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Digital Markets, Competition and Consumers Act 2024

Contents

Commentary on provisions of Act

Part 1: Digital Markets

Chapter 1: Overview

Section 1: Overview

  1. Section 1 sets out the subject matter of Part 1 of the Act, being the conferral of functions on the Competition and Markets Authority (CMA) in relation to the regulation of competition in digital markets, and related provision as described.

Chapter 2: Strategic Market Status

Power to designate undertaking as having SMS

Section 2: Designation of undertaking

  1. This section gives the CMA the power to designate undertakings (as defined in section 118) as having strategic market status ("SMS") in respect of a digital activity. Only those undertakings designated with SMS will be subject to the digital markets regime.
  2. Subsection (1) provides that the CMA may designate an undertaking as having SMS in respect of a digital activity carried out by the undertaking, where the CMA considers that the criteria listed in paragraphs (a) and (b) are met. These criteria are that the digital activity is linked to the UK (as set out in section 4) and that the undertaking meets the SMS conditions in respect of the digital activity.
  3. Subsection (2) sets out the SMS conditions. The conditions are that the undertaking has, in respect of the digital activity, both substantial and entrenched market power (see section 5) and a position of strategic significance (see section 6).
  4. Subsection (3) provides that the CMA’s power to designate is subject to the turnover condition (in section 7).
  5. Under subsection (4), the CMA may only make a designation after carrying out an SMS investigation in accordance with Chapter 2.

Section 3: Digital activities

  1. This section sets out what constitutes a digital activity for the purposes of Part 1 of the Act.
  2. Under subsection (1), a digital activity is the provision of a service by means of the internet, the provision of digital content, or any activity which is being carried out for the purposes of providing an internet service or digital content. Digital content is defined in section 330.
  3. Under subsection (1), the provision of a service by means of the internet and the provision of digital content include services and digital content that are purchased and those that are delivered free of charge to users. Examples are social media platforms and e-commerce platforms. Paragraph (b) of subsection (1) does not restrict how digital content should be provided, meaning that the provision of digital content would include digital content, such as software, which is pre-installed on a device.
  4. Subsection (2) sets out what "by means of the internet" includes for the purposes of section 3. It includes services provided by the internet as commonly understood, as well as services provided by a combination of the internet and electronic communication services as defined in section 32(2) of the Communications Act 2003. For example, a service which is partly made available over the internet and partly by routing through the public switched telephone network would count as an internet service. This includes services accessed by a mobile phone application as well as those accessed via an internet web browser.
  5. Subsection (3) gives the CMA the power to treat multiple digital activities carried out by a single undertaking as a single digital activity. For different activities to be grouped together, they must either:
    • Have substantially the same or similar purposes; for example, a social media provider offering a number of internet services under different brands with a common function, allowing users, such as advertisers and publishers, to interact and communicate with each other, or
    • Be able to be carried out together to fulfil a specific purpose; for example, services and products that are part of the same supply chain, such as services selling advertisements and the provision of an advertising platform.
  1. Subsection (4) sets out that where the CMA is required to give or publish a notice or other document under Part 1 of the Act, it may describe the digital activity by reference to the nature of that activity, brand names, or a combination of these.

Section 4: Link to the United Kingdom

  1. This section sets out the ways in which a digital activity could be linked to the UK for the purposes of designation under section 2(1). At least one of the three criteria set out in paragraphs (a), (b) and (c) must be met.
  2. Paragraph (a) refers to the activity having a significant number of UK users ("UK user" being defined in section 118). For example, provision of a search engine service, with some operations physically located elsewhere, could be linked to the UK if the activity had a significant number of UK users.
  3. Paragraph (b) refers to where the undertaking that carries out the digital activity carries on business in the UK in relation to the digital activity.
  4. Paragraph (c) refers to circumstances in which the digital activity, or the way in which the undertaking carries on the digital activity, is likely to have an immediate, substantial and foreseeable effect on trade in the UK.

Section 5: Substantial and entrenched market power

  1. This section requires the CMA to look at a period of at least the next five years when assessing whether an undertaking has substantial and entrenched market power in respect of a digital activity. The underlying policy intent is that the CMA should be satisfied that the undertaking’s power and influence in the digital activity is neither small nor transient, based on their consideration of competitive conditions. However, the CMA is not required to demonstrate that the undertaking’s market power will definitely endure for a minimum period of five years. The intent is also that the CMA should not be prevented from considering past and present market conditions as part of this forward-looking assessment. This section does not require the CMA to undertake a formal market definition exercise as part of an SMS investigation.
  2. When carrying out the forward-looking assessment, the CMA must take into account expected or foreseeable developments if the CMA did not designate the undertaking as having SMS in respect of the digital activity to which the investigation relates. For instance, where an undertaking is already designated in respect of a digital activity, the CMA must consider what might happen if that designation and existing regulation relating to that designation (such as conduct requirements, described in Chapter 3 of this Part, or pro-competition interventions, described in Chapter 4 of this Part) were to be revoked; for example, a persistence in the undertaking’s power in respect of the digital activity following revocation. Where relevant, this would include consideration of expected or foreseeable future developments resulting from other types of regulation that were not dependent on the designation; for example, conduct requirements relating to a different digital activity, or regulation under a different regime.
  3. The CMA must consider whether the expected or foreseeable developments it has identified are capable of affecting the undertaking’s conduct in carrying on the digital activity.

Section 6: Position of strategic significance

  1. This section sets out when an undertaking has a position of strategic significance.
  2. The section sets out four conditions, at least one of which must be met in order for an undertaking to have a position of strategic significance.
  3. In paragraph (a), having a position of significant size could refer to the number of users in relation to the relevant digital activity. A position of significant size or scale may also depend on the undertaking’s size relative to the digital activity. For example, if the total number of potential users of a digital activity is small (because the activity is relevant to businesses in a particular sector only) but the undertaking captures a large proportion of those users, it could be considered that the undertaking has achieved a position of significant scale in respect of the activity.
  4. Paragraph (b) is intended to cover scenarios where the digital activity as carried out by the undertaking plays an important role in the day-to-day business or critical operations of a significant number of other undertakings which would be impacted by the undertaking’s conduct of the digital activity. For example, this condition could capture a situation where large numbers of businesses advertise on a search engine to reach their customers or use particular software to carry on their activity.
  5. Paragraph (c) is intended to cover circumstances in which the undertaking can use its position in the digital activity to leverage or expand into a range of other activities. For example, an undertaking with substantial and entrenched market power in the sale of operating systems may be able to use this power to bundle other services, such as its own online communication service, with its operating system, making it harder for users to switch.
  6. Paragraph (d) is intended to cover scenarios where an undertaking’s position enables it to determine or substantially influence how other undertakings operate (that is to say, to set the rules of the game). For example, if a search engine requires its customers to use certain mobile friendly formats to benefit from advantageous distribution, that may have important effects on how mobile webpages are designed across the internet.

Section 7: The turnover condition

  1. This section is about the turnover condition.
  2. Subsection (1) sets out that the turnover condition must be met for the CMA to be able to designate an undertaking as having SMS in respect of a digital activity.
  3. Subsection (2) sets out that the turnover condition is met in relation to an undertaking if the CMA estimates that the undertaking’s UK turnover in the relevant period exceeds £1 billion or that its global turnover in the relevant period exceeds £25 billion. Only one of these thresholds needs to be met for the turnover condition to be met. If the undertaking is part of a group (see section 117), then the turnover of the whole group should be considered. For example, if the undertaking is part of a larger conglomerate, the CMA must estimate the turnover of the larger conglomerate. Where the undertaking or group engages in non-digital activities, the CMA will have to take the turnover from those activities into account (see paragraphs 34 and 35 below).
  4. Subsection (3) gives the Secretary of State the power to amend the turnover thresholds in subsection (2). Subsection (4) provides that regulations made under subsection (3) are subject to the draft affirmative procedure (see section 337(3)).
  5. Subsection (5) requires the CMA to keep the thresholds under review and, from time to time, advise the Secretary of State as to whether they are still appropriate.
  6. Subsection (6) makes provision about the meaning of the "relevant period" and "relevant turnover". Paragraph (a) sets out that the "relevant period" is either the most recent period of 12 months in respect of which the CMA considers it can estimate the undertaking or group’s relevant turnover, or the period of 12 months immediately before that if the CMA estimates that the undertaking’s or group’s relevant turnover was higher in that earlier period. Paragraph (b) sets out that the "relevant turnover" of the undertaking or group is either the UK turnover or the global turnover of the undertaking or group.

Section 8: Turnover of an undertaking

  1. This section makes provision about the value of an undertaking’s or a group’s UK or global turnover in the relevant period for the purposes of the turnover condition.
  2. Subsection (2) sets out that the total value of the undertaking’s or the group’s global turnover in the relevant period is the total value of turnover arising in connection with any of its activities.
  3. Subsection (3) sets out that the total value of the undertaking’s or the group’s UK turnover in the relevant period is the total value of turnover arising in connection with any of its activities and relating to UK users or UK customers (as defined in section 118).
  4. Subsection (4) gives the Secretary of State the power to make regulations providing further detail about how the total value of an undertaking’s or a group’s UK turnover or global turnover is to be estimated for the purposes of the turnover condition. Under subsection (5)(b), such regulations may confer on the CMA the power to determine certain matters, including which amounts are to be regarded as comprising the turnover of an undertaking or a group. Subsection (6) provides that regulations made under subsection (4) are subject to the negative procedure.

Procedure

Section 9: Initial SMS investigations

  1. This section concerns initial SMS investigations.
  2. Subsection (1) sets out that the CMA may begin an initial SMS investigation where it has reasonable grounds to consider that it may be able to designate an undertaking in accordance with section 2.
  3. Subsection (2) sets out that an initial SMS investigation is an investigation into whether or not to designate an undertaking in respect of a digital activity in respect of which it is not already designated. This is subject to section 10(4) in relation to further SMS investigations. Where the CMA considers that the digital activity is similar or connected to a digital activity in respect of which the undertaking is already designated, it may instead begin a further SMS investigation.
  4. Subsection (3) clarifies that the CMA has the power to open a designation investigation in respect of a digital activity even if it has previously decided not to designate the undertaking as having SMS in respect of that particular digital activity. This would include circumstances in which a previous designation has been revoked, or where a previous decision had been taken not to designate the undertaking in respect of that digital activity.

Section 10: Further SMS investigations

  1. This section concerns further SMS investigations. Further SMS investigations relate to existing SMS designations in respect of a digital activity.
  2. Subsection (1) sets out that the CMA may begin a further SMS investigation in relation to a designation at any time during the designation period.
  3. Subsection (2) sets out that the CMA must begin a further SMS investigation no later than nine months before the end of the 5-year designation period if it is not already carrying out a further investigation under subsection (1). This section will ensure that the CMA reviews all designations before the end of the 5-year designation period; the CMA may also exercise its discretion to begin a further SMS investigation at an earlier stage (see subsection (1)).
  4. Subsection (3) sets out the various matters with which further investigations are concerned. A further SMS investigation is an investigation into whether to revoke a designation or to designate an undertaking again in respect of the same digital activity. It is also concerned with whether to make provision under section 17 in relation to existing obligations.
  5. Subsection (4) sets out that a further investigation may also concern whether or not to designate an undertaking in respect of a digital activity that the CMA considers to be similar or connected to the relevant digital activity (as defined in section 118). This aspect of the investigation would be in addition to the matters listed in subsection (3). Designation in respect of a similar or connected digital activity could be instead of or in addition to the relevant digital activity.

Section 11: Procedure relating to SMS investigations

  1. This section sets out how the CMA should carry out an SMS investigation. Under section 118, an SMS investigation means an initial SMS investigation and a further SMS investigation. This section therefore applies to both types of SMS investigation.
  2. Subsection (1) requires the CMA, when beginning an investigation, to give an SMS investigation notice to the undertaking subject to the investigation.
  3. Subsection (2) sets out what the SMS investigation notice must cover.
  4. Subsection (3) sets out what the statement of the purpose and scope of the investigation must include. The investigation may relate to more than one digital activity.
  5. Subsection (4) requires the CMA to give the undertaking a revised version of the SMS investigation notice if it changes its view of the purpose and scope of the investigation.
  6. Subsection (5) sets out that as soon as reasonably practicable after giving an SMS investigation notice, or a revised version of the notice, the CMA must publish the notice and give a copy of the notice to the Financial Conduct Authority, the Office of Communications, the Information Commissioner, the Bank of England and the Prudential Regulation Authority.

Section 12: Closing an initial SMS investigation without a decision

  1. This section is about the closure of an initial SMS investigation without a decision.
  2. Subsection (1) sets out that the CMA may close an initial SMS investigation before and without reaching a final view on whether the undertaking should be designated in respect of a digital activity. This could, for example, cover a situation where the CMA has to prioritise other matters.
  3. Subsections (2) to (4) set out that if the CMA decides to close an initial SMS investigation, it must give the undertaking under investigation notice of the closure (including reasons) and also, as soon as reasonably practicable, publish the notice.

Section 13: Consultation on proposed decision

  1. This section requires the CMA to consult on any decision that it is considering making as a result of an SMS investigation.
  2. Subsection (1) requires the CMA to carry out a public consultation and bring it to the attention of such persons as it considers appropriate.
  3. Subsection (2) sets out that consultation under subsection (1) may be carried out at the same time as consultation under section 24 on proposed conduct requirements.
  4. Section 113 sets out further procedural requirements relating to consultation under Part 1.

Section 14: Outcome of SMS investigations

  1. This section sets out what the CMA must do at the end of an SMS investigation.
  2. Subsection (1) sets out the decisions that the CMA must make. In the case of an initial investigation (save where it has been closed under section 12), the CMA must decide whether to designate the undertaking with SMS in respect of a digital activity to which the investigation relates. In the case of a further SMS investigation, the CMA must make a decision on the matters set out in section 10(3) and, where relevant, section 10(4).
  3. Subsection (2) requires the CMA to give the undertaking a notice of its decisions on or before the last day of the SMS investigation period, and sets out that the period for the SMS investigation is nine months, beginning with the day on which the SMS investigation notice is given. Subsection (3) provides that if the SMS investigation notice is revised under section 11, the giving of a revised notice does not change the day on which the SMS investigation period begins. Subsection (4) states that the details of what an SMS decision notice should contain are set out in sections 15 and 16.
  4. Subsection (5) sets out that, as soon as reasonably practicable after giving an SMS decision notice, the CMA must publish the notice.
  5. Subsection (6) sets out what happens if the CMA does not give an SMS decision notice on or before the last day of the SMS investigation period. In the case of an initial investigation, it is as if the CMA had decided not to designate the undertaking in respect of any digital activity to which the investigation related. In the case of a further investigation, it is as if the CMA had decided to revoke the existing designation with effect from the end of the SMS investigation period.

Section 15: Notice requirements: decisions about whether to designate

  1. This section sets out requirements for SMS decision notices in two situations. The first situation is where the CMA decides not to designate an undertaking following an initial SMS investigation. The second situation is where the CMA decides to designate an undertaking as having SMS in respect of a digital activity (whether or not the undertaking is already designated).
  2. Subsection (1) requires the CMA to give reasons in the SMS decision notice when it decides not to designate an undertaking following an initial SMS investigation.
  3. Where the CMA decides to designate an undertaking as having SMS in respect of a digital activity, subsection (3) sets out what the notice must include (for example, CMA’s reasons for its decisions). The policy intent is that the descriptions of the designated undertaking and digital activity do not need to be exhaustive.
  4. Subsection (4) gives the CMA the power to update its decision notice if it changes its view of the undertaking or of the digital activity, provided that the undertaking or digital activity remain substantially the same. For example, if a firm changes the brand name of a product in scope of the digital activity or undergoes a corporate restructuring but the activity or undertaking remains substantially the same.
  5. Under subsection (5), a revised notice does not affect either the day on which the SMS designation begins, nor anything done by the CMA under its powers under Part 1 in relation to the designated undertaking.
  6. Subsection (6) sets out that the CMA must publish the revised notice. This must be done reasonably practicable after giving the revised notice to the undertaking.

Section 16: Notice requirements: decisions to revoke a designation

  1. This section sets out requirements for SMS decision notices where the CMA decides to revoke an existing designation as a result of a further SMS investigation.
  2. Subsection (2) requires the notice to provide for the revocation to have effect. Revocation may have effect at the end of the day on which the notice is given (under section 16(2)(a)) or from an earlier date (under section 16(2)(b)); for example, where the undertaking has already ceased to engage in the relevant digital activity.
  3. Subsection (3) sets out what the SMS decision notice must include.

