Back in the autumn, the Competition & Markets Authority (CMA) responded to the Government’s consultation on ‘a new pro-competition regime for digital markets’. These proposals – both in the consultation and in the CMA response – risk repeating the poor policies we’ve already seen in Europe and America. It’s noble to want to support UK innovation and growth in the technology sector, but pushing for more regulation in such a globally intertwined area could alienate UK customers and rot competitive digital markets.
According to the CMA, consumers, start-ups, and businesses are getting a worse deal than they would in a more regulated digital economy. But that’s simply not the case.
Consumers currently have free-to-use or low-cost services, high-quality products, and an abundance of choice and innovation online. Over the last two decades, multinational companies have driven down the prices of electronic goods and services, not increased them.
Take digital advertising, which currently costs about 27.5% less than it did in 2010. Despite what the CMA argues in its response, online advertising today is constantly innovating and growing to be a powerful force for small businesses and advertisers to reach customers across the world. While this year costs have increased compared to 2020, digital is still a more affordable advertising option than mainstream media and does not pass the burden onto consumers.
In the current regulatory structure, the UK’s start-up and scale-up ecosystem is already beating the rest of Europe, rapidly outpacing Germany, France, Sweden, Switzerland, the Netherlands, and Spain. London is fourth for venture capital investment in tech behind San Francisco, Beijing, and New York, and Cambridge is the second best city in Europe for such billion-dollar investment.
Nor would replacing the UK’s current and clearly successful pro-business environment with a more restrictive regulatory structure actually help competition. More regulation and intervention would raise barriers to entry, burden entrepreneurs, and leave them with fewer investors able to help. That would only reduce the number of start-ups able to get off the ground.
That’s why the Government should focus more on growing entrepreneurship and stewardship, rather than using the CMA’s Digital Markets Unit to push for ever more regulation in the name of competition.
The CMA goes so far as to somewhat commend problematic proposals like the EU’s Digital Markets Act and President Biden’s Executive Order on Promoting Competition in the American Economy. Both legislative proposals would regulate internet businesses into listening to the will of a single nation’s government, without regard to the potential negative impact on consumers and small businesses. Despite being lauded by the CMA as effective competition policy, both proposals would actually result in a global dearth of innovation and market competition. They would entrench established tech companies and arm unelected bureaucrats with more power to control internet services and how they develop over time.
If the EU’s previous over-regulation of the digital economy left Spotify as the only European top 30 internet tech company by market cap, why should the UK follow in its footsteps when the London Stock Exchange is currently a huge 2021 hub for tech IPOs? Doing so will only ruin London’s thriving tech market.
The UK is uniquely set up post-Brexit to stand up to such misguided policies. The continued Europeanization of competition policy will only harm British and global consumers, bog down research and development, and increase regulatory barriers to entry.
If DMU policy is biased from the get-go on how the agency defines digital markets, then the UK risks stifling just how much its digital markets can grow, which will spread the negative impact of over-regulation harm to internet users everywhere.
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