Reed Smith Client Alerts

  • A number of recent UK studies have identified concerns with certain conduct by large digital platforms.
  • The government’s consultation sets out proposals for a new regime to regulate the conduct of particular digital platforms and markets.
  • The proposals include formally establishing a Digital Markets Unit (DMU) within the Competition and Markets Authority (CMA), with a duty to promote competition and innovation in digital markets, to enhance powers to regulate, investigate and ensure compliance through enforcement and sanctions, where necessary, and to redress the balance between potential competitors.
  • The proposals would also introduce a new regime by which the DMU would designate digital firms with strong and entrenched market power as holding strategic market status (SMS). Firms with SMS:
    • would be subject to legally binding principles contained in a new code of conduct (Code);
    • would be subject to the DMU’s power to make pro-competitive interventions (PCIs) against them; and
    • may be obliged to notify the CMA of all mergers they undertake, and the largest could be subject to a mandatory merger regime with a new, lower substantive threshold for the CMA to oppose mergers.

On 20 July 2021, the UK government announced a consultation, titled “A new pro-competition regime for digital markets” (the Consultation), which proposes a number of radical changes that would introduce a new regulatory regime applying to the largest digital platforms operating in the UK.

The government’s proposed reforms build on the recommendations made by the Digital Competition Expert Panel (the Furman Report), which called for the need to update the rules governing merger and antitrust enforcement in digital markets as well as the recommendations of the Digital Markets Taskforce comprised of the CMA, the Office of Communications (Ofcom) and the Information Commissioner’s Office (ICO). These recommendations, together with the CMA’s market study into “Online platforms and digital advertising”, have informed the changes proposed in the Consultation.

The DMU started to operate informally earlier this year (April 2021), but the Consultation would formally set up the unit by statute, setting out its duties and powers. It is proposed that the DMU will oversee an entirely new regulatory regime for digital markets which would place significant additional obligations and regulation on digital platforms found to have strategic market status.