Section 17: Existing obligations

  1. An ‘existing obligation’ for the purposes of this section is defined in subsection (5), and it is any conduct requirement, enforcement order, final offer order, pro-competition order or commitment, applying at the time when a designation is revoked, or another designation is made, after a further SMS investigation.
  2. Subsections (1) and (2) grant the CMA a power to make transitional, transitory or saving provisions when revoking a designation, in respect of an existing obligation to manage the impact of revocation on the obligation’s beneficiaries, and in a way that appears fair and reasonable to the CMA. Subsection (2A) provides that the CMA's information gathering and enforcement powers in Chapters 6 and 7 in respect of designated undertakings also apply to undertakings still subject to obligations applied under section 17(1).
  3. Subsections (3) and (4) set out that the CMA may continue any existing obligation in respect of a new designation, may modify that obligation in respect of the new designated activity, and may make transitional, transitory or saving provision in respect of that obligation. The digital activity may be the same activity as under the previous designation, or a digital activity that the CMA considers to be similar or connected to the previously designated activity (see section 10(4)).
  4. Subsection (6) sets out that decisions related to existing obligations must be included in the SMS decision notice.

Section 18: Designation period

  1. This section sets out the length of the SMS designation period.
  2. Subsection (2) refers to the circumstances in which the designation period may be extended and in which a designation may be revoked before the end of the designation period.

Chapter 3: Conduct Requirements

Imposition of conduct requirements

Section 19: Power to impose conduct requirements

  1. Subsections (1) and (2) give the CMA power to impose conduct requirements on a designated undertaking and vary existing conduct requirements, by giving a notice to the undertaking. Subsection (4) requires that the notice then be published as soon as reasonably practicable.
  2. Subsection (3) explains that conduct requirements are requirements as to how a designated undertaking must behave in relation to the digital activity for which it has been designated.
  3. Subsection (5) provides that the CMA may only impose conduct requirements if it considers it proportionate to do so for the purposes of one or more of the following objectives: fair dealing; open choices; and trust and transparency, having regard to what those conduct requirements are intended to achieve.
  4. Subsections (6) to (8) set out what the objectives mean. The objectives are for the benefit of users and potential users of the relevant digital activity, meaning they will benefit both those who are interacting, and those who may interact in the future, with the relevant digital activity. The limbs within the fair dealing and trust and transparency objectives are not required to operate cumulatively.
  5. The fair dealing objective is about fair treatment of users and potential users, including the ability to interact with the designated undertaking on reasonable terms. Reasonable terms that could be required by a conduct requirement for the purposes of this objective may include, for example, providing a clear appeals process for when a designated undertaking terminates a user’s marketplace access.
  6. The open choices objective is about enabling free and easy choices for users and potential users between the services and digital content offered by the designated undertaking (both within and outside of the designated activity) and those offered by other businesses. An example of conduct that a requirement under this objective could prohibit is a designated undertaking restricting the functionalities of web browsers that compete with its own.
  7. The trust and transparency objective is about ensuring that those using or seeking to use the relevant digital activity have the information they need to understand how the activity is provided and that they are able to make informed decisions about their interactions with the designated undertaking.
  8. Subsection (9) provides that a conduct requirement must be of a type permitted by section 20.
  9. Subsection (10) provides that the CMA must consider the likely benefits for consumers when imposing conduct requirements. These consumer benefits could arise directly, as a result of the requirement itself, or they may arise indirectly (for example, by creating benefits for a business user of a designated activity, which it may pass on to consumers). Consumer benefits could also arise in the short term and/or longer term (for example, as a result of improved competition).
  10. Subsection (11) provides that the CMA has discretion over when conduct requirements come into force, and sets out when they cease to have effect.
  11. When considering the imposition of conduct requirements the CMA will assess the information and factors that it considers relevant in each case. This could include (but is not limited to) considerations such as the impacts on competition, burdens on designated undertakings and third parties, freedom of contract and property rights, the safety and privacy of users, and innovation in digital markets.

Section 20: Permitted types of conduct requirement

  1. This section sets out an exhaustive list of permitted types of conduct requirements. The CMA may only impose conduct requirements which fall within at least one of these permitted types.
  2. Subsection (2) refers to requirements for the purpose of obliging particular conduct and subsection (3) refers to requirements for the purpose of preventing particular conduct. The specific conduct requirements imposed by the CMA may be framed as either obligations or restrictions, no matter whether they fall within types of requirements under subsection (2) or (3). For example, the CMA may impose a conduct requirement under section 20(3)(g) that prevents a designated undertaking from using data in a particular way or alternatively it may require the undertaking to keep two types of data separate.
  3. Subsection (2), paragraph (a) refers to requirements to oblige the designated undertaking to trade on fair and reasonable terms. Unfair or unreasonable terms may include requiring users to sign up to terms that would unreasonably limit their legal or proprietary rights or imposing a price on users that is unfairly high or low. Trade is undefined, and in this context has a broad meaning that includes how the designated undertaking provides the relevant digital activity or otherwise interacts with users and potential users. This type of conduct requirement is relevant even if the designated undertaking is providing a service to users for free, if that is part of the undertaking’s trade (for example the service may be monetised so that the undertaking gets the benefit of advertising revenue).
  4. Subsection (2), paragraph (b) refers to requirements to oblige the designated undertaking to have effective processes for handling complaints and disputes. This may include requiring the designated undertaking to have an effective appeals process in place when terminating a user’s access to a marketplace.
  5. Subsection (2), paragraph (c) refers to requirements to oblige the designated undertaking to provide users of the relevant digital activity with clear, relevant, accurate and accessible information about the activity. This could include, for example, ensuring there is a clear application and review process in place for assessing whether an application will be included in a designated undertaking’s application store.
  6. Subsection (2), paragraph (d) refers to requirements to oblige the designated undertaking to give advance notice and explanations of changes in the way the designated undertaking proposes to carry out the relevant digital activity where those changes are likely to have a material impact on the users. For example, a designated undertaking could be required to ensure that undertakings that rely on its marketplace are made aware of, and receive an explanation of, upcoming changes to search algorithms which may have a significant impact on how users interact with the marketplace, and that they receive a reasonable period of notice ahead of the changes coming into effect.
  7. Subsection (2), paragraph (e) refers to requirements to oblige the designated undertaking to present to users engaging with the relevant digital activity any options or default settings. This should be done in a way that allows those users to make informed and effective decisions about those options or settings in their own best interests. For example, where the relevant digital activity is a search engine, a designated undertaking could be required to make clear to users that this search engine is the default setting on a particular device and that there are other search engines available, and to ensure that information provided to users on how to switch search engines is clear and understandable.
  8. Subsection (3), paragraph (a) refers to requirements to prevent the designated undertaking from applying terms, conditions or policies differently to different users or types of users. Discriminatory policies may include treating users more favourably if they purchase other products from the designated undertaking.
  9. Subsection (3), paragraph (b) refers to requirements to prevent the designated undertaking from self-preferencing, i.e. treating its own products or services more favourably than those offered by other businesses.
  10. Subsection (3), paragraph (c) refers to requirements to prevent the designated undertaking from carrying out activities in non-designated areas of its business in a way that is likely to materially enhance the undertaking’s market power or position of strategic significance in relation to the relevant digital activity. This would include requirements to prevent the designated undertaking from carrying out non-designated activities in a way that is likely to reinforce or embed an undertaking’s market power and/or position of strategic significance. This may include, for example, preventing an undertaking with strategic market status in video streaming from including a default setting in its search engine which automatically redirects users to the designated undertaking’s video streaming service.
  11. Subsection (3), paragraph (d) refers to requirements to prevent the designated undertaking from incentivising or requiring the use of its services or products alongside the use of the relevant service or digital content in the designated digital activity. This includes conduct which is sometimes referred to as ‘tying’ or ‘bundling’, and may include, for example, preventing the designated undertaking from refusing to extend warranty or after-sales services where bundled products are not purchased together. This permitted type also encompasses a situation where a designated undertaking requires or incentivises the use of one part of the designated activity (e.g. a payment service) alongside another part (e.g. an app store).
  12. Subsection (3), paragraph (e) refers to requirements to prevent the designated undertaking from restricting the ability of the relevant digital activity offered by the designated undertaking to interact with and communicate with products offered by other undertakings. A designated undertaking could be prevented from, for example, restricting the functionality of certain applications on the designated undertaking’s operating system for third party developers.
  13. Subsection (3), paragraph (f) refers to requirements to prevent the designated undertaking from restricting whether or how users can access and use the designated digital activity. These restrictions could range from a blanket refusal to grant access to a particular platform to more implicit restrictions such as making access to a platform conditional on unfair terms.
  14. Subsection (3), paragraph (g) refers to requirements to prevent the designated undertaking from using data unfairly. This may include, for example, prohibiting the provider of a designated digital marketplace from preventing a third party seller using that marketplace from accessing any data about how users engage with the third party’s services or products, or prohibiting the designated digital marketplace provider from using third party sellers’ data to develop competing products.
  15. Subsection (3), paragraph (h) refers to requirements to prevent the designated undertaking from restricting the ability of their users to use products provided by other undertakings. This may include, for example, a designated undertaking restricting the functionalities of web browsers that compete with its own when using the designated undertaking’s operating system.
  16. Subsection (4) contains a delegated power for the Secretary of State to amend by regulation the list of types of permitted conduct requirement and subsection (5) clarifies that amending the list would be subject to the draft affirmative procedure, see section 337(3).

Section 21: Content of notice imposing a conduct requirement

  1. This section sets out the information that the CMA is required to publish as part of the notice imposing or varying a conduct requirement.

Section 22: Revocation of conduct requirements

  1. This section provides that the CMA has power to revoke a conduct requirement by way of notice to the designated undertaking. The notice must then be published as soon as reasonably practicable.

Section 23: Transitional provision relating to conduct requirements etc

  1. Subsection (1) establishes that the CMA may impose transitional, transitory or saving provisions in relation to imposing, varying or revoking conduct requirements. An example would be if a conduct requirement was imposed as from a particular date, but some allowances were made in relation to certain aspects of that conduct requirement so that they had effect from a later date, to smooth the transition for the benefit of the designated undertaking. The CMA could undertake similar smoothing in relation to the ceasing of a conduct requirement, helping to ensure a smooth market transition for the undertaking and other market participants.
  2. Subsection (2) allows the CMA to exercise its digital markets functions in relation to potential and actual breaches of conduct requirements where the conduct requirements are no longer in place. This enables the CMA to investigate and enforce against historic breaches.

Section 24: Consultation in relation to a conduct requirement

  1. This section imposes a duty on the CMA to consult publicly before imposing, varying or revoking a conduct requirement. The consultation must be brought to the attention of such persons as the CMA considers appropriate.
  2. The CMA is only able to impose conduct requirements on a designated undertaking, i.e. after designation of that undertaking with SMS, but subsection (3) provides that the CMA is allowed to carry out a consultation on proposed conduct requirements before it has made a decision on designation. This makes it possible for the CMA to impose conduct requirements at the same time as issuing a decision on designation or very shortly afterwards.

Section 25: Duty to keep conduct requirements under review etc

  1. This section places a duty on the CMA to consider, on an ongoing basis, the effectiveness of any conduct requirements in place and how far the designated undertaking is complying with them. The CMA also needs to consider, on an ongoing basis, whether to impose, vary or revoke a conduct requirement, or whether it would be appropriate to take action against a breach of any conduct requirement.

Enforcement of conduct requirements

Section 26: Power to begin a conduct investigation

  1. This section provides when and how the CMA can begin an investigation into a suspected breach of a conduct requirement (a conduct investigation). The CMA can use its investigatory and enforcement powers where a suspected breach has taken place during a period of designation or while transitional provisions under section 17 are or have been in place.
  2. Subsection (1) outlines the threshold that the CMA must meet to open a conduct investigation. The CMA will decide on the basis of available evidence, such as that arising from complaints submitted by third parties or from the CMA’s market monitoring, whether it has reasonable grounds to suspect that an undertaking has breached a conduct requirement.
  3. Subsection (2) explains that a conduct investigation concerns both whether a breach of the conduct requirements has occurred and, if it has, what action the CMA should take in relation to the breach - for example, the imposition of penalties and/or enforcement orders.
  4. Subsections (3) and (4) outline the requirement for the CMA to give a notice to the undertaking about the investigation (a conduct investigation notice) and set out the content required for that notice. A conduct investigation notice marks the start of the investigation and of the statutory conduct investigation period, which is a period of six months (see section 30(2)), although it can be extended in certain circumstances (see section 104).
  5. Subsection (6) requires that the CMA must, as soon as reasonably practicable after giving a conduct investigation notice, publish a summary of the notice. This is to make those who may be interested aware of the ongoing investigation and could summarise the contents of the notice provided to the relevant designated undertaking, while allowing the CMA to redact some information for confidentiality purposes.

Section 27: Consideration of representations

  1. This section provides that the CMA is required to consider representations that the undertaking being investigated makes during the period specified in the investigation notice for representations (see section 26(4)(c)), before making a decision on whether the undertaking has breached conduct requirements.

Section 28: Closing a conduct investigation without making a finding

  1. This section provides that the CMA can choose to close a conduct investigation without making a decision about a breach, and sets out the process and timing for giving a notice to the undertaking about the closure and publishing a summary of the notice. This could summarise the contents of the notice provided to the relevant designated undertaking, while allowing the CMA to redact some information for confidentiality purposes.

Section 29: Countervailing benefits exemption

  1. Subsection (1) provides that the CMA must close a conduct investigation where representations made by the designated undertaking under investigation lead the CMA to consider that overall the conduct results in benefits for users that outweigh the negative consequences for competition. There are similarities with the approach of section 9 of the Competition Act 1998 (agreements exempt from the Chapter 1 prohibition on anti-competitive agreements) and the relevant customer benefit test under section 134(7) of the Enterprise Act 2002.
  2. Subsection (2) sets out the criteria for the exemption. The benefits need to be for the users or potential users of the digital activity to which the conduct investigation relates, and must outweigh any actual or potential harm to competition. Some examples of benefits may include protecting user security or privacy, lower prices, higher quality goods or services, or greater innovation in relation to goods or services. It must not be possible to realise the benefits without the conduct. This means the CMA must be satisfied that there is no other reasonable or practical way for the designated undertaking to achieve the same benefits with less anti-competitive effect. The conduct must also be proportionate to the benefits, and must not eliminate or prevent effective competition, which means that the outcome must be that which is the least disruptive to competition.
  3. Subsection (3) explains that where the exemption applies, the designated undertaking is to be treated as if the CMA had found that it had not breached the relevant conduct requirement.
  4. In deciding whether the exemption applies, the CMA can consider evidence submitted by the undertaking under investigation, evidence submitted by third parties and evidence it has gathered itself. However it is incumbent on the designated undertaking to make representations to the CMA to establish that the exemption applies.
    5. Example of a designated undertaking’s claim of countervailing benefits

    A conduct requirement is imposed on a designated undertaking requiring users to be allowed to make their own choice between internet browsers on their phone operating system (rather than using the undertaking’s own default browser). If the undertaking rolled out an update to its operating system which changed the default internet browser back to the undertaking’s own browser, the CMA could investigate the undertaking for breaching the conduct requirement. The undertaking could claim that the countervailing benefits exemption is engaged on the basis that the change benefits consumers because it is needed to apply critical security patches. The undertaking would need to demonstrate that the requirements of the countervailing benefits exemption are met, and the CMA would then close the conduct investigation in relation to the conduct requirement on default options.

Section 30: Notice of findings

  1. This section outlines that the CMA must give a notice setting out its findings to the undertaking under investigation on or before the last day of the six month investigation period, and publish the notice as soon as reasonably practicable after that point, subject to necessary redactions for confidentiality reasons. The CMA is not required to give a notice of findings if it has closed the investigation without making a finding under section 28, or it has accepted under section 36 a commitment from the designated undertaking in relation to the behaviour under investigation.

Section 31: Enforcement orders

  1. This section gives power to the CMA to impose obligations on an undertaking for the purpose of remedying a breach of the conduct requirements, by way of enforcement order. Enforcement orders are a key enforcement tool and sit alongside other means of enforcement set out in Chapter 7.
  2. Where a provision refers to an "enforcement order" it is referring to both standard enforcement orders and enforcement orders made on an interim basis (set out in section 32 - "interim enforcement orders") unless otherwise specified.
  3. Subsections (2) and (3) provide that enforcement orders may be varied, and may include transitional, transitory and saving provision.
  4. Subsection (4) specifies information that the enforcement order must contain. The enforcement order must specify the breach (or in the case of an interim enforcement order, suspected breach, see section 32(2)) to which it relates. Subsection (5) provides that the CMA may consult such persons as it considers appropriate before making or varying an order.
  5. Subsection (6) provides that where the CMA wishes to make an enforcement order (other than an interim enforcement order under section 32) it must do so as soon as is reasonably practicable after giving a notice of the conduct investigation findings under section 30. This is to make sure that the CMA acts swiftly where it wants to make an enforcement order after finding a breach of conduct requirements has occurred, while also providing it with flexibility to consult on a proposed order under subsection (5) where it considers that is appropriate.
  6. Subsection (7) requires that, for reasons of public transparency, as soon as reasonably practicable after giving an undertaking an enforcement order the CMA must publish the order.
  7. Subsection (8) enables the CMA to consent to an undertaking doing something that would otherwise constitute a breach of an enforcement order. This is to allow for flexibility in relation to particular circumstances. For example, an interim enforcement order may need to be introduced urgently to prevent immediate harm. The designated undertaking may be able to show that it should be able to continue particular aspects of its conduct which could breach the interim enforcement order, but which will not result in any harm.

