The Google unit of Alphabet Inc. (GOOGL, GOOG) faces heightened regulatory challenges in the United Kingdom, which is planning to launch a new Digital Markets Unit (DMU) with powers to root out “predatory practices” of big tech firms. With fines that can rise to 10% of global revenues, plus additional penalties of 5% of daily global revenues for each day that an offense continues, the potential exposure could rise to tens of billions of U.S. dollars for leading players such as Alphabet.
To be housed within the Department for Digital, Culture, Media and Sport (DCMS), the DMU will be charged with increasing competition among tech firms and applying rules that also aim to give users more control over their data. Additionally, the U.K. government stated, “Senior managers will face civil penalties if their firms fail to engage properly with requests for information.”
The proposed new move against the power of big tech in the U.K. comes on the heels of a European Union (EU) regulation called the Digital Markets Act (DMA) that cleared a major hurdle to adoption on March 24, 2022. Alphabet and its Google division are among the leading targets of that pending measure.
Key Takeaways
- The U.K. is creating a new Digital Markets Units (DMU) with a mandate to rein in big tech firms.
- The relevant legislation is still awaiting introduction.
- Violations can trigger fines that could range into the tens of billions of dollars for tech giants such as Alphabet.
- The DMU and the pending new rules may limit Google’s ability to create targeted personalized ads and force it to pay news organizations for content.
Status and Rationale of the New U.K. Rules
As of May 5, 2022, it was unclear when the new rules and the DMU will come into full force, since the U.K. government has indicated that the necessary legislation will be introduced “in due course.”
Chris Philp, a Member of Parliament and the Parliamentary Under Secretary of State at the Department for Digital, Culture, Media and Sport (DCMS), said that the government wants to “level the playing field” in the technology industry, in which a few U.S. companies have been accused of abusing their market dominance.
“The dominance of a few tech giants is crowding out competition and stifling innovation,” Philp said.
Implications for Google
The DMU will seek to give people more control over how their data is used by tech firms, such as in targeted personalized advertisements. It intends to make it easier for people to switch between phone operating systems, such as Apple iOS and Google Android, or between social media accounts, without losing data and messages.
Google’s search engine, currently the default option on products offered by Apple Inc. (AAPL), also will be the target of scrutiny by the DMU, the U.K. government said. Yet another area of focus will be getting news publishers paid fairly for their content, with the DMU being empowered to resolve conflicts. On this score, the U.K. government indicated that the new rules could increase the “bargaining power” of national and regional newspapers.
