UK Government accelerates major reforms to competition and consumer law regimes and digital regulation in a drive for supply side growth

The UK government has committed to bringing forward the Digital Markets, Competition and Consumer Bill (the Bill) in the current Parliamentary session. This accelerates the timeline originally proposed in May 2022, when the government committed only to publishing a Draft Bill – a step which would have allowed for further stakeholder consultation on the detailed proposals before formal legislation was introduced.

The accelerated timetable means that we should expect the Bill to be published in the next few weeks, and depending on the legislative timetable in Parliament, it could be enacted by May 2023 and come into force later next year. Recent comments from senior officials at the CMA indicate that they expect the reforms to be effective from October 2023.

The decision to bring forward this legislation is a clear sign that the government is prioritising wide-ranging reforms to the UK’s competition and consumer law regimes as part of its efforts to drive innovation, productivity and growth. As indicated in the government’s response to the public consultations earlier this year, the reforms will include a significant strengthening of the CMA’s powers across its toolkit, a new regulatory regime for digital markets and enhanced rights for consumers.  They will affect not only large digital firms but businesses across all sectors, regardless of their size. Once published, the Bill will provide more detail on how the government proposes to scope the reforms and the appropriate safeguards that businesses will be afforded.

Extensive competition law reforms will impact businesses across all sectors

The Bill is expected to consolidate a broad package of reforms to the UK’s competition law regime that will affect all businesses (for further detail see our previous blog here). In his Autumn Statement, the UK’s Chancellor of the Exchequer (equivalent of the finance minister) called out, in particular, the updated merger thresholds and “streamlined” decision-making. Based on the government’s consultation response, key changes are likely to include:

• a new jurisdictional threshold for merger review: although the CMA is already using its existing powers extensively to challenge so-called “killer acquisitions” (acquisitions of small players by larger incumbents) and deals which do not involve direct competitors in all sectors of the economy, the Bill is likely to include further specific enhanced powers of intervention in these circumstances;
• more evidence gathering powers – including broader rights to interview individuals, stricter obligations on businesses to preserve evidence and powers for the CMA to “seize-and-sift” evidence when it inspects domestic premises. These are likely to become increasingly relevant as the CMA ramps up dawn raids post-pandemic; and
• stronger and faster enforcement – including a stricter standard of review for appealing interim measures imposed by the CMA, and tougher penalties for failing to comply with investigative measures or CMA orders, undertakings and commitments. In tandem, the Bill is expected to contain a new statutory duty for the CMA to act expeditiously in competition and consumer cases, reflecting the desire for faster decision-making. It remains to be seen how the CMA intends to speed up its processes whilst retaining evidence-based decision-making, robust procedures and protecting parties’ rights of defence.

It is not just the UK that is reforming and evolving its competition law regime. For example, the European Commission is consulting on the performance of Regulation 1/2003 (which lays out the procedures for the application of EU competition rules) and the FTC has recently voted out a new policy statement that seeks to breathe new life into the use of Section 5 of the FTC Act to tackle conduct as an “unfair method of competition” (see our blog here). These global changes in competition enforcement will be relevant to many businesses, when assessing their product strategies and initiatives.

Sweeping reforms to the consumer law regime highlight the government’s focus on protecting consumers

We previously wrote about the government’s sweeping reforms to the consumer law regime more generally, and in particular its plans to grant new powers to the CMA in our blog post here.

The Autumn Statement hones in on plans for the Bill to protect consumers in fast-moving markets, for example, by tackling so-called “subscription traps” and fake reviews online and strengthening prepayment protections. However, there are other changes proposed by the government as part of its plan to protect consumers, whilst delivering growth and innovation, and also minimising burdens on businesses.

Further reforms we can expect to see as part of the Bill include stronger enforcement and investigative powers for the CMA in consumer protection cases. These powers will enable the CMA (for the first time outside the competition space) to impose large fines of up to 10% of annual global turnover where it finds that a business has breached consumer protection rules, as well as to order consumer compensation.  Similar to its powers in competition investigations, the CMA will also be able to impose lower level fines on firms which, without reasonable excuse, do not comply with requests for information, which provide false or misleading information in consumer protection investigations, or which breach undertakings agreed with the CMA.

The government noted in its consultation response that there will be adequate protections for businesses (including rights of appeal based on a full merits review), but we will need to wait and see the detail of the Bill (once published) to confirm the extent of these safeguards. Other key questions – such as what incentives there will be for settlement, and the interaction between fines and orders for consumer redress – are unlikely to be resolved until the new consumer enforcement regime is in force.

The new regulatory regime for digital markets will arrive sooner than expected

The government has indicated that the Bill will also include proposals for a new regulatory regime overseen by the Digital Markets Unit (DMU) that applies to firms designated as having so-called “strategic market status” (SMS) – for more detail on the regime and the interplay with the broader competition reforms in the Bill see our previous blog post here.

The UK proposals differ in material respects to the EU’s regime in the Digital Markets Act (DMA), which entered into force on 1 November. We can expect that the DMU will be looking closely at the European Commission’s implementation of the DMA, in particular around the process for designating so-called “gatekeepers” and any early learnings from how “gatekeepers” propose to comply with the DMA’s regulatory obligations.  The accelerated timetable reduces the extent to which the UK regime lags behind the EU’s.  It seems likely, however, that the UK Bill risks creating a complex web of new regulatory obligations for businesses with international operations with the UK forging its own distinctive path.

Based on the government’s consultation response earlier this year, we understand the reforms are also likely to include a new mandatory and suspensory merger control regime in which firms designated as having SMS will be required to notify all deals over a certain size (expected to be £25m) where the transaction meets a (yet-to-be-determined) UK nexus test.

As the Bill progresses through Parliament, further careful consideration will be needed of the overall impact of the three competition, consumer and digital strands, and the expected impact of wide-ranging and potentially burdensome new UK-specific regulatory obligations on businesses, innovation and the UK’s future economic prosperity

We will be following these legislative reforms closely.  If you would like to discuss any aspects of the reforms in more detail at any stage, please get in touch.