FCA chief executive Nikhil Rathi has pledged to support a new digital regulation shake-up announced today by the Competition and Markets Authority.

The new ‘digital age’ regulatory regime is likely to lead to tighter controls on major digital firms such as Google and Facebook and the products and services they offer.

The CMA today published its advice to government on the design and implementation of the UK’s new “pro-competition” regime for digital markets.

A framework has been produced by the Digital Markets Taskforce which was set up by the government in March and led by the CMA working with Ofcom, the ICO and the FCA to formulate a new regulatory regime.

The CMA says the taskforce has outlined a, “modern regulatory regime to harness the full potential of digital markets, driving greater competition and innovation.”

If implemented, the new regime will govern the most powerful UK tech firms – those with ‘strategic market status’ (SMS).

This means a potential shake-up of “entrenched market power,” says the CMA.

A new ‘Digital Markets Unit’ (DMU) will ensure the ‘rules of the game’ are clear up-front and it will work with powerful tech firms to ensure they comply with them.

The three key proposed pillars of the regime for SMS (Strategic Market Status) firms are:

• A new, legally binding code of conduct, tailored to each firm overseen by the DMU. There will be a range of powers available to the DMU including the potential for significant penalties.
• Pro-competitive interventions which can be used to address the ‘sources of market power’. This could impose ‘interoperability requirements’ on tech firms and enable consumers to better control and share data kept on them.
• Enhanced merger rules, which would enable the CMA to apply closer scrutiny to transactions involving SMS firms. The CMA may block deals likely to harm consumers when tech firms merge.

The CMA recently blocked platform engine firm FNZ from buying rival GBST.

The DMU would be part of the CMA and the new regime will become part of a wider regulatory framework for digital markets, including the new regime for harmful online content, and data protection laws.

The CMA is now working with Ofcom, the ICO and FCA on the new regime and the government has committed to consult on proposals for a new pro-competition regime in early 2021 and to legislate to put the DMU on a statutory footing when parliamentary time allows.

CMA CEO Andrea Coscelli said: “To ensure the UK can continue to enjoy a thriving tech sector, consumers and businesses who rely on tech giants, like Google and Facebook, should be treated fairly, and competitors should face a level playing field - enabling them to deliver more of the innovative products and services we value so highly.

“For that to happen, the UK needs new powers and a new approach. In short, we need a modern regulatory regime that can enable innovation to thrive, while taking swift action to prevent problems.”

Information Commissioner Elizabeth Denham said: “The dominance of a few major players in digital market impacts on people’s data protection rights when they use these platforms. Our involvement with the Taskforce reflects the importance of safeguarding these rights and ensuring individuals have greater control over their personal information.”