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The Research Brief: All hail the Digital Overlords

Your weekly dose of policy thinking.

By Spotlight

Welcome to the Research Brief, where Spotlight, the New Statesman’s policy section, brings you the pick of recent publications from the think tank, charity, government and NGO world. See more editions here.

What are we talking about this week? We’re talking about a new paper, Digital Overload: How the Digital Markets, Competition and Consumers Bill’s sweeping new powers threaten Britain’s economy. It’s from the Institute for Economic Affairs (IEA), written by one of their staffers plus two experts in competition law – Dirk Auer and Lazar Radic. They’re based at a co-publishing organisation called the International Centre for Law and Economics, a “”non-partisan research centre” that looks to “promote the use of law and economics methodologies to inform public policy debates”, according to its website.

The IEA, eh? They sound familiar. They will be to many regular New Statesman and Spotlight readers. They’re the free-market think tank that were closely associated with the brief experiment in “Trussonomics” last year. When that period drew to a swift close, the IEA and many others on the (in)famous Tufton Street think tank circuit, were variously labelled as either a) dangerous libertarian ideologues who crashed the economy; or b) misunderstood visionaries whose supply-side reform ideas weren’t adequately communicated by the shortest-serving PM in history (delete as appropriate).

Right, so what’s their Digital Overlord paper saying? Not overlord, OverLOAD. The Tory MP and former justice secretary Robert Buckland writes in the introduction that the Digital Markets, Competition and Consumers Bill (DMCC), currently making its way through parliament, “risks putting up barriers to innovation and investment that could greatly restrict the growth of the UK’s digital sector”.

For the opposing view, the Competition and Markets Authority (CMA) says the DMCC is a “watershed moment” for protecting consumers. The proposals could give the CMA new powers to enforce big fines for practices such as operating “subscription traps”.

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Subscription traps? Yes – we’ve all been there. That’s when we’re hoodwinked into agreeing a subscription through a free trial or reduced price offer. That might be fair enough on the company’s part, but unscrupulous sellers can sometimes abuse what’s called continuous payment authorities to take as much money as they want, whenever they like, without prior notice. The government estimates that unwanted subscriptions like these cost us £1.6bn a year.

[See also: The Trussites are plotting their comeback]

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Yikes. Indeed. So do go and check your bank statements carefully. And that’s not all. The DMCC is also likely to ban the commissioning of fake customer reviews, and will probably also force companies to verify customer reviews are genuine before they quote them in marketing (the government will consult on these powers being introduced by the Secretary of State through secondary legislation – which would make the DMCC easy to amend and interpret).

On the subscription side, companies will have to make it easier to cancel – so if you subscribe online you should be able to cancel online, too. The Bill also accounts for so-called interoperability, which means companies will have to make it easier to switch between online service platforms, taking their data with them. That’s meant to allow newcomers to challenge established online brands and websites.

It will also be an offence to falsely state “that a product will only be available for a very limited time”, and use of other online “dark patterns” designed to trick you into signing up or buying something.

It all sounds fair enough. So what’s the IEA worried about? As you might expect from a free-market think tank that promotes market solutions, deregulation, and limited government, it is worried about regulatory oversight. “Whilst well intentioned,” the authors say, “this Bill would grant substantial powers to the new Digital Markets Unit [a division of the CMA], risking an overreach in regulation without the necessary checks and balances.”

The bolstered regulatory body will get “extensive new powers to categorically prohibit certain types of conduct at an incipient stage and impose far-reaching remedies”.

Of particular concern is the fact that it will “only be possible to challenge the decision-making on process grounds under the judicial review standard”. That means that “courts will not assess whether the CMA was ‘right’, but whether the correct procedures were followed”. The new processes and enhanced levers for the CMA and the Secretary of State could lead to “regulatory capture and politicised decision-making”, the report adds.

Crucially, it says that the Bill could “deter post-Brexit investment in the British economy and damage job creation in high-tech industries”.

And we wouldn’t want the state and its agencies “telling some of the most successful and popular platforms on the planet how to run their businesses”, would we?

Depends what they’re telling them to do. I suppose it does. But basically the IEA wants the rules to be tightened up as they pass through the Lords. They want it to be made easier to appeal the decisions of the regulator, and for those decisions to be subject to a “full merits review” based not just on whether the CMA has followed the right processes but whether it has correctly interpreted the law according to the facts. They also want the “interoperability” rules watered down, saying that the CMA should have to “demonstrate how proposed interventions… will be beneficial for consumers”.

Will any of this happen? We’ll have to wait and see as the DMCC makes its way through the Lords. The IEA are a well-connected bunch, with friends and allies in the cabinet (as well as in the tech industry itself, which will have much to say as the Bill goes through committee stages in the upper chamber).

In a sentence? To protect the interests of high-value digital industries, we shouldn’t hand too much power to regulatory bodies.

Read the full report from the Institute for Economic Affairs here.

If you have a report, briefing paper or a piece of research that you’d like featured in the Research Brief, get in touch at