The Digital Markets, Competition, and Consumers Bill (the DMCC) was introduced in the House of Commons on 25 April 2023, and the second reading was held on 17 May. The DMCC aims to cover two main topics: (a) digital markets and proposed competition law reforms; and (b) new consumer rights and proposed reforms of consumer law enforcement. The law has extraterritorial application and will apply to ‘digital activities’ where they either (i) have a ‘significant number of UK users’, (ii) are based in the UK, or (iii) are likely to have an ‘immediate, substantial and foreseeable effect on trade’ in the UK.
Digital markets: The power of some of the largest tech companies has come under increasing scrutiny across the globe. The DMCC generally aims to boost competition in digital markets by introducing a new regulatory regime targeted to the sector. The proposals would seek to empower the Competition and Markets Authority (CMA) to ‘designate’ businesses that are very powerful in particular digital activities linked to the UK (designated undertakings), for example if they have ‘substantial and entrenched market power’ or ‘a position of strategic significance’, giving them strategic market status (SMS) in relation to those activities.
A designated undertaking that has SMS would be held to a higher standard of accountability in relation to those activities and will need to ensure it complies with specific rules on how it treats consumers and other businesses. Designated undertakings would also need to be more transparent about any mergers that pose risks to competition.
These proposals echo the aims of the EU’s Digital Market Act (DMA). The DMA, which entered into force in November 2022, also established a new ex ante regulatory regime for the most powerful tech companies operating in the region. The two regimes are largely aligned on their substantive objectives, but they do diverge in some key respects, for example the conduct requirements under the DMCC will be tailored to each SMS firm, while the DMA sets out a uniform list of dos and don’ts, which may make compliance potentially more burdensome.
Competition law reforms: The proposals in the DMCC would reform aspects of competition law across the economy by amending existing UK law on merger control, market inquiries, and the cartel offence, and make amendments to enhance the CMA’s investigative and enforcement powers. The ultimate aim of these wide-ranging reforms is to empower the CMA to take rapid and effective action to tackle competition law infringements.
New consumer rights: The DMCC proposes to revoke the existing Consumer Protection from Unfair Trading Regulations 2008 (CPR) and re-create their effect, with minor amendments, prohibiting unfair commercial practices in business-to-consumer relationships, including misleading actions, omissions, or aggressive practices relating to the marketing and sale of products to consumers. The DMCC would largely replicate the list of specific practices that are considered automatically ‘unfair’ and unenforceable and would create a power to make regulations that could add to such a list.
- Fake reviews: The DMCC would prohibit traders from actively commissioning false reviews or creating their own false reviews and would require traders to take steps to ensure reviews that appear in marketing activities are truthful and accurate.
- Subscription traps: The DMCC would introduce new rules that impose duties on traders, including a requirement to give specific precontract information to consumers, to send reminders before a contract rolls over or auto-renews into a new term, and to ensure that consumers have a straightforward, cost-effective, and timely mechanism to terminate a subscription contract (for example, if the subscription was entered into online, online termination must be permitted and displayed in a place the consumer is likely to find it).
- Consumer saving schemes: The DMCC would give new protections to consumers who make advance payments to consumer saving scheme contracts (e.g., Christmas saving clubs), requiring businesses to protect payments via a trust arrangement or insurance and to inform consumers about such protections.
Direct enforcement: The DMCC would create two separate regimes for the enforcement of consumer protection law: (a) a court-based regime, which would simplify and enhance existing procedures; and (b) a direct enforcement regime administered by the CMA.
The DMCC would allow the CMA to enforce obligations on designated undertakings and impose penalties (including fines of up to 10% of global turnover).
Next steps: The Public Bill Committee are now open to taking written evidence submissions and are expected to meet on 13 June, with a final report due on 18 July 2023.
This alert was published with assistance from Hattie Muncey.