The UK's New Digital Markets Regime: Outlook for 2025
David Boosey · Posted on: February 3rd 2025 · read
On January 7th, the UK's Competition and Markets Authority (CMA) introduced a new framework aimed at curbing the dominance of major digital firms by designating certain companies with “Strategic Market Status” (SMS). This move is designed to prevent anti-competitive practices and foster innovation in the digital sector. Once designated, these firms will face additional regulatory scrutiny to ensure fair competition, prevent anti-competitive practices, and foster innovation. With the rise of digital monopolies and consumer concerns about data control, the UK’s new regime represents a significant shift in market regulation.
As we look ahead to 2025, does this represent a tough stance on Big Tech or a pragmatic approach to addressing market failures?
On one hand, if there is a common sense approach in terms of implementation and aligns us with current regimes in both the EU and the US, then in theory it should help innovation. It will be the attempted actions the CMA takes using the new power that will give us a real indication.
First and foremost, consumer experience will likely improve, as the CMA’s measures aim to prevent large firms from self-preferencing, where they favour their own services over those of smaller competitors.
"The new rules could encourage more competition and choice and make it easier for consumers to switch providers. In turn, this may create a more dynamic digital marketplace where consumers feel empowered and businesses are encouraged to innovate."
However, whether these regulations will truly stimulate innovation remains a key question. While the intention is to foster a fairer playing field for startups, the impact on smaller firms will depend on how the CMA enforces these new powers and how those smaller firms see that impacting their ambitions. In theory, it shouldn’t create a barrier for entry to small firms as they would not be designated but in the digital world, it’s very easy to set up your business in other territories, like the US, if regulation is more advantageous in those other territories, and that impacts access to capital. Therefore overbearing enforcement of the regulation could unintentionally stifle the growth of emerging businesses, which would undermine the very innovation the regime seeks to protect. If the CMA strikes the right balance, and it doesn’t end up impacting the £14bn committed by private leading tech firms through AI Action Plan then we could see an innovation boom in most UK sectors over the next few years.
In terms of global competitiveness, the UK finds itself navigating a middle path between the diverging regulatory approaches of the EU and the US. The EU’s Digital Markets Act (DMA) represents a stringent framework aimed at curbing the dominance of large digital firms, though it and other EU Acts are increasingly viewed as overly burdensome and stifling growth. Meanwhile, the US, under its current administration, has introduced regulatory uncertainty, alienating investors by withdrawing agreed funding for initiatives like green tech and the Inflation Reduction Act (IRA) and undermining confidence in digital assets with unpredictable policies. For the UK, the challenge is to avoid being “too off-kilter” with either region while fostering a regulatory environment that supports innovation and growth without compromising fair competition.
The EU’s Digital Markets Act (DMA) represents a stringent framework aimed at curbing the dominance of large digital firms, though it and other EU Acts are increasingly viewed as overly burdensome and stifling growth.
President Trump has already taken steps to revoke several executive orders from the previous administration, including those related to AI regulation. When you couple this with the clear lobbying by and perceived pandering to Big Tech, it raises questions about whether the US might amend its American Innovation and Choice Online Act and the Open App Markets Act.
As the CMA’s actions unfold, the real test will be its ability to implement these regulations without hindering growth. If successful, 2025 could mark a new era of equitable competition, where businesses of all sizes can thrive, and consumers benefit from more choices, better services, and enhanced digital rights. However, if the CMA’s interventions are too burdensome, they risk creating barriers for businesses and stifling the very competition they aim to promote. The success of this regulatory regime will depend on thoughtful, strategic implementation in 2025 and beyond.
Change is already underway for other UK consumer protection regulators, such as the Financial Conduct Authority (FCA), as they face similar pressures to not hinder growth as they also address longstanding criticisms of key failures. These changes will be pervasive and will focus on simplification and digital innovation while also tackling deeper issues related to regulatory and cultural issues. The challenge for regulators like the FCA - and by extension, the CMA - is not necessarily the regulations themselves but the way they are implemented and how well the regulators understand their purpose. For the CMA, as with the FCA, effective enforcement and a clear grasp of the goals behind the regulations will be critical to achieving meaningful, balanced outcomes.
