UK’s Antitrust Regulator Tests New Powers Targeting Google
Since Jan. 1, the U.K.’s Competition and Markets Authority (CMA) has been granted new powers to regulate digital markets, investigate firms, impose remedies and enforce sanctions. The newly introduced Digital Markets, Competition and Consumers Act (DMCC) closely aligns with the European Union’s Digital Markets Act, sharing similar powers and obligations.
The primary goal of the DMCC is to equip regulators with enhanced tools to scrutinize the activities of major tech companies like Google, Amazon and Meta. These activities may fall outside the scope of traditional antitrust practices under existing legislation but can still pose significant risks to consumers and other businesses.
This regulation introduces new provisions regarding how the regulator can investigate companies. These include the ability to request information from individuals outside the U.K., impose almost any conduct and structural remedies to eliminate anticompetitive effects and require companies to notify the regulator of any potential mergers and acquisitions.
Notably, these powers and obligations will only apply to companies designated as having Strategic Market Status (SMS). For a company to be classified as having SMS, the regulator must first conduct an investigation, which can take up to nine months. During this period, the regulator must determine that the company engages in a digital activity linked to the U.K., meets specific minimum thresholds, holds “substantial and entrenched market power” and occupies a position of strategic significance.
The first three elements appear relatively straightforward. A digital activity, according to the legislation, includes the provision of a service by means of the internet or the provision of digital content. This is a rather broad definition, encompassing activities such as internet search, app distribution, or operating an online marketplace, for instance. For the second and third elements, the regulator can rely on metrics such as the number of users in the U.K. and turnover, either globally (25 billion pounds) or nationally (1 billion pounds). Again, these criteria are clear and straightforward.
The challenges may arise with the other two elements: market power and a position of strategic significance. First, “substantial and entrenched market power.” Traditionally, regulators have taken more than nine months to determine whether a company possesses market power in a digital market. On the surface, this could be a significant challenge for the CMA. However, given its prior market studies on web browsers, app stores and other digital activities, the CMA may already have sufficient data and expertise to reach conclusions relatively quickly. The “entrenched” aspect of this analysis could also be problematic for the regulator. According to the regulator’s guidelines, “in order to assess whether a firm has substantial and entrenched market power in respect of a digital activity, the CMA must carry out a forward-looking assessment of at least five years.”
Essentially, this means the CMA must determine that a company currently holds market power and is likely to maintain it in the future. This provision, along with the subsequent analysis, could face legal challenges from companies, as it relies on predictions subject to interpretation. The rapid evolution of artificial intelligence (AI) in digital activities adds further complexity. Will the landscape for search engines, app distribution or online marketplaces shift significantly in the next five years? And if so, will this impact the dominant players in these areas? These are the critical questions the CMA will need to address.
Finally, the regulator must assess whether a company holds a “position of strategic significance.” This concept parallels the “gatekeeper” designation introduced by the European Union in the Digital Markets Act (DMA). It applies to companies that can extend their market power to other areas or products and influence how other firms operate in relation to the digital activity. Since this evaluation is based on the current situation rather than future projections, it may prove less challenging than the market power assessment.
On Jan. 14, the CMA initiated its first proceedings to determine whether Google holds Strategic Market Status (SMS) in its general search and search advertising activities. The CMA is expected to reach a decision by October, which could result in a finding that Google holds SMS and lead to appropriate remedies. These could include requirements for Google to make the data it collects accessible to other businesses or to grant publishers greater control over how their data is used, including in Google’s AI services.
While this investigation is limited to Google and the specific activities described, it does not preclude the regulator from launching other traditional antitrust investigations. The CMA can pursue cases against Google or any other company without the need to assess SMS, provided there is reason to believe the firm has violated competition law.
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