UK: Landmark Digital Markets Regime

The Digital Markets, Competition and Consumers (“DMCC”) Act is finally now law in the UK. The King signed his assent today (although his views on conflicts of interest in the ad tech stack are still unknown).

In Q2, 2024, the UK Parliament passed the highly anticipated Digital Markets, Competition, and Consumers (DMCC) Bill, heralding the most significant changes to UK competition and consumer law in years. This sweeping legislation, which received royal assent on May 24, 2024, introduces a new era of regulation with an ex ante digital competition regime akin to the EU's Digital Markets Act (DMA).

Digital Markets

The Digital Markets Unit (DMU), housed within the Competition and Markets Authority (CMA), will lead the enforcement of the new digital competition regime. Since its inception in April 2021, the DMU has operated without bespoke powers, contributing to the CMA's broader digital sector initiatives. Now, it gains substantial authority to regulate firms designated as having "strategic market status" (SMS). These SMS firms must adhere to specific conduct requirements developed and enforced by the CMA, ensuring compliance with fair dealing, open choices, and transparency.

The CMA will publicly consult on proposed conduct requirements before they become binding and will employ various investigatory and enforcement powers to ensure adherence. SMS firms can invoke the "countervailing benefits exemption" during CMA investigations, arguing that consumer benefits from their actions outweigh any harm caused.

The DMCC Act imposes mandatory reporting obligations on SMS firms for proposed mergers and acquisitions (M&A). Transactions meeting certain criteria must be reported to the CMA, which has five working days to review the merger report before the deal can proceed. This aims to prevent "killer acquisitions" in the digital sector.

Additionally, the CMA can investigate potential competition issues in digital markets even without a suspected breach of conduct requirements. The DMCC Act grants the CMA extensive powers to demand information, conduct dawn raids, and impose substantial fines for non-compliance, reaching up to 10% of a company's global annual turnover.

Competition

Beyond digital markets, the DMCC Act strengthens the CMA's investigatory powers across all sectors. It now has enhanced authority to conduct domestic dawn raids, access electronic documents, and demand information from companies worldwide. Non-cooperation can lead to significant fines, with businesses facing penalties up to 1% of their annual global turnover and additional daily fines for continued non-compliance.

The Act also introduces changes to merger control, raising the UK target annual turnover threshold to £100 million and allowing the CMA to scrutinise mergers where the acquirer has a significant market share and turnover. A "safe harbour" provision prevents the CMA from reviewing mergers where each party's annual UK turnover is below £10 million.

Moreover, the DMCC Act empowers the UK government to intervene in M&A transactions involving foreign powers seeking control over newspaper enterprises, and enhances the CMA's market study and market investigation powers.

Consumers

Consumer protection law has undergone a major overhaul with the DMCC Act. The CMA now has the power to determine consumer law breaches without court proceedings and can impose fines up to 10% of global annual turnover for substantive breaches. The Act targets a range of unfair commercial practices, including fake consumer reviews and "drip pricing," ensuring businesses disclose total prices upfront.

Subscription contracts face stricter regulations, requiring businesses to provide clear pre-contract information and allow easy contract exits. The Act also mandates protections for consumer savings schemes and addresses issues in secondary ticketing markets.

International Cooperation and Next Steps

The DMCC Act facilitates international cooperation and information-sharing with other regulatory bodies, complementing ongoing post-Brexit competition cooperation agreements between the EU and UK. Substantive provisions of the Act will come into force on dates specified by the Secretary of State, with the CMA already consulting on new guidance for the digital markets competition rules.

The DMCC Bill represents a transformative shift in UK competition and consumer law, equipping the CMA with powerful new tools to regulate digital markets and protect consumers. As businesses adapt to these sweeping changes, the UK is poised to lead in maintaining fair competition and robust consumer protections in the digital age.