Royal Assent for the DMCC Act: what do you need to know?

Over a year after it was first introduced in the House of Commons, the UK Digital Markets, Competition and Consumers Bill (DMCC) received Royal Assent on 24 May 2024. The DMCC introduces widespread changes to competition law and consumer law enforcement in the UK, as well as a new regime regulating designated Big Tech companies. 

Key takeaways

• The DMCC has now completed the legislative process. While further rules and guidance are required, we expect the key reforms to enter into force later this year.
• The DMCC implements the Government's digital markets strategy, which includes tailored codes of conduct for certain digital companies and a bespoke merger control regime for designated firms.
• The DMCC also contains significant reforms to the competition and consumer regimes in the UK, including:
  • wide-ranging changes to the CMA's Competition Act 1998 and market study / investigation powers, including the ability to impose significant penalties for non-compliance with market investigation orders;
  • significantly strengthening the consumer law enforcement regime by enabling the CMA to directly enforce consumer law through the imposition of fines and the ability to award compensation to consumers; and
  • new provisions covering drip pricing and the inclusion of additional practices relating to fake reviews within the list of practices that are considered unfair in all circumstances under consumer law.

Background

The DMCC was introduced in the House of Commons on 25 April 2023 (see our April 2023 update). On 21 November 2023, the DMCC passed its third reading in the House of Commons and consideration of the Bill moved to the House of Lords. See our January 2024 update for an overview of the key debates and amendments to the Bill in the House of Commons. After some back and forth between the House of Commons and the House of Lords, the DMCC was finally passed by both Houses on 23 May 2024. 

The Act

The DMCC Act has three main parts: 

• Digital Markets - the Act gives the CMA the power to impose tailored conduct requirements on firms that are found to have substantial and entrenched market powers in a digital activity (SMS), with breaches of those conditions potentially resulting in fines of up to 10% of a SMS firm's global turnover. The CMA will also have the power to make pro-competition intervention orders;
• Consumer Law - the CMA will have the power to directly enforce consumer protection laws through administrative enforcement in a manner similar to its Competition Act powers. The CMA will also be able to fine companies up to 10% of global turnover for consumer law breaches, as well as to award compensation to consumers; and
• Competition Law - the Act includes a number of amendments to the current Competition Act and merger control regimes, including revised merger control thresholds, additional Competition Act investigatory powers (including powers to obtain information from non-UK companies and when carrying out raids of domestic premises) and greater flexibility in undertaking, and enforcing the outcomes of, market investigations.

Digital markets

The Digital Markets Unit (DMU) was launched in "shadow form" in April 2021, pending the introduction of legislation to put it on a statutory footing. The new digital regime will apply to firms found to have "substantial and entrenched" market power and a "position of strategic market significance" in at least one digital activity: these companies will be designated as having "strategic market status" (SMS). Firms will only be designated if their global (group) turnover exceeds GBP 25 billion or the UK (group) turnover exceeds GBP 1 billion. 

The designation process will last up to nine months (extendable by up to a further three months); if the DMU does not issue a designation notice by this deadline then it shall be deemed to have issued a notice that it has decided not to designate the business in respect of that particular digital activity. Further guidance from the CMA on the designation process is expected shortly. 

Once designated, businesses will be subject to enhanced regulation through:

• an enforceable code of conduct tailored to the particular business. The code of conduct may include requirements not to apply discriminatory terms; to provide clear, relevant, accurate and accessible information to users; or preventing the tying or bundling of services. Failure to comply with the code of conduct may result in fines of up to 10% of global turnover and director disqualification; and
• mandatory reporting requirements for certain transactions where the consideration exceeds GBP 25 million. Reportable transactions must not be closed until at least five working days after the CMA confirms that the information contained in the report was sufficient.

The CMA will also have the power to impose a wide range of pro-competitive interventions, which are "mini" market investigations. 

