On 11 January 2024, the CMA published an overview of its “provisional approach to implement the new Digital Markets competition regime” (Overview), the new regulatory powers the CMA is set to take on once the Digital Markets, Competition, and Consumers Bill (DMCC) passes through Parliament (see earlier posts here and here). The CMA published this Overview in response to the UK government’s request on 4 January that CMA publish a “high-level plan” for implementing the digital markets competition regime.[1]  

In summary, the DMCC provides for the designation of firms with “strategic market status” (SMS) in relation to a relevant digital activity.  The CMA can then impose ex ante “conduct requirements” (CRs) on SMS-designated firms, or target specific competition issues through “pro-competitive interventions” (PCIs).  The CMA’s Overview provides helpful insight into the CMA’s proposed approach, expected timelines, and enforcement priorities under the forthcoming regime. 

Timelines for commencement and enforcement

The CMA is working on the assumption that the DMCC will receive Royal Assent in April 2024.  Shortly afterwards, the CMA intends to publish draft guidance relating to the new regime, which will be open for public consultation.  The CMA expects its new powers to come into force in Autumn 2024. It then anticipates launching the first SMS investigations “very soon after commencement”, and making the first SMS designations around July 2025.[2]  It plans to open 3-4 SMS investigations in the first year.  The CMA envisages publishing CRs at around the same time it adopts SMS designations.  

Source: Overview, p. 4

Desired outcomes and potential harms under the new regime

The CMA sets out the benefits it expects to accrue from the new regime, which it categorises according to three ambitions included in its 2023-2024 Annual Plan :[5]

  1. Ensuring that consumers can be confident that they are getting “great choices and fair deals” (e.g., ensuring users can make informed choices);
  2. Ensuring that competitive, fair-dealing businesses can innovate and thrive (e.g., ensuring SMS firms do not exploit businesses relying on their services); and
  3. Ensuring the whole UK economy can grow productively and sustainably (because dynamic competition in digital markets stimulates investment and competitive innovation, driving economic growth and improved productivity).

The CMA also identifies a list of potential harms in digital markets that it expects to tackle under the DMCC regime. The CMA groups these harms into five broad buckets:

  • Behaviours that reinforce core market power, such as sophisticated online design to lock in customers and restrictions on competitors’ access to data which impede smaller firms from being able to compete fairly;
  • Behaviours that extend market power into related markets, such as self-preferencing, bundling and anti-competitive use of data;
  • Behaviours to block or restrict new markets and innovation, such as preventing competitors’ access to the hardware or software needed to create complementary products or services;
  • Behaviours that harm consumers, such as providing poor quality or false information that distorts consumer decision-making and using online design to mislead consumers into buying products they don’t want or signing up to subscriptions without realising;
  • Exploitation of market power, such as through charging excessively high prices (including to business users), collecting excessive amounts of data, and setting exploitative T&Cs for businesses that rely on their platforms to access their customers.

The CMA said it will focus its early work on “building on and leveraging” its understanding and evidence-base in markets that it has already investigated before during its digital advertising and mobile ecosystems market studies.[6]  This is in line with expectations, given that the CMA’s market study reports contained recommendations for the interventions the CMA could put in place under the new regulatory regime.

SMS designation, CRs and PCIs under the DMCC

The Overview gives some indication on how the CMA plans to increase transparency into its approach to designating firms as having SMS, implementing CRs, and imposing PCIs:

  • SMS.  The CMA will publish and consult on draft guidance setting out the CMA’s metrics for assessing whether a firm meets the conditions for SMS status, namely whether it has substantial and entrenched market power or a position of strategic significance.  The guidance will also cover the assessment of what constitutes a “digital activity”.[7]
  • CRs.  CRs under the new regime must serve one or more of three objectives (fair dealing; open choices; and trust and transparency). The Overview explains that CRs may either specify the outcome the SMS firm must achieve (outcome-focused CR) or the actions that an SMS firm must complete to achieve an outcome (action-focused CR). The Overview sets out four principles that the CMA expects to apply when settings CRs for an SMS firm.[8]
    • Principle 1: As a first step, the CMA will identify the outcome it intends to achieve. When this outcome is measurable, and compliance with the outcome will be easy for the CMA to assess, the CMA is more likely to impose an outcome-focused CR.  In this scenario, the SMS firm would be free to determine for itself how it seeks to achieve the outcome.
    • Principle 2: An outcome-focused CR may not be appropriate or sufficient in some scenarios, including where compliance against the outcome is difficult to assess.  In this scenario, the CMA may impose an action-focused CR.
    • Principle 3: As a general rule, while setting an action-focused CR, the CMA will impose “higher-level requirements”, which give SMS firms greater flexibility in deciding the specific steps it will take to comply.
    • Principle 4: When necessary to achieve the intended outcome, the CMA may build on higher-level action-focused CRs with more detailed requirements.

