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UK CMA publishes response to Government’s proposed reforms to digital markets

  • United Kingdom
  • Competition, EU and Trade

07-10-2021

On 4 October 2021, the Competition and Markets Authority (“CMA”) published its response to the UK Government’s consultation on a new pro-competition regime for digital markets. The consultation sets out proposals to empower the new Digital Markets Unit, including creating enforceable codes of conduct for the biggest tech firms.  The CMA is supportive of the proposals and has said it will work with the Government to develop them.  A summary of the CMA’s response is set out below.

The Digital Markets Unit forms part of the CMA and was launched earlier this year in “shadow form”.  The aim of the DMU is to oversee a new regulatory regime for the most powerful digital firms, promoting greater competition and innovation in these markets and protecting consumers and businesses from unfair practices.  The new regulatory regime will require legislation and the Government has been consulting on that.

The Government proposes to: enable the DMU to implement codes of conduct for the largest digital firms which, if broken, could result in remedies or penalties; empower the DMU to intervene in the market to boost long term competition; give the DMU powers to scrutinise and block mergers involving the most powerful digital firms.

In its response to the consultation the CMA has:

  • agreed with the proposal that the regime should focus on firms with substantial and entrenched market power in at least one activity for which digital technologies are a core component, and designate certain firms as having Strategic Market Status (SMS).
  • agreed that a code of conduct for SMS firms will be important, and expressed the view that the DMU should have the power to devise legally binding obligations on firms which can be tailored to the business models of each firm – this will provide certainty and make the regime effective.
  • commented that a code of conduct will not be enough on its own and the DMU will need to be able to make pro-competitive interventions to tackle the root causes of SMS firms’ entrenched market power.  Remedies including personal data mobility and interoperability are seen as “essential” to empowering consumers, removing barriers to entry and making it easier for innovative competitors to enter the market.
  • supported the Government’s proposals to have a specific (mandatory) SMS merger regime, including a requirement for SMSs to inform the CMA of all of their proposed transactions, to ensure that mergers involving SMSs can be given proper scrutiny and where necessary stopped.
  • supported the proposal to fund the DMU through a levy and will work with the Government on the detail on how that could function.
  • recognised that the DMU will need to work with a number of other regulators, including the ICO, Ofcom and the FCA.

The proposals regarding the DMU represent a significant change to the way competition law is enforced in the digital sector and businesses engaging with this sector will need to ensure that they keep abreast of the changing landscape and understand how the proposed reforms may impact them moving forward. 

For further information on the implications for you and your business please contact: