Competition | UK Regulatory Outlook September 2023
Published on 27th Sep 2023
DMA designation | Housebuilding Market Study | Horizontal agreements
On 6 September, the European Commission designated six big tech companies as gatekeepers in relation to 22 core platform services, which include tech services such as social media platforms, operating systems, ad tech and marketplaces. This was done in line with the Digital Markets Act (DMA). For an in-depth discussion of this legislation when it was published, see our previous Insight.
Following their designation, gatekeepers have six months to comply with the full list of requirements under the DMA, which control a range of activities, from digital wallets to data. However, some of the obligations will start applying as of designation, for example, the obligation to inform the Commission of any intended merger/acquisition.
The DMA obligations are aimed at creating more choice and freedom for consumers and business users of the gatekeepers' services. It is for the designated companies to ensure and demonstrate effective compliance. To this end, gatekeepers have six months to submit a detailed compliance report in which they outline how they comply with each of the obligations of the DMA. The Commission can fine companies up to 10% of worldwide turnover for breaches of the rules, rising to 20% in the case of repeated infringements.
In the future, additional companies, or the same companies in relation to other core platform services, could submit notifications to the Commission under the DMA, based on their self-assessment with respect to the relevant thresholds.
Additionally when a platform does not meet all the thresholds but has a significant impact on the market, is an important gateway for business users to reach end users, and enjoys an “entrenched” and “durable” position, the Commission can designate it after a market investigation.
While these initial designations confirm some expectations of how the designation process under the DMA will function it leaves open further questions: most notably the fact that it is still not clear for many technologies what delineates a core platform service from one that does not fit this criteria.
While the most obvious impact will be on the firms that are designated as gatekeepers and which will be required to undertake significant work to ensure compliance with the rules, the ramifications will be felt by all players active in digital markets as business practices begin to change. Gatekeepers and those that deal with gatekeepers will all need to ensure they understand the rules.
In the UK, we await the Digital Markets, Competition and Consumer Act, which is likely to govern similar digital services but may diverge in terms of the specific "dos and don'ts". The legislation is expected in 2024, with the designations to follow from there.
Housebuilding Market Study
On 25 August 2023, the Competition and Markets Authority (CMA) issued a consultation on launching a market investigation reference following on from its market study into this sector. The consultation closed on 18 September, after which the CMA will collect feedback received from key stakeholders in the sector – which included housebuilders of all sizes, campaign groups, councils, and devolved administrations. The CMA will now look at five areas in greater detail as the market study progresses.
These areas are land banking, estate management charges, competition between housebuilders, barriers to entry for new businesses wanting to build homes and the planning system. The CMA will investigate each of these issues further – while considering the economic conditions affecting the sector – and will provide updates on its work later in the autumn. This will include publishing working papers on estate management charges, land banks, and planning rules.
In relation to its consultation on the proposal to launch a market investigation, the CMA has highlighted concerns with the private management of public amenities on freehold housing estates and the practice of land banking. It has also kept open the possibility of the market investigation reference looking into other matters.
This market study and potential market investigation may have a significant impact on the housebuilding sector. It is important for all businesses operating in this sector to remain aware of developments, which may include mandatory requests for information from the CMA and ultimately remedies that affect conduct in the market.
On 16 August 2023 the CMA published guidance on how UK competition rules apply to horizontal agreements (agreements between competitors, such as buying agreements and R&D collaboration).
The UK guidance is intended to help businesses make their own assessment of common types of horizontal agreements. This includes practical guidance on:
- when horizontal agreements are likely to restrict competition;
- when horizontal agreements are likely to be treated as acceptable under UK competition law because they produce benefits which outweigh on the potential detriments to competition; and
- guidance on common agreements between competitors such as in joint purchasing agreements and joint negotiations, commercialisation agreements and information exchange.
There are some important divergences between the UK and EU guidance. The UK guidance:
- does not specifically address sustainability agreements. The CMA has indicated its intention to publish guidance on this topic in the near future, having published draft guidance earlier this year.
- creates some ambiguity as to whether information exchanges by public disclosure may be considered genuinely public or could amount to the sharing of competitively sensitive information which could potentially infringe competition law.
- expands on the definition of "competition in innovation", which is a key requirement for R&D agreements. The UK expects parties to R&D collaborations demonstrate the presence of at least three undertakings competing in innovation, which was dropped by the EU due to the complexities and uncertainty that could be raised by this concept, particularly as innovation is so often confidential.
There is much to welcome in the practicality of the CMA's guidance, including a number of case studies that walk through its approach to real life scenarios. However, we are awaiting the final guidance on sustainability and there are increasing divergences between the UK and EU approach.
For companies entering into collaborations with competitors, it is important to seek competition advice and to ensure your arrangements fall within the "safe harbours" of the UK and EU guidance.
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