On 25 April 2023 the Digital Markets, Competition and Consumers Bill (the Bill) was introduced by the UK Government. The Bill has completed the ‘first reading’ and ‘second reading’ in the House of Commons and is now at the ‘committee stage’ to be completed by 18 July 2023. The new draft Bill aims to “improve consumer protection, regulate digital markets and strengthen competition enforcement powers”.

Summary of the Bill

Existing competition and consumer laws are not devised to address the distinctive barriers to competition in digital markets. The Bill will amend existing legislation including the Competition Act 1998, the Enterprise Act 2002 and the Enterprise and Regulatory Reform Act 2013 in addition to creating new laws to regulate competition law and protect consumer rights.

Pro-competition Regime for Digital Markets

A small selection of firms that exert significant control over digital markets, identified as ‘Strategic Market Status’ (SMS) firms, will be the first to be targeted. The regime will be enforced by the Digital Markets Unit (DMU), sitting within the Competition and Markets Authority. The DMU will have the authority to:

• conduct requirements to manage the effects of market power and ensure markets are open to competition and innovation; and
• design pro-competition interventions to tackle the sources of SMS firms’ market powers.

Final Offer Mechanism

To resolve violations of conduct requirements relating to payment terms between SMS firms and third parties, the Bill adopts the ‘Final Offer Mechanism’ as a measure. The purpose of this is to tackle unfair payment terms, as a result of imbalances in bargaining power. The DMU will have the authority to generate conduct requirements so that SMS firms have to operate on fair and reasonable payment terms. Where the DMU is unable to set a direct price, it will rely on the Final Offer Mechanism, where parties will be required to choose between to final offers made by the parties. This is to encourage a ‘final offer’ scenario. This tool is expected to be utilised as a backstop in niche scenarios, including complex cases where the parties do not have equal access to information and therefore distorting their bargaining positions. The expectation is that the tool will promote competition for consumers and is designed to evolve alongside digital markets.

Competition Reform

The Bill is designed to deliver competition reforms to form a level playing field for business, with the aim that innovative and customer-focused business are rewarded with increased market share and businesses using unfair practices are dealt with efficiently by the regulator. The Bill achieves this by bringing together a string of reforms to the CMA’s competition tools. These include:

• rebalanced merger controls;
• competent, flexible and proportionate market inquiries;
• robust investigatory powers to deal with illegal anticompetitive conduct; and
• quicker and more effective investigation and enforcement.

The expectation is that these reformed competition tools will drive lower prices and greater variety of innovative products and services in markets for consumers.

Strengthening Consumer Enforcement and Dispute Resolution

The BEIS Consumer Protection Study 2022 showed that consumers often lose out due to unresolved disputes with traders. The Bill seeks to address this gap by strengthening enforcement of consumer protection law and improving the quality of dispute resolution outside of courts. The UK government has identified that enforcement action is slow to afford consumers with redress and there is little to deter traders who adopt non-compliant consumer practices. The Bill will boost the toolkit of corrective measures available in respect of  traders and deliver a more robust enforcement process. The ADR services as a means of dispute resolution will also be strengthened, with mandatory accreditation required for those who offer this.

Enhancing Consumer Rights

The Bill considers the current landscape and evolving consumer behaviours and introduces  requirements to help tackle the new risks faced by consumers

The Bill focuses on subscription traps and fake online reviews. There has been regulatory scrutiny in this area for a number of years, heightened by the increase in subscription based online offerings. Subscription traps can prevent consumers from readily switching to one provider to another, resulting in limitation of consumer choice and committed spend which wasn't necessary anticipated. Similarly, fake reviews and false information can deter consumers from outwardly searching for better deals in the wider market, and induce consumers into purchasing goods or services due to unfounded claims.

The Bill will replace the Consumer Protection from Unfair Trading Regulations (CPRs), reshaping the key principles for a UK market.

The Bill introduces more prescriptive requirements to be satisfied by businesses who offer subscriptions to consumers, including obligations to:

• provide in a clearly presented manner any prescribed pre-contract information, including information regarding price, automatic renewals and cancellation rights;
• issue reminders to alert consumers when a free or discounted trial period is due to end or renew, ensuring that information regarding how consumers can exit is clearly made available;
• ensure that consumers who have entered contracts online can exit these easily online;
• provide 'end of contract' notices when a consumer has cancelled; and
• provide an additional 14 day cancellation right after the expiry of a free or discounted trial, or for any autorenewal where the extended term is at least a year.

Note that not all subscriptions will be subject to these proposed requirements – utilities supplies, financial services, medical prescriptions, and OFCOM regulated contracts, among others, are excluded.

Enhanced Enforcement

The Bill introduces enhanced enforcement measures for businesses which do not comply with CMA orders or undertakings, with the CMA entitled to impose a fixed penalties of up to 10% of a company's global turnover.  

Next steps 

The new draft Bill is progressing through the legislative process. Following the committee stage, the Bill will be subject to the report stage to be debated and further amended.