Article

Digital Markets, Competition and Consumers Bill – what it means for digital markets in the UK

28th June 2023

The Digital Markets, Competition and Consumers Bill (the DMCC Bill) is expected to come into force in late 2024 and represents a big change for digital markets in the UK.

There are important updates to consumer protections and greater enforcement powers for the Competition and Markets Authority (CMA), meaning that businesses operating in the digital space need to be alert to these changes. The rules will apply to firms that have been designated as having strategic market status (SMS). This will include very large technological businesses with a global turnover of over £25 billion or a turnover in the UK of over £1 billion, such as companies like Google and Meta – better known as Facebook. However, as the aim is to regulate digital markets in the UK, it’s important for all businesses to be aware of the changes.

Below, we look at some of the key changes to increase awareness before the DMCC Bill comes into force next year.

Consumer protections

The DMCC Bill aims to tackle certain practices to increase consumer protections, including:

  • fake reviews
  • subscription traps
  • savings clubs.

Unlike the updates outlined below, the consumer protection rules will apply to all businesses.

Fake reviews – the DMCC Bill will outline banned practices, which will include banning the commission or incentivisation of any person to write and/or submit a fake consumer review of goods or services. Businesses will also have a requirement to verify that reviews they host are genuine. This is following research that between 11% and 15% of reviews on e-commerce websites for the sale of commonly used consumer product categories, are likely fake. These proposed changes will therefore mean that any business operating in the UK will have an obligation to verify that reviews on their websites are genuine and will be banned from commissioning or incentivising anyone from writing and/or submitting a fake review in relation to its goods or services.

Subscription traps – the DMCC Bill will create new rules to give consumers more knowledge and power when entering and cancelling subscriptions. The proposed changes will introduce new consumer rights throughout the entire life of the subscription contract, including pre-contract information requirements and easy exiting of the contract. Some of these new consumer rights will include the requirement for businesses to prominently display information relating to the subscription, including information relating to automatic renewals and cancellation methods and rights.

Savings clubs – the DMCC Bill wants to address unregulated savings schemes, such as Christmas saving clubs, which are attractive to consumers but potentially risky in comparison to bank accounts due to their current unregulated status. These businesses will be required to protect payments, for example – through a trust arrangement or insurance. Businesses will also be required to communicate to consumers how their payments are protected.

Digital markets

There are existing rules aimed at regulating big businesses, however the DMCC Bill will add to these rules by giving the CMA’s Digital Markets Unit (DMU) the right to regulate digital companies that fit certain criteria of having SMS. The aim is to address and prevent harmful business practices in relation to SMS firms due to the large amount of power they have within digital markets. These SMS firms have significant control in the digital market for several reasons including their large size, which means that new entrants have trouble challenging them and their use of algorithms, which then creates a lack of transparency as to how decisions are made.

These rules will apply only to firms with designated SMS status, however it is still relevant for all businesses to be aware of the updates due to the power these SMS firms have in the digital sector. Smaller businesses may benefit from the proposed new rules due to their reliance on these large companies, for example – for reaching customers by marketing and selling online. The DMCC Bill aims to provide a more equal balance of power between larger and smaller businesses by forcing SMS companies to act fairly. The DMU’s pro-competitive interventions may also make it easier for smaller companies to compete in digital markets.

Competition and CMA powers

The DMCC Bill also introduces a new pro-competition digital markets regime that has three main objectives:

  1. fair trading
  2. open choices
  3. trust and transparency.

The DMU will be given rights to address the SMS firms’ power within digital markets. This will include implementing measures such as requiring interoperability, which means the sharing and exchanging of information between firms and is a new legally binding code of conduct that will be specific to each of these SMS firms. The CMA will also have powers to apply for director disqualification and make senior managers responsible for ensuring compliance with its requests for information, demonstrating an increased amount of personal responsibility.

The DMCC Bill also addresses competition by updating merger and fine rules and thresholds. According to these new updates, SMS firms will be required to notify the CMA of a merger and acquisition if certain thresholds are met.

What does this mean for UK businesses?

The DMCC Bill is wide reaching and will likely have a big impact on digital markets in the UK. Businesses that use services from SMS firms should hopefully see a more balanced bargaining position and we should see that smaller businesses in the digital space are able to compete on a more even playing field. Businesses should review the new consumer law rules to ensure their business practices are compliant before the Bill comes in to effect next year, to avoid any findings of wrongdoing.