Apple and Google face renewed CMA scrutiny over mobile browsers and cloud gaming
This follows the CMA’s recent and significant success against Apple, in which the Court of Appeal overturned a ruling of the Competition Appeal Tribunal to hold that the time limits prescribed for a market study do not limit the CMA’s powers to make a reference under the Enterprise Act 2002.
Background
The CMA conducted a market study into mobile ecosystems between June 2021 and June 2022 looking at Apple and Google’s effective duopoly in the supply of operating systems, app stores and browsers on mobile devices. The CMA assessed the state of competition in the relevant market and identified certain concerns that in principle justified a market investigation reference (MIR). However, in an interim report of December 2021, the CMA decided not to make a reference because it considered the problems would be better addressed using the powers it anticipated acquiring under the Digital Markets Competition and Consumer Bill. This was the same as the conclusion the CMA had reached in a Digital Advertising Market Study which concluded in July 2020.
By the time of the final report on mobile ecosystems in June 2022, the introduction of the Digital Markets Competition and Consumer Bill had been delayed. In response to this delay, the CMA reversed its prior decision and decided to launch an MIR in relation to two aspects of the market study – mobile browsers and cloud gaming. In the case of mobile browsers, the CMA’s concern was Apple and Google were highly likely to retain market power within their respective ecosystems, which would lead to increased developers costs and dampening innovation. For cloud gaming, the CMA’s concern was limited to Apple having “blocked the emergence of cloud gaming services on its App Store”.
Apple appealed the CMA’s decision to make a MIR (the Decision) to the Competition Appeals Tribunal (the CAT), contending that the CMA had exceeded its powers under the Enterprise Act 2002 (the EA 2002).
A question of statutory interpretation
Pursuant to the EA 2002 the CMA has jurisdiction to:
- initiate an MIR where it has reasonable grounds for suspecting that any feature or combination of features of a market for services or goods restricts, prevents, or distorts competition in the United Kingdom or any part of it (the Standalone Power) (s131(1) EA 2002).
- collect information under section 5 of the EA 2002 (which confers such powers as the ability to obtain and compile relevant information and carry out research) and publish a Market Study Notice (MSN) (the MSN Power). Notably, should the CMA propose to make an MIR in relation to a matter specified within an MSN (s131A(1) of the EA 2002), it must comply with the procedure and time limits in sections 131A and 131B of the EA 2002.
Apple alleged that the Decision went beyond the CMA’s powers as the CMA proposed an MIR pursuant to the MSN Power and it did not comply with the time limits set out in s131B, including by failing to propose/initiate consultations on an MIR within 6 months of publishing the MSN (section 131B(1) and s131A(2) EA 2002).
Conversely, the CMA contended that it had invoked the Standalone Power to make the Decision which was not subject to the time limits set out in 131B of the EA 2002, which was distinct from the exercise of the MSN Power.
The CAT upheld Apple’s challenge that the CMA acted beyond its powers, suspending the CMA’s investigation from 31 March 2023, and ruling that:
- as the Decision was in relation to the same matter as set out in the mobile ecosystems MSN (s131A(1) of the EA 2002), the CMA was obliged to follow the procedure and time limits in sections 131A and 131B of the EA 2002;
- the CMA published its MSN on 15 June 2021, but did not publish a notice of the proposed MIR or begin to consult on the same until 10 June 2022, so had breached the six-month time limits set out under section 131B(1) of the EA 2002; and
- having decided against an MIR in the Earlier Decision, the CMA could not therefore then use the Standalone Power to make a MIR.
Interestingly, the CAT recognised that its strict interpretation of the statute could lead to undesirable results including the “CMA [being] constrained without good reason from making a market investigation reference”.
The CMA appealed the Ruling to the Court of Appeal, which overturned the CAT’s Ruling, holding that the CMA had lawfully exercised its powers to initiate an MIR under its Standalone Power, which is separate from the MSN Power and need not comply with the time limits set out in section 131B of the EA 2002.
The Court of Appeal disagreed with the CAT’s strict interpretation, and instead interpreted the legislation pursuant to the purpose of the act which was to “promote competition and protect consumers”.
The Court of Appeal noted that there were limits to the CMA’s use of the Standalone Power, including where a reference has already been made/undertakings accepted, or where the CMA did not employ the power rationally and in accordance with the proper purpose for which the power was conferred by Parliament. However, the Court of Appeal found that neither limit applied in this instance, and that the only applicable condition (of there being reasonable grounds for suspecting that a feature of the market prevents, restricts or distorts competition) was met.
What next for the investigation?
Following the CMA’s success in the Court of Appeal, and Apple’s choosing not to appeal to the Supreme Court, the investigation recommenced on 24 January 2024. For now, it looks as though the MIR remains a priority for the CMA, but it will be interesting to see what the final outcome is and how it will interplay with the new Digital Markets, Competition and Consumers Bill. Notably, the CMA’s indicative timing for designating firms under the new regime anticipates a date only a few months later than the statutory deadline for the MIR.
This article was co-authored by trainee solicitor Robyn Welham.
