The CMA takes matters into its own hands with browsers and cloud gaming market investigation references

The UK’s Competition and Markets Authority (“CMA”) has published its report into mobile ecosystems a few days before its statutory deadline. This market study has focused on mobile browsers, mobile operating systems and app stores.

Following the UK Government’s disappointing decision to delay the necessary legislation that will give the Digital Markets Unit (“DMU”) its legal powers to regulate the Big Tech gatekeepers, the CMA has been putting a brave face on it.

However, actions speak louder than words, and the CMA’s action has been to reverse its previous decision not to conduct a fully-fledged market investigation.  The CMA is therefore taking matters into its own hands rather than rely on the Government to write legislation, at least in certain discrete areas where it feels it can make a targeted difference. This is exactly what we have been calling for it to do and we applaud the CMA’s decision.

The market investigation will focus on two specific areas of Google and Apple’s ecosystems – namely, mobile browsers and cloud gaming. In these areas, the CMA makes some particularly strong findings as regards Apple, for example saying it has “blocked the emergence of cloud gaming services on its App Store”, “bans alternatives to its own browser engine on its mobile devices” and “seriously inhibits the capability of web apps”. Pre-installed defaults for both Apple’s and Google’s browsers, and other restrictive practices, are also clearly in the firing line.

Market investigation

Market investigations are an unusual tool that are unique to the UK. They involve an 18-month (extendable to 24 months) investigation into an industry, at the end of which the CMA has huge powers to reshape the industry even without any wrongdoing on behalf of the industry players. The CMA has previously completed market investigations into retail banking, energy, airports and many other industries.

Over the years, the CMA (and its predecessors) have gone through phases where they favour this tool because it means the CMA has the power to implement its own interventions, and then phases where the legal challenges and large case teams required seem too burdensome and making recommendations to Government seem easier. The cycle then continues when the CMA discovers that it is not always straightforward to persuade Governments to do what the CMA wants it to do, so the market investigation tool comes back into favour. We may therefore be about to enter a new era of market investigations (albeit probably scoped more narrowly than in the past).

The CMA’s interim report into mobile ecosystems, published in December 2021 (the “Interim Report”) said that the legal test for launching a market investigation was met, but the CMA provisionally decided against making a reference because it believed the legislative route would be more efficient. However, the Interim Report foresaw the possibility of needing to revisit that provisional decision:

“We may, for example, revisit our present decision not to make a reference if the legislation required to bring the proposed new regime into force is not laid before Parliament for some time, or its anticipated scope materially altered, such that it no longer appears to us that action by the DMU represents the most effective and timely means of addressing the issues we have identified.” (paragraph 9.12)

When the Government delayed the DMU legislation, it was therefore foreseeable that the CMA would reverse its decision, and that is what in fact has happened.

The CMA is proposing a market investigation into:

• the supply of mobile browsers and mobile browser engines, and
• the distribution of cloud gaming services through app stores on mobile devices. 

These are only two discrete areas out of the many issues covered by the mobile ecosystems report.  The CMA has decided to scope the market investigation narrowly to improve the deliverability of its interventions. Its previous experience in the retail banking and energy sectors is that wide-ranging market investigations are incredibly difficult to manage.

The DMU legislation is therefore still clearly required as a matter of urgency to tackle the market power of the digital gatekeepers more generally. The CMA takes great care to emphasise that point in today’s report.

It seems at first glance that browsers and cloud gaming are a clever choice for intervention. They are areas where the CMA can add value because they have not been the subject of detailed scrutiny internationally, and the CMA clearly has some targeted remedies in mind that it believes it can impose successfully. We have flagged in a previous blog post that we thought cloud gaming might be the biggest news from the CMA’s market study.

The CMA has decided, on the other hand, that successful interventions to improve competition in mobile operating systems and app distribution would be more difficult within the tight statutory timetable of a market investigation, which only allows a one-off intervention. These will be better suited to the ongoing regulatory regime of the DMU, assuming that there are not further delays in bringing forward the legislation.

For companies active in these sectors, the market investigation will form a huge opportunity to achieve real change in the ways in which Google and Apple operate. They will have until 22 July to comment on the CMA’s proposed scope.

Antitrust enforcement action

Separately, the CMA has also launched an antitrust case into the Play Store. This will investigate Google’s rules which oblige certain app developers to use Google’s own payment system (Google Play Billing) for in-app purchases. It seems to be the mirror image of the ongoing investigation into Apple’s in-app purchasing rules.

Readers may recall that the CMA had already launched a further antitrust case into Google’s adtech activities only a couple of weeks ago. This previous case is investigating Google’s practices in the digital advertising market to see whether Google unlawfully tied or gave prominence to its services in different levels of the market.

The CMA’s response

The CMA’s actions tell a clear story of its senior management being furious at the Government. Since the delay to the DMU legislation was formalised in the Queen’s Speech on 10 May, i.e. one month ago today, the CMA has already launched two antitrust cases and a market investigation.  We heavily suspect that there will be further announcements to come, perhaps before the Chief Executive, Andrea Coscelli, departs at the end of this month.

There is now a short consultation about the scope of the CMA’s market investigation (deadline 22 July) before it kicks off in earnest.  This is likely just a formality, although the final decision to make the market investigation may be taken by a CMA Board headed by a new interim Chief Executive (rumoured to be Sarah Cardell, the current General Counsel) and a new Chair (Marcus Bokkerink), so there is some scope for a further twist in this tale.

We may return to the findings of the CMA’s extensive report in future blog posts.