by Anush Ganesh
The UK Digital Markets, Competition and Consumers Act (DMCCA) received Royal Assent on 24 May 2024, with key provisions coming into force on 01 January 2025. This groundbreaking legislation represents the United Kingdom’s distinct approach to regulating digital markets, differing significantly from the EU’s Digital Markets Act Regulation 2022.
The discussion about the need to complement the traditional ex-post competition policy apparatus with a more proactive, asymmetric pro-enforcer set of rules had started in the EU and UK simultaneously. The normative underpinning and the overall ethos of the new regime is identical in both jurisdictions. However, the legal mechanisms adopted in the UK and EU are characterised by several important differences. Some are rather cosmetic. Others may well become significant. Such a situation offers a very fertile soil for a comparative analysis – and the aim of our project is to engage in such a comparison.
While dealing with very similar set of objectives and while developing very similar regulatory mechanisms, the UK regime uses different terminology. For example, undertakings known in the DMA parlance as “gatekeepers” are called under the UK regime “undertakings with strategic market status” (or uSMSs), and gatekeepers’ obligations are called “conduct requirements”. In addition, the DMCCA establishes a principles-based regulatory framework that empowers the Competition and Markets Authority (CMA) with extensive new tools to address competition concerns in digital markets. Unlike the prescriptive rules-based approach of the EU’s Digital Markets Act, the DMCCA adopts a flexible, dialogue-driven approach consisting of consultations at several decision-making levels that allows for bespoke interventions tailored to specific market conditions and competitive harms. See here for a more in-depth comparative analysis of the DMCCA, DMA and Sec. 19 GWB (German Competition Act) by the SCiDA Team.
The DMCCA’s Polycentric Objective
The purpose of the DMCCA should be considered polycentric and is not discussed in great detail in the legal text. Practically, the aim of the DMCCA seems to be to create effective cross-economy competition and well-functioning markets, which in turn protect the interests of consumers. For some parts of the DMA, fairness is considered to be the main objective. Understanding the actual set of objectives pursued by the DMCCA requires additional in-depth research, so the discussion on the objectives pursued by the DMCCA here is limited.
Irrespective of what its primary goal, in order to achieve the sum of its policy objectives, the DMCCA introduces stronger enforcement against anti-competitive conduct and a series of enhancements to the CMA’s investigative and enforcement powers, a rebalanced merger control system, new penalty powers for the CMA and civil courts for consumer laws, and other measures to enhance consumer choice. Overall, the DMCCA is aimed at creating fair digital markets where undertakings with a certain size and position cannot unduly influence competition. The law itself is less specific about the objectives it pursues when compared to the DMA, which perhaps allows for more flexibility in motivating interventions.
The Strategic Market Status Framework: Designation Criteria and Scope
In Chapter II of the DMCCA lies the concept of Strategic Market Status (SMS), a designation system that allows the CMA to regulate specific digital activities rather than entire companies. 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 under Section 2(1) DMCCA.
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 according to Section 2(2) DMCCA. This activity-based approach represents a more targeted intervention strategy compared to entity-wide designations found in other jurisdictions. The legislation establishes both qualitative and quantitative criteria for SMS designation, creating a comprehensive assessment framework that differs markedly from other regulatory approaches.
The position of strategic significance under Section 6 DMCCA is determined where one or more of several conditions is met. 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 quantitative thresholds are established under Section 7 DMCCA, which creates the turnover condition. 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. 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.
The DMCCA takes an expansive approach to defining digital activities under Section 3. 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)”. As highlighted in page 11 of the SCiDA comparative paper, the definition of the digital activity is wide and indeed unlimited, contrasting sharply with the EU’s approach which carefully delineates specific “core platform services.” The solution offered by the DMCCA appears by far more pro-enforcement compared to the restrictive definitions found in other digital market regulations.
One of the most distinctive and potentially problematic aspects of the DMCCA is its requirement for forward-looking analysis under Section 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. The provision arguably needs to be treated with apprehension as “entrenched” market power ought to be evaluated through backward-looking evidence of established market positions rather than speculative five-year predictions in rapidly changing digital markets. If the CMA’s forward-looking analysis proves inaccurate, designated undertakings will likely challenge their designations at the Competition Appeal Tribunal (as the DMCCA falls within UK competition rules which are bound by Section 16 of the Competition Appeal Tribunal Rules 2015), undermining the regulatory framework’s effectiveness.
The CMA’s Extensive Powers: Conduct Requirements and Pro-Competition Interventions
The DMCCA equips the CMA with two primary regulatory tools: conduct requirements and pro-competition interventions (PCIs). These mechanisms reflect the Act’s principles-based approach, allowing for tailored interventions rather than one-size-fits-all rules. The CMA may impose one or more conduct requirements on a designated undertaking by giving the undertaking a notice containing the information set out in section 21 under Section 19(1) DMCCA. “Conduct requirements” are requirements as to how the designated undertaking must conduct itself in relation to a relevant digital activity according to Section 19(3).
