Tech watchdog’s wings are clipping following Silicon Valley pressure Business

The new tech watchdog will have its powers to block takeovers by Silicon Valley giants after ministers bowed to pressure from Google and Facebook.

Ministers are drawing up plans to ease a crackdown on tech acquisitions under the Digital Markets Unit after fears it could stifle investment in UK startups, Whitehall sources say.

The unit within the Competition and Markets Authority was created to rein in the Silicon Valley giants, including the power to more easily intervene in takeovers by big tech companies with “market status” strategic”.

However, experts have warned that the startup scene will be badly damaged by proposals that would virtually ban big tech companies from making deals by judging them by a tougher new standard.

Whitehall sources said powers to block takeovers will be significantly limited in a major win for Silicon Valley and startups.

“The proposed new merger control regime will not be implemented,” a source said. “That’s the only thing that needed to be changed that was preventing something that’s otherwise really great and really impactful.”

The digital markets unit had drawn opposition from early-stage startups and big tech, including Google and Facebook. It had been hoped that legislation giving the unit the new powers would be introduced this year following consultations.

The startups warned that the initial proposals threatened to hurt investment because they could block a lucrative exit route from stakes in innovative startups.

Sam Dumitriu, Research Director at the Entrepreneurs Network, said: “Startup creation and venture capital investment are extremely sensitive to the availability of exits. If the ability to exit through the acquisition of Big Tech were removed, it would give founders fewer options and make starting a tech company more risky.

He warned the proposals would mean “fewer high-growth tech companies starting in the UK and a tougher investment environment for those who stay”.

A poll by startup industry group Coadec found that 90% of investors believe the ability to be acquired is “very important to the success of the tech startup ecosystem”. Half warned that restrictions limiting the exits of startups would “significantly reduce investment”.

Coadec estimates the Digital Markets Unit plans could result in a £2.2bn drop in venture capital as countries with more liberal takeover rules benefit from greater investment.

He said in a report last year that lowering the bar for intervention in tech buyouts “threatens the foundations of the tech ecosystem.”

“This lower bar demonstrates the mission creep that Parliament should be afraid of, as it effectively empowers the Competition and Markets Authority to block any acquisition that can be seen to have a realistic prospect of harming competition. .”

When unveiling the Digital Markets Unit’s new powers last year, the government said it would ensure that “British businesses are on a level playing field with tech giants and that the public obtain the best services at fair prices”.

He said the reforms will “lead to greater dynamism in our tech sector, empower consumers and spur growth across the economy.”

A spokesperson for the Department for Digital, Culture, Media and Sport said: “Our pro-competitive regime will change the behavior of the most powerful technology companies and protect the businesses and consumers who depend on them across the world. economy. It’s about supporting competition and innovation, without stifling it.”