A new era of digital oversight
The DMCCA, which came into force on 1 January 2025, introduces a bespoke regulatory regime for digital markets. It empowers the CMA to designate firms as having SMS in relation to specific digital activities where they meet certain thresholds, including substantial and entrenched market power and a position of strategic significance. This designation remains in place for five years. Once designated, firms may be subject to tailored Conduct Requirements or, where necessary, Pro-Competition Interventions ("PCIs").
Unlike traditional competition enforcement, the CMA does not need to establish historic harm to impose Conduct Requirements. This forward-looking regime is designed to prevent harm before it occurs and to promote fairer, more open digital markets.
Why Google?
The CMA’s investigation focused on Google’s provision of general search and search advertising services, activities it treated as a single digital activity due to their interconnected nature. The CMA found that Google’s services are clearly linked to the UK, with an estimated 60–70 million mobile users and 20–30 million desktop users.
In assessing whether Google meets the SMS criteria, the CMA highlighted:
- Market dominance: Google accounts for over 90% of UK general search queries, with no rival gaining ground in over 15 years.
- Barriers to entry: Google’s vast index, data ecosystem, and distribution agreements (including with Apple and Samsung) create formidable obstacles for competitors.
- Profitability: Google’s UK search advertising revenues exceed £10 billion annually, with margins above 25% and returns on capital over 40%.
- Strategic significance: Google’s services are used by hundreds of thousands of UK businesses, and its scale allows it to influence how others operate in the market.
The CMA concluded that Google holds both substantial and entrenched market power and a position of strategic significance—meeting the statutory test for SMS designation.
What remedies are on the table?
The CMA has outlined a roadmap of potential interventions, grouped into three categories based on urgency:
- Category 1 (2025): These include choice screen obligations on Chrome and Android, data portability requirements, fair ranking principles, and transparency around how publisher content is used in AI services.
- Category 2 (2026): Measures under consideration include fair treatment of specialist search services, fair terms for publisher content, and greater transparency in search advertising auctions.
- Category 3 (2027+): Longer-term possibilities include restrictions on data sharing within Google’s ecosystem and further controls on ad pricing and load.
These measures aim to rebalance the playing field, enhance consumer choice, and support innovation.
Can Google appeal?
At this stage, the CMA’s decision is provisional. Google has the opportunity to respond before a final designation is made. Once designated, Google would be subject to the new obligations and could challenge the designation through judicial review. However, the threshold for overturning such a decision is high, and the CMA’s detailed reasoning suggests it is prepared to defend its position robustly.
Implications for the tech sector
This decision is not just about Google. It signals a broader shift in how digital markets will be regulated in the UK. The CMA is already consulting on whether Microsoft should be designated with SMS in the cloud services sector. The inquiry group’s provisional view is that SMS designation could enable more effective remedies than traditional competition tools—such as promoting technical standardisation and reducing switching costs.
Meanwhile, private enforcement is gaining traction. Consumer group Which? has brought a claim against Apple over alleged restrictions on cloud service competition. Whether or not the claim succeeds, it reflects growing scrutiny of dominant tech firms and a willingness to challenge entrenched positions.
A sector under the microscope
The UK is catching up with global efforts to rein in digital giants. The CMA’s approach is more flexible than the EU’s Digital Markets Act, allowing it to tailor interventions to specific market dynamics. But the direction of travel is clear: increased scrutiny, proactive regulation, and a focus on ensuring digital markets work for consumers and businesses alike.
What should tech clients do now?
For tech companies operating in the UK, this is a pivotal moment. The regulatory landscape is evolving rapidly, and firms must ensure their commercial strategies and contractual arrangements are future-proof.
At DWF, our Competition, Technology and Commercial Transactions teams work closely together to provide integrated advice across the full spectrum of digital regulation. Whether you are reviewing existing agreements, planning market expansion, or responding to regulatory scrutiny, we can help you navigate the complexities of the DMCCA and beyond.
For more information on how the DMCCA could affect your business, please get in touch.
Thank you to Amanpreet Kaur and Adrianna Zawilska for contributing to the production of this article.
