Competition and communications regulators have recently published a joint statement - what does this mean for businesses?
On 14 July 2022 the Competition and Markets Authority (CMA) and Ofcom published a joint statement on online safety and competition in digital markets. The statement examines the considerations that may apply when weighing competition goals against online safety – for example, are there limits on the requirements that the leading platforms can impose on third parties to achieve privacy aims?
The statement was drafted through the ongoing work between these regulators as part of the Digital Regulation Cooperation Forum (DRCF). The DRCF is a non-statutory, voluntary network between the CMA, the Information Commissioner's Office, Ofcom and the Financial Conduct Authority and aims to achieve regulatory consistency and information sharing in digital markets. The DRCF has undertaken a wide variety of work including launching a UK hub for expertise and publishing papers on algorithmic processing.
Ofcom and the CMA identify a number of interactions between online safety and competition in digital markets, including how actions by businesses and interventions by regulators can benefit both online safety and competition. However, the paper also believes that pursuing online safety goals can harm competition and vice versa.
Synergies between competition and online safety
The regulators state that competition interventions can strengthen incentives for platforms to improve safety by making it easier for consumers and advertisers to "vote with their feet" and change to a different supplier of digital services in search of better protections.
Similarly, where online safety interventions clarify the requirements for online services, consumers may have greater confidence to switch from larger incumbents to new entrants or other smaller competitors. This will enable greater competition as consumers will be able to switch between providers of digital services with confidence knowing that the new company will meet their online safety requirements. This is especially true where children and other vulnerable individuals are using online services.
A competitive market can also promote positive safety outcomes through the provision of innovative third-party online safety technologies such as content moderation and age verification. The statement notes that third-party safety tech markets can enable the availability and take-up of safety solutions which may not otherwise be available.
Ofcom and the CMA say that considering these synergies will allow them to shape their respective interventions in both areas to maximise the benefits to UK consumers.
Tensions between competition and online safety
The statement also puts forward a view that interventions across online safety and competition are not always complementary. An example is where interventions that aim to enhance online safety may increase the cost of entry into the market. The paper states that this can make it harder for new entrants to enter the market and compete effectively with established services.
Interoperability requirements are another possible cause of conflict between these regulatory aims. These are requirements for businesses to ensure that their platforms can interact with other platforms, that is, that data from one can be used on another.
Much of the enforcement of new regulations such as the EU Digital Markets Act (DMA) and the work of the Digital Markets Unit in the UK will be influenced by the trade-off between device safety and security on the one hand and interoperability on the other. Early indications are that regulators feel that it is possible for interoperability to be achieved without compromising safety and security, but significant concerns have been raised about this.
Another concern put forward in the statement is that where platforms act as gateways for other businesses to reach customers they may take on a "quasi-regulatory" role. It is possible, says the paper, for these companies to control the "rules of the game" by determining the criteria for admittance onto their platform, including in respect of online safety. On that basis these companies could potentially restrict competition by imposing high safety standards on third party businesses as a condition of using their platform.
Both the EU and the UK are proposing legislation to control this particular intersection between competition and online safety. The largest firms, designated as "gatekeepers" under the DMA in the EU or given "strategic market status" by the Digital Markets Unit in the UK, will be subject to greater scrutiny in how they allow third-parties to access their ecosystems. This may include limits on the extent of online safety requirements imposed by these firms.
The UK and the EU are developing regulation that will fundamentally change how digital markets are regulated.
The challenges of weighing competing policy goals and online safety will be a recurring theme over coming months and years. It is no surprise that the CMA and Ofcom have said that they will continue to engage proactively on issues where they have a joint interest, such as this one, including through the work of the DRCF.
Digital regulation is increasing the volume of legislation and regulatory frameworks that all businesses must follow and understanding and influencing how regulators weigh policy goals against each other is increasingly important.