Insights UK digital markets competition regime: Competition and Markets Authority sets out approach

The Digital Markets, Competition and Consumer Bill (“DMCC”) has been making its way through the legislative process. The various stages, and a summary of the contents of the DMCC, were previously reported by Wiggin here and here.

Under the DMCC, the Competition and Markets Authority (“CMA”) would be able to designate certain firms as having Strategic Market Status (SMS) in the UK where they meet specific market turnover thresholds and certain other conditions such as having entrenched market power and a position of strategic significance in respect of a digital activity. Designated firms will be subject to specific “conduct requirements” (“CRs”) tailored by the CMA to the firm (e.g. preventing tying or self-preferencing) and, in certain cases, to “pro competition interventions” enabling the CMA to implement measures that address the root causes of entrenched market power that stem from factors other than conduct (e.g. harms flowing from network effects). Such interventions could include requiring the undertaking to facilitate interoperability or data mobility or a functional separation. Before the CMA can designate a firm as having SMS, it must conduct a detailed investigation including a public consultation.

On 11 January 2024, the CMA published an overview of how it intends to operate the new digital markets competition regime. The paper explains the CMA’s target outcomes with respect to the digital markets regime including ensuring that customers have choice and are treated fairly, businesses have a fair chance to compete with SMS firms, and ensuring dynamic competition in digital markets with a view to stimulating investment, innovation and improved productivity. The paper includes a table of potential harms that the CMA will seek to address including promoting a platform’s own product ahead of competitors, bundling products/services to prevent rivals competing on one product/service, and firms which collect excessive amounts of data or restrict competitors’ access to data in a way which stops them competing fairly. The paper goes into some detail on the different types of CRs that the CMA may impose. Finally, the paper contains a set of 11 draft operating principles by which the CMA will conduct its digital markets competition function. These address the need for targeted and proportionate action; to focus on positive outcomes; to prevent harms quickly, sustainably and primarily through competition; and for collaboration with other stakeholders, involving transparency and coherence with other regulators.

The paper refers to the various pieces of guidance which the CMA will be required to provide following the DMCC coming into force.

The paper states that the CMA expects the number of firms designated as having SMS to be very limited, but it has also indicated, in its press release, that it expects to start three to four investigations within the first year of the regime coming into force.

The DMCC has not yet completed its passage through Parliament. It entered the Committee Stage in the House of Lords on 22 January 2024 and may yet be subject to amendment. If so, the CMA may need to revise its approach.

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