The UK’s Digital Markets, Competition and Consumers Bill (DMCC) was introduced earlier this year in an effort to regulate digital markets and safeguard consumers. The bill, currently under review by the UK House of Commons, mainly targets large corporations deemed to be ‘big tech’ with a strategic market status (SMS) designation. Although the small and medium-sized enterprises (SMEs) that make up ACT | The App Association’s membership are unlikely to receive an SMS designation, their success is closely linked to the success of the overall app economy and requires an SME-friendly implementation of the DMCC.

SME-driven economy

The UK boasts the world’s third-largest tech sector, worth more than $1 trillion, with over half of all private sector jobs in the UK provided by SMEs. In 2021, these small businesses made up 56 per cent of the £182.1 billion the digital sector contributed to the UK economy. In order for SMEs to continue to grow the UK’s app economy, policymakers must understand how SMEs leverage digital infrastructure provided by larger companies before regulating in this space.

Our SME members may not get the strategic market status label, but their future success is reliant on an SME-friendly implementation of the DMCC. The app economy is deeply interconnected; small businesses flourish thanks to the resources and tools bigger companies offer. In return, the devices, code, and designs from small businesses make products from big companies even better. This is why it is so crucial that when UK policymakers begin to regulate big tech, they should consider the impact on the wider app economy so that the small businesses driving innovation don’t face unintended consequences.

SMS impact

The DMCC primarily seeks to regulate the digital market through a new regulatory body called the Digital Markets Unit (DMU) within the UK Competition Market Authority (CMA). This body would decide where to apply strategic market status and create specific codes of conduct that will apply to that SMS designation. It’s worth noting that SMS designations apply to specific business areas, rather than the companies as a whole.

Small businesses often struggle with increased costs, making it crucial to maintain low entry barriers for app marketplaces, promote SME creativity, and welcome new players. The DMCC’s adaptability could mean multiple companies getting SMS designation for similar roles, like the varied app marketplaces our members use. While we appreciate this flexibility, there’s a need for protective measures to avoid making things too complex for developers selling on different platforms. For SMEs working across several platforms, consistent DMU rules can ease their work, align security standards, and better serve consumers.

Most App Association members rely on the tools and infrastructure provided by larger platform companies in the app economy to create and maintain safe, secure products. Aside from instant access to a global market, developers find tremendous value in enhanced consumer trust, protection from intellectual property (IP) theft, and enhanced privacy and security features provided by large corporations. If these tools or safety provisions were to be removed or altered, SMEs and their customers would face an uncertain, potentially unsafe app ecosystem.

A consumer-designed bill

The DMCC will also introduce a broad range of reforms in UK consumer protection law. If implemented, the bill will apply to all ‘traders’ or businesses active in the UK, with very few exemptions for SMEs under £1 million of revenue.

The main obligations contained in this section of the DMCC are aimed at fighting unfair commercial practices, such as fake reviews, unwilling automatic renewals of contracts, unclear pre-contract information, and cancellation rights or misleading subscription contracts. The DMU will have the power to decide whether there was a relevant infringement of these provisions and to impose substantial monetary penalties outside the court, proceeding with its enforcement actions more swiftly to make businesses comply with the relevant consumer law.

In conclusion

The entire app economy is deeply connected with decisions at the SMS level, inevitably affecting SME innovation and growth. The DMCC is a long and complex piece of legislation that will require a significant effort from British SMEs to understand, comply, and make the most of its potential positive impact on their business. Clear guidance and continuous cooperation with third parties, especially the smaller ones, will be key in making the DMCC a real success for consumers and the SMEs who serve them. Policymakers should consider both the negative and positive measures to help digital SMEs comply with the rules. By actively engaging with small enterprises, UK policymakers have an opportunity to sidestep potential pitfalls within the DMCC, making the digital landscape even more welcoming for small companies.

Members of Parliament (MPs) have ended discussions at the committee level, and the DMCC is now in the report stage, giving MPs an opportunity to consider further amendments. We will be sure to keep you posted on future DMCC updates.