High Tide: A Watershed Moment As The UK Seeks To Tackle Big Tech As Well As Strengthen Competition And Consumer Laws

Brace yourself: it's finally here! What has been termed by Sarah Cardell as a potential ‘watershed moment’, yesterday (25 April 2023) the draft Digital Markets, Competition and Consumers Bill (“Bill”) was put before parliament (see link to the statement here). The new Bill aims to enhance consumer rights, crack down on subscriptions traps and fake reviews, enhance the CMA’s powers and boost competition in digital markets.  

The Bill will:

• establish a new digital markets competition regime which will regulate firms designated as having strategic market status (SMS) in relation to specific digital activities;
• empower the new Digital Markets Unit (DMU), which is already operational within the CMA, to oversee and enforce the new digital competition regime;
• provide the CMA with stronger tools to investigate competition problems and take faster, more effective action;
• give the CMA powers to directly enforce consumer law rather than go through lengthy court processes; and
• have stronger consumer enforcement powers with penalties of up to 10% of global turnover for breaches, heightening the consequences for wrongdoers as well as impose senior management liability.

Consumer Protection

The CMA’s press notice provides a flavour of what to expect in the Bill and, in fact, highlights that at least some of the Department for Business, Energy & Industrial Strategy proposals in its response to ‘Reforming Competition and Consumer Policy’ will be included.

Importantly, the new Bill will empower the CMA to decide when consumer law has been breached through a new administrative model and to issue fines directly. This will be a welcomed relief for the CMA, which is currently required to take each case to court if infringements can’t be resolved informally or via undertakings.

On ‘subscription traps’ the new Bill will require businesses to:

• provide clearer information to consumers before entering subscription contracts;
• issue a reminder to consumers that a free trial or low-cost introductory offer is close to ending, and a reminder before a subscription contract automatically renews onto a new term; and
• ensure consumers can exit subscription contracts in simple, easy and cost-effective ways.

On fake reviews, the Bill will allow the Government to prohibit the practices of facilitating fake reviews or failing to take reasonable steps to verify whether reviews are genuine where a business uses consumer reviews in its promotions.

Competition

The new Bill bolsters the investigative and enforcement powers of the CMA, meaning faster and more flexible competition investigations. The proposed changes to the competition framework (including updated merger and fine thresholds) will also make it easier for the CMA to act against mergers which harm UK consumers and businesses.

Digital Markets

The new Bill establishes a new, targeted regime built for the digital age, overseen by the DMU within the CMA that will use a proportionate approach to tackle the challenges in digital markets. Firms designated as having Strategic Market Status will be subject to:

• a range of tailored remedies to ensure fair dealing, open choices and trust and transparency designed to manage the effects of market power and ensure markets are open to competition and innovation.
• Potential pro-competitive interventions to address the root cause of competition issues in digital markets (such as greater interoperability or data access).
• A requirement to report all mergers and acquisitions above a certain threshold to the CMA.
• The Bill will also include a new “Final Offer Mechanism” which enables the DMU, as a last resort, to address unfair payment terms and resolve disputes between SMS firms and third parties (e.g. publishers).

Snap-shot analysis

The new measures are set to come into effect as soon as possible following parliamentary approval, subject to secondary legislation and the publication of guidance. We understand that there is wide cross-party support for the Bill and expect it to receive royal assent; however, given that there may be challenges in the use of the Bill as a vehicle to address numerous other issues, it may take some time for it to pass through the parliamentary process with adoption expected in 2024.

You can find the Bill here, and the CMA’s supporting documentation for the Bill here. See also the Department for Business and Trade’s press release here, and the CMA’s press release here.

You can also read our previous insights for competition here, for consumer here, and for digital markets here.