Alongside updates to the UK competition regime, the UK Digital Markets, Competition and Consumers Act 2024 (the Act) also regulates Big Tech through the introduction of a digital markets regime1 and gives the Competition and Markets Authority (CMA) enhanced consumer protection powers. 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.
Amendments to the UK competition regime
The Act amends specific provisions of the Competition Act 1998 and Enterprise Act 2002, with an updated competition regime effective from 1 January 2025.
1. Anti-competitive behaviours
One key change made by the Act is widening the scope of anti-competitive agreements and practices that may be caught under the regime. Any agreement with potential anti-competitive effects within the UK, regardless of where it is carried out, will now fall under the CMA’s jurisdiction. This will apply to agreements made after 1 January 2025.
2. Merger control regime
The Act has introduced several changes to the merger control regime in the UK.
- There are now three different thresholds which would allow the CMA to have jurisdiction to review a transaction. The CMA can either call in and investigate a transaction within four months from the date of completion of the transaction, or parties can voluntarily submit a notification to the CMA.
- From 1 January 2025, the turnover threshold of £70 million UK turnover increased to £100 million UK turnover. This change is mainly targeting inflation and is not expected to affect many businesses.
- The share of supply test will remain in force. Therefore, the CMA has jurisdiction over transactions that create or increase the parties’ share of supply of particular goods or services beyond 25%. The share of supply test requires an overlap between the activities of the parties (i.e., they must together supply or acquire the particular goods or services).
However, a new safe harbour will be in effect alongside the share of supply test from 1 January 2025 where – unless the target or any other undertaking concerned has UK turnover of more than £10 million – the merger is exempt from notification. Small transactions where all undertakings concerned have turnover of less than £10 million will therefore be excluded from the regime.
This may deter acquirers that have no prior turnover or have limited turnover in the UK from acquiring businesses that exceed the threshold. On the flipside, foreign direct investments into businesses that do not exceed the threshold, while falling within the safe harbour, may still be notifiable under the National Security and Investment Act 2021 if there is a relevant transaction and a notifiable change of control.
- The CMA also has the power to review mergers where one party has a UK nexus and the other party has an existing share of supply of 33% or more of any goods or services in the UK and a UK annual turnover of £350 million or more. The scope of the 33% share of supply test is very broad and could potentially catch a wide range of goods and services as there is no requirement for the parties to overlap in any relevant market. Additionally, unlike the 25% share of supply test, this threshold does not require an increment (i.e., the transaction need not create or increase share of supply to 33% or more). The introduction of the new threshold is aimed mainly at ‘killer acquisitions’ by large companies trying to eliminate competition in the relevant market.
The UK nexus test has a very low threshold and typically applies to the target. It can be satisfied if one of the following three criteria is fulfilled:
- The relevant party’s activity is carried out by a body of persons formed or recognised by UK law (Note: this will not be fulfilled if the party only has assets), or
- At least part of its activities (including any preparatory steps such as obtaining regulatory clearances or intellectual property rights) were carried out in the UK pre-transaction, or
- During the pre-transaction stage, the party supplies (directly or indirectly) goods or services to a party in the UK.
The new 33% threshold will also allow the CMA to review vertical and conglomerate transactions (e.g., transactions between different industries) as opposed to previous guidance that the share of supply test cannot be used where the parties have a purely vertical relationship or there is no overlap between the parties. This widens the scope of transactions covered under the merger control regime as long as there is an existing share of supply. The UK government has estimated that the new threshold could lead to at least two to five additional CMA merger filing investigations per year.
- The CMA uses a two-stage review process to investigate transactions: Phase 1 considers any initial competition concerns and Phase 2 conducts an in-depth review for more complicated mergers. The Act allows the CMA to fast track an investigation into Phase 2 if requested by the parties before the end of the initial period (Note: This mechanism will not be available to energy networks mergers). The CMA and the parties involved can also mutually agree to extend the Phase 2 timetable. There is no limit on the duration or number of extensions that can be agreed upon. Equally, any extension period can be cancelled by agreement between the CMA and the parties involved.
- The Secretary of State also has the power to intervene in transactions on public interests and special public interest grounds, following which, the CMA may be asked to investigate and submit a report on the effect of the transaction. In relation to media and newspaper mergers, the threshold for public interest interventions will remain at £70 million (as opposed to the new threshold of £100 million) and the safe harbour of £10 million for the 25% share of supply test will not be available.
The above merger control regime is in addition to the mandatory merger notifications which will also be required of companies with strategic market status under the digital markets regime.
3. Changes to penalties
The CMA has increased the scope of powers in relation to penalties to be imposed on parties that fail to comply with its investigative measures or that breach their commitments, orders, or undertakings as set out below.
- Failure to comply with investigative measures
Investigative measures here refer to, among others, complying with requests for information, providing access for dawn raids, preserving information, and other procedural requirements. For failure to comply with these, the CMA has the power to impose fines of up to 1% of worldwide annual turnover and/or up to 5% of the daily worldwide turnover for each day that the party fails to comply. With the basis of turnover being worldwide, businesses should ensure that they seek guidance on the obligations required of them to avoid incurring significant penalties.
- Breach of commitments/orders/undertakings
For breaches of any commitments, orders, or undertakings made by the parties involved as, for example, remedies in a merger control investigation, the CMA has the power to impose fines of up to 5% of worldwide annual turnover and/or up to 5% of the daily worldwide turnover for each day that the party fails to comply.
With the basis of turnover being worldwide and a daily rate being included, the CMA can impose substantial penalties on businesses for the above. We expect regulations regarding, among others, the calculation of turnover (the Turnover Regulations) for the basis of the penalties in all the regimes under the Act to come into force in early 2025. In relation to the competition regime, the Turnover Regulations set out the situations in which a company is deemed to be controlled by a person, which companies’ turnover should be included in the calculations, and how to determine turnover amounts for different types of companies (e.g., financial institutions, credit institutions).
Next steps
The changes detailed above are targeted at gaps in the regime and recent practices that enable anti-competitiveness in the UK. The CMA can now scrutinise agreements as long as they have an anti-competitive effect in the UK (regardless of where they are carried out), expanding the CMA’s jurisdiction for investigations. When carrying out mergers, acquisitions, or joint ventures, businesses will need to carefully consider the new merger thresholds which can be easily triggered due to a low UK nexus threshold, a lack of overlap requirement, and the inclusion of vertical and cross-industry transactions. Businesses investing in smaller competitors should be aware that they may be within scope of the new ‘killer acquisition’ threshold. The CMA also has enhanced enforcement powers in relation to businesses failing to comply with the competition regime and can impose substantial penalties. With the strengthening of the regime, businesses should consider the updated competition law requirements, review their operations to assess risk, and proactively consider solutions to ensure continuous compliance.
- See our digital markets regime alert for a more in-depth review on its key elements.
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