How businesses can get set for the UK Digital Markets Competition and Consumers Act in 2025

The Digital Markets Competition and Consumers Act 2024 (DMCCA) starts to come into force through 2025 and beyond and introduces significant changes to UK digital markets regulation, competition rules and consumer law.

The digital market and competition aspects of the DMCCA will come into force on 1 January 2025, while the consumer aspects are expected to come into force from April 2025, with the subscriptions regime following from spring 2026.

The UK government and the Competition and Markets Authority (CMA) have undertaken consultations on the implementation of the DMCCA, after the legislation was passed by Parliament and received royal assent in May this year.

Businesses will need to be aware of and up to speed with the main features of the landmark digital markets regime as it comes into force in the new year, as well as the significant changes across competition and consumer law. 

The new digital markets regime: five things to know

DMU fully launches

The DMCCA establishes a new unit within the CMA – the Digital Markets Unit (DMU) – to oversee the new regime. While it has been operating in shadow form since April 2021, the DMU will be placed on statutory footing by the DMCCA and will be fully operational from 1 January 2025.

'Strategic market status' designation

The new regime will regulate the most powerful participants in the UK digital market. Only a handful of these companies will be subject to the new digital regulation powers of the CMA – those with so-called strategic market status (SMS) that have substantial and entrenched market powers, as well as a position of strategic significance in respect of a digital activity.

In practice, it can be expected that SMS firms will broadly align with those regulated under the EU's similar regime under the Digital Markets Act. The expected timeframe for SMS designation is now adjusted to reflect the new commencement date, with the CMA indicating that three or four investigations are likely to start in early 2025. 

Additionally, the CMA has indicated that mobile ecosystems, search and digital advertising are likely to be priorities. Each of these investigations is likely to take nine months and the CMA may also face legal challenges, including litigation, as it seeks to designate large tech companies and impose new codes of conduct. While the CMA will have greater interventionist powers to regulate SMS companies, such as through pro-competition interventions (PCIs), a further period of lag in this activity is likely while the CMA flexes other powers first.

DMU has extensive powers

The new regime will give the DMU extensive powers, including the introduction of binding codes of conduct on the SMS firms and to carry out PCIs. The DMCCA will introduce new codes of conduct for SMS firms, setting out conduct requirements for them SMS to follow, these requirements must follow the objective of either fair dealing, open choices or trust and transparency. Examples of the types of conduct requirement that may be imposed include a requirement to trade on fair and reasonable terms and a requirement that technology interoperates with third parties.

In addition, the CMA via the DMU will be able to carry out PCIs to resolve competition problems in digital markets – this power will enable the DMU to design targeted interventions to address the root cause of competition issues in digital markets following an investigation process.

DMA similarities and differences

The digital markets regime under the DMCCA will be similar but not the same as the EU's new digital markets regime. The new regime will pursue similar aims and operates in a similar way to the EU's new digital regulation rules under the Digital Markets Act (DMA) which regulates "gatekeepers" – these are broadly expected to align with SMS firms under the UK's regime.

Both regimes seek to shift to "before the event" (rather than "after the event") enforcement – a move designed to address long-held concerns that traditional dominance enforcement under competition law is just too slow to address harms in fast-moving digital markets.

However, a significant difference is that, while the EU's DMA applies a standard set of rules that apply to all gatekeepers, the DMCCA gives the DMU the ability to create a bespoke set of rules for each separate SMS firm. While the flexibility may enable the DMU to be more targeted in its requirements, it may also create challenges for the unit as it needs to take a more collaborative approach and engage with both the gatekeeper and other interested parties – this approach may be slower and more open to challenge.

New rules have broad market relevance

The new digital rules are not just relevant to the players regulated under the DMCCA. While the digital rules may only apply to the handful of firms designated as SMS, given the broad reach of the firms with this designated status, the rules have the capability of affecting any company that has dealings with the regulated firms.

