The draft Digital Markets, Competition and Consumers Bill (the Bill), published on 25 April 2023, heralds a significant expansion in the powers of the UK Competition and Markets Authority (CMA) in relation to merger control, competition enforcement and consumer protection, as well as introducing the widely publicised new competition regime for certain large digital firms designated as having "strategic market status". These represent the most significant changes to the relevant UK laws since 2013, potentially affecting a wide variety of businesses active or considering strategic transactions in the UK. This briefing focuses on some of the Bill's main points in relation to merger control and competition enforcement.

Merger control 

The Bill proposes the following key changes to UK merger control:

• New general thresholds for merger control review: the CMA will have merger control jurisdiction in relation to a transaction involving one party (A) which has at least a 33% share in the supply of goods or services "of any description" in the UK, and at least £350 million in UK turnover, and another party (B) which is a UK registered business, has activities in the UK, or supplies goods and services in the UK.
  • There is no requirement for any overlap between party A (usually the buyer) and party B (usually the target) – so the new thresholds can catch conglomerate and vertical mergers. 
  • There is also no minimum transaction size criteria or target UK turnover requirement for the new threshold – so acquisitions of very small and start-up businesses can be caught. This is in line with the policy aim of capturing so-called "killer acquisitions", i.e. acquisitions intended to neutralise emergent or potential competitors.
• Turnover threshold test increased to reflect inflation: the standalone "turnover test" for UK merger control jurisdiction, which currently applies where the target has UK turnover of £70 million or more, will be increased, to £100 million or more. However, this is unlikely to have much impact on the number of notifications as, given that notification is voluntary, decisions as to whether to notify tend to be based on substantive competition considerations rather than the turnover test alone.
• £10 million "safe harbour" for transactions between SMEs: transactions will be exempted from review where each party's UK turnover does not exceed £10 million. The change is intended to reduce the burden on small and medium-sized enterprises.
• Changes to merger control procedure: parties will now be able to request a "fast track" referral to the Phase 2 extended review at any stage of pre-notification, or Phase 1, with increased possible extensions to the Phase 2 time limits. Although parties can currently request such fast-track referrals, the increased flexibility in the timing of referral requests may streamline the process.
• New mandatory reporting requirement: certain large digital firms designated as having "strategic market status" (SMS) will be required to notify certain acquisitions, namely:
  • Transactions whereby the SMS firm crosses 15%, 25% or 50% thresholds in shares or voting rights in the target, where the value of consideration for the transaction is £25 million or more; and
  • 15% holdings in shares or voting rights, in UK joint ventures, where the value of consideration provided to the joint venture by the SMS firm is £25 million or more.

For SMS firms, this represents a significant departure from the current voluntary (non-mandatory) approach to merger control notification in the UK.

Competition enforcement

The Bill also proposes several further changes to UK competition enforcement:

• Increased extra-territorial jurisdiction: currently, for an anti-competitive agreement to infringe the "Chapter 1 prohibition", it must have been "implemented" in the UK. Under the new proposals, UK jurisdiction can also arise where there is likely to be an "immediate, substantial and foreseeable" effect on trade within the UK. 
• Increased fines for non-compliance: The CMA will be able to impose:
  • Fixed penalties of up to 1% of a business's total annual worldwide turnover, and daily penalties of up to 5% of daily worldwide turnover, for failures to comply with CMA investigative measures and/or statutory information requests; for concealing, falsifying or destroying evidence; and for providing false or misleading information.
  • Fixed penalties of up to 5% of annual worldwide turnover, and daily penalties of up to 5% of daily worldwide turnover, for failing to comply with CMA directions, orders, undertakings or commitments.
  • Individuals may be personally fined up to £300,000 for these infringements.
• Greater evidence gathering and search powers, including as regards individuals and their homes: the CMA will be given greater powers to interview individuals when carrying out investigations under the Competition Act – as well as more flexibility in conducting "dawn raids" on domestic premises (i.e. their homes). These powers are considered necessary given the increased prevalence of working from home. 
• Increased powers for the Competition Appeals Tribunal (CAT): the CAT will be given jurisdiction to grant declaratory relief in individual and collective claims under Chapters I and II of the Competition Act 1998  (which respectively prohibit anti-competitive agreements and the abuse of a dominant position). 
  
  • The UK courts and the CAT will also be granted powers to award exemplary damages in private competition claims, but not in collective competition damages claims. 
• Changes to CMA's market investigation powers and procedures: market investigations are the process by which the CMA can assess whether competition is functioning effectively in a market as a whole. This is a powerful tool. In recent years, the CMA has used market investigations in the context of the cost of living crisis, for example, to investigate petrol retail pricing, as well as to scrutinise "big tech", including via the recently announced investigation into the development and use of artificial intelligence foundation models.     
  • Among other things, the CMA will be granted more flexible powers to define the scope of its market investigations, including powers to require businesses to try out proposed remedies before they are finalised.
  • The CMA will also have powers to accept undertakings as to future conduct from market participants at any stage of a market investigation.

The Bill remains in draft form and may be amended as it goes through the legislative process. The Bill is expected to enter into force in around mid-2024.