On 22 November 2022, the CMA launched a market investigation into cloud gaming and mobile browsers. In this post, I focus on this investigation as it relates to mobile browsers. This blog has already discussed cloud gaming in an earlier post, and we will return to the topic in the future.
CMA market investigations must typically be concluded within 18 months from the date that the reference is made. They consider whether there are features of a market that have an adverse effect on competition (“AEC”), in which case the CMA has the power to impose its own remedies on businesses and it can also make recommendations to other bodies such as sectoral regulators or the government. A market investigation is thus a powerful instrument.
In the Final Report of its Market Study on Mobile Ecosystems (the “Final Report”), the CMA devoted a full chapter to “mobile browser and mobile browser engine competition” (Chapter 5), in which it identified a variety of competition issues that should be addressed. The findings of the CMA were widely supported by the submissions made by third parties. Further analysis is provided in Appendix F of the same report.
Browsers are one of the most important and widely used apps on mobile devices and they represent a critical gateway to access the web on such devices. Browsers comprise two elements: (i) a browser engine, which transforms web source code into web pages and (ii) a user interface, which is responsible for user-facing functionality. Web content can also be accessed through native app’s in-app browsers, which can for instance be found in chat apps or social networks.
Mobile devices typically have either Chrome or Safari pre-installed and set as default at purchase, which gives Apple and Google an important advantage over other vendors. Browsers also generally come with a default search engine, which is the main source of monetization of browsers either because the browser vendor owns a search engine (e.g., Google Chrome) or sells the search default (e.g., Apple or Mozilla).
In its Final Report, the CMA made the following important findings:
First, the browser market is an effective duopoly. The combined share of supply for Apple’s and Google’s browsers on mobile devices in the UK is around 90%. Moreover, in 2021, 97% of all mobile web browsing in the UK was performed on top of the browser engine of Apple (WebKit) or Google (Blink). As a result, Apple and Google enjoy substantial market power in mobile browsers and browser engines. That is a source of concern.
Second, Apple’s requirement that all browsers on iOS use its WebKit browser engine is problematic:
- Apple effectively dictates the features that browsers on iOS can offer. This impedes the ability of rival browsers to differentiate themselves from Safari on factors such as speed and functionality. As a result, Safari faces less competition.
- As WebKit lags behind other browser engines in terms of the developer features it supports and its user-facing performance and capabilities, it limits the capability of all browsers on iOS devices, potentially depriving iOS users of useful innovations they might otherwise benefit from.
- Apple inhibits the functionality of web apps (websites resembling native apps), which raises developers’ costs, deprives consumers of innovative apps and limits the competitive constraint web apps could exert on native apps (which is ironic considering that Apple and its lawyers often argue that Apple does not have market power on the market for the distribution of apps on iOS devices as the App Store is constrained by the availability of web apps).
While Apple’s WebKit’s restriction benefits Apple, the CMA considered it impedes competition and innovation to the detriment of users.
Third, Apple’s justifications for the WebKit restriction, which are (as usual) pretextually based on security and privacy considerations, lack credibility. The CMA finds that, according to evidence from security experts that it consulted, Apple’s ban on the use of alternative browser engines is not necessary in order to provide secure browsing. In certain respects, the ban could also potentially prove harmful to security, in that it limits competition to improve security.
Fourth, there are features that are available to Safari which are not available to other mobile browsers on iOS devices. This once again limits the ability of other browsers to compete with Safari.
Unsurprisingly, Apple rejected the findings of the Final Report in its response to the CMA consultation on a market investigation reference (“MIR”) for mobile browsers and cloud gaming, alleging that the evidence shows that, “with respect to mobile browsers, WebKit and Safari have pioneered innovation, enhanced user choice, and prompted responses from competitors”. Apple also submitted that the findings underpinning the CMA’s proposal “are based on a partial and erroneous analysis of the evidence submitted to the CMA during the market study.”
This submission apparently failed to impress the CMA and was directly at odds with the submissions of multiple market actors. In particular, the Open Web Advocacy’s extensive submission – which is truly worth reading – observed that “For the past decade, severe underfunding of Apple’s browser Safari combined with a ban of competitive browsers on iOS has removed competitive pressure and resulted in an unstable platform missing critical functionality ensuring that only vendor-specific native apps are competitive. Intervention is essential not only to the future of competition between Browsers but also to deliver a free and open, universal, interoperable application development and distribution platform.”
In its reference decision to make a MIR, the CMA observes that the examination of the four criteria set in its guidance on making MIRs – the scale of the suspected problem, the availability of appropriate remedies, the availability of undertakings in lieu of a market reference, and the presence of alternative powers available to the CMA or to sectoral regulators – justified making a MIR.
We note that a MIR will allow the CMA to deliver faster results that through the DMU regime considering the CMA is still waiting for the powers that will allow it to adopt codes of conduct and pro-competition interventions, although we recently heard some positive news. In any event, the CMA will likely use the MIR to lay the groundwork for the upcoming DMU regime with respect to mobile browsers.
As far as remedies are concerned, the reference decision suggests that potential measures could include: removing Apple’s restrictions on competing browser engines on iOS devices; mandating access to certain functionality for browsers (including supporting web apps); requiring Apple and Google to provide equal access to functionality through APIs for rival browsers; requirements that make it more straightforward for users to change the default browser within their device settings; and choice screens to overcome the distortive effects of pre-installation.
The CMA is not wasting any time as almost immediately after launching its MIR it started sending requests for information to what appears to be many companies regarding their reliance on browsers.
Of course, the CMA’s MIR is not the only worry for Apple and Google as the Digital Markets Act also contains a series of (browser-related) obligations, and there is no question that they will be designated as gatekeepers with respect to their web browser services.
As noted above, browsers are critical gateways allowing users to access the web. More competition and innovation in this sector will bring significant benefits to all of us.
One final word. While I am satisfied that the MIR covers browsers and cloud gaming, I am disappointed that it does not cover Apple’s App Tracking Transparency (“ATT”) framework, which is nothing but a cynical way for Apple to destroy under the guise of privacy the ability of app developers to monetize their content through targeted advertising at the very time Apple is developing its own mobile advertising business. To the extent Apple is not applying to itself the same restrictions it applies to others, it is currently being investigated by the French, German and Polish competition authorities. Considering the findings the CMA made in its Final Report, which are critical to Apple (see in particular Appendix J), it is disappointing that the CMA is not further investigating the matter (at least for now).