Are you ready for the UK Digital Markets Competition and Consumers Act?

On 23 May, the Digital Markets Competition and Consumers Act (DMCCA) was passed by Parliament and expected to receive royal assent on 24 May. It not only introduces a new UK digital markets regulation regime, but also makes sweeping changes to the competition rules in the UK, and ushers in the most significant reform to UK consumer law in several years.

This is a large piece of legislation, but covers three distinct areas, Competition, Consumer and Digital Markets regulation.  In all the noise, what are the five things you need to know about each?

Five things to know about the new digital markets regime

Five things to know about the changes to competition law

Five things to know about the changes to UK consumer law

Five things to know about the new digital markets regime

1. Say hello to a new regulator – the Digital Markets Unit

The DMCCA establishes a new unit within the Competition and Markets Authority (CMA) – the Digital Markets Unit (DMU) – to oversee the new regime. While it has been operating in shadow form since April 2021, the DMU will be placed on statutory footing by the DMCCA.

2. New regime regulates the most powerful digital players in the UK

Only a handful of players will be subject to the new digital regulation powers contained within the CMA – those that have substantial and entrenched market powers, as well as a position of strategic significant in respect of a digital activity, so-called players with 'Strategic Market Status' (SMS).  

In practice, it can be expected the SMS players will broadly align with those regulated under the EU's similar regime under the Digital Markets Act – see below.

Before the general election was announced, the expected timeframe for SMS designation was July 2025, following nine month designation investigations from the autumn. At this point it is unclear whether the general election will affect this timeframe.

3. DMU will have extensive powers

The new regime will give the DMU powers to introduce binding codes of conduct on the SMS firms, as well as to carry out pro-competitive interventions (PCIs).

The DMCCA will introduce new codes of conduct for SMS firms, setting out conduct requirements that the SMS firms may follow, providing they follow the objective of either fair dealing, open choices or trust and transparency. Examples of the types of conduct requirement that may be imposed include: a requirement to trade on fair and reasonable terms and a requirement that technology interoperates with third parties.

In addition, the CMA via the DMU will be able to carry make PCIs in order to resolve competition problems  in digital markets – this power will enable the DMU to design targeted interventions to address the root cause of competition issues in digital markets following an investigation process (not dissimilar to the existing market studies powers).

4. Similar, but not the same as, the EU's new digital markets regime

The digital markets regime under the DMCCA pursues similar aims, and operates in a similar way to the EU's new digital regulation rules under the Digital Markets Act (DMA) which regulates "gatekeepers" – broadly expected to align with SMS firms under the UK's regime.

Both regimes seek to shift to "before the event" (rather than "after the event") enforcement – a move designed to address long-held concerns that traditional dominance enforcement under competition law is just too slow to address harms in fast-moving digital markets.

However, a key difference is that while the DMA applies a standard set of rules that apply to all gatekeepers, the DMCCA gives the DMU the ability to create a bespoke set of rules for each separate SMS firm. While the flexibility may enable DMU to be more targeted in its requirements, it may also create challenges for it as it needs to take a more collaborative approach and engage with both the gatekeeper and other interested parties – this approach may be slower and more open to challenge.  

5. These rules aren't just relevant to the players regulated under the Act

While the rules themselves may only apply to the handful of players designated as SMS firms, given the broad reach of the firms designated as such, the rules have the capability of affecting any company that has dealings with the regulated firms.

The CMA will see third party engagement as key, given the flexibility of the new regime.  This engagement may kick off very soon, with the CMA expected to consult soon on how it will use its new powers.

Five things to know about the changes to competition law

1. The DMCCA makes changes to the UK merger control regime

The DMCCA increases the turnover threshold from £70 million to £100 million.

It also creates a new safe harbour for mergers where each party's UK turnover is less than £10 million.

Neither provision is likely to have a substantial impact on the number of cases reviewed by the CMA due to the continued voluntary nature of the notification regime and the influence of inflation on deal values.  

However, the Act introduces a new threshold to catch 'killer acquisitions'. The new threshold will be met if one of the transaction parties has a UK turnover of £350 million and supplies at least 33% of goods or services in the UK. The other party must be a UK business that carries on part of its business, or supplies goods or services in the UK.

There are also specific requirements for SMS firms to report transactions that will result in the SMS group containing an entity of "qualifying status" (based on the percentage increase in shares/voting rights) in a "UK-connected body corporate" for a consideration of £25 million or more. This mandatory notification is a deviation from the general voluntary merger control regime and in practice will likely also trigger the above killer acquisitions threshold.

2. Changes to extra-territorial reach of the CMA

The Act expands the prohibition on agreements that restrict, distort or prevent competition or trade within the UK.

Under the new regime, agreements do not need to be implemented in the UK and the prohibition will apply where there are (or are likely to be) immediate, substantial and foreseeable effects within the UK, potentially capturing a wider range of commercial agreements and activities.

3. Increased enforcement powers for the CMA for investigations

The DMCCA increases the CMA's dawn raid powers for domestic premises. This modernises the powers to reflect the increase in employees working from home.

Under the Act, the CMA is granted powers to remove laptops and other personal devices from domestic premises to examine them off site. The CMA's interview powers will also be increased to enable to the regulator to compel interviews from any person even where they are not connected to a business under investigation.

The Act also includes a general duty to preserve documents and evidence where a party knows or suspects that an investigation is likely to be carried out.

