In the final days of Parliament, the landmark UK Digital Markets, Competition and Consumers Act 2024 (the ‘Act’) has received Royal Assent and is now law. Some reforms come into effect immediately (notably new controls over foreign ownership of newspapers), but the vast majority will come into force in a staged approach later in 2024 and beyond, following public consultation on important legislative guidance.
The Act significantly strengthens the powers of the Competition and Markets Authority (CMA) to:
- investigate and take enforcement action against behaviour which breaches competition or consumer protection laws, and impose heavier sanctions for non-compliance with investigative measures;
- regulate specific digital activities of firms designated as having “strategic market status” by imposing conduct rules, remedies and reporting obligations using a new bespoke regulatory toolkit for digital markets;
- review more mergers and adopt more flexible procedures for deals raising concerns; and
- exercise new powers to trial and vary remedies imposed following a market investigation.
We have set out below a reminder of the key areas of reform being introduced by this significant and lengthy piece of legislation.
Game-changing reforms for enforcement of consumer protection law in the UK
- Antitrust-style regulatory enforcement for the UK consumer protection regime – the CMA will now be able to investigate and determine directly whether companies have infringed UK consumer protection laws – a power that currently rests with the courts. With associated additional powers for the CMA to gather evidence, the consumer protection regime will, for the first time, mirror the CMA’s competition regime.
- Headline-catching penalties for consumer law infringements – as is the norm in the antitrust space, the CMA will now also be able to directly impose significant financial penalties (up to 10% of global turnover) for breaches of consumer protection laws. Companies will similarly face higher penalties if they fail to comply with investigative measures (e.g., information requests), and there are new turnover-based penalties for non-compliance with CMA orders, undertakings and commitments.
- Subscription contracts, fake reviews and pricing practices in the spotlight – the DMCC Act adds fake reviews to the blacklist of practices that are deemed automatically unfair in all circumstances. In addition, any invitation to purchase that omits material information (including for e.g., “drip pricing” – i.e., the use of headline prices without including fixed and variable mandatory fees), will be prohibited regardless of whether the practice has caused or is likely to cause the average consumer to take a transactional decision they would not have taken otherwise. Furthermore, the DMCC Act introduces new rules on subscription contracts and consumer saving schemes. Taken together, all of these changes serve to update the current regime, with a view to the CMA being able to target these areas of significant media and political focus.
- Increased litigation risk for companies that breach consumer law – as the UK’s collective proceedings regime continues to evolve (with consumer issues featuring increasingly prominently in a number of recent cases), we expect to see claimants and their lawyers looking to leverage future CMA enforcement actions to support private litigation against businesses found to have infringed consumer law.
The digital markets regime - codes of conduct, targeted interventions and a wide net for M&A notifications
- Enforceable codes of conduct for firms designated as having ‘strategic market status’ (SMS) – the Digital Markets Unit (DMU) will work with SMS firms and consult publicly to establish enforceable conduct requirements based on the objectives of “fair trading”, “open choices” and “trust and transparency”.
- Targeted pro-competition interventions to tackle the source of perceived market power – as the more proactive tool in the DMU’s armoury, the DMU will – following an investigation – be able to impose pro-competition orders that remedy, mitigate or prevent any identified “adverse effect on competition”. This could include restrictions on conduct, obligations to be performed and even divestments.
- The CMA’s first mandatory and suspensory merger reporting regime, solely for SMS firms – a low threshold regime (e.g., requiring consideration of just £25m), designed to require SMS firms to report many transactions with a UK nexus. The reporting obligation will trigger an accelerated timetable for the CMA to determine whether to review the merger under its merger control regime.
Proposed amendments by the House of Lords failed to make the cut:
- Appeals against the level of penalties imposed by the CMA will be subject to a full merits review standard. The higher “judicial review” standard will still apply to other decisions, including SMS designation, the imposition of conduct requirements and pro-competitive orders, as well as infringement decisions.
- The CMA must act “proportionately” when imposing conduct requirements. The Government confirmed it would clarify the intention behind this standard in its guidance.
- There is no requirement for conduct that would otherwise be a breach of requirements to be “indispensable” to benefit from the countervailing benefits exemption. But SMS firms will still have to show that there is no other reasonable, practicable way to achieve the same benefits for consumers with less anticompetitive effects.
Businesses will need to consider the interplay between this new UK regime and other similar regulatory regimes that have been (or will be) enacted in other jurisdictions, such as the EU Digital Markets Act.
New merger thresholds, changes to the markets regime and stronger investigation and enforcement powers
- New acquirer-focused jurisdictional threshold: transactions involving any party (including acquirers) with a share of supply greater than 33% and turnover in excess of £350m in the UK will be within the CMA’s jurisdictional remit where the other party has some nexus to the UK (likely a low bar). This further widens its already expansive reach to capture vertical and conglomerate deals.
- Reforms to the CMA’s mergers process: complementing changes to the CMA’s phase 2 process introduced by the CMA in April 2024, the ability to utilise a new, statutory fast-track mechanism to Phase 2 without the need to concede a substantial lessening of competition and mutual stop the clocks (e.g., for remedies).
- A more flexible approach to market inquiries with binding commitments possible at any stage of a market study or investigation, and new powers for the CMA to conduct implementation trials before remedies are accepted or imposed. The CMA will also be able to vary remedies if it considers them ineffective within the 10 years following publication of a market investigation report.
- Enhanced investigative and enforcement powers, with additional powers for the CMA to gather evidence and impose higher penalties for failure to comply with investigative measures, as well as new turnover-based penalties for non-compliance with CMA orders, undertakings and commitments.
As trailed in our previous Report Stage update, one measure which has already come into force as of Royal Assent is the prohibition on foreign ownership of newspapers.
Watch out for…
The CMA will next release important draft guidance on how it will exercise its extensive new powers under the Act. This guidance will provide additional insight for businesses in how they should prepare for the new regimes coming into force later this year.
If you would like to discuss any aspect of the DMCC Act, please contact a member of the team or your usual Freshfields contact. You can also subscribe to our client toolkit for further updates and insights.
