Digital Markets, Competition and Consumers Act 2024

Policy background

Digital Markets

3. Digital markets are markets where businesses develop and apply new technologies for the benefit of other businesses and consumers, or create brand new products and services using digital capabilities, connecting groups of users in new and innovative ways. This includes services such as social media, mobile applications and online shopping.1 Businesses operating in digital markets make a very significant contribution to the UK economy.2 However, it is the Government’s view that the unprecedented market power, in relation to certain digital activities, of a small number of businesses, is holding back innovation and growth. Existing competition and consumer laws are not designed to address the unique barriers to competition in digital markets. In response, this Act establishes a new regime that is designed to boost competition in digital markets.

Expert advice and Market Studies

4. In 2018, the Government established a Digital Competition Expert Panel (the "Panel") to examine competition in digital markets. The Panel issued its final report in March 2019, which recommended the establishment of a digital markets unit equipped with tools and frameworks to support greater competition in digital markets.3 In March 2020, the Government announced it would accept all six of the report’s strategic recommendations4 and committed to establishing a cross-regulator Digital Markets Taskforce to provide advice on the design and implementation of a competition regime for digital markets. In December 2020, the Digital Markets Taskforce recommended that the Government set up a digital markets unit with powers to designate an undertaking with Strategic Market Status, and that designated undertakings be subject to additional merger control requirements.5
5. The CMA agreed with the Panel’s recommendation to launch a market study into online platforms and digital advertising. This Market Study was launched in July 2019 and the final report was published in July 2020.6 The report identified several characteristics of digital markets which can cause them to tip in favour of a small number of firms, including network effects and economies of scale which can act as a barrier to market entry, unequal access to user data, platforms’ control over default settings and a lack of transparency around complex decision-making algorithms. In November 2020, the Government responded to the Market Study and committed to establishing and resourcing a new Digital Markets Unit within the CMA from April 2021 to oversee a regime designed to increase competition in digital markets.7
6. The CMA launched a second Market Study in June 2021 into mobile ecosystems in the UK. Its report found that Apple and Google have "substantial and entrenched market power" in mobile operating systems.8 The report emphasised the CMA’s support for the Government’s proposals to give it new powers to address competition issues in digital markets. In June 2022, the CMA announced a Market Investigation into mobile browsers and cloud gaming.

Digital Markets - public consultation

7. The Government set out its plans for the regime in detail in its public consultation which ran from July to October 2021.9 The consultation received 105 written submissions, with the majority of respondents signalling strong support for the proposals and a desire for them to be delivered quickly. In May 2022, the Government published its response to the consultation.10 The consultation response detailed the final policy positions for the new regime and how they had been developed in line with evidence received during consultation. It confirmed the Government’s intention to enshrine the policies in law. The Government’s policy is to:
8. Empower the CMA to designate undertakings which are very powerful in particular digital activities, with Strategic Market Status in relation to those digital activities.
9. Ensure that designated undertakings comply with rules (called conduct requirements) on how they treat consumers and other businesses in relation to the activities in which they have been designated. These conduct requirements could prevent a firm ranking its own products more highly in a search result where that harms consumers, for example.
   • Give the CMA powers to address proactively the root causes of competition issues in digital markets. It could intervene to impose interoperability obligations on designated undertakings to help new competitors enter the market, for example.
   • Require designated undertakings to be more transparent about mergers which pose risks to competition.
   • Allow the CMA to enforce obligations on designated undertakings and impose penalties including fines of up to 10 per cent of a firm’s global turnover for breaches.
   • Empower the CMA to resolve payment-related breaches of conduct requirements to deal on fair and reasonable terms through a backstop enforcement tool called the 'Final Offer Mechanism'.

Competition and Consumer Protection Law

10. Effective cross-economy competition and strong consumer protection are critical features of well-functioning markets. Competition stimulates innovation across the economy and helps to drive productivity growth, ultimately raising living standards. Strong consumer rights play an essential part in fair, free and competitive markets by providing consumers with the information and confidence to choose how and where to spend their money.
11. However, recent evidence suggests that UK competition and consumer law is failing to keep pace with market developments. Overall levels of competition may have declined since the legislative framework was last overhauled in 1998, and further since the 2008 financial crisis.11

Establishing priorities for reform

12. In April 2018, the Government published the "Modernising Consumer Markets" Green Paper, which set out its ambition to ensure that modern consumer markets work for all and included a number of proposals aimed at safeguarding consumer rights, particularly in view of new technology and new business models, whilst strengthening competition.
13. In August 2018, the Secretary of State for Business, Energy and Industrial Strategy asked Lord Tyrie, then Chairman of the CMA, to make proposals on legislative and institutional reforms to safeguard the interests of consumers and to maintain and improve public confidence in markets. Lord Tyrie’s response, published in February 2019, indicated that there was scope for strengthening and updating the UK’s competition and consumer law framework, particularly in light of the economic and technological developments of recent years.12 Lord Tyrie presented a series of proposals intended to focus the work of the CMA more directly on protecting the interests of the consumer, enabling the CMA to intervene earlier and more robustly to tackle consumer detriment and to penalise and deter wrongdoing when it occurs. Lord Tyrie also recommended a suite of measures to make the CMA’s work generally more agile and efficient, including a reconsideration of all aspects of the competition regime, complemented by a statutory duty of expedition.
14. In February 2020, the Government commissioned the CMA to produce a regular state of competition report to raise the collective understanding of the level of, and the trends in, competition across the UK economy.13 The CMA published their first report in November 2020, concluding that competition may have weakened over the previous two decades.14 Their report called for regulators and government to remain vigilant in protecting and promoting competition, especially as the UK prepared to emerge from the severe economic impact of the coronavirus pandemic. The CMA published their second state of competition report in April 2022, finding that market concentration remained higher than it was before the financial crisis of 2008, average markups had been increasing, and the biggest firms had been able to maintain their leading positions for longer.15

