The Digital Markets, Competition and Consumers (“DMCC”) Act received Royal Assent on 24 May 2024 (the final text is now available here). The DMCC Act will only enter into force, however, when secondary commencement legislation has been enacted (with some minor exceptions). This is expected to occur in Autumn 2024, but it could be delayed due to the General Election taking place on 4 July. This secondary legislation could also stagger the dates on which separate provisions become effective.

This legislation ushers in a new rulebook for the largest digital firms active in the UK, alongside some consequential changes to the broader UK competition law framework. In relation to digital markets specifically:

  • The Competition and Markets Authority (“CMA”) may designate certain companies active in digital markets in the UK as holding “Strategic Market Status” (“SMS”) in relation to a specific digital activity. Companies designated with SMS will need to comply with tailored conduct requirements imposed by the CMA and report certain transactions to the CMA ahead of completion.
  • The CMA can make “pro-competition interventions” (“PCIs”) to impose requirements to remedy or prevent conduct in relation to digital activities which the CMA considers have an adverse effect on competition.
  • The CMA will be able to impose fines of up to 10% of worldwide group turnover for non-compliance with SMS conduct requirements or “pro-competition orders”.

More broadly, the DMCC Act includes some amendments to the UK’s existing competition law regime which apply to all sectors of the economy. In particular, the DMCC Act introduces a new merger control jurisdictional review threshold designed to capture vertical and conglomerate mergers where the parties do not overlap, applicable to any industry. Additionally, the DMCC Act introduces a fast-track route to a Phase 2 review without the need to concede at Phase 1 that there is a realistic prospect that the merger gives rise to a substantial lessening of competition.

This post outlines each of these changes. For an analysis of some key practical considerations for companies in light of the DMCC Act, please see this separate post here.

A new digital markets regime – Strategic Market Status regulation

Under the DMCC Act, the CMA may designate certain companies (or “undertakings”) active in the UK as holding SMS in relation to a specific digital activity if – following a designation investigation – the CMA determines that the undertaking:

  1. Carries out a digital activity linked to the UK;
  2. Has substantial and entrenched market power in respect of the digital activity;
  3. Has a position of strategic significance in respect of the digital activity; and
  4. The CMA “estimates” that the global turnover of the undertaking’s group exceeds £25 billion, or the group’s UK turnover exceeds £1 billion.

The CMA may (but is under no obligation to) initiate a designation investigation if it “has reasonable grounds to consider” that an undertaking meets these criteria. The CMA will publish an invitation for comment at the outset of the investigation and must later open a public consultation on its proposed designation decision. The CMA must issue its designation decision within nine months, unless special reasons justify an extension (of up to an additional three months). Designation is imposed in respect of a specific digital activity or activities. A single undertaking can be designated in respect of multiple different services. The designation lasts for five years, unless extended or revoked.

Conduct Requirements

Following designation as having SMS, the CMA has the power to impose a broad range of conduct requirements on the digital activities of SMS undertakings in order to meet one or more of three objectives set out in point (i) below. Prior to imposing any such conduct requirements, the CMA must carry out a public consultation. This process is intended to allow the CMA to design conduct requirements that are tailored to the individual circumstances of the SMS undertaking, the digital activity (or activities) within scope of the SMS designation, and the technological and competitive dynamics relevant to that undertaking.  

The CMA can only impose conduct requirements where the following criteria are met:

  1. the CMA considers that imposing conduct requirements would be a proportionate means to meet one or more of three objectives: (a) fair dealing, (b) open choices, and (c) trust and transparency (each of which is defined in the DMCC Act);
  2. the CMA has considered the benefits for consumers; and
  3. the conduct requirement falls within one of the broad categories of possible conduct requirements set out in the DMCC Act (e.g., obligations to trade on fair and reasonable terms, or prohibitions on self-preferencing or using data unfairly).

The CMA can impose one or more conduct requirements on an SMS undertaking at the same time. Conduct requirements may be active (i.e., requiring the designated undertaking to take certain actions), or restrictive (i.e., preventing the designated undertaking from taking steps).  The CMA may also impose conduct requirements on SMS undertakings in relation to activities not covered by the designation decision, where doing so prevents the SMS undertaking from materially increasing its market power or position of strategic significance in relation to the digital activity covered by the designation decision.

Although designation is a prerequisite for the imposition of any conduct requirements, from a procedural standpoint, the CMA has indicated that it expects to proceed with SMS designation and conduct requirement consultations in parallel.  An undertaking could therefore be subject to conduct requirements from the first day of its designation.

Merger reporting requirements

In addition to compliance with conduct requirements, any SMS undertaking and any entity in the SMS undertaking’s group must report any transaction meeting the following criteria to the CMA before it occurs:

  1. The proposed transaction would result in the entity in the SMS firm’s group crossing a specified threshold of shares or voting rights of the target (15% or more, more than 25%, or more than 50%);
  2. The target, wherever incorporated, has a connection to the UK (either through carrying on activities in the UK or through supplying goods or services into the UK); and
  3. The entity in the SMS undertaking’s group has cumulatively (as part of the proposed transaction and/or historically) provided consideration of at least £25 million for its shares or voting rights in that target.

