Earlier this week, the UK Competition and Markets Authority (CMA) made a market investigation reference in relation to mobile browsers and cloud gaming. Another day, another CMA announcement on Big Tech? Not quite: the CMA has a multiplicity of investigations open in the tech sector, but this is the first time it has used its market investigation tool in the sector and represents a significant milestone in CMA tech enforcement.

Mobile ecosystems and cloud gaming services in the firing line

This reference follows the mobile ecosystem market study final report, published in June. That report’s key finding was that Apple and Google have an effective duopoly on mobile ecosystems that allows them to exercise a “stranglehold” over operating systems, app stores and web browsers on mobile devices. Market studies are a CMA tool to assess whether particular markets are working well and can lead to a range of outcomes, including a market investigation reference, as is the case here.

The market investigation will focus on two key areas: (1) the supply of mobile browsers and mobile browser engines, and (2) the distribution of cloud gaming services through app stores on mobile devices (and the supply of related ancillary goods and services) in the UK.

The general focus will be on restrictions imposed on developers by the ecosystem owners which “may affect or have the potential to affect millions of UK businesses and consumers." The CMA has said that "[m]any stakeholders have told us that decisive and timely action in these areas is critical.” Meanwhile, the CMA resisted the calls from some stakeholders to expand the scope into desktop devices and general search.

A key focus will be on whether the restrictions imposed by Apple in particular can be justified, on grounds of protecting users’ privacy, security or safety online. The CMA has indicated that “should the market investigation find problems with cloud gaming and mobile browsers, it may be able to tackle these via a one-off removal of restrictions”. This will force the CMA to yet again tackle the question of how to balance competition against privacy considerations within a competition-based toolkit.

The CMA’s weapon of choice

Market investigations are a powerful and versatile tool for the CMA. Unlike in a cartel or abuse of dominance investigation, the CMA does not need to find a breach of competition law to take action. Instead, the CMA evaluates whether a market is functioning well. If the CMA concludes that a market has features that result in an “adverse effect on competition”, it then has broad discretion to impose behavioural, and even structural remedies on the businesses under investigation.

In the policy debates over Big Tech in recent years, other global authorities have eyed the CMA’s market investigation tool with envy. Many see it as precisely the kind of flexible tool needed to “tackle” structural issues in the tech sector: the European Commission even proposed (but later abandoned) creating its own parallel tool in an early proposals for the Digital Markets Act. 

Despite this, the CMA has previously shied away from using this tool in the tech sector. Following its Digital Advertising Market Study in 2020, the CMA decided not to make a market investigation reference - despite finding numerous issues with competition in the market -, preferring instead to propose legislative reform. That process led to the CMA’s Digital Taskforce, the establishment of the Digital Markets Unit (DMU) and proposals for a special regime for firms with “Strategic Market Status”.

Warming up for pro-competitive interventions - a blueprint for future investigations by the DMU?

The promised DMU reforms have been slow coming. After being put on the backburner before the summer, it was announced just last week that the proposals which would give the DMU legislative powers will only be laid before Parliament in the first half of 2023, with implementation inevitably some time behind that.

The “pointy end” of the Strategic Market Status regime would allow the DMU to make “pro-competitive interventions”. That proposed power is similar in many ways (though in some respects more limited) to the market investigation powers the CMA is using in this case.

This market investigation could therefore prove a blueprint for future investigations by the DMU, and will rightly be watched closely by potential SMS firms. It is also further proof  – not that any further proof was required – that the CMA is not shying away from enforcement in the tech sector while it awaits its new DMU powers.