Section 32: Interim enforcement orders

  1. This section gives power to the CMA to make enforcement orders on an interim basis, i.e. interim enforcement orders. Interim enforcement orders can only be made during the breach investigation and in the limited circumstances set out in subsection (1)(b).
  2. Subsections (2) to (8) explain the procedural requirements in relation to interim enforcement orders, including that the CMA must give an opportunity for the designated undertaking to make representations before introducing an interim enforcement order unless doing so would substantially reduce the effectiveness of the order. The procedural requirements outlined in section 31 also apply to interim enforcement orders unless otherwise specified.

Section 33: Duration of enforcement orders

  1. This section makes provision for the coming into force of enforcement orders and interim enforcement orders and the circumstances in which they cease to have effect.
  2. Subsection (4) allows the CMA to exercise its functions in relation to potential and actual breaches of enforcement orders where the enforcement orders are no longer in place. This enables the CMA to take action against historic breaches.

Section 34: Revocation of enforcement orders

  1. This section gives power to the CMA to revoke an enforcement order or interim enforcement order, and to make transitional, transitory and saving provision in relation to revocation. It sets out the procedural requirements on the CMA for giving notice to the undertaking to whom the order applies and for ensuring public transparency, as well as giving power to the CMA to consult on the revocation.

Section 35: Duty to keep enforcement orders under review

  1. This section provides that the CMA must keep the enforcement orders and interim enforcement orders it has made under review, including whether to vary or revoke them, and also the extent to which undertakings are complying with them and whether further enforcement action needs to be taken.
    2. Example of an enforcement order

    The CMA imposes a conduct requirement obliging the undertaking to make sure that users are not prevented from selecting alternative web browsers on the mobile operating system.

    The CMA suspects that the undertaking has breached the conduct requirement by making it difficult for smartphone users to change their web browser. The CMA consequently opens a conduct investigation.

    Having investigated and considered representations from the undertaking, the CMA concludes that the undertaking has breached the conduct requirement. The CMA gives the undertaking a notice containing its investigation findings setting out its decision and also makes an enforcement order and publishes a statement about the order. The order requires the undertaking to introduce effective and clear systems so users are able to choose freely between competing web browsers on the mobile operating system. The CMA then monitors the enforcement order and the undertaking’s compliance.

    Example of an enforcement order being varied

    The CMA is monitoring the enforcement order introduced above. Over time it becomes apparent that the contents of the enforcement order is out of date because of changes in technology. The CMA varies the order by making a revised version of it, and issues the undertaking with the revised enforcement order, and then publishes a notice concerning the variation of the order.

Commitments relating to conduct requirements

Section 36: Commitments

  1. This section provides that the CMA can accept binding voluntary commitments from an undertaking during a conduct investigation to bring the investigation to an end. Commitments are a common approach to solving competition issues, with similar provisions in the Competition Act 1998 for suspected breaches of the Chapter 1 and Chapter 2 prohibitions against anti-competitive agreements and abuse of dominant positions (see sections 31A to 31E and Schedule 6A).
  2. Subsection (3) provides that when a commitment is accepted by the CMA the undertaking must comply with it and that the CMA may not issue a notice of findings under section 30 or make an enforcement order. The commitments in effect bring an end to the conduct investigation. Subsection (4) sets out that the CMA can accept a commitment that addresses part of the conduct under investigation while continuing the investigation into other conduct. It also sets out when the CMA can investigate the same behaviour again.
  3. Subsections (5) and (6) make provision for the coming into force of commitments and the circumstances in which they cease to have effect. A commitment ceases to have effect when the first of the following occurs: its terms say it ends, the conduct requirement to which the commitment relates ceases to have effect or the CMA releases the undertaking from the requirement to comply with the commitment. Using the power contained in section 17, the CMA may make transitional provisions in relation to a commitment when it revokes the relevant designation, or it may continue the commitment where it decides to designate the same, similar or connected activity.
  4. Subsection (7) provides that the CMA may accept a variation to a commitment from time to time, provided that the commitment as varied remains appropriate, and subsection (8) enables the CMA to release an undertaking from a commitment.
  5. Subsection (9) allows the CMA to exercise its functions in relation to potential and actual breaches of commitments where the commitments are no longer in place. This enables the CMA to take action against historic breaches.
    Example of a commitment accepted by the CMA

    The CMA imposes a conduct requirement that stipulates that an undertaking must make sure users are not prevented from using alternative internet browsers on their mobile operating system. The undertaking is suspected of stopping smartphone users from being able to access and operate competing internet browsers. The CMA therefore opens a conduct investigation.

    During the investigation the undertaking offers commitments: it puts forward a proposal to introduce a specific system so users are permanently able to choose freely between competing internet browsers on the mobile operating system. The CMA reviews the offered commitments and thinks they are a likely effective solution to the potential breach of conduct requirement. The CMA therefore develops the commitments further with the undertaking. The CMA in the meantime continues with the breach investigation.

    The CMA publishes the proposed commitments in a notice, and takes into account any representations made to it due to the publication of the proposed commitment. The CMA decides that the commitments given are appropriate and so publishes a notice on its decision to accept the commitments and what the commitments consist of. The commitments come into force and the undertaking alters its conduct in line with their direction.

Section 37: Duty to keep commitments under review etc

  1. This section provides that the CMA has an ongoing duty to keep under review the commitments it accepts and the extent to which undertakings are complying with them, in the same way as it does for conduct requirements and enforcement orders.

Schedule 1: Procedure relating to commitments

  1. Schedule 1 makes provision about the procedure for accepting or varying commitments with regard to conduct requirements (in Chapter 3 of Part 1 of the Act) and pro-competition orders (in Chapter 4 of Part 1), and for releasing undertakings from commitments.

Final offer mechanism

Section 38: Power to adopt final offer mechanism

  1. This section provides the CMA with the power to use what is called the "final offer mechanism" (FOM) as a backstop tool to enforce conduct requirements to offer fair and reasonable payment terms.
  2. Subsection (1) provides that the CMA can require the designated undertaking and invite a third party to submit what they consider to be fair payment terms for a transaction (their "final offer payment terms"), provided the CMA considers that three conditions are met.
  3. The first condition, set out in subsection (2), requires the transaction to be a transaction in which the designated undertaking would either provide goods or services to the third party, acquire goods or services from the third party or use goods or services belonging to or produced by the third party. This includes situations where the parties are re-negotiating terms or agreeing terms in relation to a new transaction, including one which arises as a result of a newly established obligation to pay.
  4. Subsection (3) sets out the second condition, which is that the designated undertaking has failed to agree fair and reasonable payment terms, and in doing so has breached an enforcement order relating to the breach of a conduct requirement to trade on fair and reasonable terms.
  5. Subsection (4) sets out the third condition, which is that the CMA considers that it could not resolve the relevant breach satisfactorily and within a reasonable time period by exercising any of its other functions under the digital markets regime. These other functions could include further conduct requirements or PCIs, or other enforcement action by way of financial penalties, enforcement orders and court orders. The decision to adopt FOM does not preclude the CMA from concurrently exercising any of its other functions.
  6. Subsection (5) provides that in subsection (1), "transaction" means not only a potential future transaction, but also the future performance of an ongoing transaction. This specifies that FOM is forward-looking, in the sense that it can apply either in relation to the renegotiation of an existing arrangement, or in relation to a new transaction (including one which arises as a result of a newly established obligation to pay).
  7. Subsection (6) provides that the CMA can use its investigatory and enforcement powers where a suspected breach of a Final Offer Order occurred during a period of designation or while transitional provisions under section 17 are or have been in place.

Section 39: Collective submissions

  1. This section sets out the situations in which two or more third parties may make a single submission of payment terms that they collectively regard as fair and reasonable during the Final Offer Mechanism (FOM) process. This is known as a collective submission. The provisions set out in this section do not preclude parties from engaging in collective bargaining at other stages in the enforcement process, within the confines of existing competition law.
  2. Subsection (1) clarifies that, where a designated undertaking is involved in a single transaction involving two or more third parties, the CMA has discretion to invite – but not compel – the third parties in question to submit a single final offer of payment terms as a collective. For multiple parties to be able to submit a single bid, the usual conditions required for FOM (see section 38) apply, and the CMA must consider that the third parties are able to act jointly when submitting a final offer of payment terms. The CMA is not required to share the reasons behind their decision to allow a collective submission in the final offer initiation notice but may choose to do so.
  3. Subsection (3) allows the CMA to invite two or more third parties to make collective submissions in situations where there are multiple transactions. The third parties can be invited to make a collective submission in relation to the transactions provided that the CMA considers the parties can act jointly and that the same terms as to payment could be applied to all the transactions in question. The ‘same terms as to payment’ does not necessarily mean the same price applies for all the transactions; it also encompasses scenarios where, for example, a common formula for determining a price could apply to all the transactions. For example, a transaction entered into with one third party could be grouped with a different transaction entered into with another third party, or with multiple third parties.
  4. Subsection (4) clarifies the situations in which the provisions in sections 39-44 apply to all the third parties/transactions subject to FOM, and when they could also apply to a smaller subset of them. This provides in particular for the possibility that some decisions taken by the CMA during the FOM process may not affect all members of a grouped third party.
    1. For example, the effect of subsection (4) is that section 43(3) requires the CMA to give notice to all the grouped third parties if it decides not to issue a final offer order, while section 40(4) provides that, for the purposes of information gathering, the CMA has discretion to require any one or more of the grouped third parties to provide information.

Section 40: Final offer mechanism

  1. This section sets out the process the CMA must follow if it decides to use FOM.
  2. Subsection (1) requires the CMA to give a notice (the "final offer initiation notice") to the two parties of its decision to use FOM.
  3. Subsection (2) sets out the information that must be contained in the notice, which includes a description of the enforcement order breach that has triggered FOM. Where multiple breaches of enforcement orders are found, either as a result of one investigation or several separate investigations, the CMA can choose to combine the breaches for the purposes of FOM, where appropriate. The notice must also specify the submission date on or before which final offer payment terms are to be submitted to the CMA.
  4. Subsection (3) requires the CMA to publish a statement about the use of FOM in each particular case and sets out the contents for the statement. The statement must be published as soon as reasonably practicable after the final offer initiation notice is issued. It must specify if the CMA is considering taking any other action to address the underlying cause of the breach which led to the use of FOM. For example, a pro-competition order, instructing a designated undertaking to provide access for third parties to consumer data held by the undertaking, could also be used to rebalance bargaining power within that digital activity.
  5. Subsection (4) provides that, after giving a final offer initiation notice, the CMA can subsequently revise certain details. It can change its view of the transaction or the third party, provided they remain substantially the same; it can update the list of joined or grouped third parties, if those parties are making a collective submission of payment terms; and it can change the date on or before which final offer payment terms need to be submitted to the CMA.
  6. Subsection (5) requires the CMA to issue a revised version of the final offer initiation notice to the designated undertaking and the third party. Subsection (6) clarifies that "the third party" refers to the persons who were the joined or grouped third parties before the list was updated and any persons who are being added to the joined or grouped third parties.
  7. Subsection (8) sets out the powers that the CMA has for the gathering and sharing of information between the designated undertaking and the third party to ensure that they can each submit well-informed final offer payment terms. Powers include requiring parties to provide information to the CMA, which may in turn be shared with the other party.

Section 41: Final offers: outcome

  1. This section establishes the processes the CMA must follow with regards to the outcome of FOM. The CMA decides which final offer payment terms are to be given effect for the purposes of the transaction (or any other transaction that is substantially the same). The CMA cannot change the final offer payment terms put forward.
  2. Subsection (1) provides that this section applies if the CMA has decided to use FOM, and at least the designated undertaking or the third party has submitted final offer payment terms to the CMA before the submission date. Here, ‘the third party’ refers to all the grouped/joined third parties in a scenario where a collective submission was to be made.
  3. Subsection (2) requires the CMA to make a final offer order directing which final offer payment terms are to be given effect for the purposes of the transaction (or any other transaction that is substantially the same). This requirement is subject to section 43(1), which provides that the CMA can decide not to make a final offer order where it has reason to believe there has been a material change in circumstances. If the CMA does make a final offer order, the selected payment terms must be "given effect", or implemented fully for the intended purpose. This means that the CMA will not require certain terms to be included verbatim in the transaction, but rather it will set out the outcome the designated undertaking must achieve in the transaction.
  4. The final offer payment terms must also be given effect for the purposes of any other transaction that is "substantially the same" as the initial transaction, in order to prevent parties seeking to avoid the effects of the order for transactions that are, in essence, the same, by changing other terms. In the event that only one party submitted final offer payment terms, the CMA will have to choose those terms.
  5. Subsection (3) establishes that the period within which the CMA must make its decision, the "final offer period", is subject to a six-month statutory deadline, beginning with the day on which the final offer initiation notice is given to the parties.
  6. Subsection (4) creates a power for the Secretary of State to amend the length of the final offer period. Under subsection (5), this power is subject to the draft affirmative procedure, see section 337(3).

Section 42: Final offer orders: supplementary

  1. Subsection (1) provides that a final offer order must impose obligations on the designated undertaking that the CMA considers appropriate to ensure the final offer payment terms it has decided upon are given effect. Subsection (2) sets out the information that the CMA must give to the parties, by notice.
  2. Subsection (3) requires the CMA to publish a statement summarising the contents of the final offer order and accompanying notice as soon as is reasonably practicable after the notice is given to the parties. The statement could summarise the contents of the order provided to the relevant designated undertaking, for example by redacting some information for confidentiality purposes.

Section 43: Decision not to make final offer order

  1. Subsection (1) allows the CMA not to make a final offer order, and thereby stop the FOM process, if it has reasonable grounds to believe there has been a material change in circumstances. For example, the CMA could stop the FOM process if it has reasonable grounds to believe that one of the parties has submitted an offer under duress.
  2. Subsection (2) provides that, for the purposes of this section and section 44(3), a material change of circumstances includes the parties coming to a mutual agreement in relation to payment terms.
  3. Subsections (3) to (5) provide that, where the CMA decides not to make a final offer order, it must give a notice to the parties including the reasonable grounds for the belief of the change in circumstances and must publish a statement summarising the contents of the notice as soon as reasonably practicable after giving the notice.

Section 44: Duration and revocation of final offer orders

  1. This section sets out when a final offer order comes into effect (subsection (1)) and the circumstances in which it ceases to have effect (subsection (2)). Subsection (3) also gives power to the CMA to revoke a final offer order when the CMA has reasonable grounds to believe there has been a material change in circumstances. Where collective submissions have been made, the CMA can also partially revoke a final offer order, e.g. revoke it in respect of some of the grouped third parties, but not others. A material change in circumstances includes, but is not limited to, the third party (or some of the grouped or joined third parties) coming to their own agreement with the designated undertaking in relation to payment terms (see section 43(2)). The CMA has power to make transitional, transitory or saving provisions in relation to revocation (or partial revocation) of a final offer order (subsection (6)).
  2. The CMA must give a notice to the parties of the decision (including reasons) and publish a summary statement (subsections (4), (5) and (7)).
  3. Subsection (8) allows the CMA to exercise its functions in relation to potential and actual breaches of a final offer order where the order is no longer in place. This enables the CMA to take action against historic breaches.

Section 45: Duty to keep final offer orders under review

  1. This section requires that the CMA keep final offer orders, and compliance with them, under review.
    Flowchart of the FOM process
    A designated undertaking is instructed, as part of its conduct requirements, to offer fair and reasonable payment terms to a third party. (Sections 19 and 20)
    The CMA has reason to believe the conduct requirement has been breached, and carries out an investigation, lasting a maximum of six months. (Section 26)
    The CMA finds a breach. It makes an enforcement order to bring the undertaking’s conduct in line with the requirement. (Section 31)
    The CMA finds that the undertaking has breached the enforcement order, and is still not complying with the original conduct requirement. (Section 38(1))
    The CMA considers whether using it could not satisfactorily address the breach within a reasonable time frame by exercising any of its other digital markets functions (Section 38(2)-(4))
    Where appropriate, the CMA will also consider whether multiple third parties could be invited to make a collective submission of payment terms. (Section 39)
    The CMA refers parties to the mechanism through a notice (a FOM initiation notice). (Section 40(1))
    The CMA must state what other actions, if any, it is considering taking to address any underlying factor or combination of factors which contributed to the breach. (Section 40(3)(b))
    The CMA facilitates evidence gathering and sharing between the two parties. (Section 40(4))
    Both parties then prepare their ‘final offer payment terms’. The exact amount of time parties will have to prepare their offers will be set by the CMA. (Section 40). The CMA must make an order on or before the last day of the "final offer period" of six months. (Section 41(3)).
    The CMA must state which party’s final offer payment terms are to be included in the transaction, unless there has been a material change in circumstances. (Section 41)
    The CMA issues a final offer order to give effect to its decision. (Section 42(1))
    The CMA publishes a statement explaining, amongst other details, why the winning bid was successful. (Section 42(3))
    Parties will be able to appeal the outcome under judicial review principles, with the Competition Appeal Tribunal (CAT) reviewing the decision to adopt one of the offers. (Section 102)
  2. The various timelines set out in this flowchart are subject to the CMA’s power to extend deadlines under the circumstances in Section 103.