Similar reporting requirements apply to the formation of joint ventures.

A reportable transaction cannot be completed until the relevant waiting period has expired, i.e., the DMCC reporting obligations introduce a form of suspensory obligation into UK merger control, in contrast with the general non-suspensory nature of the regime.

Upon receipt of the notification, the CMA has five working days to confirm whether it accepts or rejects the notification. The CMA is not permitted to reject the notification where it contains all the information requested in the SMS Merger Reporting Notice (see the draft notice currently subject to consultation here), and is made in the correct form. If rejected, the SMS undertaking will have to re-file its notification, re-starting the five working day clock for the CMA to decide whether to accept the notification.

Once accepted, any proposed transaction that triggers a reporting obligation under the DMCC Act still cannot be completed until the expiry of a waiting period of five working days after the CMA accepts the report.[1] Once reported to the CMA, the authority can decide to initiate a merger investigation if the transaction falls within the UK’s general merger control jurisdictional thresholds (which are widened as a result of the DMCC Act, as outlined later in this blog).

PCIs

In addition to the CMA’s ability to impose specific regulatory conduct requirements on designated SMS undertakings, the DMCC Act also provides the CMA with a general power to make a PCI against an SMS undertaking.

The CMA may only make a PCI following an investigation into the SMS undertaking, after which it has concluded that:

  • one or more factors relating to a digital activity in respect of which the undertaking has been designated as having SMS is having an adverse effect on competition (“AEC”); and
  • it would be proportionate to make the PCI for the purposes of remedying, mitigating or preventing the AEC.

The PCI framework builds upon the UK’s existing market investigation regime, and much of the conceptual and procedural architecture underpinning the PCI regime is consonant with that regime. This includes the expansive nature of PCI remedies that the CMA may choose between where it identifies an AEC.  

A PCI can take the form of a binding order on the SMS undertaking’s conduct (a “pro-competition order”, or “PCO”), or a recommendation to a person exercising public functions about steps they should take in relation to the SMS undertaking, the relevant digital activity, or otherwise. A PCO can take the form of a behavioural or a structural remedy.

The CMA will publish an invitation to comment at the outset of a PCI investigation. As with the SMS designation process and the conduct requirements process, the CMA must then open a public consultation on its decision as to whether to impose a PCI. It must also separately consult on any proposal to impose a PCO. Unless special reasons justify an extension (of up to three additional months), the CMA has 9 months to make a decision on whether to impose a PCI. Within four months of this decision, the CMA must issue the PCI itself. This deadline can be extended to six months in special circumstances.

Compliance reports and nominated officers

Any SMS undertaking subject to: (i) a conduct requirement, (ii) a PCO, or (iii) a commitment given in relation to an alleged AEC, must:

  • Provide the CMA with a compliance report in relation to the relevant requirement, at intervals specified by the CMA; and
  • Appoint a nominated officer within the company responsible for: (i) monitoring the undertaking’s compliance, (ii) cooperating with the CMA, and (iii) ensuring the undertaking prepares the necessary compliance reports.

The CMA’s draft Digital Markets Competition Guidance (the “Draft Guidance”) notes that the CMA also expects the nominated officer to proactively notify it of any non-compliance by the SMS undertaking. This nominated officer must be a “senior manager”, meaning an individual playing a significant role in either making decisions about how the undertaking’s SMS compliance activities are managed or organised, or managing or organising the compliance activities themselves. The nominated officer could be subject to personal fines for non-compliance with the compliance reporting requirements.

Enforcement and penalties

Broadly, any conduct requirements or PCOs remain in place unless revoked by the CMA, or until the underlying SMS designation lapses. The CMA must monitor the SMS undertaking’s compliance and the effectiveness of the measures in place. The Draft Guidance makes clear that the CMA expects its own monitoring to be buttressed by complaints from third parties and whistleblower reports.

The CMA has broad investigatory powers, including in certain circumstances the power to require information (whether stored in the UK or not), to access business premises, equipment, services, information or individuals (e.g., for the purposes of supervising a test conducted by an SMS undertaking’s engineers), to conduct interviews, and to conduct dawn raids on UK premises. The DMCC Act also imposes extensive information preservation duties on SMS undertakings and third parties that know or suspect that certain investigations are being (or are likely to be) carried out.

The CMA can impose fines of up to 10% of total annual group turnover for non-compliance with e.g., conduct requirements. SMS undertakings also face the risk of private follow-on litigation, for example where a breach of a conduct requirement causes loss or damage to a third party. In this scenario, the injured third party will be able to bring civil proceedings before a court, and the CMA’s breach decision will be binding on a court.

Cross-sector reforms to the UK’s competition law regime

The DMCC Act also includes a number of amendments to the UK’s existing competition law regime which apply to all sectors of the economy.

