Audit Office that UK regulatory bodies and watchdogs were failing to combat consumer detriment in a coordinated fashion. The priorities it has set provide insight into the future focus of the CMA and other regulators, including the Financial Conduct Authority and various trading standards bodies," he said.

"In January this year the CPP outlined priorities for 2015 which included taking action in online markets on issues such as subscription traps, the use of personal data, and advertising on social media and search engines. Dividing lines were set, with the CMA, together with Citizens Advice, to report back to the CPP with its findings on the use of personal data in online markets by June this year. Already the CMA has acted on this, launching a call for information on the commercial use of consumer data. It is separately looking to deepen its understanding of the way businesses use online reviews and endorsements."

According to the CPP's report, lead responsibility for assessment of subscription traps and advertising on social media and search engines will fall to the National Trading Standards Board, but Kalmanowicz said this does not completely rule out action in related areas by the CMA.

"Each authority that makes up the CPP has its own areas of jurisdiction and as a cross-sectoral consumer protection regulator with additional powers to intervene if there are competition problems the CMA is well placed to assess online markets and take action if the need arises," Kalmanowicz said. "There will inevitably be areas of cross-over, and this is evidenced by the FCA's move to study insurers' use of 'big data'," Kalmanowicz said.

The expert said that the CMA's conclusions on how online markets are operating are likely to be based in part on "behavioural economics". He said that regulators had already recruited some specialists in behavioural economics and that they would likely have a role in researching the way online markets work.

"The CMA is increasingly interested in how consumer behaviours are driving their economic decisions and so it is likely to scrutinise social factors among others that determine those behaviours when assessing whether markets are operating to consumers' benefit," Kalmanowicz said.