Falling off Cloud 9 – Competition in Digital Markets
- unlatchedlaw
- Feb 7
- 5 min read
Competitive applicants will appreciate competition law. It's always a hot topic in the UK and the US, and the only practice area which is predicated on a fundamental fusion of economics and law, achieved by an analysis of the rules and theories that create the ‘optimal’ conditions for efficiency, market development, and the welfare of consumers. Let’s use the recent implementation of the Digital Markets, Competition, and Consumers Act 2024 (“DMCCA”) as an example of why competition law can be incredibly intriguing and useful as a training contract/law firm application driver.
The DMCCA came into force on the 1st of January 2025, and it regulates competition in digital markets. It follows in the footsteps of the EU’s Digital Markets Act (“DMA”) which was brought into force in 2022. The DMA created ‘Gatekeepers’ who are subject to a range of prohibitions and obligations, thereby promoting a self-regulatory mechanism in the relevant markets to avoid the anti-competitive effects of concentration, refusal to deal, tying, or other measures which have been the subject of critical case law in the EU. The DMA, more than anything, appears to be an enhanced enforcement tool for the European Commission, with severe fines for players who don’t adhere to the rules.
The DMCCA on the other hand, creates a ‘Strategic Market Status’ (“SMS”) for firms based on a two tier assessment. The first tier is the jurisdictional and turnover tests. The jurisdictional test requires a digital activity to be linked to the UK, whilst the turnover test sets clear thresholds which, if met, bring a firm within the scope of the DMCCA. The second tier is the ‘substantive SMS conditions’ test, which considers whether a firm has ‘substantial and entrenched market power’ in respect of a digital activity. Broadly, the Competition Markets Authority (“CMA”) is scrutinizing a firms competitive pressures and the availability of alternatives for consumers. Once designated as an SMS, there are conduct requirements (“CR”) and pro-competition interventions (“PCI”) which the CMA may use to remedy what it deems to be anti-competitive behaviour. CRs appear to be highly discretionary but are subject to a number of defined ‘permitted types.’ As law firms have quickly pointed out, there is significant risk and uncertainty created by the latitude which the CMA possesses when it comes to CRs. PCIs – which are effectively CRs which are intended to address long-term adverse effects on competition (“AEC”) – are interventions which similarly have not provided certainty, as the CMA has stated that the theoretical benchmark assessing whether something is an AEC is a ‘well functioning market.’ The guidance provides useful insight into the factors that will determine whether an AEC exists, but the breadth and lack of a statutory framework means that CMA decisions and appeals to the Competition Arbitration Tribunal will pave the way forward.
What developments, therefore, have sprung from the DMCCA? Microsoft and Amazon AWS have already been recommended for investigation to be designated as an SMS by the CMAs independent enquiry group, and the cloud services market has been identified as one which is not working as efficiently as it could be . In the digital advertising space, Google has come under the CMA spotlight under the new regime (an unsurprising development following United States v. Google in 2023). It will be eye opening to see if the CMA’s qualitative assessment of potential SMS’s, compared to the DMAs quantitative thresholds that a company has to meet to be designated as a gatekeeper. The fact that UK companies will not have an obligation to report whether they meet the requirements of an SMS puts far more proactive pressure on the CMA to investigate competition in digital markets. The European Commission, on the other hand, must be notified under the DMA if gatekeeper thresholds are met, and it then has 45 working days to make a decision as to the company’s designation.
Conclusively, competition law continues to evolve at a rapid pace in digital markets. Traditional concepts used to weed out anticompetitive actors, such as market definition and the SSNIP test, are becoming obsolete in these areas. The legal requirements and arguments being used to monitor digital activity is becoming increasingly fluid and creative. Economists, tech enthusiasts, and lawyers will all be keen to weigh in, but it boils down to the fundamental question – is this increasingly regulatory approach disrupting innovation, or protecting consumer welfare?
How can this be used in your applications?
The first step, as always, is to consider whether you can find a personal link or interest in competition law. The less interested you are in this topic, the less personable your application and interviews are likely to be when you attempt to demonstrate your genuine desire to practice at a particular firm.
Having said that, consider the following analytical points as ways to embed the developing digital markets landscape into your applications:
Inherent risks - what are your perspectives? The DMCCA, as established above, is new and allows for a significant amount of discretion and ambiguity when it comes to CMA decisions. Although it is obvious which firms will be designated SMS, we can only speculate how frequent and severe CMA enforcement will be in digital markets, which have typically had a hard time being appropriately regulated by competition authorities globally.
Current developments and decisions: As the new regulatory mechanisms are in their infancy stages, this is the time to bring up recent developments in your applications and weigh in on them to demonstrate your actual interest. “My interest in digital markets and competition aligns strongly with [X firm]’s dedicated antitrust risk team and approach. The CMA’s recent provisional findings in the cloud services market have suggested that the powers afforded to it under the DMCCA are better suited to addressing the identified challenges, including significant barriers to entry and technical barriers affecting consumers’ ability to switch providers. Although Amazon AWS and Microsoft ought to be investigated for their impact on UK competition, the potential circumvention that DMCCA powers provide over the existing market investigation regime is a concern which needs to be evaluated promptly by clients. The established global antitrust investigations and commercial risk profiling that [X firm] adopts provides the market leading focus in this area which I aim to explore further.” This answer is likely too lengthy for applications that don’t utilise a cover letter, but a truncated version could still be developed for answers in the 300-400 word count range.
Will you practice competition law (with a specific focus on digital markets)? Will you maintain an interest in the long term? There is a decent chance that the answers to these questions might be no, but this style of answering questions lends itself well to showing your preference to the firm along with a commercial awareness on a topic that you are currently personally interested in, and not one which you think the firm would 'prefer' to hear about.
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