CMA kicks off its digital markets powers with SMS investigation focusing on Google search and advertising services

Hot on the heels of Part 1 of the Digital Markets, Competition and Consumers Act 2024 (DMCC Act) coming into force on 1 January 2025, the CMA has wasted no time in launching its first Strategic Market Status (SMS) designation investigations.

As widely expected, the first firm to be investigated is Google. The CMA launched its landmark SMS designation investigation in respect of Google’s search and digital advertising activities on 14 January 2025.

Separately, on 23 January 2025, the CMA launched two separate SMS designation investigations in relation to mobile ecosystems: one into Apple and another into Google. That means Google is already confronting two potential SMS designations for different digital activities.

One more SMS investigation is expected in the first half of 2025. For more information on the CMA’s new digital markets powers, read our Digital Markets guidance.

What is SMS designation and why does it matter?

The SMS designation process is a key first step as the CMA launches its new digital markets regime. SMS designation unlocks a number of statutory powers for the CMA, including the ability to impose wide-ranging behavioural requirements on SMS firms.

The powers are ‘pro-competitive’ in nature, giving the CMA the ability to break down structural barriers to competition and ensure fairer market conditions for all UK businesses (not just other tech firms) that interact with the global tech giants.

The CMA will use its powers to address specific competition concerns for each firm it designates with SMS. In Google’s first SMS investigation, the CMA intends to focus on its market power in general search and search advertising services.

This will have a significant impact on all UK businesses that rely on Google’s advertising services to reach customers – many of whom commit sizeable portions of their marketing budgets to paid search. As detailed further below, the CMA will use its new powers to proactively address many of the concerns raised by advertisers in the CMA’s Digital Advertising Market Study, which concluded back in 2020.

What are the consequences of SMS designation for Google in its search and advertising services?

Assuming that the CMA concludes in its first investigation that Google satisfies the test under the DMCC Act for SMS, the consequences will be far reaching for Google and third-parties who deal with them with regards to general search and search advertising services. It will enable the CMA to impose Conduct Requirements (CRs) and Pro-Competition Interventions (PCIs).

Conduct Requirements (CRs)

CRs are bespoke ex-ante rules that SMS firms will need to comply with. This is one of the central pillars of the CMA’s new digital markets regime as it will (in theory at least) enable the CMA to closely scrutinise the activities of Google without needing to launch ex-post competition enforcement action (as currently required under the Competition Act 1998). There is no requirement to find evidence of historic or ongoing harm. CRs are designed to guide the behaviour of SMS firms, ensuring they do not exploit their market power to the detriment of consumers or businesses.

Pro-Competition Interventions (PCIs)

The CMA can also impose PCIs on SMS firms, which are wider than CRs and enable the CMA to ‘open up’ competition if it identifies structural competition issues in certain areas. The purpose is to remedy, mitigate or prevent an Adverse Effect on Competition (AEC) relating to a designated activity.

These interventions can be behavioural or structural and may include recommendations to other public authorities. The CMA would launch a PCI investigation once a firm is designated as having SMS.

What CRs and PCIs are proposed if Google is designated SMS?

The CMA is obliged to conduct a public consultation on CRs it intends to impose, and a PCI investigation would be launched once a firm is designated as having SMS.

With Google’s ‘search’ SMS investigation, the potential measures and interventions that the CMA is proposing and consulting on are set out in the Invitation to Comment (ITC) document on the investigation page and summarised below under the following categories:

Addressing weak competition and barriers to entry and innovation in search

Access to key default positions by challenger search services: the CMA proposes ensuring that challenger search services can access key access positions by, for example, restricting Google’s ability to enter into revenue-sharing and placement agreements.
Promoting consumer awareness, engagement and choice: empowering consumers to make more active design choices to on how the search services are set up and simplify the user’s journey.
Data sharing requirements: Google may be required to make key data, such as its web index and click-and-query data, available to competitors on fair and reasonable terms. This could help other firms improve the quality of their search results and enable the development of innovative new AI search services that could compete with Google.

Preventing leveraging of market power and ensuring open markets

Non-preferencing requirements: to level the playing field, Google could be required not to preference its own services over those of other firms. This might involve preventing Google from giving greater prominence to its own specialised search services or AI query response services than those of rivals.
Data sharing restrictions: Google may be restricted in its ability to share user data gathered through its search services with other Google services. This could prevent Google from using data collected across its ecosystem to reinforce its position in general search.
Search web crawling restrictions: restrictions could be imposed on the tying of Google's search web crawling with web crawling for its AI services. This would prevent Google from using data collected for search results in the development of AI services, allowing other AI developers to compete on an equal footing.

