UK Digital Markets, Competition and Consumers Bill moves one step forward to being adopted

Why should I read this?

On 20 November 2023, the House of Commons completed its review of the UK Digital Markets, Competition and Consumers Bill (the “Bill”) and it will now be considered by the House of Lords. The Bill, which has cross-party support, is expected to become law around Spring 2024. It will introduce a new competition law regime for digital markets and make changes to both the UK competition law and consumer law regimes, providing the Competition and Markets Authority (“CMA”) with a broader remit and greater enforcement powers.

The UK Government put forward numerous amendments to the Bill before it went for the House of Commons review, including some unexpected new provisions (which have not previously been consulted on), all of which were accepted. In this briefing, we highlight some of the changes concerning the proposed new digital regime and the current competition law regime. (If you would like further information on the changes to the consumer law regimes, read our article here).

What else do I need to know?

Changes to the digital markets regime

• Changes to the definition of “strategic market status” (SMS)

The Bill requires firms designated by the CMA as having SMS (in respect of a digital activity linked to the UK) to comply with certain bespoke conduct requirements. Designated firms may also be subject to pro-competition interventions if the CMA considers that a relevant digital activity is having an adverse effect on competition.

Changes to the Bill include amendments to the way in which SMS is determined, introducing for example: a requirement for the CMA to undertake a competition law assessment before being able to conclude that strategic significance exists and changing the definition of the term “position of strategic significance; linking the £1 billion turnover threshold that needs to be met for a firm to be designated as having SMS to UK turnover arising from the designated digital activities and not just UK turnover; and requiring the CMA to publish terms of reference summarising the evidence base for a finding of SMS.

• Introduction of a “proportionality” obligation and stronger focus on consumer benefits

Other changes introduce a requirement that CMA decisions are “proportionate” and that they deliver consumer benefits. For example, a conduct requirement on a designated firm can now only be imposed if the CMA considers it would be proportionate to do so and its reasons identify likely benefits arising from the requirement to consumers. Similarly, a pro-competition intervention can only be imposed to remedy an adverse effect on competition arising from a digital activity, where the intervention would be proportionate for the purpose of remedying, mitigating or preventing the harm.

• Limited changes to the appeal standards

Perhaps controversially, and in spite of much lobbying to change the standard of appeal for CMA decisions from judicial review to “on the merits”, the standard of review has largely remained unchanged other than in relation to appeals against penalties imposed on SMS firms where the standard under the new Bill will be a full “on the merits” review.

The Government defended its position over the standard of review, but conceded that given the huge size of fines that may be imposed, a review on the merits would allow the Competition Appeal Tribunal to consider the appropriateness of the level of the fine and decide on a different penalty to that issued by the regulator. This change also brings the digital markets regime in line with the approach taken for decisions under the CMA’s mergers and markets regimes.

Changes to UK competition law

• Litigation funding

Among the raft of Government amendments, the Bill also introduces a new clause to respond to the UK Supreme Court judgment in PACCAR (considered in detail in our speed brief here) relating to the funding arrangements for competition law opt-out collective damages actions (where consumers are automatically included in the class unless they choose to be excluded). The judgment ruled that litigation funding agreements which allow funders to receive payment “by reference to” the amount of financial benefit obtained by the funded party (eg on a percentage of any damages recovered) are considered to be “Damages Based Agreements” (“DBAs”). The effect of this was that those types of funding arrangements cannot be used to fund competition law “opt-out” collective proceedings (as the current legislation prohibits DBA funding for competition law opt-out collective actions). The proposed amendment to the Bill attempts to reverse the effect of the Supreme Court’s judgment so that funders will be able to fund opt-out competition law actions on the basis that they can receive a percentage of any damages recovered.

New provisions for retail of motor fuel

Unexpectedly, the Government introduced a new section in the Bill focusing on competition in the retail of motor fuel sector. The CMA conducted and completed a market study into the supply of road fuel in July 2023. It found that competition was not working as well as it should and recommended a monitoring body to report on the state of the road fuel market. On 9 November 2023 the CMA published its first monitoring report. In its press release, it stated that some of the relevant stakeholders had not responded to the CMA’s information requests, which limited the CMA’s analysis for the report.

Under the Government’s proposals, and presumably to address this issue, the CMA will be given new powers to request information from firms involved in the distribution, supply or retail of petrol or diesel requiring them to provide the CMA with information in certain circumstances, for example where the CMA considers that the information would assist in assessing competition in the UK in connection with the retail of motor fuel or making proposals to the Secretary of State about potential action that should be taken. These powers will last for 5 years.

Failure to comply with the CMA’s information requests could result in fines of: up to 1% of global turnover; up to 5% of daily global turnover; or both, in the case of a combination of a fixed amount and a daily amount.

Next steps

The Bill will now be scrutinised in the House of Lords before it can receive Royal Assent. As the Bill has cross-party backing, however, we do not expect any significant changes to be made to the Bill. Indeed a spokesperson for the opposition Labour party stated that “it must be passed without delay and without significant changes that would water down the provisions”.

Once the Bill receives Royal Assent, it is likely to take a number of months before the new digital regime becomes fully operational and the Digital Markets Unit finally steps out of the shadows.

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
• A new dawn for UK consumer law - the impact of the Digital Markets, Competition and Consumer Bill on enforcement
• A new dawn for UK competition law: significant reforms on the horizon

 

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