Strategic market status (SMS) is the gateway to the UK’s digital markets competition regime. Under Part 1 of the Digital Markets, Competition and Consumers Act 2024 (the DMCC Act), the Competition and Markets Authority (CMA) can designate a firm as having SMS in a specific digital activity and then impose conduct requirements that govern how it behaves. The regime has been in force since 1 January 2025 and now carries enforceable obligations. We advise designated firms, and the many businesses that depend on them, on what designation means, how conduct requirements bite, and where the regime creates commercial risk and opportunity.

The regulatory framework

The DMCC Act gives the CMA a bespoke, participative regime distinct from ordinary competition enforcement. The CMA’s Digital Markets Unit runs SMS investigations, decides on designation, and negotiates or imposes the obligations that follow. Designation is not a finding of wrongdoing: it is a status that unlocks forward-looking regulation of a firm with durable market power in a digital activity linked to the United Kingdom.

Three conditions must all be met before the CMA can designate a firm under section 2. The digital activity must be linked to the UK (section 4). The firm must have substantial and entrenched market power, assessed on a forward-looking basis over a period of at least five years (section 5). And it must hold a position of strategic significance, which can arise from its size or scale, from other businesses depending on the activity, from its ability to extend its power into adjacent markets, or from its ability to determine how others behave (section 6). A separate turnover condition applies: global group turnover above £25 billion, or UK turnover above £1 billion (section 7).

Designation is activity-specific and time-limited. A firm is designated in relation to a defined digital activity rather than across its whole business, and the designation lasts five years from the day after the decision notice (section 18). A single firm can hold more than one designation. The CMA’s first designations, of Apple and Google in mobile platforms and Google in general search, illustrate the point: each rests on a specific finding of entrenched power in a defined activity, not a general judgment about the company.

What is a conduct requirement and how does it differ from the EU approach?

A conduct requirement is a tailored obligation the CMA imposes on a designated firm under section 19 of the DMCC Act. Unlike the fixed, per-se obligations the EU Digital Markets Act places on every gatekeeper, a UK conduct requirement is designed for the specific firm and activity. The CMA must pursue one of three statutory objectives, fair dealing, open choices, or trust and transparency, and must act proportionately, weighing the likely benefits for consumers before it acts.

Each requirement must fall within a permitted type listed in section 20. These divide into positive obligations, such as trading on fair and reasonable terms, operating effective complaints processes and giving clear information and advance notice of material changes, and prohibitions, such as not self-preferencing, not tying products together, not misusing data and not restricting interoperability with rival products. This flexible design lets the CMA calibrate intervention to the harm, but it also means firms cannot simply read their obligations off a statutory list. Each conduct requirement has to be read on its own terms.

What is the difference between a conduct requirement and a pro-competition intervention?

The regime carries two distinct tools. Conduct requirements govern behaviour and the Digital Markets Unit can impose them directly following consultation. Pro-competition interventions (PCIs) address the underlying features of a market that prevent, restrict or distort competition, and can require structural or behavioural remedies including mandated interoperability or data access. A PCI requires a separate pro-competition investigation, so it is a slower and more powerful instrument than a conduct requirement.

Feature	Conduct requirement	Pro-competition intervention
Legal basis	Section 19 DMCC Act 2024	Pro-competition investigation, Chapter 4 of Part 1
What it does	Governs how the firm behaves towards users and rivals	Remedies the market features that entrench the firm’s power
Process	Imposed by the CMA after consultation; relatively quick	Requires a separate investigation; slower and more far-reaching
Typical remedies	Fair terms, no self-preferencing, transparency, interoperability	Structural change, mandated access, data portability

What happens if a designated firm breaches a conduct requirement?

Enforcement has real bite. Where a designated firm fails, without reasonable excuse, to comply with a conduct requirement, the CMA can impose a penalty of up to 10% of the firm’s global group turnover (section 86). The CMA can also use interim measures to prevent significant damage while an investigation runs. A designated firm has a defence: under the countervailing benefits exemption (section 29), the CMA must close a conduct investigation where the firm shows that benefits to users outweigh the harm to competition and that effective competition is not eliminated. Firms can also offer commitments, which the CMA may accept in place of imposing a requirement and must then keep under review.

Why SMS designation matters for your business

The regime reaches well beyond the handful of designated firms. If your business distributes through an app store, advertises through a designated search service, or relies on a designated platform for payments, discovery or data, the conduct requirements imposed on that platform change your commercial terms. The first requirements on general search, covering publisher control over AI features, fair ranking and data portability, show how quickly obligations can reshape a market. For payments and fintech clients, the CMA’s work on steering and access to near-field communication on mobile platforms is directly relevant to how alternative payment flows can operate. Designated firms, meanwhile, face a mandatory pre-completion merger reporting duty under Chapter 5 of Part 1 (section 57) that runs alongside the ordinary merger regime. Reading the regime early, whether you are regulated by it or affected by it, is the difference between shaping outcomes and reacting to them.

How we work

We work with clients in three ways: as direct legal advisers on a specific question, as specialist co-counsel alongside a competition or corporate team, and as fractional general counsel on a retained basis. Rob Bratby currently holds four fractional General Counsel appointments, at The One Touch Switching Company, TelXL, Core Communication and the UK Payments Initiative, which give direct operator-side insight into how platform obligations affect businesses that depend on regulated infrastructure. Where a matter raises the use of personal data in AI-driven features, we address it through our data protection practice, since AI sits within data protection rather than as a standalone practice area.

Frequently asked questions about SMS designation

Does SMS designation mean a firm has broken the law?

No. Designation under section 2 of the DMCC Act is a forward-looking status, not a finding of infringement. It reflects a judgment that a firm has substantial and entrenched market power and a position of strategic significance in a digital activity. It is the trigger that allows the CMA to impose conduct requirements, not a penalty in itself.

Which firms can be designated?

Only firms that meet all three designation conditions and the turnover condition in sections 5 to 7: substantial and entrenched market power, a position of strategic significance, a UK link, and global turnover above £25 billion or UK turnover above £1 billion. In practice this captures a small number of large digital firms. The CMA’s first designations were of Apple and Google.

How long does a designation last?

Five years from the day after the decision notice, under section 18. The CMA must begin any reassessment well before expiry. A firm can be designated in more than one digital activity, and each designation runs on its own timetable.

We are not designated, but a platform we rely on is. Does the regime help us?

Yes. Conduct requirements are designed to protect the users and business customers of designated firms. If a platform you depend on is subject to a requirement on fair terms, ranking transparency, interoperability or data portability, that requirement is intended to benefit you. We advise businesses on how to use those obligations and how to raise concerns with the CMA.

How does the UK regime compare with the EU Digital Markets Act?

Both regimes regulate the most powerful digital firms, but the UK regime is bespoke and participative where the EU Digital Markets Act sets fixed obligations on designated gatekeepers. The CMA has used its flexible conduct-requirement power to achieve outcomes comparable to specific EU obligations, such as data portability, without adopting the EU’s per-se architecture. Firms active in both jurisdictions need to track both.

Also see

Explore our related Digital Regulation pages on Pro-Competition Interventions, EU Digital Markets Act Compliance, Merger Control in Digital Markets and Competition Enforcement and Litigation, or return to the Digital Regulation hub. The regime intersects with our work in Telecoms Regulation, Payments Regulation and Data Protection. For commentary on current developments, see our Insights.