icon
icon
icon
icon
Upgrade
icon

UK's CMA Launches Digital Market Probes: What Investors Need to Know

AInvestTuesday, Jan 7, 2025 6:17 am ET
2min read



The UK's Competition and Markets Authority (CMA) is set to launch two investigations this month into some of the largest tech companies, using its expanded powers to curb dominance in digital markets. The regulator, which has been granted new authorities under the Digital Markets, Competition and Consumers Act 2024, will focus on firms designated as having "Strategic Market Status" (SMS) in relation to two areas of digital activity. The investigations must be completed within a nine-month statutory timeframe.

The CMA has hinted at targeting Apple and Google, specifically their mobile app stores, in its investigations. This is due to the CMA's previous findings that these companies' gatekeeping of their respective app stores creates substantial competition concerns. In December 2021, the CMA published a mobile market study that suggested both Apple and Google would meet the incoming criteria for SMS designation for several of their ecosystem activities. The CMA has also confirmed that it expects to undertake 3-4 investigations of tech giants in the first year of the regime, further indicating that these companies are likely targets.

The CMA's new powers and approach differ significantly from previous antitrust investigations in the UK. The new regime, set to come into force in January 2025, enables the CMA to proactively regulate digital giants with SMS, rather than relying on reactive investigations. Unlike traditional antitrust probes, which typically follow complaints or market developments, the SMS regime allows the CMA to designate firms upfront and impose bespoke rules to prevent anti-competitive behavior. For instance, the CMA has already identified Apple and Google as potential targets, citing their gatekeeping of mobile app stores as a concern (CMA, 2021). The new regime also empowers the CMA to impose Conduct Requirements and Pro-Competition Interventions, such as mandating interoperability or data sharing, to address specific competition problems arising from a firm's market power (CMA, 2024).

If designated with SMS, these companies could face Conduct Requirements and Pro-Competition Interventions from the CMA. These interventions could include preventing them from preferencing their own products, mandating interoperability, or requiring them to trade on fairer terms. Such interventions could limit their ability to extract rents from their dominant positions, potentially impacting their profit margins and stock prices.

However, it's important to note that these impacts are not guaranteed. The CMA's investigations are forward-looking and could result in no action being taken if the companies can demonstrate that their practices are not anti-competitive. Moreover, the CMA's new regime is designed to be proportional and targeted, meaning that the impacts on the companies' stock prices and market positions could be limited if the interventions are narrowly tailored.

In conclusion, the CMA's investigations could have significant impacts on the targeted tech companies' stock prices and market positions, but the extent of these impacts will depend on the specific findings of the investigations and the nature of the interventions imposed by the CMA. The CMA's new regime is expected to drive long-term growth and improved productivity in the UK's digital markets by promoting competition and innovation.
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.