After months of speculation, the UK Government has now confirmed that various changes to the competition law/merger control rules and the new digital markets regime under the Digital Markets, Competition & Consumers Act 2024 ("DMCCA") will come into force on 1 January 2025.1 The new provisions in relation to the UK's consumer protection rules will, however, not come into force until Spring 2025.
Stakeholders have had a long time to prepare for the introduction of these new rules, given that the DMCCA received Royal Assent in June 2024 (see our previous briefings here and here). As we look ahead to 2025, it is worth reminding ourselves of some of the key changes that will come into effect on 1 January 2025.
One of the key changes for dealmakers both in, and indeed outside, the UK is the revision to the applicable merger control thresholds. The new revised merger control thresholds will apply to deals that have not completed (i.e., including deals where parties have signed), or for which the UK's Competition and Markets Authority ("CMA") has not opened a Phase 1 investigation, by 31 December 2024. Parties contemplating M&A transactions with a UK nexus therefore should be particularly mindful of this and plan their deals accordingly in case the CMA is able to assert jurisdiction under any of the new thresholds.
By way of reminder, the DMCCA will introduce the following changes to the UK's merger control regime as of 1 January 2025:
This change to the UK's Share of Supply Test is likely to have the most impact as it can be triggered without a need for any increment in the merging parties' combined post-transaction share of supply. This will greatly increase the CMA's (already flexible) ability to claim jurisdiction over deals that it suspects might lead to a substantial lessening of competition ("SLC").
The change to the Share of Supply Test is particularly aimed at so-called "killer acquisitions" – i.e., deals involving incumbent firms with a strong market position which seek to acquire new market entrants which may (at the time of the acquisition) have low turnover and low shares of supply. The aim of such deals is to stifle future competition. Regulators around the world have been grappling with the issue as to how their appliable merger control thresholds and/or rules can be adjusted to address these types of transactions. In light of the recent "killer" – pun intended – blow to the European Commission's ("EC") ability to accept Article 22 referrals from Member States in situations where the relevant national merger control rules are not triggered,4 this issue has taken on still greater prominence.
The DMCCA has clarified that, where an agreement or arrangement has (or is likely to have) direct, substantial and foreseeable effects within the UK, it is capable of infringing the Chapter I prohibition even if the agreement/arrangement in question is implemented outside the UK.
This will further widen the ability of the CMA to take action against, for example, cartels implemented outside the UK's national territority. It brings the UK's position on this into line with that of the EC which, since its original decision5 and the subsequent litigation in Intel,6 has employed an effects-based approach to its antitrust enforcement – i.e., it has considered whether anti-competitive misconduct has (or is likely to have) direct effects in the EU's single market, not where the relevant agreement/arrangemet was implemented.
Apart from widening the number of anti-competitive arrangements that may be reviewed and sanctioned by the CMA, this change will also likely result in an increase in the number of parallel antitrust investigations that are liable to be launched by the CMA and the EC (as well as other global regulators). Consequently, participants in international cartels may well find themselves fighting more battles on mutiple fronts, which will increase the costs and complexity of any regulatory investigations they may face in future.
Under the DMCCA, the CMA has been empowered to impose much higher fines on parties which breach any of the procedural rules and obligations that apply when the CMA is exercising its powers of enforcement (for example, providing false or misleading information to the CMA).
As of 1 January 2025, such fines will be calculated in accordance with the relevant entity's turnover. Previously, these types of fines were capped at a specified amount, meaning that an entity like Apple or Google could receive the same level of fines for these offences as a UK-based SME.
Specifically, the CMA may now impose the following fines:
The UK Government has enshrined these powers in three draft statutory instruments ("SIs")7 which have been passed to facilitate this aspect of the DMCCA coming into force and which were subject to a public consultation which began in July 2024.
Importantly, the UK Government has confirmed that the CMA will not be able to impose these new penalties retrospectively – rather, only for offences committed on or after 1 January 2025.
The introduction of the DMCCA in the UK has often been compared with the EU's Digital Markets Act ("DMA"), as a key feature will be the creation of a new, bespoke regime to regulate the conduct and activities of the most influential digital firms.
Unlike the DMA, however, under which so-called Gatekeepers must self-assess whether they meet defined thresholds and proactively notify the EC, the DMCCA places the onus on the CMA to identify and designate those firms which it deems to have strategic market status ("SMS"). On the one hand, this affords the CMA a much wider discretion to identify those entities it deems should be subject to the new digital regime than the EC has under the DMA. On the other, the process for investigating firms and issuing SMS designations will be time-consuming and, in all likelihood, resource-intensive for the CMA as compared with the EC's position under the DMA. According to the CMA, they expect to issue three to four SMS designations in the first year of the DMCCA's operation (i.e., 2025). For more details on how the CMA – or, more accurately, its Digital Markets Unit ("DMU") – will approach SMS designations, please see our previous briefing.
