Antitrust, Regulation & Foreign Investment Q3 newsletter

Welcome to our third quarterly newsletter of 2024, where the Ashurst Antitrust, Regulation and Foreign Investment Team recaps some of the key developments of Q3 2024. 

This edition highlights:

• the UK Digital Markets, Competition and Consumers Act 2024 (DMCC Act) which received Royal Assent on 24 May 2024. The Act introduces widespread reforms to competition and consumer law, as well as a new regime regulating designated digital companies. Our series of briefings considers each pillar of the DMCC Act in more detail – this newsletter covers the UK Competition and Markets Authority's (CMA) consultation on its guidance on administrative penalties and the new digital regime (including a comparison with the EU Digital Markets Act (DMA)).
• regulators continued interest in sustainability issues. The Australian Competition and Consumer Commission (ACCC) is the latest regulator to publish draft guidance on sustainability collaborations: competition authorities in the United Kingdom, the European Union, New Zealand, Japan, the Netherlands and Singapore have also published guidance. In September 2024, the CMA published guidance for the fashion retail sector on how to comply with the Green Claims Code and consumer law when making environmental claims.
• the European Court of Justice's (ECJ) ruling in Illumina v Commission which concluded the long-running Illumina / Grail saga. The ECJ held that the European Commission cannot review cases which do not meet EU or the national merger control thresholds of the referring Member State. However, below threshold transactions will remain under scrutiny by national competition authorities and the European Commission through several mechanisms.

Spotlight on the UK DMCC Act

1. Digital markets, competition and consumer law – from legislation to enforcement 

In our first podcast episode on the DMCC Act since it received Royal Assent in May 2024, we discuss the new digital markets regime in the UK which will enable the CMA to designate firms with strategic market status (SMS) and to impose bespoke conduct requirements on designated firms. The episode also covers the CMA's draft digital guidance and the open questions about how the CMA will exercise its broad powers, particularly in relation to conduct requirements and pro-competition interventions. We also discuss the CMA's draft statement of policy on administrative penalties which proposes to apply an "in the round approach" to penalties for breaches of orders and undertakings following merger and market investigations.

2. DMCC Act: CMA consults on revised guidance on administrative penalties

On 11 July 2024, the CMA published a consultation on its proposed approach to administrative penalties (referred to by the CMA as the draft CMA4). The draft statement proposes to apply an "in the round" approach to the assessment of the appropriate administrative penalty, including pursuant to new powers to fine companies for breaches of undertakings and orders in mergers and markets cases. 

The draft statement does not cover penalties imposed for substantive infringements under the Competition Act 1998, or for breaches of digital markets competition requirements, or under the new consumer protection law direct enforcement regime, all of which are subject to separate guidance. See here for our overview.

3. DMCC Act: New digital regime for the UK 

The DMCC Act establishes a new digital markets regime which provides the CMA with the power to designate firms as having SMS. Once designated, firms are subject to tailored codes of conduct and a specific merger reporting regime. In addition, the CMA has the power to make pro-competition interventions.

On 24 May 2024, minutes after the DMCC Act received Royal Assent, the CMA published its draft guidance setting out how it plans to exercise its new digital market competition powers, for consultation. 

See here for our overview of the new regime, including the criteria for designation, how conduct requirements will be determined, pro-competition interventions, enforcement powers and the new merger reporting regime. 

4. Digital markets regulation in the EU and UK: DMA v DMCC 

In our latest podcast episode on the DMCC Act, we discuss the shifting regulatory landscape for Big Tech in the EU and UK. In recent years, the EU and UK have both introduced new regimes regulating Big Tech companies with the EU DMA and the UK DMCC Act. Under both regimes, companies will be subject to enhanced regulation if they are designated as a gatekeeper in the EU or as having strategic market status in the UK. The episode highlights the key similarities and differences between the two regimes, considering the designation process and criteria, the obligations imposed on designated companies and the regulators' enforcement powers.

Significant penalties may be imposed on companies who breach their obligations under the DMA and DMCC Act, including fines of up to 10% of global turnover (and up to 20% for repeated breaches of the DMA). 

See here for our accompanying briefing.

July 2024 Recap

1. ACCC's draft guide cautiously encourages sustainability collaborations

The ACCC has published long-awaited draft guidance for businesses proposing to collaborate on sustainability initiatives. In the draft guide, the ACCC recognises "the clear need for urgent action on environmental sustainability" and that "environmental harm, including climate change and biodiversity loss, represents a special category of threat to the environment and economy which requires action by all stakeholders, including the business community." See here for our overview.

The guide highlights that in Australia, unlike some other jurisdictions, the ACCC is able to give businesses certainty about their exposure to the risk of legal action through the authorisation process. If businesses obtain authorisation before engaging in a sustainability collaboration, they can engage in the authorised conduct without risk of the ACCC, or third parties, taking legal action against them for a breach of competition law.

2. Getting ready for the EU Net Zero Industry Act

The EU Net Zero Industry Act (Regulation (EU) 2024/1735) (NZIA) was officially adopted and entered into force at the end of June 2024. Its primary objective is to speed up net zero industrial transformation by expanding the EU's manufacturing and installation of clean technologies. The NZIA is designed to implement the EU's commitment to climate neutrality whilst simultaneously boosting competitiveness and reducing dependencies and supply chain disruptions.

The coming months will be decisive for affected entities and operators. See here for further details.

