Out-Law / Your Daily Need-To-Know

The UK’s Competition and Markets Authority (CMA) has published details of how it intends to use its new powers to regulate competition in digital markets.

The Digital Markets, Competition and Consumers Bill (DMCC) (408 pages/ 20,471 KB), which could become law in spring 2024, proposes to give the CMA extensive new powers to help ensure effective competition in digital markets in the UK. The CMA will gain the power to designate certain digital companies as having ‘strategic market status’ (SMS), meaning they will be subject to new competition rules – both behavioural and relating to merger control – that are tailored specifically for digital markets.

On 11 January, the CMA published its intended approach for implementing these new powers. On the CMA’s working assumption that the DMCC Bill is passed by parliament in spring, the enforcer anticipates launching its first investigations in autumn to determine which digital firms should be designated as having SMS. The agency expects to initiate three to four SMS investigations in the first year of the new regime, with new conduct requirements potentially applicable to companies by July 2025.

The CMA’s document (28 pages/ 386 KB) outlines outcomes the CMA will seek to achieve as well as the issues the agency will seek to address. The approach sets out 11 operational principles underpinning how the CMA will carry out its new digital markets role. This includes tailoring of activities to the specific problems identified, considering proportionality and effectiveness. The CMA notes that its actions will focus where they can have the most impact for people, businesses, and the economy, also measuring outcomes and outputs. The agency further states that it will “stay abreast of developments and seek to deal with harm quickly” while promoting competition as the primary lever to deliver better outcomes for users. CMA aims also include preventative measures in terms of abuses of market power, operating with transparency.

The target outcomes of the ex ante regime include promoting competitive markets and tackling unfair behaviour with aims to allow fair-dealing businesses to be innovative and thrive, helping the UK economy to grow productivity and sustainability. The CMA said that it is building its expertise in anticipation of the DMCC Bill, aiming to ensure businesses will be regulated more expertly when operating in digital markets.

The CMA stressed that the recently published overview is provisional, and that is approach could change to reflect the final wording of DMCC Bill once it is passed by parliament.

Tadeusz Gielas, competition law expert at Pinsent Masons, said: “The CMA’s provisional approach was produced in response to a UK government request, while the DMCC Bill is still before parliament, and provides useful insight at an early stage into how the authority anticipates its new powers will apply in practice. Once the DMCC Bill becomes law, the CMA will publicly consult on detailed new guidance for implementing the finalised digital markets competition rules. That will be an important opportunity for stakeholders to meaningfully engage with the CMA on the operational and procedural aspects of the new regime.”

As well as preparing for its new digital markets competition powers, which will be mainly delivered by the CMA’s Digital Markets Unit, the CMA has recently published its first horizon scanning report (71 pages, 5.08MB) on 10 trends in digital markets and how they may develop over the next 5 years and beyond, and their potential impacts on competition and consumers.  Trends covered include rapid and widespread deployment of AI foundation models; increasing technology convergence enabling the creation of new and disruptive products and services; digital platforms increasingly integrating additional services, and the increased development and usage of open-source software and hardware.

“The CMA’s focus on future digital market trends aligns with its enforcement priorities as set out in the UK government’s recent strategic steer to the CMA; and the CMA’s draft annual plan for 2024/25”, Gielas added.

Competition authorities worldwide are closely focused on digital markets. The European Commission enforces EU competition rules both through the traditional EU antitrust framework (Articles 101/ 102 TFEU) and its new competition powers under the Digital Markets Act. Additionally, the G7 and guest competition authorities have recently published a revised compendium on this subject, highlighting the global focus in this area.

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