Part 1

Digital Markets
Chapter 2

Strategic Market Status

Power to designate undertaking as having SMS

Designation of undertaking
2
1
The CMA may designate an undertaking as having strategic market status (“SMS”) in respect of a digital activity carried out by the undertaking where the CMA considers that—
a
the digital activity is linked to the United Kingdom (see section 4), and
b
the undertaking meets the SMS conditions in respect of the digital activity.
2
The SMS conditions are that the undertaking has—
a
substantial and entrenched market power (see section 5), and
b
a position of strategic significance (see section 6),
in respect of the digital activity.
3
Subsection (1) is subject to section 7 (the turnover condition).
4
The CMA may only designate an undertaking as having SMS in respect of a digital activity after carrying out an SMS investigation in accordance with this Chapter.

Digital activities
3
1
For the purposes of this Part, the following are “digital activities”—
a
the provision of a service by means of the internet, whether for consideration or otherwise;
b
the provision of one or more pieces of digital content, whether for consideration or otherwise;
c
any other activity carried out for the purposes of an activity within paragraph (a) or (b).
2
For the purposes of this section, a service is provided by means of the internet even where it is provided by means of a combination of—
a
the internet, and
b
an electronic communications service (within the meaning given by section 32(2) of the Communications Act 2003).
3
The CMA may treat two or more activities within subsection (1) that are carried out by a single undertaking as a single digital activity where—
a
the activities have substantially the same or similar purposes, or
b
the activities can be carried out in combination with each other to fulfil a specific purpose.
4
In any notice or other document that the CMA is required to give or publish under or by virtue of this Part, the CMA may describe a digital activity by reference to the nature of the activity, brand names or both.

Link to the United Kingdom
4
A digital activity is linked to the United Kingdom for the purposes of section 2(1)(a) if—
a
the digital activity has a significant number of UK users,
b
the undertaking that carries out the digital activity carries on business in the United Kingdom in relation to the digital activity, or
c
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 United Kingdom.

Substantial and entrenched market power
5
In order to assess whether an undertaking has substantial and entrenched market power in respect of a digital activity for the purposes of section 2(2)(a), the CMA must carry out a forward-looking assessment of a period of at least 5 years, taking into account developments that—
a
would be expected or foreseeable if the CMA did not designate the undertaking as having SMS in respect of the digital activity, and
b
may affect the undertaking’s conduct in carrying out the digital activity.

Position of strategic significance
6
An undertaking has a position of strategic significance in respect of a digital activity for the purposes of section 2(2)(b) where one or more of the following conditions is met—
a
the undertaking has achieved a position of significant size or scale in respect of the digital activity;
b
a significant number of other undertakings use the digital activity as carried out by the undertaking in carrying on their business;
c
the undertaking’s position in respect of the digital activity would allow it to extend its market power to a range of other activities;
d
the undertaking’s position in respect of the digital activity allows it to determine or substantially influence the ways in which other undertakings conduct themselves, in respect of the digital activity or otherwise.

The turnover condition
7
1
The CMA may not designate an undertaking as having SMS in respect of a digital activity unless the turnover condition is met in relation to the undertaking.
2
The turnover condition is met in relation to an undertaking if the CMA estimates that—
a
the total value of the global turnover of an undertaking or, where the undertaking is part of a group, the global turnover of that group in the relevant period exceeds £25 billion, or
b
the total value of the UK turnover of an undertaking or, where the undertaking is part of a group, the UK turnover of that group in the relevant period exceeds £1 billion.
3
The Secretary of State may by regulations amend either of the sums mentioned in subsection (2).
4
Regulations under subsection (3) are subject to the affirmative procedure.
5
The CMA must—
a
keep under review the sums mentioned in subsection (2), and
b
from time to time advise the Secretary of State as to whether the sums are still appropriate.
6
In this section—
a
the “relevant period” means—
i
the most recent period of 12 months (“period A”) in respect of which the CMA considers that it is able to make an estimate of the total value of the relevant turnover of the undertaking or group, or
ii
if the CMA estimates that the relevant turnover of the undertaking or group in the period of 12 months ending immediately before period A was higher than the relevant turnover of the undertaking or group in period A, that earlier period of 12 months;
b
the “relevant turnover” of the undertaking or group is the UK turnover or, as the case may be, global turnover of the undertaking or group.

