We wrote recently that the Government has announced plans to establish a Digital Markets Unit (DMU) under the Competition and Markets Authority (CMA). The DMU will be tasked with implementing and enforcing a new pro-competition regime designed to regulate behaviour within digital markets. This will include preparing a new, legally binding code of conduct, which will govern how the tech giants do business and treat their customers.
The CMA has now fleshed out its plans in advice to the Government. Particularly interesting is the potential for fines to be levied for breaches of the code of conduct. The advice confirms that breaches of the code should not automatically lead to penalties. However, the intention is that the prospect of significant penalties should have a deterrent effect. The advice suggests that the legal test should require that the breach of the code is "committed intentionally or negligently" in order for a penalty to be imposed.
The CMA proposes that the DMU be able to impose penalties up to a maximum of 10% of worldwide turnover. For companies with 'strategic market status' (i.e. the tech giants) the level of fine is intended to be commensurate with fines available in antitrust cases and other regulators.
The content of the code is yet to be determined, but the advice indicates that its objectives should be ‘fair trading’, ‘open choices’ and ‘trust and transparency’ (and they should be set out in legislation). It therefore remains to be seen what an intentional or negligent breach might look like. What is clearer at this stage is that the level of proposed fines is eye-catching. The GDPR's 4% of worldwide turnover looks meagre in comparison. Watch this space.
CMA advises government on new regulatory regime for tech giants