Chapter 4: Pro-Competition Interventions

Section 46: Power to make pro-competition interventions

  1. This section sets out the CMA’s power to remedy competition problems it finds in relation to relevant digital activities undertaken by designated undertakings by making "pro-competition interventions" (PCIs), and its power when doing so to address any associated consumer detriment.
  2. Subsection (1) empowers the CMA to implement a PCI where it considers doing so would be proportionate to remedy, help remedy or mitigate an adverse effect on competition.
  3. Subsection (2) provides that when deciding what, if any, action to take to address the factor or combination of factors having an adverse effect on competition, the CMA may consider any benefits to UK users and UK customers arising from those factors. The PCI provisions adopt the terms UK users and UK customer, the former term being defined in this Act and the latter using the customer definition set out in the Enterprise Act 2002.
    4. Example (1): A consumer benefit in a PCI investigation

    The CMA may conduct a PCI investigation into a suspected competition concern related to a designated undertaking’s designated operating system (OS) for mobile devices. The OS pre-installs and makes the designated undertaking’s own web browser the default on mobile devices that are powered by the OS. Users of mobile phones that use this OS rarely take the time to download alternative web browsers, or to set alternatives as the default. This makes it significantly harder for other web browsers to build market share and compete.

    To remedy this, during the course of the investigation the CMA may propose a pro-competition order that prohibits the designated undertaking’s OS from pre-installing a web browser on mobile phone devices. However, the designated undertaking may provide evidence that the pre-installed web browser on the device improves the quality of the product for consumers, as it makes setting up the new phone easier and quicker.

    If the CMA accepted the evidence and took the view that it was appropriate to preserve the benefit, it could instead propose to introduce a different pro-competition order to preserve this benefit. It may instead propose to require the designated undertaking’s OS to present users with a choice screen when setting up a device, with different options for setting the default web browser. This could remedy the competition concern by giving users an active choice in their preferred web browser, whilst preserving the consumer benefits of pre-installed web browsers.

  4. Subsection (3) sets out how the CMA can implement a PCI. It can take the form of either - or both - an order imposing requirements on the designated undertaking, and non-binding recommendations to other persons exercising functions of a public nature on steps they should take. Other parties may include the Government or another independent regulator better placed to act (e.g. by way of statutory powers and expertise). The CMA can also implement a PCI in relation to any part of the designated undertaking’s business, where the CMA decides that such requirements or non-binding recommendations would address the competition problem.
    5. Example (2): A pro-competition order on an undertaking

    The CMA may order a designated undertaking to make its designated social media service interoperable with other competitors’ social media platforms, with features including cross-posting on multiple platforms, in order to allow competitors to overcome barriers to entry and expansion and facilitate greater competition.

    Example (3): A recommendation to another party

    The CMA may find that there is an adverse effect on competition relating to a designated undertaking’s mobile operating system (OS). The OS restricts competitors’ access to the technology needed to make contactless payments on the mobile devices that are powered by the designated OS. The CMA may recommend that the Financial Conduct Authority (FCA) intervenes to address some of the concerns, if it judged in the circumstances of the case that the FCA could be better placed to intervene due to its expertise as the conduct regulator for the UK’s financial markets.

  5. Subsection (4) provides that, while the PCI power primarily empowers the CMA to address an adverse effect on competition, a PCI may additionally make provision to remedy or minimise any related detrimental effects on UK users and UK customers. The CMA may take this detriment into account when deciding which PCI remedy to implement.
  6. Subsection (5) defines an adverse effect on competition in the United Kingdom and provides that a factor or combination of factors associated with a designated digital activity causes adverse effects on competition where it prevents, restricts or distorts competition in connection with the relevant digital activity in the United Kingdom. These factors can be related to a designated undertaking’s conduct (e.g. self-preferencing behaviour) or factors not caused by the designated undertaking’s conduct (e.g. the designated undertaking benefits from network effects resulting from large numbers of users).
  7. An adverse effect on competition can concern competition in relation to the relevant digital activity itself; or it may concern competition in relation to another activity, provided the effect is connected to the relevant digital activity.

Section 47: Power to begin a PCI investigation etc

  1. This section gives the CMA the power to launch a formal evidence gathering process - a PCI investigation - where it suspects there is a competition problem related to an undertaking’s relevant digital activity, and sets out its duties during the investigation. A PCI investigation may relate to one or more designated undertakings and multiple designated digital activities. The CMA will decide whether to open a PCI investigation on the basis of available evidence: this may include that arising from complaints submitted by third parties; evidence, where appropriate, from the CMA’s other tools; or from referrals of information from other regulators.
  2. Subsection (3) states that the CMA may launch a fresh PCI investigation in respect of a designated undertaking in cases where it had previously made a decision to not implement a PCI in relation to the undertaking for either the same digital activity or the same AEC.

Section 48: Procedure relating to PCI investigations

  1. This section describes how and when the CMA should give notice to the relevant designated undertaking of the initiation of a PCI investigation. The CMA is under a duty to publish as soon as reasonably practicable a PCI investigation notice provided to the designated undertaking under investigation, subject to necessary redactions for confidentiality reasons.
  2. Subsection (2) sets out the information that the PCI investigation notice must include. This includes a description of the CMA’s grounds for suspecting that there is an adverse effect on competition and the purpose and scope of the investigation in relation to the designated undertaking and the digital activity.
  3. Subsection (3) allows the CMA to update the PCI investigation notice if it has refined its view of the purpose and scope of the investigation, such as if the activity has changed since the earlier notice was given to the designated undertaking. For example, the CMA could give notice that it is narrowing or extending in a limited way an investigation in relation to the digital activity as a result of its assessment of evidence gathered during the investigation. This may not change the general nature of the scope and purpose of the investigation as a whole and does not change the date on which the investigation begins (see section 50(3)).
  4. Subsection (4) places a duty on the CMA to publish a statement summarising the contents of the investigation notice as soon as reasonably practicable following the initiation of the investigation. This notice could summarise the contents of the notice provided to the relevant designated undertaking, for example by redacting some information for confidentiality purposes.

Section 49: Consultation on proposed PCI decision

  1. This section sets out the process for how the CMA must publicly consult on its provisional findings before giving notice of its PCI decision under section 50. It requires the CMA to include in the consultation its findings from the PCI investigation as well as at least a description of any pro-competition orders the CMA proposes to make. The CMA may choose to consult on a draft pro-competition order as part of this consultation (see section 54(2)) but does not have to.

Section 50: PCI decision

  1. This section describes the procedure for concluding a PCI investigation. The CMA must notify the designated undertaking of its decision before the end of the PCI investigation period (which is a period of nine months beginning with the day on which the PCI investigation notice is given to the undertaking under section 48), must publish that decision as soon as reasonably practicable afterwards, and then has a period of four months in which to consult and issue a pro-competition order(s) if it so chooses. Any recommendations being made in addition or in the alternative to pro-competition orders should also be made within the four-month period.
  2. Subsections (6) and (7) set out that the CMA may subsequently decide not to make a pro-competition order after providing notice that it would. The CMA must inform the designated undertaking of this change and publish that notice.

Section 51: Pro-competition orders

  1. This section provides for the remedies possible as part of a pro-competition order, including an order implemented on a trial basis. The CMA must state in the pro-competition order the date by which it must be reviewed, and the CMA is under a duty to publish a pro-competition order provided to the relevant designated undertaking, subject to necessary redactions for confidentiality reasons.
  2. Subsections (1) provides that a pro-competition order following a PCI investigation, may implement the same remedies, including directions, that are provided for in Section 161 and Schedule 8 of the Enterprise Act 2002 following a market investigation reference. Schedule 8 of the Enterprise Act 2002 sets out a non-exhaustive list of structural and behavioural remedies that the CMA may implement as an order. These include:
    1. General restrictions on conduct e.g. a prohibition on combining user data collected from different activities that the undertaking carries out;
    2. General obligations to be performed e.g. a requirement to make a service interoperable with a competitor’s;
    3. Acquisitions and divisions e.g. a requirement to divest an aspect of the business;
    4. Supply and publication of information e.g. a requirement to supply a competitor with user data.
  3. Subsection (1), as a consequence of sections 161 and 164 of the Enterprise Act 2002, allows the CMA to also be able to issue directions of the kind described in section 87 of the Enterprise Act 2002 in respect to compliance with pro-competition orders.
  4. Subsection (2) makes necessary modifications to the wording of Schedule 8 to the Enterprise Act 2002 to achieve this.
  5. Subsection (3) and (4) outline that the pro-competition order may require a designated undertaking to trial a remedy or remedies with subsets of, or all of, the designated undertaking’s users following a PCI investigation, if it would help the CMA build evidence on an effective PCI remedy made on a non-trial basis. The CMA can choose to trial different remedies at the same time, or trial different versions of the same remedy in order to determine the effective remedy design. By their nature trials will be time limited.
    Example (4): A trial pro-competition order

    The CMA may conclude that, due to a competition concern, the designated undertaking’s designated mobile operating system (OS) should show users a choice screen containing different search engine providers. The CMA may order the undertaking to run a trial of different choice screen layouts in order to determine which design is most effective at boosting competition. It could, for example, order the undertaking to run a 3-month trial, with 4 different choice screen layouts for 1% of its users. At the end of the 3-month trial, the CMA would analyse the results and determine the choice screen design that particularly encourages switching. The CMA would therefore vary the PCI trial order to become a long-term pro-competition order, requiring the SMS undertaking to show all UK users that particular choice screen layout.

  6. Subsection (5) stipulates with reference to section 55(3) that the CMA must state in the pro-competition order a date by which it will carry out a review of that order. It must complete a review of the pro-competition order by this date and conclude whether the order should continue unchanged, be replaced (by way of section 52), or be revoked.

Section 52: Replacement of pro-competition orders

  1. This section gives the CMA the power to replace a pro-competition order. This allows the CMA to effectively address competition problems identified during a PCI investigation, implementing targeted remedies through the iteration of pro-competition orders. The CMA may trial an intervention, or initially adopt lighter-touch pro-competition orders designed to address the competition problem, before escalating them (for example, by including more onerous obligations, or greater detail in the order) where the CMA assesses it is appropriate to do so. This will include considerations of proportionality because of the requirement in section 46 that PCIs be proportionate.
  2. Subsection (1) gives the CMA the power to replace a pro-competition order if it determines that it is appropriate to do so. The CMA will particularly have regard to the impact of the existing pro-competition order on the competition problem (and where relevant the related detriment to UK users or customers), and whether circumstances have changed since the existing order was made in a way which means alternative provision is now appropriate.
  3. Subsection (2) makes express provision that pro-competition orders which made provision on a trial basis may be replaced to update the terms and parameters of the trial (e.g. the design of a trial, the length of the trial period), or to convert the trial into a pro-competition order that will address the competition problem on a non-trial basis. In doing so the CMA may have regard to that trial as well as other trials the CMA has conducted, including if that trial was done with a different designated undertaking.

Section 53: Duration and revocation etc of pro-competition orders

  1. This section sets out the provisions for a pro-competition order ceasing to have effect, either by the CMA revoking the order, or by the designated undertaking’s relevant digital activity ceasing to be designated with SMS.
  2. Subsection (3) sets out that the CMA may revoke a pro-competition order where it considers it appropriate to do so. When considering whether it is appropriate to revoke a pro-competition order, the CMA must in particular have regard to where there have been changes in circumstances. For example, this could occur if new legislation which affects the carrying out of the pro-competition order were implemented. Section 54(3) requires the CMA to consult before revoking an order under this subsection.
  3. Subsections (4), (5) and (6) set out that the CMA must give notice to the designated undertaking of its decision to revoke a pro-competition order. This includes details of any transitional, transitory or saving provision being made in relation to the revocation. The CMA must publish the notice as soon as reasonably practicable.
  4. Subsection (7) provides that where a pro-competition order is revoked without being replaced, the CMA is not able to subsequently introduce another pro-competition order based on the initial PCI investigation. The CMA would need to carry out a new PCI investigation.
  5. Subsection (8) allows the CMA to exercise its digital markets functions in relation to potential and actual breaches of a pro-competition order where the order is no longer in place. This enables the CMA to investigate and enforce against historic breaches.

Section 54: Consultation

  1. This section requires the CMA to consult publicly on a pro-competition order before imposing it, replacing it, or revoking it (subsections (1) and (3)).
  2. Subsection (2) provides an exception to the CMA’s duty to consult on a pro-competition order if it consulted on a draft order which is materially the same as the final order.
  3. To facilitate minor amendments from time to time, subsection (4) exempts the CMA of its duty to consult on a pro-competition order where the CMA judges that the replacement order is not materially different to the order it replaces.

Section 55: Duty to review pro-competition orders etc

  1. This section requires the CMA to monitor the effectiveness of any pro-competition order it makes, whether it is being complied with, and if not whether to take enforcement action.
  2. Subsections (1) to (3) set out the CMA’s specific duty to include in each pro-competition order a date by which the CMA will conduct a formal review on whether to retain, replace or revoke it. This includes replacement pro-competition orders.
  3. Subsection (4) provides that the CMA will additionally be under a general duty to keep pro-competition orders under review. Ongoing monitoring may inform the CMA’s decision to conduct a formal review earlier than the date stipulated in the most recent order relating to the PCI.

Section 56: Commitments

  1. This section gives the CMA the power to accept legally binding proposals ("commitments"), from a designated undertaking to address a possible competition problem that relates to a designated activity of that undertaking.
  2. Subsections (2) and (3) outline that the CMA may accept a commitment if it considers that it would usefully address a competition problem; it does not necessarily need to comprehensively address the competition problem in order for the CMA to be able to accept it. Where an investigation has begun and commitments have been accepted, the CMA may choose to reduce the scope of the PCI investigation set out in the opening notice, or to close the investigation without making a PCI decision.
  3. Subsection (5) provides that where the CMA accepts a commitment then this does not prevent the CMA continuing a PCI investigation in relation to other conduct from the designated undertaking. In addition, the CMA is able to start a new PCI investigation into the conduct related to the commitment if the CMA judges that there has been a change of circumstances following acceptance of the commitment, where the CMA has reasons to believe the designated undertaking has not complied with the commitment or where the CMA suspects that information that led to the acceptance of the commitment was false or misleading.
  4. Subsection (6) makes provision for the coming into force of commitments.
  5. Subsection (7) makes provision for the circumstances in which they cease to have effect. A commitment ceases to have effect when the first of the following events occurs: its terms say it ends, the SMS designation to which the commitment relates ceases to have effect or the CMA releases the undertaking from the commitment. Using the power contained in section 17, the CMA may make a transitional provision for a commitment when it revokes the relevant SMS designation, or it may continue the commitment where it decides to designate the same, similar or connected activity.
  6. Subsection (7) requires the CMA to comply with the procedural provisions in sections 36 and 37 concerning the review, amendment and release of commitments in respect of PCI commitments. These are the same provisions and requirements set out for conduct requirements (see section 36).

Chapter 5: Mergers

  1. Chapter 5 (Mergers) is concerned with imposing a duty on designated undertakings (or, where a designated undertaking is part of a larger corporate group, the whole group) to report certain possible mergers involving them to the CMA before they take place. It also requires designated undertakings (or, where there is a larger corporate group, the members of the group) not to allow a reported possible merger to take place until the report has been accepted as sufficient by the CMA and then a period of five working days has elapsed. The purpose of these requirements is to ensure that the CMA is made aware of anticipated mergers involving designated undertakings (or larger corporate groups) that will be harmful to competition in the UK, and to give the CMA sufficient information and time to decide, before a reported possible merger takes place, whether to open an investigation into the possible merger under the merger control regime set out in Part 3 of the Enterprise Act 2002, and whether to impose restrictions on the possible merger (such as a block on the integration of the enterprises involved) while an investigation is ongoing, through an initial enforcement order under section 72 of that Act.

