Open consultation

DMCCA 2024 turnover and control regulations: consultation

Published 30 July 2024

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Background

What is the government consulting on?

The Digital Markets, Competition and Consumers (DMCC) Act 2024 will drive innovation, grow the economy and deliver better outcomes for consumers by:

  • increasing competition in digital markets, proactively driving dynamic markets and ensuring the most powerful tech businesses treat businesses and consumers fairly
  • enhancing the wider UK competition regime, so that the Competition and Markets Authority (CMA) is able to focus its work on the areas of greatest potential harm and deliver a level playing field for businesses
  • protecting consumers from rip-offs by strengthening consumer enforcement powers and giving consumers new rights
  • monitoring and assessing the state of competition in the motor fuel retail market to ensure it is delivering for consumers

We are consulting on the content of draft regulations setting out, for purposes provided for in the DMCC Act:

  • how turnover should be estimated or calculated
  • the circumstances in which a person is considered to have control over an enterprise

The DMCC Act received Royal Assent on 24 May 2024. The DMCC Act contains provisions requiring the CMA, the courts and other enforcers to estimate or calculate a business’s[footnote 1]turnover. This is for the purposes of assessing whether a business should be designated as having strategic market status (SMS), or to determine the statutory maximum for penalties that non-compliant entities or individuals may be required to pay.

These penalties relate to the Act’s provisions relating to digital markets, and to the enforcement of competition and consumer law, including the motor fuel regime.

The introduction of turnover based penalties enables the issuing of penalties proportionate to the size of the business involved, providing a more effective deterrent for businesses not complying with investigative measures or breaching the remedies, conduct requirements or other measures imposed by regulators.

The consumer protection regime, and the amendments made by the DMCC Act to the Enterprise Act 2002, require an assessment to be made as to whether a person controls an enterprise.  These draft regulations also provide for the circumstances in which a person is considered to have control.

 Why we are consulting?

We are consulting to gather views on 3 draft Statutory Instruments (SI) which set out how the CMA, civil courts or other enforcers will estimate or calculate turnover for the purposes given above, and for establishing who has control over a business.

We intend to make and lay the final version of these regulations in the Parliament in coming months. We invite views from businesses in affected industries, academics, and any other interested party. 

What are the government’s objectives?

With respect to the provisions listed above, the government’s objectives are:

  • to ensure that the relevant decision maker’s estimation or calculation of turnover is fit for purpose and transparent
  • to maintain consistency with existing statutory frameworks for the calculation of turnover
  • to ensure consistency with accounting principles and practices

Overview of consultation topics

Digital markets: Strategic Market Status designation

Part 1 of the DMCC Act creates a new pro-competition regime, giving the CMA new powers to drive competition in digital markets. Designation is the gateway to the regime and only those businesses that have been designated as having SMS, following an evidence-based investigation that determines that they meet certain criteria, will be subject to the Digital Markets Regime.

One of these criteria is the turnover condition. The CMA will only be able to designate businesses with SMS if the CMA estimates that the undertaking[footnote 2] under investigation or, where the undertaking is part of a group[footnote 3], that group, has either a UK turnover of more than £1 billion or global turnover of more than £25 billion.

Though size and turnover are not the same as power, it is more likely that very large businesses will hold the most market power, though we anticipate that the vast majority of businesses will not be covered by this regime.

Relevant provisions in the draft regulations

Regulation 2 and Schedule 1 to the draft Digital Markets, Competition and Consumers Act 2024 and Consumer Rights Act 2015 (Turnover and Control) Regulations 2024 (the “draft Turnover and Control Regulations”) is relevant to SMS designation.

Relevant provisions in the DMCC Act

Section 8 (Turnover of an undertaking) of the DMCC Act gives the Secretary of State the power by regulations to make provision regarding how the total value of UK or global turnover is to be estimated.

It is important that the estimation of turnover for the purposes of SMS designation is appropriate and sufficiently flexible to accommodate the complex corporate structures which may be present.

Digital markets penalties

The DMCC Act introduces new fines that the CMA can use if entities or persons fail to comply with a regulatory requirement or an investigative measure imposed under Part 1 (Digital Markets) of the DMCC Act.

The maximum level of fine for breaches are set out in relation to the turnover of the undertaking. Based on the severity of the breach, the CMA can choose to set the fine at a lower level than the maximum. In all cases, turnover amounts refer to the global turnover of the undertaking or, where the undertaking is part of a group, that group.

Fines issued to individuals and organisations that are not undertakings are outside the scope of this regulation because they are subject to different limits, unrelated to turnover[footnote 4].

Relevant provisions in the draft regulations

Regulation 3 and Schedule 2 of the draft Turnover and Control Regulations are relevant to digital market penalties.

