Digital Markets, Competition and Consumers Bill

Written evidence submitted by the Online Dating Association (DMCCB22)

Representation to the Public Bill Committee on the Digital Markets, Competition and Consumer Bill

Dr Hannah Shimko, CEO

About the Online Dating Association:

The Online Dating Association is the trade association recognised internationally as the voice of the online dating sector, supported by a membership of dating services who believe in trust, safety, honesty, clarity, and privacy; who believe in creating a positive experience for users; and who support a technology ecosystem that encourages innovation in online dating. We build trust and confidence in online dating through a set of industry standards and promote safe online dating education to users of apps and websites.

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The Online Dating Association is an active member of the Coalition for App Fairness (CAF), and alongside other members, welcomes the introduction of the Digital Markets, Competition and Consumers (DMCC) Bill and its ambition to drive growth, innovation and productivity, helping to ensure that businesses and consumers in the UK reap the benefits of competitive markets.

Our main concerns about competitive practices in digital markets are in relation to the following points:

● Anti-competitive measures are artificially raising prices for consumers. In 2021, the CMA found that Apple and Google were able to earn more than £4 billion of profits in 2021 from their mobile businesses in the UK over and above what was required to sufficiently reward investors with a fair return. With 27.8 million households in the UK, this equates to an approximate cost of ~£148 per UK household in overpayments. This is because the App Stores require app developers to use their payment systems. If app developers could use alternative payments systems, they would be able to offer users a better price.

● Stifling UK start-ups’ ability to scale and innovate by taxing 30% of most app purchases restricting developers of much needed capital to invest in and grow their business. For most purchases made through an app, gatekeepers take a 30% fee from the purchase price for using its in-app payment system, which it requires as a condition to access their respective app stores. This "app tax" cuts deeply into consumer purchasing power and developer revenue, and it creates a steep barrier to entry for new developers, hurting their ability to innovate. We have small members of the ODA who have made clear they have been delayed, or even restricted, from building an app to complement an already existing and successful web-based service due to the inability to make it financial viable. Now that most individuals access the internet through their phones, we know there will be users missing out on dating services because of this situation.

● Restricting competition and freedoms through self-preferencing. This anti-competitive and anti-consumer practice unfairly promotes gatekeepers’ own apps at the expense of third parties and the benefit of consumers. Dating services are required to share their data with the app store which can then be used by the app store companies to improve their own offer; however app developers have no access to the data from the app store and therefore are highly disadvantaged in an anti-competitive manner.

Part 1&2 of the Bill

We agree with the main points on the Bill submitted by CAF, and will highlight here the position of our members - online dating companies that range from major established players to start-ups and challengers, in relation to the DMCC Bill.

1. A holistic mobile ecosystems approach - The ‘leveraging principle’ (clause 20(3)(c)) is critical to ensure the regime can handle anti-competitive activity across different parts of digital ecosystems that don’t break down neatly into individual ‘activities’. We need a comprehensive solution in the form of a stronger leveraging principle, to prevent Apple or Google, the owners of the App Store or the Play Store, from simply moving its 30% fee from one location in its ecosystem to another - e.g. from app store 'service fee' to a new location like an operating system licence. This would continue to hinder innovation in our sector.

2. Deadline for implementation of conduct requirements - For swift implementation, we support conduct requirements being considered alongside SMS designation, there is no statutory deadline for the DMU to impose the first set of conduct requirements. We support a statutory requirement to impose the first set of conduct requirements at the same time as SMS designation, or within three months. Otherwise, the regime will take too long to tackle anti-competitive practices deployed by Apple and Google. The deadline should only cover the first set of conduct requirements as the DMU should be free to add subsequent requirements.

3. Consultation rights and transparency for non-SMS firms - ODA has concerns about the consultation and transparency provisions where SMS firms may receive more rights than other parties. There are places where the DMU is only required to publish a summary of a given document, meaning that the SMS firm will be given greater detail than non-SMS firms due to their position in the investigations. Further, the non-SMS firms are often only consulted at a later stage than the SMS firms. The non-SMS firms that are most directly affected should have equal consultation rights to the SMS firms. We also would encourage this consultation process to continue to have safeguards for the protection of confidential representations - small firms continue to be concerned about the repercussions of speaking out against SMS firms, and the impact this may have on their business.

