Insights Digital markets competition regime: Competition and Markets Authority publishes consultation on guidance


The Competition and Markets Authority (“CMA”) has published a consultation on two pieces of draft guidance relating to its functions under the Digital Markets competition regime established by the Digital Markets, Competition, and Consumers Act (the “DMCC Act”). It comes as the DMCC Act received Royal Assent before Parliament was dissolved in advance of the upcoming UK general election.

The first piece of guidance is extensive, covering both substantive and procedural matters relating to the Digital Markets competition regime. It explains how the CMA will assess whether a firm has ‘strategic market status’ (“SMS”) and therefore falls within scope of the new regime, breaking down the guidance into five sections: (1) explaining how the CMA will identify a “digital activity”; (2) explaining the jurisdictional and turnover conditions for SMS; (3) explaining the substantive SMS conditions, namely that a firm has “substantive and entrenched market power” and a “position of strategic significance in respect of a digital activity”, and how the CMA will assess them; (4) explaining the procedural steps of an SMS investigation; and (5) explaining the purpose and procedure in respect of a further SMS investigation. The consultation also includes a draft SMS investigation notice that will be sent to firms before an investigation commences.

There is also guidance on the analytical and procedural approaches the CMA will adopt when conducting so-called “conduct requirements” (“CRs”) under the new digital markets competition regime. As the guidance explains, CRs are “intended to guide the practices of an SMS firm and tackle existing or future conduct where the firm seeks to take advantage of its substantial and entrenched market power and position of strategic significance in ways that could exploit consumers and businesses or undermine fair competition.” In deciding whether to impose a CR, the guidance states that the CMA will consider what is the most appropriate tool to address the nature and scope of the issue identified, bearing in mind that a CR can only be imposed where the CMA considers it proportionate to do so in pursuit of one or more of three objectives: fair dealing, open choices, and trust and transparency. The guidance also states that the CMA expects CRs to vary across firms and designated activities, and that it will typically follow a three step process to design CRs: (1) identifying what the CR is intended to achieve; (2) considering potential CRs within the permitted types to identify those CRs that would be effective in achieving its aim; and (3) ensuring that the CR it is no more onerous than necessary to achieve its aim. CRs may be imposed at any point during the designation period, and will be accompanied with a notice explaining to the firm in question why the CR is being imposed, why the CMA considers it proportionate to impose it, and the benefits that the CMC considers will result from it. The notice may also be accompanied by ‘interpretative notes’ which will provide additional information about the CR including, for example, illustrative examples of the types of conduct that would result in compliance with it.

The guidance also contains information about ‘pro-competition interventions’ (“PCIs”), including how the CMA will assess whether there is an adverse effect on competition, as well as how it will design and impose effective and proportionate PCIs. It also sets out the procedural steps the CMA will take, from initiating a PCI investigation into an SMS firm, to gathering information and publicly consulting on a proposed decision to make a PCI, to issuing the outcome of the investigation and imposing any relevant PCIs within four months.

The guidance also covers the investigatory powers that the CMA has at its disposal, as well as its approach to information handling, monitoring compliance and breaches of requirements under the regime, and imposing penalties.

The second piece of guidance is on the merger reporting requirement for SMS firms and is less substantial. Under the DMCC Act, SMS firms have a duty to report certain acquisitions of shares and/or voting rights in targets that have a UK nexus. The guidance sets out that the duty applies to so-called ‘SMS Acquirers’ who must notify the CMA of a ‘reportable event’ before the transaction takes place. ‘Reportable events’ are acquisitions of an interest in a target or in a new joint venture where the transaction: (a) results in SMS Acquirers having a ‘qualifying status’ (as set out in the DMCC Act); (b) has a nexus to the UK; and (c) meets the consideration value threshold. Each of these three requirements are explained in detail in the guidance. The guidance also goes on to set out information about the procedure for submitting a report.

The consultation is open until 12 July 2024 and can be read in full here.