The UK government should take a firmer stance against the “bullying tactics” of tech giants, such as Google and Amazon according to a new review
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Stronger competition laws, new regulators, user data controls and an investigation into the digital advertising duopoly could be the answer to break the dominance of tech giants in the UK market, according to recommendations from the Furman Review.
The suggestions were made in a report on the lack of competition in the technology sector, led by Jason Furman, former chief economic adviser to Barack Obama.
It has been handed to the UK government, which will now decide whether to implement any new legislation.
Mr Furman said: “The digital sector has created substantial benefits but these have come at the cost of increasing dominance of a few companies which is limiting competition and consumer choice and innovation.
“Some say this is inevitable or even desirable. I think the UK can do better.”
Concerns over the influence of Silicon Valley giants – such as Facebook and Google’s dominance in digital advertising revenues, and Google and Apple’s duopoly of the mobile app market – prompted the review.
Here we break down some of the Furman Review recommendations.
Furman Review recommendations include a new digital markets unit
The first recommendation of the Furman Review is for the UK government to form a digital markets unit, which would be responsible for “securing competition, innovation, and beneficial outcomes for consumers and businesses”.
According to the report, one of the first tasks for the digital markets unit would be to draw up a code of conduct and new set of standards that define anti-competitive conduct in the digital space.
This new unit should work closely with technology experts and industry stakeholders.
TechUK CEO Julian David welcomed the decision and said: “The report’s recommendations around ensuring that regulators have sufficient expertise in digital sectors display a strong understanding of the importance of getting technical decisions right.”
But the body for the UK technology industry warned that “bad regulation can be as big a barrier to competition and innovation as monopolistic activities”.
Data is the main source of currency for the biggest tech companies and, as such, the digital markets unit would also have a role in promoting data openness.
The report said: “There may be situations where opening up some of the data held by digital businesses and providing access on reasonable terms is the essential and justified step needed to unlock competition.”
More power for the Competition and Markets Authority
The report found an extensive use of mergers within the digital market, such as Facebook’s purchase of messaging platform WhatsApp and Instagram.
Over the past ten years, the five largest firms have made more than 400 acquisitions globally, but none of these have been blocked or even scrutinised by the Competition and Markets Authority (CMA), according to the Furman Review.
It advises the CMA should take “more frequent and firmer action” in order to address this and also raised the possibility of retrospective evaluation of certain mergers.
CMA chief executive Andrea Coscelli said: “The digital revolution has brought positive change to people across the UK, such as improved innovation and increased choice, but also new forms of consumer detriment.
“The CMA is at the forefront of tackling these issues.
“Technology is transforming the economy and creating new challenges which require a response.
“The expert panel’s report provides invaluable insight into these challenges and how they might be addressed by updating the UK competition framework.”
Assessing the impact of AI and machine learning
The technological revolution brought by machine learning and AI has the potential to improve customer experience and reduce costs.
It is already being used in tech such as smart speakers and image recognition devices.
But the Furman Review fears that access to the technologies may be limited to the existing large companies because of the importance of large data sets in the implementation of AI.
The report therefore concluded that: “The government, CMA and the Centre for Data Ethics and Innovation should continue to monitor how use of machine learning algorithms and artificial intelligence evolves to ensure it does not lead to anti-competitive activity or consumer detriment, in particular to vulnerable consumers.”
Addressing the digital advertising imbalance
Targeted advertising is a core revenue driver in the digital marketplace.
The current domination of Facebook and Google in this area and it is anticipated that by 2020, the pair could take 71% of all the money spent in the UK on digital advertising.
The Furman Review report said: “It is clear that the market is opaque, with limited information disclosed either at an aggregate or an individual level.
“A thorough investigation of its workings, encompassing the entire value chain, would be helpful in either identifying any valid grounds for concern about effective competition, or dispelling the mistrust that exists.”
It concludes that the CMA should investigate these concerns.
Giving consumers control of their data
The acquisition of personal data is a key factor in dominating the digital market.
Knowledge of customers and their habits and has led to hyper-personalised online shopping experiences.
Facebook introduced easier options for users to delete their personal data following the Cambridge Analytica scandal.
But the Furman Review argues that consumers should have even greater control of their data.
It said: “Personal data mobility means agreeing common standards to give consumers greater control of their personal data so they can choose for it to be moved or shared between the digital platform currently holding it and alternative new services.
“By making this easy, consumers could, for example, move across to a new social network without losing what they have built up on a platform, manage through a single service what personal data they hold and share, or try out an innovative digital service that uses their information in a new way.
“Open banking has shown the potential for data mobility to provide new opportunities to compete and innovate in this way.”
The Furman Review recommendations also highlighted the need for cross-border co-operation to address these international problems.