The Competition Appeal Tribunal’s (CAT) decision

Background

On 15 June 2021, the Competition and Markets Authority (CMA) commenced a market study under the Enterprise Act 2002 relating to the UK markets for the supply of mobile devices and operating systems, the distribution of mobile apps, and the supply of mobile browsers and browser engines (the “Market Study Notice”). On 14 December 2021, the CMA issued an interim report and gave public notice of a decision not to make a market investigation reference arising out of the market study (the “Earlier Decision”).

On 10 June 2022, the CMA published its market study final report and launched a public consultation on whether a market investigation reference should be made against Apple Inc. and its related UK and EU business entities and Alphabet Inc (Google). Following the public consultation, the CMA purported to make the market investigation reference on 22 November 2022 (“the Contested Decision”).

Apple sought a review of that decision before the Competition Appeal Tribunal (CAT), contending that it was ultra vires because it was made outside the statutory time limits stipulated in the Enterprise Act 2002. Apple submitted that the CMA should have made the reference in June 2022 rather than November 2022, and therefore, the decision should be quashed. 

The relevant statutory framework

Market studies are one of several tools at the CMA’s disposal to address competition or consumer protection problems. Market studies may lead to various outcomes, including, but not limited to, competition, consumer enforcement action, or market investigation references.

Under section 131 of the Enterprise Act 2022, the CMA can make a ‘freestanding’ market investigation reference independently or separately from a market study.  Alternatively, under section 131A of the Enterprise Act 2022, the CMA may issue a market investigation reference concerning the matter specified in a market study notice. If the market reference results from a market study notice, the CMA must abide by the time limits set in section 131B of the Enterprise Act 2022.

Parties’ arguments

1. CMA’s arguments

The CMA contended that the Earlier Decision did not circumscribe the CMA in making a self-standing market reference under section 131. This was precisely what the CMA had done through the Contested Decision. It argued that there was nothing in the statutory provisions to constrain the CMA in such a course, and the Decision was, therefore, intra vires the CMA.

2. Apple’s arguments

Apple contended that statutory provisions rendered the Earlier Decision of the CMA not to make a reference binding on the CMA, such that the Earlier Decision could only be revisited with the CMA making a fresh market study notice.

The decision 

The CAT examined whether the Decision in this case was or was not a ‘freestanding’ reference. It noted that the trigger for the jurisdiction to make a market investigation reference is low. The CMA only needs ‘reasonable grounds for suspicion’. However, where a market study notice has been issued, additional constraints are added by section 131(A) and the time limits in section 131(B). 

The CAT concluded that this was not a standalone reference for the following reasons:

• The Earlier Decision made explicit reference to the provisions in sections 130A (duty to publish market study notice), 131 (power to make references) and 131B (Time limits to make a reference after a market study notice) of the Enterprise Act 2002. 

• The proposal to make a market investigation reference in the Market Study Final Report was stated to be ‘in relation to the matter specified in the notice’. 

Therefore, the CAT held that the CMA was obliged to comply with the time limits in section 131B of the Enterprise Act 2002. Under this article, the CMA must issue a proposal for a market investigation reference within six months from the Market Study Notice. These time limits cannot be extended or waived. However, the CMA issued its proposal almost a year after its Market Study Notice. 

The CAT then concluded both the notice under section 131A(2)(a) (proposal to make a market investigation reference) and the commencement of the consultation process under section 131A(2)(b) were too late. Therefore, the Contested Decision lacked the statutory prerequisites for a valid decision in this regard, and it was a decision ultra vires the CMA. The CAT, therefore, concluded that Apple’s application succeeded and the Decision must be quashed.

The consequences in the studied market 

The CAT’s decision clarifies a point of law that sounds rather evident under public law: authorities cannot act beyond their mandate. In this scenario, the CMA does not have the power to reserve its right to raise a proposal to make a market reference at a later stage. In other words, where a market study notice has been made, the power of the CMA to make a market investigation reference is constrained to the time limits set in Section 131B. However, where the subject of the reference is an entirely different matter from an anterior market study notice, no constraint will arise at all. 

Nevertheless, beyond the exact interpretation of section 130 of the Enterprise Act, we should consider the consequences of this decision. The CAT stated that the CMA would be most undesirable to be constrained without good reason from making a market investigation reference. Unfortunately, the CAT’s decision caused just that. The CAT’s decision is so thorough that there is no room for the CMA to issue a new market reference soon. The CMA would have to start a fresh market market investigation. However, even if the CMA took that route, it is evident that a series of market studies on the same or very similar subject matter could well be challenged on other public law grounds.

The only option for the CMA would be to issue a new and freestanding market investigation reference. As the CAT itself, the Court did not hear any argument about the precise meaning of the words ‘in relation to the matter specified’ in section 131A(1)(a) of the Enterprise Act 2002. Arguably, the CMA could demonstrate that its new market reference has little to do with its previous market investigation or that a change of circumstances, including the mere effluxion of time, makes its reference sufficiently different from the ‘matter’ of the Challenged Decision.

In the meantime, the more significant questions remain unanswered: how will the CMA protect and guarantee effective competition in the markets allegedly affected by Apple’s behaviour? Does the CMA have other tools to protect these markets, and if so, are they effective?