Digital competition regime

Latest developments

The UK’s new digital competition regime has been adopted. For the first time, this will regulate digital companies designated as having Strategic Market Status (SMS). The regime will be enforced by the specialist Digital Markets Unit in the CMA. The DMU will be able to impose a range of tailored remedies and have strong enforcement power (including criminal sanctions). This regime is similar to the EU’s Digital Markets Act which regulates “Gatekeepers”.

Summary

On 24 May 2024, the UK’s Digital Markets, Competition and Consumer Act (“Act”) received royal assent. 

The Act establishes a new digital competition regime that will be overseen by the DMU within the CMA that will use a proportionate approach to tackle the challenges in digital markets. Firms designated as having SMS 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 the firms’ market power;
  
  
• SMS firms will now be subject to a mandatory merger reporting requirement prior to closing, especially where:
  
  
• The SMS firm acquires at least 15% of the shares or voting rights in a company carrying on activities in the UK or supplying goods or services in the UK, with further reports required if its stake passes 25% or 50%.
  
  
• The value of the SMS firm's total holding is at least £25 million.
  
  
• Additionally, and more generally, the UK merger control turnover thresholds will increase from £70 million to £100 million (for the UK turnover of the target entity). There will also be a new threshold for merger review, designed to capture so-called “killer acquisitions” where an acquirer of the merging enterprises has at least 33% share of supply of goods or services in the UK and a UK turnover of greater than £350 million. Finally, there is also a safe harbour for transactions where each of the merging enterprises have a UK turnover below £10 million; and
  
  
• 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.

How could it be relevant for you?

Firms with substantial and entrenched market power in at least one digital activity (where this digital activity provides them with a strategic position) will be designated with SMS status by the DMU and will be subject to the new regime. This will apply where the CMA reasonably estimates that the undertaking’s UK turnover in the relevant 12-month period exceeds £1 billion or that its global turnover in the relevant period exceeds £25 billion. Only one of these thresholds needs to be met. If the undertaking is part of a group, then the turnover of the whole group should be considered.

Next steps

The Act is expected to enter into force in the Autumn.

Written by Dr Saskia King and Anthony Rosen.

*Information is accurate up to 1 July 2024