Digital Markets, Competition and Consumer Bill

By Tim Sadka & Elizabeth Howlett

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The Digital Markets, Competition and Consumer Bill (the Bill) is currently being considered for royal assent. When in effect, the Bill is set to enhance regulations of competition within digital markets, provide for amendment to the Competition Act 1998, in addition to the Enterprise Act 2002, and also contain provisions in relation to consumer rights. Due to come into force during the second half of 2024, the reforms are set to increase consumer protection, whilst also equipping regulatory bodies with greater authority to investigate companies which fall in breach of UK competition legislation.

Most notably, the draft Bill, which was initially introduced in 2023, broadened the scope of power afforded to the Competition and Markets Authority (CMA). Companies which operate digitally must be mindful with regards to the changes that the Bill is set to impose, as the introduction of a Digital Markets Unit (DMU) means that regulations can be imposed on certain companies without any prior evidence of a breach of competition laws. Companies which fall within the scope of the DMU will be those which have a UK turnover of at least £1bn or a global turnover of £25bn, with digital activities linked to the UK. The purpose of the DMU is to identify and address digital competition issues, with a power to intercept and intervene, should it be necessary. This is known as pro-competitive interventions. For smaller businesses, it will benefit those most who rely on reaching their target-consumers, through the use of companies which specialise in digital technology.

Kevin Hollinrake, Business and Trade Minister, highlighted that ‘smartphones and online shopping have profoundly changed the landscape for businesses, consumers and the foundations of a modern thriving economy, which now lie in strong consumer choice, confidence and competition’.

Schedule 14 of the Bill focuses on consumer protections and enhances the authority to enforce the Consumer Rights Act 2015, the Consumer Credit Act 1974, and also Consumer Protection from Unfair Trading Regulations 2008. The new regulations proposed by the Bill once implemented will grant the CMA authority to enforce consumer legislation directly, as opposed to the current indirect approach which requires the threat of court application submissions. Potential sanctions, compensation and the issuing of infringement notices can act as a costly deterrent, so it is certainly worthwhile for companies to ensure compliance with the Bill, or no doubt end up facing the consequences later down the line. In anticipation of the Bill’s introduction, it is advised that companies review their terms and conditions, particularly relating to consumer subscriptions, and implement training where necessary to ensure staff are fully up to speed and can thereby manage risk. Consumer rights breaches could result in up to £300,000 fines for individuals or up to 10% of the annual turnover (globally) for companies.  Areas which have been scrutinised by the Bill already include fake online reviews, false green claims and subscription traps; all of which perpetuate the success of a company at the expense of misleading their consumers. Such strategies put in place are set to ‘crack down on rip-offs, protect consumer-cash online and boost competition in digital markets’ according to the Government website.

Investigative powers are also set to be boosted, in a bid to expand upon existing authority to identify corruption. Failure to comply may result in significantly increased fines, meaning the CMA will be able to issue fines of up to 5% of turnover for a breach of any existing orders and undertakings. The CMA will also be granted the authority to obtain necessary information from company premises or remotely –the latter without the requirement for a warrant. In addition to financial repercussions, reputational damage is also a possibility, as customers and employees of third-party competitors may be asked to respond to questioning in relation to ongoing investigations.

Though only time will tell just how effective the Bill is once implemented, it is reasonable to believe that the intended changes that are anticipated could likely boost confidence in a rapidly evolving digital market which is increasingly competitive. The CMA having the power to directly enforce consumer law as opposed to making lengthy and time-consuming court applications will likely instil a greater sense of confidence amongst consumers and also hopefully provide more efficient and effective resolutions. It is evident that swift action is necessary to tackle issues of competition in today’s digital market; providing authorities, such as the CMA, with the tools to investigate and directly enforce these rules which are set to protect consumers will certainly aid in facilitating the effectiveness of the Bill once it takes effect. Once the tools granted to authorities by the Bill have been fully implemented and embraced, that is when we will likely see how effective it proves to be.

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