How does the UK seek to regulate digital markets?

At the beginning of this year, the Competition and Markets Authority (CMA) set out its plans for a new digital markets competition regime. The new CMA powers apply in the context of those with ‘strategic market status’ (SMS) in relation to a digital activity.

The new powers are designed to apply to big businesses and apply only to those businesses that are designated with SMS. The first entities in focus are Google and Apple.

What are the conditions for Strategic Market Status?

The Government says SMS requires:

• UK turnover of more than £1 billion or global turnover of more than £25 billion
• substantial and entrenched market power in relation to the digital activity, and
• a position of strategic significance.

Therefore, to be an SMS business:

• It must be an entity carrying out digital activity.
• The activity must be linked to the UK.
• There must be substantial and entrenched market power.
• There must be “a position of strategic significance” in respect of the digital activity.

What is good and bad about the UK’s regulatory approach?

The good part is that the UK is common law by nature, so UK authorities tend to be willing to listen to arguments about what was reasonable and expected, rather than being rigid in the application of regulation. The Digital Markets, Competition and Consumers Act 2024 is a big shift, and it empowers the CMA to be more engaged with digital businesses. It seeks to promote competition in fast-moving digital markets, while protecting UK consumers and businesses. The limit on investigations to nine months is very welcome; other regulators have taken too long and left those under investigation in limbo.

How do the EU and the US regulate digital markets activity?

The EU is seen as a regulation heavy place. The Digital Markets Act (DMA) imposed rules on platforms acting as “gatekeepers” in the digital sector, and they get designated much like the SMS system. There are currently six gatekeepers and there are already litigation/regulatory tussles over who was designated in the EU.

The US is seen as less interventionist in regulation, and its culture tends to see greater willingness to invest, found new companies and try new things. The DMA is grounded in EU competition law, and it is forward-looking and interventionist.

The UK is being mid-Atlantic – neither the US nor the EU in its aim and law. The difference is the bespoke option in the UK. The EU’s DMA applies a standard set of rules to all, whereas the UK’s Act permits a bespoke set of rules for each separate SMS entity. Therefore, the UK is not as free as the US, but not as rigid as the EU.

The approach of other UK regulators

The FCA has its own approach to digital regulation. The FCA is more attune to the messaging of its plans than some other regulators. In 2024, it said that it wanted to make the most of the opportunities of Big Tech whilst mitigating the risks. This was its aim with the Digital Regulation Cooperation Forum. It tends to invite more discussion with the market, something that is easier given its regulatory role compared to the CMA. It is concerned about social media and how people obtain advice and make decisions, and it is likely to seek to work with other regulators, and this Government may encourage more collaboration between regulators.

If you have questions or concerns about the regulation of digital markets, please contact James Tumbridge.