Competition | UK Regulatory Outlook April 2023

First references to SAU

During February and April 2023, the Subsidy Advice Unit (SAU) published its first two reports into referral requests received under the Subsidy Control Act (SCA). Under the SCA, public authorities must refer certain subsidies and subsidy schemes to the SAU for analysis.

The subsidy schemes reviewed were the proposed Energy Bills Discount Scheme for Energy and Trade Intensive Industries and the proposed Contracts for Difference for Renewables Scheme. Both reports emphasise the need to follow the BEIS guidance on conducting an assessment of a subsidy or subsidy scheme. This includes making use of up-to-date examples and providing counterfactuals demonstrating the situation if the subsidy was not granted. Additionally, the reports suggested that greater detail was required at a number of stages.

These reports provide useful insights into the approach that the SAU will take in practice to the assessments conducted by public authorities. However, as the reports are only advisory and cannot directly assess whether the schemes in question comply with the subsidy control requirements, it remains to be seen whether the SAU's criticisms of these assessments will translate into improvements as more assessments are carried out.

It is important for firms in receipt of subsidies to be aware of these reports as doing so will better enable them to assess the subsidies granted to them. Doing so is of critical importance as subsidies awarded in breach of the SCA rules may have to be paid back to the granting authority. Additionally, aggrieved parties may use learnings from these reports to inform when they may successfully challenge the award of a subsidy.

Arrival of the Digital Markets Unit

The UK's Digital Markets, Competition and Consumer Bill was presented to Parliament on 25 April 2023. The legislation brings sweeping reforms to the application of competition rules in digital markets. These reforms include regulating competition in digital markets and giving the Digital Markets Unit (DMU) a range of powers to deploy against powerful digital firms who will be designated as having "strategic market status" (SMS).

The new legislation will target the most powerful digital platforms. To fall within the scope of the new regime enforced by the DMU regime, a firm must satisfy:

• a UK nexus test (that is, have a sufficient connection to the UK in a particular digital activity);
• a revenue test; and
• an activity test (that is, conduct a digital activity, or digital activities, that fall within the scope of the regime).

and then can designate it as having SMS.

The DMU will be able to impose specific, tailored conduct requirements on a firm designated as having SMS. The legislation will set out permissible conduct requirements but also provide the DMU with a substantial degree of flexibility as to the particular measures that it imposes on a firm with SMS. Any conduct requirement imposed on such a firm must be aimed at least at one of three objectives: fair dealing, open choices and/or trust and transparency.

The bill updates a number of other competition law provisions, as well as making substantial changes to the consumer law landscape. For full details please see our recent Insight. The bill is currently expected to complete the legislative process in spring 2024 and come into effect during autumn that year.

The changes proposed by this bill will have a substantial impact for businesses operating in the digital sector. Given that further changes may be made to the bill during the parliamentary process, it is important for these businesses to follow the bill's progress.

For consumer law aspects of the bill please see the Consumer law section.

Digital Markets Act Implementing Regulations adopted

On 14 April, the European Commission adopted implementing regulations detailing how the Digital Markets Act will function in practice. The regulations dive into issues including time limits, confidential information, access to files and requests for information. We have discussed the substantive contents of the DMA in our previous Insight.

The implementing regulations provide substantial detail about the filling out of the "Gatekeeper Designation" Form (Form GD). This form is to be used by potential gatekeepers to notify the Commission of activities which may fall within the DMA's scope. The implementing regulations also specify how an undertaking may make substantiated arguments that it should not be designated as such, despite meeting the thresholds.

Once the Commission has received the complete notification, it will have 45 working days to make an assessment as to whether the undertaking meets the thresholds and to designate it as gatekeeper. Following their designation, gatekeepers will have six months to comply with the requirements in the DMA, that is, at the latest by 6 March 2024.

Firms need to remain aware of this development as non-compliance with the DMA can result in significant penalties of up to 10% of global turnover. Conversely, the threat of these fines can present substantial opportunities for smaller firms active in a digital market.

Motor vehicle block exemption regulation

The European Commission has recently extended the application of the current Motor Vehicle Block Exemption Regulation until 31 May 2028. Previously, the regulation was due to expire on 31 May 2023.

The Commission hopes this extension will allow it to react in a timely manner to possible market changes, such as those resulting from vehicle digitalisation, electrification and new mobility patterns.

A key change is the updating of the supplementary guidelines to:

• Clarify that data generated by vehicle sensors may be an essential input for the provision of repair and maintenance services. This has included extending existing requirements for providing technical information, tools and training necessary for the repair and maintenance of vehicles to explicitly cover vehicle-generated data.
• Specifying that the proportionality principle should be used when considering whether to withhold any of these inputs. This included specifically noting that sharing vehicle-generated data may be restricted on the basis of potential cyber security concerns.
• Warning suppliers that they may be committing an abuse of dominance where they unilaterally withhold essential inputs on independent operators, for example vehicle-generated data.

The Commission has highlighted the importance of providing vehicle-generated data to independent operators given the increasing importance of data in ensuring effective competition.

Vehicle manufacturers and those active in the vehicle aftermarket sector should  take note of this development as the changes proposed will have a substantial impact on the development of new vehicles and the subsequent aftermarket servicing of them.