Section 57: Duty to report possible mergers

  1. This section sets out the circumstances in which designated undertakings, or where a designated undertaking is part of a larger corporate group (see section 117), group members, will have a duty to report a possible merger involving them (a "reportable event") to the CMA before it takes place.
  2. There are two categories of reportable event. The first category is concerned with designated undertakings (or larger corporate groups collectively) reaching (whether through the acquisition of shares or voting rights or otherwise) certain percentage thresholds of the shares or voting rights held in certain bodies corporate with links to the UK. The second category is concerned with designated undertakings (or one or more members of a larger corporate group) forming certain joint venture vehicles (bodies corporate formed with an unconnected party or parties for the purpose of working together) that are intended or expected to have certain links to the UK. A minimum value requirement also applies in relation to the consideration provided by the designated undertaking (or larger corporate group collectively) for the relevant shares or voting rights, or in relation to the formation of the joint venture vehicle. The purpose of the reporting criteria is to target the "relevant merger situations" within the investigative jurisdiction of the CMA under the merger control regime that are most likely to raise competition concerns in the UK.
  3. Subsection (2) sets out the first category of reportable event: those that result in a designated undertaking or (by virtue of section 61(2)) larger corporate group collectively having qualifying status (as defined in section 58(1)) in respect of shares or voting rights in relation to a UK-connected body corporate (as defined in subsections (5) and (6)), where the value of all consideration (as defined in section 59) provided by the undertaking or group for its shares or voting rights (whichever gives the undertaking or group qualifying status) is at least £25m.
  4. Subsection (3) defines the second category of reportable event: those that involve a designated undertaking, or one or more members of a larger corporate group, forming a body corporate (a "joint venture vehicle") with at least one other person (such as a company) that (as stipulated by subsection (7)) is not part of the undertaking or group, in circumstances where: the undertaking or (by virtue of section 61(2)) larger corporate group collectively acquires qualifying status (as defined in section 58(2)) in respect of shares or voting rights in relation to the joint venture vehicle; the undertaking or group members involved intend or expect the joint venture vehicle to become a UK-connected body corporate (as defined in subsections (5) and (6)); and, the total value of all capital and assets contributed to the joint venture vehicle by the undertaking or group, and of all other consideration provided by the undertaking or group in relation to the formation of the joint venture vehicle, is at least £25m.
    5. Example 1: Reportable Event (categories 1&2)

    Category 1:

    If Designated Undertaking A already holds 20% of the shares in Company B, which carries on a digital advertising business in the UK , for which it has provided £20 million consideration, and then seeks to acquire an additional 10% for consideration of £10m, the proposed acquisition must be reported to the CMA prior to completion, as: B carries on activities in the UK and is therefore a UK-connected body corporate; the acquisition will take A from a shareholding in B of 25% or less (20%) to one of more than 25% (30%), giving it qualifying status; and the total consideration for the resulting shareholding will be above the £25 million value threshold (£30m), thus satisfying both limbs of the test in section 55(2).

    Had A proposed to acquire the additional shareholding for consideration of only £4 million (rather than £10 million), it would not have had a duty to report the event, because the value threshold would not have been met.

    Category 2:

    Designated Undertaking A, which is not part of a larger corporate group, and Company B, which is not part of A, propose to establish Company C together, with A holding 51% of the shares and B the remainder. A and B intend for C to supply digital services to customers in the UK. A agrees to transfer a pre-existing business with a value of £20 million to C and also to pay £10 million to B in relation to it agreeing to establish C with A. A must report the proposal to establish C to the CMA before C is formed because: C will be a body corporate formed with an unconnected person B and therefore a joint venture vehicle; A will have qualifying status in respect of shares in relation to C, as it will own a percentage of the shares above the 15% threshold for qualifying status in relation to joint venture vehicles; A intends that C will supply services to persons in the UK and therefore that C will be a UK-connected body corporate; and the value of the consideration to be provided by A in relation to the formation of C will be above the £25 million threshold, including the capital and assets that will be contributed to C.

    The creation of C would not need to have been reported had the consideration been less than £25 million or if A did not intend or expect C to carry on any activities in the UK or to supply goods or services to anyone in the UK.

  5. Subsections (5) and (6) define "UK-connected body corporate" for the purposes of the first and second categories of reportable event. A body corporate is UK-connected if it, or any of its subsidiaries (which section 118(1) defines as having the same meaning as in section 1159 of the Companies Act 2006), carries on activities in the UK or supplies goods or services to a person or persons in the UK.
  6. Subsection (7) clarifies that, in relation to the second category of reportable event, the formation of a joint venture vehicle solely by persons (such as companies) that make up a designated undertaking or larger corporate group is not in scope of the reporting duty.
  7. Subsection (9) signposts two sections of the Enterprise Act 2002 that establish some of the more significant steps that the CMA may be in a position to take under the merger control regime (where the relevant statutory requirements are met) in relation to a possible merger that has not yet taken place, including one that has been reported under this section.

Section 58: Qualifying status

  1. This section sets out the circumstances in which a designated undertaking or larger corporate group will have qualifying status in relation to a UK-connected body corporate or joint venture vehicle.
  2. Subsection (1) provides that, for the purposes of the first category of reportable event, an event will result in qualifying status if it results in the undertaking or group increasing the percentage of shares or voting rights it holds in a UK-connected body corporate to or beyond any of the thresholds set out in paragraphs (a), (b) and (c).
  3. Subsection (2) sets out that, for the purposes of the second category of reportable event, the undertaking or group will have qualifying status in relation to a joint venture vehicle if it acquires at least 15% of the shares or voting rights in the vehicle.
  4. Subsections (3), (4) and (5) set out how the percentage of shares and voting rights held should be calculated, including in relation to bodies corporate that do not have a share capital or that do not have general meetings at which matters are decided by the exercise of voting rights.
  5. Subsection (6) provides that a person (such as an undertaking or group member) should be treated as acquiring an interest (such as a shareholding) or right (such as voting rights) for the purposes of the duty to report where they come to hold the interest or right by virtue of any of the provisions in Schedule 2. For example, when a shareholding comes to be held jointly with another person or becomes subject to a joint arrangement with another person under which the parties are to exercise the rights granted by their shares in a coordinated way.

Section 59: Value of consideration

  1. Subsection (1) explains how the value of consideration should be calculated for the purposes of the first category of reportable event. This is the value of all consideration provided by the undertaking or group, directly or indirectly, for shares or voting rights in the UK-connected body corporate in all transactions which result in the undertaking or group holding shares or voting rights in the body corporate.
  2. Subsection (2) defines consideration for the purposes of the duty to report. The intention is for consideration to be given a very broad meaning, encompassing any benefit provided, any detriment suffered, any conditional consideration and any consideration that is deferred to after the relevant event.
  3. Subsection (3) creates a delegated power for the Secretary of State to make regulations setting out further provision about how the value of consideration, capital or assets is to be calculated for the purposes of the duty to report. This power is subject to the negative procedure as per subsection (5).

Section 60: Content of report etc

  1. Subsection (1) requires the CMA to set out, in a notice that must be published online (see section 113(3)), the required form and content of a report.
  2. Subsection (2) prohibits the CMA from requiring information in a report beyond that which it considers necessary to decide, in relation to a reportable event, whether to begin an investigation (commonly known as a Phase 1 investigation) into whether it has a duty under section 33 of the Enterprise Act 2002 to refer the matter for an in-depth merger investigation (commonly known as a Phase 2 investigation), or to make an initial enforcement order under section 72 of that Act.

Section 61: Application of the duty to report etc

  1. This section explains how the duty to report in section 57(1) applies in cases where a designated undertaking is part of a larger corporate group (see section 117). It also sets out circumstances in which this Chapter will not apply or will cease to apply after a report has been made.
  2. Subsection (2) provides that the members of the group are to be treated as acting, or failing to act, collectively. It also provides that the combined consideration provided by all members of the group is to be treated as provided by each member individually, and that each member is to be treated as holding the combined interests or rights of all members of the group. This means that if a report is provided to the CMA by one member of the group, all members are deemed to have provided the report. Equally, if one of the members of the group fails to provide a report when required to do so, then all members are deemed to have failed to meet this requirement.
    Example 2: Application of the Duty to Report

    Designated Undertaking X is part of a larger corporate group Group Y. Company 1, a member of Group Y, acquires a 15% shareholding in a body corporate for consideration of £15 million. At the same time, Company 2, another member of Group Y, acquires a 10% shareholding in the same body corporate for consideration of £10 million. Each and every member of Group Y is deemed for the purposes of the duty to report to have acquired a 25% shareholding in the body corporate for consideration of £25 million.

  3. Subsection (3) refers to Schedule 2, which sets out further cases in which a person (such as an undertaking or group member) should be considered to hold an interest (such as a shareholding) or right (such as voting rights) for the purposes of the duty to report.
  4. Subsection (4) sets out circumstances where the duty to report to the CMA will not apply:
  5. Paragraph (a) provides that the duty to report does not apply in relation to an event where a report has already been provided in relation to another event which does not differ from it in a material respect;
  6. Paragraph (b) provides that the duty to report does not apply in relation to an event where it, or arrangements which do not differ from it in a material respect, have already been notified to the CMA under the merger control regime set out in Part 3 of the Enterprise Act 2002;
  7. Paragraph (c) provides that the duty to report does not apply in relation to an event where the person that would otherwise be required to report has been informed by the CMA that the event, or one that does not differ from it in a material respect, is already subject to a Phase 1 investigation under the merger control regime (see Section 60, subsection 2);
  8. Paragraph (d) provides that the duty to report does not apply in relation to an event where it, or a situation that does not differ from it in a material respect, has been the subject of a public interest intervention notice issued by the Secretary of State under the merger control regime;
  9. Paragraph (e) provides that the duty to report does not apply in relation to an event where it, or a situation that does not differ from it in a material respect, has been the subject of a special public interest intervention notice issued by the Secretary of State under the merger control regime.
  10. Subsection (5) sets out circumstances where the requirements of this Chapter will cease to apply to an event after it has been reported to the CMA:
  11. Paragraph (a) provides for the requirements to cease to apply where the Secretary of State issues a public interest intervention notice under the merger control regime in relation to the event or a situation that does not differ from it in a material respect.
  12. Paragraph (b) provides for the requirements to cease to apply where the Secretary of State issues a special public interest intervention notice under the merger control regime in relation to the event or a situation that does not differ from it in a material respect.
  13. Paragraph (c) provides for the requirements to cease to apply where the CMA makes an initial enforcement order under the merger control regime imposing obligations, prohibitions or restrictions in relation to the event.
  14. Paragraph (d) provides for the requirements to cease to apply where the relevant undertaking ceases to be designated.

Section 62: Acceptance of report

  1. This section explains how the CMA must proceed once a report has been received. It also provides for a person who has made a report to be able to withdraw it prior to it being accepted.

Section 63: Delay to possible mergers etc

  1. This section sets out restrictions on reportable events taking place.
  2. Subsection (1) provides that a designated undertaking or group member with a duty to report a reportable event (see section 57(1)) must not allow the event to take place until a report in relation to the event has been submitted to the CMA and the waiting period in relation to the event has expired.
  3. Subsection (2) defines the waiting period as the period of 5 working days beginning with the first working day after the day on which the CMA gives notice to the reporting person that it accepts their report is sufficient. "Working day" is defined in section 330.
  4. Subsection (3) provides that, where a reportable event takes place in breach of subsection (1), every person with a duty to report the event is to be treated as having breached subsection (1). This means that all members of a group will be treated as having failed to comply where one or some members have failed to do so.
  5. Subsection (4) permits the CMA to give its consent to a reportable event happening before the end of the waiting period, including before a report has been accepted by the CMA or submitted to the CMA. The CMA may also revoke its consent before the event takes place.
  6. Subsection (5) provides that the restrictions in subsection (1) do not apply in relation to a reportable event where the CMA gives and does not revoke its consent to the event taking place before the end of the waiting period.
  7. Subsection (6) applies section 95 of the Enterprise Act 2002, which enables statutory restrictions under the merger control regime to be enforced through the courts, to the restrictions on reportable events taking place set out in subsection (1). This for example enables the CMA to apply for an injunction requiring a designated undertaking or group member to undo a reportable event that has taken place prior to the expiry of the waiting period and for the reporting requirements to be complied with before the event takes place again.

Section 64: Timing of a reportable event

  1. This section provides that in certain cases a reportable event is considered to take place at the point there is an unconditional obligation to proceed with the event. That is, where a reportable event results from an agreement for a designated undertaking or group member to acquire shares or voting rights, or to form a joint venture vehicle, the event is to be treated as taking place for the purposes of the duty to report when the undertaking or group member becomes unconditionally obliged to acquire the shares or voting rights, or to form the joint venture vehicle. Unconditionally obliged means either that there are no conditions that need to be met for the agreement to be executed or that any such conditions have been met. This is to ensure that a reportable event that amounts to a merger is reported before it is treated as taking place under the merger control regime (see section 27 of the Enterprise Act 2002).

Section 65: Authorisation for one person to act for another

  1. This section provides for a designated undertaking or group member with a duty to report a reportable event (see section 57(1)), to authorise another person (such as a legal representative) to report the event on its behalf.

Section 66: Applications for review of decisions relating to mergers

  1. This section applies section 120 of the Enterprise Act 2002, which allows for review of certain decisions under the merger control regime by the Competition Appeal Tribunal, to non-penalty decisions made by the CMA in connection with its functions under this Chapter. This would include not only challenges to decisions made under this Chapter but also to the exercise of other functions under Part 1, such as a requirement to provide information under section 69, in relation to this Chapter. Section 89(1) provides for penalties imposed in connection with this Chapter to be subject to separate appeal arrangements.

Section 67: Regulations about duty to report

  1. This section creates a delegated power for the Secretary of State to make regulations about the duty to report.
  2. Subsection (3) sets out some of the provision that these regulations may include, including provision which amends this Chapter or Schedule 2.
  3. Subsection (4) stipulates that regulations containing provision under any of paragraphs (a), (b), (c), (d), (e) or (h) of subsection (3), including regulations amending this Chapter or Schedule 2, are subject to the draft affirmative procedure (see section 337(3)).
  4. Subsection (5) provides that any other regulations made under subsection (1) are subject to the negative procedure. This includes regulations under subsection (3)(f) which modify how section 332 applies for the purposes of this Chapter or Schedule 2. This is considered appropriate because these regulations would be of a supplementary procedural nature, limited to modifying the rules for the service of notices by the CMA in the context of merger reporting.

Section 68: Duty to keep compliance under review

  1. This section places a duty on the CMA to monitor and enforce the merger reporting provisions. This duty goes no further than requiring the CMA to consider exercising its investigative and enforcement powers, as set out in section 63(6) and in Chapter 7 of Part 1, where it is aware of a basis for doing so.

Schedule 2: Mergers: Holding of Interests and Rights

  1. In conjunction with sections 61(3) and 58(6) respectively, Schedule 2 sets out further circumstances in which interests (such as shareholdings) and rights (such as voting rights) are deemed to be held or acquired for the purposes of the duty to report, and therefore provides for further ways in which reportable events may take place.
  2. Paragraph 1 provides that jointly held interests or rights are treated as held by each person that holds them.
  3. Paragraph 2 provides that parties acting through joint arrangements are treated as holding the collective interests and rights that each party to that arrangement holds individually.
  4. Paragraph 3 provides that where an interest is held by a nominee on behalf of another person, the interest is treated as held by that person. For example, where the legal owner of shares in a company (the person in whose name the shares are registered) holds the shares on behalf of the beneficial owner (the actual owner) under a declaration of trust, the shares are treated as held by the beneficial owner.
  5. Paragraph 4 provides that a person who controls a right is deemed to hold that right. This means that the controller of the right - and not the holder unless they are also a controller - will be considered to hold the right. Paragraph 4(2) sets out that control can be held through an arrangement between a person and others (see paragraph 7, Schedule 2).
  6. Paragraphs 5 and 6 provide for rights that are exercisable only in certain circumstances and rights attached to shares held by way of security respectively and replicate corresponding provisions in Schedule 1A to the Companies Act 2006.
  7. Paragraph 7 defines an arrangement for the purposes of this Schedule in broad terms. In particular, an arrangement need not be legally enforceable but there must be a degree of stability about it.

Chapter 6: Investigatory Powers etc and Compliance Reports

Investigatory powers etc

Section 69: Power to require information

  1. This section gives the CMA the power to require any person (subject to section 111 (Extra-territorial application)), including a designated undertaking and any other party believed to hold relevant material, to provide information needed for its operation of the regime. This includes information in any form, which might include data, correspondence, forecasts and estimates.
  2. Subsection (1) sets out that the CMA can require any person, including a designated undertaking, to produce any information which the CMA considers relevant to its operation of the regime. Section 118(1) (General interpretation) defines "information".
  3. Subsection (3) sets out content requirements for an information notice. The notice must set out the time and place it requires the information to be produced as well as how it must be shared with the CMA. For example, a notice might specify the format in which a dataset should be provided and how it should be transferred (e.g. by hard drive or uploaded to a secure server). It must also set out the consequences of not complying with the notice, as a person could face penalties or prosecution for failing to comply.
  4. Subsection (4) provides a non-exhaustive description of what the recipient of an information notice could be required to produce or generate.
  5. Paragraph (a) covers copies of or extracts from information.
  6. Paragraph (b) covers obtaining or generating information, including information that does not yet exist.
  7. Paragraph (c) covers enabling the CMA to compel evidence collection by requiring a person to collect and retain information that it may not otherwise collect and retain.
  8. Paragraph (d) imposes a duty on the recipient of an information notice - in cases where specified information is not given to the CMA - to explain where the requested information might be and why it has not been shared with the CMA.
  9. Subsection (5) sets out how the CMA may require information to be obtained or generated under subsection (4) (b). Subsection (5) (a) specifies that the CMA can require an undertaking to amend its business processes, including processes that might affect its users, and report the outcomes. Subsection (5) (b) specifies that the CMA can require a person to carry out a specified demonstration or test. For example, under subsection (5) the CMA might require a designated undertaking to demonstrate a technical process with examples, such as how an algorithm operates, or to undertake testing or field trials of its algorithms and report the outcomes. This could include the CMA specifying relevant input data, parameters and other aspects of the test or demonstration.
  10. Subsection (7) specifies that the CMA can require the recipient of an information notice to give the CMA information - either in physical or electronic form - which is located outside the United Kingdom.

