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Can current competition regulation keep up with the internet age?

3rd August 2017

Over recent decades, the UK has seen the Competition and Markets Authority (CMA), select committees, and the Government, question and intervene in a number of corporate mergers. When such an intervention has occurred, it has been to preserve competition in a market and ensure that monopolies in industry do not begin to form. Perhaps the most famous of these cases was the 2011 merger of Sky and BskyB. Running concurrently to the phone hacking scandal that was across front-pages for a number of weeks, the Government eventually decided to not allow the merger to take place due to the Murdoch’s already large media share in the UK.

Since this ruling took place in 2011, the UK has undergone considerable change, fuelled primarily by rapid technological growth. Uber arrived in London in 2012, with Airbnb finding its feet in the country at a similar time. Simultaneously, media and services companies like Google, Facebook and Twitter have continued to grow. The success of all of these companies, and their near complete dominance in their respective sectors, has only been made possible due to the growth of the internet. This then begs the question: are competition laws keeping pace with this massive growth in the utilisation of the internet and advances in technology?

There are a growing number of monopolies forming in the world of technology. Globally, Facebook is the only social network that truly matters, both to its users and to advertisers hoping to capture not only the mysterious millennial, but also middle aged shoppers. Instead of companies creating a new market for a product, and then competing inside that marketplace to both innovate the fastest and to move to ever lower prices, now there is simply short lived competition, before a winner emerges. Uber dominates ridesharing and is putting pressure on the taxi industry, Airbnb has more rooms available than many large hotel chains globally, and Amazon’s rise has accelerated the traditional high street’s fall.

These internet titans therefore create an issue for the CMA and other bodies looking to police competition. Where before the ownership and audience numbers of an organisation could be taken into account on a national level, services such as Facebook or WhatsApp cross borders, and so a true measure of their market share in one country is nearly impossible to ascertain. This poses a challenge for the CMA, because their current guidelines state that companies must need to have a UK turnover of at least £70 million in order for a merger to be investigated. However, when the precise figure from a single nation is shrouded in mystery, and the company’s userbase itself shifts between different nations constantly, it becomes almost impossible to identify the exact scale of the UK market, let alone in a formal enough manner to begin an investigation into a merger.

Where companies like Sky and BSkyB have not been allowed to merge, technology companies seem almost exempt due to their international scope. Looking at the example of Facebook’s acquisition of Whatsapp in late 2014, it becomes clear that bodies like the CMA lack the tools to challenge large mergers, and even institutions like the EU can only dole out fines, rather than being able to block it taking place. From a policymaker’s perspective, the challenge when looking to regulate new and developing markets is to ensure competition. However, there is currently no framework on which action can be taken. MPs from across the House have begun to believe that in order to make the internet age work for everyone, this must be addressed.

Sam Colson

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