Saliently, firms issued with an SMS designation will be subject to a number obligations, including:
It is interesting to note that the CMA has been steadily gearing up to utilise its powers under the DMCCA since the legislation received Royal Assent. In fact, the CMA has clearly indicated that, when it comes to investigating anti-competitive conduct being potentially committed by the largest tech companies, it believes that this work is best conducted under the DMCCA powers as opposed to the CMA's traditional enforcement powers.
Two developments are worth noting on this front:
Therefore, where Big Tech is concerned, it is likely that the CMA will look to shift more of its workload to the DMU for investigation and enforcement under the DMCCA powers. Time will tell just how effective this will be at addressing the many concerns the CMA has over the market conduct of some of the largest digital firms.
It will be important for stakeholders to be aware of the changes to the competition law landscape in the UK that the DMCCA will bring. The CMA's powers of investigation, monitoring and enforcement have been significantly strengthened and parties that are not fully up to speed with these developments risk falling foul of them.
In an M&A context, the new merger control thresholds will apply to any deal that has not completed before 1 January 2025 (unless the CMA has already launched a Phase 1 review). It is likely that, in some cases, this will turbo charge the usual desire to close transactions before the year end. Where this is not possible – and particularly where parties have already carried out an assessment under the old rules and determined that the CMA will not have jurisdiction – this assessment may need to be re-visited in light of the new thresholds. Particularly if the basis for such a determination was that, whilst an existing party could have a share of supply in excess of 25%, the relevant transaction will see no increment in the merging parties' combined shares of supply. Such a view may no longer be enough to avoid the CMA claiming jurisdiction if one party's share of supply could amount to 33% or more.
More broadly, parties should keep a watchful eye for further guidance that is likely to be publised by the CMA on the new rules and its own powers under the DMCCA. This will shed further light on how the CMA intends to pursue its enforcement role in practice.
It will interesting to see how much impact the DMCCA will have and how quickly this will come about. And, more relevantly, whether the DMCCA has done enough to ensure competition law can keep pace with the digital age.
1 See The Digital Markets, Competition and Consumers Act 2024 (Commencement No.1 and Savings and Transitional Provisions) Regulations 2024 which sets out the timeline for key parts of the legislation coming into effect from 1 January 2025.
2 The UK's Turnover Test is triggered where a target entity generated turnover of £70 million or more in the UK in the most recent financial year. As above, this threshold of £70 million is increased to £100 million under the DMCCA.
3 The UK's Share of Supply Test is triggered where, post-transaction, the relevant parties would collectively supply (or acquire) at least 25% of particular goods or services in the UK (or within a substantial part of the UK).
4 In a highly consequential judgment, the European Court of Justice ("ECJ") handed down a ruling in September 2024 that, in relation to its controversial review and prohibition of the Illumina / Grail merger, both the EC and, indeed, the General Court (which initially upheld the EC's decision on appeal) had erred in their determination that Article 22 of the European Merger Control Regulation ("EUMR") allowed the EC to accept merger referrals from Member States in such circumstances.
For details on this, please see the ECJ's judgment in Joined Cases C-611/22 P and C-625/22 P, Grail v Commission: 3 September 2024, EU:C:2024:677 and EU:C:2024:677. Available at: CURIA – Cases C-611/22 P and C-625/22 P
5 Case COMP/C-3/37990 – Intel. 13 May 2009. Available at: https://ec.europa.eu/competition/antitrust/cases/dec_docs/37990/37990_3581_18.pdf
6 Case C-413/14 P Intel v Commission [2017] ECLI:EU:C:2017:632. Available at: CURIA – Case C-413/14 P
7 Namely: (i) The Digital Markets, Competition and Consumers Act 2024 and Consumer Rights Act 2015 (Turnover and Control) Regulations 2024; (ii) the Competition Act 1998 (Determination of Turnover for Penalties) Regulations 2024; and (iii) The Enterprise Act 2002 (Mergers and Markets Investigations) (Determination of Control and Turnover for Penalties) Regulations 2024.
8 Inter alia, the applicable criteria are that: (i) the target entity has a UK nexus as a result of carrying on activities in the UK and/or supplying goods or services to customers in the UK; and (ii) the deal in question has a consideration value of at least £25 million.
10 See the CMAs case page here and the Provisional Decision Report at: https://assets.publishing.service.gov.uk/media/67406fe502bf39539bdee865/Provisional_decision_report1.pdf
11 See the CMA's press release at: CMA publishes provisional findings in Mobile Browsers and Cloud Gaming market investigation - GOV.UK