Section 70: Requirement to name a senior manager

  1. This section provides the CMA with the power to require, in an information notice, that a designated undertaking (and an undertaking subject to existing obligations under section 17(1)) or a previously-designated undertaking subject to a breach investigation names a relevant senior manager to be responsible for ensuring the undertaking complies with the notice. A penalty may be imposed on the named senior manager if the undertaking fails to comply with the notice (see section 87).

Section 71: Power of access

  1. This section gives the CMA the power to require a designated undertaking (and an undertaking subject to existing obligations under section 17(1)) or an undertaking subject to a breach investigation to obtain, generate, collect or retain information (which includes information in any form) or to conduct a specified demonstration or test of a business system or process under the supervision of the CMA. This power can be exercised where the undertaking has failed to comply with a previous request for information under section 69 or it has failed to provide sufficient assistance to a skilled person under section 79.
  2. Subsection (1) sets out the circumstances in which the CMA can exercise this power. The CMA can only use this power where a designated undertaking or an undertaking subject to a breach investigation has failed to comply with the requirements of an information notice under section 69, or has failed to comply with a duty to assist a skilled person under section 79. This might include situations where an undertaking has failed to provide the information requested, or has not carried out the request in the way specified in the information notice, or where information provided is incomplete or inaccurate.
  3. Subsection (2) gives the CMA the power to require that an undertaking gives access to relevant business premises, equipment, services, information or individuals for the purpose of the CMA supervising the undertaking obtaining, generating, collecting or retaining information, or for the CMA to observe the operation of the undertaking’s business process or a specified demonstration or test of a system. For example, under this subsection the CMA could supervise a test or be provided with a demonstration of an undertaking’s systems or technical processes (including algorithms), where an undertaking has failed to comply with a request to conduct a test itself and report the results to the CMA under sections 69 and 79. This could include the CMA specifying relevant input data, parameters and other aspects of the test or demonstration. Securing compliance for the purpose of this section includes the ability for the CMA to require information requested under sections 69 and 79 or to verify any reasons an undertaking has given for not complying with sections 69 and 79.
  4. Subsection (3) requires that any notice given under subsection (2) must describe the access the CMA requires, and the date by and manner in which the undertaking must provide access to the CMA. The CMA could, for example, require that it supervise a test being carried out in the presence of an undertaking’s engineers, either at the undertaking’s business premises or remotely.
  5. Subsection (4) imposes a duty on the undertaking to comply with the access required by the CMA.
  6. Subsection (5) specifies that the CMA may only require access to premises, equipment or individuals which are located in the United Kingdom under subsection (2). However subsection (6) specifies that the CMA may require access to information or services under subsection (2) regardless of whether they are located in the United Kingdom or not.
  7. Subsection (7) defines a "business premises" as a premises, or any part of premises, not used as a dwelling. This is the same definition as in section 27 of the Competition Act 1998.

Section 72: Power to interview

  1. This section gives the CMA the power to require any individual to attend an interview and answer questions for the purposes of a digital markets investigation. This is consistent with the amendments to section 26A of the Competition Act 1998 made under section 141 of the Act, which enable the CMA to interview any individual for the purposes of an investigation. The CMA has existing powers under sections 109 and 174 of the Enterprise Act 2002 to require any person to attend an interview for the purpose of a mergers or markets inquiry.
  2. Subsection (1) gives the CMA the power to give notice to any individual it considers has information relevant to a digital markets investigation requiring them to answer relevant questions at a place or in a manner specified in the notice, and either at a specified time or on receipt of the notice. This could include a remote interview.
  3. Subsection (2) requires that the notice must set out the details of the investigation. It must also set out the consequences of failing to comply with the notice, as a person could face penalties for failing to comply, or prosecution for the offences under sections 93 or 94 of destroying or falsifying evidence or providing false or misleading evidence.
  4. Subsection (3) requires that, where the individual subject to the notice under subsection (1) is connected to an undertaking subject to an SMS investigation, the CMA must also give a copy of the notice to that undertaking. Section 118(3) defines how a person can be "connected to" an undertaking.
  5. Subsection (4) requires the CMA to give a copy of the notice to connected undertakings at the same time the notice is given to the individual, or as soon as possible afterwards.
  6. Subsection (5) gives the CMA the power to interview individuals on oath in relation to digital markets investigations.
  7. Subsection (6) specifies that the CMA cannot require an individual outside the United Kingdom to answer questions in relation to a digital markets investigation.

Section 73: Use of interview statements in prosecution

  1. This section lists the circumstances in which interview statements in answer to questions under section 72 may be used as evidence against that individual in a criminal prosecution.
  2. Subsections (1) and (2) provide that an interview statement required under section 72 may not be used as evidence against the individual who gave it in any criminal proceedings, except where that individual is being prosecuted for destroying or falsifying information under section 93 or for providing false or misleading information under section 94. The statement may also be used as evidence in a prosecution for any other criminal offence, but only where that individual gives evidence or asks questions about the statement given under section 72, or this is done on their behalf, and makes a statement inconsistent with it. Section 30A of the Competition Act 1998 places similar limits on the use of a statement given as evidence as part of an investigation under that Act in criminal proceedings against the individual who gave it.

Section 74: Power to enter business premises without a warrant

  1. This section gives the CMA the power to enter business premises without a warrant for the purposes of a breach investigation. A breach investigation is defined in section 118(1), and includes an investigation into whether an undertaking is breaching or has breached a requirement. The power can be exercised both with and without notice. The CMA has existing powers of inspection without a warrant under section 27 of the Competition Act 1998.
  2. Subsection (1) gives an investigating officer of the CMA the power to enter any business premises for the purposes of a breach investigation. The CMA must have reasonable grounds to suspect that information relevant to the breach investigation can be accessed from or on the premises.
  3. Subsections (2) and (3) set out that an investigating officer must give notice prior to entry in all circumstances, except where they suspect that the premises are or have been occupied by the undertaking subject to the breach investigation, or where they have taken reasonable steps to give notice but have failed to do so.
  4. Subsection (2) sets out that, where an investigating officer is required to give notice, the notice must give the occupier at least two working days’ notice of entry and give details of the breach investigation. It must also indicate the consequences of failing to comply with the notice, as an individual could be subject to a penalty under sections 87(4) or prosecution under section 95 for obstructing an officer exercising their power of entry.
  5. Subsection (4) sets out that, where an investigating officer is not required to give notice, the officer is required to produce, on entry, evidence of their authorisation by the CMA and a document specifying the same information that a notice would include under subsection (2), paragraphs (b) and (c).
  6. Subsection (5) lists the powers an investigating officer has in addition to entering the business premises. This includes the power to take necessary equipment with them, to require any person on the premises to produce and explain relevant information, and take copies or extracts from any information given to them.
  7. Subsection (6) specifies that any information given to an officer must be provided in a form in which it can be taken away and either is, or can easily be made, visible and legible. This includes the ability for the CMA to require information to be provided in electronic form.
  8. Subsection (7) specifies that the CMA cannot enter premises outside the United Kingdom under this section. However, subsection (8) specifies that the CMA can access information regardless of where it is physically stored.

Section 75: Power to enter premises under a warrant

  1. This section gives the CMA the power to enter business and domestic premises under a warrant, without notice and using reasonable force, for the purposes of a breach investigation. A breach investigation is defined in section 118(1), and includes an investigation into whether an undertaking is breaching or has breached a requirement. The CMA has existing powers of entry under a warrant under sections 28 and 28A of the Competition Act 1998.
  2. Subsection (1) sets out the circumstances in which the High Court, the Court of Session or the CAT may issue a warrant to the CMA under this section. The CMA must prove that (a) there are reasonable grounds to suspect that there is information relevant to the breach investigation on or accessible from the premises, and (b) the CMA has already attempted to use another investigatory power to obtain the relevant information unsuccessfully, or suspects that no other investigatory power would enable it to obtain the relevant information it needs.
  3. Subsection (2) lists the powers an authorised officer of the CMA, and any officers authorised to accompany them, has under a warrant issued under this Part of the Act. This includes the power to enter the premises using reasonable force, to search the premises for relevant information, to operate equipment to produce information, and to require assistance and explanations from any person on the premises. The officer has the power to require the production of any information which is accessible from the premises, including material stored remotely or online in electronic form. This includes the power to take copies of or extracts from, or take possession of, any relevant information that is given to them.
  4. Subsection (3) specifies that any information given to an officer must be provided in a form in which it can be taken away and either is, or can easily be made, visible and legible. This includes the ability for the CMA to require information to be provided in electronic form.
  5. Subsection (4) provides that a warrant may also authorise people who are not employees of the CMA to accompany and assist the authorised officer who is exercising the powers under this section. This might include individuals who have expertise that is not available within the CMA but is required to fully carry out the terms of the warrant (e.g. technical or IT experts).
  6. Subsection (7) defines "domestic premises" in relation to the premises the CMA is empowered to enter, and "occupier" and "premises" for the purposes of this section and section 76.

Section 76: Power to enter premises under a warrant: supplementary

  1. This section sets out supplementary requirements for the exercise of the power under section 75 to enter premises under a warrant.
  2. Subsection (1) requires the warrant to set out the subject matter and purpose of the breach investigation. It must also indicate the consequences of obstructing an officer exercising their power of entry, as a person could be subject to a penalty under section 87(4) or prosecution under section 95 for obstructing an officer.
  3. Subsection (2) provides that an authorised officer must have a warrant to exercise the powers listed under section 75.
  4. Subsections (3) and (4) apply when there is no one at the premises when the authorised officer proposes to execute the warrant. Subsection (3) requires an authorised officer to take reasonable steps to inform the occupier of entry and give them, or a representative, a reasonable opportunity to be present before executing the warrant. Subsection (4) requires the officer to leave a copy of the warrant in a prominent place on the premises if they are unable to inform the occupier prior to entry.
  5. Subsection (6) specifies that the CMA cannot enter premises outside the United Kingdom under section 75. However subsection (7) specifies that the CMA can access information under section 75 regardless of where it is physically stored.

Section 77: Amendments to the Criminal Justice and Police Act 2001

  1. This section amends sections 50, 57, 63, 64, 65, 66 and Part 1 of Schedule 1 of the Criminal and Justice Police Act 2001 to enable the CMA to seize information and take copies of, or extracts from, information when exercising its power to enter business and domestic premises under a warrant under section 75. Section 123 of this Act makes similar amendments to these sections of the Criminal and Justice Police Act 2001 to enable the CMA to seize documents when entering domestic premises under a warrant under section 28A of the Competition Act 1998. The CMA has existing powers to seize documents from business premises under section 28 of the Competition Act 1998.

Section 78: Application for a warrant

  1. This section requires the CMA to follow the respective rules of the High Court, the Court of Session or the CAT when making an application to one of those courts for a warrant to exercise its power to enter premises under section 75.
  2. Subsection (2) amends Schedule 4 of the Enterprise Act 2002 to specify that Competition Appeal Tribunal rules (made under section 15 of the Enterprise Act 2002) may make provision for proceedings when the CMA applies for a warrant under section 75.

Section 79: Reports by skilled persons

  1. This section gives the CMA the power to require a skilled person, which could be a legal or natural person, to provide a report to it on a matter relevant to the operation of the regime.
  2. Subsection (1) sets out that the CMA can use this power when exercising, or deciding whether to exercise, any of its digital markets functions. The CMA can only exercise this power in relation to a designated undertaking (and an undertaking subject to existing obligations under section 17(1)) or an undertaking subject to either a breach investigation or an SMS investigation.
  3. Subsections (2) and (3) set out that the CMA may appoint a skilled person to provide a report. Where it does so, the CMA must give notice of the appointment, and the relevant matters to be included in the report, to the undertaking in question. The CMA may specify the form of the report.
  4. Subsection (4) specifies that the CMA can make the designated undertaking (and undertaking subject to existing obligations under section 17(1)) or the undertaking subject to either a breach investigation or an SMS investigation liable to pay the skilled person directly for producing the report.
  5. Subsections (5) and (6) set out that the CMA can also give notice to an undertaking requiring it to appoint a skilled person to produce a report to the CMA. The notice should specify the form of the report, the relevant matters that it must deal with and the date by which it must be provided. The CMA must approve any appointments made by an undertaking, including details of how payment will be made to the skilled person.
  6. Subsections (7) to (10) state that the payment due to the skilled person from an undertaking under subsection (4) and subsection (6), paragraph (b) can be recovered through the courts.
  7. Subsection (11) provides that the CMA must be satisfied that the skilled person has the necessary skills to report on the relevant matters. This could include an external third party with relevant expertise, such as an accounting firm, management consultancy or an individual with technical expertise such as a software engineer.
  8. Subsection (12) imposes a duty on the designated undertaking (and undertaking subject to existing obligations under section 17(1)) or undertaking subject to either a breach investigation or an SMS investigation, and any person connected to those undertakings, to assist the skilled person in any way reasonably required to prepare the report. Section 118(3) defines how a person can be connected to an undertaking. If an undertaking or connected person fails to comply with this duty, the CMA may impose a penalty in accordance with section 87 of the enforcement provisions under this Part of the Act.
  9. Subsection (13) specifies that the duty to assist a skilled person in subsection (12) does not include giving access to individuals, premises, equipment or individuals outside the United Kingdom. However, subsection (14) clarifies that the skilled person can require access to information and services within and outside the United Kingdom.

Section 80: Duty to preserve information

  1. This section creates a legal duty to preserve evidence which is relevant to a digital markets investigation, a compliance report by an undertaking or where the CMA is providing investigative assistance to an overseas regulator. Where the CMA has made a request for information, there are penalties for non-compliance, or for falsifying, concealing or destroying information. The purpose of this section is to preserve evidence before and after the CMA has made a formal request. This is consistent with an existing duty to preserve evidence in section 201, subsection (4) of the Enterprise Act 2002 in relation to cartel offence investigations and the creation of a new duty to preserve evidence under section 28B of the Competition Act 1998 made under section 121 of this Act.
  2. Subsection (1) sets out that in the circumstances described in subsections (2), (3), (4) and (5), a person must not carry out, cause or permit the destruction, disposal, falsification or concealment of relevant information. This duty does not apply where the person has a reasonable excuse to do so.
  3. Subsections (2), (3), (4) and (5) set out the circumstances in which this duty applies. This includes situations where a person knows or suspects that a breach or PCI investigation is being or is likely to be carried out, but - for example - where the CMA has not yet formally opened an investigation or required information to be produced. The duty also applies where an undertaking, or a person connected to an undertaking, knows that the undertaking is subject to an initial SMS investigation. This also includes where an undertaking, or a person connected to an undertaking, knows that the undertaking is required to produce a compliance report under section 84, or is subject to a further SMS investigation. The duty also applies where an undertaking, or a person connected to an undertaking, knows or suspects that the CMA is, or is likely to, provide investigative assistance to an overseas regulator in relation to that undertaking. Section 118(3) defines how a person can be connected to an undertaking.
  4. Subsection (6) sets out the circumstances in which information would be considered relevant for the purposes of this section.

Section 81: Privileged communications

  1. This section specifies that the CMA cannot require any information subject to legal professional privilege or (in Scotland) confidentiality of communications - i.e. the principle that legal advice is confidential to the client to whom it is given - when exercising its investigatory powers under this Part of the Act.
  2. Subsection (2) specifies that this limitation applies to producing, taking possession of, taking copies of, or extracts from, a privileged communication. Subsection (2) also clarifies that this limitation is subject to Part 2 of the Criminal Justice and Police Act 2001 as that Part is amended by section 77 of the Act. This means that legally privileged information is subject to the relevant provisions and safeguards in the Criminal Justice and Police Act 2001, when the CMA is exercising its power to seize information when entering premises under a warrant under section 75 of the Act.

Section 82: Power of CMA to publish notice of investigative assistance

  1. This section gives the CMA the power to publish a notice of any decision to use its investigatory powers under the digital markets regime to assist an investigation by a regulator in another jurisdiction. This notice may include the regulator the CMA is assisting, the undertaking which is the subject of investigation, as well as the matter for which the undertaking is under investigation.

Compliance reports etc

Section 83: Nominated officer

  1. This section requires an undertaking subject to a digital markets requirement under the regime to assign an appropriate senior manager to the role of "nominated officer", for the purpose of monitoring the undertaking’s compliance with a digital markets requirement. A penalty may be imposed on a nominated officer of an undertaking that fails to comply with a relevant compliance reporting obligation (see section 87(3)).
  2. Subsection (2) sets out the tasks of the nominated officer and requires them to carry out those tasks in relation to "digital markets requirements and each related requirement". For example, if a nominated officer is assigned to a conduct requirement, they are automatically assigned to any subsequent enforcement orders made in connection to it.
  3. Subsection (5) requires that the individual assigned to the role of nominated officer must be a "senior manager" as defined in section 69 and must be able to carry out the tasks required.

