Fashionably late:  The UK digital markets legislation starts its passage through Parliament

More than four years after the Furman Report, the British Government has laid its Digital Markets, Competition and Consumers Bill before Parliament.  However, what is perhaps more remarkable than the delays is how closely the Bill sticks to the CMA’s original recommendations. One can always quibble over some of the drafting, but overall this is a coherent new regime and an impressive piece of drafting.

When it becomes law, the Digital Markets Unit (DMU) will have the power to designate firms as having strategic market status (SMS), write conduct requirements for each SMS firm, make pro-competitive interventions to reduce SMS firms’ market power, and review more of their mergers. Depending on the DMU’s ambition, the new regime could have a more widespread impact on SMS firms’ businesses than even the EU’s Digital Markets Act, but that is dependent on the Bill surviving the current lobbying blitz and being passed in substantially the same form as currently proposed.

How does the Bill look?

We will be reading the 388-page Bill in detail over the coming days, but at first glance it seems as we expected. This means the CMA’s original Digital Markets Taskforce report of December 2020 has been implemented in almost its entirety, despite several public consultations and indeed changes of Government in the interim. Broadly speaking, the Bill sets out the legal framework within which the DMU will then write the detailed rules. The legal processes in the Bill are vitally important to the success or failure of the new regime. A burdensome process could add several years to the timeline, which may be too long if you are thinking of investing in a tech start-up that would rely on (e.g.) an open app store ecosystem or fair product rankings. Lengthy processes would greatly reduce the DMU’s capacity to tackle multiple issues simultaneously. It could also set the threshold for intervention so high that the DMU could never plausibly meet it. And while it is commendable to want to keep the new regulator’s powers within strict bounds, care must also be taken to avoid the situation where the categories of intervention are so rigid that the regime is not future-proof. It is better to argue about the important substantive issues involved in the new regime than the legal definitions of the DMU’s remit.

SMS designations

As expected, the DMU will need to analyse each potential SMS firm individually and publish a detailed decision giving its reasons why each activity justifies SMS status. It will also need to write bespoke conduct requirements for each SMS firm. This process will naturally limit the number of SMS firms, but in any case the Government has said the regime is intended to cover a “small number” of firms. The way in which the regime is so tailored to each activity is normally touted as one of the key advantages it has over the EU’s Digital Markets Act, and it does certainly give the DMU the ability to draft some specific rules even for some granular issues.

There will be a safe-harbour threshold below which businesses can be confident they are not eligible for SMS designation. If a business has below £25 billion of global revenues and below £1 billion of UK revenues, it cannot be caught by the regime. This approach was recommended by the CMA’s December 2020 Digital Markets Taskforce report, but we did not know what the threshold would be until now. It will help the regime to get buy-in from mid-sized tech businesses generally, but individual businesses will want to think about how likely they are to hit these thresholds in the future and whether to argue for a higher (or lower) figure.

The DMU seems to win some and lose some in terms of the implementation timelines. It is explicitly permitted to undertake the 9-month (or 12-month) designation investigations in parallel with writing the conduct requirements. Tackling these sequentially would have significantly added to the timeline. However, the Bill seems to give the DMU no legal cover for relying on the CMA’s two 2,000-page market study reports into digital advertising and mobile ecosystems, which provided so much of the analytical underpinning of the new regime, when making designation decisions. It therefore faces the painful task of re-running that analysis.

Conduct requirements

The conduct requirements must fall within the prescribed list of categories. The requirements must fall within the three objectives of “fair dealing”, “open choices” and “trust and transparency”. There are also defined lists of permitted types of conduct requirement, which limits the DMU’s rule-making freedom. We will need to carefully analyse where precisely these lists will bite.

