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Britain launches controversial antitrust crusade over technology

UK antitrust regulators will be given sweeping new powers to regulate technology – powers potentially stronger than their European and US counterparts.

When Britain left the European Union, Brexit leaders promised to promote a free-market and technology-friendly environment. Instead, they tightened the rules.

First came the Internet Safety Act. It allows the UK government to require online platforms to break encryption and search photos, files and messages for illegal content, imposing tough penalties on companies that fail to comply, including criminal penalties. The second change was an update to the Investigatory Powers Act, which would force companies to inform the UK Home Office about security changes before they are published and to disable those updates or features deemed to hinder investigations.

Now there is a new Act on Competition and Consumers. It enjoys bipartisan support and looks set to be approved by Parliament within a few weeks. The bill empowers the new Digital Markets Unit to identify and impose obligations on large technology companies ex ante before they cause harm to consumers or competition. The Digital Markets Unit says it will reduce its focus on consumer welfare and instead focus on market power, focusing on the largest companies – in a sense punishing them for their success.

UK regulators would have powers that go well beyond US and European trust breaches. In the US, regulators must prove their case in court before imposing remedies. In the UK, judicial review will be limited. In Europe, regulators are limited to enforcing specific prohibitions imposed by the Digital Markets Act. In the UK they will be able to question and ban anything to “tackle market power”.

Fierce lobbying from tech companies has brought some change. After Signal and WhatsApp threatened to withdraw from the UK over clauses of the Internet Security Act that could break encryption, authorities backed down and said the requirement would only be enforced when it was technically possible to do so – which is not feasible in foreseeable future.

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In terms of antitrust laws, a major dispute has arisen over the issue of judicial review. Originally, the decisions of the Digital Markets Unit were only subject to judicial review, and not to the stronger, so-called “substantive” assessment. The November amendment provides for the possibility of substantive consideration of appeals against the amount of financial penalties. Another amendment required that the proposed penalty be “proportionate” to the amount of damage suffered by the consumer.

Defenders of the UK approach say it provides regulators with much-needed flexibility. The American approach is too weak and time-consuming. The European approach is too rigid and requires major changes in the business models of large American companies. In comparison, the UK can still deliver on its tech-friendly promises by enforcing new rules in a light and business-friendly way.

But critics say the British approach promises excessive regulation. Even before receiving the new powers, UK antitrust regulators exceeded their powers. They blocked Microsoft’s proposed takeover of game maker Activision. When both the EU and the US disagreed and approved the deal, and British courts expressed reservations, British competition authorities were forced to make an embarrassing U-turn.

The failed merger review may be part of a trend. UK regulators can act quickly. They have already published reviews on Microsoft’s planned investment in Open AI and Amazon’s proposed investment in AI startup Anthropic. If they take action but the US and EU do not agree, the British could be forced to withdraw again.

These moves reflect a potential disconnect between the UK’s technology-friendly ambitions and its limited size and power. London has unveiled plans to boost the country’s semiconductor industry and quantum computing efforts. And yet, while both the EU and the US have committed billions of euros and dollars to chip programs, little public funding is available for British semiconductors and quantum components.

While ambition is always matched by reality, and budget constraints limit the scope for public investment in technology, British politics appears to be suffering from schizophrenia. Great Britain’s decreasing geopolitical influence prevents it from taking a third path, independent of the EU and the USA. As the reversal in the Microsoft-Activision deal shows, London must catch up with Washington and Brussels.

Politics is unlikely to bring change. The House of Lords, which had argued for a relaxation of the Internet Safety Act, has given the green light to a new antitrust regime. Little public or political debate focuses on new technology regulations, with the potential exception of support for breaking encryption to improve children’s safety.

The elections are approaching. While the current Conservative government is likely to lose, the opposition Labor Party shares most of its positions on technology. Post-Brexit Britain may want to become a tech superstar. Instead, it appears that efforts continue to find a true third voice between the US and the EU.

Bill Echikson is a non-resident CEPA Senior Fellow and editor of Bandwidth.

Clara Riedensteing contributed to the research.

Bandwidth is CEPA’s online journal dedicated to strengthening transatlantic cooperation on technology policy. All opinions are those of the author and do not necessarily reflect the position or views of the institutions they represent or the Center for European Policy Analysis.

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