3. Key insights into Australia's draft merger reform legislation

In July 2024, the Australian Federal Government consulted on exposure draft legislation to implement its proposed significant changes to Australia's merger control regime. The exposure draft bill entitled "Treasury Laws Amendment Bill 2024: Acquisitions" (Draft Bill) was released on 24 July 2024 and the consultation closed on 13 August 2024. The short consultation period indicates that the Government is likely to seek to progress the amendments through Parliament quickly. 

In this article, we outline our key insights into the move to a single mandatory and suspensory administrative merger control regime as set out in the Draft Bill. Parties to acquisitions above certain (yet to be specified) thresholds will be required to notify the ACCC of the acquisition and the acquisition must not be put into effect unless the ACCC has determined that it may be put into effect.

August 2024 Recap

1. Trade and foreign policy: what to expect from the next European Commission term

On 18 July 2024, Ursula von der Leyen was re-elected as President of the European Commission. Her political guidelines for the next European Commission highlight the key challenges and priorities for the EU from 2024 to 2029, including security, defence, climate change and competitiveness, and indicate the key initiatives to address these challenges. 

In this briefing, we consider the key messages from the political guidelines and next steps. In particular, the guidelines envisage a new foreign and security policy to address an age of geostrategic rivalries and the weaponisation of economic dependencies. Sustainable competitiveness is also high on the political agenda – this includes massive investments in decarbonisation, digital tech and research and innovation to reduce dependencies in supply chains, make business easier and fulfil climate neutrality goals.

2. New guidance on the EU Foreign Subsidies Regulation

The EU Foreign Subsidies Regulation (FSR) was introduced to address concerns that subsidies granted by non-EU Member States may impact the internal market and were not considered in the context of EU M&A and public procurement procedures. The FSR was designed to address this by enabling the European Commission to scrutinise subsidies granted by non-EU Member States. It requires companies active in the EU to monitor the foreign financial contributions that they receive. The FSR entered into force on 12 July 2023 and the notification obligation entered into force on 12 October 2023 (see our February 2023 and July 2023 updates).

On 26 July 2024, the European Commission published a staff working document setting out some initial clarifications on the FSR. In our latest briefing on the FSR, we set out the key takeaways from the staff working document, including guidance on how the European Commission is interpreting "distortion" under the FSR and the balancing test. Further guidance is due to be published by 12 January 2026. 

3. Tech M&A: Recent "Acquihires" in the Tech Sector 

The tech sector has seen a number of recent high-profile exits by AI and other technology companies in the form commonly known in the industry as "acquihires", certain of which have attracted the attention of regulators in the UK, US and elsewhere. In this cross-practice briefing, we set out the key considerations for acquihire transactions including the CMA's recent interest in whether AI partnerships qualify for review under the UK merger rules. 

September 2024 Recap

1. High Court finds removing customer safeguards can lead to unconscionable conduct

The High Court of Australia has decided that, under the Australian Consumer Law, it was unconscionable to remove key safeguards which mitigated the risk of unsuitable or unwitting students incurring significant debts for no benefit, even without evidence that the decision makers wanted those risks to eventuate to the detriment of the students. 

The High Court also clarified that an individual may be liable for corporate unconscionable conduct as an accessory where they are aware of the essential matters comprising the conduct. This does not require the individual to know it is "unconscionable" as a matter of law but does require the individual to know the details of the conduct and know that there are manifest, common or prevalent risks of harm to consumers because of it.

See here for our overview of the High Court case and its implications.

2. Lights on: ECJ's Illumina sheds light on future oversight of killer acquisitions in the EU

On 3 September 2024, the ECJ published its much-anticipated judgment in Illumina v Commission. The ECJ concluded that the European Commission does not have jurisdiction to review transactions referred by EU Member States' national competition authorities under Article 22 of the EU Merger Regulation (EUMR) where the referring authority does not have jurisdiction to review the transaction in question. 

The judgment concludes the long-running Illumina / Grail saga, following the divestment of Grail which was completed in June 2024. However, an increasing number of EU Member States' national competition authorities have the power, in certain circumstances, to call in transactions which do not meet national notification thresholds. Below threshold transactions are therefore still likely to be scrutinised and the European Commission has indicated that it expects national competition authorities will continue to refer transactions to the European Commission under Article 22 of the EUMR. See here for our insights into what to expect following the ECJ's ruling.

3. CMA publishes guidance on environmental claims in the fashion sector 

On 18 September 2024, the CMA published guidance (the Guidance) to the fashion retail sector on compliance with the Green Claims Code and consumer law when making environmental claims. The Guidance has been issued in advance of the commencement of the CMA's new consumer law enforcement powers under the DMCC Act, which are expected to come into force in April 2025. Once in force, the CMA will have the ability to impose financial penalties of up to 10% of a business' global turnover for breaches of consumer protection law, including in relation to misleading green claims.

The Guidance follows the conclusion of the CMA's investigations into ASOS, Boohoo and George at Asda, and largely reflects the undertakings offered by those firms to conclude the investigation.

See here for our summary of the key points arising from the guidance and potential implications for businesses both within and outside the fashion sector, including in relation to internal processes and supply chain engagement. 

4. Implementation of the Public Procurement Act 2023 delayed to February 2025

The Procurement Act 2023 received Royal Assent on 26 October 2023 and creates a new public procurement rulebook in England, Wales and Northern Ireland. The Act is part of Government's strategy of overhauling EU-derived legislation following Brexit. In April 2024, the Cabinet Office informally announced that it was "working towards a go-live date of" Monday 28 October 2024 (see our May 2024 update). 

On 12 September 2024, the Cabinet Office announced the Act will now enter into force on 24 February 2025 in a ministerial statement. Our latest briefing sets out the guidance published to date and next steps for contracting authorities.