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Similar regulatory initiatives elsewhere are already causing the biggest tech companies to change the way they operate – for example, since the introduction of the EU’s Digital Services Act in August 2023, platforms are offering increased transparency on how their algorithms work. However, while much of the discussion around the Bill has focused on the biggest tech companies who are set to be designated as having ‘strategic market status’ (SMS) by the regulator, with all the additional scrutiny that entails, these changes will also have far-reaching impacts throughout the digital ecosystem.
The Bill entering into law by no means represents a done deal on any of its key measures – there will be a lengthy implementation process where secondary legislation and guidance is drawn up. Engagement in this process over the next couple of years will therefore be just as important as having engaged with the primary legislation in shaping how this Bill will impact the digital economy.
Below we outline a few of the key considerations in the months and years after the Bill passes into law – and where the opportunities and challenges will be for businesses across the digital ecosystem.
Engaging with secondary legislation
Following campaigns from policymakers and industry, the Government has already committed to publishing secondary legislation on media mergers and state ownership; drip pricing; and exemptions from various subscription provisions, including charitable donations and digital content services.
Additionally, the Secretary of State can choose to make changes to the Bill’s provisions, including altering the conditions for strategic market status, and adding to or removing from the list of conduct requirements and unfair commercial practices.
The consultation process for this secondary legislation will allow businesses and other stakeholders the opportunity to feed in their priorities and concerns; while the powers afforded to the Secretary of State make them an ongoing target for engagement from different groups to ensure new regulations align with their interests.
Responding to legal challenges
As the Bill introduces far-reaching new powers for the regulator to intervene in digital markets, it is likely that some of the CMA’s early decisions will be challenged. The Government have stuck by their decision for most appeals under the Bill to be conducted by Judicial Review – meaning the CMA can be challenged only based on the process it took to reach a decision – as opposed to full merits, which allows for a challenge on the merits of the decision itself.
The outcomes of the first few cases under the new regime will therefore set the tone for the next decade, or more, of competition law – particularly as Judicial Review tends to rely heavily on legal precedent as opposed to a set of codified principles.
The first few years of the digital market's regime will of course be particularly critical for those who are set be designated as having SMS. However, the process of officially designating all the firms who would expect to fall under the regime will not happen overnight – the CMA have indicated that they will only undertake two investigations at once, and each will take several months to conclude. Any decision to designate a firm could also be subject to appeal, and a successful or partially successful appeal could change the manner in which SMS investigations are carried out for the next batch of big tech firms.
The outcomes of these decisions and the way in which they are reached matters not only for the firms under scrutiny at the beginning of the regime, but also those who may grow at a sufficient scale to be designated with SMS in the future.
Tech start-ups and scale-ups will also be interested in how the merger control regime and new, more stringent reporting requirements within the Bill work in practice, as this may affect the ease and feasibility of future mergers and acquisitions.
Equally, the order in which firms are designated will matter for other players in the ecosystem who rely on different big tech firms for a platform and are keen to see the DMU address perceived imbalances in market power in their sector as a priority.
As of this month, the EU’s Digital Markets Act has required companies designated as ‘gatekeepers’ to set out how they are complying with the DMA’s obligations. Already, some ‘gatekeeper’ firms are starting to challenge the EU’s initial decisions and assessments of their market power, which has provoked concern among some policymakers that the DMU will encounter the same obstacles. Government and industry will be keeping a close eye on the EU’s early experience with regulating digital markets for any potential lessons or discrepancies in how different issues are approached.
How to address emerging technology
While the DMU has stated its intention to be ‘technology neutral’ in its approach to regulation, the extent to which the Bill will be future proof will depend upon its ability to address emerging issues on which there is not yet a clear Government position.
Chief among these is AI – with many of the major players already establishing themselves in the generative AI space and acquiring innovative smaller firms in the process (e.g. Google DeepMind). The debate around copyright and AI in the UK – including what constitutes a fair use of journalists’ work by AI tools – is proving particularly intractable, with the Intellectual Property Office’s recent attempt to convene a cross-sector working group breaking down without any conclusion being reached.
Although the Bill looks set to enter onto the statute books in the coming months, there is still much that remains undecided in how it will be implemented and how this will shape the landscape of digital markets in the years to come. Companies that may be affected will need to keep a close eye on how this regulation develops – even if they haven’t engaged closely with the primary legislation.
Moving forward, it will be important for businesses across the digital ecosystem to communicate their positions and priorities as the regulator looks to implement these far-reaching new powers and address emerging issues – like AI and copyright – which may prove increasingly contentious.