August 13, 2024 | 4 minutes read

DMCC Act: Enforcement and penalties

Get in touch

Francion Brooks

Senior Associate

Get in touch

Francion Brooks

Senior Associate

In our Spotlight series on the DMCC Act we have explored which big tech firms may be designated as having strategic market status (SMS) and how the new digital markets competition regime will apply to them. In this final article of the series, we outline the raft of enforcement powers that the CMA has available in relation to the new rules (having already discussed the possibility of private enforcement in our article here).

Most notably, as with its competition powers, the CMA has the power to impose fines for breaches of the rules of up to 10% of a company’s global annual turnover, as well as daily penalties where it wishes to incentivise timely compliance. The CMA also has several enforcement powers specific to breaches of conduct requirements (CRs). Some of these are similar to the CMA’s powers in the competition and merger regimes (e.g. interim measures and commitments), and the countervailing benefits exemption (CBE) is akin to the exemption for the Chapter I prohibition of anti-competitive agreements (i.e. the exemption for agreements which give rise to an economic benefit, without unnecessary restrictions or substantially eliminating competition). As is the case for that exemption, the burden of proving that the exemption applies will be on the SMS firm and is likely to require concrete evidence of benefits to users or potential users. Given the interconnected nature of digital services, there is also likely to be much debate as to whether the users receiving the economic benefit need to be the same as those suffering any detrimental impact on competition (i.e. whether conduct which is detrimental to users of one digital activity can be justified by benefits accrued to users of another).

There is currently less clarity as to how enforcement orders and final offer mechanisms (FOM) will be used by the CMA; these options appear more interventionist than the CMA's usual powers in competition investigations. That said, enforcement orders will only be required where the CMA has failed to reach a participative resolution of its concerns with the SMS firm. FOMs are expected to be even more rare and triggered only following a breach of an enforcement order and where the CMA's other tools under the digital regime are not able to resolve the concerns.

Our guide to the various powers is below:

Additional powers for enforcement of conduct requirements

The CMA has several additional enforcement powers specific to conduct requirements (CR).

Interim enforcement orders (IEOs): Imposed on an interim basis in conduct investigations in relation to a suspected breach of a CR:
- to prevent significant damage to a particular person or category of person;
- to prevent conduct which could reduce the effectiveness of any other steps the CMA might take in relation to the CR; or
- to protect the public interest.
Countervailing benefits exemption (CBE): Meaning that the CMA will close a conduct investigation where:
- the conduct gives rise to benefits to users or potential users of the digital activity in respect of which the CR in question applies;
- those benefits outweigh any actual or likely detrimental impact on competition resulting from a breach of the CR;
- those benefits could not be realised without the conduct;
- the conduct is proportionate to the realisation of those benefits; and
- the conduct does not eliminate or prevent effective competition.
Commitments: Agreed with the SMS firm as to its behaviour (expected to be rare given that the CMA would have already sought a participative resolution of the concerns before starting a conduct investigation on a short statutory timetable).
Enforcement orders (EOs): Final orders imposing obligations on a firm to stop a breach, prevent it from happening again or address any damage caused by the breach.
Final offer mechanism (FOM): Power to resolve breaches relating to payment terms by the CMA choosing between the final offers of an SMS firm and a third party with an order to give effect to the preferred offer. Only available if the CMA has found a breach of a CR and a subsequent breach of an EO.