Court Clarifies CMA's Powers to Initiate Market Investigation References

Citation: [2023] EWCA Civ 1445
Judgment on

Introduction

The case Competition and Markets Authority v Apple Inc & Ors represents a detailed judicial analysis of the scope and exercise of the powers of the Competition and Markets Authority (CMA) under the Enterprise Act 2002. The fundamental question at issue was whether, and under what circumstances, the CMA could initiate a market investigation reference (MIR) after previously concluding not to do so. This article dissects the legal principles applied in the judgment and elucidates their application to the facts of the case.

Key Facts

The CMA initially exercised its market study notice (MSN) power under sections 130A, 131A, and 131B of the Enterprise Act 2002 in connection with the market activities of Apple and Google, particularly concerning their control over mobile ecosystems. Initially, the CMA decided against making a MIR based on a belief that impending government legislation would introduce a more appropriate regulatory regime. However, when such legislation was delayed, the CMA revisited its decision and sought to use its standalone power under section 131(1) to make a MIR, leading to the challenge from Apple that resulted in the instant case.

The pivotal legal principles scrutinized in this case involve the interpretation of the CMA’s powers as prescribed under the Enterprise Act 2002, specifically in relation to making a MIR.

Standalone Power vs. MSN Power

The case highlights two principal regimes under which the CMA has jurisdiction to make a MIR:

  • The standalone power (section 131(1)), which can be initiated if reasonable grounds exist for suspecting that a market feature distorts competition in the UK.
  • The MSN power (sections 130A, 131A, 131B), which involves a procedural pathway commencing with a MSN, leading to consultations, and adhering to statutory time frames for a decision on whether to make a MIR.

Vires

The core legal issue revolved around the “vires”, or the authority of the CMA to act. The Court of Appeal was tasked with determining whether sections 131A or 131B impliedly limited the CMA’s ability to make a new MIR using its standalone power after having previously decided against it under the MSN procedure.

Public Law Limitations

The judgment also considered the public law limitations on the exercise of statutory powers. The CMA’s power under section 131(1) had to align with public law principles such as the duty to act rationally and with the statutory purpose, despite meeting the conditions for its use.

Outcomes

The Court of Appeal, overturning the Competition Appeal Tribunal (CAT), decided that:

  • The standalone power provided under section 131(1) is not implicitly curbed by any process under sections 131A or 131B, such that previous engagement with these sections would not preclude future exercise of the standalone power.
  • The interpretation and application of the phrase “in relation to the matter specified in the notice” found in section 131A(1) only triggers the duties in section 131A(2) and is not meant to create a wider limitation.
  • Possible advertising legislative change can arguably be within the CMA’s statutory purpose when deciding to exercise its power under section 131(1).
  • New evidence emerging can be relevant to the CMA’s decision to initiate a MIR, supporting its exercise of the standalone power.

Conclusion

In resolving the appeal, the Court of Appeal has clarified crucial aspects of the CMA’s jurisdiction, delineating the independence of the standalone power from the procedural constraints of the MSN power. The judgment reinforces the overarching statutory duty of the CMA to promote competition for the benefit of consumers and serves as a guidance on the limits of statutory interpretation within the compass of public law. This reaffirms the CMA’s flexibility in re-evaluating its decision-making process in light of new information or changes in circumstances, ensuring that market regulatory interventions remain dynamic and responsive to evolving market conditions.

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