A digital regulation (re)awakening: CMA's Digital Markets Unit set to get legal standing

Today's Autumn Statement from the UK Chancellor has been making headlines for many reasons, as the Government attempts to stabilize the UK economy. While the focus has understandably been on tax rises and spending cuts, the statement also included a significant announcement for tech regulation, with confirmation that the Government will bring forward the Digital Markets, Competition and Consumer Bill (DMCC) in the third Parliamentary session.

Will the DMU finally get teeth?

We previously wrote about how the UK looked set to fall behind other regulators, including those in the EU, Germany and the US in the regulation of digital markets, following the omission of the final bill from the Queen’s Speech back in May 2022. The Government said that it would legislate “as soon as parliamentary time allows” but the appetite to pursue this appeared to have waned. 

There has been significant political upheaval and two prime ministers since then, with the fate of the legislation hanging in the balance. In the meantime, the EU has also forged ahead with the Digital Markets Act (DMA), which entered into force on 1 November. 

The Competition and Markets Authority continued its digital markets strategy in the background by (1) preparing the DMU to put the new legislation into action whenever it arrived; and (2) using the CMA’s ‘imperfectly suited’ current powers, including in relation to market studies, market investigations and abuse of dominance investigations to address perceived problems in digital markets. 

But the DMU still lacked the teeth it needs to regulate digital markets, with the CMA's CEO at the time acknowledging that the problems the CMA saw in digital markets were extremely difficult to solve using its existing toolkit, and only an ex-ante regulator that could (1) regulate digital firms’ behaviour before it happens, (2) implement remedies and (3) monitor M&A activity closely, could address these problems effectively.

Today's announcement is therefore a significant boon for the CMA and the DMU, confirming that the end of its teething problems is on the immediate horizon - the new legislation providing the CMA "with new powers to promote and tackle anti-competitive practice in digital markets". 

The statement also confirms that the legislation will include additional competition and consumer powers for the CMA, by making "changes to the competition framework that will include streamlined decision making and updating merger and fine thresholds; and protect consumers in fast-moving markets by tackling ‘subscription traps’ and fake reviews online."

What's next for the DMU?

Now that it has a more certain timetable to work toward, with the full bill coming before parliament in the current session, preparation for the new regime will no doubt ramp up inside the DMU, which has been operating (without teeth) since April 2021 and actively recruiting and preparing in anticipation of its new powers. 

In addition, those tech companies that might have "strategic market status" (SMS), meaning substantial and entrenched market power in at least one digital activity, will need to start thinking about how they prepare for the new regime, likely in parallel with their preparation for the DMA and its sister Digital Services Act. For them, the regulatory landscape will certainly become more difficult to navigate and it remains to be seen whether they can or will try to adopt a 'one size fits all' approach.