In the first of a flurry of new reports, yesterday we released a new paper with the International Centre for Law and Economics, arguing that the Competition and Markets Authority’s new Digital Markets Unit (DMU) risks chilling investment in UK startups and undermining competition.

While the new regulatory powers are aimed at the likes of Google and Facebook, we’ve heard from lots of tech entrepreneurs and investors concerned that by creating huge uncertainty around mergers and acquisitions, the new regime would cut off a potential exit for many startups. Just yesterday, an early-stage VC told me that making an IPO effectively the only possible exit for them would result in them passing on otherwise investable businesses.

As my colleague Sam Dumitriu writes in City AM: “Under the new regime, any deal involving a regulated company with a ‘greater than fanciful’ chance of reducing competition would be blocked, even if the CMA thought it would, on balance, increase competition. Entrepreneurs should be worried about this: attracting VC investment will be much harder if exit-by-acquisitions is taken off the table or made more difficult.”

As its remit expands, the DMU is likely to become a super-regulator. Sam Bowman, another of the report's authors, writes for CapX: “In a few years, the idea that there is such a thing as a distinct ‘digital market’ will be as meaningless as referring to a ‘market that relies on the roads’. Everything will be a ‘digital market’, and every firm that succeeds in these markets could fall under the control of the DMU.”

There is growing concern in Parliament too. John Penrose MP, author of the Penrose Review of Competition Policy, who wrote the foreword for our report said: “The DMU under its current proposed set-up risks becoming a bloated and unwieldy regulator which could be seized by vested interests and hold back innovation through over burdensome regulations. The government should be wary of this. We want post-Brexit and post-pandemic Britain to be the best place in the world to start a business. The DMU jeopardises this aim. We should not risk leaving the UK less competitive and with less successful companies, exports and jobs – making us a poorer country in the long-run.”

I recommend reading the report and articles linked to above for details of the wider concerns about the regulatory changes. We’re also hosting a virtual roundtable discussion on this topic with the DMU on Wednesday at 2pm. Just let me know if you’re keen to attend (as well as little about why).

James Croft
Over the bank holiday I learned the sad news that James Croft had sadly passed away. Most recently in his role as co-founder of Whitebeam Strategy, James wrote our Education Entrepreneurship Monthly newsletter, and a few years ago worked with us on the Business Stay-Up campaign with ABE.

I first got to know James when he set up the Centre for the Study of Market Reform of Education (CMRE), which later became Centre for Education Economics (CfEE). He was always incredibly modest about what he achieved, but for my money he was producing the best research on education policy of any think tank.

James delivered solid research because he was extremely thoughtful and a genuine seeker of the truth. He was also assiduous in everything he wrote and edited, and allowed others to flourish by giving them the freedom and funds to write.

But, first and foremost, James was an incredibly kind and generous man. He always had time for a chat and always looked for the good in others. While we only really saw each other when working on projects or at events, it’s proof that friendships can be made and strengthened through work.

Other people who knew him shared their thoughts – all of which are testament to his good character. Here are just a few:

– Dame Rachel de Souza: “So sad to hear this. James was a lovely man and will be sorely missed. Thoughts with his family.”

– Dr Nicholas Capstick, OBE: “An amazing man with an amazingly agile brain and such a gentle persona.”

– Sam Bowman: “Really sad news that James Croft has died. He was kind, intelligent and did great work in education policy. I'm really glad to have known him and been able to work with him.”

– Ryan Shorthouse: “A great loss. A lovely, thoughtful man.”

Our thoughts are with his family. He will be missed.