Relevant provisions in the DMCC Act

Section 85 of the DMCC Act allows the CMA to impose an appropriate penalty for an undertaking’s failure to comply with a regulatory requirement, such as an enforcement or final order. This is subject to the statutory maximum set out in Section 86, a cap of 10% of turnover for fixed amounts or 5% of the daily turnover if the penalty is calculated as a daily rate.

Where the CMA applies a combination of a fixed amount and a daily rate, the same maximums apply to the relevant parts of the combined penalty.

Section 87 allows the CMA to calculate a penalty for an entity or person’s failure to comply with an investigative measure, subject to the statutory maximums set out in Section 88. This cap for fixed amounts is 1% of the total value of turnover.

For daily rates, the cap is 5% of the total value of the person’s turnover for each day. The maximum amounts for fixed and daily amounts apply where the penalty is a combination of both.

Failure to comply with an investigative requirement, includes:

  • failure to comply with a requirement imposed by or under Chapter 6

  • the provision of false or misleading information in connection with any function of the CMA under Part 1 of the Act

  • the provision of false or misleading information to another person knowing that the information was to be used for the purpose of giving information to the CMA in connection with any function of the CMA under Part 1 of the Act

Section 90 includes provisions on the calculation of a penalty by reference to a daily rate and gives the Secretary of State the power by regulations to make provisions for determining global turnover.

Competition penalties

The DMCC Act amends the Competition Act 1998 and Enterprise Act 2002 to introduce new turnover-based penalties for non-compliance with investigative measures, where the failure to comply is committed by a person who is an undertaking (under the Competition Act 1998) or a person who owns or controls an enterprise (under the Enterprise Act 2002).

It also introduces new turnover-based penalties for breaches of a competition remedy (that is a commitment or direction given or issued under the Competition Act 1998, or an undertaking accepted or order made under Part 3 or 4 of the Enterprise Act 2002), where currently the enforcement action can only be pursued through the courts.

Relevant provisions in the draft regulations

The draft Competition Act 1998 (Determination of Turnover for Penalties) Regulations 2024 (the “draft Competition Act Regulations”) and the draft Enterprise Act 2002 (Mergers and Market Investigations) (Determination of Control and Turnover for Penalties) Regulations 2024 (the “draft Enterprise Act Regulations”) are relevant to competition penalties.

They set out how turnover should be calculated for the purposes of maximum penalties under the Competition Act 1998 and Parts 3 and 4 of the Enterprise Act 2002 respectively, and set out the circumstances in which a person is considered to have control of an enterprise.

Relevant provisions in the DMCC Act

Schedule 10 to the DMCC Act amends the Competition Act 1998 and the Enterprise Act 2002 to introduce turnover based penalties of either a fixed penalty of up to 1% of worldwide turnover, a daily penalty of up to 5% of daily worldwide turnover, or both, for failure to comply with an investigative measure[footnote 5].

Schedule 11 to the DMCC Act amends the Competition Act 1998 and Parts 3 and 4 of the Enterprise Act 2002 to introduce turnover based penalties of either a fixed penalty of up to 5% of worldwide turnover, a daily penalty of up to 5% of daily worldwide turnover, or both, for breaching a competition remedy[footnote 6].

In each case, the Secretary of State is given the power to make regulations regarding the determination of turnover and daily turnover for the purposes of calculating the maximum penalty.

The Secretary of State also has the power to make regulations for the purposes of determining when an enterprise is to be treated as being controlled by a person, for the purposes of the relevant provisions in Parts 3 and 4 of the Enterprise Act 2002[footnote 7]

Penalties given to a person who is not an undertaking, or who does not own or control an enterprise, are out of scope of these regulations because they are subject to different limits, unrelated to turnover[footnote 8].

Consumer law penalties

Part 3 of the DMCC Act gives new powers to the civil courts and the CMA to impose turnover based penalties under the consumer law regime.

The DMCC Act provides the following penalties in the consumer law regime:

  • breaches of consumer protection laws, which may incur a penalty of up to 10% of turnover or £300,000[footnote 9], whichever is higher
  • breaches of undertakings given to the court or to enforcers, which may incur a penalty of up to 5% of turnover or £150,000, whichever is higher[footnote 10]
  • breaches of undertakings given to the CMA, which may incur a penalty of up to 5% of turnover or £150,000, whichever is higher[footnote 11]
  • breaches of directions imposed by the CMA, which may incur a penalty of up to 5% of turnover or £150,000, whichever is higher[footnote 12]
  • provision of materially false or misleading information to the CMA, which may incur a fine of up to 1% of turnover or £30,000, whichever is higher[footnote 13]
  • non-compliance with a statutory information notice, which may incur a fine of up to 1% of turnover or £30,000, whichever is higher[footnote 14]

Relevant provisions in the draft regulations

Regulations 4 and 5 and Schedule 3 of the draft Turnover and Control Regulations, and the Draft Enterprise Act Regulations are relevant to consumer penalties.

