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On 25 April 2023, the Digital Markets, Competition and Consumers Bill (DMCC) was introduced into the UK House of Commons, bringing expanded and strengthened consumer protection laws and a new regulatory regime to promote competition in digital markets in the UK. We provided key insights into the consumer and competition law changes when the DMCC was introduced. In this article, we explain in more detail the changes and implications for competition law.
The DMCC is the product of extensive and long-running work by the UK Government and the Competition and Markets Authority (CMA), which is largely reflected in the CMA's Advice of the Digital Markets Taskforce published in December 2020 and the joint statement by the CMA and the Information Commissioner's Office of May 2021. These and other publications record the view that consumers would benefit from improved competition in digital markets but that these improvements would not necessarily come about through the application of conventional pro-competition approaches or interventions. Rather, the traditional competition law toolkit needs to be supplemented by a new and more flexible approach, designed with the dynamics of changing technology and digital markets in mind.
The CMA accordingly recommended that the Government establish a Digital Markets Unit (DMU) which would be the "centre of expertise for digital markets", intended to promote competition and innovation in digital markets and proactively prevent harm to consumers. To enable the DMU to achieve these goals, a new and tailored regulatory framework was required, together with enhancements to existing consumer protection and competition laws. The CMA recommended that certain firms be designated as having "strategic market status" (SMS) and become subject to:
The DMCC seeks to bring these recommendations (and others) to fruition and to provide the CMA with new enforcement powers through the DMU (which will remain an administrative function, rather than become a separate enforcement body). Sarah Cardell, Chief Executive of the CMA, said that the Bill "has the potential to be a watershed moment" for protection of consumers in the UK and ensuring digital markets support economic growth and innovation in the UK.
Designation of SMS
The DMCC provides that firms may be designated as having SMS in respect of a digital activity following investigation if (1) the digital activity is linked to the UK, (2) the firm has substantial and entrenched market power, (3) the firm has a position of strategic significance, and (iv) the turnover condition is met.
In more detail:
The "turnover condition" is the only clear threshold test for SMS designation, with the other requirements giving the CMA some flexibility in their determination. The CMA will need to publicly consult on any decision in respect of an SMS investigation. The designation period will run for 5 years from the date of notice of the designation decision, subject to extension or early revocation. Further guidance on how the CMA will interpret and apply the test is expected, and firms that meet the turnover condition, should assess whether they may currently or in future be considered to satisfy the remaining three conditions.
Conduct requirements may be imposed on SMS-designated firms
The CMA will be able to impose tailored conduct requirements on SMS-designated firms in relation to a relevant digital activity subject to the condition that the CMA must consider it appropriate to do so for the purposes of one or more of the following objectives:
The DMCC contains a list of prescribed permitted conduct requirements that may meet one or more of these objectives, including the requirement to trade on fair and reasonable terms, to have effective complaints handling processes, and to provide clear, relevant, accurate and accessible information about the activity to users.
It is important to note that these obligations will not displace existing competition or consumer protection laws, rather they will create a bespoke set of behavioural expectations on each SMS-designated firm that will operate alongside and strengthen these existing laws. Once a conduct requirement is set, the CMA will be under a duty to monitor compliance and take enforcement action if faced with a suspected breach, as well as to assess the effectiveness of requirements and make amendments as needed.
The DMCC will empower the CMA to make pro-competition intervention (PCI) in relation to an SMS-designated firm where, following investigation, the CMA thinks that a factor or factors relating to a relevant digital activity is adversely affecting competition and a PCI would likely help remedy, mitigate, or prevent that effect. A PCI may be:
While the standard merger control regime in the UK remains voluntary, SMS-designated firms will be required to notify the CMA before completing a merger where:
Upon notification, the CMA will have five working days to determine whether the filing is sufficient – the transaction cannot complete during this period. Once the report is accepted, the CMA can then decide to review the transaction in accordance with the wider merger control regime under the Enterprise Act 2002.
Next steps
The DMCC completed its Committee stage in the House of Commons on 11 July 2023, where minor amendments were made. The Bill will be carried over to the next session of Parliament, which is due to start on 4 September 2023.
However, we do not expect to see significant changes bearing in mind the intentions and principles that underpin the Bill. Once passed, the CMA will provide guidance on how it intends to interpret and apply the new rules and powers.
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