Stocktake on UK DMCC Bill - entering the final stages

Last week the House of Lords Report stage concluded for the Digital Markets, Competition and Consumers (DMCC) Bill. As the Bill progresses through its final stages before becoming law, the Government continues to make significant amendments - including new powers to prevent foreign state ownership of newspapers and new consumer-facing practices that will be prohibited under the newly strengthened and expanded consumer law regime.  Amendments put forward by the Lords also illustrate that some important aspects of the new Digital Markets regime remain subject to debate. Following our update on amendments made in the House of Commons, we set out below our stocktake on the key changes following the Report stage.

Consumer – more practices prohibited under a newly strengthened and expanded regime

In our recent blog post, we identified key updates following the conclusion of the Government’s consultation on “Smarter Regulation: Improving consumer price transparency and product information for consumers”. Some of these updates were discussed and agreed in the DMCC Bill Report Stage, at which additional amendments were confirmed, highlighting the new, expanded consumer law regime that is due to come into force:

• Hidden fees and drip pricing: the Government has committed to prohibiting the provision of headline prices which do not incorporate fixed mandatory fees or disclose the existence of variable mandatory fees and how these will be calculated. Given media coverage and statements by the UK Government in relation to so-called “hidden fees” in recent months, we expect this type of behaviour to be near the top of the CMA’s agenda once it has its new powers.  In a radical change to consumer law in the UK, any invitation to purchase that omits material information (such as this pricing information) will be deemed an unfair commercial practice without the need for evidence that the practice influenced a consumer’s transactional decision-making.
• Fake reviews: the Government has added certain practices involving fake reviews to the list of commercial practices that are considered unfair in all circumstances. While the UK Government decided against the imposition of criminal liability for such practices, they will be subject to civil liability.
• Subscription contracts: the Government has introduced amendments to simplify the circumstances in which, and methods by which, a consumer can bring a subscription contract to an end. For example, consumers will have the right to terminate a contract by simply making a clear statement to the trader setting out their decision to bring the contract to an end.
• Secondary ticketing requirements: the Government has imposed additional requirements on secondary ticketing facilities, with the aim of reducing fraud. These requirements align with the CMA’s 2021 recommendations. For example, secondary ticketing facilities must:
  • not permit the resale of tickets unless the trader or business reselling them has provided evidence of title to the tickets;
  • not permit a reseller to sell more tickets to an event than they can legally purchase from the primary market; and
  • ensure that the reseller’s name and trading address are clearly visible, in full, on the first page the ticket is viewable on.
• Other conclusions: a number of relevant points from the House of Commons reading stage and the DBT consultation that have not resulted in specific amendments to the DMCC Bill include:
  • Expansion of collective actions regime: Despite discussions at the reading stage in the House of Commons, a right of collective action for consumer law breaches (i.e., similar to the existing regime for competition infringements) has not been included in the DMCC Bill.
  • Private rights of redress - prohibited practices: The Government has said that it is continuing to consider evidence as to whether a private right of redress should arise with respect to the list of practices which are considered unfair in all circumstances The DMCC Bill allows the Government to implement changes in this respect through secondary legislation.
  • Online platforms: the Government has acknowledged the need for more engagement with online platforms to create further guidance on the requirement under the DMCC Bill to act with “professional diligence” in relation to digital transactions.
  • Online interface orders: the Government has introduced amendments to allow all public designated enforcers to apply for online interface orders and interim online interface orders. Such orders may, for example, require a trader operating an online interface that infringes consumer law to remove or modify content; disable or restrict access to the online interface; display a warning to consumers; or delete a fully qualified domain name. The Government has confirmed these powers will not be extended to private enforcers such as “Which?”.

New Government amendment to prevent foreign state ownership of newspapers

The Government also confirmed it will table an amendment at Third Reading preventing foreign states from owning, influencing or controlling UK newspapers or periodical news magazines. These new powers will require the Secretary of State to issue a “foreign state intervention notice” to the CMA if they have reasonable grounds to believe that a merger involving a UK newspaper or magazine has given or would give a foreign state (or body connected with a foreign state) ownership, influence or control. The notice will require the CMA to investigate and, if the thresholds are met, make an order blocking or unwinding the merger.  The new regime will work in parallel to the existing public interest intervention regime. It will take the form of amendments to the Enterprise Act 2002 which are likely to take immediate effect upon Royal Assent. 

