The United Kingdom is poised to overhaul its regulatory framework for the digital economy as a new law empowers authorities to scrutinize the operations of the world’s largest technology companies. This legislation grants the newly established Digital Markets Unit (DMU) within the Competition and Markets Authority (CMA) the power to designate certain firms as having “strategic market status” (SMS), subjecting them to bespoke rules aimed at fostering fair competition, boosting innovation, and offering consumers greater choice.
The Digital Markets, Competition, and Consumers (DMCC) Act, which passed through Parliament, marks the culmination of several years of deliberation regarding the overwhelming market power wielded by a handful of global tech giants. Proponents argue that the current regulatory toolbox is insufficient to address the speed and complexity of digital markets, leading to entrenched positions that stifle smaller competitors and innovators.
Empowering the Digital Watchdog
The core mechanism of the new law is the SMS designation. This status will be applied to companies demonstrating substantial and enduring market power in a UK digital activity. Once designated, a firm must adhere to a set of mandatory Conduct Requirements—proactive rules designed to prevent anti-competitive behaviour before it harms the market. These conduct rules could dictate how a company processes user data, how it ranks search results, or how it operates its app stores.
Furthermore, the DMU will have the authority to impose pro-competitive interventions (PCIs). These are targeted, structural changes to a company’s operations intended to resolve specific competition issues. For instance, the regulator could mandate data sharing protocols or require a company to ensure interoperability with third-party services.
Crucially, the legislation introduces substantial enforcement powers. Companies found to be in breach of the SMS requirements face significant financial penalties, potentially reaching up to 10% of their global annual turnover. The law also establishes a new criminal offence for providing false or misleading information to the CMA, ensuring compliance is taken seriously at the executive level.
Addressing Consumer Protection and Subscriptions
Beyond regulating the market power of tech behemoths, the DMCC Act includes significant new safeguards for consumers, particularly concerning online subscription services. This aspect of the law is designed to combat “subscription traps”—situations where companies make it difficult for users to cancel recurring payments.
Under the new rules:
- Companies must provide clear and timely pre-contract information about subscription terms and costs.
- The renewal process must be transparent, including mandatory reminder notices before automatic renewal.
- Crucially, businesses must ensure that the cancellation process is straightforward and easily accessible, mirroring the ease with which consumers signed up.
If businesses fail to comply with these consumer protection measures, the CMA, working with Trading Standards, will have enhanced powers to intervene and seek redress for affected individuals.
Global Context and Future Implications
The UK’s strategy aligns with a growing international movement, including the European Union’s Digital Markets Act (DMA) and similar ongoing efforts in the US, to rein in the dominance of major tech players. However, the UK has tailored its approach, focusing on specific UK-relevant digital activities and providing the DMU flexibility to define tailored rules rather than universally applying a blanket set of regulations.
The successful implementation of the DMCC Act will be a litmus test for the UK’s ability to regulate the rapidly evolving digital landscape. Supporters anticipate that by ensuring a level playing field, the law will unlock billions in investment for smaller British tech firms and ultimately lead to lower prices and better services for consumers. The focus now shifts to the CMA, which faces the complex task of developing and applying the practical SMS designations and enforceable conduct requirements against some of the world’s most sophisticated legal and technological entities.
