The Digital Markets, Competition and Consumers Act is Approved: Key Things to Know About the UK’s New Competition and Consumer Powers

On May 23, 2024, the UK finally passed its Digital Markets, Competition and Consumers Act (DMCCA), introducing a new “pro-competition” regime for digital markets and marking the biggest reform to UK competition and consumer laws in a decade. The DMCCA is the latest piece of legislation aiming to tackle the power of Big Tech, as regulators around the world debate new ways to oversee competition in the digital sector.

Below are the key points you should know about the DMCCA. For more details on the original proposals for the DMCCA, and a comparison with the EU’s Digital Markets Act, please refer to our earlier Sidley Updates here and here.

1. Pro-competition regime

The DMCCA introduces a new “pro competition” regime to enable the CMA to act more quickly and effectively in relation to digital markets. The CMA’s Digital Markets Unit (DMU) will designate certain tech companies with “strategic market status” (SMS). SMS companies will be subject to: (i) bespoke enforceable codes of conduct; (ii) the prospect of “pro-competitive interventions;” and (iii) a strict merger reporting regime which captures minority investments as low as 15%.

The DMU will have robust enforcement powers, including the ability to impose financial penalties of up to 10% of a company’s global turnover, as well as civil penalties on named senior managers and director disqualifications.

While only time will tell how the CMA will exercise these new powers, it has published detailed draft guidance for consultation. In particular, the CMA is seeking views on, among other things, the proposed basis on which it will designate SMS firms and corresponding codes of conducts, the approach for assessing whether pro-competitive interventions are required, and its approach to the bespoke SMS merger reporting regime.

2. New merger control thresholds

The DMCCA will implement new merger control thresholds that will significantly expand the CMA’s jurisdictional remit, capturing transactions by acquirers with a large UK presence (i.e., with a share of supply >33% and turnover >£350m in the UK), even where the target has limited UK nexus and there is no overlap between the acquirer and the target. For private equity clients this is significant because it will apply across all of their portfolios, bringing an increased number of transactions within scope for review.

In light of the voluntary nature of the UK merger control regime (which is not impacted by these changes), guidance is expected from the CMA on when to notify transactions that meet the new acquirer-focused threshold.

Separately, there are important procedural changes to the existing regime, including a broader scope to request fast-track referrals to in-depth Phase 2 investigations for particularly complex acquisitions and the ability for merging parties and the CMA to mutually agree to stop the clock during a Phase 2 investigation, which will likely be helpful for early consideration of remedies, or in multi-jurisdictional mergers where several investigations are being undertaken in parallel.

3. Increased evidence-gathering powers

The DMCCA will considerably enhance the CMA’s evidence-gathering powers. In addition to new powers allowing any relevant person to be called to interview as part of competition investigations (regardless of any connections to the relevant parties), the DMCCA will also impose a duty on companies to preserve any documents relevant to a competition investigation, even if the CMA has not requested them, and to produce information stored remotely (i.e. on the cloud).

The CMA will likely seek to rely on these bolstered evidence gathering powers to complement its pre-existing investigative tools.

4. Extra-territoriality

The DMCCA will also significantly expand the CMA’s geographical remit by allowing, in certain cases, investigation of anti-competitive agreements implemented outside of the UK. Other UK regulators with competition powers, such as the ICO, FCA and Ofcom, will also benefit from increased global reach and be able to send information notices to non-UK companies as part of merger and market investigations.

5. Enhanced co-operation between regulators

While other UK sectoral regulators have their own concurrent competition powers, the CMA will be required to consult with these bodies when proposing to exercise certain digital markets functions. Further, the CMA will be able to provide investigative assistance to, and, in certain situations, use its powers to gather information in the UK on behalf of, overseas regulators. These changes signal increased cooperation between both domestic and international regulators.

6. Strengthened market-inquiry-based powers

The DMCCA grants the CMA a range of new and enhanced market inquiry-based powers. These include greater flexibility to define the scope and process of market studies and investigations as well as the ability to accept binding commitments at any stage during the process.

While these changes will likely make market studies and investigations more efficient and effective, they could also lead to a ramp-up in market inquiries and investigations generally. This is likely to be the case especially in concentrated markets that are prone to competitor/consumer complaints, and in industries of particular relevance to the Government’s economic priorities.

7. Significant fines for non-compliance

Companies that fail to cooperate with the CMA in competition and market investigations may be fined (i) up to 1% of their global turnover for non-compliance with investigative measures, and (ii) up to 5% of their global turnover for non-compliance with remedies, for instance, commitments and undertakings. The UK courts will also be able to award exemplary damages in competition cases (except for collective claims) that go beyond damages to compensate for the loss suffered by the anticompetitive conduct in order to punish particularly egregious conduct.

8. Strengthened consumer law powers

A large part of the DMCCA is dedicated to consumer protection. The Act empowers the CMA to enforce consumer law – and impose significant fines – directly through administrative proceedings (i.e., without having to go to court). Specifically, the DMCCA targets practices such as so-called “drip-pricing,” the facilitation of fake online reviews, transparency of mandatory fees and subscription “traps.”

In certain circumstances consumer law might be a preferred enforcement route for the CMA compared to competition law (which would require it to demonstrate such concepts as “dominance,” “abuse,” etc.). This new route and the wide range of targeted harms preview a likely increase in consumer law enforcement by the CMA generally.

Conclusion

The reforms to the UK’s competition and consumer regime will have far-reaching effects across all business conducted in the UK. The CMA has already been creative in enforcing competition rules using its existing powers, both in relation to alleged abuses of dominance and in the merger control context. We can expect that with these far-reaching new powers the CMA will become even more proactive and assertive.