A new dawn for UK competition law: significant reforms on the horizon

Why should I read this?

The UK Digital Markets, Competition and Consumers Bill (“DMCC Bill”) was included in the King’s speech on 7 November 2023.  The DMCC Bill introduces a wide-ranging new competition regime for digital markets which will put the Competition and Markets Authority (“CMA”) at the heart of the UK Government’s policy to regulate large digital platforms.  This is a step-change in the UK regulatory landscape which provides for a proactive and interventionist regulatory regime – similar to the regulation of financial institutions and utilities – for some of the major Big Tech companies. 

The Bill proposes substantial reforms to UK competition law more generally which impact all sectors, not just digital markets.  The CMA’s enforcement powers to intervene in anti-competitive conduct are expanded and reforms proposed to the UK’s merger control regime introduce new ways in which the CMA can intervene in M&A deals.  Importantly, the Bill provides the CMA with an explicit ability to intervene in conduct which takes place outside of the UK, and to review M&A deals which have a very limited impact on the UK economy.  This means that the Bill substantially strengthens the role and powers of the CMA for the future.

The DMCC Bill is expected to become law around Spring 2024. 

New competition law regime for digital markets

The Bill introduces the long-awaited regulation which aims to create a new pro-competition regime for digital markets.  The new regime is targeted at a small number of firms who undertake significant digital activity in the United Kingdom. We set out below the key features of the proposed new regime.

• it will be enforced by the Digital Markets Unit (DMU), an administrative unit of the CMA, which has been operating in shadow form for over two years.  The DMU will designate firms having “strategic market status” (“SMS”) in respect of a digital activity if they meet certain conditions
• firms with SMS (“SMS firms”) will be subject to bespoke conduct requirements setting out how they must behave in relation to the relevant digital activity.  The CMA may only impose a conduct requirement if it considers that it would be appropriate to do so to prevent SMS firms from: treating users unfairly and interacting with them on unreasonable terms; limiting choices available to users; and restricting information needed to make informed choices.  Examples include, trading on fair and reasonable terms, and providing clear, relevant, accurate and accessible information about the relevant digital activity to users or potential users
• the CMA will have the power to undertake pro-competition interventions (“PCI”) in relation to a SMS firm which, following a PCI investigation,  may take the form of a pro-competition order requiring a SMS firm to comply with certain structural and/or behavioural remedies. For example, requiring the SMS firm to allow greater interoperability or data access in relation to the digital activity
• SMS firms will be required to report all of their M&A deals above a certain threshold to the CMA.  After studying and accepting a report, the CMA may choose to open an investigation using its existing merger powers
• the CMA intends to seek to resolve any concerns relating to the digital markets regime through informal and cooperative engagement with the relevant SMS firms.  The CMA will, however, have robust powers to address non-compliance when firms do not comply with the relevant requirements including the ability to issue fines of up to 10% of global turnover and disqualify directors; make senior managers responsible for ensuring that the SMS firm complies with information requests; and enforce conduct requirements through a “final offer mechanism”, which is designed as a backstop measure to resolve breaches relating to complex payment terms
• CMA decisions adopted under the digital markets regime can be appealed to the Competition and Appeal Tribunal (“CAT”) on a judicial review basis to challenge the legality of the decision

What are the key changes to UK competition law?

The DMCC Bill also aims to strengthen the CMA’s investigatory and enforcement powers by:

• enabling it to enforce against anti-competitive conduct which takes place outside of the UK but which impacts the UK economy
• providing the CMA with stronger evidence-gathering powers by introducing, amongst others, a new duty to preserve documents, the ability to use its “seize and sift” powers when it inspects domestic premises under a warrant, and the power to interview any individual including those not connected with the business under investigation
• enabling the CMA to issue civil penalties where previously only criminal offences existed, for failure to comply with investigative measures and information requirements in relation to the CMA’s antitrust, mergers and market inquiries investigations.  For businesses, the CMA can impose a fine of up to 1% of the business’ annual global turnover or up to 5% of its daily global turnover; and for an individual, the CMA can impose a fine of up to £30,000 or up to £15,000 per day

Finally, the DMCC Bill makes changes to the UK merger control regime by:

• increasing the UK merger control turnover threshold from £70m to £100m
• introducing a “small merger safe harbour test” requiring the UK turnover of the target or any other enterprise concerned to exceed £10m for there to be a relevant merger situation
• introducing a new acquirer-focused threshold to catch “killer acquisitions” and other deals not involving direct competitors. This requires at least one merging party to have:  
  • an existing share of supply of at least 33% in the UK
  • UK turnover of at least £350m
  • another party is a UK business/body, at least part of its activities are carried on in the UK, or it supplies goods or services in the UK

Next steps

The DMCC Bill, which was introduced in Parliament in April 2023 and carried-forward into this new Parliamentary session, is due to have its report stage and third reading in the House of Commons on 20 November before it is scrutinised by the House of Lords. The DMCC Bill is expected to receive Royal Assent around Spring 2024.  However, we expect that it will take a number of months before the new digital regime becomes operational.  

Further reading

• Reforms to UK Competition and Consumer Law introduced in the Digital Markets, Competition and Consumer Bill: "Watershed" moment for UK Competition and Consumer Regulation
• A new dawn for UK consumer law - the biggest shake-up in almost a decade could push consumer law compliance up your legal risk register

For more information about the competition law aspects of the DMCC Bill