Remedies under the DMCCA: a new digital regulation toolkit in the UK
The UK’s new regime for regulating digital markets went live at the start of this year. The new powers of the UK’s Competition and Markets Authority (“CMA”) are designed to effectively and efficiently promote competition for the benefit of consumers in digital activities such as social media platforms, digital advertising services, e-commerce platforms, and online browsers. This article compares the framework and remedial tools available under the new digital markets regime under the Digital Markets, Competition and Consumers Act (“DMCCA”) with the CMA’s pre-existing powers, and the EU’s Digital Markets Act (“DMA”).[1]
Rationale for new UK digital markets regulatory regime
In March 2019, the UK government’s Digital Competition Expert Panel published a report recommending the establishment of a specialist unit empowered with the tools needed to support greater competition in digital markets.[2] The Panel’s views were that “[a]ntitrust enforcement can be improved but it cannot alone tackle the tendency to high concentration in [digital] markets. Even where dominance is abused, antitrust enforcement faces challenges in acting rapidly enough or in establishing upfront certainty about the standards to be applied […] Engaged, agile and participative pro-competition regulation is the better approach.”[3] The UK government agreed that the UK’s traditional competition powers were not sufficient to tackle the unique barriers to innovation and growth present in digital markets.[4] The DMCCA became law in May 2024 and its provisions in respect of the new digital markets regime entered into force on 1 January 2025.[5]
Digital markets powers under DMCCA
Under the DMCCA, the CMA can designate digital companies as having “strategic market status” in one or more digital activities where they have (i) substantial and entrenched market power; (ii) are in a position of strategic significance; and (iii) meet certain minimum turnover requirements. Once a firm has been investigated and designated as having ‘Strategic Market Status’ (“SMS”) in respect of a digital activity (“SMS firm”), the CMA has different tools available to guide how the firm should conduct its digital activity and to prevent, mitigate, or remedy any issues adversely impacting competition.
Conduct requirements
One of the tools available to the CMA is the power to impose conduct requirements, which are rules setting out how an SMS firm must conduct its business in relation to the designated digital activity. Conduct requirements can only be imposed where it is proportionate to do so for the broad purposes of one or more of the DMCCA’s statutory objectives: fair dealing, open choices, and/or trust and transparency.[6]
The CMA can consider potential conduct requirements alongside its SMS investigation[7] (which means that obligations can be imposed on SMS firms from the date of their SMS designation), as well as on an ongoing basis following an SMS designation.[8] As SMS investigations must be completed in nine months,[9] this shows that the new powers are designed to effectively address competition concerns as quickly as possible and effectively over time. In the three SMS investigations launched to date (which target general search services and mobile ecosystems)[10], the CMA has clarified that it will be considering potential conduct requirements in parallel with the SMS investigation. The CMA encourages market participants or stakeholders to contact it with any concerns they have regarding an SMS firm’s compliance with its competition requirements.[11] Conduct requirements can be varied where the CMA investigates and identifies issues related to compliance, effectiveness or enforcement.[12]
Prior to the DMCCA, the CMA’s competition enforcement powers were ex-post in nature, meaning that they addressed anti-competitive practices which had already arisen. By contrast, conduct requirements are a forward-looking (ex-ante) intervention to not only remedy existing issues but also to protect against any potential future risks of an SMS firm leveraging its position to exploit consumers and businesses or undermine fair competition in the market.[13] The nature of the ex-ante assessment under the DMCCA means that the CMA does not need to find evidence of historical or ongoing harm, nor determine whether an SMS firm has breached competition law by entering into an anti-competitive agreement or by abusing a dominant position. Rather, the CMA’s investigations will include an assessment of any expected or foreseeable developments that may arise over the next five years that may affect a firm’s conduct in respect of the digital activity if it is not designated as having SMS.[14]
In addition to falling within one of the three broad statutory objectives, any conduct requirements imposed must be one of a limited list of “permitted types” set out in the DMCCA. Despite this restriction, the permitted types of conduct requirements are phrased broadly enough to give the CMA a degree of flexibility and creativity in their application. For example, the list permits conduct requirements obliging an SMS firm to “trade on fair and reasonable terms”. The list also permits requirements which prevent an SMS firm from applying discriminatory terms, conditions, or policies on certain types of users; using its position to treat its own products more favourably than those of other companies; restricting interoperability; and using data unfairly.[15]
Final offer mechanism
In the event that an SMS firm breaches a conduct requirement, the CMA can issue an enforcement order or accept binding voluntary commitments. Breaching an enforcement order or commitments can lead to financial penalties. However, where the breached conduct requirement relates to payment terms between the SMS firm and a third party, the CMA may resolve a breach through the use of the final offer mechanism (“FOM”) to offer fair and reasonable payment terms to affected third parties.