Section 84: Compliance reports

  1. This section requires undertakings subject to a digital markets requirement under the regime to provide the CMA with reports setting out how they are complying with requirements imposed upon them. The CMA has a duty to notify an undertaking of any compliance reporting requirements and will specify in the notice when reports should be submitted, what information they should contain, and what form they should take. The CMA can alter the reporting requirements on an undertaking by giving the undertaking a further notice.
  2. Subsection (5) permits the CMA to require an undertaking to publish a compliance report or a summary of a compliance report. This could include publication on the undertaking’s website or in hard copy at a registered office of the undertaking. The version the undertaking is required to publish may be different to the version provided in private to the CMA under subsection (1), for example some information may be redacted for confidentiality purposes.

Chapter 7: Enforcement and Appeals

Civil penalties

Section 85: Penalties for failure to comply with competition requirements

  1. This section sets out that the CMA can impose monetary penalties on an undertaking where it is satisfied that the undertaking has breached a regulatory requirement, including for merger reporting and commitments, without reasonable excuse.

Section 86: Amount of penalties under section 85

  1. This section sets the maximum penalties that the CMA can impose under section 84. The CMA is able to impose penalties of up to 10% of worldwide turnover, and in the case of breaches of orders or commitments up to 5% of daily worldwide turnover for each day a breach continues.
  2. Subsections (2) and (3) state that the CMA will in most situations have the discretion to choose whether to impose a fixed penalty or a daily rate penalty, or both. However, where an undertaking breaches a conduct requirement (as opposed to an enforcement order) or breaches any requirements under Chapter 5 of Part 1 (mergers), the CMA will only be able to impose a fixed penalty.

Section 87: Penalties for failure to comply with investigative requirements

  1. This section sets out that the CMA can impose penalties on any person (including an undertaking), where it is satisfied that they have failed to comply with an investigative requirement or a compliance reporting obligation without reasonable excuse. This includes supplying the CMA with information which is false or misleading in connection with any function of the CMA under Part 1 of the Act. The section also sets out the circumstances in which the CMA can impose civil sanctions against either a named senior manager assigned to an information request (see section 70) or a nominated officer with relation to a compliance report (see section 83).

Section 88: Amount of penalties under section 87

  1. This section sets the maximum fixed and daily rate penalties that the CMA can impose under section 87 on persons.
  2. Subsection (3) sets out that the CMA may impose a fixed penalty on undertakings that are not individuals, of up to 1% of worldwide turnover, or a daily penalty of up to 5% of daily worldwide turnover for each day non-compliance continues, or both. Subsection (5) sets out that the CMA may impose a fixed penalty on a person that is not an undertaking of up to £30,000, or a daily penalty of £15,000, or both. Within those limits, the level of penalty will be an amount that the CMA considers appropriate given the circumstances of the case.
  3. Subsections (6) to (8) set out that the Secretary of State has the power to amend the maximum amounts of penalty that can be imposed on an individual under section 87.

Section 89: Procedure and appeals etc

  1. This section sets out which sections of the Enterprise Act 2002 apply to the CMA’s decision to impose a penalty under section 85 or section 87, following a finding that a person has breached a requirement imposed under this Part. Section 112 of the 2002 Act covers the main procedural requirements for giving notice of a penalty. Section 113 covers procedural requirements for payment of a penalty and interest. Section 114 covers appeals in relation to penalty decisions (set out below). Section 115 sets out the procedure for recovering a penalty which has not been paid.
  2. As a result of the provision made by subsection (1), section 114 of the Enterprise Act 2002 applies to appeals which are brought under section 89 against the decision to impose penalties under either sections 85 or 87, the amount of one of those penalties and the date by which the penalty is required to be paid. Appeals against all other decisions taken under Part 1 are to be brought under section 103, with the exception of those decisions taken in connection with the CMA’s functions under Chapter 5 which section 66 applies to.

Section 90: Calculation of daily rates and turnover

  1. This section sets out how the CMA will calculate daily rates and turnover for the purpose of imposing a monetary penalty. Daily penalties are calculated from the date that the relevant party is served notice of the penalty by the CMA. Daily penalties will accumulate until the person complies with the requirement (e.g. the requested information is provided) or, where the penalty is incurred in relation to an overseas investigation, when the overseas regulator no longer requires assistance. The CMA has the discretion to determine an earlier date for the amount payable to cease accumulating.
  2. Subsections (2) to (4) set out that the Secretary of State has the power to specify how turnover is calculated in secondary legislation.

Section 91: Statement of policy on penalties

  1. This section sets out that the CMA must publish and have regard to a statement of policy in deciding how to make use of the powers to impose penalties under section 85 and section 87. It requires the CMA to consult the Secretary of State and then publish the statement of policy, which will include the considerations relevant to determining the nature and amount of any monetary penalty.

Section 92: Monetary penalties: criminal proceedings and convictions

  1. This section provides that where a person has been found guilty of a criminal offence committed under sections 93, 94 or 95, they will not be required to pay a civil penalty for that same offence. Likewise, where a person has paid a civil penalty for an act of the kind referenced under section 87, they cannot be criminally convicted for that same offence. The section does not prevent criminal or civil proceedings from being started where, respectively, a penalty has been imposed but not paid or someone has been charged but not convicted.

Offences

Section 93: Destroying or falsifying information

  1. This section sets out that it is a criminal offence to intentionally or recklessly destroy, falsify or conceal information that has been requested by the CMA. The section mirrors section 43 of the Competition Act 1998. The offence can only be committed in relation to information that has been requested by the CMA, and can only be committed by the person from whom the information was requested.

Section 94: False or misleading information

  1. This section sets out that it is a criminal offence to knowingly or recklessly provide information to the CMA which is false or misleading. This section mirrors section 44 of the Competition Act 1998 and section 117 of the Enterprise Act 2002.

Section 95: Obstructing an officer

  1. This section sets out that obstructing an investigating officer is a criminal offence. The section mirrors section 42 of the Competition Act 1998.

Section 96: Offences by officers of a body corporate etc

  1. This section provides for the circumstances in which individual officers of a body corporate (for example, companies), members of limited liability partnerships and partners of Scottish partnerships may be held responsible for the conduct of their body corporate where they have committed a criminal offence under sections 93, 94 or 95. Criminal proceedings may be pursued against such an individual where their body corporate has committed an offence, and that offence is proved to have been committed with their consent, connivance, or neglect.
  2. This section mirrors section 72 of the Competition Act 1998 and section 125 of the Enterprise Act 2002.

Section 97: Offences: limits on extra-territorial jurisdiction

  1. This sets out that an individual cannot commit an offence under sections 93, 94 and 95, if they are outside the UK when they perform the act, unless they meet one or more of the listed conditions.

Section 98: Sentences

  1. This section sets out the punishments that can be imposed by the relevant courts on conviction of a criminal offence under sections 93, 94 or 95.
  2. In England, Wales and Northern Ireland, a summary offence is triable in the Magistrates' Courts and an indictable offence, in the Crown Courts. In Scotland, a summary offence is triable in the Justice of the Peace Courts or the Sheriff Courts, and an indictable offence in the Sheriff Courts or High Court of Justiciary. In Scotland and Northern Ireland, there are statutory limits on fines that can be imposed by courts on conviction. In England and Wales, there is no such limit.

Further enforcement provisions etc

Section 99: Director disqualification

  1. This section inserts new text into the Company Directors Disqualification Act 1986. The Company Directors Disqualification Act 1986 provides that the court must make a disqualification order against a director of a company which has breached competition law if the court considers the person’s conduct was such as to make them unfit to be concerned in the management or control of a company. This section will enable disqualification of a person from being a director as a consequence of their involvement in an infringement of a requirement relating to conduct requirements or pro-competition interventions. The disqualification can be for up to 15 years.

Section 100: Enforcement of requirements

  1. This section makes provision for the CMA to enforce orders and commitments through the courts if a person (including an undertaking) has failed to comply with the instructions set out by the CMA in those orders or has failed to adhere to commitments accepted by the CMA.
  2. Subsection (1) states that the CMA only has the power to apply to court under this section once a person (including an undertaking) has failed to comply with an order or commitment listed in subsection (2). This means, for example, that an initial breach of a conduct requirement, before an enforcement order has been put in place or a commitment has been accepted, cannot be enforced with a court order.
  3. Subsection (1) also states that if a requirement listed in subsection (2) relates to the management or administration of the undertaking, then a court order can be addressed to either the undertaking itself or its officers, members or partners.
  4. Subsection (3) states that the person who is the subject of the order may be made responsible for the costs incurred by the CMA in applying for it.

Section 101: Rights to enforce requirements of this Part

  1. This section sets out the right for any person to bring private action seeking a remedy for losses, resulting from a designated undertaking’s breach of its statutory duties.
  2. Subsection (1) explains that any duty listed as a relevant requirement in sub-section (4) may be subject to private action if it is breached.
  3. Subsection (2) sets out that any person that suffers loss or damage, as a result of a designated undertaking's (or part of a designated undertaking’s) breach of a statutory duty, can seek appropriate compensation in the High Court, Court of Session, Sheriff Courts or the CAT. The claimant can seek damages, a court order to restrict the designated undertaking’s actions in relation to their legal rights, or any other suitable type of remedy for loss resulting from the undertaking’s breach of its statutory duty.
  4. Subsection (4) sets out that the relevant statutory duties for which redress is available are: conduct requirements, pro-competition intervention orders and commitments.
  5. Subsection (5) creates a power to permit rules of the relevant court and CAT to make provision for private actions brought under this section to be transferred between the relevant court and the CAT and vice versa.
  6. Subsection (6) sets out that, outside of the CAT, claimants can choose to bring a private action case in the High Court for England & Wales; the Court of Session and the Sheriffdom courts for Scotland; and the High Court for Northern Ireland.
  7. Subsection (6) allows for the CAT to refer a designated undertaking’s breach of an injunction to the High Court. If the High Court is satisfied that the designated undertaking would have been in contempt of court if the injunction had been granted by the High Court, the High Court may deal with the designated undertaking as if it were in contempt.

Section 102: Treatment of CMA breach decisions etc

  1. This section sets out that the courts and Tribunal are bound by the CMA’s finalised breach decisions. This means that for any private action brought by a person following a finalised CMA breach decision, the court or Tribunal will not consider whether a breach was made, but instead will consider what a suitable remedy would be.
  2. Subsections (2) and (3) detail the circumstances under which a CMA’s breach decision becomes final and therefore binding on the courts for any private actions brought under section 101. This is when the deadline to apply for a review of the decision has passed without any application being made or when an application, including any appeal relating to it, is determined or has ended.
  3. Subsection (5) defines a "CMA breach decision" as a decision by the CMA that a designated undertaking has breached a statutory duty imposed on it by the regime. These statutory duties are: conduct requirements, pro-competition intervention orders and commitments.
  4. Subsection (6) sets out that the courts or Tribunal rules can be amended to allow the CMA to assist in private action cases brought in relation to the digital regime. For example, the CMA may assist by providing interpretations of the pro-competition interventions it imposed, or information about enforcement decisions relevant to the case.

Applications for review

Section 103: Applications for review etc

  1. The section allows decisions taken by the CMA in connection with its digital markets functions to be reviewed by the CAT. It applies to any decision taken by the CMA in connection with its digital markets functions, other than decisions made in connection with the CMA’s mergers functions (see section 66) and decisions to impose a penalty under section 85 or section 87 (see section 89). The CAT will decide these challenges on the same basis as the courts decide applications for judicial review. Case law suggests possible grounds of challenge include: (i) that an error of law was made; (ii) that there was a material procedural error; (iii) that a material error as to the facts has been made; and (iv) that there was some other material illegality (such as unreasonableness or lack of proportionality).
  2. Subsections (1) and (2) set out that, any party with a "sufficient interest" in a decision has the right to make an appeal. "Sufficient interest" is a test for who has standing to bring a challenge, which is already used by the CAT and also the Administrative Court. These provisions mean that undertakings who are subject to the decision as well as third parties, which may include competitors of the undertaking, who have a particular interest in the subject matter of the decision can challenge that decision.
  3. Subsection (3) provides that a designated undertaking will always be expected to comply with a decision until the outcome of an appeal is known, unless the CAT makes an interim order to the contrary.
  4. Subsections (6) to (8) provide that decisions of the CAT may be appealed to the appellate court for that jurisdiction. As the CAT is a UK-wide tribunal, at the beginning of a case, the CAT will decide which of the UK’s three legal jurisdictions it is sitting in for the purposes of that case. If the CAT decides it is sitting in Scotland, for example, subsection (6) means that any appeals of CAT decisions in that case should be made to the Court of Session.

Chapter 8: Administration etc

Administration

Section 104: Extension etc of periods

  1. This section sets out the powers the CMA has to extend the statutory deadlines established in Part 1 of this Act.
  2. Subsections (1) and (2) establish the CMA’s power to extend the relevant investigation period or a period when the final offer mechanism is being used by up to three months for special reasons. Subsection (8) defines ‘relevant investigation period’ as being the period set by the statutory deadlines for SMS investigations, conduct requirement breach investigations, and pro-competition intervention investigations. The section does not further define ‘special reasons’, but it is anticipated that they would include occasions where there are specific reasons which justify an extension of the normal time limits. These might include matters such as the illness or incapacity of members of an investigation team that has seriously impeded its work, an unexpected event such as a merger of competitors, or new relevant information. These reasons will depend on the relevant circumstances of each case. The CMA must publish a notice to trigger the beginning of any extension. The CMA must also specify in the notice how long the extension will be for (up to a maximum of three months).
  3. Subsection (3) establishes the CMA’s power to extend a relevant investigation period or period when the final offer mechanism is being used in the case of failure to comply with an information request (see section 69) or an interview request (section 72). The CMA must publish a notice to trigger the extension. The following conditions must be met before a notice can be published:
    1. In the context of a relevant investigation period:
    2. The CMA has issued an information request under section 69 or an interview request under section 72, as part of an SMS designation investigation, PCI investigation or conduct breach investigation, and the recipient of those requests has failed to comply. For example, a firm may have failed to return requested information or turn up to an interview. And,
    3. By virtue of their request not being complied with, the CMA has been unable to properly carry out the function that the request was in relation to. For example, failure to supply information has led to the CMA being unable to properly assess whether a conduct requirement breach has taken place.
    4. In the context of a final offer period:
    5. The CMA has issued a notice under section 69 and a person has failed to comply with a requirement in that notice, and
    6. By virtue of the notice not being complied with, the CMA has been unable to properly carry out any of its functions under sections 38 to 45.
  4. Subsection (4) requires the CMA to publish a notice to mark the end of an extension under subsection (3). This process of suspending the statutory time limits is colloquially known as "stopping the clock". Under subsection (5), the extension lasts until the information requested has been provided or the CMA has decided to end the extension period for some other reason, for example, because it has obtained the information required through another source. Sections 25(2) and 34ZB of the Enterprise Act 2002 set out equivalent powers.
  5. Subsection (7) explains the interaction between extensions to SMS investigations and active SMS designations. If the CMA is carrying out a further SMS investigation for a designated undertaking, and they need to extend that investigation, it is possible that the investigation would not conclude until the original designation has expired, meaning that undertaking would fall out of the regime before the need for continued SMS designation is confirmed. This subsection allows an SMS designation to be extended to match the length of the SMS investigation period. If the extension is made under subsection (3), an extension to the SMS designation can only be made if the person not complying is, or is connected to, the designated undertaking in question. Section 118, subsection (3) sets out when a person is "connected to" an undertaking.
  6. The power to extend relevant investigation periods under this section does not affect any other powers that the CMA has to address a failure to comply with the provisions noted above, such as the power to impose a fine under section 87.

Section 105: Extensions: supplementary

  1. This section provides additional detail on how extensions made under section 104 interact with each other, are brought to a close and are calculated.
  2. Subsection (1) clarifies that both types of extension provided for in section 104 can be applied in the course of any given final offer period or ‘relevant investigation period’, defined at section 104, subsection (8), for SMS investigations, conduct requirement breach investigations, pro-competition intervention investigations. For example, the CMA can extend an SMS designation investigation for up to three months, and also make a "stop the clock" extension as part of that period.
  3. Subsection (2) clarifies that only one extension of up to three months for special reasons can be made per ‘relevant period’. This restriction does not apply for a "stop the clock" extension which can be applied multiple times.
  4. Subsection (3) clarifies how the total length of SMS investigations, conduct requirement breach investigations, pro-competition intervention investigations and final offer periods will be calculated, when they have been subject to an extension made under section 104, subsection (1) or section 104, subsection (3). For example, if a 9-month SMS investigation is subject to a 2-month extension under section 104, subsection (3), the final length of the investigation will be 11 months.
  5. Subsection (4) clarifies that for periods where multiple 103 (3) extensions are active at the same time, they are considered to run concurrently rather than cumulatively. For example, if a 9-month SMS investigation had been extended for two months under section 104, subsection (3), and one month into that extension a further two-month extension under section 104, subsection (3) occurs, then those extensions would run concurrently for one month, and that period of overlap would be ignored when calculating the total length of the extension made. The total length of that investigation would be nine months plus two months for the initial extension, plus one month for the remainder of the second extension, for a total of 12 months.

