Tech watchdog's takeover powers might tame Facebook and Google at last | Nils Pratley

The UK’s Digital Markets Unit is likely to have powers to protect startups from the giants, and about time too

Don’t imagine that the UK’s national debt can be eroded by whacking Facebook, Google et al with fines worth 10% of their worldwide revenues. The Digital Markets Unit (DMU), the soon-to-be-created watchdog for the tech sector, would still have to ensure penalties are “proportionate”; and it would have to set out its fining framework in advance. Multibillion-pound fines might be extremely rare.

But the regulatory power to whack miscreants with big fines for breaches of new behavioural codes is important. It’s about having a “credible deterrence”, as the Competition and Markets Authority (CMA) put it in its advice to government about how the DMU should be designed.

Nor is the 10% figure plucked out of thin air. It’s what the CMA can levy for breaches of competition law and it’s equivalent to the European commission’s powers. If ministers are serious about backing DMU as a strong tech regulator, 10% should not be controversial.

Indeed, Google and Facebook may be more bothered by the recommendation that the CMA should itself have “enhanced merger rules” for big tech firms. The enhancement would be the right to investigate proposed takeovers that fall below the standard test of £70m of revenues in the UK.

The extra freedom is vital when you see how big tech has played the takeover game to lock apps and services into digital “ecosystems” before startup firms have had a chance to grow. Last year’s Furman review, which paved the way for the creation of the DMU, included an extraordinary statistic that should embarrass anti-trust authorities everywhere: over the last 10 years the five largest digital firms have made more than 400 acquisitions globally and no deal has been blocked by competition authorities.

So, yes, a more imaginative merger regime – one adapted to the tech world – sounds entirely sensible. The CMA and DMU would merely be catching up (one hopes) with a sector that moves fast and constantly changes shape. Implementation will be everything, of course, but the outline script for this regulatory shake-up is promising. Don’t let big tech’s lobbyists dilute it.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Ofgem was probably right to give utilities a break

The CMA appeared in less heroic light in September when it sided with four water companies that thought their regulator, Ofwat, was being too mean on allowed returns. It was a baffling ruling (and is being challenged by Ofwat) and one that threatened a crisis in the world of utility regulation. If appealing to the CMA were to become the norm, what authority do independent regulators really have?

That backdrop provided spice to Ofgem’s review of returns for network companies. Sounding very much like the hissing water companies, some of electricity’s big players had warned the sky would fall in, more or less, if Ofgem stuck to its view in July that an annual rate of return of 3.95% for shareholders should apply for the next five years.

In the event, Ofgem moved to 4.3% in Tuesday’s final decision. That is still some way below the 5% to 6% that the companies had unrealistically sought, but the switch still counts as significant. In utility-land, each 10th of a percentage point counts.

Was Ofgem’s retreat a capitulation? Actually, no, one can’t say that. The regulator offered some credible-sounding technical reasons for adjusting its assessment of companies’ cost of equity, and so forth. Nor is it unusual for a regulator to revise between “preliminary” and “final” stages. This may be a case of regulation working as it’s supposed to – encouraging companies to invest in greener infrastructure while ensuring consumers aren’t ripped off.

But, before one can reach that conclusion definitively, let’s see how the companies respond. A few still muttered about reserving the right to appeal to the CMA. One hopes they don’t. Share prices are usually a useful guide and National Grid and SSE were both up – by 1.4% and 2.9%, respectively. That rather suggests the companies should just get on with their jobs.

It’s fourth time lucky for G4S shareholders

The fourth bid for G4S has produced a surrender in the boardroom. John Connolly, the chairman, emerged after the stock market had closed to give a thumbs-up to 245p a share, or £3.8bn, from Allied Universal of California.

GardaWorld, the rival bidder from Canada, is free to return for another bite, but G4S’s board was obliged to roll over at this stage and give a recommendation to accept. G4S’s share price, remember, was 146p before the fun started and, since both bidders are offering cash, there’s nothing complicated about the relative financial merits of the offers. The only mystery is why anyone wants to own G4S this badly.

Contributor

Nils Pratley

The GuardianTramp

Related Content

Article image
Google and Facebook under scrutiny over UK ad market dominance
Competition watchdog to investigate potential abuse of power and control of user data

Mark Sweney

03, Jul, 2019 @3:25 PM

Article image
Tech giants may face billions of pounds in fines from new UK watchdog
Competition regulator wants new Digital Markets Unit to have power to levy huge penalties if firms abuse code of conduct

Mark Sweney

08, Dec, 2020 @1:19 PM

Article image
Ofgem faces pricing rebellion from energy network suppliers
National Grid wants rethink on plans to halve the return that will be allowed on investment

Jillian Ambrose Energy correspondent

31, Aug, 2020 @11:39 AM

Article image
Watchdog backs regulator’s plan to reduce UK energy firms’ returns
CMA sides with Ofgem on protecting consumers by capping cable and gas pipe investment returns

Jillian Ambrose Energy correspondent

11, Aug, 2021 @10:00 AM

Article image
UK watchdog to investigate Facebook takeover of Giphy
CMA concerned acquisition could lessen competition for creation of gifs popular on social media

Rupert Neate

01, Apr, 2021 @5:41 PM

Article image
Hammond calls for regulator to investigate UK's digital ads market
Request follows independent report findings that Google and Facebook ‘dominate’ market

Mark Sweney

13, Mar, 2019 @3:21 PM

Article image
Is it time to break up the tech giants such as Facebook? | Larry Elliott
Amazon, Facebook and Google are as dominant as Standard Oil and AT&T were. But breaking them up is not going to be easy

Larry Elliott

25, Mar, 2018 @12:14 PM

Article image
Advertisers should follow Vodafone's lead after Facebook and Google failures | Nils Pratley
Telecoms giant is right to stop relying on social media titans to prevent its adverts appearing next to inappropriate content

Nils Pratley

07, Jun, 2017 @6:26 AM

Article image
Facebook, Google and Amazon could pay 'fair' tax under EU plans
Tech firms would pay wherever they have digital presence, regardless of staff location

Jennifer Rankin in Brussels

21, Mar, 2018 @3:33 PM

Article image
Ofgem faces National Grid challenge over energy earnings plan
Other network companies including Scottish Power and SSE also expected to take on regulator

Jillian Ambrose

02, Mar, 2021 @12:11 PM