The CMA states that it does not intend to follow the above principles sequentially in every case, because there may be cases where there are identifiable existing harms which can be corrected via specific steps (Principle 4) at the outset. Providing firms with a degree of flexibility to determine how they will implement CRs is generally welcome.  It will at the same time be important that the CMA’s approach does not become over-anchored on outcomes (such as changes in market share) that risk putting the interests of less popular or efficient businesses ahead of the interests of UK consumers.

  • PCIs. The CMA will publish draft guidance on PCI assessments after the DMCC receives Royal Assent.

Overarching principles governing enforcement of the new regime

The Overview proposes an initial set of 11 overarching principles that the CMA will apply when implementing the digital markets regulatory regime. The CMA will rely on these principles in deciding where to focus its resources. These principles are as follows:[9]

Principle 1Targeted and proportionateThe CMA will tailor its actions to the specific problems it identifies, considering their proportionality and likely effectiveness.
Principle 2Focused on positive outcomesThe CMA will focus its actions where it can have the most impact for people, businesses and the economy.
Principle 3The CMA will measure its impact, outcomes and outputs. It will learn from experience and use this to inform future decisions.
Principle 4Address and prevent harms quickly and sustainably, primarily through competitionThe CMA will stay abreast of developments and seek to deal with harm quickly.
Principle 5The CMA will promote competition as the primary lever to deliver better outcomes for users.
Principle 6Where steps to improve competition alone will not deliver the outcomes to the desired extent or pace the CMA seeks, the CMA will prevent abuses of market power more directly.
Principle 7The CMA will seek to intervene in a technology-neutral way, i.e., the effectiveness of interventions should not rely on the use of current technology or supply chain structures.
Principle 8The CMA will ensure the Digital Markets competition regime complements other CMA tools.
Principle 9Participative, transparent and coherent with other regulationsThe CMA will engage with a wide range of stakeholders who are affected by or have an interest in its work.
Principle 10The CMA will operate with transparency.
Principle 11The CMA will work with its domestic and international counterparts to coordinate and minimise unnecessary duplication.

Conclusion

The Overview provides useful practical insights into the CMA’s proposed implementation strategy for the upcoming digital markets regime. It reinforces the CMA’s determination to take a transparent, participative approach that strikes an appropriate balance between regulating SMS firms’ conduct and maintaining their incentive to innovate and compete.  Sarah Cardell, the CMA’s Chief Executive, commented recently that “the CMA is committed to taking a targeted, evidence-based and proportionate approach to implementing the substantial new powers” under the new digital markets regime.[10]  The Overview indicates that the CMA proposes to approach its powers flexibly rather than prescriptively.

[1]                     The CMA’s Provisional Approach, para. 2.1.

[2]                     The CMA’s Provisional Approach, para. 1.7, 10.4.

[3]                     ibid.

[4]                     European Commission, Digital Markets Act: Commission designates six gatekeepers.

[5]                     The CMA’s Provisional Approach, para. 4.1.

[6]                     The CMA’s Provisional Approach, para. 4.6.

[7]                     The CMA’s Provisional Approach, para. 5.2.-5.6.

[8]                     The CMA’s Provisional Approach, para. 5.15.

[9]                     The CMA’s Provisional Approach, ch. 7.

[10]                  CMA, The CMA’s approach to digital markets regulation: Remarks by Sarah Cardell, delivered during the January 2024 Concurrences Tech Antitrust Conference, Palo Alto, USA.