Relevant provisions in the DMCC Act  

Section 204 (Determination of turnover) gives the Secretary of State the power to make regulations for determining the turnover of a person to calculate maximum penalties. It also requires provisions for determining when a person is to be treated as controlled by, or controlling, another person.

This is to support the operation of Section 204(1), which sets out that turnover shall include the turnover of persons who control or are controlled by the infringer.

Schedule 17 inserts new paragraph 16H into Schedule 5 of the Consumer Rights Act 2015. This paragraph gives the Secretary of State essentially the same delegated powers as are granted by section 204, to facilitate the calculation of turnover for penalties for non-compliance with an information notice issued under paragraph 14 of Sch 5 CRA 2015.

Motor fuels penalties

The DMCC Act gives the CMA the power to request that a business involved in, or connected with the distribution, supply, or retail of motor fuel provides specific information. This information would be requested when the CMA considers that it will assist in its assessment of competition in the retail motor fuel market.

These new powers have been given to the CMA following the findings and recommendations in the CMA’s year-long study into the road fuels sector, which reported in July 2023.

These new information gathering powers are enforceable through a new turnover based civil penalty regime. The CMA is empowered to issue a penalty for non-compliance with an information notice, the falsification or concealment of information which has been required under a notice, and the provision of false or misleading information in response to a notice.

The maximum penalty which may be imposed is either a fixed penalty of up to 1% of worldwide turnover, a daily penalty of up to 5% of daily turnover, or both.

Relevant provisions in the draft regulations

Regulation 6 and Schedule 4 to the draft Turnover and Control Regulations are relevant to the motor fuel penalties.

Relevant provisions in the DMCC Act

Chapter 1 in Part 5, of the DMCC Act gives new information gathering powers to the CMA in relation to the monitoring of competition in the retail of motor fuel. [footnote 15] The civil penalties regime[footnote 16] and maximum penalties are also set out here. The Secretary of State is given the power to make regulations regarding the determination of turnover and daily turnover for the purposes of calculating the maximum penalty[footnote 17]

Consultation questions

Overview

The government is consulting on draft regulations which set out how turnover should be estimated or calculated for the purposes described above, and, where relevant, the circumstances in which a person will be treated as controlling an enterprise or business.

In particular, the regulations deal with:

  • how the turnover will be estimated or determined, including what sums should be taken into account for that purpose
  • what factors the CMA must take into account when determining whether turnover is relating to UK users or UK customers for the purposes of section 8(3) of the DMCC Act
  • the period for the determination of turnover
  • the trigger event for determining the period of turnover
  • how turnover should be calculated in relation to financial institutions credit institutions, and insurance undertakings
  • the application of exchange rates where sums are not in sterling
  • the circumstances in which a person will be treated as having control of an enterprise or business

Unless otherwise specified, the policy positions proposed below apply for the purposes of estimating turnover in relation to SMS designation, and calculating turnover in relation to the maximum penalties which may be imposed under the digital markets competition, consumer regimes, and motor fuel information gathering provisions.

Policy rationale

This section notes the overarching rationale the Government has used in relation to estimating or calculating turnover when drafting the provisions of the 3 SIs.

The calculation of turnover should be undertaken in a manner which is pragmatic and avoids unnecessary burden for the relevant authority concerned.

It should also ensure that it allows an accurate picture of the financial position of the undertaking, group, enterprise or trader to be identified, for the purposes of assessing whether they are in scope of the digital markets regime, or determining the maximum penalty which may be imposed under any of the digital markets, competition, consumer law enforcement, or motor fuel information gathering regimes.

It is further recognised that an undertaking, enterprise or trader might take one of a number of legal forms, from sole traders through to complicated corporate structures, each subject to differing regimes regarding the preparation of their accounts.  The regulations have been drafted so that they can be applied regardless of the legal form taken by the entity or person concerned.

It is noted that there are existing regulations in place under the competition regime, and under the National Security and Investment Act 2021, which deal with the calculation of turnover and the circumstances in which a person will be treated as controlling an enterprise.

Where relevant and helpful, the approaches taken under the existing regulations[footnote 18] have been used as starting point for these regulations.

Where the approach taken by any of these instruments has been considered appropriate as a starting point for consideration, has been identified in this document. 

How turnover will be estimated or determined[footnote 19]

The intention of the provisions made in all 3 sets of draft regulations is to capture all revenue from the relevant entity or relevant person’s trading, minus certain unavoidable deductions (any sales rebates, value added tax, and other taxes which are directly related to turnover).

