Digital Markets, Competition and Consumers Bill
25 April 2022
The Digital Markets, Competition and Consumers Bill (the Bill), introduced on 25 April 2022, aims to introduce a new regulatory regime for competition in digital markets.
The Bill, based on its current form, will empower the Competition and Markets Authority (CMA) to regulate digital markets and the companies that operate in them. This will include eligible companies operating in the InsurTech space. The CMA will also have more robust enforcement powers to strengthen consumer protection.
The proposed new regime aims to:
- Boost competition by opening new pathways for start-ups or smaller firms that have previously struggled to grow in an environment dominated by large and well-established businesses.
- Create a marketplace where consumers are able to shop without the fear of falling victim to “rip-offs".
Digital markets and competition
The proposed pro-competition regime for digital markets, as set out in the Bill, is designed to proactively shape the behaviour of the most powerful technology companies. It will take a similar form to the framework provided under the EU’s Digital Markets Act which came into force in November 2022 and is due to take effect from March 2024.
The CMA will be obliged to work alongside other industry regulators, including the FCA, OFCOM, the ICO, the Bank of England the PRA, on proposals to exercise a regulatory digital markets function.
Strategic market status (SMS)
The proposed regime will apply to large businesses with a global turnover exceeding £25 billion, or a UK turnover exceeding £1 billion will be designated by the CMA as having SMS status in relation to a ‘digital activity’, providing that:
- The digital activity is linked to the UK.
- The undertaking has substantial and entrenched market power and is in a position of strategic significance.
SMS designation can only occur after an SMS investigation which can take up to nine months.
The exact thresholds and definitions for assessing SMS designations will be published separately in secondary legislation.
The Bill proposes that businesses with SMS status must comply with bespoke conduct requirements and the mandatory reporting of mergers. They will also be at risk of pro-competitive interventions (PCI) by the CMA if it has reasonable grounds to consider that factors relating to a digital activity might be having an adverse effect on competition in the UK. A PCI could lead to the CMA issuing behavioural orders or structural remedies.
The Bill introduces a number of major changes to consumer protection law to improve and modernise consumer rights. This includes protections against false reviews, unclear subscription contracts and pressure selling.
The Bill seeks to improve existing pre-contract information requirements for subscription contracts. Subscription providers will be required to remind consumers:
- Before a contract rolls over or auto-renews.
- When a free trial or a low-cost introductory offer is coming to an end and that they are able to exit a contract in a straightforward and timely manner. A cooling-off period of 14 days must also be available at the start of the contract and at the renewal stage.
Protection from unfair trading
The Bill not only prohibits digital platforms from commissioning fabricated reviews, but also imposes an obligation on them to take reasonable steps to ensure that the consumer reviews they display are genuine.
The Bill provides more detail for firms and consumers on the use of pressure selling that limits consumers’ ability to make informed decisions. For example, where a consumer is told that delaying signing a contract will subsequently result in less favourable terms.
The CMA will have greater enforcement powers. These include being able to directly enforce consumer protection laws (rather than the courts) and award significant financial penalties.
The Bill will make it easier for the CMA to gather information and evidence to prevent and tackle anti-competitive practices. Its powers will include:
- Fining parties for destroying evidence and failing to preserve documents.
- Interviewing witnesses with no connection to a business being investigated (including customers).
- Investigate global cartels, facilitated through the extension of Chapter 1 prohibition of the Competition Act 1998.
The Bill proposed to give the CMA direct powers to impose significant fines:
- Breach of consumer legislation: Fines of up to 10% of global annual turnover of a business, or £300,000 in the case of an individual.
- Non-compliance with an information request: Fines of up to 1% of a business’ annual turnover, plus 5% of daily worldwide turnover where non-compliance continues. Where an individual fails to comply, the CMA can impose fixed penalties of up to £30,000 with an additional daily penalty of up to £15,000 where non-compliance continues.
- Breach of undertakings: Fines up to 5% of a company’s annual global turnover, with an additional daily penalty of 5% of daily turnover during non-compliance. For similar breaches by an individual, the CMA can impose fixed penalties of up to £150,000 and a daily penalty of up to £15,000 for each day a breach continues.
Companies will be able to approach the Competition Appeals Tribunal (CAT) for review of the CMA’s decisions made under the digital markets regime. Cases will be assessed on the same basis as the courts decide applications for judicial review. It will not be possible to challenge CMA’s decisions based on merit.
The Bill remains a legislative priority for the UK Government, as reflected in the King’s Speech, although it could be subject to heavy scrutiny in a similar manner to the Online Safety Act 2023. If it comes into force in late 2024, the digital markets rules are likely to start applying to SMS firms in 2025 due to the nine-month-long designation process.
The proposed new regime sets out the direction of travel around the regulation of digital markets. Businesses and insurers with a digital presence should carefully review their procedures and practices to ensure the transition to an enhanced regulatory environment is as painless as possible.