4. Using market studies to inform the DMU’s work from day 1 - We understand that the DMU will want to build upon its comprehensive market study reports, which is welcome, but the Bill does not explicitly state that they are able to do so. The DMU will face strong calls from the SMS firms to start with a blank piece of paper, despite the DMU operating in ‘shadow form’ for the past two years, therefore, a provision that enables the DMU to "take account of" recent analysis (e.g. within the last 5 years) would empower the DMU to act more quickly.

5. Judicial review approach to appeal - We strongly support the judicial review standard of appeal, which is the well-established standard in UK regulated sectors and which is flexible enough for the courts to exercise a very high level of oversight over DMU actions. A full merits appeal would undermine the new regime to such an extent that it may not fulfil the purpose it is designed to fulfil. It is imperative that SMS firms are not able to re-argue the merits of the case or ask the court to impose its own views on the substance of the case.

Part 3 & 4 of the Bill

Fake Reviews

The ODA is supportive of the opportunity to allow the Secretary of State the power to add to the current list of banned unfair commercial practices under Schedule 1 of the CPRs by way of secondary legislation. The DMCC Bill supporting document clarifies that the government will use this new power to tackle fake reviews and will be consulting on practices around fake reviews during the passage of the Bill.

Many online dating services have longstanding concerns and challenges with fake reviews. In particular, competing, but dubious, dating sites post fake negative reviews which link to the competitor’s site. These are found on many well-known review sites, and members have found it difficult to get these fake reviews taken down. Therefore, we are very supportive of further regulation of the publishing, procurement or sale of fake reviews being included in a CPR. We support the further secondary legislation based on proposals from the Reforming Consumer and Competition Policy recommendations from April 2022; in particular the expectation of hosting sites to take reasonable and proportionate steps to check they are genuine.

Subscription Practices

The ODA is supportive of creating fair practices for consumers of subscription services. Many dating services run on a subscription model, offering users different levels of engagement for meeting their needs at different times. This model allows dating services to create revenue through monthly subscriptions and ‘boosts’ for users’ experience, rather than advertising revenue. By not relying on advertising revenue, there is no incentive for dating services to host fake profiles and bots, or encourage users to interact with the service more than they desire. Dating services are very committed to creating safe spaces for their users.

However, we would caution against overly prescriptive regulations in relation to how companies deal with subscriptions. We believe this places excessive regulatory burden on businesses due to the overly prescriptive nature of the proposals and challenges in demonstrating paths to compliance. We do not believe that this approach is necessary to deliver the Bill’s objectives, and could prevent dating services from providing reminders to consumers in the ways that are most relevant and proportionate for the services being rendered. The more simple and concise this list of pre-contract information is, the more likely the consumer will actually read and understand it.

We support proposals that primary legislation should take a more principles-based and outcomes-oriented approach to pre-contract information and reminder notices, including the mode of presentation, so that the regulator responsible for overseeing these interactions will be empowered to engage with different business models in a more flexible manner. Rather than including an exhaustive list of information that must be disclosed to consumers, we recommend a more flexible standard, such as that traders must disclose all material terms of the contract during sign-up.

Finally, Section 252(1)(a) requires traders to allow consumers to bring subscription contracts "in a single communication" and clause 252 says that a consumer can notify a trader to end a subscription "by any means" and clauses 256-258 require cooling-off periods for subscriptions, including following the end of a concessionary period and after any renewal of a subscription with a term of one year or longer. There do not appear to be provisions to prevent purchasers of digital services from signing up, benefiting from the services, and then cancelling within the cooling-off period.

The dating industry is particularly concerned that this is such a wide definition that it could encompass not just the cancellation methods provided by traders, but also a direct tweet or Facebook Post to the trader, for example. Dating services, as many other services, have ongoing challenges with users who sign up for their services, use them frequently and heavily, and then ask for a cancellation and refund because the service ‘did not meet their needs’. Services need to be able to work through this situation without undue burden of ‘one communication’ or providing services to users who then want a refund.

We do not believe these difficulties to be the government’s intent, but emphasise that the legislation as currently worded would be extremely complex and burdensome to implement.

June 2023