The approach intends to provide a comprehensive picture of the financial position of the business concerned, reflecting every type of entity which might form an undertaking or enterprise (other than financial institutions, credit institutions and insurance undertakings, for which special provision is made). 

The substantive approach taken in each set of regulations is that the turnover of an undertaking, group or enterprise is the sum of all amounts it derives from the provision of goods and services (broadly speaking), less any sales rebates, value added tax, and other taxes which are directly related to turnover.

The policy intention is that this should include services that are free to end-users but otherwise monetised, such as digital services that make money from third-party advertising.

This is considered appropriate given the wide reach of the regimes concerned. 

The specific drafting used in each set of regulations reflects definitions used in the relevant primary legislation. In particular:

  • the draft Turnover and Control Regulations, Schedules 1 and 2, refer to the supply of products alone, given the definition of “products” at s.118 DMCC Act, which applies for the purposes of Part 1 DMCC Act and includes all goods, services and digital content
  • the draft Competition Act Regulations refer to the supply of products and provision of services, consistent with the drafting of the Competition Act 1998
  • the draft Enterprise Act Regulations refer to the sale of goods and provision of services, consistent with the drafting in Parts 3 and 4 of the Enterprise Act 2002.

The substantive approach is consistent with that in the existing secondary legislation in place under the Competition Act 1998, Enterprise Act 2002 and National Security and Investment Act 2021 in relation to the calculation of turnover. 

However, unlike in those instruments, no reference is made to an undertaking’s, group’s or enterprise’s ‘ordinary activities’. This reflects changes in accounting practices and the approach in Part 15 (Accounts and reports) of the Companies Act 2006[footnote 20].

Some types of entity will be required to prepare and publish accounts in line with specific legal requirements.  Not all entities will be subject to such requirements.  To recognise the flexibility in approach that may be required, provision is included that the regulations are to be interpreted in accordance with generally accepted accounting principles and practice.

Treatment of intra-group transactions

Where an undertaking consists of 2 or more undertakings that each individually prepare accounts, or a person controls more than one enterprise, then the turnover of each should be added together, excluding any turnover resulting from any transactions between them.

This follows precedents set within other competition turnover regulations and avoids double-counting of turnover when consolidating more than one entity’s accounts.  Similarly, where the CMA is required to estimate or calculate turnover for a group, no account should be taken of intra-group transactions.

Treatment of subsidies

The draft regulations each include provision regarding the treatment of subsidies. Any subsidies (as defined in the regulations) received by an undertaking, group, enterprise or trader, are included within the estimation or calculation. This means that all relevant revenues are captured in the estimation of turnover for SMS designation and penalties, regardless of source.    

The definition of ‘subsidy’ in each of the draft regulations is consistent with the secondary legislation currently in place under the National Security and Investment Act 2021. The National Security and Investment Act 2021 (Monetary Penalties) (Turnover of a Business) Regulations 2021 use the definition of ‘subsidy’ under the Subsidy Control Act 2022 as a starting point and modify it slightly to widen its reach[footnote 21].

The modification removes a condition that financial assistance should only be considered if it has or could have impacts on competition, trade or investment[footnote 22]. Including this condition would mean that smaller amounts of financial assistance, which are less likely to impact on competition, might not qualify as subsidies and would therefore not be counted towards turnover.

This would not be appropriate for the purposes of these draft regulations. The proposed approach is designed to ensure that the CMA can look as widely as needed to calculate turnover, as well as ensuring legal clarity and maintaining consistency with other definitions of “subsidy”.

In relation to SMS designation, section 8(3) of the DMCC Act specifies that the UK turnover of an undertaking or group is the turnover generated from any of its activities and relating to UK users or UK customers[footnote 23].

The draft Turnover and Control Regulations specify that, for the purposes of determining whether turnover is relating to UK users or UK customers, the CMA must have regard to:

  • the amounts derived in connection with the direct or indirect supply of products to UK users or UK customers
  • the amounts derived in connection with products which are used, viewed or otherwise consumed by UK users or UK customers
  • such other factors that the CMA considers appropriate

This approach is intended to capture all potential revenue that may be related to UK users or UK customers, both by direct or indirect commercial activities, such as direct sale of a digital product or the sale of that product to a distributor in the UK (1), and through other means of generating revenue through UK users or UK customers, such as digital advertising (2).

Since there is not a standardised way that businesses will report a geographic breakdown of their turnover for accounting purposes, the final criterion is intended to provide the CMA with the appropriate level of flexibility to adapt its approach to each individual assessment, and to changes in digital markets or businesses models more generally (3).

