The arrival of the new Digital Markets, Competition and Consumer Act 2024 (DMCCA) on 1st January 2025 brought with it a new power for the Competition and Markets Authority (CMA); the ability to label big tech companies as having “Strategic Market Status” (SMS).
But what is Strategic Market Status, and what will it actually change?
What is Strategic Market Status?
SMS marks a firm as having particularly influential status within the market for a specific digital activity.[1]
The aim of the SMS designation is to promote competition in digital markets and protect businesses and consumers from harm caused by very large tech players like Apple, Amazon and Google.
To be designated as having SMS, a company needs to have:
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Have the CMA launched any Strategic Market Status Investigations yet?
The CMA have already announced three SMS Investigations since the DMCCA came into force at the beginning to the year.
The first is looking at Google’s position within the market for general search and search advertising. The second and third investigations are being run in parallel, assessing the Apple and Google “mobile ecosystems” (i.e. their mobile devices, operating systems, app stores and browsers).
Looking forwards, CMA CEO Sarah Cardell and Director of Digital Markets Will Hayter have indicated that another SMS Investigation will be launched towards the end of the first half of the year, and commentators have also suggested that the CMA’s ongoing investigations into the provision of cloud services by Amazon Web Services (AWS) and Microsoft could be looked at through the SMS lens.
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What will the Strategic Market Status designation do?
We all already know that Apple and Google have huge market power and influence, so how would this new designation help anything?
Once the CMA has labelled a firm as having SMS, the regulator gains two new key powers: Conduct Requirements and Pro-Competition Interventions (PCIs).
Conduct Requirements
Conduct Requirements are binding rules for operation, enforced by the CMA and tailored to each firm. The requirements aim to make sure that users are treated fairly and are provided with the right tools to make informed decisions.
These could include obligations such as ensuring interoperability with other services, giving users greater control of their data usage, requiring fairer terms of use and so on.
Pro-Competition Interventions
PCIs go one step further, largely reflecting the CMA’s current investigative structures and giving the regulator power to address competition barriers by directly enforcing specific actions, restricting specific behaviours, or requiring divestitures from SMS designated firms.
Unlike the CMA’s day-to-day behavioural investigations under the Competition Act 1998 (CA98), even though both types of investigation focus on specific firms, PCIs have the broader aim of long-term and market-wide systemic change.
Interestingly, the CMA closed its CA98 investigation into Apple and Google’s app store billing practices, preferring to investigate these practices under an SMS PCI.
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How else could Strategic Market Status designations help consumers?
Aside from the CMA’s direct enforcement powers, if a firm has been designated as having SMS, it may be easier for businesses and / or consumers bringing a claim for damages to argue that a firm has significant market power and is abusing its dominance.
It’s not clear yet how the CMA envisions the interaction of SMS with traditional definitions of market power and market dominance, but this will be something to look out for in the coming months as both the Collective Proceedings and Strategic Market Status regimes develop.
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We hope you've found this article of interest.
If you'd like to discuss it, or any other matters where we may be able to assist you, please contact David Rankin on david.rankin@puntersouthallgroup.com.
[1] How the UK’s digital markets competition regime works - GOV.UK
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