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Google and Facebook to be scrutinized by new U.K. unit from next year

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Mark Zuckerberg, Chairman and Chief Executive Officer of Facebook, arrives to testify during the House Financial Services hearing on An Examination of Facebook and Its Impact on the Financial Services and Housing Sectors on Wednesday, Oct. 23, 2019.

Bill Clark | CQ-Roll Call, Inc. | Getty Images

LONDON —  The U.K. on Friday said a new government unit will work to tackle ongoing concerns about a concentration of power among a small number of tech giants.

The Department for Digital, Culture, Media and Sport said it plans to create a Digital Markets Unit (DMU) to enforce “a new code to govern the behavior of platforms that currently dominate the market, such as Google and Facebook.”

The code is designed to ensure that consumers, small businesses, and news publishers aren’t disadvantaged by actions taken by tech giants, the government said.

Under the new code, some of the world’s biggest tech companies may have to be more transparent about the services they provide and how they use consumers’ data. They may also be forced to give consumers a choice over whether to receive personalized advertising, and they won’t be able to place restrictions on customers that make it difficult for them to use rival platforms. 

The DMU, which will be part of the Competition and Markets Authority (CMA), will start work in April 2021.

The government said the DMU may be given the unit the power to suspend, block and reverse decisions made by large tech companies. The DMU could also order them to take certain actions to achieve compliance with the code, and impose financial penalties for non-compliance, the government said.

Digital Secretary Oliver Dowden said in a statement: “I’m unashamedly pro-tech and the services of digital platforms are positively transforming the economy — bringing huge benefits to businesses, consumers and society.”

“But there is growing consensus in the UK and abroad that the concentration of power among a small number of tech companies is curtailing growth of the sector, reducing innovation and having negative impacts on the people and businesses that rely on them. It’s time to address that and unleash a new age of tech growth,” Dowden said.

Digital strategy

In July, the CMA called on the government to give it more powers and set up the DMU, saying it was necessary to rein in big digital advertising platforms. The regulator said it was concerned about how tech giants like Google and Facebook use digital advertising to fuel their business models.

Though the CMA’s recommendations had a domestic focus, the watchdog said the problems it had identified were “international in nature” and that it would look to “take a leading role globally” as part of its digital strategy.

“Through our examination of this market, we have discovered how major online platforms like Google and Facebook operate and how they use digital advertising to fuel their business models,” Andrea Coscelli, chief executive of the CMA, said on July 1. “What we have found is concerning – if the market power of these firms goes unchecked, people and businesses will lose out.”

Ronan Harris, Google’s vice president for the U.K. and Ireland, said in a statement at the time: “Advertisers today choose from a wide range of platforms that compete with each to deliver the most effective and innovative ad formats and products.”

He added: “We support regulation that benefits people, businesses and society and we’ll continue to work constructively with regulatory authorities and Government on these important areas so that everyone can make the most of the web.”

Facebook has previously said it would engage with U.K. government bodies “on rules that protect consumers and help small businesses rebuild as the British economy recovers” from the coronavirus pandemic.

“We face significant competition from the likes of Google, Apple, Snap, Twitter and Amazon, as well as new entrants like TikTok, which keeps us on our toes,” a spokesperson for the company said in a statement on July 1. “Giving people meaningful controls over how their data is collected and used is important, which is why we have introduced industry leading tools for people to control how their data is used to inform the ads they see.”

— CNBC’s Ryan Browne contributed to this story.


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EU fines PC gaming giant Valve for antitrust practices on Steam

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In this photo illustration, the Steam application seen displayed on a iPhone.

Guillaume Payen | SOPA Images | LightRocket via Getty Images

LONDON — European antitrust regulators have fined Valve and five other PC game publishers a total of 7.8 million euros ($9.5 million) over a practice known as “geo-blocking.”

Valve is most well known as the creator of the popular PC game store Steam.

The European Commission, the executive arm of the EU, said Wednesday that Valve and other publishers restricted sales of video games based on the geographical location of users. Such practices breach EU competition law.

The publishers include Japanese gaming giants Bandai Namco and Capcom, American firm ZeniMax — which owns the well-known game studio Bethesda Softworks — French developer Focus Home and German group Koch Media.

Fines for those publishers were reduced to a maximum of 6 million euros due to their cooperation with EU competition officials, the EU said. However, Valve was fined over 1.6 million euros for refusing to cooperate.

“Today’s sanctions against the ‘geo-blocking’ practices of Valve and five PC video game publishers serve as a reminder that under EU competition law, companies are prohibited from contractually restricting cross-border sales,” EU Competition Commissioner Margrethe Vestager said in a statement.

“Such practices deprive European consumers of the benefits of the EU Digital Single Market and of the opportunity to shop around for the most suitable offer in the EU.”

Valve was not immediately available for comment.

What did Valve do?