The Act establishes three core objectives that guide the imposition of conduct requirements under Section 19(5) DMCCA. The CMA may only impose a conduct requirement or a combination of conduct requirements on a designated undertaking if it considers that it would be proportionate to do so for the purposes of one or more of the following objectives- (a) the fair dealing objective, (b) the open choices objective, and (c) the trust and transparency objective. Each objective is precisely defined within the legislation to provide clear guidance for CMA decision-making.
The fair dealing objective is that users or potential users of the relevant digital activity are- (a) treated fairly, and (b) able to interact, whether directly or indirectly, with the undertaking on reasonable terms under Section 19(6). The open choice objective is that users or potential users of the relevant digital activity are able to choose freely and easily between the services or digital content provided by the undertaking and services or digital content provided by other undertakings according to Section 19(7). The trust and transparency objective is that users or potential users of the relevant digital activity have the information they require to enable them to- (a) understand the services or digital content provided by the undertaking through the relevant digital activity, including the terms on which they are provided, and (b) make properly informed decisions about whether and how they interact with the undertaking in respect of the relevant digital activity under Section 19(8).
Section 20 DMCCA specifies the types of conduct requirements that the CMA may impose, establishing both positive and negative obligations. Requirements are within this subsection if they are for the purpose of obliging a designated undertaking to- (a) trade on fair and reasonable terms; (b) have effective processes for handling complaints by and disputes with users or potential users; (c) provide clear, relevant, accurate and accessible information about the relevant digital activity to users or potential users; (d) give explanations, and a reasonable period of notice, to users or potential users of the relevant digital activity, before making changes in relation to the relevant digital activity where those changes are likely to have a material impact on the users or potential users; (e) present to users or potential users any options or default settings in relation to the relevant digital activity in a way that allows those users or potential users to make informed and effective decisions in their own best interests about those options or settings under Section 20(2).
Section 20(3) provides the CMA with a menu of potential negative requirements that could be imposed to prevent designated undertakings from engaging in various harmful practices. Requirements are within this subsection if they are for the purpose of preventing a designated undertaking from- (a) applying discriminatory terms, conditions or policies to certain users or potential users or certain descriptions of users or potential users; (b) using its position in relation to the relevant digital activity, including its access to data relating to that activity, to treat its own products more favourably than those of other undertakings; (c) carrying on activities other than the relevant digital activity in a way that is likely to materially increase the undertaking’s market power, or materially strengthen its position of strategic significance, in relation to the relevant digital activity; (d) requiring or incentivising users or potential users of one of the designated undertaking’s products to use one or more of the undertaking’s other products alongside services or digital content the provision of which is, or is comprised in, the relevant digital activity; (e) restricting interoperability between the relevant service or digital content and products offered by other undertakings; (f) restricting whether or how users or potential users can use the relevant digital activity; (g) using data unfairly; (h) restricting the ability of users or potential users to use products of other undertakings.
Beyond conduct requirements, the CMA possesses the power to implement pro-competition interventions when market structure or conditions create competitive concerns. The CMA may make a pro-competition intervention (a “PCI”) in relation to a designated undertaking where, following a PCI investigation (see section 47), the CMA considers that— (a) a factor or combination of factors relating to a relevant digital activity is having an adverse effect on competition, and (b) it would be proportionate to make the PCI for the purposes of remedying, mitigating or preventing the adverse effect on competition under Section 46(1). A PCI may take the form of one or both of the following- (a) an order imposing on the designated undertaking requirements as to how the undertaking must conduct itself, in relation to the relevant digital activity or otherwise (a “pro-competition order”: see section 51); (b) recommendations made by the CMA to any person exercising functions of a public nature about steps which the CMA considers the person ought to take in respect of the designated undertaking or the digital activity, or otherwise according to Section 46(3).
Significantly, in considering PCIs, the CMA may have regard to any benefits to UK users or UK customers that the CMA considers have resulted, or may be expected to result, from a factor or combination of factors that is having an adverse effect on competition under Section 46(2). This provision allows for a more nuanced approach that considers the complex trade-offs inherent in digital markets, distinguishing the DMCCA from more rigid regulatory frameworks.
Consultation Requirements and Participatory Regulation
One of the DMCCA’s most distinctive features is its emphasis on consultation and dialogue throughout the regulatory process. This approach reflects a fundamental philosophical difference from the top-down regulatory models employed elsewhere. The Act establishes comprehensive consultation obligations that permeate every aspect of CMA decision-making, creating what has been described as a dialogue-focused design.
