What have we learned from the CMA's initial Strategic Market Status investigations?
18 February 2025Following the launch of the CMA’s first round of Strategic Market Status investigations into Apple and Google, we take a look at the nature of the concerns the CMA is investigating and consider what its announcements to date tell us about the way in which it intends to operate the new digital markets competition regime.
Introduction
With the entry into force of the Digital Markets, Competition and Consumers Act 2024 (DMCCA) on 1 January 2025, the CMA can designate large tech firms as having “Strategic Market Status” (SMS) when those firms hold “substantial and entrenched market power” and occupy a “position of strategic significance” in in relation to one or more digital activities. Once designated, the CMA can impose “conduct requirements” (CRs) on those firms, and/or introduce “pro-competition interventions” (PCIs) to address the root causes of their market power and ensure that digital markets are open to competition and achieve positive outcomes for UK consumers and businesses.
As discussed in our previous article, earlier this year the CMA gave a strong indication of how it intends to deploy its new powers in practice. This came in the form of detailed Guidance and a statement on the expected sequencing of its initial rounds of SMS investigations.
Since then, we have, as expected, had two rounds of announcements of SMS investigations from the CMA: the first into Google’s search business; and the second, two weeks later, into Google and Apple’s mobile ecosystems. These were accompanied by public Investigation Notices addressed to Google and Apple, setting out the CMA’s grounds for believing the SMS criteria may be met, and by detailed Invitations to Comment (ITC) for the benefit of third-party stakeholders.
The investigations
General search services
The first SMS investigation, launched on 14 January 2025, targets Google's “general search and search advertising services”. These comprise two distinct sets of products:
- the user-facing aspects of Google’s general search engine (excluding its “specialist” search engines/comparison services, such as Google Hotels and Google Shopping); and
- the business-facing functionality and services that support search advertising, including Google Ads and Search Ads 360, which allow businesses to advertise to users of Google’s general search engine.
The CMA notes that these distinct activities are carried out in combination for the common purpose of operating Google’s general search engine, which can be viewed as a two-sided platform that offers free general search services to users, financed through the sale of search advertising to businesses. The CMA therefore considers that these services may be grouped together as a single “digital activity” under the DMCCA for the purposes of designating Google as having SMS.
The CMA’s investigation will therefore assess the extent of competition between Google and its rivals on both the user and advertiser sides of the market, and seek to identify barriers to entry and expansion. The CMA will also explore potential interventions to promote competition and reduce those barriers, and prevent Google from leveraging its market power in search into other services and/or engaging in conduct that exploits users and advertisers. These could include CRs ensuring challenger search services can access key default positions on Google’s search engine results page (SERP), forcing Google to make key data available to competitors, and restricting Google's ability to share user data across its different services.
Mobile ecosystems
The CMA’s second and third investigations, jointly announced on 23 January 2025, examine whether Apple and Google should be designated with SMS in relation to their mobile ecosystems, covering the provision of:
- mobile operating systems – i.e. pre-installed software that acts as an intermediary between the hardware and software on a mobile device;
- native app distribution – i.e. services (commonly known as “app stores”) that enable the distribution and installation of software applications (“apps”) on mobile devices; and
- mobile browsers, which enable mobile device users to interact with web content, and the browser engines that provide the underlying technology powering those browsers.
The CMA considers that these three digital activities may be carried out in combination for the purpose of facilitating interactions between mobile device users and providers of digital content (in the form of mobile apps and web content). Accordingly, the CMA is, as part of its ITC, seeking views on whether there should be a grouped designation, with a ‘mobile ecosystem’ constituting a single digital activity.
The SMS investigations will assess the extent of Apple and Google's market power and the potential competitive constraints they face in respect of these activities, including the presence of barriers to entry and expansion, competitive dynamics between the iOS and Android operating systems, and the influence of Apple's App Store and Google's Play Store on app design and distribution.
The CMA will also examine how the role and design of mobile browsers and browser engines – particularly Apple's Safari and WebKit, and Google's Chrome and Blink – shape user access to online content and services, including web apps (which can provide some of the same functionality as “native” apps, but run via a mobile browser), and how the configuration of iOS/Android impacts on the competitive landscape for mobile browsers and browser engines.
In parallel, the CMA will explore potential CRs to address issues arising from such market power. These are likely to focus on practices at the operating system level that impact competition at the browser and/or app store level (which is perhaps also why the CMA is considering whether ‘mobile ecosystem’ should be the relevant digital activity). Other interventions could include measures to promote switching between iOS and Android devices, forcing Apple and Google to allow alternative app stores and payment methods, and fair and transparent app review processes.
Key takeaways
The investigations are at a very early stage, but the CMA’s announcements (which, whilst not as voluminous as a typical market study Statement of Scope, provide a lot more detail than announcements of antitrust investigations) already provide an indication of what lies in store and how the CMA is likely to wield its powers under the new regime.
Unfinished business?
