The long-awaited Digital Markets, Competition and Consumers Bill has been published. Touted as a Bill to "stamp out unfair practices and promote competition in digital markets", the DMCC seeks to enhance consumer protection and limit the market power of a small number of the most powerful technology firms. We take a look at the key features of the DMCC and how it plans to achieve its objectives.
Consumer Protection
With consumers purchasing an increasing number of goods and services digitally, the DMCC aims to protect them from "scams and rip-offs" by introducing new rights and strengthening the enforcement of consumer protection law.
Tackling fake reviews and “subscription traps”
Fake reviews are one unfair commercial practice the DMCC is looking to tackle. Not only will it prohibit digital platforms from commissioning fabricated reviews, it will also impose an obligation on them to take reasonable steps to ensure that the consumer reviews they display are genuine.
The DMCC also addresses various issues around subscription contracts, which the government estimates to be costing consumers £1.6 billion a year. The DMCC will require businesses to send "reminder notices" to consumers if a subscription contract is due to auto-renew, or move from a free trial or introductory offer to a paid or higher rate subscription. Consumers must also be provided with clearer information prior to entering a subscription contract, and must be able to exit in a timely and straightforward way. For example, certain key contract information (such as the minimum duration of a subscription) must be given to consumers separately from the full terms and conditions of the contract. Additionally, consumers who enter into a subscription contract online must also be able to terminate it online, with the applicable instructions readily available.
Enhanced enforcement powers
The new rules in the DMCC will allow the Competition and Markets Authority to enforce consumer protection laws directly, rather than having to take individual cases to court. Significantly, the DMCC will allow the CMA to impose penalties in the form of fines of up to 10% of a company’s global turnover.
Competition
The DMCC is similar to the EU Digital Markets Act, although it purports to be a "more targeted and pro-innovation approach" that "avoids creating unnecessary regulatory burdens" for the firms to which it will apply. It takes a pro-active approach to regulating digital markets. It aims to prevent companies with strategic market status from capitalising on their size to limit digital innovation or increase barriers to entry in adjacent digital markets. The DMCC will bolster the CMA’s ability to investigate competition concerns and allow it to take enforcement action more quickly.
Strategic Market Status and Pro-competition Interventions
Digital firms with a global turnover of over £25 billion, or UK turnover of over £1 billion, will fall within the scope of the DMCC. The CMA will be able to designate firms holding substantial market power and a position of strategic influence in a digital activity as having "strategic market status". Once a firm is designated as having strategic market status, the CMA has a wide discretion to impose conduct requirements that it considers appropriate as well as regulating each SMS-designated firm’s conduct via dedicated codes of conduct. SMS-designated firms will also be under a mandatory obligation to notify acquisitions to the CMA prior to closing where a firm intends to make a "qualifying acquisition" in targets with UK activities. Qualifying acquisitions will be those where the equity stakes acquired cross certain thresholds, starting at 15%, provided the transaction value is at least £25 million.
The DMCC will also give the CMA the power to make a "pro-competition intervention" where, following an investigation, it has reasonable grounds to consider that there may be an adverse effect on competition in the UK. Where a pro-competition intervention is made, the CMA will have broad powers to impose structural and behavioural remedies.
New merger control thresholds
The DMCC seeks to introduce a new, additional, jurisdictional threshold targeting certain vertical and conglomerate mergers. This is seen as a response to CMA concerns about "killer acquisitions" in the digital sector in particular, but will be of general application. For this threshold to apply, an acquirer must have both an existing share of supply of goods or services of 33% in the UK or a substantial part of the UK, and a UK turnover of £350 million. This new threshold differs from the current test; it does not require any increment in the share of supply for the test to be met.
The existing thresholds giving the CMA jurisdiction to review transactions will be increased under the DMCC. The threshold for the target's UK turnover (except for media mergers) will increase from £70 million to £100 million and create a new "safe harbour" for transactions where each party has UK turnover below £10 million.
Enactment into law
The DMCC is at the start of the legislative process; both Houses of Parliament must approve it before it passes into law. This process will involve members of both Houses of Parliament debating the DMCC and proposing amendments, as well as scrutiny by a specially convened committee. There may therefore be amendments to the DMCC before enactment. However, its aims and central principles are not thought likely to change substantively, and it can be expected to enter into law later this year.
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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
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