One much-debated aspect of the regime has been the so-called firmwide leveraging principle. The firmwide leveraging principle was always considered necessary because the conduct requirements apply only to specific activities within the SMS firm rather than to the SMS firm more generally. Without a leveraging principle, the definition of the SMS activity would come under too much strain, and the DMU would sometimes encounter problems it could not address. The Bill states that conduct requirements may prevent the SMS firm from “carrying on activities other than the [SMS activity] in a way that is likely to increase the [SMS firm’s] market power materially, or bolster the strategic significance of its position, in relation to the [SMS activity]”. The Bill seems to be trying to avoid giving the DMU carte blanche to roam across the SMS firm’s business, while preserving the essential elements of the leveraging principle, but it leaves a potential for significant holes in what the DMU can touch. This is an issue that needs further attention, and it will certainly get that.

The DMU will have the power to require an SMS firm (and the firms with whom they are in dispute) to submit to a ‘Final Offer Mechanism’ process to resolve price-related disputes where the SMS firm is subject to a “fair and reasonable” requirement. This idea was born out of the issues that news publishers have encountered in dealing with the large platforms (particularly Google and Meta) in recent years, and the experiences of the Australian News Media Code, but it is notable that the Bill does not limit this procedure to the news sector. One wonders what other aspects of the potential SMS firms’ businesses are intended to fall within this process.

The SMS firms will be able to rely on exemptions where there are benefits to consumers which outweigh potential harm to competition. They may frequently argue that their conduct is necessary to achieve legitimate security and privacy objectives. This exemption is modelled on the long-standing individual exemption provisions under EU and UK competition law (Article 101(3) TFEU and s.9 Competition Act 1998). The DMU may therefore construe it as narrowly as the equivalent exemptions are construed in competition law, but the drafting is not identical and needs to be considered carefully. If the exemption was not set out in the legislation, the DMU’s rules would surely have incorporated some safety valves of a similar nature anyway. We just need to make sure they do not undermine or clog up the regime.

Pro-competitive interventions

The DMU will have the power to impose pro-competitive interventions, which are intended to be significant measures to address the source of the SMS firm’s market power. The toolkit will mirror the CMA’s existing market investigation powers, and will therefore will be very wide (in my seven years at the CMA, I don’t recall ever coming across a remedy idea that couldn’t be implemented under Schedule 8 of the Enterprise Act). The main difference from market investigations will be the streamlined process because these types of investigations will need to be completed within 9 months (extendable by 3 months) instead of the 18 months (extendable by 6 months) that a market investigation takes, and there will be no need for an independent decision-making panel to be appointed. Of course, the DMU is free to scope its enquiry as it sees fit, so it ought to be able to make its cases deliverable in the time.


SMS firms will only need to report mergers when (a) the target has a connection to the UK; (b) following the merger, the SMS firm would hold at least 15% of shares or voting rights (with thresholds of over 25% and 50% triggering further reports); and (c) the SMS firm will also hold at least £25 million in value of the target. The legal threshold for intervening in a merger will be the same as the existing CMA regime, i.e. a “substantial lessening of competition”. The CMA’s request to lower the threshold for intervening is the one major element of its original recommendations that has not been adopted, and the Government’s approach seems well justified. The CMA’s recent track record in cases such as Meta/Giphy, yesterday’s Microsoft/Activision decision, and the c.80% of Phase 2 mergers that it has opposed since the beginning of 2021, does not suggest that it is overly constrained in opposing mergers (to say the least). Provided that the CMA can describe its objections rationally and provide the merging parties with a reasonable opportunity to defend themselves (it’s only really the latter that seems to prove a stumbling block), it has the tools it needs to stop SMS firms’ accretion of market power by acquisition. Note also that there are other parts of the Bill that amend the general competition regime. These will increase the merger control filing thresholds and therefore reduce the number of merger investigations per year. The result therefore seems to be a rebalancing of the UK’s merger control regime away from small and rarely-problematic mergers and towards the areas where the CMA wants to devote its resources.

Investigative and enforcement powers

The DMU will have the explicit ability to gather data and interrogate algorithms that are held abroad, which is a novel power, but it arguably makes sense given the global nature of the likely SMS firms, the central role played by their algorithms, and the CMA’s recent painful court defeat when it tried unsuccessfully to demand documents from BMW in Germany.

