Google and Facebook to be scrutinized by new U.K. unit from next year

LONDON —  The U.K. on Friday said a new government unit will work to tackle ongoing concerns about a concentration of power among a small number of tech giants.

The Department for Digital, Culture, Media and Sport said it plans to create a Digital Markets Unit (DMU) to enforce “a new code to govern the behavior of platforms that currently dominate the market, such as Google and Facebook.”

The code is designed to ensure that consumers, small businesses, and news publishers aren’t disadvantaged by actions taken by tech giants, the government said.

Under the new code, some of the world’s biggest tech companies may have to be more transparent about the services they provide and how they use consumers’ data. They may also be forced to give consumers a choice over whether to receive personalized advertising, and they won’t be able to place restrictions on customers that make it difficult for them to use rival platforms. 

The DMU, which will be part of the Competition and Markets Authority (CMA), will start work in April 2021.

The government said the DMU may be given the unit the power to suspend, block and reverse decisions made by large tech companies. The DMU could also order them to take certain actions to achieve compliance with the code, and impose financial penalties for non-compliance, the government said.

Digital Secretary Oliver Dowden said in a statement: “I’m unashamedly pro-tech and the services of digital platforms are positively transforming the economy — bringing huge benefits to businesses, consumers and society.”

“But there is growing consensus in the UK and abroad that the concentration of power among a small number of tech companies is curtailing growth of the sector, reducing innovation and having negative impacts on the people and businesses that rely on them. It’s time to address that and unleash a new age of tech growth,” Dowden said.

In July, the CMA called on the government to give it more powers and set up the DMU, saying it was necessary to rein in big digital advertising platforms. The regulator said it was concerned about how tech giants like Google and Facebook use digital advertising to fuel their business models.

Though the CMA’s recommendations had a domestic focus, the watchdog said the problems it had identified were “international in nature” and that it would look to “take a leading role globally” as part of its digital strategy.

“Through our examination of this market, we have discovered how major online platforms like Google and Facebook operate and how they use digital advertising to fuel their business models,” Andrea Coscelli, chief executive of the CMA, said on July 1. “What we have found is concerning – if the market power of these firms goes unchecked, people and businesses will lose out.”

Ronan Harris, Google’s vice president for the U.K. and Ireland, said in a statement at the time: “Advertisers today choose from a wide range of platforms that compete with each to deliver the most effective and innovative ad formats and products.”

He added: “We support regulation that benefits people, businesses and society and we’ll continue to work constructively with regulatory authorities and Government on these important areas so that everyone can make the most of the web.”

Facebook has previously said it would engage with U.K. government bodies “on rules that protect consumers and help small businesses rebuild as the British economy recovers” from the coronavirus pandemic.

“We face significant competition from the likes of Google, Apple, Snap, Twitter and Amazon, as well as new entrants like TikTok, which keeps us on our toes,” a spokesperson for the company said in a statement on July 1. “Giving people meaningful controls over how their data is collected and used is important, which is why we have introduced industry leading tools for people to control how their data is used to inform the ads they see.”

— CNBC’s Ryan Browne contributed to this story.