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.
Under the Act, the CMA has a duty to carry out a public consultation on the proposed designation. It confirmed that it intends to launch around three to four investigations within the first year of the Act coming into force and anticipates its initial investigations to focus on areas it has previously dealt with, such as mobile ecosystems, which includes app stores. Digital platforms that specialise in such areas must ensure that they understand their obligations under the new regime as they are likely to be investigated.
Notably, on 14 January 2025, the CMA launched its “first strategic market status (SMS) designation investigation” on whether to designate Google as having SMS in relation to general search and search advertising activities (this includes the search engine, advertising products, and its AI interfaces). Google and interested third parties have until 3 February 2025 to respond to or comment on the initial investigation.
The CMA has the power to impose certain requirements on companies designated with SMS (SMS companies) (e.g., conduct requirements, pro-competition interventions, commitments). A digital markets merger reporting regime (separate from the general merger control regime, discussed in our alert on the UK competition and merger control regime) will also apply to SMS companies. SMS companies should therefore actively and continually assess their activities to ensure they are aligned with the regime. Given the extent of the powers of the CMA under the Act, we expect large digital companies to be especially heavily scrutinised, as evidenced by the CMA’s first investigation.
SMS designations can last for a period of up to five years, and the CMA can carry out further investigations up to nine months before the end of the five-year period to revoke or redesignate. Therefore, large digital or tech companies should be aware that they could be designated as having SMS for an extended period of time.
Having now initiated the investigation of Google – which includes Alphabet Inc., one of the seven gatekeepers under the EU Digital Markets Act (DMA) – it remains to be seen whether the CMA would target the other six “gatekeeper” tech companies. The Act does have a broader scope in that companies are targeted based on any digital activity that meets the above criteria while the DMA designates companies that provide a core platform service that is an important gateway for businesses to reach end users.
2. Conduct requirements
Conduct requirements can be imposed on SMS companies to regulate how they conduct themselves in relation to the digital activity they are involved in. When imposing these requirements, the CMA will consider the objectives of treating users fairly, allowing users to choose freely and easily between choices, and ensuring trust and transparency between the users and the SMS company. Importantly, the CMA also has the power to impose conduct requirements in relation to activities outside of digital markets in order to maintain healthy competition in the relevant digital activity market. This may bring into scope parts of the SMS companies that may be only remotely connected to the digital activity. SMS companies should ensure that compliance by these areas are not overlooked on the basis of remoteness. Examples of requirements that may be imposed include making data collected by the digital platform available to other businesses or giving publishers more control over how their data is used in the platform’s AI services.
The CMA also has the power to and must initiate public consultations regarding any requirements that it intends to impose on an SMS company. This consultation can be carried out simultaneously with the SMS designation consultation. During the consultation, the SMS companies and third parties will be able to make representations to the CMA about the proposed decision. The finalised conduct requirement will then apply from the date of the notice of the requirement (which could be at the same time as designation) and will typically last until the company no longer has SMS, unless revoked by the CMA prior to the end of the designation period. Where the CMA designates a firm with SMS, if the firm had prior designations and therefore prior conduct requirements, the CMA may impose these as well under the new designation to prevent gaps in transition.
The CMA has a duty to carry out ongoing reviews of any conduct requirements in place to assess if the requirements are effective, if it should be varied or revoked, etc. In varying the requirements, the CMA will assess if the proposed requirement is permitted and if it is proportionate to the statutory objectives of the Act. If varying the conduct requirement is not an option, the CMA may revoke a requirement in response to market changes or circumstances which make the existing requirement inadequate for the intended aim. Once again, the CMA has a duty to conduct public consultations before varying or revoking a conduct requirement.
For Big Tech and digital companies that are likely to have SMS for extended periods of time, it would be a good idea to keep updated on market changes. SMS companies do have the opportunity to submit representations (along with evidence) or informally discuss with the CMA whether it is necessary or desirable for a requirement to be varied or revoked.
3. Pro-competition interventions
From 1 January 2025, the CMA also has the power to make pro-competition interventions (PCI) in relation to an SMS company, such as giving people the power to easily transfer their data from one provider to another, or requiring SMS companies to allow greater data access or greater interoperability between different products or services.
The CMA may begin an investigation to impose PCIs if it deems that there may be an adverse effect on competition as a result of the relevant digital activity and the PCI would remedy, mitigate, or prevent the adverse effect. Similar to the above, the CMA must carry out a consultation on the results of its PCI investigation before imposing any pro-competition orders or requirements on SMS companies.
