A New Era for Digital Regulation: Unpacking the UK’s Digital Markets, Competition & Consumer Bill

Regulation of Digital Markets

At the heart of the DMCC Bill is the establishment of a “pro-competition regime for digital markets.” The new ex-ante regulatory regime is designed to provide a more nimble and effective means of addressing issues in the fast-paced digital sector. The Digital Markets Unit (“DMU”) within the Competition and Markets Authority (“CMA”) will play a pivotal role in enforcing the new regulatory framework. The new regime will operate alongside existing competition law contained in Competition Act 1998. It will be at the discretion of the DMU whether to pursue any offending conduct under their competition law powers or under the new digital markets’ regime.

Strategic Market Status

The Digital Markets regime applies to digital platforms that have Strategic Market Status (“SMS”). So, which platforms are likely to be covered?

The CMA has the authority to designate undertakings with significant market power in digital activities as having SMS. An undertaking can be designated as having SMS if it provides digital activities in the UK, enjoys a substantial and entrenched market power, and meets the turnover thresholds. The turnover thresholds are satisfied only if an undertaking has a group worldwide of £25 billion or UK turnover of £1 billion. Likely front runners for designation include Apple, Meta ( Facebook) and Alphabet ( Google).

The DMCC Bill gives the DMU the power to start an SMS investigation into a digital platform if it thinks it meets the SMS thresholds and it is appropriate to do so. This gives the DMU the flexibility to target the most powerful players and to roll out the SMS designation process in a controlled and managed way. This contrasts to the automatic designation process for gatekeepers based solely on turnover thresholds, as seen in the EU’s Digital Markets Act.

Conduct Requirements

The CMA can impose conduct requirements on Designated Undertakings, tailored to their specific business circumstances. These requirements revolve around principles such as fair treatment of users, freedom of choice, and transparency. The bespoke nature of conduct requirements for each designated undertaking emphasises the flexibility in the new UK regime enabling it to better address the regulatory challenges posed by individual platforms. Again, the UK’s approach contrasts with the EU’s standardized obligations for “gatekeepers,” allowing for a more nuanced regulatory environment. In case of a suspected breach, the CMA can initiate a Breach Investigation, providing a fair and transparent process for Designated Undertakings to respond. The DMCC Bill grants the CMA extensive powers, including the ability to issue enforcement notices and interim measures, ensuring timely intervention.

Pro-Competitive Interventions (PCI)

The DMCC Bill introduces Pro-Competitive Interventions, a mechanism for fast-track remedies to address adverse effects on competition in digital markets. PCI investigations provide for short form market investigations to allow the CMA to issue orders or recommendations, providing a flexible tool for regulatory intervention around four months. This contrasts with the 18–24-month period it takes to hold a full-blown market investigation under the Enterprise Act 2002

Duty to Notify Mergers

Designated Undertakings must report qualifying transactions, giving the CMA the opportunity to scrutinize acquisitions for potential anticompetitive effects. This duty enhances transparency and allows the regulator to effectively oversee mergers in the digital sector. This provision needs to be read in conjunction with the proposed enhanced merger control thresholds elsewhere in the DMCC Bill which will allow the CMA to give greater scrutiny to “killer acquisitions”. Killer acquisitions are those mergers where large companies acquire much smaller or nascent competitors with market changing potential to remove the competitive threat and, to bolster their own leading market position. This has been a particular trend with “Big Tech” companies in recent years.

Penalties and Appeals

The DMCC Bill empowers the CMA to impose substantial penalties for breaches of CMA enforcement orders made under the Bill’s provisions, including fines of up to 10% of worldwide group turnover. Individuals may face fines of up to £30,000. Robust appeal mechanisms subject to judicial review principles ensure a fair and transparent process for affected parties. However, after sustained lobbying by “Big Tech” it is believed the Government may be considering allowing appeals on “a full merits” basis. The danger of this amendment is that it could incentivise big tech firms to take an adversarial approach to the regulators and slow down the regulatory process which would undermine the central objective of the legislation. To provide fast and effective solutions in fast moving digital markets.

Private Rights of Action

A ground-breaking aspect of the legislation is the broad private rights of action, allowing parties affected by breaches to seek damages in court. This provision opens the door for collective actions, potentially exposing technology companies to significant legal challenges.

Conclusion

The DMCC Bill represents a bold step toward addressing the challenges posed by powerful digital platforms in the UK. By introducing a flexible and proactive regulatory framework, the legislation seeks to empower third-party sellers, app developers, consumers, and other stakeholders to obtain faster and more effective remedies to the unfair conduct of digital platforms. The establishment of the Digital Markets Unit within the CMA and the innovative features of the DMCC Bill position the UK at the forefront of digital market regulation. As the legislation comes into force, the interactions between the DMU and “Big Tech” will undoubtedly shape the future of the digital economy in the UK.

If you would like more information on these developments or other matters covered by the DMCC Bill, please contact Robert Bell or your usual Memery Crystal contact.