In accordance with the prophecy…CMA opens SMS investigations into Apple and Google mobile ecosystems

 On 23 January, as foreshadowed in the CMA’s market investigation, the CMA opened two Significant Market Status (‘SMS’) investigations into mobile ecosystems – Apple and Google, naturally – as to whether either firm has Strategic Market Status in relation to their ‘ecosystems’, including operating systems (for Apple, both mobile and iPad), app stores and browsers on their mobile ‘devices’ [long misnamed as ‘mobile phones’]. The consequence of SMS designation will be the imposition of intrusive remedies to address any issues the CMA considers is a direct result of the SMS either through ‘conduct requirements’ or ‘pro-competition interventions’.

The CMA has constructed a very helpful diagram which explains how a mobile ecosystem works.

Source: CMA Mobile ecosystems SMS investigations, Invitation to comment,
23 January 2025

This closely follows the CMA’s first SMS investigation into Google ‘search’ and ‘search advertising’ published on 14 January, using its new digital market regulation powers bestowed on it by the Digital Markets Competition and Consumer Act previously reported here.

The mobile ecosystems SMS investigation will cover:

• Whether Apple and Google impose unfair terms and conditions on app developers for distributing apps;
• The extent of competition between Apple and Google in mobile ecosystems, which include barriers to competitors offering rival products to them on their platforms;
• The extent that market power is being leveraged using their respective positions in their operating systems, app distribution and/or browsers to self-preference their own apps and services, in particular those pre-installed;
• Whether users [that’s CMA talk for ‘you and me’] are presented with ‘choice architecture’ which makes it more difficult for us to make active choices about which apps we are using.

In accordance with the process, the CMA has also published an ‘Invitation to comment’ to those interested or affected. The CMA gives very helpful instructions that it:

“welcome[s] submissions that are supported by evidence (both quantitative and qualitative). This could include, for example, data (e.g. relating to user behaviour), third-party research, internal documents setting out commercial strategy or screenshots of webpages.”

…which is understandable, if you want the CMA to be able to actually take your submission into account in its actions.

As you might remember the CMA has been investigating competition issues it suspects with Apple and Google’s mobile ecosystems since 2021 (formally at least) when it opened its Market Study before concluding that with a recommendation for a Market Investigation which has been ongoing ever since. The recently published its “Mobile browsers and cloud gaming market Investigation provisional decision” which it is ‘consulting on’ until 16 March 2025:

1. That it has serious concerns with a number of features of the of the market which indicated that competition was being restricted (which harms businesses and consumers);
2. Its proposal to remedy the situation is to use its new powers under the DMCCA, instead of the powers it has through market investigations to prescribe remedies, which include structural and behavioural remedies and recommendations.

We note something seems to have gone awry with the process if the CMA is on one hand ‘consulting’ on its proposals in the Provisional Decision to resolve these issues using its powers under the DMCCA until 25 March 2025, requiring a further decision from the Board, but on the other has (on 23 January) opened an SMS investigation under the DMCCA and is consulting on using those powers.

The CMA has obviously already put a lot of work into its investigation, collecting truckloads of evidence from industry and publishing thousands of pages, which the CMA considers it is entitled to rely on for the purpose of SMS investigations. It was also no doubt frustrated by the slow passage of the DMCCA through parliament which is in no small part designed to address the very issues it was investigating. And so, resolving this through its new powers under the DMCCA seems a very sensible thing to do, especially given the lower evidentiary thresholds.

However, this approach might leave industry participants who feel they are currently being treated unfairly scratching their heads given (a) the SMS investigation process will take nine months followed by a process of attempts at compliance, investigations into non-compliance and final decisions on non-compliance before any behavioural changes  and (b) in the absence of clear conclusions, those that have already commenced private actions to recover damages and/or those planning to do so are left fighting their own standalone battles in the CAT.

In terms of defending the SMS investigation, it might be pretty difficult for the ecosystem operators to argue that they don’t meet the criteria for designation of SMS i.e., turnover condition of £25 bn clearly met by both and holding positions of substantial and entrenched market power and holding a position of strategic significance, as very clearly set out in the CMA’s initial view in the investigation notice for each.

We imagine any battle front might (try to) focus on proposed remedies. Some of these have been clearly coming and will be difficult to object to such as allowing sideloading of alternative app stores and external payment links, however others such as interoperability requirements which are potentially more intrusive and difficult to address may see more pushback. Exciting times.

The SMS investigation has a statutory deadline of nine months beginning with the date of this Notice, being 22 October 2025. The deadline for responding to the ITC is 12 February 2025

As always, we strongly recommend putting in a submission if it affects your business. Please do get in touch if you would like to have a discussion.