The Digital Markets, Competition and Consumers Act becomes law

The question

What changes will the new Digital Markets, Competition and Consumers Act bring to the consumer protection and competition regulation landscape? 

The key takeaway

The Digital Markets, Competition and Consumers Act (DMCCA) was passed in the “wash-up” process before the UK’s recent parliamentary sessions concluded. It introduces major reforms to the UK’s consumer protection regime including granting the CMA powers to decide on breaches of consumer protection laws itself and then penalise breaches with monetary penalties of up to 10% of global revenue.

The background

The DMCCA was intended to respond to the new consumer protection issues arising out of online marketplaces and changing consumer behaviour which had not been adequately addressed by the previous consumer law regime. Under the old regime the CMA also lacked the power to decide on breaches itself and issue penalties directly, instead having to apply for a court order to respond to any suspected breaches. In addition, the Digital Markets Unit had been launched in 2021 to regulate the market dominance of the largest technology firms but it still had only limited powers.

The development

The DMCCA repeals and replaces the Consumer Protection from Unfair Trading Regulations 2008 and introduces the following new protections:

• direct consumer law enforcement powers: The CMA will be able to directly enforce consumer protection law, avoiding the need to go through the court system. This is enabled by new powers to directly issue decisions, require the removal of online content and demand compensation payments to impacted consumers. The CMA will now also be able to impose monetary penalties directly, with the most serious breaches facing penalties of up to £300,000 or, if higher, 10% of global annual turnover
• fake reviews ban: Fake reviews will be officially added to the new blacklist of commercial practices in Schedule 19 of the DMCCA. This includes not only commissioning or writing fake reviews, but also misleading consumers by failing to publish negative reviews or emphasising positive reviews over others. Traders will also be liable if they fail to take proportionate steps to prevent and remove fake reviews
• drip pricing: Drip pricing is when a customer is shown an initial price for a product or service and subsequently additional fees are revealed later in the checkout process. It will now be prohibited to present a headline price that does not include any fixed mandatory fees paid by all customers. Breaching this will now constitute the unfair commercial practice of omitting material information from an invitation to purchase
• subscription contracts: Traders offering subscription contracts must now give specified pre-contract information on any auto-renewals, charges after trial periods and termination procedures. Consumers must be provided with reminder notices for the end of an initial trial, and they must be able to cancel the contract within a 14-day cooling off period. 

Equally, the updates to the competition regime are far-reaching and include:

• Digital Markets Unit: The largest businesses in the digital sector that are found to have substantial and entrenched market power will be designated as having “Strategic Market Status” and face a new regime enforced by the Digital Markets Unit. The Unit will enforce both a new high-level code of conduct and issue specific conduct requirements on these firms. These require high standards of open choice, fair-dealing and transparency toward their users. Following investigations into any conduct with potentially adverse competition, the Digital Markets Unit will also be able to make interventions to prevent or remedy their impact
• stronger investigative powers: The CMA will gain new powers to: i) interview third parties unconnected to those under investigation; ii) compel the disclosure of documents beyond dawn-raided premises, including the private homes of suspects, and iii) send binding information requests to businesses based outside of the UK with a sufficient UK-connection
• higher penalties: Failures to cooperate with the CMA’s investigation or any remedial undertakings will now face higher penalties – up to 5% of worldwide turnover and/or additional 5% daily penalties until the non-compliance ceases
• broader jurisdiction: The CMA’s jurisdiction to investigate competition infringements of practices outside of the UK is broadened to any arrangement, decision or practice that is “likely to have an immediate, substantial and foreseeable effect on trade within the United Kingdom”.

Next steps

Although the law has passed, the majority of the DMCCA requires implementation via secondary legislation. The new Government will need to carry through much of these reforms following this summer’s election. 

Certain elements will be delayed further – the previous Government had indicated that the new requirements on subscription contracts will not come into effect before Spring 2026. For now, the CMA’s Digital Markets Unit is commencing a consultation on its draft guidance for its main amendments to the competition regime, and it is anticipated that the final guidance will coincide with the DMCCA’s commencement.

Why is this important?

The DMCCA marks the most substantial reform of UK competition and consumer protection legislation in decades, and every consumer-facing business based or active in the UK is expected to be impacted to some degree. The CMA’s acquisition of direct enforcement and penalty powers mean that businesses who have avoided enforcement in the past may face penalties for non-compliance far quicker than under the previous regime. Alternatively, law-abiding businesses may feel it levels the playing field against their competitors who currently benefit from slower enforcement.

For those businesses who may be designated with Strategic Market Status, these developments allow the CMA to ramp up scrutiny of these organisations, which it had been building up to through recent sector-focused reports.

Any practical tips?

All consumer-facing companies should review their strategies and processes to identify any risk areas and ensure compliance with the DMCCA as it comes into force. The new rules on reviews, drip pricing and subscription contracts are extensive and may require the re-design of consumer purchase journeys, online interfaces and terms and conditions. The increased penalties for these or any of the unfair commercial practices are significant and the CMA will most likely be looking for a prominent test case to publicly demonstrate its new powers. 

The same large digital businesses captured by the new digital markets regime will already be attuned to European competition regulation, but these new developments ought to be closely monitored for any divergence and special obligations that are now required of them from the UK’s regime. These firms should also aim to engage with the Digital Markets Unit’s ongoing consultation on its draft guidance.

Summer 2024