New year, new reforms ... digital and competition (including mergers) parts of the DMCC Act in force from 1 January 2025

The UK Government has confirmed that the digital and competition parts of the landmark Digital Markets, Competition and Consumers (DMCC) Act will come into force on 1 January 2025. The CMA’s new powers to directly enforce consumer law are expected to come into force later in 2025. 

We set out below the headline areas of reform that will take effect in the new year and the impact on previous, current and future investigations. Get in touch or subscribe to our DMCC Client Toolkit for more details.

What does this mean for you?

Competition regimes - mergers, markets and antitrust

1. New merger review thresholds

On 1 January 2025, the Competition and Markets Authority (CMA) gains new powers to intervene in deals where the parties do not directly compete (known as vertical and conglomerate deals) and deals involving potential or dynamic competition where the target has no UK turnover. 

The new test allows the CMA to review any transaction where one party (likely to be the acquirer) has a UK turnover exceeding £350m and supplies or acquires at least 33% of any goods or services in the UK, even if the target has no UK turnover – but provided it meets the UK nexus test (a low bar):

• Targets have UK nexus if part of their activities are carried on in the UK. The CMA says there is no need for a target to be supplying goods or services to UK customers at the time of the merger: the test is satisfied if any preparatory step has been taken towards potentially supplying goods or services in the UK. These may include having intellectual property rights in the UK or having obtained a licence or regulatory approval. 
• Any business with UK turnover exceeding £350m which could supply or acquire 33% of any goods or services in the UK should prepare for more acquisitions falling in scope of CMA review. When considering the 33% test, note that the CMA has broad discretion to apply it to any reasonable description of a set of goods or services supplied or acquired – this is not an economic assessment. It has, for example, been satisfied by the number of patents procured. This flexible approach is expected to continue.

Otherwise, the normal UK turnover threshold for targets has been revised, so that acquisitions of a target with UK turnover exceeding £100m (up from £70m) will also qualify for review.  

The CMA may use these new thresholds to review deals that have not completed – or where it has not started its 40 working day phase 1 review – by 1 January. 

2. Higher penalties for breach of CMA requirements

From 1 January 2025, there will be a significant increase in the scale and scope of penalties for failure to comply with CMA investigative measures or orders/undertakings/commitments (see table below). 

The government has confirmed that these new penalties will not be applied retrospectively. 

3. Market studies and investigations: new powers to trial and/or amend remedies

From 1 January 2025, the CMA has the power to accept binding commitments at any stage of a market study or market investigation, require parties to conduct remedy implementation trials and amend existing remedies which the CMA considers are ineffective at remedying the adverse effect on competition.

The government has confirmed that: 

• remedy implementation trials can only be imposed where the CMA publishes its final report on a market investigation on or after 1 January (the CMA will not be able to impose a remedy implementation trial in respect of final undertakings or orders where a report was published before 1 January); and
• the CMA will not be able to vary an undertaking or order on the basis that it is ineffective if the undertakings or orders were agreed or imposed before 1 January, or if the undertakings or orders were made on or after 1 January but they vary an undertaking or order made before 1 January.

4. Duty to expedite

From 1 January 2025, the CMA will also be subject to a new statutory duty of expedition across its tools that will require it to “have regard to the need for making a decision […], or taking action, as soon as reasonably practicable”.

This may provide a gateway for the CMA to seek shorter timeframes for responses to information requests – placing a significant burden on respondents, particularly when coupled with increased penalties for non-compliance.

Digital markets competition regime 

1. Strategic market status (SMS) investigations and designations

From 1 January 2025, the CMA will have the power to begin investigations to designate digital businesses as having SMS. 

The CMA will be able to designate a firm as having SMS in respect of a digital activity based on a two-limb test: “substantial and entrenched market power”; and a “position of strategic significance” in respect of the digital activity.

We expect the CMA to initiate SMS investigations shortly after commencement and that the CMA’s first SMS investigations will focus on digital activities that have recently been the subject of market studies and investigations.

2. Consultation on conduct requirements for SMS firms

From 1 January 2025, the CMA will have the power to begin consultations on conduct requirements in parallel with SMS investigations.

Conduct requirements are intended to govern how SMS firms interact with consumers and other businesses in relation to the activities for which they have been designated.

Formal issuance of conduct requirements could, at the earliest, be at the same time as SMS designation decisions (although no specified deadline for consultation).

3. Pro-competition interventions (PCIs)

Following a SMS designation decision, the CMA will have the power to begin PCI investigations. 

PCIs can be used by the CMA to remedy, mitigate or prevent one or more factors that have an “adverse effect on competition”. A PCI can result in a pro-competition order or recommendation.

4. Merger reporting requirements

Additional mandatory and suspensory reporting requirements will apply to SMS firms i.e., once designated, SMS firms must report a transaction prior to it taking place if it meets certain (low) thresholds.

Getting prepared

The CMA is bulking up its regulatory toolkit, and the first instalment of the DMCC Act commencing on 1 January 2025 significantly strengthens its powers to take action – are you prepared? 

• Deal planning. Make sure you know where your current and future deals stand based on the incoming changes and build this into deal planning considerations.
• Compliance. Make sure that you are set up to comply and you are thinking broadly about compliance planning across regulatory regimes. 
• Personnel. Consider whether more personnel ought be trained for DMCC-specific requirements. Make sure deal teams are aware of the reporting requirements.

If you would like to discuss these updates or any aspect of the DMCC Act, please contact a member of the team or your usual Freshfields contact. You can also subscribe to our DMCC client toolkit for further insights and information.