Major new market study into mobile ecosystems

Following on from the announcement of a new antitrust investigation into Facebook (and indeed a Financial Times report that an Amazon case is imminent), the CMA has launched an ambitious market study into mobile ecosystems.  The CMA already has ongoing investigations into Google’s Privacy Sandbox and Apple’s approach to in-app purchasing; it has established the Digital Markets Unit (“DMU”) that is starting to work on the rules for the new regulatory regime for Big Tech; and it is working with other regulators on the Digital Regulation Cooperation Forum.

The CMA has published a 64-page statement of scope alongside the announcement of the new market study, which sets out what the CMA is proposing to investigate in the 12-month market study.  The CMA is asking for comments on the statement of scope by 26th July.  This is interested parties’ best opportunity to influence the issues on which the CMA will focus its attention.  If you want us to help you do this, please get in touch.

The CMA proposes to assess mobile operating systems (particularly Android and iOS), browsers (particularly Chrome and Safari), and app stores (particularly Apple’s App Store and Google’s Play Store).  This seems to us an intelligent scoping because it enables the CMA to properly analyse these interconnected markets.  Indeed, the CMA has also included the devices themselves in the legal scope of the study – we do not expect the CMA to spend too much of its time on smartphones and tablets, but they will want to gain a full picture of the sector and avoid wrangles with Apple over whether the CMA has the legal power to demand internal documents relating to those devices.

The CMA proposes to organise its work under four themes:

  1. Theme 1: competition in the supply of mobile devices and operating systems. This will include issues such as network effects, economies of scale, customer ‘lock-in’, and any under-hand tactics that nudge consumers’ decisions.
  2. Theme 2: competition in the distribution of mobile apps. This will include issues such as Google and Apple’s market power in the distribution of mobile apps, whether users are able to access alternatives, and whether consumers and app developers are being exploited.
  3. Theme 3: competition in the supply of mobile browsers and browser engines.  This will include issues such as Google and Apple’s market power, potential barriers to entry and expansion such as high development costs, the role of web standards and webpage compatibility, consumer behaviour and the role of pre-installation and default settings. They will also assess whether Google’s and Apple’s positions in the supply of browsers enable them to leverage their market power into other parts of their ecosystems.
  4. Theme 4: the role of Apple and Google in competition between app developers. This will include issues such as Apple and Google’s conduct as app store providers affecting competition between app developers (and giving them an unfair advantage when competing against them).  

Market studies are important tools for the CMA.  The last one in the tech sector was its highly influential online platforms and digital advertising report, which has provided the basis for the DMU regime and has influenced the debate worldwide (see, for example, how many times it is referenced in the US House of Representatives Sub-Committee on Antitrust report last October). 

This new market study will gather thousands of sensitive internal strategy documents, crunch millions (perhaps billions) of lines of data, and hold hundreds of meetings.  The CMA will publish a detailed interim report after six months.  At the end of the 12 months, it will publish a lengthy report setting out the CMA’s views on the problems caused by Apple’s and Google’s market power in mobile operating systems, browsers, and app stores.  It will set out some proposed remedies that will feed directly into the new DMU regime, including remedies to limit platforms’ ability to exercise market power, remedies to promote interoperability and common standards, consumer choice remedies, and remedies that force business units to be held separately. 

These are vital markets for the modern economy and the stakes are high.  Let us know if you want to discuss these issues in greater depth.

[Disclosure:  I was until recently Legal Director at the CMA and led the legal team on its online platforms and digital advertising market study.  Geradin Partners advises a number of tech businesses interested in these matters.]

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