The U.K.’s Digital Markets, Competition, and Consumer (DMCC) Act came into force on 1 January 2025, with a new set of consumer protection laws set to take effect in April 2025¹. These new consumer protection laws mark a significant shift in the regulatory landscape for consumer-facing businesses in the U.K. The legislation empowers the Competition and Markets Authority (CMA) with enhanced capabilities to protect consumers, aligning its consumer protection enforcement powers with its competition enforcement powers.

Regulators are increasingly leveraging AI and large language models (LLMs) to enhance the efficiency of competition enforcement and investigations. AI can significantly improve data analysis, streamline operations and detect potential violations with greater precision, making it a powerful tool for monitoring and enforcing competition-related best practices.

The expansion of the CMA’s enforcement powers and the growing use of AI in investigations are creating a new risk landscape for consumer-facing businesses.

Here’s what businesses need to know about the DMCC and how they can leverage AI to navigate these changes more seamlessly.

New Powers and Responsibilities Under the DMCC

1. Direct Enforcement and Fines: The DMCC grants the CMA the authority to directly impose fines of up to 10% of global turnover for breaches of consumer protection laws, eliminating the need for court proceedings. This direct enforcement capability allows the CMA to provide immediate remedies, including awarding compensation directly to consumers.
2. New Consumer Laws: The Act introduces measures to combat fake reviews and "subscription traps," and mandates protections for consumer prepayment schemes. These provisions aim to safeguard consumer payments and prevent misleading business practices.
3. Focus on Consumer Protection: With the CMA's increased focus on consumer protection, especially amid the cost-of-living crisis, businesses should review and update their compliance policies to align with both existing and new rules. A much more active CMA will mean easier claims for consumers against businesses found to have breached consumer law by the CMA.

The Role of AI in Compliance and Investigations

As the regulatory environment becomes more stringent, businesses should consider adopting innovative strategies to ensure compliance and manage investigations effectively. In this context, AI offers several advantages. It enhances data analysis by quickly sifting through vast datasets to identify relevant information and potential compliance issues, which is crucial during time-sensitive investigations. AI aids in issue review and document identification by locating materials related to specific legal or competition issues, enabling rapid identification of critical documents that require immediate attention.

AI tools also perform sentiment analysis to detect documents with negative emotional tones, potentially indicating problematic interactions or compliance breaches. Furthermore, by conducting proactive investigations, AI allows companies to identify and address potential issues before regulators do, thereby reducing the risk of fines and reputational damage.

Preparing for the DMCC Era

There are practical steps companies can implement to prepare for the new regulatory landscape under the DMCC, including:

• Updating Compliance Policies: Review and update consumer protection compliance policies to reflect the new rules and enforcement powers under the DMCC.
• Leveraging AI Tools: Integrate AI-powered analytics into compliance and investigation processes to enhance efficiency and accuracy.
• Training Legal and Compliance Teams: Ensure that teams are well-versed in the new regulations and equipped with the necessary tools and knowledge to handle investigations effectively.

The above steps all help companies to be “investigation ready”. With the DMCC’s administrative or procedural penalties now linked to business turnover, the risks of being unprepared have increased. Electronic data is at the focus of many regulatory investigations and therefore companies should be evaluating good data management practices to maintain readiness.

• Mapping IT Infrastructure: Companies should have a clear understanding of their IT structure, including where electronic data is stored, who controls it and how it can be accessed. This includes detailing the roles of different administrators, including third-party providers, who may manage access to various systems. This knowledge is crucial to avoid delays and demonstrate cooperation during investigations.
• Data Retention and Disposal Practices: It's important to review data retention and disposal practices. Companies should retain only relevant and necessary information and ensure it is not kept longer than needed. This approach reduces the volume of data that may fall within the scope of an investigation and ensures compliance with record-keeping laws and best practices.
• Training and Protocol Testing: Personnel should be trained on updated policies and procedures to understand their responsibilities and legal rights in the event of an investigation. A key area for this is in preparation for dawn raids or unannounced inspections. Regular testing of protocols ensures that staff is "dawn raid ready" and that the response plan is effective.
• Integration of Digital Forensics Experts: Companies should integrate digital forensics experts into their dawn raid response teams. These experts can track and monitor the technical processes used by inspectors during a search, ensuring that legal teams are aware of what data is collected. This intelligence supports the business through the inquiry and any parallel investigations.

In conclusion, the DMCC represents a significant development in consumer protection law, with profound implications for businesses. By updating compliance strategies with the support of AI, companies can meet regulatory requirements and gain a competitive edge in managing investigations and protecting consumer interests.

AI is still not without potential risks. The key for the successful implementation of AI across the investigation process is in partnering with the right experts to get the best from the AI systems and who understand its limitations. 

Footnotes:

¹https://competitionandmarkets.blog.gov.uk/2024/07/31/getting-ready-for-the-consumer-protection-changes-in-the-digital-markets-competition-and-consumers-act-2024/