Competition | UK Regulatory Outlook September 2024

Digital Markets, Competition and Consumers Act: implementation insights

A timeline for the implementation of the Digital Markets, Competition and Consumers Act (DMCCA) has been published in a written ministerial statement. The government aims to commence the digital markets and competition aspects of the DMCCA in December 2024 or January 2025.

It is anticipated that the first strategic market status (SMS) designations will follow very quickly.

On 3 September, the House of Lords Communications and Digital Committee held its first public session of the new Parliament to discuss the implementation of the DMCCA. Witnesses provided valuable insights on the priorities and challenges for the CMA in enforcing the new legislation. Giving evidence were individuals from key tech and policy organisations, as well as the legal sector. This evidence is likely to inform the CMA's final guidance on the digital market regime as well as secondary legislation needed to bring the Act into force. The final guidance must be approved by the secretary of state for business and trade before it comes into force.

Participants in the session advocated for swift action and specific conduct requirements to prevent perceived anti-competitive behaviour, particularly in mobile ecosystems, advertising and app stores. Bakari Middleton from Epic Games said there is a need for quick designation of SMS firms and tailored conduct requirements, particularly addressing app store distribution and payment issues. Steve Thomas from Kelkoo Group prioritised addressing self-preferencing behaviour in search and the impact of AI-generated search results on competition. Matthew Feeney from the Centre for Policy Studies suggested adding social media platforms to the CMA's focus areas and emphasised the need for clear market definitions and conduct requirements. Additionally participants in this session supported broad market studies and the importance of balancing security, privacy and competition was highlighted. The session underscored the importance of ensuring that regulation promotes competition without stifling innovation.

The CMA recently held a webinar on the direct consumer enforcement powers under this regime. It highlighted how many aspects of the new consumer law regime are likely to mirror those already seen on the competition side. This includes early resolution, settlements, penalties and appeals. Also highlighted was that the CMA's consumer protection and markets teams have been drawn into a single directorate led by George Lusty. This is intended to give greater flexibility to look at problems from more than one angle, as happened in the CMA's investigations into groceries and housing. The potential for the CMA to use any or a combination of its powers to address issues in relation to the relevant digital activities was also raised in its draft digital market competition regime guidance. Please see our consumer law update for more discussion of this and the timeline for consumer enforcement powers under the DMCCA to come into force.

The DMCCA will have a substantial impact on competition and consumer law in digital markets, as well as more widely. Businesses should remain up-to-date with the latest changes as non-compliance with the law can lead to significant regulatory fines and in some cases criminal sanctions. Please see our recent Insight.

Litigation funding

The government has given an early indication on its initial approach to third-party litigation funding and the future of the former government's abandoned bill to reverse the effect of the UK Supreme Court's Paccar judgment in 2023.

The Litigation Funding Agreements (Enforceability) Bill introduced by the former government in March was abandoned after it failed to make it through the parliamentary "wash up" before the general election, and excluded from the subsequent new government's legislative agenda published in July, which left many to consider the bill permanently abandoned.

While the bill is not presently on the legislative agenda, the Civil Justice Council's review of the litigation funding market in England and Wales is ongoing and the final report is due for publication in summer 2025.

The government has not yet taken any action to resurrect the bill. However, in an answer on 1 August to a House of Lords written question for the Ministry of Justice, Labour peer Lord Ponsonby confirmed that the government "recognises the critical role third-party litigation funding plays in ensuring access to justice" and confirmed that it would take "a more comprehensive view of any legislation to address issues" once the Civil Justice Council's review is concluded. In particular, the government in its written answer stated that it is "keen to ensure access to justice in large-scale and expensive cases" while setting up adequate safeguards to protect claimants from unfair terms.

While it is currently unknown whether the bill will resurface once the Civil Justice Council's review has concluded in summer 2025, in light of the recent comments, it appears the government may be minded to introduce amendments to the draft legislation, meaning that the proposed legislation could do more than simply ensure the enforceability of LFAs, as it did in its previous form.

With the increasing use of competition collective actions, businesses of all types should remain aware of this development and consider appropriate funding options for large competition cases, which do not necessarily need to follow on from a finding of a competition law infringement. (For more on collective actions, see our Insight.)

European Merger Control

On 3 September, the ECJ set aside the judgment of the General Court and annulled the Commission's decision fining Illumina €432 million and Grail €1000 for "gun jumping", not notifying and then completing a merger without waiting for approval from the Commission.

This represents a significant blow for the Commission in its use of Article 22 of the EU Merger Regulations. Previously, the Commission had issued guidance encouraging the national competition authorities of Member States to refer even those deals which they are not competent to examine under their own national law. In this case that was because neither party had any EU turnover.

The Commission's approach was intended to allow the review of "killer acquisitions". These are where a large company, often in the tech or life sciences sectors, acquires an innovative start-up. It is feared that these acquisitions have a negative impact on competition but are not covered by many current merger regulations. Addressing killer acquisitions is a concern of many competition regulators – as evidenced by the Digital Markets, Competition and Consumers Act which introduces a new turnover threshold, giving the CMA jurisdiction to assess a merger where the acquirer has a 33% market share and a UK turnover of at least £350 million.

The ECJ held that interpreting Article 22 in this way would remove the foreseeability and legal certainty needed by business. The court was clear that undertakings must be able to easily determine whether their proposed transaction will be the subject of a preliminary examination and, if so, by which authority and subject to what procedural requirements. Notably this acquisition was also prohibited by the Federal Trade Commission in the US.

This judgment provides important clarity for businesses with dealmaking ambitions, as it curtailed the power of the Commission to start an investigation of deals which do not have an EU dimension. However it is another example of the diverging regulatory landscape following Brexit.

EU Commission publishes report on competition in generative AI and virtual worlds

Please see AI.