The CMA sees third-party engagement as crucial, given the flexibility of the new regime. The CMA's hope for proactive engagement is reiterated throughout its draft guidance on the digital markets regime. There are a number of opportunities for companies to engage with the CMA, from suggesting SMS designation to designing and reporting compliance with conduct requirements and PCIs.

Five things to know about the changes to UK competition law

Merger controls changes

The DMCCA increases the merger-control turnover threshold £70 million to £100 million. It also creates a new "safe harbour" for mergers where each party's UK turnover is less than £10 million. Neither provision is likely to have a substantial impact on the number of cases reviewed by the CMA, due to the continued voluntary nature of the notification regime and the influence of inflation on deal values.

However, the DMCCA introduces a new threshold to catch "killer acquisitions". The new threshold will be met if one of the transaction parties has a UK turnover of £350 million and supplies at least 33% of goods or services in the UK. The other party must be a UK business that carries on part of its business or supplies goods or services in the UK.

These new thresholds will be active from the 1 January 2025. However the SMS merger control's mandatory filing requirement will only apply once a firm is designated as havingSMS.

There are also specific requirements for SMS firms to report transactions that will result in the SMS group containing an entity of "qualifying status" (based on the percentage increase in shares and voting rights) in a "UK-connected body corporate" for a consideration of £25 million or more. This mandatory notification is a deviation from the general voluntary merger control regime and in practice will likely also trigger the above killer acquisitions threshold.

CMA's extra-territorial reach

The DMCCA expands the prohibition on agreements that restrict, distort or prevent competition and trade within the UK. Under the new regime, agreements do not need to be implemented in the UK and the prohibition will apply where there are (or are likely to be) immediate, substantial and foreseeable effects within the UK, potentially capturing a wider range of commercial agreements and activities.

Enforcement powers increased

The DMCCA increases the CMA's dawn raid powers for domestic premises. This modernises the powers to reflect the increase in employees working from home. Under the DMCCA, the CMA is granted powers to remove laptops and other personal devices from domestic premises to examine them off-site. The CMA's interview powers will also be increased. This will enable the regulator to compel interviews from any person even when they are not connected to a business under investigation. It also includes a general duty to preserve documents and evidence where a party knows or suspects that an investigation is likely to be carried out.

Standard of appeal changes

A reduced standard of appeal against interim measure decisions has also been introduced. The DMCCA changes the standard of appeal from a full merits assessment to the judicial review standard. This is intended to increase the efficiency of appeals, as the Competition Appeal Tribunal will only be required to assess an appeal on grounds of illegality, unreasonableness, or irrationality.

New civil penalties

A number of new civil penalties have been introduced, where previously only criminal penalties applied, to strengthen the CMA's enforcement powers. This includes specific penalties for companies that obstruct investigations or destroy evidence, such as fixed penalties of up to 1% of global turnover, with additional daily penalties of up to 5% of daily turnover for continuing non-compliance.

This reflects the CMA's focus on pursuing civil penalties for individuals rather than criminal ones. Additionally the DMCCA includes penalties of up to £30,000 for individuals that fail to comply with the regulator's investigative measures. The CMA will also increase the use of director disqualification as a remedy against non-compliant companies.

Five things to know about the changes to UK consumer law

Stricter rules for paid subscription contracts

The DMCCA introduces a new regime for paid business-to-consumer subscription contracts. Once that regime comes into effect (anticipated no earlier than spring 2026) the key requirements will be around pre-contract information, reminders, cancellations and cooling-off rights.

Pre-contract information

Traders must provide specific and detailed information in a way that meets strict presentation requirements, which will require changes to the customer journey. This is likely to entail product development and legal sign-off, resulting in additional time and cost, and will mean that sign-up journeys must be tailored to stringent UK requirements (which are not aligned with most of the EU) and friction will be introduced into the purchase journey.

Reminders

Traders will need to issue renewal reminders prior to the end of a free trial (or discount period) and then at certain intervals depending on the length of the subscription term. There are specific timing and information requirements including a reminder of the right to cancel, with additional requirements as to form and content to be specified in further regulations (currently the subject of the UK government's DMCCA consultation). These notices increase the operational burden on traders, may annoy or overwhelm customers and/or increase the risk of subscriber churn.