Once the FOM process is initiated by the CMA, final offers on payment terms can be submitted to the CMA by the SMS firm and one or more counter-parties to the disputed transaction, and the CMA determines which final offer will be implemented.[16] The CMA must issue a final offer order (containing the binding payment terms) within six months of initiating the FOM. The FOM is a last-resort enforcement tool where previous enforcement steps have been unsuccessful in securing compliance from the SMS firm. The mechanism can only be initiated if:
- there is a transaction between the SMS firm and at least one third party;
- the SMS firm has breached a conduct requirement to trade on fair and reasonable terms (including payment terms) and breached a subsequent enforcement order issued to address the breached conduct requirement; and
- the CMA cannot satisfactorily address the breach in a reasonable time frame using its other digital markets tools.[17]
Pro-competition interventions (“PCIs”)
PCIs are interventions which can be used to remedy, mitigate, or prevent a broad spectrum of competition concerns. For example, PCIs can be obligations or restrictions on an SMS firm’s conduct; structural remedies, such as a requirement to divest part of the SMS firm’s business or assets; and requirements to supply or publish certain information such as user data.[18] In contrast to conduct requirements, PCIs can directly target the sources of an SMS firm’s market power and create greater competition by promoting longer-term dynamic changes within digital activities.[19]
The CMA can launch a PCI investigation where it suspects that there are factors related to an SMS firm’s digital activity which prevent, restrict or distort competition (this is known as having an adverse effect on competition (“AEC”)).[20] During the investigation, the CMA will investigate whether there are factors or a combination of factors relating to a digital activity that give rise to an AEC in the UK. The relevant factors do not need to arise from an SMS firm’s conduct: factors giving rise to an AEC can include structural sector characteristics such as high levels of market concentration or barriers to entry or expansion.[21]
PCIs can be launched by the CMA based on evidence such as its own market intelligence, evidence gathered from other investigations, complaints from third parties, and recommendations from specific regulators such as the Financial Conduct Authority. The digital markets regime is intended to operate quickly and efficiently. In line with this, PCI investigations must be completed within nine months, and a PCI must be made within four months of a PCI decision being made, unless there are special circumstances justifying an extension of either deadline.[22]
A PCI can take the form of a pro-competition order (“PCO”) and/or a non-binding recommendation to another public authority. A PCO is a binding order which imposes structural remedies (such as requiring an SMS firm to divest part of its business) and behavioural remedies (which, similar to conduct requirements, intervene by prohibiting or requiring certain conduct).[23]
Under the DMCCA, the CMA is statutorily required to have a pro-active approach to PCOs by monitoring the effectiveness of the PCO on an ongoing basis and including a review date in the PCO.[24]
While PCIs follow a similar structure to market investigations under the Enterprise Act 2002, the remedies under the traditional market investigations powers are generally static and are susceptible to quickly going out of date once imposed.[25] Conversely, PCIs benefit from offering a more tailored approach to remedying AECs as they are designed to ensure that any solutions that are put in place continue to remain relevant in light of technological or market changes. PCIs also benefit from being quicker to design and impose and are therefore capable of addressing changes more dynamically.
