Implications of the Digital Markets, Competition and Consumer Bill (DMCC)

As the UK's Digital Markets, Competition and Consumer Bill (DMCC) awaits royal assent, our lawyers comment on its various implications:

Peter Harper, Partner, said:

M&A

“The CMA, particularly post-Brexit, has actively sought a seat at the table to investigate cross-border M&A deals. The Act doubles down on the CMA’s approach. For businesses engaged in cross-border M&A, one important question will be whether these new powers lead to greater divergence in decision-making between the CMA and other key regulators globally such as the European Commission and the US Department of Justice and Federal Trade Commission. In the digital sector, large tech companies which are decided to have “strategic market status” will have to report proposed M&A deals valued at ￡25 million or more and which have a limited UK nexus to the CMA’s digital markets unit. While across the whole of the economy, the CMA will have new powers to investigate acquisitions by larger competitors of innovative or smaller startup companies or acquisitions of suppliers even if those companies have minimal, if any, UK presence. This reflects a trend towards regulators investigating a much broader range of deals including acquisitions of smaller companies.”

More generally, Peter Harper comments on the impact the Bill will have on the powers of the CMA, saying:

“The DMCC marks a watershed moment for the CMA. The CMA has come in for some criticism in recent years for some of its decisions. However, rather than retreating, the UK Government has substantially reinforced and expanded the CMA’s powers. In its new role as a regulator of the digital sector, the Act puts the CMA at the heart of regulating a key part of the UK economy whilst it is awarded greater tools to enforce not only its competition law regime but also its consumer regime. The CMA will need to show that the UK Government’s backing has been worthwhile and so businesses will need to be careful to ensure that they are aware of its new powers and the likely pressure on the CMA to use them.”

Julia Woodward-Carlton, Partner, said:

Dawn Raids

“The DMCC will give the CMA new and enhanced powers to carry out investigations, including new powers to conduct dawn raids against firms designated under the new digital regime including aggressive powers to seize and sift for electronic data. In a move towards tackling post-Covid hybrid working, the CMA is also boosting its powers to carry out dawn raids at domestic premises, with a clear intention to turn up at individuals’ homes where they think data or information relevant to their investigation may be held. The CMA is one of only few competition authorities bold enough to do this, and with around approximately 10 raids at domestic premises in the last seven years, we should expect to see more of this once the powers come into force.”

Personal liability

“The DMCC turns up the heat when it comes to personal liability. For the first time we see individuals being exposed to fines for conduct not relating to anti-competitive conduct, but where the CMA considers the individual has failed to comply with a CMA requirement, such as failing to provide accurate information or providing information found to be false or misleading, shifting the responsibility and risk firmly onto the individuals concerned. In addition, the power for the CMA to pursue directors of companies found to have breached competition law for disqualification, will extend to directors of firms designated under the new regime. Given the frequency with which the CMA is now actively going after directors, we should expect to see this power as a feature of the new regime as it develops. Concerns the CMA may have about the extent to which firms will comply with its requests will now be addressed, at least to some extent, by putting employees directly in the firing line – presumably a move the CMA thinks will focus the minds of individuals on the greatest need for compliance beyond the cares of their organisations.”

Elizabeth Coleman, Partner, said:

“One notable omission from the Act is the expansion of the so-called “collective actions” regime to allow for damages claims based on breaches of consumer law.?Presently, ?the only way in which a class representative can bring a claim in the UK on behalf of a whole class of consumers/companies is in respect of breaches of competition law.?As a result, the Competition Appeal Tribunal (CAT) is handling numerous collective actions relating to “competition law”, some of which seem more obviously related to consumer law issues.?The claims have largely been brought on behalf of hundreds and thousands of consumers/businesses, often for hundreds of millions, if not billions, of pounds.?In November 2023 the Rt Hon Robert Buckland KC MP tabled an amendment to the Bill proposing to expand the scope of the collective actions regime to include actions based on consumer protection law. The Government did not back the proposed amendment and ultimately it was not taken forward. Given the level of political interest in the amendment when it was proposed, it seems likely that this debate will reopen and we may well see legislation down the line paving the way for these types of claims.”