It is expected that when assessing turnover for the purposes of the UK turnover threshold, the CMA’s starting point will usually be to consider any geographic breakdown contained in the business’s published accounts. Where it is not appropriate to rely on the business’s accounts (e.g. where they do not provide a geographic breakdown), the CMA may use its investigatory powers to obtain relevant data from the undertaking.

Questions on the calculation of turnover

  1. What are your views on the amounts listed to be taken into account, including the treatment of subsidies, for:

    1. SMS designation
    2. Digital markets penalties
    3. Competition penalties
    4. Motor fuels penalties
    5. Consumer penalties
    6. If you disagree with the proposed approach, please explain why you do not think these provisions are appropriate.

  2. In relation to SMS designation, what are your views on the draft provisions for determining whether turnover relates to UK users or UK customers?

    1. If you disagree with the proposed approach, please explain why.

Period for the determination of turnover[footnote 24]

The draft regulations define the period to be used for the determination of turnover. The Government’s intention is to define precise and appropriate relevant periods for each regime.

SMS Designation

For SMS designation, the relevant period is specified in section 7(6) of the DMCC Act as either the most recent period of 12 months in respect of which the CMA considers it can estimate the undertaking’s or group’s relevant turnover, or the period of 12 months immediately before that if the CMA estimates that the undertaking’s or group’s relevant turnover was higher in that earlier period.

Penalties – the primary position

In relation to the imposition of penalties, where a fixed, rather than daily penalty, is to be imposed, the draft regulations each set out the period during which turnover is to be taken into account for the purposes of determining the maximum penalty. 

The provisions have been drafted so that the most recent accounting period (“the relevant accounting period”) prior to the trigger event should be the period used for the calculation (see section below for information on the trigger event).   Where that accounting period does not equal 12 months, the regulations make provision for it to be adjusted to produce a figure which reflects a 12-month period.

Where the figures from the most recent accounting period of the relevant entity are not available, the turnover is to be based on the accounting period immediately before the most recent one (“the preceding accounting period”).

If there is no preceding accounting period, then the period taken should be the beginning with the date on which the activities of the relevant entity began, and ending with the day immediately before the relevant accounting period.  

Penalties – adjustments which may be made

Apart from draft regulation 2 (i.e. estimation of turnover for the purposes of the turnover condition in S.7 of the DMCC Act), each set of regulations includes provision which allows an adjustment to be made where it is considered appropriate in light of any acquisition,  divestment or other transaction which has had a significant impact on the turnover since the end of the period in which the turnover is determined.

This is consistent with that in the existing secondary legislation in place under the Competition Act 1998, Enterprise Act 2002 and National Security and Investment Act 2021 in relation to the calculation of turnover.

This provision has not been included in relation to the estimation of turnover for the purpose of SMS designation since the primary framework, i.e. the DMCC Act requires the turnover thresholds to be met in the ‘relevant period’ which is defined in the DMCCA itself. Therefore, the turnover must be estimated within the ‘relevant period’ considered by the CMA.

The draft regulations also each include provision so that the accounting period before the most recent accounting period is to be the period on which turnover is based where it is calculated that turnover was higher in the earlier period. This would help ensure the statutory cap is not unduly influenced by dips in turnover in a poor trading year.

This is consistent with the approach regarding SMS designation at s.7(6)(a)(ii) of the DMCC Act. The Government seeks views on the inclusion of this provision for the purposes of calculating maximum penalties.

Trigger event for determining the period of turnover[footnote 25]

The trigger event describes the point in relation to which turnover will be calculated for the particular purpose concerned.

For SMS designation, there is no specific trigger event, as the relevant period for estimating turnover will be based on the point at which the CMA carries out the turnover estimation.

In relation to calculations for the purposes of determining a maximum penalty level, as described above, the draft regulations set out that the relevant period would be the most recent period prior to the trigger event, (referred to in the draft regulations as the ‘decision date’) with an adjustment made to reflect a 12-month period where the relevant or preceding accounting period is not equal to 12 months.

The trigger events set out in the draft regulations are:

  • for digital markets penalties, competition penalties and motor fuels penalties, the date of the provisional decision to impose a penalty
  • for consumer law penalties, the government’s intention is to ensure that the accounting period identified is as close as possible to the original infringement, so that the penalty captures profits accrued from the infringement. To achieve this, and to accommodate the differences between the court and CMA regimes, there are different trigger events depending on the penalty
  • for court penalty for infringement or breach of court undertaking, the date of issue of the original application
  • for court penalty for breach of undertaking to public enforcer, the date of issue of the application for a penalty for breach of the undertaking
  • for court penalty of failure to comply with info notice, the date of application for penalty.
  • for CMA penalty imposed by Final Infringement Notice, a Final Breach of Undertaking Enforcement Notice or a Final Breach of Directions Enforcement Notice, the Provisional Infringement Notice
  • for CMA penalty imposed by Final False Information Enforcement Notice or Final Enforcement Notice given for failure to comply with an information notice, the giving of the Provisional Final False Information Enforcement Notice or Provisional Enforcement Notice respectively.

