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The regulation of big tech: a changing tide?

As at December 2020, the market capitalisation of the main market players Amazon, Apple, Facebook and Alphabet (Google’s parent) taken together was US$5.7 trillion. Big Tech is undeniably huge.

These companies have evolved over the years to play a fundamental role in the functioning of society. These companies attribute their success in large part to their focus on and monetisation of the collection of consumer data.

As the services of these tech giants have become increasingly interwoven into the daily activities of consumers, there have been increasing calls from the public for these firms to be regulated.

Governments globally have therefore started to take action in response but this is no small exercise. This article focuses on the UK Government’s recent response, but arguably a co-ordinated worldwide approach for any regulation to be meaningfully effective is needed.

There are two main areas where the UK is increasing the regulation of Big Tech in 2021:

Moderating Content

Social media has revolutionised interactions and connectivity in recent years, allowing its users to connect with individuals and access products and information in a wide-reaching way. Despite the many advantages of social media, there are inevitably some significant downsides. Dangerous content, the proliferation of inaccurate information and the increasing toll on mental health as a result of excessive social media usage are all issues that are becoming increasingly concerning.

The Government in 2021 has big plans in this regard. The Government’s approach is outlined in its Online Harms White Paper. It moves beyond the self-regulation of these companies and aims to establish a regulatory regime that will make clear the responsibility of companies to keep its users safe. There will be an independent regulator that will set the standards of safety, report on compliance and have robust enforcement powers including to levy large fines. Therefore, companies effected by the new regulations will need to fully understand their obligations in this regard in order to ensure their compliance.

The UK Government’s proposed regulatory regime hopes to pave the way for the rest of the world to follow suit. Its regime is the first of its kind globally as it will aim to deal with the full array of online harms within one single regulatory framework. Most importantly, under the new regime, companies will owe a duty of care towards users. The Government intends for the Online Safety Bill, which will give effect to the online harms regulatory framework, to be ready this year.

Increasing Competition

There has been growing concern that the large concentration of market power amongst a very small number of technology companies is “curtailing growth in the tech sector, reducing innovation, and potentially having negative impacts on the people and businesses that rely on them.”

Consequently, in April 2021, the UK Government established a Digital Markets Unit (DMU) within the Competition and Markets Unit (CMA). The DMU was set up to ensure that those companies with large market power (‘strategic market status’) are subject to a new regulatory regime that has greater control over the competitiveness of these companies.

The DMU will be in charge of establishing and enforcing a new regulatory regime with a new statutory code of conduct that should result in “consumers [being] given more choice and control over how their data is used, and small businesses [being] able to better promote their products online.”

In practice, the outcome of this is that tech giants may have to share the significant store of information gathered of many years’ with smaller businesses in order to increase competitiveness: in the case of Amazon this would mean sharing its data on users’ shopping habits, in the case of Google its search history information and in the case of Facebook its user engagement knowledge.

Once the full remit of the DMU has been finalised and legislation has been passed (expected in 2022) the full scale of the impact of the changes to be made by the DMU will be more apparent.

Concluding Thoughts

It remains to be seen whether the increase in regulation yields the anticipated result of improving competition and protecting the users of Big Tech. What is clear is that there is likely to be an increased focus on regulation. Digital business is one of the key sectors that will drive economic growth and social progress, so a careful balance of protective measures with government growth priorities will require careful engagement by policymakers and international cooperation.

Our thinking

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