1. The Digital Markets, Competition and Consumers Bill

On 25 April 2023, the UK Government published its long-awaited draft bill to reform aspects of the UK competition regime and establish a new 'pro-competition regime for digital markets'. The new legislation has been anticipated for some time; the Government's consultation on the proposed reforms opened in July 2021, and the initial policy recommendations that find their form in the bill were first put forward by the Furman Review of digital competition's conclusions in March 2019.1 The draft bill extends beyond digital markets, however, with a range of reforms to the UK's competition regime in general, most prominently an amendment to the jurisdictional thresholds for the application of merger review by the UK Competition and Markets Authority (CMA) in addition to specific merger reporting requirements for digital firms with market power.

In keeping with the approach of several prominent competition regulators worldwide to the challenges posed by competition in digital markets, including the European Commission and German Bundeskartellamt, the bill envisages a detailed regulatory framework for firms active in such areas that are found to have 'strategic market status' (SMS).2 That framework will be administered by the CMA's new Digital Markets Unit (DMU), and includes:

  • Bespoke and ongoing conduct requirements for each SMS firm individually, aimed at preventing harm that may arise from the firm's strategic market position. These requirements will detail how the SMS firm should behave in dealings with customers and other businesses, with regard to general objectives of 'fair dealing', 'open choices', and 'trust and transparency'.
  • Powers for the DMU to intervene via 'pro-competitive interventions' (PCIs), which will seek to address the root causes of an SMS firm's entrenched market power. As with the CMA's existing market investigation powers, PCIs are intended to address adverse effects on competition which do not necessarily arise from a competition law infringement, and the DMU will have a wide discretion as to the remedies it chooses to apply. The draft bill specifies that a PCI may take the form of an order imposing requirements on a designated undertaking 'as to how the undertaking must conduct itself, in relation to the relevant digital activity or otherwise', or recommendations for action to public bodies.
  • In addition to the CMA's existing (and reformed) merger review process, SMS firms will be required to report all acquisitions that meet certain thresholds for review,3 with the CMA able to refer any such acquisition for an in-depth investigation if it concludes it may lead to a substantial lessening of competition.

Each SMS firm will be required to appoint a senior individual responsible for compliance with the new regime. The bill envisages financial penalties of up to 10% of annual global turnover for breach of its rules, with the DMU also given the power to fine senior executives personally for non compliance with information requests.

In addition to its provisions on SMS firms, the bill also introduces a range of reforms to UK consumer law as related to digital markets. These include a prohibition on companies paying for fake reviews or hosting consumer reviews without attempting to ensure their authenticity, and obligations to inform consumers clearly of the details of subscriptions they agree and facilitate cancellation of subscriptions. Fines of up to 10% of annual global turnover will also apply for breach of these provisions, as well as fines on individuals of up to £300,000.

Beyond the specific provisions for digital mergers, the bill also proposes changes to the UK's thresholds for merger review in respect of transactions in any market:

  • The quantitative threshold applied to the target company's annual turnover is to increase from £70 million to £100 million.
  • A second 'share of supply' threshold will be introduced in addition to the UK's existing test, which currently applies to transactions that create or increase a share of supply held by the parties of 25% or more on any UK market. The new threshold removes the need for an increment to the parties' combined share of supply where the acquirer's existing share is 33% or more in the UK, its turnover is at least £350 million, and the transaction involves a 'nexus' to the UK.

2. Key implications

The general reform to the UK's merger control thresholds widens the CMA's scope for intervention in deals. Although the requirement for a UK nexus in some respect limits this wider scope for intervention, the draft bill describes this fairly expansively, including for instance enterprises that 'supply goods or services to a person or persons in the United Kingdom in connection with the enterprise'.4 The new 'no increment' threshold is designed to ensure the CMA has the power to review deals absent more traditional horizontal relationships between merging parties, and will capture acquisitions by large buyers of small, but potentially important, competitors (so called 'killer acquisitions'). The new threshold does not apply only to digital markets, which, together with pharma and other innovation markets, have been the principal source of concern around such acquisitions. The new share of supply threshold therefore sits alongside the enhanced merger reporting obligations on SMS firms specifically, as a means of addressing the perceived insufficiency of the existing regime to monitor merger activity by 'Big Tech' players.