Questions on the relevant period and trigger event

3․ What are your views on the definitions of the relevant accounting period and trigger events for the calculation of turnover for the purposes of digital markets, consumer, competition and motor fuel penalties?

4․ What are your views on the CMA or the court selecting the period immediately before the relevant accounting period if the turnover was higher in that earlier period (as it is done in SMS designation) for the purpose of the digital markets, consumer, competition and motor fuel penalties?

Calculation of turnover in relation to financial institutions credit institutions and insurance undertakings[footnote 26]

We have proposed special provisions for financial institutions, credit institutions and insurance undertakings (‘financial institutions’) that form all or part of a business. While it is unlikely that an undertaking subject to an SMS investigation would be wholly a financial institution, it is possible that it may develop or have an arm that undertakes such activities.

Such institutions may also be in scope for a penalty under any of the digital markets, competition or consumer regimes. Specific provision is proposed because applying the same principles of ‘turnover’ to any such institution or arm of an undertaking or enterprise would likely generate an inflated figure.

We are not proposing to make special provisions within the motor fuels penalties as the information gathering powers will only apply to those in, or connected with, the distribution, supply or retail of petrol and diesel and is unlikely to include financial institutions.

The draft regulations make provision for the income items that the CMA should take into account for the calculation of turnover for a financial institution. These have been drafted to ensure consistency with competition legislation to ensure continuity and business certainty.

Questions on the special provisions

5․ What are your views on the way in which the SI sets out how the CMA will determine turnover for financial institutions, insurance undertakings and credit institutions, including hybrid institutions, for:

  1. SMS designation
  2. Digital markets penalties
  3. Competition penalties
  4. Consumer penalties
  5. Motor fuels penalties
  6. If you disagree with the proposed approach, please explain why you do not think these provisions are appropriate?

Exchange rates where accounts are filed in a different currency[footnote 27]

It is possible that the accounts or other information used to calculate turnover could be in a currency other than sterling.

Each of the draft regulations include provision which will allow the determination to be made in sterling, allowing the decision maker to apply an exchange rate and rounding the figure as they consider appropriate. 

The draft provision is consistent with that in the existing secondary legislation in place under the Competition Act 1998, Enterprise Act 2002 and National Security and Investment Act 2021 in relation to the calculation of turnover and is intended to promote certainty and prevent disputes over how conversion should be achieved.

Question on exchange rates

6․ What are your views on the outlined approach to exchange rates where accounts are filed in a different country?

Control

The government’s intention is that any person or entity (natural or legal) who may exercise control through legal right or through an ability to exert influence over the constitution, operation and management of the person that has committed the infringement should be captured by the consumer law regime.

An enterprise is to be treated as controlled by a person where it is carried on by that person, or where they have a controlling interest in a body corporate, or are otherwise able to directly or indirectly control or materially influence the policy of the entity which carries on the enterprise. 

The draft Turnover and Control regulations set out the circumstances in which a person is to be treated as controlled by another person for the purposes of provisions in the Consumer Rights Act 2015, and Part 3 of the DMCC Act[footnote 28]. 

The draft Enterprise Act Regulations make provision regarding the circumstances in which a person will be treated as having control of an enterprise for the purposes of the issue of penalties under Parts 3 and 4 of the Enterprise Act 2002[footnote 29]. 

The draft provision follows the framework set out in Article 2 of the Enterprise Act 2002 (Mergers) (Interim Measures: Financial Penalties) (Determination of Control and Turnover) Order 2014, which we consider achieves this.

Question on control

7․ Are there other factors or considerations the Government should include when defining how someone may have control over an enterprise?

Full list of questions

Activities to be taken into account to estimate or determine turnover

1․ What are your views, if any, on the amounts listed to be taken into account, including the treatment of subsidies, for:

  1. SMS designation
  2. Digital markets penalties
  3. Competition penalties
  4. Motor fuels penalties
  5. Consumer penalties
  6. If you disagree with the proposed approach, please explain why you do not think these provisions are appropriate.

2․ In relation to SMS designation, what are your views on the draft provisions for determining whether turnover relates to UK users or UK customers?

  1. If you disagree with the proposed approach, please explain why.

Period and trigger event for the determination of turnover

3․ What are your views, if any, on the definitions of the relevant accounting period and trigger events for the calculation of turnover for the purposes of digital markets, consumer, competition and motor fuel penalties?

