CMA market investigation into mobile browsers, mobile engines, and cloud gaming services grinds to a halt
Following Bayerische Motoren Werke AG v CMA, in which the CAT refused to recognise the CMA’s jurisdiction to compel the production of documents held outside the UK from a non UK domiciled company, it is the second time since the beginning of the year that the CAT has circumscribed the CMA’s statutory powers.
While these judgments came as a significant blow, things are in the meantime looking up again for the CMA after the long-awaited Digital Markets, Competition and Consumer (DMCC) Bill was put before Parliament last week which, once adopted, will bolster the CMA's investigative and competition enforcement powers and confer on it a range of new powers to regulate digital markets.
The uncertainty regarding the timing for the adoption of the DMCC Bill was a perpetual theme in the CMA's journey to the CAT. When the decision to initiate a market investigation was adopted on 22 November 2022, following the publication by the CMA of its Final Report on the outcome of its Market Study into mobile ecosystems, it was unclear when the Bill would be put before Parliament. The CMA therefore decided to undertake a market investigation, despite having previously decided not to do so when publishing its Interim Market Study Report in 2021. At the time of its Interim Market Report, the CMA expected the adoption of the DMCC Bill to be imminent and so decided that it would use its expected forthcoming regulatory powers to introduce more competition into mobile ecosystems, even though the statutory test for making a reference was met. However, between the Market Study Interim and Final Reports in 2022 it became apparent that the CMA's earlier expectations had been misplaced and that the introduction of the Bill would be postponed. The unforeseen delay and change in circumstances caused the CMA to change its position and reverse its earlier decision.
Apple – together with Google, the main targets of the investigation – successfully challenged the CMA’s new decision before the CAT which found that the CMA had failed to comply with the statutory timeframe laid down in the Enterprise Act 2002 and had adopted its decision well out of time. The CMA’s decision was therefore ultra vires, which automatically renders the CMA’s ongoing market investigation void. The CMA has since applied to the CAT for permission to appeal the judgment, and that permission was rejected on 3 May (though the judgment will remain stayed until the determination of any application by the CMA to the Court of Appeal for a continuation of the stay).
According to the CAT, the decision by the CMA to conduct a market investigation was made in connection with the CMA’s preceding market study. Pursuant to section 131 of the Enterprise Act 2002, the CMA was therefore obliged within six months of the original market study notice (i.e. by 14 December 2021 at the latest) to decide either not to make a reference or to consult upon a proposal to make a reference. While there is also a power to make a freestanding reference (i.e. independently of a market study), that power (which is subject to different time-limits) cannot be exercised when there is a link between a market study and a reference. Accordingly, the CMA could not rely on this power to circumvent the six month time limit which applies when a reference is made in connection with a market study. It could not make another decision arising out of the same market study outside the strict six month statutory time limit.
While it was undesirable to constrain the CMA without good reason from making a reference, according to the CAT, the CMA could have avoided the present outcome if, at the end of the six month statutory time limit, it had simply decided to propose to make a reference unless it had become clear by the end of the consultation period (and before publication of its Final Market Study Report) that the relevant legislation would be forthcoming in good time.
However, this is not what the CMA did. Instead, the CMA tried to reserve the right to revisit its earlier decision not to make a reference if the DMCC Bill was not laid before Parliament, and thereby sought to delay a decision that has an express statutory time-frame. In doing so, the CMA erred in law and according to the CAT took into account immaterial considerations which also rendered its initial decision not to make a reference liable to attack on public law grounds. Indeed, the CAT suggests that the CMA could potentially seek to set aside its earlier decision, though the judgment does not articulate the consequences that would flow from such a course of action and if this could pave the way for the CMA to resurrect its market investigation.
Now that the draft legislation has been put before Parliament, this question is, in any event, likely to have become academic since it is only a matter of time before the new regime comes into force. This means that the CMA will soon be able to leverage new regulatory enforcement tools to unlock greater competition across mobile ecosystems and other related digital markets. Accordingly, the CMA may have limited appetite to seek to resurrect its market investigation and risk further potentially successful legal challenges when today (as opposed to in 2021) its new powers are just around the corner.