Current SMS investigations
The first SMS investigation launched was in relation to Google’s search and search advertising activities. The investigation will explore whether there is:
- weak competition and barriers to entry and innovation in search;
- possible leveraging of market power including favouring and giving special prominence to its own products and services over those of its competitors; and
- potential exploitative conduct in terms of Google’s collection and use of consumer data and publishers’ content.
The subsequent SMS investigations launched into Apple’s and Google’s respective mobile ecosystems contains a variety of potential interventions, such as measures to:[26]
- prevent any unreasonable restrictions on users’ ability to transfer data across devices;
- address any challenges faced by alternative app stores in attracting a sufficient user base, and improve the interoperability with third-party apps (such as rival browsers and digital wallets);
- make changes to the choice architecture in a mobile device’s factory settings and browsers; and
- increase app developers’ visibility over the operation of search and ranking algorithms.
In all three investigations, the CMA is considering whether, subject to Google and/or Apple being designated as SMS firms, conduct requirements should be imposed at the same time as the SMS designation. This means that there could be binding obligations in place from the first day of the SMS designation.
Breach of remedies
The CMA can impose fines for non-compliance with measures imposed under the DMCCA where, without reasonable excuse, an SMS firm has failed to comply with a conduct requirement or any other requirements covered by the relevant enforcement order, a final offer order, a voluntary commitment, or a PCO. [27] SMS firms found in breach of their binding obligations may face fines of up to 10% of total worldwide turnover.
The DMCCA and the EU’s Digital Markets Act compared
The DMA came into force on 1 November 2022 and empowers the European Commission to regulate large digital platforms providing ‘core platform services’ (such as online search engines, online social networking services, operating systems, web browsers or virtual assistants).
Under the DMA, a firm will have to comply with prescribed requirements when it meets the definition of a ‘gatekeeper’ (based on its role, scale, and market power within digital markets) and provides a core platform service.[28] This section compares the different remedies available under the DMCCA with those under the DMA.[29]
Gatekeeper obligations
The types of gatekeeper obligations set out in the DMA are aimed at creating a more inclusive core platform service, that (i) allows users to interact freely on these platforms, including with third parties, and (ii) imposes restrictions on how gatekeepers use or view users’ personal data, both across core platform services and for purposes such as advertising or to benefit their own business model.[30]
While there are some parallels between the DMA’s enumerated gatekeeper obligations and the DMCCA’s permitted types of conduct requirements, a key difference is the way in which these obligations are deployed. The DMA’s approach seeks to impose harmonised legal obligations that benefit the economy and consumers across the EU by imposing on all gatekeepers a uniform list of obligations which must all be implemented by a designated gatekeeper within six months of their designation.[31] In contrast, the CMA has a greater degree of discretion and can tailor specific conduct requirements and PCIs to address the particular situation of an SMS firm.
Breach of obligations
If a gatekeeper does not comply with its DMA obligations, the European Commission can adopt a non-compliance decision, requiring the gatekeeper to cease and desist the infringing conduct, and to provide explanations of how it plans to comply with the European Commission’s decision.[32]
As part of a non-compliance decision, the European Commission may impose fines of up to 10% of the company’s worldwide turnover in cases of intentional or negligent non-compliance.[33]
Systemic non-compliance: Structural or behavioural remedies
Where the European Commission has issued at least three non-compliance decisions within an 8-year period against a gatekeeper, the European Commission may commence a market investigation for systemic non-compliance.[34]
Further to such a market investigation, the European Commission may decide to impose structural or behavioural remedies, provided that they are in line with the principles of proportionality and necessity.[35] An example of structural remedies can include the prohibition of future mergers or acquisitions in the digital sector.
In contrast to the PCIs available under the DMCCA, targeted behavioural requirements under the DMA appear to be a remedy of last resort.
