The Panel has made it clear that various features of digital platforms result in markets "tipping" to a single winner in a short period. Online search is dominated by Google, social media is dominated by Facebook, digital advertising revenues are dominated by Google and Facebook, mobile app downloads is a duopoly between Apple (App Store) and Google (Google Play) and e-commerce through online marketplaces is dominated by Amazon (with eBay providing some competition).
The report confirms that consumers tend not to use multiple services simultaneously but to "single-home" as the Panel recognised in its ‘Furman report’ delivered in March 2019. The incumbent platforms become "first choice access points for time-constrained consumers and the core route to market for many suppliers", making effective competition difficult. The fact that consumers use these online platforms without paying for them directly (paying by providing their data instead) also provides a challenge for traditional competition policy that typically measures dominance against monetary values.
The Panel recognised in its report that existing merger control rules and current methods of anti-trust enforcement are just too slow to keep up with fast-moving digital markets; calling on the UK’s Competition and Markets Authority (CMA) to use interim measures to enable rapid intervention before the incumbents’ behaviour has irreversibly changed the market.
When it comes to ‘killer acquisitions’, strategic acquisitions of small digital companies by the incumbent to protect their dominant position, the Panel mentions that these have been allowed because it is typically considered unlikely that competitive harm will arise as a result. To combat this, the Panel recommends the introduction of a "balance of harms" approach where the scale as well as the likelihood of harm in merger cases should be taken into account i.e. the authority should intervene where a merger is viewed as unlikely to result in harm, but such harm (if it ensued) would be significant.
The Panel states that engaged, agile and participative pro-competition regulation is the best way to control the conduct of incumbent platforms. It recommends establishing a new Digital Markets Unit, under primary legislation, within either Ofcom or the CMA (as an independent subsidiary of either). The Digital Markets Unit would have new primary powers relating to digital companies which hold a strategic market status, i.e. which have enduring market power over a strategic bottleneck market. The Digital Markets Unit will design and implement pro-competition rules, taking a co-operative approach, working with platforms and stakeholders to agree rules, standards and solutions. This approach would operate alongside conventional competition policy. The types of conduct likely to be unacceptable on the part of a company with strategic market status include self-preference of its own services (for example regarding the results from a search function), or an online platform excluding rival sellers or penalising users for providing a more attractive offering on another site
The Unit will introduce a digital platform code of conduct which will clarify what constitutes unfair or unacceptable conduct by a digital platform that has strategic market status. It should also, it is recommended, pursue goals of personal data mobility and systems with open standards
This action on behalf of the UK is only a piecemeal approach (as recognised by the Panel itself) if done in isolation. The incumbents are global forces, and their data flows across borders. Competition authorities need to work together and develop a shared set of internationally applicable assessment methods.
The Australian Competition and Consumer Commission reached some of the same conclusions as the Panel in their preliminary report on digital platforms in December 2018, so perhaps we will see steps towards a consistent global approach develop in the coming year.
The government is expected to launch a public consultation in the summer followed by formal proposals on whether to bring forward the legislation that would be needed to implement the recommendations.