Digital Markets, Competition and Consumers Bill

Written evidence submitted by Online Travel UK (OTUK) to the Digital Markets Competition and Consumers Bill (DMCCB27).

Summary

Online Travel UK welcomes the introduction of the Digital Markets, Competition and Consumers Bill to Parliament. This long-awaited piece of legislation is important in ensuring digital markets for products such as travel remain competitive for the benefit of consumers and businesses alike. We hope that the Bill progresses swiftly through both Houses and stand ready to work with the Competition and Markets Authority (CMA) once the Digital Markets Unit (DMU) receives statutory powers.

About Online Travel UK

Online Travel UK is a new association of some of the UK’s leading online travel services. Our members seek to make travel as easy as possible for consumers by enabling them to compare travel options and identify the best deal for them. By boosting competition and transparency, our services are a vital growth driver for what is a key sector for the UK economy. Online Travel UK seeks to preserve the benefits of competition and transparency for UK consumers via joint engagement with UK policymakers. Collectively, we have a wealth of insight and experience which we aim to use to help deliver better outcomes for UK consumers. Our members include Booking.com, eDreams ODIGEO, Expedia, Kiwi, Lastminute.com, Loveholidays, On The Beach, and Skyscanner, Travel Republic.

As online businesses, we welcome the opportunity to be part of the ongoing discussion around the Digital Markets, Competition and Consumers Bill and want to put on record our support for the DMU regime. While we have some comments on the content and drafting of the Bill, we are aligned with its intentions and look forward to its speedy passage through the UK Parliament.

The Digital Markets, Competition and Consumers Bill

Why this Bill is needed

The Bill will deal with numerous abuses by firms with Strategic Market Status (SMS). A key practice that it will be able to prevent is self-preferencing, something our businesses have been directly harmed by. Self-preferencing can manifest itself in many ways, but it is essentially the practice of a firm using its overwhelming dominance in a particular activity (such as control of a mobile operating system) to leverage an unfair advantage for its own adjacent products and services (by restricting the use of alternative app stores, for example). This means small and medium sized challenger firms cannot compete truly on the merits of their service, as they are not competing within a level playing field.  

In the online travel space, our experience of self-preferencing relates to Google’s dominance of online search, through Google Search. We rely on Google Search to access consumers. Yet Google uses its leverage as an access point to consumers to provide an advantage to its own competing vertical travel search services. Google self-preferences its own separate travel search services on the general search page by:

· Dedicating much more screen space to its own Flights/Hotels services;

· Placing its own services higher up the rankings on the search results page (they are placed ahead of organic results, and directly under paid-for ads, which Google also profits from), and;

· Allowing its own services to enjoy much richer features (for example, photos, date boxes, accurate prices) directly on the results page.

The combined effect of all this self-preferencing on the general search page is to drive traffic to Google’s own Flights/Hotels service, and away from competing services. The impact on consumers is even more stark: they are being deprived of greater choice, by not being served the services and products that are most relevant to their needs.

How this Bill would help

Existing, ex-post competition regimes have proven ineffective at dealing with such anti-competitive behaviour. With no ground rules established up front, enforcement requires competition authorities to try and impose remedies after long investigations. This process, which includes endless appeals by Big Tech firms, can take years, in which time harm has become irreversible and the market has already tipped to such an extent that any proposed remedies are ineffective.

This Bill, in contrast, prevents abusive practices up front. It will enable the CMA to stop a firm designated with Strategic Market Status (SMS) (such as Google) in a digital activity (such as online search) from "using its position in relation to the relevant digital activity…to treat its own products more favourably than those of other undertakings. " The Bill will, in short, put a stop to the kind of behaviour described above, allowing innovative firms to compete on the merits.

The need for quick remedies and a suitable appeals standard

Given the inadequacies of the existing competition regime when applied to fast-moving digital markets, it is essential that the CMA is able to impose remedies quickly. SMS firms, with their vast resources, must not be able to appeal every single enforcement decision or remedy, as they have done under the existing regime. Implementation delays quickly render remedies obsolete in the digital economy. That is why it is vital that Parliament and the Government keep a judicial review (JR) appeals standard in the Bill. A merits-based appeals standard would be fatal to the regime for two reasons. Firstly, the CMA’s own experience suggests that merits-based appeals take on average twice as long as JR appeals. But more importantly, merits-based appeals standards, by allowing SMS firms to re-make their case to a new audience with new evidence, encourage SMS firms to launch a higher number of appeals as the chances of success are higher. JR provides a meaningful avenue for appeal while ensuring the swift resolution of cases, to the benefit of consumers.

The definition and scope of "digital activity"

We understand and agree with the approach to designate firms as having SMS in respect of particular digital activities. However, we are yet to see a list of proposed digital activities that the CMA will consider as part of SMS designation, nor has the Government or CMA committed to consulting on the list of digital activities that will be considered. From our conversations with the Government, we have been advised that "digital activity" is a broader concept than simply an industry vertical such as travel bookings and may include areas such as online advertising or search. We are keen to ensure that the DMU’s codes of conduct have the desired effect on real world digital markets. Given the potential benefits of the new regime to the online travel sector, we would welcome clarity on how industry verticals which include elements of both search and online advertising, but also app stores, payments, cloud computing, Artificial Intelligence etc. will be examined.

One solution could be for the CMA to publish an initial short-list of digital activities that they will be examining and be open to feedback from stakeholders about any additional activities that should be included.

Revenue thresholds for Strategic Market Status

From our conversations with the Government prior to the publication of the Bill, we understand that the intention of SMS is to ensure only the very largest online companies are covered by the enhanced regulatory regime. At various points we have been told that this may be only five or so "gatekeeper" firms. This approach makes sense and would ensure that the Digital Markets Unit regime is targeted at those firms with a truly dominant and strategic position online. However, we were surprised to see in Clause 7 of Chapter 2 the turnover condition for SMS set at £1bn for UK revenues within a certain period and global turnover of £25bn.

While these numbers are of course significant, they do imply that a much larger number of digital companies could be considered for SMS designation. While we appreciate that the turnover condition is a necessary but not sufficient part of SMS designation, we believe the Bill would be more in line with the intentions of the Government if the overall threshold was raised to at least £40bn globally.

Progress on fake reviews

We welcome the Government’s plans to use the power created by the Bill to add creating and commissioning fake reviews to the list of business practices that are always considered unlawful.

While we note some overlap with the Online Safety Bill, which also introduces duties for online firms to act against fraudulent reviews, we would welcome the promised consultation on adding fake reviews to the transposed Consumer Protection from Unfair Trading Regulations 2008 to be expedited so that the industry can consider these proposed obligations together.

June 2023.