The regime will have the now-customary penalties of up to 10% of worldwide group revenues for breaches of the rules, in line with many countries’ existing competition regimes. However, more interestingly, the DMU can ask SMS firms to nominate an individual to take responsibility for compliance with orders. The DMU will be able to apply for director disqualification in the case of serious regulatory breaches, and impose fines on individual senior managers who fail “without reasonable excuse” to prevent the firm from breaching the terms of an information request. Securing compliance with the new regime is clearly a big concern, and the Bill takes the view that imposing fines on global businesses with 12-digit annual revenues is unlikely to be effective on its own.

Firms can bring private actions for damages against SMS firms in relation to breaches of conduct requirements, requirements imposed by virtue of a pro-competitive intervention, or a requirement to comply with a commitment. These actions should be brought in the High Court rather than the specialist competition court. The DMU regime may therefore become a significant new forum for litigants.


Another early battleground has been the appeal standard. The potential SMS firms understandably want a more detailed appeal process that would circumscribe the DMU’s discretion and delay DMU decisions being implemented. The most obvious way to do this is to introduce an element of the substantive issues into the appeal, rather than using the standard English law judicial review process that focuses more on the fairness, rationality and legality of the decision-making process. An enhanced level of review would mean that appellants could re-run the arguments that had already been considered by the DMU, or even raise new facts and arguments that were not provided to the DMU at the time, and hope to get a better outcome second time. The Government seems to be committed to the normal judicial review standard, which is well justified. Personally, I would argue that the laudable desire for checks and balances ought to be reflected in perfecting the DMU’s internal governance rather than setting up an expensive process that tries to correct a flawed decision after the event. And I would disagree with the argument that judicial review is inflexible and superficial. The Tribunal’s recent telecoms cases such as CityFibre v Ofcom and Virgin Media v Ofcom under s87(4) of the Digital Economy Act were both decided under the normal judicial review standard while incorporating a detailed level of scrutiny, and this has also been the approach in CMA market investigation cases which are the closest analogy to the DMU’s cases.

Competition and consumer law reforms

Today’s blog post does not discuss the other parts of the Bill in detail which update the general competition and consumer law regime (we may discuss them another time). However, as well as the increase in the merger filing thresholds mentioned above, there are two points that may be of interest to this blog’s readers:

  • Up until now, consumer protection law has been less high profile than competition law. In practice, the CMA’s powers meant that it merely pointed out infringements, publicly shamed the companies involved to some extent, and persuaded them to stop the infringement. Now the CMA will get significant fining powers and we predict this area of law will get more bite, particularly in the tech sector where so-called dark patterns can be used to manipulate consumer behaviour. The CMA says it will focus on issues such as subscription traps and fake reviews.
  • “Exemplary damages” will soon be available for competition cases, except for class actions. Exemplary damages are punitive and so go beyond what is needed to compensate a person or business. The existing bar on exemplary damages was enacted following an EU harmonisation measure, so it is perhaps not surprising that the UK’s Brexit-supporting Government would want to revert to the old English common law position. Note that exemplary damages will only be available for conduct commencing after the Bill comes into force.


We welcome the new Bill and look forward to dissecting it in greater detail over the coming weeks and months. There will now be a complex Parliamentary process to navigate, including several readings, both Houses of Parliament and multiple select committees. A plausible timetable for the regime would see the Bill passed into law later this year, then the DMU would conduct its initial designation decisions and draft the associated conduct requirements during 2024, with the regime being in full force in mid-2025 after the appeals of the SMS firms have been decided.

Meanwhile, the CMA is consulting on proposed commitments that would settle its antitrust investigation into Google rules that make use of its in-app billing system mandatory for app developers (which would seemingly endorse a 26% or 27% commission even when Google does not provide the payment services); the CMA is appealing its recent defeat in the Competition Appeal Tribunal whereby Apple successfully challenged its decision to open a market investigation into mobile browsers and cloud gaming; and yesterday the CMA’s blockbuster Microsoft/Activision merger decision prohibited the $75 billion deal on the basis of concerns in the small and nascent cloud gaming segment following an unprecedented reversal of its provisional findings in the console market. The tech sector continues to test UK competition law to its limits.

[Disclosure: The author was previously Legal Director at the CMA, including on the Digital Markets Taskforce report]

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