While discussion of the Digital Markets, Competition and Consumers Act 2024 (“DMCCA”) has largely concentrated on the Competition and Markets Authority’s (“CMA”) new digital markets and consumer enforcement powers, the DMCCA also introduces notable changes to the UK merger control regime. The DMCCA partially came into effect on 1 January 2025 bringing changes to the existing UK merger and competition regime (Part 2, Chapter 2 DMCCA), as well as the introduction of the Strategic Market Status (“SMS”) framework (Part 1, Chapter 5 DMCCA).

This article focuses on the changes to the current merger control regime. The CMA issued its revised Guidance on the CMA’s jurisdiction and procedure on 2 January 2025. For a deeper dive into the SMS framework, which designates firms with “substantial and entrenched market power” and a “position of strategic significance” in digital activities connected to the UK, please see our previous article.

Key Changes Under the DMCCA

The DMCCA’s new rules introduce three primary types of change to the merger regime: (1) changes to thresholds and jurisdictional tests; (2) increased enforcement powers for the CMA; and (3) procedural changes to streamline investigations and extend flexibility.

1. Threshold Changes

The DMCCA updates the existing two thresholds, and adds a third new threshold, as well as an obligation to notify on firms designated as having SMS.

• Turnover: The DMCCA will raise the existing turnover threshold from £70 million to £100 million, to account for inflation. While this adjustment is expected to have minimal impact, it reflects the government’s commitment to keep thresholds in line with economic realities.
• Share of Supply: The DMCCA retains the 25% threshold but introduces a new safe harbour to the share of supply test. A relevant merger situation will only arise if at least one of the merging enterprises has a UK turnover exceeding £10 million. This move aims to shield smaller businesses from undue scrutiny. Even where the share of supply is high, the safe harbour will apply.
• Hybrid: A new threshold, called the hybrid test, will be introduced. It significantly expands the CMA’s global reach giving it the ability to intervene in transactions involving targets with minimal or no turnover in the UK, including “killer acquisitions”. Under this new jurisdictional test, the CMA will be able to review transactions if, pre-merger:

1. One party has a UK share of supply of 33% or more and a UK turnover exceeding £350 million; and
2. The other party has a “UK nexus” – even a minimal connection such as taking preparatory steps to supply services to UK consumers, will be sufficient.

This marks a departure from the existing requirement that both the acquirer and the target must have overlapping UK activities, or that the target has substantial UK operations. This new threshold means that any transaction by certain acquirers could potentially be subject to CMA review. It remains to be seen how this will be used by the CMA – it is likely to be most relevant to digital deals, but we note that the legislative test is not sector specific.

While this significantly expands the CMA’s reach, allowing it to review mergers by larger firms that may reduce innovation and the development of new goods or services, the UK merger regime remains voluntary, offering businesses a degree of flexibility (in principle) in their approach to UK merger control.

• Finally, the DMCCA also introduces a mandatory notification requirement for companies designated as having SMS. For further information, please see our previous article.

The new merger control thresholds will apply to deals that have not completed or for which the CMA has not opened a Phase 1 investigation by 31 December 2024. While the merger regime remains voluntary (except for companies designated as having SMS) the thresholds expand the CMA’s ability to call in deals for review. Therefore, considering whether to submit an increasingly popular short briefing note will become even more salient.

2. Increased enforcement powers

The CMA’s enforcement toolkit has also been considerably strengthened, including:

• Higher fines for non-compliance: Businesses failing to respond to compulsory information requests or providing false or misleading information could face fines of 1% of global turnover and additional daily penalties of up to 5% of daily global turnover. This replaces the previous cap of £30,000.
• Expanded penalty scope: The CMA can now impose fines for breaches of undertakings in lieu (UILs), final undertakings and enforcement orders. Previously, penalties were limited to interim enforcement orders and interim undertakings.

The move underscores the CMA’s intent to maintain the integrity of the merger control process and prevent delays or obstruction. Additionally, the CMA has underlined its ability to require the production of documents or supply of information from persons located outside the UK. You can find a more detailed update on this particular point here.

3. Procedural Changes

The procedural changes brought by the DMCCA aim to enhance the efficiency and flexibility of merger investigations. Key updates include a statutory fast-track option to request that a case be ‘fast tracked’ to the consideration of UILs or to Phase 2. Parties will be able to request a ‘fast track’ of their case during the Phase 1 or pre-notification period. This formalises the CMA’s existing informal fast-track process, and is a change aimed at saving time and effort when further scrutiny is inevitable. Though the CMA will not publish a reasoned Phase 1 decision where it fast-tracks to Phase 2, which underpins the fact parties do not need to concede a substantial lessening of competition (“SLC”) finding in order to go straight to Phase 2.

Another amendment to the procedural merger rules is the introduction of an extended Phase 2 review period. The current 24-week limit for Phase 2 investigations will be more flexible, allowing extensions by agreement between the CMA and the merging parties. This added flexibility aims to accommodate complex cases requiring detailed review and where it makes sense to align its proceedings with those in other jurisdictions.

Other DMCCA Provisions and Timeline

While these changes to merger control, alongside the digital and other competition parts, took effect from 1 January 2025, other provisions under the DMCCA, including consumer enforcement regimes (Part 3 DMCCA) and unfair trading regulations (Part 4, Chapter 1 DMCCA), are expected to be rolled out in April 2025. Reforms to subscription contracts and alternative dispute resolution processes are scheduled for Spring 2026 at the earliest.

What Does This Mean?

The CMA’s expanded jurisdiction and enhanced enforcement powers raise important questions about the voluntary nature of the UK’s merger regime.

While businesses technically have the option to notify mergers voluntarily, the broader scope and tougher penalties introduced by the DMCCA could be argued to amount to de facto mandatory compliance for larger firms. This trend is in line with the CMA’s increasingly active use of its merger’s intelligence function. For example, the CMA’s Panel Chair, Martin Coleman, revealed that the mergers intelligence team reviewed 827 deals between 2021 and 2022. This proactive oversight may leave businesses little choice but to engage with the CMA to avoid losing control of the narrative and an inevitable investigation. Not least, the CMA has retained maximum flexibility in its approach. This is clear, for instance, in relation to the share of supply test and when it can extend the four-month post completion deadline for call-in (such as, if an RFI has not been complied with). Not least, the finer detail around the new hybrid test will become clearer over time. At this stage though, we eagerly wait to see the extent of the CMA’s international reach in its application of a “UK nexus”.

As these updates take effect, businesses should stay informed and ensure compliance to navigate the evolving regulatory landscape effectively. Understanding the expanded merger rules and their implications will be crucial for avoiding penalties and ensuring smooth transaction processes.

If you need more information or further guidance on this topic, please contact Dr Saskia King, Ariane Le Strat, Emma Bermingham and Alienor Troletti.

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