The Digital Markets, Competition and Consumer Act 2024: What It Means for Businesses and How to Navigate It

The Digital Markets, Competition and Consumer Act 2024 is a landmark piece of legislation that is expected to have a profound impact on the way businesses operate in the UK, particularly those in the digital economy. This bill, which is set to pass in 2024, introduces sweeping changes designed to regulate digital markets, enhance consumer protection, and empower the Competition and Markets Authority (CMA) to take more decisive action against anti-competitive behaviour.

In this article, we will explain the key provisions of the Digital Markets, Competition and Consumer Act 2024, how it works, the impact it will have on businesses, and practical steps companies can take to comply with the new rules.

Understanding the Digital Markets, Competition and Consumer Act (2024)

The Digital Markets, Competition and Consumer Act 2024 was created in response to growing concerns about the dominance of large tech companies, often referred to as "digital giants," and their impact on competition and consumer welfare. The Act aims to level the playing field by imposing stricter regulations on companies with significant market power, particularly in digital spaces like online platforms, e-commerce, and digital services.

The bill is built around three main goals:

1. Regulate Digital Markets: Introduce rules for companies designated as having "Strategic Market Status" (SMS), which means they hold a dominant position in their respective digital markets.

2. Enhance Consumer Protection: Introduce stronger safeguards for consumers, especially around unfair online practices like fake reviews and misleading pricing.

3. Empower the CMA: Strengthen the Competition and Markets Authority’s ability to take swift and effective action against anti-competitive practices and consumer law breaches.

How the Legislation Works

The Digital Markets, Competition and Consumer Act 2024 introduces a number of mechanisms that will change the regulatory landscape for businesses, particularly those operating in digital markets:

1. Digital Markets Unit (DMU) and Strategic Market Status (SMS)

At the core of the legislation is the creation of the Digital Markets Unit (DMU) within the CMA. The DMU will focus on companies that are designated as having Strategic Market Status (SMS). To be classified as an SMS, a business must have substantial control over a digital market, such as being a dominant online platform or having a major influence on digital services.

Once designated, companies with SMS will face strict obligations, including:

• Data Sharing: Requirements to share certain types of data with competitors to ensure fairness.

• Market Behavior: Restrictions on using their dominant position to stifle competition, such as favoring their own products over those of competitors.

• Consumer Transparency: Obligations to provide clear and honest information to consumers, particularly around pricing and terms of service.

2. Consumer Protection Measures

The Act introduces new measures to protect consumers from unfair practices, especially in online marketplaces. Some of the key provisions include:

• Banning Fake Reviews: Businesses will be required to ensure that reviews posted on their websites are genuine, and false reviews can lead to penalties.

• Clear Pricing and Contracts: The bill emphasizes transparency in online pricing and contracts, preventing hidden fees and misleading promotional tactics.

• Stronger Penalties: The CMA will be able to impose fines of up to 10% of a company’s global turnover for breaching consumer protection rules.

3. Enhanced Enforcement Powers for the CMA

The CMA’s enforcement powers are significantly enhanced under this Act. It will have the authority to impose penalties and take action without the need for lengthy court proceedings.

The CMA will also have the ability to:

• Disqualify Directors: Company directors involved in serious breaches of competition law can face personal consequences, including disqualification from holding senior positions.

• Impose Swift Fines: Penalties can be imposed more quickly, reducing the time it takes to enforce compliance with the new rules.

The Impact of the Act on Businesses

The Digital Markets, Competition and Consumer Act 2024 will have far-reaching implications for businesses, particularly those operating in digital markets or with significant market power. Here are some key impacts:

1. Increased Compliance Burden

For companies with Strategic Market Status, compliance with the new rules will require significant resources. These businesses will need to invest in new processes to ensure they meet the conduct requirements set out by the DMU. This includes monitoring how they handle data, ensuring transparency in consumer interactions, and avoiding practices that could be seen as anti-competitive.

2. Smaller Businesses May Benefit

Smaller businesses operating in digital markets may find new opportunities to compete as larger firms are restricted from engaging in anti-competitive behaviour. The DMU’s role in ensuring fair competition could level the playing field, allowing startups and smaller firms to grow without being pushed out by dominant players.

3. Risk of Significant Fines

With fines of up to 10% of global turnover for breaches of competition or consumer protection law, the financial risks for non-compliance are substantial. Businesses will need to ensure that they fully understand the requirements of the bill and take steps to avoid breaches.

4. Tougher Penalties for Consumer Protection Violations

Businesses that operate online marketplaces or digital services will need to ensure that they comply with the new consumer protection rules. This includes eliminating fake reviews, ensuring transparent pricing, and providing clear contract terms. Failure to comply could lead to hefty penalties and reputational damage.

How to Comply with the Digital Markets, Competition and Consumer Act 2024

Businesses should take the following steps to navigate the new regulatory environment and avoid falling foul of the new rules:

1. Conduct a Compliance Audit

Companies, especially those in digital markets, should conduct a thorough audit of their current business practices. This includes reviewing how they handle data, interact with competitors, and engage with consumers. Businesses should assess whether their current practices could be considered anti-competitive or misleading and make the necessary changes.

2. Engage with Legal Experts

Given the complexity of the Digital Markets, Competition and Consumer Act 2024, businesses should seek expert legal advice to ensure they are fully compliant. Legal professionals can provide guidance on navigating the new rules, avoiding penalties, and understanding how the legislation applies to specific business models.

3. Strengthen Consumer Transparency

Businesses must prioritise transparency in their dealings with consumers. This includes ensuring that pricing is clear and straightforward, that contract terms are easily understood, and that reviews are genuine. Investing in systems that verify customer reviews and making all terms visible and accessible will help businesses stay compliant.

4. Monitor the Competition Landscape

For businesses with market power, it’s important to keep a close eye on the competition landscape. Understanding how competitors are reacting to the new legislation and how the DMU may classify businesses as having SMS is crucial. Proactive measures to avoid practices that could be considered monopolistic will help businesses mitigate risk.

Conclusion

The Digital Markets, Competition and Consumer Act 2024 represents a major shift in how digital markets are regulated and how consumer rights are protected in the UK. For businesses, this means adapting to stricter rules and ensuring compliance to avoid severe penalties.

The key to success in this new environment is understanding the scope of the Act, taking proactive measures to meet compliance standards, and engaging with legal experts to navigate the complexities of the new legislation. By doing so, businesses can ensure they remain competitive and compliant while avoiding the significant risks associated with non-compliance.