Section 106: Exercise and delegation of functions

  1. This section explains how decisions will be made under the digital markets regime.
  2. Subsections (1) to (5) give the CMA the discretionary power to create groups (under Schedule 4 to the Enterprise and Regulatory Reform Act 2013) to carry out functions of the new regime that have not been reserved for the CMA Board or its committees. The functions that are reserved for the Board and its committees are described at subsections (7) and (8). The CMA must state the function that such a group is being established for and the group will be required to fulfil that function. For example, the CMA could constitute a Group to consider PCI orders, and subsequently all PCI orders would need to be seen by that Group.
  3. Subsections (6) and (7) add functions to the list of non-delegated functions at paragraph 29(2) of Schedule 4 to the Enterprise and Regulatory Reform Act 2013. As a result, the following decisions will need to be made by the CMA Board:
    1. Whether to launch an initial SMS investigation
    2. Whether to launch a further SMS investigation (for example if the CMA decides to launch a designation investigation ahead of the requirement to do so before the end of the 5-year designation period)
    3. Whether to begin a pro-competition intervention investigation.
  4. Subsection (8) adds a new sub-paragraph (2A) to paragraph 29 of Schedule 4 to the Enterprise and Regulatory Reform Act 2013. This section lists out functions that can only be undertaken by the CMA Board or delegated to a committee of the Board. These functions are:
    1. Whether to make an SMS designation
    2. Whether to apply existing obligations or make transitional, transitory or saving provisions in relation to them (see section 17)
    3. Whether to impose or vary conduct requirements
    4. Whether to revoke conduct requirements
    5. Whether to make an enforcement order (not including an interim enforcement order)
    6. Whether to accept a commitment
    7. Whether to adopt the final offer mechanism
    8. Whether to make a pro-competition intervention
    9. Deciding the contents of the notice of decision at the end of a pro-competition investigation
    10. Whether to replace a pro-competition order
    11. Whether to revoke a pro-competition order
    12. Whether to impose a penalty
    13. Deciding the amount of a penalty
  5. Sub-paragraph (2B) clarifies that to be eligible to carry out the functions under sub-paragraph (2A), a committee must include at least two CMA Board members, which can include the Chair. At least half of the committee’s membership must be non-staff (which may include the Chair) or CMA panel members.
  6. Subsection (9) creates a delegated power for the Secretary of State to amend the lists of decisions reserved to the Board or a Committee. A draft of this statutory instrument would need to be laid before and approved by each House of Parliament before it can be enacted.

Regulatory coordination and information sharing

Section 107: Consultation with relevant regulators

  1. This section sets out requirements for the CMA to consult specific named regulators when proposing to exercise certain significant digital markets functions (a "regulatory digital markets function", as defined in section 118(1)), where certain specified conditions are met. These functions include the discretionary opening of an SMS investigation, SMS designation, the imposition of a conduct requirement and the making of a PCI. The five regulators that these requirements apply to are the Bank of England, the Financial Conduct Authority, the Information Commissioner, the Prudential Regulation Authority and the Office of Communications.
  2. Subsections (1) and (2) require the CMA to consult the Financial Conduct Authority and the Office of Communications respectively on proposals which the CMA considers fall within the sectoral remit of the relevant regulator. In relation to the Financial Conduct Authority, this is the provision of financial services and the provision of claims management services in Great Britain, and in relation to the Office of Communications, commercial activities connected with communications matters. This could involve the CMA seeking the view of the relevant regulator on the impacts that the proposal may have on the sector the regulator is responsible for as well as any other relevant expertise the regulator might have.
  3. Subsection (3) requires the CMA to consult the Information Commissioner on proposals which the CMA considers are likely to have a non-negligible adverse impact on the Commissioner’s ability to exercise their functions under data protection and related legislation (see subsection (7)). This requirement does not affect any duty the CMA may have to consult the Information Commissioner under Article 36(4) of the UK General Data Protection Regulation.
  4. Subsection (4) requires the CMA to consult the Bank of England on proposals which the CMA considers are likely to have a non-negligible adverse impact on the Bank’s ability to advance its Financial Stability Objective (as defined in section 2A of the Bank of England Act 1998).
  5. Subsection (5) requires the CMA to consult the Prudential Regulation Authority on proposals which the CMA considers are likely to have a non-negligible adverse impact on the Authority’s ability to advance its general objective under section 2B of the Financial Services and Markets Act 2000, or its insurance objective under section 2C of that Act.
  6. Subsection (6) provides that the CMA is only required to consult a regulator to the extent that the CMA considers the burden on it of conducting the consultation not to outweigh the benefits that it would bring.

Section 108: Recommendations to the CMA

  1. This section sets out a formal mechanism for the Financial Conduct Authority or the Office of Communications to make a recommendation to the CMA for it to exercise a regulatory digital markets function. This term is defined in section 118(1) and encompasses certain significant functions under the digital markets regime, including the discretionary opening of an SMS investigation, the imposition of a conduct requirement and the making of a PCI. This mechanism could for example be used in cases where the Financial Conduct Authority or the Office of Communications identify a potential competition concern specifically in digital markets, for which the CMA is considered to have the most suitable powers to take action. The CMA must respond to the relevant regulator within 90 days setting out what action, if any, it has taken or will take and the reasons for its decision. A summary of the CMA’s response must also be published online (see section 113(3)).

Section 109: Information sharing

  1. This section extends the information provisions of Part 9 of the Enterprise Act 2002 to cover the new functions of the CMA introduced in Part 1 of this Act. It will also extend the provisions to enable sharing of information between the CMA and the Information Commissioner’s Office (ICO) where it facilitates the exercise of one of their respective statutory functions.
  2. Subsection (1) adds Part 1 of the Act to the list of Specified Functions set out in Schedule 14 of the Enterprise Act 2002. This places any information obtained by the CMA through the exercise of any statutory function under the digital markets regime in scope of the general restriction on disclosure set out at section 237 of the Enterprise Act 2002. It is a criminal offence under section 245 of the Enterprise Act 2002 to disclose or use information to which section 237 applies unless that disclosure or use is permitted by Part 9 of the Enterprise Act 2002.
  3. Subsection (2) adds several pieces of legislation to Schedule 15 of the Enterprise Act 2002. This would allow - under section 241(3) of the Enterprise Act 2002 - any public authority, such as the CMA, to share information which it holds that is subject to the restriction on disclosure in section 237 with a different party. This would only be possible for the purpose of assisting that party exercise a statutory function under any of the pieces of legislation added to this Schedule. For example, by adding legislation which contains functions of the ICO, the CMA will be able to share information obtained through its functions under this Act to facilitate the ICO carrying out its functions under that legislation.

Miscellaneous

Section 110: Power to charge levy

  1. This section will give the CMA a delegated power to collect a levy from designated undertakings to recoup costs associated with delivering the digital markets regime.
  2. Subsection (1) sets out that the CMA can require undertakings which have been designated with SMS to pay a levy, and that the requirement to pay the levy will relate to a given ‘chargeable year’, which is defined in subsection (10) as the period of 12 months ending with 31 March. It establishes that designated undertakings will be required to pay the levy in any such year where they have an active SMS designation, whether that designation is in place for the full year or only part of it.
  3. Subsection (2) sets out that the CMA will make rules to establish the methodology they will use for calculating the levy, and that the CMA must comply with these rules once created. Subsection (3) sets out that the CMA will be able to update or change these rules.
  4. Subsection (4) sets out a number of obligations that the levy rules must comply with. These are that:
    1. Paragraph (a) - the CMA cannot collect more money through the levy than it spends delivering the regime in any given chargeable year. Subsection (10), paragraph (b) establishes that the cost of delivering the regime should not include costs associated with litigation.
    2. Paragraph (b) - the rules must set out how the cost of the levy is split between designated undertakings. For example, split evenly between undertakings which have been designated, or proportionately based on the number of designated activities each undertaking has.
    3. Paragraph (c) - if an undertaking only has SMS designation for part of a year, the amount of levy it pays should be proportionate to the amount of time it has a designation. For example, if it had been designated for six months of the year, it would pay 50% of the amount that it might have to pay if it had been designated for the full year.
    4. Paragraph (d) - the rules must set out how the CMA calculates its anticipated costs in a year. This will be the amount that it bases its initial levy charges on at the start of the year.
    5. Paragraph (e) - As the amount identified when complying with (4)(d) might change if the CMA ultimately carries out more or less work than expected, the rules must also set out how the CMA will calculate its actual costs, so that it can increase or reduce the amount of levy charged to designated undertakings at the end of the year. This will support the CMA’s compliance with (4)(a), ensuring that the CMA does not collect more than it actually spends on the regime.
    6. Paragraph (f) - the CMA will need to set out how repayment or crediting of overpayment would be carried out if the CMA’s estimates for its spending end up being greater than its actual costs.
    7. Paragraph (g) - the CMA should make sure that repayment or crediting of designated undertakings is proportionate to the amount that was paid by a designated undertaking in that year.
    8. Paragraph (h) - the CMA will need to set out how additional charges would be made to designated undertakings if the CMA’s estimates for its spending end up being less than its actual costs.
    9. Paragraph (i) - additional charges should be in proportion to the amount already paid by a designated undertaking in that year.
    10. Paragraph (j) - the rules will need to set out how the CMA will administer the levy, for example the processes that will be used to design, calculate and charge for it, and how the levy is to be paid, for example setting out when levy payments are due.
  5. Subsection (5) establishes that the CMA is able to charge interest on the late payment of levy fees, and sets the rate of interest as that in section 17 of the Judgments Act 1838, which is currently 8%. Subsection (6) clarifies that stipulations made for the administration of the levy in subsection (5), specifically references to amounts payable, do not include any interest that may be charged. Subsection (7) specifies that any interest collected must be returned to the Consolidated fund.
  6. Subsections (8) to (11) set out how the levy rules will be created and published. Before the levy rules can be implemented, the CMA will need to consult such persons as it considers appropriate (for example, undertakings which have or who may be designated) on the draft rules and arrange for the draft rules to be laid before Parliament. The same conditions apply should the CMA seek to amend or replace the levy rules. The final rules, including where they are amended or replaced, must be published.
  7. If a designated undertaking fails to pay the levy, subsection (12) allows the CMA to recover the amount due through the courts as a debt owed to it by the designated undertaking.

Section 111: Extra-territorial application

  1. This section specifies that, unless stated otherwise, the digital markets regime applies extraterritorially in relation to persons outside the UK. For example, the CMA’s powers to interview (section 72), enter premises without a warrant (section 74) and enter premises under a warrant (section 75) all expressly state that they are not exercisable outside the UK. However, powers conferred by section 74 and section 75 are exercisable in relation to information whether it is stored within or outside the United Kingdom.
  2. Subsection (2) sets out that the CMA can only give a notice (such as a penalty notice) under this Part to a person outside the United Kingdom if that person meets at least one of the descriptions set out in subsections (3), (4) and (5).
  3. Subsection (3) sets out that a person is within this subsection if that person is or is part of an undertaking (for example a subsidiary firm) that has been designated with SMS, or that is subject to existing obligations (see section 17), or that is the subject of a digital markets investigation.
  4. Subsection (4) describes senior managers (see section 70) and nominated officers (see section 83) on whom the CMA has imposed or is considering imposing a penalty under section 87(2) or 87(3).
  5. Subsection (5) describes four types of link to the United Kingdom. A person with at least one of the four links to the United Kingdom will fall within this subsection.
  6. Subsection (6) makes provision so that to the extent that the CMA has broader powers, absent this section, to issue notices extra-territorially under Part 1 of the Digital Markets, Competition and Consumers Act, section 111 does not limit such powers.

Section 112: Defamation

  1. This section protects the CMA against legal action for defamation as a result of their exercise of functions under the digital markets provisions in this Part.

Section 113: Consultation and publication of statements

  1. This section outlines how the CMA must undertake its duties to consult and publish statements online under Part 1 of the Act.
  2. Subsection (1) provides that the CMA, when consulting and publishing statements under this Part, must take into account matters of confidentiality and the timetable for making a decision or taking action following the consultation. Subsection (2) provides that the CMA must include reasons and sufficient information for consultees to understand those reasons.

Section 114: Guidance

  1. This section sets out the CMA’s obligation to publish guidance on how it will exercise its powers under the digital markets regime in Part 1 of the Act. It will be able to revise or replace any guidance it publishes, but must then publish the revised or replacement guidance.
  2. Subsection (3) permits the CMA to update the guidance over time.
  3. Subsection (4) places requirements on the CMA in relation to the publication of guidance. It provides that the CMA must consult such persons as it considers appropriate before publishing guidance. For example, this could include industry associations with a particular interest in the specific guidance in question. The CMA must also obtain the approval of the Secretary of State before publishing any guidance under this section.
  4. Subsections (5) and (6) require the Secretary of State to respond to the CMA’s request for approval for guidance documents within 30 working days. By that time the Secretary of State must either approve the guidance or give reasons to the CMA for not doing so.

Section 115: Protected Disclosures

  1. This section ensures that any whistleblower making a disclosure regarding compliance with the digital regime will be afforded protections which prevent retaliation from their employer, such as dismissal or demotion. The Employment Rights Act 1996 provides protection for workers who suffer a detriment as a result of whistleblowing by making a qualifying disclosure.

Section 116: Restriction on disclosure orders

  1. This section places restrictions on the use of disclosure orders to access certain information in the possession of the CMA or information which relates to a CMA investigation.
  2. Subsections (1) and (4) define the context of the restriction as private actions relating to competition claims or those brought under section 101 of this Act.
  3. Subsection (2) prevents the CMA from being required to disclose information in its possession by a court or the CAT where another person would reasonably be able to provide that information.
  4. Subsection (3) prevents any party from being required to disclose information where it relates to an ongoing CMA investigation by a court or the CAT.
  5. Subsection (6) amends Schedule 8A of CA98 to prevent any information which cannot be required through a disclosure order through a competition claim being required through a disclosure order in a private action brought under section 101 of this Act.

Interpretation

Section 117: Groups

  1. Subsection (2) provides that an undertaking will be part of a group for the purposes of Part 1 of the Act if it is part of a larger corporate group. That is, when one or more bodies corporate that make up the undertaking belong to the same corporate group (as explained in subsection (3)) as one or more bodies corporate that do not form part of the undertaking.
  2. Subsection (3) sets out that two bodies corporate are members of the same group if one is the subsidiary of the other or if both are subsidiaries of another body corporate. For example, where A is a subsidiary of B, both will be members of the same group. This would also be the case if neither A nor B was a subsidiary of the other but both were subsidiaries of C.

Section 118: General interpretation

  1. This section defines certain terms for the purposes of Part 1. All terms that are not listed below are self-explanatory (or, where the definition of the term is found in another section, have been explained elsewhere in these explanatory notes).
    1. "Customer" includes customers that are not consumers, for example, business customers.
    2. A "digital markets function" is any function of the CMA in Part 1 of the Act, and the CMA’s power to do anything that is calculated to facilitate or is conducive or incidental to, the performance of those functions (this power is bestowed on the CMA in relation to any of its functions by paragraph 20 of Schedule 4 to the Enterprise and Regulatory Reform Act 2013).
    3. "Information" is to be understood in the widest possible sense, including estimates and forecasts as well as information that can be generated or brought into being by a party. Where the CMA requires a party to produce information in a visible and legible form, this might include producing estimates based on knowledge or experience in written form, or providing datasets or code in a usable format.
    4. "Person" is broader than the definition in the Interpretation Act 1978 and includes any undertaking, as well as legal persons and human individuals.
    5. "Undertaking" has the same meaning as it has in Part 1 of the Competition Act 1998. Simply put, an undertaking is an economic entity engaged in an economic activity e.g., placing goods or services on a market. A single undertaking may be comprised of one or more legal entities, where those entities constitute a single economic entity. This will be the case where one company can and does exercise decisive influence over another; for example, a parent company which decides the commercial policy of its subsidiaries.
    6. "User" is to be understood in very broad terms to include a person or a business that interacts in any way with the relevant digital activity. This term applies to all parts of the supply chain and regardless of whether or not the person or business provides any form of compensation/payment to interact with the relevant digital activity. Where the Act refers to "potential users", it applies to people and businesses that are not interacting with the relevant digital activity but may be seeking to do so, or who may seek to do so in the future. For example, a user may include a business whose product depends on interoperating with the relevant digital activity. It may also include a person or business whose content is hosted on or accessible through the relevant digital activity, such as is the case with the platform-press publisher relationship. A potential user may include a person or business that accesses a different undertaking’s similar or competing product to the relevant digital activity provided by the designated undertaking.
    7. "Using" is similarly to be understood in very broad terms to include any activity carried out by a person or a business that makes use of the relevant digital activity. It also applies to those conducting activities that interact with the relevant digital activity. This term applies to all parts of the supply chain and applies regardless of whether or not the person or business provides any form of compensation/payment to use the relevant digital activity. For example, if a person is using an undertaking’s video streaming service which is not the activity in relation to which it has been designated, but which prompts or otherwise redirects users to use the undertaking’s search service for which it has been designated, then the person may be considered to be using or potentially using the search service.

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