Frontier welcomes the CMA’s draft Digital Markets Competition Regime guidance, and has provided a response.

We consider the guidance provides helpful information on how the CMA plans to administer the recently passed Digital Markets Competition and Consumer (DMCC) Act in practice.

Our response focuses on specific parts of the guidance that we believe are important to highlight and/or can be clarified or improved to support the proper and effective functioning of the new regime.

Our observations include the following:

• In the context of designating firms as having Strategic Market Status:
  • Multi-homing is an important driver of competition in digital markets, but it is not currently mentioned in the guidance. It would be helpful to clarify that evidence on multi-homing will be considered relevant for the assessment of “substantial and entrenched” market power;
  • In fast-moving digital markets, evidence gathered from historic cases (e.g. past market studies) will often need updating before incorporating in an SMS assessment;
  • The guidance could provide further information about the relationship between “dominance” and “substantial and entrenched” market power including examples where a firm could be considered dominant but not having “substantial and entrenched market power” (or vice versa).
• Innovation in digital markets is fundamentally different to innovation in the utilities that have historically been subject to ex-ante regulation. This creates an increased risk that the regime will unintentionally restrict innovation pathways. To mitigate this risk, the regime should aim to create a stable and predictable platform for investment and innovation for all firms, including SMS firms.
• We broadly welcome the CMA’s focus on trials and experiments to test and monitor Conduct Requirements but the CMA should make this work with SMS firms’ innovation and testing arrangements.
• The CMA should seriously consider how it guards against the risk of regulatory capture in the implementation of the new regime.
   

Read our full response to the CMA's Consultation On Digital Markets Competition Regime Guidance.

You can find the CMA consultation documents here.

Frontier regularly advises clients operating in digital markets, as well as clients operating in other sectors subject to ex-ante regulatory regimes.

For further information please contact media@frontier-economics.com or call +44 (0) 20 7031 7000.