Competition and Markets Authority v Apple Inc.; Apple Distribution International Ltd; Apple Europe Ltd; Apple (UK) Ltd

Hearing date: Tuesday 3rd October 2023

Approved Judgment

This judgment was handed down remotely at midday on Thursday 30 th November 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

A. Introduction: The issue

The central issue arising upon this appeal concerns the circumstances under the Enterprise Act 2002 (“ EA 2002”) in which the Competition and Markets Authority (“ CMA”) has jurisdiction to make a market investigation reference (“ MIR”) having, in the past, concluded that it would not conduct such an investigation. To understand the appeal, it is necessary to have an appreciation of the various powers the CMA is entitled to exercise in order to conduct an investigation. There are two principal regimes under which the CMA has jurisdiction to make a MIR.

The first (“ the standalone power”) is broad in nature. It is subject to certain conditions precedent the most important of which is that that CMA has reasonable grounds for suspecting that any feature or combination features of a market for goods or services prevents, restricts or distorts competition in the United Kingdom or a part thereof. This power is found in section 131(1) EA 2002.

The second (“ the MSN power”) arises where the CMA wishes to investigate a matter but considers that it does not, at that point in time, possess sufficient information. Under the EA 2002 it is empowered to exercise its power to collect information by publishing a market study notice (“ MSN”). In such circumstances it is required, under sections 131A and 131B, to adhere to a procedure the ultimate effect of which is to require the CMA within fixed time periods to take a decision upon whether it intends to investigate or not, and why.

In the present case, the CMA adopted this second course of action. In accordance with the statutory procedure and timescale, it adopted a decision not to conduct a MIR. This was upon the basis that, whilst the CMA entertained concerns about the conduct of Apple and Google in the markets that it was investigating, it confidently anticipated that the Government would, shortly, introduce new legislation in Parliament which would, in the view of the CMA, confer upon it a different and more sophisticated and suitable regime of regulation of the tech-industry. The CMA indicated that if there were delays to the introduction of this legislation it reserved the right to revisit its concerns and, if appropriate, make a MIR.

In this regard the UK Government was intending to introduce legislation in order to march broadly in line with a seminal piece of legislation adopted at the EU level, namely the Digital Markets Act (“ DMA”): Regulation (EU) 2022/1925 of the European Parliament and of the Council (14 ^th September 2022) on contestable and fair markets in the digital sector (OJL265/1). Under the DMA the European Commission is empowered to adopt decisions identifying certain operators in the digital sector as “ gatekeepers”. These are large digital platforms providing so called core platform services, such as online search engines, app stores, messenger services, etc. Gatekeepers, so designated will be required to comply with a series of obligations and prohibitions listed in the DMA. The legislation amounts to a paradigm shift in the approach to regulation conferring an ex ante, before the event, jurisdiction to prevent harm arising at all; in contrast with the largely ex post, after the event, jurisdictions which presently exist whereby regulators must await the emergence of harm before acting. As of the date of the appeal hearing, the DMA was on the statute book but was in the transitional period prior to its coming into full force and effect. In anticipation of domestic legislation, the CMA established a Digital Markets Unit (“ DMU”) to begin work preparing for the new domestic regime but it only becomes operational upon the coming into force of the new law. Notwithstanding a clear statement of intent upon the part of the Government, the anticipated UK equivalent legislation did not emerge. In fact the proposed law (the Digital Markets, Competition and Consumers Bill) was included in the King's Speech on 7 ^th November 2023 and is not therefore yet in force though might be enacted during the present 4 ^th session of Parliament.

In the circumstances, the CMA decided not to proceed with a reference. It set this out in a decision dated 14 ^th December 2021 which was 6 months after the issuance of the MSN. However, upon the expiry of the 12 month period from the date of the MSN, when it had become clear that the new legislation was not imminent, the CMA made a proposal to exercise the broader standalone power under section 131(1) EA and commence a new procedure leading to a possible MIR.

This culminated in a decision of 22 ^nd November 2022 to initiate a MIR. This is the decision under challenge in these proceedings (“ the Decision”). Apple, the respondent, contends that the regulatory regime set out in sections 131A and 131B of the EA 2002 permits the CMA to take one, and only one, decision on whether to conduct a MIR in relation to a particular matter unless the CMA issues a further MSN. Having decided not to initiate such an investigation, and absent the issue of a further MSN, the CMA had no enduring jurisdiction or power to take another. Apple therefore challenged the Decision as ultra vires the powers of the CMA. The CAT agreed.

If this is a correct interpretation of the EA 2002 it could have serious consequences. It would mean that the CMA had no jurisdiction, even some years later, to investigate concerns into the behaviour of an undertaking such as Apple or Google, even if such concerns were objectively justified. The CMA would be unable to impose a remedy designed to protect consumers in the public interest. Appreciating this, the CAT, having endorsed a strict and preclusive interpretation of the EA 2002, sought to mitigate the rigour of its construction by postulating, though without making definitive rulings, that there could be exceptions to the prohibition upon subsequent and fresh regulatory intervention. Nonetheless, the CAT still indicated, though again without so finding, that the sorts of justifications advanced by the CMA for conducting a fresh investigation in this case were contrary to general principles of public law. The net effect, in practice, of the judgment of the CAT is that there is very little scope, if any, for the CMA to initiate any further investigation into the conduct of Apple or Google, howsoever deep or justifiable the CMA's concerns about their conduct.

The issue arising upon this appeal is narrow. It concerns the interpretation of EA 2002 and the circumstances in which the CMA might, lawfully, conduct a fresh market investigation having already come to a prior conclusion that it would not investigate. It is common ground between the parties that the central issue arising is one of vires i.e. the jurisdiction of the CMA to act. The respondent, Apple, was clear that this was the only issue it wished to address. In response to a question from the Court, Mr Otty KC confirmed that he was not seeking to either address or justify the analysis of public law set out in the CAT judgment. For its part, the CMA also accepts that the central issue is one of vires. It challenges the CAT's analysis of the EA 2002 in its totality. However, it also challenges the CAT's public law analysis, not least because it is concerned that there could be a lingering and adverse effect upon policy if the Court of Appeal did not correct the reasoning in the judgment.

The central question on the appeal concerns the interpretation of the EA 2002 and the jurisdiction or vires of the CMA to conduct a fresh investigation subsequent to an earlier decision not to conduct an investigation. It will though be necessary also to address, in some measure, the public law analysis of the CAT.

B. Legislative Framework

The section 5 “function” of keeping information under review

The CMA has a statutory function under section 5 EA 2002: “… of obtaining, compiling and keeping under review information about matters relating to the carrying out of its functions”. Section 5 provides:

“Acquisition of information etc.

(1) The CMA has the function of obtaining, compiling and keeping under review information about matters relating to the carrying out of its functions.

(2) That function is to be carried out with a view to (among other things) ensuring that the CMA has sufficient information to take informed decisions and to carry out its other functions effectively.

(3) In carrying out that function the CMA may carry out, commission or support (financially or otherwise) research.”

The CMA has additional powers pursuant to section 174 EA 2002, which it may exercise for a “ permitted purpose” which includes requiring a person to attend to give evidence, produce documents, and/or provide estimates, forecasts returns or other information. Enforcement powers are provided for in section 174A. According to Market Guidance published by the CMA 1, a MSN may lead to a variety of outcomes, including: (i) no action; (ii) actions improving the...