Notable exclusions from the new regime include: 

• digital media – only newspapers and periodical news magazines will be covered for now; and
• television and radio broadcasters – which the Government will continue to consider as part of its broader work on the media mergers regime (see draft Media Bill which reforms the regulation of public service broadcasting in the UK).

The Government is also planning to bring forward an amendment at Third Reading to create secondary legislation which will preserve the opportunity of “legitimate foreign investment” in news media (such as a sovereign wealth fund of a democratic state up to a very low threshold). For example, reference was made to the unproblematic example of the Norwegian state investment fund which has single digit investments in News Corp, Reach, Paramount Global and Comcast. 

Digital Markets – certain aspects of the new regulatory regime continue to be debated

The Lords reversed a number of changes made by the Commons at Committee stage, which are likely to attract more debate when the Bill returns to the Commons after the Easter recess. It remains unclear whether any of these amendments will be accepted by the Commons: 

• Judicial review standard for challenges to penalties: As anticipated in our last update, the Lords have proposed applying the higher “judicial review” standard to appeals of penalty decisions (limited to challenges based on procedural fairness, errors of law and irrationality), rather than a full merits review. The Government previously introduced a full merits standard to align with penalty decisions made under the Enterprise Act 2002 for failure to comply with investigative measures during merger reviews. Judicial review remains the standard for challenges to other decisions made by the Digital Markets Unit. The proper standard of appeal of decisions made by the CMA under its extensive new powers has been one of the more controversial aspects of the legislation – this amendment is therefore likely to be subject to further debate. 
• No requirement for the CMA to carry out a “separate” proportionality assessment when imposing a conduct requirement: The Lords have proposed that the CMA should be able to impose a conduct requirement on an undertaking designated as having “strategic market status” when “appropriate” rather than when “proportionate”. As noted in our last update, the CMA is already under a general requirement to act proportionately when exercising its powers, but the Lords’ intention through this amendment is to avoid any risk that proportionality would be introduced as a separate line of review outside of ordinary judicial review principles. As this seeks to reverse an amendment made in the Commons, it is likely to be subject to further debate. 
• Narrowing of countervailing benefits exemption: The Lords have sought to reverse another amendment made in the Commons by reintroducing the requirement for conduct to be “indispensable” to the achievement of a countervailing benefit and therefore satisfy the criteria for exemption (where the CMA closes an investigation for breach of a conduct requirement if the benefits outweigh the negative effects). This is controversial as the high antitrust threshold for “indispensability” applies in circumstances where conduct creates a specific harm, whereas the CMA is not required to prove such harm when investigating breaches of conduct requirements, which would logically mean that the threshold for exemption should be lower.

Competition – funding of opt-out collective actions

• PACCAR reversal: The Government will no longer seek to use the DMCC Bill to reverse the unenforceability of damages-based litigation funding agreements following the Supreme Court’s decision in R (PACCAR) v CAT [2023] UKSC 28. Instead of a narrow reversal only affecting competition law proceedings, the Government is now planning to bring forward a separate Bill addressing the effect of PACCAR in respect of all proceedings.

What happens next?

Third Reading will take place on 26 March 2024, providing the Lords with a chance to ‘tidy up' the Bill and ensure the law is effective and workable before it goes back to the House of Commons. The Lords are able to suggest further amendments at Third Reading provided the issue has not been fully considered and voted on during either the committee or report stage.

Third Reading will be followed by Easter recess (ending 15 April), following which the House of Commons will consider final amendments. Given the disagreement between the two Houses on some of the key elements of the Bill, particularly in relation to the Digital Markets regime, the “ping-pong” process could continue and see the Bill go back and forth again between the Houses before it receives Royal Assent. Subject to the timing of that process (and any delays which might be caused in the event of an early General election), the Bill appears to be still on track for Royal Assent in the Spring and to come fully into force later in 2024, once all the necessary guidance has been published for public consultation and finalised. 

If you have any questions regarding the DMCC Bill, please contact a member of the team or your usual Freshfields contact.