UK Digital Markets Regulation: A New Year’s Countdown to Day One

On 1 January 2025, the digital markets landscape will undergo a transformative change with the introduction of the Digital Markets, Competition, and Consumer Act (DMCC Act). This landmark legislation will reshape the regulatory framework governing digital markets and the broader commercial environment. Below, we explore key expectations for Day One and provide insights into the newly issued DMCC Act Statutory Guidance.(DMCC Act).

The much anticipated (and overdue) “Digital Markets Competition Regime Guidance” (Statutory Guidance) was published yesterday by the CMA. This document is a vital component of the framework, providing critical insights for those affected by the upcoming changes and outlining what to expect from Day One. With less than two weeks remaining until the Act takes effect—a groundbreaking regulation set to reshape the operations of some of the world’s most influential companies, their business users, and, by extension, the GDP of several economies—the countdown is on for those still unprepared. However, the publication of the Statutory Guidance offers much-needed clarity and is likely to become essential Christmas reading for those most impacted.

Unsurprisingly, not a great deal has changed in the Statutory Guidance from the consultation document, though there are a couple of things worth noting. The draft Guidance started long at 188 pages and has grown longer to 221 in the definitive version. A lot of this is down to some very helpful summary tables which set out the processes and procedures the CMA will follow in relation to the exercise of key functions and powers such as SMS investigations, conduct requirements, pro-competition investigations and the final offer mechanism (“FOM”). By any standard, it’s an extensive piece of Guidance for stakeholders to navigate, better suited to separate volumes or documents—for example, (1) SMS investigation procedures and (2) Conduct Requirements. That said, it’s understandable why it was released as a single document at this stage.

The Guidance incorporates additional procedural details, added in response to consultation feedback, including a new section outlining the process for making procedural complaints. However, why the CMA chose to include this in the DMCCA Statutory Guidance—thereby increasing its length—rather than addressing it as a broader CMA-wide process remains puzzling.

In terms of substance, the CMA has taken the opportunity to add some new drafting on what the “reasonable excuse” defence to non-compliance means in this context. To this end the CMA has provided the example of where it would “put an undertaking in breach of foreign law.” It is unclear why the CMA felt compelled to provide this, or any, example given the reasonable excuse defence is not a new concept in law and therefore the CMA is not short of principles to guide them. What the example provided inevitably does do, however, is narrow the focus on this particular example for anyone seeking to rely on it, which might prove an unhelpful distraction.

Looking ahead to Day One—or shortly thereafter (it’s only fair to allow the CMA a break on New Year’s Day)—the CMA is expected to initiate “initial SMS investigations” and issue “SMS investigation notices” to digital platforms it deems to have “reasonable grounds” for designation with Significant Market Status (SMS) under the Act. These grounds can draw on evidence it has gathered from other CMA functions, recommendations other regulations, or, as newly included in the Guidance, “submissions or complaints from external sources.” This will follow prior CMA assessments confirming the platform meets the Act’s ‘quantification’ and ‘qualification’ criteria, including the “turnover condition,” and likely holds “strategic market status” with “entrenched and enduring market power” in its defined “digital activities.”

The CMA has emphasised—through the final Statutory Guidance and statements over the past 18 months—that it will “typically” avoid using competition law or ex ante regulation case law and won’t conduct a formal market definition exercise when assessing substantial and entrenched market power for SMS designation much to the consternation of many economists and lawyers. The CMA argues that substantial and entrenched market power is distinct legal concept from competition law ‘dominance’ due to the “new” nature of digital market regulations and their “different purpose.” However, given the overarching common themes of enabling fair and reasonable terms of access to essential infrastructure controlled by its owners, it remains unclear how established competition law principles can be disregarded, making it interesting to see how this approach unfolds.

Market sentiment suggests that the CMA’s initial SMS designations may be fewer in number compared to the seven “gatekeepers” designated by the European Commission under the DMA. This approach aligns with the CMA’s likely focus on the most clear-cut candidates at first, allowing it to test the waters and manage the new regulatory framework—and its role as an ex-ante regulator—effectively from the outset.

As the CMA is only required to publish an initial SMS investigation notice and give a copy to other relevant regulators (Ofcom, FCA, ICO, BoE, and PRA) “as soon as reasonably practicable” [sigh!] after notifying the platform under investigation, the wider public may not immediately know which platforms the CMA intends to designate on Day One. However, we can expect prompt action from the CMA, especially since the nine-month statutory deadline for completing the SMS investigation begins when the notice is issued to the target platform and does not reset if the CMA revises the scope through a revised notice (quite interestingly). This makes it likely the CMA will seek and rely on support it can gather from platform business users.

The CMA has also said we may see parallel consultations on conduct requirements that the CMA proposes to impose on platforms subject to current SMS investigations. We expect the CMA will want to be cautious and as certain as it can be about the outcome of any SMS investigation (including appeals) or risk wasting significant, scarce resources. This would support the aforementioned strategy of only selecting a small set of candidates to regulate to begin with.

The DMCC Act will regulate some of the highest earning, most profitable firms in the world. These firms make substantial contributions to the UK economy, drive domestic and international economic growth, and indirectly support countless business users who rely on their platforms as essential inputs, ultimately benefiting end consumers. Against this, while the delay in the CMA publishing the Statutory Guidance was no doubt frustrating to all stakeholders, they got there in the end and there are no big surprises in the definitive version (but we will provide further thought on this in the new year).

While there will be no New Year’s Day fireworks on 1 January 2025 from the DMCC Act for digital platform users or the platforms themselves given the nine-month SMS designation investigation process, the regulatory framework will finally be in place, heralding a new era in digital market regulation in the UK. Once SMS investigations commence, finite limits will manifest into backstop dates for regulatory obligations being created and applied to the firms designated with SMS, which will reshape the commercial landscape of digital commerce in the UK. The rest of the world is watching this with keen interest.

If you would like to have a conversation about the UK DMCC Act or the EU DMA (or digital markets regulation generally) please feel free to get in touch with Lucas.Ford@wiggin.co.uk.