SMS companies and third parties will be able to make written representations to the CMA before the investigation (through an invitation to comment by the CMA), during the consultation, and about the proposed decision. The CMA will typically also offer SMS companies and key third parties that are likely to be impacted by the proposed decision the opportunity to make oral representations, unless there is a reason not to do so.
In place of imposing a PCI, the CMA may accept commitments from SMS companies in relation to their conduct that may be causing the adverse effect, if the commitments will remedy, mitigate, or prevent the adverse effect.
When carrying out consultations in relation to designating SMS, imposing conduct requirements, or pro-competitive interventions, the CMA can freely use information it has obtained in the exercise of its statutory function. It is also statutorily obliged to protect confidential information from companies which comes to it in the same manner and is restricted from disclosing this information during the lifetime of an individual or the existence of the undertaking concerned. Disclosing or using such information improperly (unless permitted in certain situations) constitutes a criminal offence. Therefore, companies that may be respondents of such consultations need not worry about the confidentiality risks of a consultation as the CMA is bound by high standards and requirements. The CMA will adopt measures such as asking respondents to provide confidential and non-confidential versions of any submissions and taking steps to redact, anonymise, or aggregate confidential information to protect confidentiality.
4. Merger reporting obligations
Unlike the UK’s voluntary merger control regime, under the digital markets regime, it is mandatory for SMS companies to report UK-connected mergers, acquisitions, or any other act of concentration (e.g., joint ventures) if it satisfies all of the following criteria:
(i) The act of concentration results in an increase in the percentage of shares or voting rights held by the SMS company
(a) From below 15% to 15% or more; or
(b) From 25% or less to more than 25%; or
(c) From 50% or less to more than 50%.
Note: If the act of concentration is a joint venture, the threshold is that the SMS company holds at least 15% of the shares or voting rights in the joint venture.
(ii) The target/joint venture carries on or expects or intends to carry on activities in the UK or supplies or expects or intends to supply goods and services (directly or indirectly) to a person in the UK.
(iii) The total consideration of the deal is at least £25 million.
SMS companies must submit a report regarding such acquisitions of interest once they become obliged to complete the transaction (e.g., once the contract has been signed). The report must be done before the transaction completes. SMS companies must also regularly assess any deals taking place that may become reportable due to material changes to the arrangement.
Once the report has been submitted, the CMA has five working days to accept it and another five working days thereafter to review it (called ‘the waiting period’). Unlike the non-suspensory nature of the UK merger control regime, the transaction cannot close under this regime during the waiting period. At the end of the waiting period, where the CMA finds that there may be a reasonable chance that the merger could result in a substantial lessening of competition within any market in the UK, it may decide to launch a formal merger investigation. If no competition concerns are found at the end of the waiting period, the CMA may inform the acquirer that it has no further questions or that it is continuing to assess whether a formal investigation would be needed (in which case the CMA may ask the parties to provide additional information). In the latter scenario, the CMA will aim to arrive at a decision as efficiently as possible. Regardless, if an investigation is not opened by the CMA by the end of the waiting period, the transaction may close.
5. Enforcement powers
Under this regime, the CMA has the power to impose a fine of up to 10% worldwide turnover (of the company or its group) and in cases of breaches of an order or commitment, a fine of 5% of daily worldwide turnover for each day a breach continues. In imposing penalties, the CMA will have regard to factors contained in its “Administrative Penalties: Statement of Policy on the CMA’s Approach” guidance.
Looking forward
The introduction of the digital markets regime is changing the landscape of the competition regime in the UK, alongside the changes to the competition and consumer protection regimes. The CMA will be investigating Big Tech companies and large digital platforms for SMS designation and will consider imposing conduct requirements to ensure that healthy competition is maintained in connection with the relevant digital activity. It can also impose interventions to remedy any anti-competitive consequences of the companies’ activities. Large digital companies will also be scrutinised heavily in relation to their mergers, acquisitions, and joint ventures for compliance with the new mandatory merger control reporting criteria. Breaches of conduct requirements and merger reporting requirements, among others, will be grounds for the CMA to enforce substantial penalties on SMS companies. Therefore, large businesses in the digital markets should anticipate SMS investigations and make sure that they set up systems to align with the new regime.
In-depth 2025-020