Turnover of an undertaking
8
1
This section applies for the purposes of the turnover condition.
2
The total value of the global turnover of an undertaking or group in the relevant period (as defined in section 7(6)) is, subject to regulations under subsection (4), the total value of the turnover of the undertaking or group arising in connection with any of its activities.
3
The total value of the UK turnover of an undertaking or group in the relevant period is, subject to regulations under subsection (4), the total value of the turnover of the undertaking or group—
a
arising in connection with any of its activities, and
b
relating to UK users or UK customers.
4
The Secretary of State may by regulations make provision about how the total value of the global turnover or UK turnover of an undertaking or group in a period is to be estimated for the purposes of the turnover condition.
5
Regulations under subsection (4) may (among other things)—
a
make provision about amounts which are, or are not, to be regarded as comprising the turnover of an undertaking or group;
b
confer on the CMA the power to determine matters specified in the regulations (including the matter mentioned in paragraph (a)).
6
Regulations under subsection (4) are subject to the negative procedure.

Procedure

Initial SMS investigations
9
1
The CMA may begin an initial SMS investigation where it has reasonable grounds to consider that it may be able to designate an undertaking as having SMS in respect of a digital activity in accordance with section 2.
2
An “initial SMS investigation” is an investigation into whether to designate an undertaking as having SMS in respect of a digital activity where the undertaking is not already designated in respect of that activity (subject to section 10(4)).
3
The CMA may begin an initial SMS investigation into whether to designate an undertaking as having SMS in respect of a digital activity even if it has previously made a decision not to designate the undertaking as having SMS in respect of that activity.

Further SMS investigations
10
1
The CMA may begin a further SMS investigation in relation to the designation of a designated undertaking in respect of a relevant digital activity at any time during the designation period (see section 18) relating to that designation.
2
The CMA must begin a further SMS investigation in relation to the designation of a designated undertaking in respect of a relevant digital activity not later than 9 months before the end of the designation period relating to that designation, if it is not already carrying one out at that time under subsection (1).
3
A “further SMS investigation” is an investigation into whether—
a
to revoke a designated undertaking’s designation in respect of the relevant digital activity or to designate the undertaking again in respect of that activity, and
b
to make provision under section 17 (existing obligations).
4
A further SMS investigation may also include an investigation into whether to designate the designated undertaking in respect of a digital activity that the CMA considers to be similar or connected to the relevant digital activity (whether instead of, or in addition to, the relevant digital activity).

Procedure relating to SMS investigations
11
1
When the CMA begins an SMS investigation it must give the undertaking to which the investigation relates a notice (an “SMS investigation notice”).
2
The SMS investigation notice must state—
a
in the case of an initial SMS investigation—
i
the reasonable grounds mentioned in section 9(1);
ii
that the CMA may close the investigation in accordance with section 12;
b
the purpose and scope of the SMS investigation;
c
the period by the end of which the CMA must give the undertaking a notice setting out its decisions as a result of the investigation (see section 14(2));
d
the circumstances in which that period may be extended (see section 104).
3
The statement of the purpose and scope of the investigation must include a description of the undertaking and digital activities to which the investigation relates.
4
The CMA must give the undertaking one or more revised versions of the SMS investigation notice if it changes its view of the purpose and scope of the investigation.
5
As soon as reasonably practicable after giving an SMS investigation notice or a revised version of an SMS investigation notice, the CMA must—
a
publish the notice, and
b
give a copy of the notice to the FCA, OFCOM, the Information Commissioner, the Bank of England and the PRA.