4․ What are your views, if any, on the CMA or the court selecting the period immediately before the relevant accounting period if the turnover was higher in that earlier period (as it is done in SMS designation) for the purpose of the digital markets, consumer, competition and motor fuel penalties?

Special Provisions

5․ What are your views, if any, on the way in which the SI sets out how the CMA will determine turnover for financial institutions, insurance undertakings and credit institutions, including hybrid institutions, for:

  1. SMS designation
  2. Digital markets penalties
  3. Competition penalties
  4. Consumer penalties
  5. Motor fuels penalties
  6. If you disagree with the proposed approach, please explain why you do not think these provisions are appropriate?

Exchange rates where accounts filed in a different currency

6․ What are your views, if any, on the outlined approach to exchange rates where accounts are filed in a different country?

Control

7․ Are there other factors or considerations the Government should include when defining how someone may have control over an enterprise?

Responding to this consultation

Consultation timeline

Consultation launches: 30 July 2024

Consultation concludes: 10 September 2024

Consultation response published within 12 weeks of it closing.

Who should respond to this consultation?

We are seeking views from anyone who has an interest, expertise, or experience in any or all the proposals contained in this consultation document.

We would particularly welcome views from:

  • consumers and consumer bodies
  • businesses that operate in digital markets and representative organisations - businesses, including technology businesses and their representative groups
  • fuel retailers and representative organisations
  • enforcement bodies and agencies
  • legal experts and bodies
  • accounting experts and bodies

How to respond

Respond to the consultation by either:

When responding, please state whether you are responding as an individual or representing the views of an organisation.

Your response will be most useful if it is framed in direct response to the questions posed, though further comments and evidence are also welcome.

Confidentiality and data protection

Information you provide in response to this consultation, including personal information, may be disclosed in accordance with UK legislation (the Freedom of Information Act 2000, the Data Protection Act 2018 and the Environmental Information Regulations 2004).

If you want the information that you provide to be treated as confidential, please tell us but be aware that we cannot guarantee confidentiality in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not be regarded by us as a confidentiality request.

We will process your personal data in accordance with all applicable data protection laws. See our privacy policy.

We will summarise all responses and publish this summary. The summary will include a list of names or organisations that responded, but not people’s personal names, addresses or other contact details.

Quality assurance

This consultation has been carried out in accordance with the government’s consultation principles.

  1. For the purposes of this consultation document, the term “business” is used as shorthand for a variety of different terminology in the draft regulations: for example. ‘undertaking’; ‘enterprise’; ‘person’. ↩

  2. Under section 118 of the DMCC Act, “undertaking” has the same meaning as it has for the purposes of Part 1 of the Competition Act 1998 (competition: agreements, abuse of dominant position). The concept of an undertaking encompasses every natural or legal person engaged in an economic activity, regardless of its legal status and the way it is financed (Hofner and Esler v Macrotron GmbH C-41/90). ↩

  3. An undertaking is part of a group if one or more bodies corporate which are comprised in the undertaking are members of the same group as one or more other bodies corporate. Two bodies corporate are members of the same group if – (a) one is the subsidiary of the other, or (b) both are subsidiaries of the same body corporate (section 117 of the DMCC Act).   ↩

  4. Section 88(5) of the DMCC Act sets out the maximum amounts of a penalty that may be imposed on an individual or a person that is not an undertaking. In the case of a fixed amount, the maximum is £30,000. In the case of an amount calculated by reference to a daily rate, the maximum is £15,000 per day. The Secretary of State can amend these amounts by regulation. ↩

  5. See the new section 40ZE Competition Act 1998 inserted by paragraph 8 in Schedule 10 to the DMCC Act and the new sections 111(4A) and174D(4) Enterprise Act 2002 inserted by paragraphs 16(6) and 29(7) in Schedule 10 to the DMCC Act. ↩

  6. See the new section 35A Competition Act 1998 inserted by paragraph 6 in Schedule 11 to the DMCC Act, the new sections 94AA and 167A Enterprise Act 2002 inserted by paragraphs 11 and 18 of Schedule 11 to the DMCC Act. ↩

  7. See sections 94AB(9) and 167B(9) inserted by paragraphs 11 and  18 of Schedule 11 to the DMCC Act. ↩

  8. See sections 35B(3) and 40A(3A)  Competition Act 1998 inserted by paragraph 6 in Schedule 11 and paragraphs 9 in Schedule 10 to the DMCC Act, and sections 94A and 111 Enterprise Act 2002, as amended and inserted by paragraph 11 in Schedule 11 and paragraph 17 in Schedule 10 to the DMCC Act and sections 167A and 174D Enterprise Act 2002, as amended and inserted by paragraphs 18 in Schedule 11 and paragraph 29 in Schedule 10 to the DMCC Act. These provisions set out the maximum amounts of a penalty that may be imposed on a person who is not an undertaking, or who does not own or control an enterprise. In the case of a fixed amount, the maximum is £30,000. In the case of an amount calculated by reference to a daily rate, the maximum is £15,000 per day. The Secretary of State can amend these amounts by regulation. ↩

