The CMA has published guidance on how it will enforce the new regime, detailing potential measures such as pro-competition interventions and new investigatory powers
The CMA has published guidance on its approach to ensuring competition in digital markets
On 19 December 2024, the Competition and Markets Authority (CMA) published its guidance for businesses on how it will approach operating the digital markets competition regime in the UK. This regime was established by the Digital Markets, Competition and Consumers (DMCC) Act 2024, which grants the CMA new powers and responsibilities (as of 1 January 2025) to safeguard competition in digital markets. The act also directed the CMA’s internal Digital Markets Unit (DMU) to act as the administrative body tasked with enforcing the framework. Enforcement of the DMCC Act will also see collaboration across regulatory bodies, as evidenced by the memoranda of understanding signed between the CMA and organisations such as Ofcom and the ICO, which have been released in parallel. The CMA’s guidance for stakeholders spans various key areas, including:
How the CMA will assess whether a firm has a Strategic Market Status (SMS);
How the CMA will impose conduct requirements (CRs) on firms that have been designated as having SMS;
How the CMA will assess whether there is an adverse effect on competition (AEC) and impose pro-competition interventions (PCIs);
How the CMA will monitor compliance with, and enforcing breaches of, competition requirements (i.e. CRs and PCIs) that are imposed under the digital markets competition regime; and
The CMA’s investigatory powers and its approach to imposing penalties.
SMS designation is the gateway to regulation under the new regime
Interventions can only be imposed on a firm once it has been designated as having SMS. This approach hopes to enable the CMA to ensure its competition regime is focused on the most powerful firms present across various digital markets. In order to make an SMS designation, the CMA must investigate whether a firm meets a series of conditions relating to its turnover and link to the UK market, and crucially whether the firm has “substantial and entrenched market power” as well as a position of “strategic significance” in a given digital activity. For example, for a firm to be considered as being linked to the UK, it may need to have a significant number of users in the country. This provides a clear difference between the DMCC Act and the Digital Markets Act (DMA) in the EU, with the DMA setting specific quantitative thresholds of consumer and business users for a firm to qualify as a ‘gatekeeper’. The regulator has already indicated what is likely to fall into the scope of its regime through its inquiries into Apple and Google’s hold on mobile ecosystems, which it is planning to continue to investigate under its powers granted by the DMCC Act. The CMA will launch its first SMS designation investigations into two distinct digital activities later this month, with a third expected to begin within the next six months. The focus areas for these investigations are yet to be confirmed, but could potentially target the online search or app distribution markets, or online marketplaces. Sarah Cardell (Chief Executive, CMA) has emphasised the importance of a “predictable and proportionate” implementation of the digital competition regime and believes that the provision of these timescales will start to provide that predictability.
The CMA may impose conduct requirements and pro-competition interventions on SMS-designated firms
Once a firm has been designated as having SMS, the CMA can then impose CRs to guide the firm’s behaviour in relation to a given digital activity. These requirements will be designed to prevent and discourage SMS-designated firms from exploiting their market power and strategic importance in ways that negatively affect consumers or fair competition. Alternatively, the CMA can impose PCIs, which are interventions that aim to mitigate or prevent a range of competition problems related to the conduct of a firm or to structural market issues. When deciding whether to impose a CR or a PCI, the CMA will consider which measure is the most aligned with the nature of the competition problem at hand. The EU’s DMA similarly allows the regulator to impose structural remedies on firms but this is a notable exception from the Australian Government's proposed framework for a new digital competition regime, which would only enable the Australian Competition and Consumer Commission (ACCC) to impose behavioural remedies.
The DMCC Act empowers the CMA to enter stakeholder premises as a means of investigation
To administer the competition regime, the CMA plans to gather information from, and engage with, key stakeholders through its investigatory powers. The guidance explains that obtaining timely and accurate information from firms will be critical to the CMA’s competition regime. Some of the CMA’s key investigatory powers granted by the DMCC Act include:
Power to require information: A notice may be issued requiring an individual or a firm to provide specified information. The CMA can also take enforcement action against those who do not comply with this requirement;
Power to interview: The regulator can require an individual to attend an interview if it concludes that this individual has information relevant to an investigation;
Power to enter premises: In some instances, the CMA may exercise the ability to enter domestic and business premises where it has reasonable grounds to suspect that information relevant to an investigation is accessible on these premises; and
Reports by skilled persons: The CMA may appoint or require a firm to appoint a skilled person to provide it with a report focusing on a specific relevant matter.
These powers will be used by the regulator in several different circumstances, such as investigations into a potential breach of competition requirements, SMS investigations or investigations into previously SMS-designated firms.