Closing an initial SMS investigation without a decision
12
1
The CMA may close an initial SMS investigation at any time before it has reached a final view on the matters mentioned in paragraphs (a) and (b) of section 2(1).
2
When the CMA decides to close an initial SMS investigation, the CMA must give the undertaking to which the investigation related a notice to that effect.
3
The notice must include the CMA’s reasons for closing the investigation.
4
As soon as reasonably practicable after giving a notice under subsection (2), the CMA must publish the notice.

Consultation on proposed decision
13
1
The CMA must—
a
carry out a public consultation on any decision that it is considering making as a result of an SMS investigation (see section 14(1)), and
b
bring the public consultation to the attention of such persons as it considers appropriate.
2
Consultation under subsection (1) may be carried out at the same time as consultation under section 24(1) (consultation in relation to a conduct requirement).

Outcome of SMS investigations
14
1
The CMA must—
a
in the case of an initial SMS investigation which it does not close under section 12, decide whether to designate the undertaking to which the investigation relates as having SMS in respect of a digital activity to which the investigation relates;
b
in the case of a further SMS investigation, make a decision on the matters mentioned in section 10(3) and, where relevant, section 10(4).
2
The CMA must give the undertaking a notice (an “SMS decision notice”) setting out its decisions under subsection (1) on or before the last day of the period (the “SMS investigation period”) of 9 months beginning with the day on which the SMS investigation notice is given.
3
The giving of a revised version of an SMS investigation notice under section 11(4) does not change the day on which the SMS investigation period begins.
4
Sections 15 and 16 make provision about the content of an SMS decision notice.
5
As soon as reasonably practicable after giving an SMS decision notice, the CMA must publish the notice.
6
If the CMA does not give an SMS decision notice on or before the last day of the SMS investigation period, the CMA and the undertaking to which the investigation related are to be treated as if—
a
in the case of an initial SMS investigation, the CMA had given the undertaking an SMS decision notice stating that it had decided not to designate the undertaking in respect of any digital activity to which the investigation related, and
b
in the case of a further SMS investigation, the CMA had given an SMS decision notice stating that it had decided to revoke the designated undertaking’s designation in respect of the relevant digital activity with effect from the end of the SMS investigation period.

Notice requirements: decisions about whether to designate
15
1
Where the CMA decides as a result of an initial SMS investigation not to designate the undertaking to which the investigation relates as having SMS in respect of a digital activity to which the investigation relates, the SMS decision notice must include the CMA’s reasons for its decision.
2
Subsections (3) to (6) apply where the CMA decides to designate an undertaking as having SMS in respect of a digital activity (whether or not that undertaking is already a designated undertaking).
3
The SMS decision notice must include—
a
a description of the designated undertaking,
b
a description of the digital activity with respect to which the designation has effect,
c
any provision that the CMA has decided to make in reliance on section 17 (existing obligations),
d
the CMA’s reasons for its decisions under section 14(1),
e
a statement of the period (the “designation period”) for which the designation has effect (see section 18),
f
a statement of the circumstances in which the designation period may be extended (see section 104), and
g
a statement of the circumstances in which the designation may be revoked before the end of the designation period (see sections 10 and 14(1)(b)).
4
The CMA may give one or more revised versions of an SMS decision notice if it changes its view of—
a
the undertaking, or
b
the digital activity,
provided that the undertaking or digital activity, as the case may be, remains substantially the same.
5
The giving of a revised SMS decision notice providing for the designation of an undertaking does not affect—
a
the day on which the designation period in relation to that designation begins, or
b
anything done under this Part in relation to that undertaking.
6
As soon as reasonably practicable after giving a revised SMS decision notice, the CMA must publish the revised notice.

Notice requirements: decisions to revoke a designation
16
1
This section applies where the CMA decides, as a result of a further SMS investigation, to revoke the existing designation of a designated undertaking in respect of a digital activity without making a further designation in respect of that digital activity under section 14(1)(b).
2
The SMS decision notice must provide for the revocation of the existing designation—
a
to have effect at the end of the day on which the notice is given, or
b
to have effect from such earlier time as the CMA may specify in the notice.
3
The SMS decision notice must include—
a
any provision that the CMA has decided to make in reliance on section 17 (existing obligations);
b
the CMA’s reasons for its decisions under section 14(1)(b).

