The UK government, on Tuesday, released a draft bill that would give a newly created department an independent competition regulator powers to levy massive fines against big tech firms for abusing competition and investigate and block acquisitions with more incredible speed.
The draft Digital Markets, Competition and Consumer Bill will target technology companies with annual revenues of at least £25 billion ($31.2 billion) worldwide, or £1 billion in the UK, it said in a statement.
This includes Amazon, Apple, Google, Microsoft and Meta, which generated revenues of $514 billion, $394.33 billion, $282.8 billion, $198 billion and $116.6 billion, respectively, in 2022.
As part of the bill, the Competition and Markets Authority’s Digital Markets Unit will be empowered with enhanced enforcement powers over large technology mergers and acquisitions, a new regulatory body established in 2020 to promote competition in digital markets.
Separately, it includes changes to merger thresholds and fines that will help the CMA to conduct more efficient and flexible competition investigations. This will allow it to detect and stop unfair competition sooner.
The new law, unveiled in parliament on Tuesday, will allow the CMA to levy fines of at least 10% of the company’s global annual revenue on companies that breach the rules. The legislation has yet to be approved by lawmakers but is expected to receive broad cross-party support.
CMA has been at the centre of some extensive tech crackdowns lately. The watchdog is holding up MMicrosoft’s$69 billion acquisition of video game publisher Activision Blizzard with a deepening competition probe. It had earlier ordered Facebook to take down the US GIF creation platform Giphy.
Catherine Kirrage, the digital competition partner at Osborne Clarke, said it was rare for a competition regulator to fine a company at the maximum level of 10% – but the risk to their reputation should worry them.
“n practice, the maximum 10% threshold is rarely reached in competition law cases, and a key issue will understand how the CMA will calculate consumer law fines,” “Kirez said in comments emailed to CNBC.
“f a similar approach is taken to start with turnover only in the market where the infringement took place, it takes the focus away from the total group turnover and makes the final fine much lower than the maximum 10%. As a result, millions of dollars in fines are common in the world of competition.”
Additionally, the rationale for establishing these strong sanctioning powers is that they should be significant deterrents. The adverse PR impact of a hefty fine that grabs the headlines should not be underestimated – our experience is that fined businesses in relationships are at least as concerned about the reputational risk of a breach as such.”
The law is intended to break the dominance of tech giants such as Amazon, Microsoft and Apple in the online market. These companies have faced accusations of limiting competition in several ways, including restricting the use of software to specific platforms and using their customer’s data to improve their business.
On Monday, a unique competition case involving Apple suffered a blow when a judge mostly sided with the company in its legal battle with US video game maker Epic Games.
Epic accused the Cupertino tech giant of harming competition and payment processes in-app distribution by removing Epic’s Fortnite game from the App Store.