The planned regime for digital markets specifically will represent an imposing set of obligations for firms designated with SMS status. Signalling its ambition, the CMA has previously indicated that it expects the DMU to require a staff of around 200, far in excess of the circa 70 responsible for the European Commission's implementation of the EU Digital Markets Act.5 The size of the CMA's commitment is commensurate to the scale and scope of the proposed regulation. This differs from other new regulatory frameworks for digital markets, such as the EU's DMA or Germany's recent amendment to its competition law (the Gesetz gegen Wettbewerbsbeschränkungen (GWB)), in particular with respect to the draft bill's approach to regulating and intervening in digital markets:

  • Conduct requirements: the DMU's power to impose targeted conduct requirements represents a uniquely detailed approach to ex ante regulation, in contrast to the DMA's single set of rules applicable to all firms designated as 'gatekeepers' of digital markets, or the specific list of potential abuses of dominance by such firms under the German GWB. The DMU's conduct requirements, by contrast, will proceed from its overarching objectives ('fair dealing', 'open choices', 'trust and transparency'), but allow the DMU to tailor specific obligations for each SMS firm, subject to conditions that offer a wide range of discretion. For instance, any conduct requirement is permitted as long as it is for the purpose of obliging an SMS firm to 'trade on fair and reasonable terms', or preventing an SMS firm from 'restricting whether or how users or potential users can use the relevant digital activity' or 'using data unfairly'.
  • PCIs: the EU DMA imposes a set of conduct rules and obligations on digital market gatekeepers, breach of which will be subject to ex post facto investigation by the European Commission. In the case of repeated breach of the rules, the European Commission notes that non-financial penalties may be imposed 'if necessary and as a last resort option'.6 In Germany, the Bundeskartellamt can intervene by means of fines and prohibition orders in response to findings of abuse of the kind listed in the GWB. By contrast, the DMU's PCIs are intended to offer a more flexible and iterative approach to intervention, allowing the DMU proactively to identify root causes of entrenched market power and implement pro-competitive remedies. Beyond the broad stipulation to issue orders to firms or recommendations to public bodies, the draft bill deliberately omits to prescribe the potential actions the DMU could take in imposing a PCI, emphasising its wide scope for action. Such interventions are therefore more akin to the CMA's existing power to conduct market studies and investigations and impose tailored, forward-looking solutions, than to the ex post investigation of competition law infringements.

Furthermore, the DMU's power to impose PCIs and its review of SMS firm mergers will be subject to review in the same way as the CMA's existing market investigation remedy and merger review powers in the traditional competition context. Consequently, any review of these decisions would be by application to the Competition Appeal Tribunal (CAT) for judicial review (i.e., that the decision was irrational or otherwise procedurally deficient). This implies limited scope for substantive full merits review of the key regulatory tools of the new regime. Combined with the extensive powers of intervention planned under the bill, the new regime will therefore give the DMU broad discretion to act in digital markets.

3. Next steps

Publication of the draft bill is the first step towards its enactment. It will be subject to consultation and pre-legislative scrutiny before it can be introduced formally in Parliament. In respect of its specific provisions on digital markets, the bill also provides for extended assessment periods prior to the designation of SMS firms (up to twelve months in exceptional cases). The full operation of the DMU and the new regime therefore remains some way in the future.

However, the draft bill provides insight into what can be expected for the regulation of digital markets and the UK's new merger control regime. It indicates the UK Government's intention to put its plans for significant regulatory intervention in digital markets into action. The CMA has experienced some difficulties recently in attempting to balance its responsibility to promote competition using its existing powers against the potential benefits of awaiting a regime designed specifically to address digital markets, and criticism for the 'expansive' way in which it has interpreted its jurisdiction to review certain mergers. The publication of the draft bill will be welcomed by the CMA to help it resolve these recent issues, and demonstrates the UK's ambition to be a leading player in the regulation of digital markets going forward.


1. See Unlocking digital competition: Report of the Digital Competition Expert Panel (March 2019), at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/785547/unlocking_digital_competition_furman_review_web.pdf.

2. 'Strategic market status' will apply to technology companies with global turnover in excess of £25 billion, or UK turnover in excess of £1 billion, and that hold substantial and entrenched market power and a position of strategic significance in at least one digital market. 'Strategic significance' is defined as significant size or scale, the use of the relevant company's activities by a significant number of other undertakings in carrying out their business, the company's ability to extend its market power to a range of other activities, or its ability to determine or substantially influence the ways in which other undertakings conduct themselves.

3. The reporting requirement covers all acquisitions where: (i) the SMS firm's share of shares or voting rights in the target will increase post acquisition to least 15%; (ii) the value of the consideration provided by the SMS firm for its entire holding in the target (both as part of the acquisition and prior to it) exceeds £25 million; and (iii) the transaction has a 'nexus' to the UK (defined somewhat broadly, as considered further below).

4. Under the existing regime, the CMA, endorsed by the Competition Appeal Tribunal (CAT) has shown itself comfortable interpreting the similar requirement for the parties' share of supply to be 'in the UK or a substantial part of the UK' expansively.

5. See https://globalcompetitionreview.com/article/uk-plans-hefty-cohort-enforce-incoming-digital-rules.

6. See the Commission's guidance on the application of the DMA: https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/europe-fit-digital-age/digital-markets-act-ensuring-fair-and-open-digital-markets_en.

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