Merger Control

First, the DMCC Act introduces a new merger control jurisdictional review threshold that does not require an overlap between the merging parties’ activities (see our summary of this new threshold, here). At a high level, the CMA will have jurisdiction to review a merger where one party to the transaction has a sufficient nexus to the UK (including through supplying goods or services into the UK), and another party has a share of supply (or purchase) of 33%, and UK turnover of at least £350m. The DMCC Act also amends the UK’s existing merger control jurisdictional thresholds, by increasing the UK target annual turnover requirement under the CMA’s existing jurisdictional thresholds to £100m from £70m.

Looking beyond jurisdiction, the DMCC Act will also introduce a statutory “fast-track” route for CMA merger reviews.  This will allow parties to move more complex deals into a Phase 2 review more quickly and without needing to concede at Phase 1 that there is a realistic prospect that the merger gives rise to a substantial lessening of competition in the UK.

Competition Act 1998

In addition, the DMCC Act will amend the Competition Act 1998 to prohibit (unless exempt) agreements between undertakings, decisions by associations of undertakings or concerted practices which have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom, which:

  • may affect trade in the UK (where the agreement, decision or practice is implemented, or intended to be implemented in the UK); or
  • are likely to have an immediate, substantial and foreseeable effect on trade within the UK (where the agreement, decision or practice is not implemented, nor intended to be implemented in the UK).

The legislation also introduces enhanced document preservation duties for anyone who knows or suspects that the CMA is carrying out or is likely to carry out an investigation into a possible infringement of Chapters I or II of the Competition Act 1998.

Market investigations

In addition to the merger control and Competition Act amendments, the DMCC Act also amends the CMA’s market investigation powers.  In particular, the changes will allow the CMA to accept undertakings at any stage during a market study or investigation, and introduce a procedure to permit the trialling of undertakings and orders that seek to address competition concerns identified in the context of the CMA’s markets work. These trials are intended to assess the likely effectiveness of final undertakings and orders that the CMA or the Secretary of State is minded to accept or impose.

Cooperation with overseas regulators

Finally, the DMCC Act also introduces provisions on situations in which the CMA may cooperate with overseas regulators, under competition law and under the new SMS regime (e.g., with the European Commission under the Digital Markets Act).


[1] Section 63(1) of the DMCC Act states that a reportable merger cannot be completed without the merger having been reported “or” before the end of the waiting period.  Other provisions in the legislation and in the CMA’s draft guidance confirm that the reportable merger cannot complete until the expiry of the waiting period.


Photo of James Marshall James Marshall

James Marshall advises on all aspects of competition law and foreign direct investment (FDI) screening, with a focus on merger and FDI control, investigations and enforcement, commercial counselling, and abuse of dominance. He has strong experience in the life sciences, energy & infrastructure…

James Marshall advises on all aspects of competition law and foreign direct investment (FDI) screening, with a focus on merger and FDI control, investigations and enforcement, commercial counselling, and abuse of dominance. He has strong experience in the life sciences, energy & infrastructure, digital and technology, financial services, and sports sectors.

James regularly leads cross-border teams to steer clients through both the merger control and FDI aspects of major global deals. Clients turn to James to help them navigate complex global transactions, and to find innovative solutions to antitrust enforcement and counselling matters.

Earlier in his career, James worked with the UK Competition and Markets Authority (CMA), where he helped develop the UK’s antitrust and regulated sector enforcement regimes. He also practiced for several years in the Asia-Pacific region and has experience advising on competition, regulatory, and public policy issues in Asia and the Middle East.

James is a former Chair of the Competition Section Advisory Committee of the Law Society of England and Wales. He is highly recommended by Legal 500 and is recognized as leading adviser by Who’s Who Legal. James is dual qualified in England and Wales, and the Republic of Ireland.

Photo of Sophie Albrighton Sophie Albrighton

Sophie Albrighton advises clients on all aspects of competition law, including merger control, market investigations, cartel investigations, abuse of dominance, and state aid. She regularly advises clients on EU, UK and multi-jurisdictional merger control and foreign direct investment. She also has extensive experience…

Sophie Albrighton advises clients on all aspects of competition law, including merger control, market investigations, cartel investigations, abuse of dominance, and state aid. She regularly advises clients on EU, UK and multi-jurisdictional merger control and foreign direct investment. She also has extensive experience advising clients subject to investigations by various competition regulators in the EU and the UK, as well as developing and carrying out bespoke compliance training for clients in sectors including media, FMCG, retail, energy, travel, and financial services.

Photo of Tomos Griffiths Tomos Griffiths

Tomos Griffiths is an associate working across the technology regulatory and competition groups in London.

Tomos joined the firm as a trainee solicitor in 2021, qualifying in 2023. His practice covers technology regulation, competition law, and regulation that spans the two. His recent…

Tomos Griffiths is an associate working across the technology regulatory and competition groups in London.

Tomos joined the firm as a trainee solicitor in 2021, qualifying in 2023. His practice covers technology regulation, competition law, and regulation that spans the two. His recent experience includes advising clients on data protection compliance, foreign direct investment screening, and competition law litigation.

As a trainee solicitor, Tomos also gained experience in capital markets and commercial litigation for clients in the technology and life sciences sectors.