According to the EU, Valve allowed five prominent PC game publishers to distribute geo-blocked game codes for its distribution platform Steam.

“Users located outside a designated Member State were prevented from activating a given PC video game with Steam activation keys,” the Commission said.

Steam is a household name in PC gaming. It is the biggest online marketplace for PC games and generates the most revenues for Valve, which is also known for highly acclaimed game series like Half-Life and Portal.

Valve was founded in 1996 by former Microsoft employees Gabe Newell and Mike Harrington. The company has been privately owned since its inception.

The EU says Valve agreed bilateral deals with all the named publishers to issue Steam keys that prevented activation of certain games outside the Czech Republic, Poland, Hungary, Romania, Slovakia, Estonia, Latvia and Lithuania. These practices last between one and five years and were implemented between September 2010 and October 2015, according to the Commission.

Meanwhile, Bandai Namco, Focus Home, Koch Media and ZeniMax formed licensing and distribution agreements with clauses restricting cross-border sales of games, the EU added. The bloc said these deals tended to last longer — between three and 11 years — and occurred between March 2007 and November 2018.

The practices concerned around 100 PC games, according to the EU.

Why does it matter?

Vestager, Europe’s top competition official, has made a name for herself taking on the biggest tech titans in the United States. Wednesday’s news suggests she is now turning her attention to the massive video game sector.


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Netflix stock soars 13% on subscriber growth and possible buybacks

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The Netflix Inc. true crime documentary miniseries “Tiger King” overview page is displayed on a laptop computer.

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Netflix stock continued to soar in the premarket Wednesday after the company revealed in its Q4 2020 earnings report that it was considering stock buybacks and surpassed 200 million subscribers for the first time.

Shares were up more than 13% in early trading, maintaining the double-digit jump from Tuesday evening.

“We’ve gone from a historical bear on NFLX to a card-carrying bull,” Wells Fargo analysts wrote in a Wednesday note to clients. The firm also upgraded its price target to $700 per share, up from $510. At least 15 other firms also hiked their price targets.

The company said it expects to become cash flow positive after 2021, helping to make the bull case for analysts.

“We remain bulls on the NFLX story as NFLX offers consumers an increasingly compelling unique entertainment experience on virtually any device, w/o commercials at a still relatively low cost,” Pivotal Research Group analysts wrote in a note Wednesday.

Netflix has benefitted from the so-called “stay at home” boom, since the pandemic has left millions in need of daily entertainment in the comfort of their homes. That likely helped push its paid subscriber count to more than 200 million for the first time. It reached 100 million subscribers in 2017.

Netflix’s growth also comes as the streaming wars continue to heat up, with competition from Apple TV+, Discovery+, Disney+, HBO Max from AT&T‘s WarnerMedia and Peacock from CNBC parent NBCUniversalViacomCBS‘s Paramount+ is also set to launch in March.

“We continue to believe the bear case around competition hindering the long-term success of NFLX is overblown,” Jefferies analysts wrote in a note Tuesday. “Some competitors will succeed, some won’t, but the big picture is that there will be multiple winners within the OTT streaming space, and we expect NFLX to remain at the top of the food chain.”

Disclosure: NBCUniversal is the parent company of CNBC.


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Dixons Carphone has bumper Christmas as online revenues soar | Dixons Carphone

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Locked down European consumers bought big-screen TVs, food preparation gadgets and health and beauty appliances, handing Dixons Carphone’s 11% more revenue from selling electrical items over the Christmas trading period than a year earlier.

The retailer, which owns the Currys PC World brand, said computing and gaming products were also big sellers during the festive period and online sales had grown by more than 120%.

Internet sales growth was highest in the group’s Greek business, where it soared 366%.

In the UK, Dixons Carphone has not been classed as an essential retailer, meaning that its stores have been closed during lockdowns. But Alex Baldock, its chief executive, hailed the company’s increase in online sales.

“We’re winning online, where we’re the biggest and fastest-growing specialist technology retailer in all our markets. And even where stores have been closed, our work to bring the best of digital and physical shopping to every customer has borne fruit in such innovations as our one-hour drive-thru order and collect and ShopLive,” Baldock said.

The retailer said its revenue from mobile phone sales dropped by 40% in the UK and Ireland during the period, although it said this was as expected, following its decision last April to close all 531 standalone Carphone Warehouse stores, with the loss of 2,900 jobs.

The company said it would launch a new mobile offer this year.

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Dixons Carphone estimated in December the cost of Covid-related disruption, including store closures and extra spending on safety measures, to be £155m. However, the company said at the time the negative impact had been reduced to £10m by government support.

Unlike the nation’s biggest supermarkets, Dixons Carphone has said it has no plans to pay back the business rates relief it has received, which was worth £34m up to the end of October. This is despite the company having reported a profit before interest and tax of £95m in the six months to the end of October.


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