Protecting users against exploitative conduct

Consumer data control: consumers may be given more control over their data, providing them with information to facilitate active choices about data collection and use. This could also enable consumers to share their Google data with other providers.
Effective complaints process: Google could be required to have an effective complaints process for businesses listed in search results, ensuring that any issues with search listings are addressed quickly and effectively.
Non-discriminatory search rankings: interventions might be considered to ensure that search rankings are non-discriminatory, preventing undue discrimination against particular businesses or types of business.
Fair terms for publisher content: Google may be required to ensure fair terms, including payment terms, for the use of publisher content. This could involve providing fair terms when using publisher content as part of or alongside search results or in Google's AI Overviews.
Fair terms for search advertising: interventions might be considered to ensure that search advertising auctions operate fairly and transparently by giving advertisers the tools and information they need to participate in auctions effectively.

What test does the CMA need to satisfy?

To designate Google with SMS, the CMA must satisfy two key qualitative tests:

1. Substantial and Entrenched Market Power: Google must hold a position of significant market power in relation to general search and search advertising services. This market power must be both substantial and durable, meaning it is not transitory but rather entrenched over time.

2. Strategic Significance: Google's role in general search and search advertising services be strategically significant. This could include acting as a key gateway or intermediary for other businesses to access consumers or controlling critical infrastructure or digital ecosystems.

In addition, the CMA must satisfy certain quantitative turnover thresholds, although this is not anticipated to be contentious in Google’s case.

How does the UK approach compare to global competition enforcement against Google?

Needless to say, this is not the first time that Google has found itself under investigation by global competition and antitrust enforcers in relation to its search and advertising services.

EU Digital Markets Act (DMA). Google’s parent company, Alphabet Inc, is already designated as a ‘gatekeeper’ under the DMA in respect of Google Shopping, Google Search and Alphabet’s online advertising service alongside its other core platform services. The Commission commenced two enforcement cases investigating Alphabet’s non-compliance with the DMA in March 2024. One of those investigations focussed on self-preferencing in Google Search. The DMA requires that third-party services featured on Google’s search results page be treated in a fair and non-discriminatory manner compared to Alphabet’s own services, but the Commission suspects that Alphabet’s compliance measures may not achieve this outcome. The Commission seeks to conclude the investigation within 12 months and in the case of an infringement, it could impose fines up to 10% of Alphabet’s total worldwide turnover, which can increase to 20% for repeated infringements. In the case of systematic non-compliance, the Commission may impose additional remedies, such as requiring the sale of the business or banning acquisitions related to non-compliance.
The Google Shopping case. The Commission fined Google for abusing its dominant position by preferring its own comparison shopping service on the results pages of its general search engine. The practices concerned included the use of a ‘Panda’ algorithm (exploiting consumers’ reliance on default search results) which affected searches, such that Google Shopping results were prominently displayed at the top of the search results page compared to rival shopping services results. This made it significantly harder for competitors to attract traffic. In 2017, the Commission imposed a fine of €2.4 billion, which was upheld by the General Court and subsequently the Court of Justice of the European Union.
Antitrust enforcement in the US. In the US, in August 2024, Google was found by a District Court to have monopoly power in general search and general search text advertising. The US Department of Justice is pursuing an anti-monopoly case against Google, proposing a range of potential remedies including a break-up Google’s search dominance by divesting parts of its business such as its Chrome browser and Android operating system. The outcome of the trial on these fixes is not expected until August 2025 (and will be subject to any subsequent appeal).

What sets the UK apart is the CMA’s more flexible ‘ex-ante’ approach to regulating Google’s activities without the need to launch time-consuming enforcement cases. If Google is designated with SMS, it could lead to significant changes in how it operates its search and advertising services in the UK, which will have an impact on the many UK businesses that use the platform.

Next steps and timescales

The investigation was officially launched on 14 January 2025, with the CMA publishing the ITC on the same day. The process is structured into several stages:

1. Stage 1 (January to March 2025): Initial evidence gathering and engagement with Google and other stakeholders.

2. Stage 2 (April to June 2025): Further evidence gathering and analysis, followed by a consultation on the proposed decision regarding Google's ‘search’ SMS designation and any initial CRs.

3. Stage 3 (July to September 2025): Analysis of consultation responses and further evidence gathering.

The statutory deadline for issuing the SMS Decision Notice is set for 13 October 2025.

If you’d like to learn more about the CMA’s new powers as part of the DMCC Act, please visit our DMCC In Focus page, or get in touch with our experts below.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2025. Specific advice should be sought for specific cases. For more information see our terms and conditions.

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