Following debate in both Houses of Parliament, the final version of the DMCC provides for appeals "on the merits" for penalty decisions under the new digital markets regime. The House of Lords proposed applying the judicial review standard (i.e. challenges would need to be based on procedural fairness, errors of law or irrationality) but this was rejected by the House of Commons and ultimately not insisted upon by the Lords. Other decisions by the DMU will be challengeable on judicial review grounds only. 

Competition law

The DMCC introduces reforms across the suite of competition law tools in the UK, including: 

• Competition Act investigations: significant changes to the CMA's powers when conducting investigations using its Competition Act 1998 powers, such as: (i) new evidence gathering powers (including the ability to interview any relevant person; seize and sift powers at domestic premises); (ii) strengthening the CMA's powers to obtain information remotely when executing a warrant; and (iii) additional powers to sanction companies who fail to cooperate, with maximum caps of 1% of global turnover for non-compliance with investigation measures and up to 5% for non-compliance with remedies such as commitments and undertakings.
• Merger control: amending the CMA's jurisdiction to review mergers by increasing the target turnover threshold from GBP 70 million to GBP 100 million; and introducing a new threshold designed to capture so-called "killer acquisitions" which will give the CMA jurisdiction where at least one party has a share of supply of goods or services of 33% and UK turnover of GBP 350 million.
• Market studies and investigations: (i) giving the CMA greater flexibility to define the scope of market investigations; (ii) providing for a more flexible process (including removing the requirement to consult on a market investigation references in the first six months of a market study; more flexibility for the CMA to make a market investigation reference after issuing a market study notice; and allowing the CMA to accept undertakings at any stage in the process); (iii) enhanced remedy powers, including the ability to require businesses to trial remedies in certain circumstances and to amend remedies within a ten year period following the finding of an adverse effect on competition in a market investigation; and (iv) powers to impose penalties for breaches of market investigation orders and directions.

Consumer law

The DMCC has introduced significant changes to the enforcement of consumer law in the UK. Significantly, the DMCC enables the CMA to directly enforce consumer law through administrative proceedings. This brings the CMA's consumer law powers in line with its existing competition law powers. 

The CMA will now have the power to issue infringement notices, fine companies up to 10% of their global turnover and individuals up to GBP 300,000 for breaches of consumer law, as well as the ability to award compensation to consumers. In addition, the CMA will be able to directly enforce undertakings given by parties under investigation, with the possibility of fines for breaches of undertakings or directions imposed by the CMA. Penalties and directions imposed by the CMA will be subject to an appeal "on the merits" to the High Court. 

The DMCC also revokes the Consumer Protection from Unfair Trading Regulations and restates the protections from unfair commercial practices in primary legislation. The Government has been given a new power to amend the list of practices that are considered unfair in all circumstances under consumer law. 

New provisions have been added to the DMCC to address drip pricing and fake reviews: 

• The new rules on drip pricing include information about mandatory fees and optional fees as "material information" which must be included in any invitation to purchase.
• In relation to fake reviews, certain practices have been added to the list of unfair practices in the DMCC, including (i) submitting / commissioning a fake review or concealing that a review has been incentivised; (ii) publishing consumer reviews in a misleading way; (iii) publishing consumer reviews without taking reasonable and proportionate steps to prevent publication of fake reviews/information and (iv) offering services to businesses for doing or facilitating the practices set out in (i) to (iii).

Comment

These reforms have been anticipated for several years. In the intervening period, the EU has introduced its Digital Markets Act (DMA) which has been fully in force since March 2024 and seven companies have now been designated in respect of particular digital activities (see our January 2024 update). 

The CMA has previously indicated that it expects the digital markets regime to commence in October 2024, with the first SMS designations and conduct requirements in place from July 2025.  In January 2024, the CMA published an overview of its provisional approach to implementing the new digital markets regime, explaining how it will carry out its digital markets functions, including: 

• its operational readiness;
• how it will engage with potential SMS firms and other stakeholder;
• how it will be held to account; and
• its indicative timing for the implementation of the new regime.

The CMA also indicated that it expects to publish draft guidance around the time of Royal Assent so further guidance is expected shortly.