As the clock ticked past midnight on New Year’s Eve, the Competition and Markets Authority (CMA) had extra reason to celebrate. The provisions in the Digital Markets, Competition and Consumers Act 2024 (DMCC Act) introducing the UK’s new digital regulatory regime for “SMS firms” – large tech firms with “Strategic Market Status” – entered into force on 1 January 2025, as did the provisions strengthening the UK’s existing competition law regime.

Frustrated with how long it has had to wait for the SMS regime, the CMA’s Digital Markets Unit (DMU) will not waste any time now in launching investigations to designate the first SMS firms.  SMS firms will be subject to specific conduct requirements, possible pro-competition interventions, and mandatory merger reporting regarding qualifying transactions involving their groups – and face serious adverse consequences including fines and damages actions for non-compliance.  An area to watch is whether any SMS firms seek to challenge the DMU’s decision to designate them as such, or to challenge other aspects of the regime.

Stronger CMA investigation powers

The competition law reforms in the DMCC Act include stronger CMA investigation powers, including in respect of foreign cartels causing harm in the UK, a new duty to preserve documents, and the extension of “seize and sift” powers to dawn raids at domestic premises – reflecting the rise in home-working. Expect to see the CMA ramping up penalties for non-compliance with investigative measures in 2025, especially where parties fail to comply fully with information requests in antitrust and merger cases, with the DMCC Act providing for higher procedural penalties. Parties planning deals should also take note of the CMA’s revised merger control thresholds – including their new “hybrid threshold”.

Key changes to UK consumer law regime

The DMCC Act will also introduce important changes to the UK consumer law regime, including substantive changes to areas of consumer law such as in respect of fake reviews, drip pricing and subscription contracts. But the most significant change is stronger enforcement powers, with the CMA gaining the “game-changing” new power to impose turnover-based fines for breaches of consumer law.  Consumer-facing companies face greater risk in this regard, but still have time to up their compliance efforts. The consumer reforms – including CMA’s new fining powers – are expected to commence in April 2025 in the main.

CMA more open to behavioural merger remedies?  

Does the CMA’s recent decision clearing Vodafone/Three with behavioural commitments – which include the parties having to invest billions rolling out a combined 5G network across the UK – indicate a greater CMA willingness to accept behavioural remedies in merger cases generally?  The CMA has a reputation for being less receptive to behavioural remedies than the European Commission, while the new Labour Government expects the CMA to do more to prioritise economic growth – although the CMA takes independent decisions in its cases.  Last month the CMA committed to launching a review of its approach to merger remedies in the New Year and time will tell whether this is a watershed moment.  However, in Vodafone/Three it clearly helped that the deal is in a regulated sector, with Ofcom able to assist in overseeing remedies.    

“More of the same” from ISU

Expect more of the same is broadly the message from the Investment Security Unit (ISU) which enforces the UK’s national security regime under the National Security and Investment Act 2021 (NSI Act). Their message has been there has been no change in approach since the General Election. We hope that 2025 will see the new Government implement the previous Government’s plans to clarify and refine some of the often difficult to apply mandatory notification sectors, as well as introducing possible exemptions for intra-group arrangements. The new Government at least recognises that there are aspects of the sector definitions and related guidance that could be improved, based on its statutory report published last month on the Notifiable Acquisition Regulations which set out the sector definitions.

2024 saw a noticeable increase in final orders under the NSI Act – for transactions requiring remedies to address national security concerns after an in-depth full assessment – following a decline in 2023 compared to the first year of the regime. There have now been more than 30 final orders since the regime commenced, although only a handful are outright prohibitions. And this is in a context where more than 2,000 transactions have been notified in total and around 96 per cent are cleared unconditionally at the first review stage. Arguably this suggests significant scope to narrow the regime – which would also be investor friendly – but that seems unlikely. The recent report on the Notifiable Acquisition Regulations also indicates the Government’s view is that the regime is generally proportionate and that businesses and investors whose transactions are cleared at the first review stage face only a relatively small burden.                           

Growth expected to continue in antitrust damages claims

More of the same is also expected regarding antitrust damages litigation – with nothing to suggest the huge growth in UK antitrust damages claims over recent years is slowing down. Following failed legislative attempts in 2024 to address the impact of the Supreme Court judgment in PACCAR (R (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28), which rendered many litigation funding agreements unenforceable, the Civil Justice Council’s broader litigation funding review, due to report by summer 2025, is something to keep an eye on. In the meantime, the first substantive judgments in class action cases are starting to arrive, with Le Patourel v BT handed down in December.

AI to remain a hot topic

Finally, given its potentially transformative effects, AI will remain an area of considerable interest in 2025 and beyond for the CMA and likewise other competition authorities globally – both in terms of continuing work to understand AI and potential areas of competition concern, as well as looking into specific AI partnerships and collaborations.