Digital Markets Competition and Consumer Act 2024 Overview

The Digital Markets Competition and Consumer Act (the Act) is a new Act that received Royal Assent in the twilight hours of the last Government. The scope of the Act is wide but the coming into effect is staggered over the coming months depending on the subject area.

The Act is a law in three distinct parts: (Regulation of) Digital Markets (and more specifically businesses having “strategic market status,” Competition (Regulation) and Consumer Law.

Digital Markets

The Act enables the creation of the Digital Markets Unit (DMU) within the Competition and Markets Authority (CMA.)

The DMU shall consider which businesses fall into the remit of the Digital Markets regulation, by performing an analysis of whether it believes a business has “strategic market status.” A business has strategic market status if it:

• Holds a position of strategic significance; and
• Has substantial entrenched power (looking over a five year horizon); and
• UK turnover is greater than £1bn per annum or Global turnover is greater than £25bn per annum

Once a business is so-designated and falls into the purview of the DMU for regulation, that regulation will take the form of a bespoke code of conduct setting out conduct requirements that:

• Are proportionate to an aim (to achieve a consumer benefit); and
• Satisfy a requirement to pursue either
  • Fair dealing; or
  • Open choices; or
  • Creation of trust and transparency

Regulated companies also face a further requirement to work with the DMU in relation to any mergers and acquisition activity with a value of more than £25m.

The DMU/CMA has significant teeth in relation to their enforcement powers for breaches of the code of conduct with fines of up to 10% of global turnover, as well as enforcement orders and “pro-competition interventions” which could lead to mandatory divestitures.

No businesses have yet been designated as having strategic market status, but the focus is on “Big Tech.” The EU Digital  Services Act which has a similar underlying purpose as the Act and is a little further ahead in its implementation, has so far designated Alphabet (e.g. Google), Amazon, Apple, Bytedance (Tiktok), Meta (Facebook, Instagram, Whatsapp and Snapchat), Microsoft and Booking as regulated entities. The EU regulators are in dispute with X (Twitter) regarding its status, but readers can expect X will be at least considered by the CMA.

Competition

The second strand of the Act, gives the CMA broader general powers (beyond digital markets) of enforcement. In particular, the chilling effect of the GDPR-fining regime has been noted by legislators and the Act introduces  monetary penalties for breaches of consumer law of 10% of global turnover or up to £300,000 whichever is the higher.

In relation to consumer law, the intention is that the CMA will now take a conduct-policing role (similar to the Information Commissioner’s Office or the Financial Conduct Authority.) This is in contrast to their previous high-level investigatory and guidance making approach.

There are additional technical elements in the Competition area. The Act expands the territorial scope of the Chapter I prohibition on “anti-competitive arrangements” in the Competition Act 1998 (deriving from the Treaty of the EU)  to those both implemented in the UK and those that will have an immediate, substantial and foreseeable effect in the UK. This will allow the CMA to intervene in international transactional activity that will impact UK consumers. Additionally, the CMA has been given powers to support overseas regulators in their investigations.

Finally, there are additional powers given to the CMA during “dawn-raids” and the introduction of additional offences in relation to the destruction of documents where a CMA investigation is suspected by a business.

Consumer Law

The last strand relates to consumer law. This seeks to expand and sharpen elements of the Consumer Rights Act 2005 and includes an updated list of blacklisted actions that are automatically unfair as well as specific regulations relating to subscriptions. Further detailed analysis of the consumer aspects are being followed up by the team in forthcoming articles.