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 under Section 13(1) for SMS designation consultations. For conduct requirements, before imposing a conduct requirement on a designated undertaking, the CMA must- (a) carry out a public consultation on the conduct requirement which it proposes to impose, and (b) bring the public consultation to the attention of such persons as it considers appropriate according to Section 24(1). Similarly, for PCIs, before making a final decision (a “PCI decision”) on whether to make a PCI as a result of a PCI investigation, the CMA must- (a) carry out a public consultation on its proposed decision, and (b) bring the public consultation to the attention of such persons as it considers appropriate under Section 49(1).
This extensive consultation framework reflects the DMCCA’s commitment to participatory regulation. Unlike regulatory models that impose predetermined rules, the DMCCA envisions a lot of consultations with stakeholders including the investigated undertaking. This is reflected both in the procedures for developing conduct requirements and pro-competition orders, where publishing non-confidential versions and opening consultations is mandatory, but also by the availability of commitments in all procedures. As noted in comparative analysis, the DMCCA expects the CMA to open public consultations before it takes action, to collect information from a variety of stakeholders including the regulated entity itself. The CMA is also able to bilaterally and informally engage with the regulated entity, as to co-develop compliance mechanisms.
This approach has both advantages and potential drawbacks. On the positive side, it ensures that regulatory interventions are informed by market realities and stakeholder perspectives. However, it may also slow the pace of intervention and create opportunities for regulatory capture or delay tactics, as the DMCCA is flexible and bespoke yet likely slower to act initially, as activities must be designated one by one and this requires the opening of consultations, hearing the investigated firm, and specifying conduct requirements associated with the designation.
Enforcement Mechanisms and Procedural Safeguards
The DMCCA establishes robust enforcement mechanisms while maintaining important procedural safeguards for regulated undertakings. The CMA may begin an investigation (a “conduct investigation”) where it has reasonable grounds to suspect that an undertaking has breached a conduct requirement under Section 26(1). A conduct investigation is an investigation into- (a) whether a breach has occurred, and (b) if it has, what action, if any, the CMA should take in relation to the breach according to Section 26(2).
The CMA possesses extensive investigatory powers as outlined in Sections 69-82 DMCCA, including the power to enter premises, take statements, access communications and request other types of information. When the CMA finds a breach of conduct requirements, Where the CMA finds, as a result of a conduct investigation, that an undertaking has breached a conduct requirement, it may make an order (an “enforcement order”) imposing on the undertaking such obligations as the CMA considers appropriate for one or more of the following purposes— (a) in a case where the breach is ongoing, stopping the breach; (b) preventing the breach from happening again; (c) addressing any damage caused by the breach under Section 31(1).
For urgent situations, the CMA can impose interim enforcement orders under Section 32(1). The CMA may make an enforcement order on an interim basis (an “interim enforcement order”) in relation to a suspected breach of a conduct requirement where- (a) the CMA has begun a conduct investigation in relation to the suspected breach, and (b) the CMA considers that it is necessary to act on an interim basis- (i) to prevent significant damage to a particular person or category of person, (ii) to prevent conduct which could reduce the effectiveness of any other steps the CMA might take in relation to the conduct requirement which it suspects the undertaking has breached or is breaching, or (iii) to protect the public interest.
A crucial safeguard within the DMCCA is the countervailing benefits exemption under Section 29. The CMA must close a conduct investigation under section 28 where representations made by the undertaking to which the investigation relates lead the CMA to consider that the countervailing benefits exemption applies according to Section 29(1). The countervailing benefits exemption applies where- (a) the conduct to which the investigation relates gives rise to benefits to users or potential users of the digital activity in respect of which the conduct requirement in question applies, (b) those benefits outweigh any actual or likely detrimental impact on competition resulting from a breach of the conduct requirement, (c) those benefits could not be realised without the conduct, (d) the conduct is proportionate to the realisation of those benefits, and (e) the conduct does not eliminate or prevent effective competition under Section 29(2).
This provision represents a significant departure from other digital market regulations. As noted in comparative analysis, the presence of the mandatory efficiency defence disarms a significant part of the CMA discretionary competences, though it provides important protection against over-enforcement. The mandatory nature of this exemption has drawn criticism, with some commentators arguing that it could create loopholes for sophisticated undertakings to exploit.
The Final Offer Mechanism
One of the DMCCA’s most innovative features is the final offer mechanism established in Sections 38-45, which provides a unique approach to resolving disputes between designated undertakings and third parties. Where the CMA considers that the following three conditions are met in relation to a transaction between a designated undertaking and a third party, the CMA may- (a) require the undertaking, and (b) invite the third party, to submit to the CMA terms as to payment (“final offer payment terms”) which the undertaking or, as the case may be, the third party regards as fair and reasonable for the transaction under Section 38(1).
