The UK’s new Digital Markets, Competition and Consumers Act (DMCC) gives regulators unprecedented power to intervene in global tech deals and business practices. The law, passed in May 2024, is enforced by the Digital Markets Unit (DMU), a team within the Competition and Markets Authority (CMA). The DMCC allows the UK to block acquisitions, demand data from foreign companies, and impose hefty fines for non-compliance.
Key Features of the DMCC:
- “Strategic Market Status” (SMS):
Tech companies earning $30 billion globally or $1.3 billion in the UK, and holding significant market influence, can be labeled as having SMS. This designation forces them to follow stricter rules, including:- Allowing app side-loading (like Apple permitting apps from non-App Store sources).
- Offering users alternatives to default apps (e.g., choosing a browser other than Safari on iPhones).
- Ex-Ante Regulation:
Unlike traditional laws that act after a problem arises (ex-post), the DMCC proactively monitors companies, assuming potential harm unless they prove otherwise. - Broad Extraterritorial Powers:
The CMA can demand testimony and documents from companies and individuals worldwide, even if they are outside the UK or unrelated to UK markets. Non-compliance risks penalties of up to 10% of global revenue or daily fines of $20,000 for individuals.
Impacts on Tech Innovation and Deals:
- Blocked Deals: Adobe’s $20 billion acquisition of Figma and Amazon’s $1.4 billion bid for iRobot were abandoned due to regulatory barriers in the UK and EU.
- Delayed Product Launches: Google limited its AI search assistant in Europe, and Apple released a downgraded iPhone 16 due to fears of violating these regulations.
- Entrepreneurial Challenges: Startups may struggle to attract buyers, reducing innovation and competition.
Concerns and Criticism:
- Harm to Consumers: Critics argue that rules like limiting “self-referencing” (e.g., Google linking directly to its Maps) make services less convenient for users.
- Focus on US Tech: The law largely targets American tech giants, ignoring monopolies in sectors like energy or pharmaceuticals.
- Global Trend: Countries such as Brazil, Germany, South Korea, and Australia are considering similar frameworks, adding layers of complexity for US companies.
The Bigger Picture:
Instead of fostering innovation within Europe’s tech ecosystem, critics say these regulations blame American tech for Europe’s struggles. They argue this approach stifles competition and increases costs for businesses and consumers.
As regulatory hurdles rise, the global tech industry faces new challenges. While some governments push for more control, others, like the US under Trump’s administration, might push back against these sweeping regulations.