Digital

“One of the key purposes of this Act is to provide dedicated legislation for the regulation of competition in digital markets. Whilst it has always been possible for the UK competition authorities to enforce existing UK competition law against digital players, the UK Government was concerned that the existing regime was not sufficiently tailored to protecting and promoting competition and innovation in digital markets, and therefore there had not been enough effective enforcement in this important market for the UK economy.? The EU introduced dedicated regulation for digital players in October 2022 (which became applicable last year), and whilst there are some similarities between that regulation and the new UK regime, the UK has intentionally taken a more tailored approach to its regulation, so that only businesses designated as having “strategic market status” will be subject to the new regime and the rules for those businesses will be bespoke (rather than applying a generic set of rules across all SMS businesses, despite the fact that many of them operate in different digital markets).? The new UK regime marks a significant step change in the way these companies can operate in the UK, so that there will be much more engagement with, and reporting to, the competition regulator moving forward, and much more scope for the CMA to intervene in these businesses’ commercial decisions where it considers that those decisions could negatively impact competition in the UK.? The UK Government has estimated that the net benefits of the regime will be ￡5.167 billion over ten years.”

Annabel Borg, Legal Director, said:

“The DMCC is primarily designed to promote growth in the UK economy by ensuring vigorous competition both online and on the high street. While it aims to address market power and unfair practices, its overall impact on growth remains a subject of debate. Some argue that increased regulation could stifle innovation and investment, potentially hindering growth. However, proponents emphasise the need for a level playing field and consumer protection. Ultimately, the Bill’s effectiveness will depend on its implementation and balancing competing interests.”

Eve England, Partner, said:

“The DMCC makes a number of changes that will impact consumer businesses here in the UK.?The most significant change is that the Bill will update and strengthen the way that consumer law is enforced.? It does this by making a wider range of corrective measures, including fines, available to the courts and the Competition and Markets Authority for use against businesses that are not complying with their consumer law obligations.

“Other notable changes being introduced include a new set of rules that will apply to subscription contracts, as well as refreshing the existing unfair commercial practices framework to expressly prohibit practices such as fake reviews and drip pricing.

“The DMCC will make it far easier for the existing consumer law regime to be enforced, and businesses will need to make sure consumer law compliance is a priority.”

Greenwashing

“The CMA has re-iterated that it remains focussed on holding businesses to account when it comes to making sustainability claims, and this will apply to all sectors, including retail fashion and consumer? goods. The new Digital Markets, Competition and Consumers Act gives the CMA new direct enforcement powers against anyone who fails to comply with the Green Claims Code and wider consumer law without having to go to the courts. This will represent a significant change in the consumer law framework here in the UK.

“It will be essential for any businesses making sustainability claims to consumers to review and, if needed, update any statements being made to avoid reputational scrutiny and potential enforcement action.”

Subscriptions

“Although we have always had general consumer law protection for customers buying subscriptions in the UK, the new DMCC will, for the first time, provide a specific regime that traders will need to comply with when offering subscriptions to consumers, and the main aim of establishing this new set of rules is to help customers avoid what has become known as “subscription traps”. ?It has been estimated that consumers are spending about ￡1.6 billion per year on subscriptions that they don’t want. The main issue with many subscriptions is that customers find it difficult to get out of them, and often forget that they even have them.??

“The DMCC will change this, as it provides a far more robust regime regulating the information that businesses must give to subscription customers both before the contract is entered into, but also at different intervals thereafter. There is an emphasis on providing customers with notices and reminders at various touch points during the contract term, and this will mean that all businesses will need to look at how they communicate with customers, and ensure that their systems are geared up to meet these new requirements.

“With the enforcement regime being strengthened, we expect regulators such as the CMA to be keeping a close eye on subscription contract businesses.”