The three conditions for deploying this mechanism are precisely defined in Section 38. The first condition is that the transaction is a transaction in which the designated undertaking would- (a) provide goods or services to the third party, or (b) acquire goods or services from, or use goods or services of, the third party under Section 38(2). The second condition is that, by failing to agree fair and reasonable terms as to payment for the transaction, the designated undertaking has breached an enforcement order, other than an interim enforcement order, made in relation to a breach of a conduct requirement of the type permitted by section 20(2)(a) (requirement to trade on fair and reasonable terms) according to Section 38(3). The third condition is that the CMA could not satisfactorily address the breach within a reasonable time frame by exercising any of its other digital markets functions under Section 38(4).
The CMA must, unless section 43(1) applies, make an order (a “final offer order”) requiring that final offer payment terms it has received from the designated undertaking or the third party are to be given effect for the purposes of- (a) the transaction, and (b) any transaction between the designated undertaking and the third party which is substantially the same as the transaction under Section 41(2). This innovative mechanism operates on a “sealed envelope” principle, where both parties submit their proposed terms, and the CMA selects the fairer offer. As described in the comparative analysis, the idea here is to use a ‘sealed envelope’ mechanism, where both parties make an offer of what they think is fair, and then the CMA decides which one is fairer and the winner takes all.
Institutional Design and Review Mechanisms
The DMCCA establishes a clear institutional framework centered on the CMA’s Digital Markets Unit (DMU), though this unit lacks separate statutory status. The DMCCA is embedded in the UK’s Competition Act 1998. However, it exhibits characteristics of a distinct regulatory regime. The DMCCA maintains its own mechanisms, pursues its own objectives, and includes its own procedures and powers. The Act also establishes various review and monitoring obligations to ensure ongoing effectiveness. Under Section 25 DMCCA, The CMA must keep under review, in relation to a designated undertaking- (a) whether to impose, vary or revoke a conduct requirement under; (b) the extent to which it is complying with each conduct requirement to which it is subject; (c) the effectiveness of each conduct requirement to which it is subject; (d) whether to take action in accordance with sections 26 to 35 (enforcement of conduct requirements) or Chapter 7 (enforcement and appeals) in respect of any breaches or suspected breaches of a conduct requirement.
The Act also includes provisions for designated undertakings to appoint compliance officers. Following Section 83 of the DMCCA, a regulated firm must appoint a nominated officer. This officer will monitor compliance and prepare the compliance report for the CMA. The compliance officer also cooperates with the CMA and communicates with the CMA on digital market requirements (conduct requirements, pro-competition orders) and related requirements (enforcement orders, commitments). 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 under Section 18(1), providing certainty for both regulators and regulated entities while allowing for periodic review.
Conclusion: A Distinctive Regulatory Approach
The DMCCA represents a distinctive approach to digital market regulation that differs significantly from models adopted elsewhere. Its principles-based framework, emphasis on consultation, and innovative mechanisms like the final offer procedure reflect a commitment to flexible, responsive regulation that can adapt to the complexities of digital markets. As our comparative analysis notes, the DMCCA is a principles-based competition law-regulation hybrid that relies heavily on dialogue between the regulator and stakeholders to impose a number of ex ante and ex post obligations.
However, the Act also faces significant implementation challenges, particularly regarding the forward-looking assessment requirement and the potential for the efficiency defence to undermine enforcement effectiveness. This problem with Section 5 has been identified by members of the SCiDA project in the past here. The success of the DMCCA will ultimately depend on how the CMA navigates these challenges while leveraging the Act’s innovative features to promote effective competition in digital markets.
As digital markets continue to evolve, the DMCCA’s approach offers valuable lessons for other jurisdictions grappling with similar challenges. Its emphasis on dialogue, flexibility, and targeted intervention provides an alternative model to the more prescriptive approaches adopted elsewhere. The DMA works quickly through its self-executing obligations but is rigid. Meanwhile, the DMCCA is flexible and bespoke yet likely slower to act initially, as activities must be designated one by one and this requires the opening of consultations, hearing the investigated firm, and specifying conduct requirements associated with the designation. The DMCCA’s implementation will be closely watched by regulators, businesses, and academics worldwide as a test case for principles-based digital market regulation, with its success or failure likely to influence the next generation of digital market regulations as governments continue to ensure competitive and fair digital markets.
The DMCCA’s theoretical framework has rapidly transformed into regulatory reality with unprecedented speed and precision. From the launch of the first Strategic Market Status investigations in January 2025 to provisional designations announced by August, the UK has moved beyond legislative aspiration to deliver comprehensive market interventions targeting Apple’s mobile platform and Google’s search services. These investigations reveal how the DMCCA’s activity-specific focus enables surgical precision in addressing platform power, while the parallel cloud services market investigation demonstrates the regime’s expanding scope and practical superiority over traditional regulatory tools.
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