One immediate observation is that the CMA, through these new interventions, is finally seeking to address concerns it identified some time ago in previous investigations, notably its:
- 2020 market study into online platforms and digital advertising (DAMS), which found that Google Search had a very high share of the search market and faced weak competitive constraints on both the user and advertiser sides of the platform;
- 2022 mobile ecosystems market study (MEMS), which found there was inadequate competition between Android and iOS, that Apple and Google each held significant market power and controlled the main gateways into their ecosystems, and that this control was used to harm competition;
- ongoing (but very nearly completed) mobile browsers and cloud gaming market investigation (MBMI), from which the CMA is very likely to draw when designing browser-related CRs; and
- abuse of dominance investigations into Apple’s App Store and Google’s Play Store terms and conditions, which the CMA decided to park and therefore closed in August 2024 (following the rejection of commitments offered by Google, but not Apple) having taken the view that the competition concerns at the heart of these investigations could be more effectively addressed once the DMCCA entered into force.
For the CMA, a chief advantage of taking remedial action under its new powers is the possibility of ensuring that the concerns it has identified across a range of markets are addressed more holistically, taking into account the links and inter-dependencies between different underlying digital services and products. Additionally, the new regime is inherently forward-looking and iterative, allowing the CMA to refine its interventions over time to keep pace with technological and market developments and address possible circumvention by designated firms.
Are findings of SMS a foregone conclusion?
In each of the above-mentioned market studies/investigations, which it intends to draw upon, the CMA concluded that Apple and/or Google enjoyed significant market power in respect of the products under scrutiny (in some, the CMA described that market power as being “substantial and entrenched”) or had reasonable grounds to suspect that they were dominant.
Consequently, while the CMA has reiterated that the outcomes of the SMS investigations have not been pre-judged, and that the qualitative legal test for a finding of SMS is distinct from any similar concepts under competition law, Apple and Google will face an uphill battle to convince the CMA that they do not benefit from substantial and entrenched market power and a position of strategic significance.
The CMA will, however, still have to establish that the position has not materially shifted since the findings of its previous investigations were reached, up to five years ago, and that there is nothing to suggest that the position will shift in the next five years.
Front-loading remedy design
A key element of the CMA’s pronouncements around the turn of the year (including the revisions incorporated in its final Guidance document) was its aim to impose CRs at the same time as designating the first SMS firms, or very shortly thereafter.
The recent investigation announcements further emphasise this aim. Indeed, the relevant CMA case pages make clear that the CR imposition process set out in the Guidance, including the various consultative steps therein, is being carried out in parallel with the SMS designation process, following the same administrative timetable.
We can, therefore, expect a large part of the present investigations to focus on identifying, designing and consulting upon appropriate CRs, with initial draft CRs to be published in June 2025. Again, the CMA will here be able to draw on its previous work, including the extensive work carried out on remedies as part of the MBMI. But this will still be a substantial undertaking, given the range of products in scope of the investigations (each of which could require multiple CRs) and the diverging stakeholder interests the CMA will need to grapple with.
A flexible and forward-looking regime
The first wave of SMS investigations illustrates the inherent flexibility of the UK’s digital markets competition regime.
Most notably, the CMA has been quick to deploy its ability to group distinct activities into one digital activity for SMS investigation purposes – something that is not possible under the EU’s Digital Markets Act (DMA), which is based on a more rigid framework, where each core platform service must be assessed and designated separately. To group the activities in this way, the CMA will need to establish that the relevant legal test (i.e. that the activities have a substantially similar purpose, or can be carried out in combination for a specific purpose) is met.
The main motivators for the CMA in seeking to group activities in this way appear to be a desire to: (i) look at the various activities holistically through one investigation (taking into account the interplay between the various components of the SMS firms’ ecosystems); and (ii) move quickly in imposing CRs that address concerns across multiple markets, in a way that is administratively manageable.
Another element that comes to the fore in the ITCs is the forward-looking nature of the assessment the CMA intends to carry out. Not only is this required by the SMS criteria (as for substantial market power to be “entrenched”, the CMA must consider the competitive position over the next five years), but the CMA also appears to be looking to identify CRs that can prevent harms that have not yet arisen. This is particularly evident in its focus on the competition that generative AI services and AI interfaces might be able to provide in online search, as these nascent technologies continue to mature at pace.
Here again a contrast can be drawn with traditional antitrust enforcement, which focuses on existing harms and/or conduct, and with the DMA’s more rigid rulebook, under which the conduct obligations address known and present concerns and can only be modified by the Commission after a detailed market investigation and subject to certain pre-defined parameters.
The CMA will no doubt hope that, by anticipating future market dynamics, it can implement proactive measures to foster competition and protect consumers and businesses over the coming years of continued technological development. What remains to be seen is the extent to which this results in the CMA’s CRs supplementing and/or diverging from the DMA’s conduct obligations, the impact such additional regulatory layer and/or potential divergence may have on market outcomes, and also whether the CMA will be as quick as the Commission to investigate alleged non-compliance with such requirements.
What next?
Over the next few months, the CMA will focus on evidence-gathering, through the submission of information requests to, and by holding roundtables and bilateral meetings with, the potential SMS firms and relevant third parties.
The CMA will then publicly consult upon its proposed SMS designation decisions and CRs in July 2025. This will allow the CMA to consider the representations and feedback it receives in response to the consultation, as well as conduct further evidence-gathering, ahead of the statutory deadline for SMS designation in October 2025 (the CMA can unilaterally extend this deadline by three months if it considers it has “special reasons” to do so).
We can also expect the CMA to announce at least one more SMS investigation towards the middle of the year.
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