Existing obligations
17
1
Where the CMA decides, as a result of a further SMS investigation, to revoke a designated undertaking’s designation in respect of a relevant digital activity, the CMA may make transitional, transitory or saving provision in respect of any existing obligation.
2
Provision may be made in reliance on subsection (1) only for the purpose of managing the impact of the revocation—
a
on any person who benefited from the existing obligation, and
b
in a way that appears to the CMA to be fair and reasonable.
3
In Chapters 6 (investigatory powers and compliance reports) and 7 (enforcement and appeals), references to a “designated undertaking” are to be read as including an undertaking to which an existing obligation applies by virtue of provision made in reliance on subsection (1).
4
Subsection (5) applies where the CMA decides, as a result of a further SMS investigation, to—
a
designate an undertaking again in respect of a relevant digital activity, or
b
designate an undertaking in respect of a different digital activity in reliance on section 10(4).
5
Where this subsection applies, the CMA may—
a
apply any existing obligation, with or without modification, to the designated undertaking in respect of the new designation;
b
make transitional, transitory or saving provision in respect of any existing obligation.
6
For the purposes of this section, an “existing obligation” is any—
a
conduct requirement (see section 19),
b
enforcement order (see section 31),
c
commitment (see sections 36 and 56);
d
final offer order (see section 41(2), or
e
pro-competition order (see section 46(3)(a)),
that is in force in relation to a designated undertaking in respect of the relevant digital activity before the revocation mentioned in subsection (1) or, as the case may be, the designation mentioned in subsection (4).
7
Provision made in reliance on this section is to be included in an SMS decision notice.

Designation period
18
1
Where the CMA decides to designate an undertaking as having SMS in respect of a digital activity, the designation period is 5 years beginning with the day after the day on which the SMS decision notice is given.
2
See—
a
section 104 for circumstances in which the designation period may be extended, and
b
sections 10 and 14(1)(b) for circumstances in which a designation may be revoked before the end of the designation period.
S. 2 not in force at Royal Assent, see s. 339(1)
S. 3 not in force at Royal Assent, see s. 339(1)
S. 4 not in force at Royal Assent, see s. 339(1)
S. 5 not in force at Royal Assent, see s. 339(1)
S. 6 not in force at Royal Assent, see s. 339(1)
S. 7 in force at Royal Assent for specified purposes, see s. 339(2)(c)
S. 8 in force at Royal Assent for specified purposes, see s. 339(2)(c)
S. 9 not in force at Royal Assent, see s. 339(1)
S. 10 not in force at Royal Assent, see s. 339(1)
S. 11 not in force at Royal Assent, see s. 339(1)
S. 12 not in force at Royal Assent, see s. 339(1)
S. 13 not in force at Royal Assent, see s. 339(1)
S. 14 not in force at Royal Assent, see s. 339(1)
S. 15 not in force at Royal Assent, see s. 339(1)
S. 16 not in force at Royal Assent, see s. 339(1)
S. 17 not in force at Royal Assent, see s. 339(1)
S. 18 not in force at Royal Assent, see s. 339(1)
S. 2 in force at 1.1.2025 by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 3 in force at 1.1.2025 by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 4 in force at 1.1.2025 by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 5 in force at 1.1.2025 by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 6 in force at 1.1.2025 by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 7 in force at 1.1.2025 in so far as not already in force by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 8 in force at 1.1.2025 in so far as not already in force by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 9 in force at 1.1.2025 by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 10 in force at 1.1.2025 by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 11 in force at 1.1.2025 by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 12 in force at 1.1.2025 by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 13 in force at 1.1.2025 by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 14 in force at 1.1.2025 by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 15 in force at 1.1.2025 by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 16 in force at 1.1.2025 by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 17 in force at 1.1.2025 by S.I. 2024/1226, regs. 1(2), 2(1)(2)
S. 18 in force at 1.1.2025 by S.I. 2024/1226, regs. 1(2), 2(1)(2)