Digital Markets, Competition and Consumers Act 2024 receives Royal Assent
The new Digital Markets, Competition and Consumers Act 2024 (DMCCA) implements the most extensive changes to the UK competition law (and consumer protection) landscape since the Enterprise Act 2002 brought about wholesale change to the merger control regime over 20 years ago.
New regulatory regime for Big Tech
The most talked-about reform is the new regulatory regime for Big Tech. The UK is the latest jurisdiction to introduce regulation specifically targeting the largest tech firms, with the EU's Digital Markets Act (DMA) being the other most high-profile example.
Digital technologies are at the heart of the UK Government's vision for driving economic growth, and the new DMCCA empowers the UK's Digital Markets Unit (DMU) (already set up within the UK Competition and Markets Authority (CMA)) to designate the biggest digital players with 'Strategic Market Status' (SMS). Having designated a firm as having SMS, the DMU will:
- set ex ante Conduct Requirements on designated firms i.e. rules on what those firms must and must not do;
- be able to make Pro-Competition Interventions to remedy competition problems; and
- require designated firms to report M&A activity before deals are completed.
The new Government has now confirmed that it expects this regime to enter into force in December 2024 or January 2025. While the UK's DMCCA and the EU's DMA vary materially, the basic aim remains the same – promoting the openness, transparency, 'fairness' and, in turn, competitiveness of digital markets. Read our key take-aways here.
The DMCCA also makes significant competition law reforms applicable to all types of business, not just Big Tech.
Merger control reform
In the merger control space, the DMCCA updates the UK's jurisdictional thresholds, as well as introducing the UK's first 'no-increment' share of supply test (to capture so-called 'killer acquisitions' as well as vertical and conglomerate mergers), a new safe harbour for 'small mergers' and a specific reporting regime for designated tech firms. Read our key takeaways for more.
Alongside the new legislation, the CMA is consulting on new guidance on how the CMA can use the new incoming jurisdictional tests to cast a wide net and catch a broad range of deals. The guidance also provides for greater procedural flexibility during the CMA's merger reviews – including specifically for private equity firms. See our initial takeaways, prior to the guidance being finalised.
Competition investigations
The DMCCA also introduces substantive reform to investigations across the UK competition law sphere, strengthening the CMA's cross border reach and significantly increasing the penalties that it may impose for failures to comply with its investigatory measures. Read on for more.
Competition litigation
Whilst the DMCCA shifts the dial forwards in some respects (including by adding clout to the relief available for certain competition law breaches, and by introducing a mechanism for damages to be claimed for breaches of the new digital regulatory regime), there are also some notable omissions as discussed in our briefing. The much-debated damages regime for consumer protection breaches did not make it through Parliament, and neither did the provisions dealing with the Supreme Court's judgment in PACCAR on litigation funding arrangements. On the latter, action from the new Government is keenly awaited.
Artificial Intelligence through a competition law lens
Competition authorities across the globe have, like most organisations, been investing significantly in building their understanding of AI and the potential competition and consumer law impacts of its development and use. There are various ways in which competition authorities, including the CMA, are seeking to tackle the key issues arising from AI through a competition law lens. Read our overview to learn more.
Scope for challenge to UK merger control decisions: the case that keeps 'rolling'
After a lengthy (and still ongoing) court battle, the Court of Appeal has upheld the CMA's intervention in (and unwinding of) Cérélia's completed acquisition of Jus-Rol. In doing so, the Court provides valuable colour to the permitted scope of judicial review as well as to the inherent tension between appeals of CMA merger decisions being limited in this way and the specialist nature of the Competition Appeal Tribunal's competition expertise.
In providing important guidance for parties (and third parties with jurisdiction) seeking to challenge CMA merger decisions, the judgment is timely: given the post-Brexit backdrop and the incoming new merger control thresholds under the DMCCA, the CMA has jurisdiction over a wider range of, and more complex, merger cases and is expected to engage with increasingly complex evidence and theories of harm. See our take-aways here.
National Security and Investment Act: remedies clear the path in telecoms deal
The UK Government has repeatedly emphasised its aim to remain "proportionate and well-targeted" and as "pro-business and pro-investment as possible" through its operation of the National Security and Investment Act (NSIA) regime. Now, two years into the NSIA regime (and with 5 deal prohibitions and 21 remedies cases under the Government's belt) what more can we say about the UK's willingness to solve national security risks via remedies packages, even where politically sensitive states are involved?
The recent proposed merger between Vodafone's UK business (Vodafone Limited) and Hong Kong-based mobile network operator 'Three' (Hutchison 3G UK Holdings Limited) can, in some respects, be seen as confirmation of a "pro-investment" approach. It signals the UK's willingness to accept remedies in a sector falling within the UK's 'Critical National Infrastructure' (in this case, telecoms and telecoms infrastructure) and in a case involving a politically sensitive origin of investor. The outcome has been keenly awaited given the vigorous debate generated around the stated benefits of the deal (in terms of advanced roll-out of a 5G network) balanced against the perceived national security risks of Hong Kong-based Hutchison as a party. Read our briefing here. Meanwhile, the CMA's merger control investigation into the merger is ongoing.
National Security and Investment Act trends
Focus on defence: The Government's latest
annual report on the operation of the NSIA covers the regime's
second full year of operation. In large part, it shows a
continuation of existing trends. Defence still tops the list for
number of notifications, as well as a focus on Defence and
Military/Dual Use when it comes to interventions. China also
remains the origin of investor with the largest number of call-ins
(although the UK and US also feature highly, demonstrating the
owner-agnostic stance of the regime). However, there are some
points worth calling out.
Notifications up, call-ins down: The time taken by
Government to accept a notification is up – in the case of
the mandatory track, from three to six working days. Also, whilst
the overall number of notifications is up, call-in numbers are down
(meaning that only 4.4% of notifications reviewed were called in
for further assessment, down from 7.5%). The number of 'final
orders' also dropped (from 15 to 5).
4.4%
4.4% of notifications called in, down from 7.5%
5
final orders 5, down from 15
This latest report covers the year to 31 March 2024, and therefore does not extend to the period since the change of UK Government. Going forwards, we expect the new Government to continue plans to consult upon updating the mandatory notification sector definitions, to continue its work on assessing the need for Outbound Investment controls, and to further assess how targeted exemptions may improve the operation of the regime.
For a quick, digestible summary of the report, take a look at our NSIA 3rd Annual Report Overview here.
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