Reforming Competition and Consumer policy - public consultation

15. The Government set out its plans for reforming competition and consumer policy in detail in its public consultation which ran from July to October 2021.16 The consultation covered proposals relating to promoting competition, updating consumer rights and strengthening the enforcement of consumer law.
16. In April 2022, the Government published its response to the consultation.17 The key policy positions established were to:
    • Introduce a rebalanced merger control system, stronger enforcement against anti-competitive conduct and a series of enhancements to the CMA’s investigative and enforcement powers.
    • Introduce new penalty powers for the civil courts for consumer law breaches and out-of-court (administrative) powers for the CMA to determine and sanction breaches of certain consumer laws.
    • Prevent the restriction of consumer choice in relation to subscription contracts.
    • Strengthen the quality of alternative dispute resolution arrangements.
    • Protect consumer payments to Christmas saving clubs and other similar saving schemes.

17. The Government set out plans for further consumer reforms in a public consultation: 'Smarter Regulation: Consultation on Improving Price Transparency and Product Information for Consumers’ which ran from September to October 2023. 18 In January 2024, the Government published a response setting out its intention to legislate to tackle drip pricing and fake reviews, and to extend powers to take down harmful digital content to all public enforcers of consumer law. 19

Background to road fuel market study

18. In 2021 to 2022 the price of both petrol and diesel went up by 60 pence per litre, following the Russian invasion of Ukraine. Against this backdrop, the then Secretary of State for the Department for Business, Energy and Industrial Strategy asked the Competition and Markets Authority (CMA) to carry out an urgent review to consider the health and competition in the road fuel market, geographical factors, and further steps government could take to strengthen competition or increase price transparency for consumers.
19. The CMA reported their urgent review in July 2022 and found that while the retail road fuel market appeared relatively competitive, there were local variations in the price of road fuel, including pricing disparities between urban and rural areas. 20 Following the urgent review, the CMA undertook a 12-month market study to explore whether the retail market has adversely affected consumer interests, and to assess how far weakness in competition might be driving higher retail prices in certain parts of the UK.
20. The CMA published its final report of its market study on 3 July 2023 and found three areas of concern. 21
21. At a national level: competition between fuel retailers has weakened since 2019, due to a decision by the historic price-leaders to take a less aggressive approach to pricing by significantly increasing their internal margins for fuel. This coupled with other retailers maintaining largely passive pricing policies, pricing by reference to local competitors rather than responding promptly to cost movement and/or trying to win market share. As a result, consumers are paying generally higher prices than would otherwise have been the case, with estimated financial impact of an increased average supermarket fuel margin resulting in a combined additional cost of £900 million for consumers of the four supermarket retailers in 2022 alone. In addition, during 2023, competition has been significantly weaker for diesel than petrol.
22. At a local level: the national level weakening of competition appears to have affected pricing in different parts of the UK in a similar way. However, longstanding patterns of variable pricing between different local areas remain, meaning that consumers in some areas can pay significantly more for fuel than in others.
23. At motorway service areas (MSAs): Competition remains weak between MSA petrol filling stations (PFSs), meaning that consumers without access to fuel cards pay significantly more to buy fuel on the motorway than off it.
24. Given the findings in the CMA market study on the health of competition the CMA recommended that the Government introduce a statutory open data scheme for prices in the retail road fuel section. The CMA also recommended that government introduce an ongoing road fuels monitoring function to be housed within an appropriate public body and provide it with information gathering powers to monitor developments in the market, both nationally and locally, as we move through the net zero transition, provide ongoing scrutiny of prices, and consider whether further action may be needed to protect consumers.
25. Sections 311 to 318 provide the CMA with information gathering powers to establish a road fuels monitoring function. This will enable the CMA to request specified information from undertakings involved in the distribution, supply or retail of petrol and diesel. The CMA will use the information obtained to provide an ongoing assessment of competition in the retail road fuel market to government and provide advice on the need for further intervention to facilitate competition.

Background to Foreign State Intervention Regime

26. Under the Enterprise Act 2002, the Secretary of State has a quasi-judicial role in considering whether mergers raise media public interest concerns. The Secretary of State can intervene in a merger where they believe there may be a public interest concern.
27. A debate was held in the House of Commons on 30 January 2024 about foreign state ownership of UK news media organisations. During that debate, concerns were raised by Members of Parliament about the risks that foreign state ownership of, or control or influence over, the UK’s newspapers and news magazines could pose to democracy and free speech. Parliamentarians across both Houses continued to raise such concerns in the weeks following the debate in the Commons.
28. On 13 March 2024, the Government responded to these concerns by announcing that it would amend the media merger regime to create a new foreign state intervention regime for newspapers and periodic news magazines.
29. Under the new regime, the Secretary of State will be obliged to give the CMA a foreign state intervention notice where the Secretary of State has reasonable grounds to believe that a merger involving a UK newspaper or news magazine has given, or would give, a foreign power (or a person associated with a foreign power) control or influence over the policy of a person carrying on the newspaper enterprise. The CMA will be obliged to investigate and provide a report to the Secretary of State on the merger or potential merger. If the CMA concludes the merger has resulted or would result in a foreign state newspaper merger situation, the Secretary of State will be required to make an order to block or unwind the merger.