As we know, Ofcom is the regulator responsible for enforcing the UK's new Online Safety Act 2023, which is primarily designed to bring global social media platforms and search platforms under some degree of regulatory control as far as UK users are concerned.

Ofcom is now consulting on two important elements of the Act:

1. Fees due: Firstly, given that Ofcom's enforcement work under the Act will be funded by most of the tech firms it regulates, Ofcom is consulting on the annual fees regulated platforms and firms will need to pay. It is expected that only companies that reach a certain threshold in terms of ‘qualifying worldwide revenues’ will need to pay such fees, and the amount they pay will be based on the amount of qualifying worldwide revenue.

2. Penalties: At the same time, Ofcom is in the process of clarifying how it will calculate the maximum penalties it may levy against the same regulated platforms and firms if they are found to have breached the requirements of the Act. Under the Online Safety Act, Ofcom has a range of enforcement powers to deal with firms that fail to comply with their new duties and obligations that were introduced by the Act. Perhaps most the most important enforcement tool in its arsenal is the ability for Ofcom to impose a stiff financial penalty of up to 10% of a regulated company's ‘qualifying worldwide revenues’ (or £18 million, whichever is the greater).

Definition

So, the important question is, how should ‘qualifying worldwide revenue’ (QWR) be defined? That is precisely the question Ofcom now seeks to answer. It has started a consultation process to confirm this point.

It proposes to define QWR as the total revenue of a provider referable to the provision of regulated services anywhere in the world. 

Fees

When it comes to fees, providers of regulated services are required to pay fees if their QWR meets or exceeds a threshold that will be set by the Secretary of State as advised by Ofcom. Ofcom proposes to advise the Secretary of State to set the QWR threshold, at or above which providers of regulated services will be required to pay fees, at £250 million. It considers that any threshold figure within a £200 to £500 million range could be appropriate.  

The Act enables Ofcom to make regulations requiring providers of regulated services to notify Ofcom if their QWR meets or exceeds the QWR threshold. It is consulting on draft “Notification Regulations”  which set out the “evidence, documents or other information” providers must supply to Ofcom for fees notifications and how these should be supplied. 

Subject to the Secretary of State’s approval, Ofcom also proposes that providers of regulated services whose UK referable revenue is less than £10 million should be exempt from the duty to notify as well as the duty to pay fees.

Ofcom must also issue a Statement of Charging Principles (SoCP) and plans to consult separately on the draft SoCP itself next year.

Penalties

If Ofcom finds a provider and one or more of its group undertakings jointly and severally liable for a breach of the duties under the Act, the maximum penalty is calculated based on the QWR of the entire group. 

Next steps

The consultation ends on 9 January 2025. Ofcom will consider responses in early 2025, following which it will publish its statement, and formally provide advice to the Secretary of State, who will ultimately decide on the threshold for the payment of fees.  

In addition, providers of regulated services who are liable to pay fees will be required to pay additional fees over a number of years to recover the initial costs of setting up the online safety regime. Before Ofcom can charge these additional fees, the Secretary of State must consult on, and make, regulations which set out how they will be calculated and the period over which Ofcom should recover them.