Not over yet: UK DMCC Bill enters the House of Lords with some key questions still up for debate

The Digital Markets, Competition and Consumers Bill (the Bill) is still expected to come into force in Autumn 2024.  Although the overall framework for the new regime remains largely politically uncontentious, debates during the Bill’s second reading in the House of Lords on Tuesday, and in the House of Commons last month, have shown that its final form is not yet settled and some key aspects remain up for debate. 

Our guide to some of the most important moving pieces is set out below.  We’re likely to see increased focus around these core issues when the Bill reaches committee stage in the House of Lords in the new year. 

Digital markets

Full merits appeal available for challenges to penalties

The appeal standard for the ex ante regulatory regime has been one of the most discussed aspects of the Bill, with concerns that the judicial review (JR) standard – limited to challenges based on procedural fairness, errors of law, and irrationality – contemplated for all decisions of the Digital Markets Unit (DMU) would result in excessive deference to the Competition and Markets Authority (CMA).

Since the initial draft of the Bill, the appeal standard for challenging any penalties imposed under the digital markets regime (up to 10% of a firm’s global group turnover) has been broadened from the ‘JR standard’ to a ‘full merits standard’.  Government justification for the change pointed to alignment with the Enterprise Act 2002 (where reviews of penalties for failure to comply with investigative measures during merger reviews are subject to full merits appeal)  and providing reassurance to firms on the appropriateness of any fines imposed.  Reaction from the House of Lords on even this relatively limited change was, however, largely hostile on the basis that the change could decrease clarity on the appropriate legal standard and risk lengthier appeals.

JR remains the appeal standard for challenges to all other DMU decisions – including CMA decisions to designate firms as having “strategic market status” (SMS) and to impose extensive conduct requirements on designated firms that are likely to have global product-facing implications.

Proportionality requirement for conduct requirements and pro-competitive interventions

Following amendments introduced in November, the DMU may now only (explicitly) impose conduct requirements (CRs) and make pro-competition interventions (PCIs) where it is “proportionate” to do so.  The Government’s explanation for these amendments was that the addition will enable SMS firms to challenge the proportionality of DMU decisions without having to establish that their ECHR rights are also engaged.  Despite the CMA already being required to act proportionately, some peers in the House of Lords have argued that the change could hamper the CMA’s ability to act quickly.

Countervailing benefits exemption – removal of the indispensable benefit requirement 

A number of peers challenged the Government’s deletion of the requirement that SMS firms’ conduct should bring about an “indispensable benefit” to users in order to benefit from the countervailing benefits exemption.  In their view, the term has been tested in the courts and its deletion would risk creating a “loophole”.  The Government, however, appears to be mindful that in the antitrust context, the high threshold of “indispensability” applies in circumstances where the conduct creates a specific anti-competitive harm.  In the case of the DMU’s DMCC powers, the CMA is not required to prove the existence of any such harm when investigating breaches of CRs, thereby indicating the need for a different threshold. 

Consumer

Collective actions regime

An amendment pushing for the introduction of a right of collective action for consumer law breaches – similar to the existing regime for competition infringements – failed to make the cut in the House of Commons.  But the House of Lords debate suggested that the idea might be revived in the new year.

Drip pricing, fake reviews and auto-renewal subscription tweaks left for another day

A push to add “drip-pricing” (i.e. the addition of charges at the end of the buying process) and fake reviews to the list of unfair commercial practices has so far not made it into the Bill – signs suggest that this will be a key focus when the House of Lords continues its scrutiny in 2024.  Also likely to be up for further debate are proposals to add to the new provisions on subscription contracts to make it easier for consumers to cancel recurring subscriptions.

Limited relief for businesses from information requirements

The extensive information requirements put in place by the Bill when selling products have been relaxed in certain circumstances.  Granular information (such as the business and service address of the trader, freight and delivery charges, and additional taxes) will not have to be given by businesses if the information is already apparent to the consumer from the context.

The Bill remains on track to provide the CMA with extensive new powers to enforce consumer law directly (i.e., powers and processes akin to those currently used by the CMA to enforce competition law, including without the prior involvement of the Courts). 

Competition

Market investigation references – greater flexibility

Further flexibility was introduced to the markets regime during Third Reading of the Bill in November, with the CMA to be empowered to make a market investigation reference even if it has previously made a decision not to (though only if two years have passed since publication of the market study report, or if there has been a material change in circumstances since the initial report was prepared).  The amendment came after a recent ruling by the Competition Appeal Tribunal that the CMA had been timed out of making a market investigation reference following a mobile ecosystems market study report (although this CAT ruling has now been overturned on appeal).

Another important expansion of the CMA’s extensive powers under the markets regime – which will allow it to amend remedies following a market investigation for a 10 year period if they are deemed “ineffective” – has so far not attracted much debate in parliament.  These reforms could well be raised in the next stages of debate given concerns expressed by business about the need for regulatory certainty to support long-term investment decisions.

PACCAR reversal?

A new clause in the Bill, introduced by the Government at Third Reading, partially reverses the UK Supreme Court’s recent judgment in R (PACCAR Inc) v Competition Appeal Tribunal by providing that third party litigation funding agreements (LFAs) where the funder receives a fixed percent of the unrecovered litigation proceeds will remain enforceable in opt-out collective proceedings before the CAT.  But the net effect is both narrow and unclear – the new amendment only restores enforceability of LFAs in opt-out proceedings in the CAT, but doesn’t address LFAs in opt-in or High Court proceedings.  One peer noted on Tuesday that the House of Lords may propose an amendment to the Bill to address this discrepancy.

The Bill will undergo further detailed review in the House of Lords in the new year.  We will be tracking developments closely.  For a guide to the five key themes firms should be thinking about when preparing for the reforms, please read our fuller briefing or listen to our Essential Antitrust podcast.