  9. Section 156 (for court penalties) and section 181 (for CMA penalties). ↩

  10. Section 166 and section 167. ↩

  11. Section 189. ↩

  12. Section 192. ↩

  13. Section 198. ↩

  14. Paragraph 16A (for court penalties) and paragraph 16C (for CMA penalties) of Schedule 17 to the DMCC Act, which amends Schedule 5 to the Consumer Rights Act 2015. ↩

  15. Section 311 DMCC Act. ↩

  16. See section 312 and section 312(1) DMCC Act. ↩

  17. Section 312(6) DMCC Act. ↩

  18. The Competition Act 1998 (Determination of Turnover for Penalties) Order 2000; the Enterprise Act 2002 (Merger Fees and Determination of Turnover) Order 2003; the Enterprise Act 2002 (Mergers) (Interim Measures: Financial Penalties) (Determination of Control and Turnover) Order 2014; the National Security and Investment Act 2021 (Monetary Penalties) (Turnover of a Business) Regulations (S.I. 2021/1262). ↩

  19. Relevant provisions are: The draft Turnover and Control Regulations: for the purposes of SMS designation, Schedule 1 (Paragraphs 2, 5 and 6), for the purposes of digital markets penalties, Schedule 2 (Paragraphs 2, 5 and 6), for the purposes of consumer penalties, Schedule 3 (Paragraphs 2, 5 and 6), for the purposes of motor fuels penalties, Schedule 4 (Paragraphs 2, 3 and 4). The draft Competition Act Regulations, Schedule (Paragraphs 2, 5 and 6). The draft Enterprise Act Regulations, Schedule (Paragraphs 2, 5 and 6). ↩

  20. Section 474 (minor definitions) of the Companies Act 2006, the definition of turnover was amended by the Companies, Partnerships and groups (Accounts and Reports) Regulations 2015, S.I. 2015/980, to omit the words “falling within the company’s ordinary activities”. ↩

  21. See paragraph 6(1) of the Schedule to S.I. 2021/1262. ↩

  22. See section 2(1)(d). ↩

  23. The terms “UK user“ and “UK customer“ are defined in section 118 of the DMCC Act. “UK user“ and “UK customer“ mean any user or, as the case may be, customer who it is reasonable to assume - (a) in the case of an individual, is normally in the United Kingdom, and (b) in any other case, is established in the United Kingdom.  ↩

  24. Relevant provisions are: The draft Turnover and Control Regulations: for the purposes of digital markets and motor fuels penalties, Regulation 3, for the purposes of consumer penalties, Regulation 5. The draft Competition Act Regulations, Regulation 2. The draft Enterprise Act Regulations, Regulation 3. ↩

  25. Relevant provisions are: The draft Turnover and Control Regulations: for the purposes of digital markets penalties, regulation 3(7), for the purposes of motor fuels penalties, regulation 6. The draft Competition Act Regulations, Regulation 2(7)(b). The draft Enterprise Act Regulations, Regulation 3(7)(b). ↩

  26. Relevant provisions are: The draft Turnover and Control Regulations: for the purposes of SMS designation, Regulation 2 and Schedule 1, (Paragraphs 1, 3 and 4), for the purposes of digital markets penalties, Regulation 3 and Schedule 2 (Paragraphs 1, 3 and 4), for the purposes of consumer penalties, Regulation 5 and Schedule 3, Paragraphs 1, 3 and 4. The draft Competition Act Regulations, Regulation 3 and Schedule (Paragraphs 1, 3 and 4), The draft Enterprise Act Regulations, Regulation 2 and Schedule, (Paragraphs 1, 3 and 4). ↩

  27. Relevant provisions are: The draft Turnover and Control Regulations: for the purposes of SMS designation, Regulation 2 and Schedule 1, (Paragraph 5(4)), for the purposes of digital markets penalties, Regulation 3 and Schedule 2 (Paragraph 5(4)), for the purposes of consumer penalties, Regulation 5 and Schedule 3, (Paragraph 5(3)), for the purposes of motor fuels penalties, Regulation 6 and Schedule 4, (Paragraph 3(3)). The draft Competition Act Regulations, Regulation 3 and Schedule, (Paragraph 5(3)). The draft Enterprise Act Regulations, Regulation 2 and Schedule, (Paragraph 5(3)). ↩

  28. See regulation 4 ↩

  29. See regulation 2. ↩

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