May 9, 2023
The aim of the Digital Markets, Competition and Consumers Bill is to establish a new pro-competition regime for digital markets which will address the far-reaching market power of a small number of tech firms. The Competition and Markets Authority (CMA) will be given the tools to proactively drive more dynamic markets and prevent harmful practices that hold back innovation and growth.
The Government explains that the measures in the regime will be targeted at a small number of firms which exert significant control over digital markets. Those firms will be designated as having “Strategic Market Status” (SMS) in respect of specific digital activities. The Digital Markets Unit (DMU) will consider whether a given firm has substantial and entrenched market power and holds a position of strategic significance in respect of one or more digital activities.
The DMU will oversee and enforce the regime. The DMU will have two tools:
- conduct requirements to manage the effects of market power and ensure markets are open to competition and innovation: the DMU will be able to set tailored rules for each firm on how they should treat consumers and other businesses in relation to their designated digital activities to prevent SMS firms from: (i) treating users unfairly and interacting with them on unreasonable terms; (ii) limiting choices available to users; and restricting information needed to make informed choices;
- pro-competition interventions to tackle the sources of SMS firms’ market power: the DMU will be given powers to design targeted interventions to address the root causes of competition issues in digital markets, e.g. they might require designated firms to allow greater interoperability or data access.
SMS firms will also be required to report all mergers and acquisitions above a certain threshold to the CMA. After studying and accepting a report, the CMA may choose to open an investigation using its existing merger powers.
As for enforcement, the DMU will seek to resolve concerns through informal and cooperative engagement with firms. However, the DMU will have robust powers to address non-compliance when firms do not follow the rules set for them, including fining firms up to 10% of global turnover and making senior managers responsible for ensuring that the firm complies with information requests. The DMU will also be given backstop powers to enforce conduct requirements through a final offer mechanism, where this is needed to resolve breaches relating to complex payment terms.
Parties will be able to appeal decisions of the DMU to the Competition Appeal Tribunal (CAT). The CAT will apply judicial review principles, i.e. it will consider the legality of the decision that was made. Valid grounds for appeal could include challenging whether the DMU acted lawfully and within its powers, applied proper reasoning or followed due process, as well as (in some circumstances) whether the DMU’s decision was proportionate. To read the Bill in full, click here. To read the Government’s policy paper and supporting documentation for the Bill, click here.
We’ve created a tracker as a resource to keep you up to date with all the latest developments on the Digital Markets, Competition and Consumer Bill. To read our reaction and insight upon publication, click here.