Future outlook for UK digital markets regime
On any view, the DMCCA represents a paradigm shift in enforcement of competition law in the UK. The CMA will now be able to deploy a range of tools on a forward-looking basis which should result in tailored remedies and a real-time impact on competition concerns. This ushers in an exciting and challenging new era for all parties involved in competition enforcement in digital markets in the UK. By the end of this year, it is anticipated that businesses and consumers alike will be able to assess the effectiveness of the UK’s new digital markets regime and its interaction with the requirements of digital regulation in Europe.
*Lisa Mildt and Nanret Senok are Associates and Luke Streatfield is a Partner in London.
Footnotes
[1] Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act).
[2] Unlocking digital competition, Report of the Digital Competition Expert Panel, March 2019.
[3] Unlocking digital competition, Report of the Digital Competition Expert Panel, March 2019, paragraph 2.131.
[4] Explanatory Notes to the Digital Markets, Competition and Consumer Act 2024, paragraph 3.
[5] See our earlier contribution examining the scope of the digital market powers under the DMCCA: Hannah/Cooper, ‘One size fits one? The challenge of “tailored” regulation in digital markets in the UK’, Competition Bulletin, 15 November 2023, https://www.hausfeld.com/en-gb/what-we-think/competition-bulletin/one-size-fits-one-the-challenge-of-tailored-regulation-in-digital-markets-in-the-uk/
[6] DMCCA, Section 19; Digital Markets Guidance, paragraph 3.6.
[7] Digital Markets Guidance, paragraph 3.39.
[8] Digital Markets Guidance, paragraphs 3.39, 3.42 and 3.82.
[9] DMCCA, Section 14(2).
[10] SMS investigation into Apple’s mobile ecosystem: https://www.gov.uk/cma-cases/sms-investigation-into-apples-mobile-ecosystem; SMS investigation into Google’s mobile ecosystem, here: https://www.gov.uk/cma-cases/sms-investigation-into-googles-mobile-ecosystem; and SMS investigation into Google's general search and search advertising services: https://www.gov.uk/cma-cases/sms-investigation-into-googles-general-search-and-search-advertising-services.
[11] Digital Markets Guidance, paragraphs 6.14 and 6.26.
[12] Digital Markets Guidance, paragraph 3.82.
[13] Digital Markets Guidance, paragraph 3.2.
[14] Digital Markets Guidance, paragraph 2.57.
[15] DMCCA, Section 20.
[16] Digital Markets Guidance, paragraph 7.119.
[17] DMCCA, Section 38.
[18] Digital Markets Guidance, paragraph 4.23.
[19] Speech by Sarah Cardell, Ensuring digital market outcomes that benefit people, businesses and the wider UK economy, 28 November 2022.
[20] DMCCA, Section 46(5) and Digital Markets Guidance, paragraph 4.4.
[21] Digital Markets Guidance, paragraph 4.6.
[22] DMCCA, Sections 50(1) and (4).
[23] Digital Markets Guidance, paragraphs 4.24-4.28.
[24] Digital Markets Guidance, paragraph 6.69.
[25] Unlocking digital competition, Report of the Digital Competition Expert Panel, March 2019, paragraph 2.108-109.
[26] Strategic Market Status Investigations into Apple’s and Google’s mobile ecosystems, Invitation to Comment, 23 January 2025.
[27] DMCCA, Section 85 and Digital Markets Guidance, paragraph 8.11.
[28] “Gatekeeper” is defined at Article 3 of the DMA and Article 2(2) of the DMA contains a list of core platform services.
[29] Hausfeld has previously covered the changes introduced by the DMA and the practical implications for Europe: The EU Digital Markets Act and The Digital Markets Act: how will it work in practice?
[30] DMA, Articles 5-7.
[31] DMA, recital 8.
[32] DMA, Article 29.
[33] DMA, Article 30.
[34] DMA, Article 18(3).
[35] DMA, Article 18.
