Reed Smith In-depth

Key takeaways

  • Big Tech companies with SMS are likely to be caught under the regime and should evaluate their business models and operations to ensure compliance.
  • For those with SMS, mandatory merger reporting requirements will be in place, specifically for digital markets.
  • The CMA has a wide scope of enforcement powers, including imposing conduct requirements, pro-competition interventions, and severe penalties.

Authors: Marjorie C. Holmes Emma Weeden Vaibhav Adlakha Pratheeba Vachiraveel

In 2021, a new regulatory regime was envisioned, not only to introduce a regime for the digital markets but also to reinvent the wider competition regime and consumer protection regime. This culminated in the Digital Markets, Competition and Consumers Act 2024 (the Act) becoming law in the UK in May 2024. The Act’s provisions on digital markets and competition law came into force on 1 January 2025, with the enhanced consumer protection regime coming into force in spring 2025.

The Act has broad scope, along with regulation of Big Tech and amendments to the competition regime and consumer protection regime.

Key elements of the digital markets regime

1.    Strategic market status

From 1 January 2025, the Competition and Markets Authority (CMA) (through the Digital Markets Unit) has the power to designate certain companies as having ‘strategic market status’ (SMS) by conducting investigations in accordance with the Act. The CMA expects the regime to focus on only a small number of companies. SMS designation requires the fulfilment of the following:

  • Carrying out digital activity linked to the UK (providing services through the internet, providing digital content, etc that may affect the market in the UK);
  • Having substantial and entrenched market power (to be determined subjectively by the CMA, with a forward-looking assessment of at least five years); and
  • A position of strategic significance in respect of that digital activity.

The company must also exceed the turnover threshold of £25 billion worldwide turnover (of either the company or its group) or of £1 billion UK turnover (of either the company or its group). While this limits the scope of SMS designations to the largest tech or digital companies, foreign companies with no physical presence in the UK can also be caught as long as turnover is related to UK users or customers.