Though the DMCC Act diverges in the details when compared to the EU’s DMA, the laws both reflect a growing global scrutiny for mergers and acquisitions in tech markets
The DMCC Act receives Royal Assent, finally lending statutory footing to the Digital Markets Unit
On 24 March 2024, the Digital Markets, Competition and Consumers (DMCC) Act received Royal Assent, the last step in the legislative process to finalise the UK’s framework for digital competition policy. The DMCC Act, which was finalised in the “wash-up period” before the UK’s July general election, will provide a long-awaited statutory footing to the Digital Markets Unit (DMU). First launched in 2021, the DMU will be the unit within the Competition and Markets Authority (CMA) responsible for implementing and enforcing the new competition rules for the online platforms designated with strategic market status (SMS). On the same day that the DMCC Act received Royal Assent, the DMU launched its first consultation on implementing and enforcing the law, demonstrating its readiness for the task ahead.
The law broadly resembles the EU’s framework for policing dominant tech firms under the Digital Markets Act
In its consultation, the DMU sets out its plans for identifying firms with SMS, designing conduct requirements specific to each designated firm and launching “pro-competition interventions” similar to the CMA’s existing market study work. Unlike the EU’s Digital Markets Act (DMA), the DMCC Act sets no quantitative UK user threshold for firms to qualify for SMS. Instead, the DMU is empowered to consider different measures of the user base alongside a global turnover threshold of £25bn or a UK turnover threshold of £1bn. The DMCC Act also departs from the DMA in requiring the DMU to craft codes of conduct specific to each firm designated with SMS. These conduct requirements can be developed simultaneously with investigations to designate a firm with SMS and will be subject to public consultation before being enacted with a transitional implementation period. Similar to the DMA, the DMCC Act empowers the DMU to impose fines of up to 10% of a firm’s worldwide turnover in the event of a breach of a conduct requirement.
Opening the door for greater scrutiny of killer acquisitions
The DMCC Act also extends the powers of the CMA to investigate mergers and acquisitions proposed by SMS designated firms and targets the trend of killer acquisitions. Under the Act, SMS designated firms must report mergers and acquisitions valued over £25m in any market, not just the markets in which they hold SMS. Additionally, the CMA is newly empowered to claim jurisdiction over a proposed merger provided that one of the parties has an existing share of supply of at least 33% in the UK and a UK turnover of at least £350m. The regulator will therefore be able to better capture deals between firms which are not direct competitors. These measures are paired with enhanced investigatory powers under the Competition Act as well as stronger penalties for noncompliance, marking a substantial boost to the CMA’s powers. This increased scrutiny of tech mergers aligns with policy development and shifts in enforcement elsewhere, including the introduction of mandatory merger reporting for dominant firms under the DMA as well as the ongoing research of the US Federal Trade Commission into nonthreshold acquisitions in tech markets. These reforms also come at a time of greater interest in so-called “acqui-hires” of prominent employees from challenging firms, especially in AI markets as a way of side stepping scrutiny.