Cancellation

The DMCCA anticipates a simplified process for ending auto-renewal, as well as a right for customers to cancel on notice given by a "clear statement" (but not confined to a specific medium). The ability to use retention offers or cancellation surveys may be restricted. The change may necessitate additional customer services time and costs due to the need to process cancellation notices delivered via other means.

Cooling-off rights

The DMCCA gives consumers a right to cancel a subscription and obtain a refund during an initial 14-day period, and subsequent 14-day renewal periods for certain subscriptions (following a free or initial discount and after each annual renewal). Further detail about when a consumer may obtain a refund after exercising a cooling-off right will be determined by regulations, which are currently the subject of the consultation by the government.

CMA gets 'sharper teeth'

The CMA will have "sharper teeth" to enforce consumer law. The DMCCA creates a new "dual" enforcement regime. The courts will continue to have powers to issue a range of orders, including online interface orders. In addition, the CMA will now have broad and discretionary investigatory and enforcement powers for infringement of a range of existing consumer protection and e-commerce laws, as well as the new subscription contract regime.

These powers can be exercised without going to court, including the imposition of significant monetary penalties based on global group turnover (up to 10%).

These enforcement powers fundamentally change the risk outlook for traders in the context of their UK consumer-facing business. Traders will also need to review historic decisions on direct-to-consumer compliance in light of this new enforcement climate (such as in respect of terms and conditions and buy-flow wording).

New regime for reviews

The DMCCA will revoke and replace the UK's unfair commercial practices regime, introducing expanded and new prohibitions.

A major change is the creation of a range of new prohibited practices (which attract civil remedies only) targeting fake and misleading consumer reviews and review information (each defined very broadly). This includes publishing consumer reviews and consumer review information without taking "reasonable and proportionate steps" to perform checks to confirm the reviews are not fake or misleading and to remove these reviews or information from publication.

Unlike in the EU, it is not possible for traders to comply with the requirements of the DMCCA by means of a disclosure stating no checks have been undertaken.

The CMA is currently consulting on guidance that will give practical effect to the new regime. This includes extensive guidance for platforms on the steps needed to meet the "positive" obligation to actively monitor and take action to comply with the law, including by implementing effective policies, carrying out risk assessments, and taking proactive steps to identify and remove banned reviews.

Blacklisted practices

There is also potential for new 'blacklist' prohibitions. The DMCCA makes it easier for the government to add new prohibited practices to the UK's unfair commercial practices regime (that is, conduct that is always prohibited, irrespective of the outcome for consumers).

Potential candidates for this power are likely to be heavily directed by the focus of current debate, such as greenwashing, addictive designs, dark patterns and the labelling of AI-generated content all potentially on the horizon.

Businesses should keep an eye on government consultations, as well as activity overseas (such as the EU's digital fairness fitness check) and be prepared to respond to change.

Obligatory 'material' information

Beyond reviews and new blacklisted practices, the changes to the UK's unfair commercial practices regime include a requirement for traders to include "material" information when there is an "invitation to purchase" in order to avoid misleading consumers by omission. In effect, product detail pages that constitute invitations to purchase will have to contain a list of mandated material information, including postal address and email address (which is likely to entail product changes for many traders),

The CMA's consultation on the practical implementation of the DMCCA includes guidance on how to deal with limited means of communication and specific requirements for material price information (combatting so-called "drip pricing").

Osborne Clarke comment

The DMCCA is a landmark piece of legislation and, while much of the focus has been on the digital markets regime, businesses can expect to see significant changes across competition and consumer law too. 

Post-Brexit, the CMA has already become a more active and interventionist regulator and the DMCCA boosts this position, with a range of new powers and significant political focus on its next moves. Look out for more investigations and market studies in consumer-facing markets, regulation of the largest tech companies and requests for information from a wide range of businesses, not just those in the firing line.

This Insight is an updated version of the original published on 24 May 2024, Are you ready for the UK Digital Markets Competition and Consumers Act?