UK Crackdown on Digital Markets – What You Need to Know

UK Crackdown on Digital Markets – What You Need to Know

The Digital Markets, Competition and Consumers Bill (Bill) is catching up with the rapid digitisation of markets. It introduces new rules of conduct and regulatory powers that you should be aware of if you sell services or digital goods on the internet.

Key points include:

• The Bill targets businesses that employ or host unfair practices such as subscription traps, pressure selling, fake reviews or similar tactics.

• The Competition and Markets Authority (CMA) may impose conduct requirements on businesses with a 'Strategic Market Status' to protect customers and promote competition.

• The CMA will have the power to impose penalties and sanctions for a wide range of breaches directly, without having to go through the courts.

A New Bill for Digital Markets

The UK government announced the Digital Markets, Competition and Consumers Bill on April 25th, 2023. The Bill is expected to come into force in 2024. The new measures aim to foster the growth and innovation of the UK economy in the interest of both businesses and consumers. While the digitisation of UK markets has brought about efficiencies and growth, it has also posed challenges that impact consumer choice and competition; and when competition issues arise in the digital markets, they can quickly have a damaging impact on the entire economy. The Bill aims to address these issues.

The Bill may apply to you if you sell services or digital goods on the internet and if your business:

• is based in the UK;

• sells to a significant number of users in the UK; or

• engages in digital activities likely to have an immediate, substantial, and foreseeable impact on trade in the UK.

The rules of online trading are changing

The Bill will introduce new measures to crack down on unfair trading practices, including:

• Hosting fake reviews, requiring businesses to implement checks to verify the authenticity of reviews.

• Employing subscription traps, where consumers are deceived into signing up for subscriptions to goods or services. The Bill will also require businesses to provide consumers with reminders when free trials are ending.

• Engaging in pressure selling, misleading consumers about limited availability, popularity or usual selling price of a product.

• Restricting the choice of goods that can be used with specific devices sold by the trader.

• Employing other unfair practices that mislead or pressure consumers or contravene professional diligence requirements.

Enhanced Enforcement Powers for the CMA

The Bill will grant the CMA the ability to take direct action when enforcing consumer rights, bypassing the need to involve the courts. This will enable the CMA to act more swiftly in protecting consumers.

The CMA will have the authority to determine when consumer law has been violated and impose penalties for a wide range of breaches, including:

• Fines of up to 10% of annual global turnover for businesses or up to £300,000 for individuals for violating consumer protection laws.

• Fines of up to 5% of annual global turnover or £150,000 for individuals for breaching CMA undertakings (additional daily fines for continued non-compliance may also apply).

Regulating Tech Giants

The Digital Markets Unit (DMU) of the CMA will be empowered to impose tailored requirements on businesses with "Strategic Market Status." This aims to prevent tech giants from leveraging their size to dominate and impede the progress of digital markets. A business may be considered to have "Strategic Market Status" if it holds significant and entrenched market power in at least one digital activity, granting it a strategic position.

The DMU will be able to instruct tech giants on how they should conduct themselves in relation to relevant digital activities, such as offering customers more choice and transparency. Failure to comply with these rules may result in fines of up to 10% of their global turnover.

Strengthened Competition Law Investigations

The Bill will provide the CMA with enhanced investigative and enforcement powers, enabling it to take action more swiftly and effectively in competition law investigations and to halt anti-competitive practices.

The Bill will also update merger and fine thresholds, making it easier for the CMA to oppose mergers that harm consumers and businesses. We have already witnessed the implementation of these changes to some extent, in the recent decision by the CMA to prohibit the merger between Microsoft and Activision.

Get in touch

If you have any questions regarding the information above or if you would like further details, please feel free to contact Matthew Holman, who is a Principal and Head of our Commercial, Technology and Data Team.