Digital regulatory reform in 2023: what does the Digital Markets, Competition and Consumer Bill promise to deliver?

Disclaimer: This article is written by Thea Schirvanian. Any views and opinions expressed in this article are those of the writers and do not necessarily reflect the views or positions of the team editor nor any entities they represent.

The much-anticipated Digital Markets, Competition and Consumer Bill is expected to be enacted this spring and in place, after Royal Assent, by autumn. The purpose of the Bill is to create a pro-competition digital industry in the UK, in which consumers and businesses are protected from unfair practices. The Bill presents a significant reforming change to UK competition and consumer protection laws, and reflects increased international political will to address the dominance of Big Tech within fast developing digital markets. The Student Lawyer reported last year that the EU are also on the offensive to protect consumers. The EU Digital Markets Act and EU Digital Services Act were entered into force at the end of last year and will start to apply from May 2023 and March 2024 respectively.

New UK Regulatory Powers

The UK Digital Markets, Competition and Consumer Bill proposes a digital regulatory regime, enhanced powers for the Competition Markets Authority (CMA) and improved UK consumer protection enforcement laws. The new legislation will enable the CMA to act against companies that have infringed consumer law without the need to go to court and impose fines of 10% of a company’s global annual turnover. The CMA will also have the power to penalise companies that fail to comply with information requests or breach an undertaking.

Digital Regulatory Regime

The Bill will grant the CMA’s Digital Markets Unit legislative powers to designate digital companies as having ‘strategic market status’ (SMS) and enforce the new digital regulatory regime. SMS companies are likely to include the Big Tech ‘GAMMA’ firms (Google, Amazon, Microsoft, Meta and Apple) due to their ‘gatekeeper’ platforms, as well as other factors such as market capitalisation, revenue, geographic reach and number of users. These Big Tech firms, with a combined market valuation of £5.6 trillion, are uniquely placed to leverage the advantages of their network effects, economies of scale & scope and enormous quantities of consumer data, giving them the ability to suppress competitors. The recently upheld European court ruling on Google’s violation of competition rules by its digital adverting business, and subsequent €4.1 billion fine, demonstrates the appetite for enforcement of violations ahead of new legal obligations for designated Big Tech within respective UK and EU Acts. Following a probe by the European Commission into Amazon’s potential seller bias, and subsequent settlement, the CMA began its own investigationonto Amazon Marketplace practices.

Anti-Competitive Behaviour

The new UK Digital Markets, Competition and Consumer Bill will require SMS companies to operate within an enhanced regulatory framework, which proposes an enforceable code of conduct to tackle anti-competitive behaviour of Big Tech. The SMS regime will also deliver pro-competition interventions to address an SMS firm’s dominance in a particular area of the market, through factors such as personal data access and interoperability, in order to drive increased market competition and innovation. Furthermore, the SMS regime will provide the CMA with early visibility of potential mergers that are deemed anti-competitive and could negatively impact consumers. Early sight of mergers would prevent retrospective investigations and actions, such as the ruling on Meta’s acquisition of Giphy by the CMA. Under the proposed legislation the CMA will have jurisdiction to rule on transactions where UK turnover is more than £350 million or one party has 33% share of the supply of goods or services.

Consumer law enforcement

The Digital Markets, Competition and Consumer Bill also proposes to strengthen consumer protection law and target harmful practices, in particular:

• Fake Reviews
• Subscription Contracts and Auto-Renewals

Fake Reviews

Tackling fake reviews has been an ongoing programme of work for the CMA. Commenting on the CMA’s investigation into fake reviews on eBay and Facebook, Andrea Coscelli, CMA Chief Executive, highlighted the damage fake and misleading reviews do to ‘businesses who do the right things’, as well as consumers. The CMA estimates that £23 billion spent annually by consumers in the UK is potentially influenced by online reviews.

Subscription Contracts and Auto-Renewals

The proposed reform also aims to address subscription contracts and auto-renewals, ensuring customers do not find themselves unwittingly locked into a minimum subscription term, often through deceptive design, such as bait & switch, to force continuity. The onus will be on companies to ensure customers are provided with clear, accessible information on minimum terms of contracts, notice periods for contract cancellations, prices per billing period and how contracts can be cancelled. The Department for Business, Energy & Industrial Strategy estimated in an impact assessment that £25 billion per year was spent on subscriptions in non-regulated sectors and that consumers spent up to £3.3 billion annually on subscriptions which they considered poor value for money.

Online Exploitation of Consumer Behaviour

Although additional areas of online exploitation of consumer behaviour remain under review, the UK government has currently stopped short of increasing the scope of the proposed legislation. Practices such as dark patterns, sludgesor drip pricing are, however, under growing regulatory scrutiny and companies engaged in these activities would be advised to start considering their online choice architecture in readiness for likely future regulations. In contrast, the EU Digital Services Act prohibits dark patterns on online platforms, to prevent consumers being manipulated by tools such as countdown timers or interface design that can mislead consumer actions and lead consumer choices.

In conclusion, the proposed UK Digital Markets, Competition and Consumer legislation, like the EU Digital Markets Act, is based on an ex ante principle, demonstrating the UK government’s decision to take a proactive approach to regulating the fast-evolving digital sector. Currently, the Bill appears to propose a relatively flexible approach than the more prescriptive EU legislation, particularly regarding certain areas of potential online exploitation of consumers. However, the proposed UK legislation still presents a significant change for companies operating within digital markets and a landmark reform in 2023.