UK regulator holding up Microsoft’s Activision deal set to get new powers to rein in Big Tech

The U.K. government on Tuesday published a draft bill that would give a newly created division within the independent competition regulator powers to levy huge fines against Big Tech firms for competition abuses, and investigate and block acquisitions with greater speed. 

The draft Digital Markets, Competition and Consumers bill will take aim at tech companies with annual revenues of at least £25 billion ($31.2 billion) globally, or £1 billion in the U.K., according to a statement.

That’s sure to include Amazon, Apple, Google, Microsoft and Meta, which generated $514 billion, $394.33 billion, $282.8 billion, $198 billion and $116.6 billion in revenue respectively in 2022.

The bill will empower the Digital Markets Unit – a new regulatory body within the Competition and Markets Authority that was created in 2020 with a mandate to promote competition and innovation in digital markets – with enhanced enforcement powers regarding Big Tech mergers and acquisitions.

That includes changes to the thresholds for mergers and fines that mean the CMA “can conduct faster and more flexible competition investigations, which identify and stop unlawful anticompetitive conduct more quickly,” the CMA said in a separate statement.

The new law, which is set to be unveiled in Parliament on Tuesday, will also give the CMA the ability to impose fines of at least 10% of firms’ global annual revenues on firms that breach the rules. The law hasn’t yet been approved by lawmakers but is widely expected to receive cross-party support.

The CMA has been at the center of some major Big Tech crackdowns lately. The watchdog has held up Microsoft’s $69 billion acquisition of video game publisher Activision Blizzard with an in-depth competition investigation. It previously ordered Facebook to divest the U.S. GIF-making platform Giphy.

Katherine Kirrage, digital competition partner at Osborne Clarke, said it’s rare that a competition regulator fines a company the maximum 10% level – but it’s the risk to their reputation they should worry about.

“In practice, the maximum 10% threshold is rarely reached in the competition law field and a key point will be understanding how the CMA will calculate consumer law fines,” Kirrage said in emailed comments to CNBC. 

“If it takes a similar approach of starting with turnover only in the market where the infringement has happened, this takes the focus away from total group turnover and tends to make the eventual fine much lower than the 10% maximum. That said, fines in the millions are common in the competition world.”

She added, “Also, it is inherent in the logic of creating these strong sanction powers that they should have a significant deterrent effect on others. The adverse PR impact of a big fine that catches the headlines shouldn’t be underestimated – our experience is that businesses worry at least as much about the reputational risk of an infringement as they do about the fines.”

The law is intended to crack the dominance of tech giants like Amazon, Microsoft and Apple when it comes to online markets. These companies have faced accusations of limiting competition through a number of ways, including restricting the use of software to certain platforms and using data on their customers to boost their businesses.

On Monday, one particular competition case concerning Apple was dealt a setback when a judge mostly sided with the company in a legal battle with U.S. video game maker Epic Games.

Epic, which had its popular Fortnite game removed from the App Store after introducing a direct payment option that broke Apple’s rules, accuses the Cupertino tech giant of harming competition in app distribution and payment processes.