4. Reduced standard of appeal against interim measure decisions

The DMCCA changes the standard of appeal from a full merits assessment to the judicial review standard. This is intended to increase the efficiency of appeals, as the Competition Appeal Tribunal will only be required to assess an appeal on grounds of illegality, unreasonableness or irrationality.

5. New civil penalties where previously only criminal penalties applied

The Act provides a number of civil penalties to strengthen the CMA's enforcement powers. This includes specific penalties for companies that obstruct investigations or destroy evidence, such as fixed penalties of up to 1% of global turnover, with additional daily penalties of up to 5% of daily turnover for continuing non-compliance.

This reflects the CMA's focus on pursuing civil penalties for individuals rather than criminal ones. For example, the Act includes penalties of up to £30,000 for individuals that fail to comply with the CMA's investigative measures. The CMA will also increase the use of director disqualification as a remedy against non-compliant companies.

Five things to know about the changes to UK consumer law

1. New strict requirements for paid subscription contracts

The DMCCA introduces a new regime for paid business-to-consumer subscription contracts. Once that regime comes into effect (likely no earlier than spring 2026) the key requirements are as follows:

• Pre-contract information: Traders must provide specific and detailed information in a way that meets strict presentation requirements, which will require changes to the customer journey. This is likely to entail product development and legal sign-off, resulting in additional time and cost, and will ultimately mean: (i) sign-up journeys must be tailored to stringent UK requirements (which are not aligned with the EU); and (ii) friction will be introduced into the purchase journey.
• Reminders: Traders will need to issue renewal reminders prior to the end of a free trial (or discount period) and then at certain intervals depending on the length of the subscription term. There are specific timing and information requirements including a reminder of the right to cancel. These notices increase the operational burden on traders, may annoy or overwhelm customers and/or increase the risk of subscriber churn.
• Cancellation: The DMCCA anticipates a simplified process for ending auto-renewal, as well as a right for customers to cancel on notice given by a "clear statement" (but not confined to a specific medium). The ability to use retention offers or cancellation surveys may be restricted. The change may necessitate additional customer services time and costs due to the need to process cancellation notices delivered via other means.
• Cooling-off rights: The DMCCA gives consumers a non-waivable right to cancel a subscription and obtain a refund during an initial 14 day period, and subsequent 14 day renewal periods for certain subscriptions (following a free/initial discount and after each annual renewal). Much will turn on the drafting of regulations to follow enactment, which will take place in the new Parliament, potentially under a new governing party. Unless clarified, the current provisions enable UK consumers to sign-up, "binge-consume" content or view a specific event and then cancel within 14 days and receive a refund (without any limit on the number of times this process may be repeated).

2. Sharper teeth for the CMA to enforce consumer law

The DMCCA creates a new "dual" enforcement regime. The courts will continue to have powers to issue a range of orders, including online interface orders. 

In addition, the CMA will now have broad and discretionary investigatory and enforcement powers for infringement of a range of existing consumer protection and e-commerce laws, as well as the new subscription contract regime.

These powers can be exercised without going to court, including the imposition of significant monetary penalties based on global group turnover (up to 10%).

These enforcement powers fundamentally change the risk outlook for traders in the context of its UK consumer-facing business. Traders will also need to review historic decisions on direct-to-consumer compliance in light of this new enforcement climate (such as in respect of terms and conditions and buy-flow wording).

3. New regime for reviews and review information

The DMCCA creates a range of new prohibited practices (which attract civil remedies only) targeting fake and misleading consumer reviews and review information (each defined very broadly).

This includes publishing consumer reviews/consumer review information without taking "reasonable and proportionate steps" to: (a) perform certain checks to confirm the reviews are not fake/misleading; and (b) to remove such reviews or information from publication.

Unlike in the EU, it is not possible for traders to comply with the requirements of the DMCCA by means of a disclosure stating no checks have been undertaken.

These prohibitions were added at a very late stage and therefore have not benefited from full scrutiny and additional consultation. The government has indicated that the nature of the "reasonable and proportionate steps" that platforms are required to take will be fleshed out by guidance to follow enactment (led by the CMA).

4. Potential for new 'blacklist' prohibitions

The DMCCA makes it easier for the government to add new prohibited practices to the UK's unfair commercial practices regime (that is, conduct that is always prohibited, irrespective of the outcome for consumers).

Potential candidates for this power are likely to be heavily directed  by the "hot topic of the day" with topics such as greenwashing, addictive designs, dark patterns and the labelling of AI-generated content all potentially on the horizon.

Businesses should keep an eye on government consultations, as well as activity overseas (such as the EU's digital fitness check) and be prepared to respond to change.

5. It's not over yet…

Much of the practical detail under the subscriptions regime, as well as the way in which the CMA will exercise its new enforcement powers, will be determined by regulations and guidance yet to be issued.

Given the timing of the general election, all regulations under the DMCCA will be decided under a new government (and potentially one led by the Labour Party).

This includes important details such as commencement of the regimes, as well as more sector-specific implementation details. For example, the application of the new renewal cooling-off rights regime is expected to be fleshed out by regulations, particularly circumstances in which this cooling-off right might be "waived".

There is still plenty of opportunity for businesses to engage on how the DMCCA will apply in practice – we will be closely tracking progression of various consultations and regulations.

Vincent Guereca-Adair, Trainee Solicitor, assisted in producing this Insight.

If you would like to discuss any of the issues raised in this Insight, please get in touch with your usual Osborne Clarke contact, or one of our experts listed below.