Representing the most significant reform to UK competition and consumer protection laws for over 20 years, the DMCC Act introduces substantial changes in relation to:
- digital market regulation
- merger control and competition law enforcement
- consumer protection
In this briefing, we highlight the key points to note and illustrate why all businesses across the UK economy should be familiarising themselves with the changes introduced under the Act and preparing for when it comes into force, which is expected to be in October 2024.
A new digital markets competition regime
The CMA’s Digital Markets Unit (DMU), which is put on a statutory footing under the Act, will have the power to designate firms with “substantial and entrenched market power” and “a position of strategic significance” in relation to digital activities linked to the UK, as having ‘Strategic Market Status’ (SMS firms). SMS firms will have to comply with mandatory merger reporting requirements, codes of conduct, and where the CMA considers targeted interventions are appropriate, so-called pro-competition interventions (PCIs). Further information about the SMS regime can be found in our previous briefing here.
Whilst the SMS regime is expected to apply to only the biggest tech companies, challenger firms will also want to understand the new regime and consider engaging with CMA consultations on related guidance documents. The CMA is currently consulting on the following:
- Digital markets competition regime guidance
- Guidance on the merger reporting requirement for SMS firms
The CMA has also published a summary of its draft guidance on how it will exercise its powers under the new digital markets competition regime. The final guidance documents are expected to be published around the time that the Act comes into force.
Merger control and competition law enforcement
All businesses should be aware of the changes made by the Act to existing UK competition law. These are the most significant changes to the UK regime since 2013. The main changes include:
- The new power of the CMA to review acquisitions where: (1) at least one merging party has an existing share of supply of 33% in the UK and a UK turnover of at least £350m; and (2) the target has a UK nexus. This is one of the most significant changes to the regime, aimed at capturing “killer acquisitions” and mergers which don't involve direct competitors. The UK nexus threshold is potentially very low, whilst the 33% share of supply test has the potential to be applied broadly.
- An increase in the mergers threshold for the turnover test, from £70 million to £100 million.
- A new safe harbour for mergers where each party has a UK turnover of less than £10 million.
- Various procedural changes to the merger review process, including changes to improve the phase 2 merger process; and the power of the CMA to serve notice on persons and require the production of documents held outside of the UK where: (1) the person is a party to the merger or subject to a competition investigation; or (2) has a UK connection.
- Extension of the territorial scope of the Chapter I prohibition on anti-competitive agreements to include agreements which are implemented outside of the UK, where there are (or are likely to be) direct, substantial, and foreseeable effects within the UK.
- Enhanced investigative powers for the CMA in Competition Act investigations.
- Enhanced penalties for procedural infringements, with fines moving from a fixed cap of £30,000 (and/or a daily fine of £5,000) to fines calculated as a proportion of global turnover.
Consumer protection
The Act introduces a new civil sanctions regime for consumer protection law which will apply in addition to the existing criminal penalties. Under the new civil regime, the CMA will have the power to impose civil fines without going to court. These fines can be up to 10% of global turnover and impacted businesses will need to go to court to challenge the fines.
This will mean that CMA investigations into consumer protection issues, such as green washing and dark patterns (referred to as “online choice architecture” by the CMA), will have additional impact. Further, these changes are designed to put compliance with consumer protection legislation on boardroom agendas for all businesses that interact with consumers.
The Act is particularly significant for any business selling subscriptions online to consumers as, in addition to the new sanctions, the Act creates a new online subscription regime with new obligations including showing consumers a summary of key contractual terms as part of the signup flow, and giving consumers a new “cooling off” right after a free trial.
Finally, the Act also gives the government the right to create new ‘blacklisted’ offences – the government has already consulted on creating offences relating to price dripping and reviews. It's expected that these will be created imminently and will have the effect of requiring businesses that host reviews to perform reasonable and proportionate checks that the reviews are genuine.
Key takeaways
What impact the DMCC Bill will have on individual businesses will vary depending on the sector in which they operate and the activities they undertake in that sector.
Big tech and challenger firms will be particularly interested in the new SMS regime. The changes to consumer protection should trigger businesses which interact with consumers to review their existing compliance in light of the increased sanctions.
Any businesses that sell subscriptions to consumers should engage as a matter of urgency with the new requirements for selling subscriptions online, as these will necessitate significant changes to the signup flow and new internal processes will be needed to send the necessary notices to consumers.
Changes to the merger control regime and competition law enforcement are of much wider application. It's, therefore, important that all businesses across the UK understand all the changes as they apply to them and start preparing (as necessary) for when the Act comes into force in autumn this year.
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