DMU Insight #1: The tortoise and the hare - legislation that would make UK's DMU more powerful than the DMA finally introduced to Parliament

Last week, the UK Government introduced the long-awaited draft Digital Markets, Competition & Consumers (DMCC) Bill. The Bill is a monster: at 388 pages it includes wide-ranging reforms to competition and consumer protection laws which will apply across the economy (and doubtless be actively used in the tech sector), as well as the UK's answer to the EU's Digital Markets Act (DMA) - the Strategic Market Status (SMS) regime. 

If the Bill is passed as introduced:

• The DMU will be handed power to designate firms as having "Strategic Market Status". While it is understood that the primary targets of the SMS regime are intended to be the largest tech companies that are already under intense scrutiny by the CMA, the drafting of the power is extremely broad and there is no statutory protection from it being applied to firms in e.g. financial services, publishing/broadcasting and beyond. 
  
   
• Firms designated as having SMS will have a series of additional obligations - they will:
  • become subject to a firm-specific "Code of Conduct" - again, there are very few limitations in the legislation on what conduct rules a code could include. Our expectation is that elements of the Codes of Conduct will go beyond DMA obligations. There DMU will have powers to enforce conduct requirements, including by imposing fines of up to 10% of global turnover for breaches.
  • be obliged to report all material (>£25m deal value) acquisitions to the CMA and wait for the CMA to confirm the report is complete before closing. 
  • potentially be subject to pro-competition interventions (PCIs) where the DMU believes they are necessary to address the "root causes" of market power, which could even include forcing structural and operational separation of firms' different business units. 
    
     
• The CMA will get extensive additional consumer powers, most critically, the power to fine businesses up to 10% of global turnover for breaches of consumer law (previously, consumer law could only be enforced in court and no fines were applicable). The significance of these reforms - which include specific new rules around fake reviews and subscription traps - should not be underestimated. 
  
   
• There will be new merger control thresholds that will expand even further the CMA's already broad jurisdictional net for deals it can review.
  
   
• The CMA will be handed stronger investigative powers along with the power to impose higher fines for procedural breaches. 

There remains a long legislative road ahead and it's unlikely the law will be in force before Autumn 2024, with the SMS regime not fully operational until after a (up to) nine-month designation process, so likely some time in 2025. By this time, "gatekeepers" under EU's DMA will have already been needing to fully comply with their DMA obligations for a year. Slow as it is however, the regime that is being developed in the UK is incredibly powerful and hands enormous, almost quasi-legislative power, to the CMA (and the DMU which sits within it) - with review of the DMU's decisions to be subject only to judicial review, not full merits review. It is also highly flexible in the scope of firms it could catch, and the scope of what it could require them to do. Slow as it is therefore, the UK regime can be expected to be among the most powerful forces in the ever more complex patchwork of global tech regulation. 

We've summarised the key elements of the legislation in more detail on our Linking Competition blog. Over the coming weeks we will publish a series of DMU Insights here, covering different aspects of the regime and the practical implications it could have for tech and non-tech firms alike. We will add links to this post as our additional insights are published.