The Digital Markets, Competition and Consumers Act (digital aspects)

The Digital Markets, Competition and Consumers Act (DMCC) came into effect on 24 May 2024 and represents a major shift in UK digital markets, competition and consumer protection regulation.

From a digital markets perspective, the DMCC introduces a new regulatory regime for large digital firms and gives the Competition and Markets Authority (CMA) broader powers to intervene and enforce across its digital markets and competition remits. 

Affected businesses

The digital markets elements of the DMCC will principally affect large digital companies with UK activities that are designated by the CMA as having ‘strategic market status’ (SMS). Companies designated as having SMS will be required to comply with bespoke conduct requirements (CRs) imposed by the CMA and report certain transactions to the CMA.

However, nondesignated digital firms with activities in the UK also may be impacted – e.g., by the effects on the market of ‘pro-competitive interventions’ (PCIs) and CRs imposed on SMS firms.

Key impacts

The DMCC gives the CMA power to designate firms as having SMS where they undertake certain digital activities and fulfil the following criteria:

• They carry out a digital activity linked to the UK.
• They have substantial and entrenched market power in respect of the digital activity.
• The CMA estimates that the global turnover of the undertakings’ group exceeds 25 billion pounds, or the group’s UK turnover exceeds 1 billion pounds.

The key impacts for firms designated as having SMS include:

• Enforceable conduct requirements based on three core objectives: fair dealing, open choice, and trust and transparency – Each designated SMS firm will be subject to its own bespoke set of CRs in relation to the digital activity for which it has been designated. 
• Targeted ‘pro-competitive interventions’ – The CMA has the power to make PCIs in relation to SMS firms, designed to address any factors that the CMA identifies as having an adverse effect on competition.
• Mandatory merger reporting requirements – SMS firms will be required to report intended mergers to the CMA where they have a value of 25 million pounds or more and a UK connection.

Enforcement

The DMCC empowers the CMA to directly enforce for breach of a range of competition requirements, including breach of CRs and PCIs. In particular, the CMA will have the power to:

• Impose fines of up to 10% of global turnover for breaches of the CRs or PCIs, along with daily fines of up to 5% of global turnover for continued breaches, with decisions to impose fines subject to a full merits review on appeal.

In addition, the DMCC provides for private enforcement rights by persons affected by breaches of CRs or PCIs. This will provide further scope for third parties to challenge the commercial actions of designated companies, as well as claim damages for losses caused by breaches.

Key timings

Late 2024: Although it has received Royal Assent, the most significant aspects of the DMCC – including the SMS regime – are not expected to come into force before autumn 2024.

Ongoing: As part of the regime, the CMA is required to conduct a formal evaluation process to determine which digital companies should be designated as having SMS. The CMA has stated that it will open its first designation investigations before the end of 2024, with a view toward designating the first companies in mid-2025.

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