Tuesday, November 29, 2022

The three-letter acronym soup of UK tech antitrust enforcement: CMA, MIR, DMU, and temporarily ABK

This post is mostly a glossary of an alphabet soup. But first I'd like to draw your attention to a very interesting and well-crafted speech that Sarah Cardell, the Interim Chief Executive of the UK Competition & Markets Authority (CMA), delivered yesterday at the British Insttitue of International & Comparative Law (BICCL) and Linklaters Tech Antitrust Roundtable. Mrs. Cardell discussed the CMA's enforcement activities under the current legal framework as well as "the Digital Markets, Competition and Consumer Bill [that] will be introduced in the third session of [the British] Parliament" (emphasis added). That speech is a roadmap, and explains in very understandable terms why certain actions must be taken in order to remedy and ideally even prevent market failures.

The Digital Markets, Competition and Consumer Bill is somewhat comparable to the European Union's Digital Markets Act (DMA), but that analogy isn't meant to downplay its distinct nature. It is easy to confuse the two, however, as this UK legislative initative is often referred to as the Digital Markets Unit (DMU). But a unit is not a bill. The Digital Markets Unit of the CMA already exists, but it will make an impact on the market only after the Digital Markets, Competition and Consumer Bill is passed into law. The legislative process could have been massively delayed or even derailed as the country has very recently had three different prime ministers, but is now--fortunately--going forward.

The bedrock of the DMU as well as the EU's DMA is the realization that traditional antitrust rules are not suitable to task in a field in which unprecedented network effects giving gatekeepers an unhealthy degree of power. Many U.S. lawmakers agree, yet we are still waiting for Congress to enact at least the Open App Markets Act (OAMA).

There is something in between traditional antitrust enforcement (investigations that lead to fines for and/or injunctions against abusive conduct) and a so-called ex ante regime like the one envisaged for the DMU. Without having to establish a violation of antitrust law, the CMA has the power to conduct market investigations, which may then lead to structural measures. In other words, the standard is a market failure, not a finding of abuse (though in practice, there will be findings of abuse, just that the legal standard for such findings doesn't have to be met). I have stated on various occasions--most recently on Friday when commenting on a tweet by Internet luminary Jack Dorsey (of Twitter and Block/Square fame)--that the CMA correctly identified a need to look into (and, as I believe it will at the next stage, to take measures) relating to mobile browsers and cloud gaming. Apple's WebKit dictate--forcing all other browsers on iOS to use the same engine as Safari--is terrible for innovation and competition.

One week ago, the CMA announced that after a public consultation, the agency is now carrying out a market investigation. The next three-letter acronym is MIR: Market Investigation Reference. The MIR is a formal decision to open a market investigation (PDF) that may indeed lead to structural remedies. The CMA published the Terms of Reference (PDF) "in relation to the supply of mobile browsers and mobile browser engines, and the distribution of cloud gaming services through app stores on mobile devices (and the supply of related ancillary goods and services) in the United Kingdom."

On another occasion I'll comment on some of the submissions by stakeholders. Apple's claim of acting procompetitively is so very absurd that I don't know how they can even make that claim with a straight face, but now is not the time to go into detail on that. The market investigation will take up to 18 months and has enormous potential to bring about change. The Platform Law Blog explains the scope of the MIR very well.

The fourth and final three-letter acronym in this UK tech antitrust context is different from the others because it's non-governmental: it's the abbreviation of a company name, Activision Blizzard King (ABK).

The official company name is only Activision Blizzard, but King (the maker of Candy Crush) is key and it's in third place only for chronological reasons (Activision first acquired Blizzard, later the combined entity acquired King), not as an indicator of strategic importance. The CMA is reviewing Microsoft's purchase of ABK. While merger cases have their own legal framework, there are factual overlaps here that matter to me as an app developer.

Microsoft's response to the CMA's Phase 2 Issues Statement discusses the problems facing Fortnite on Xbox Cloud Gaming. In that section of the blog post I also show a conversation on Twitter in which I defended the CMA's decision to consider the iOS browser monopoly issue closely related to cloud gaming.

It was also in that UK merger review process that Microsoft publicly revealed its plans to compete with the incumbent mobile app stores. Section 2.15 of Microsoft's October 23 submission to the CMA explains that it takes two factors to make this work. The walled gardens must be opened up, but then there will still be the challenge of convincing consumers to use app stores other than the default ones:

"In particular, the concept of a next-generation game store that operates across a range of devices ('Universal Store') is risky. Moving consumers away from the Google Play Store and Apple App Store on mobile devices will require a major shift in consumer behaviour. Microsoft hopes that by offering well-known and popular content, gamers will be more inclined to try something new. But this is far from guaranteed and also depends on proposed regulations and legislation in the U.S., and around the world, that would require Apple and Google to make their platforms and app stores more open to third-party stores and commerce platforms. As such, in seeking approval from its Board of Directors as a public company, Microsoft leadership could [REDACTED]. Nevertheless, as Mr. Spencer confirmed, Microsoft will measure the strategic success of the Merger on [REDACTED]."

It looks like Microsoft is prepared to make a ten-year commitment to the PlayStation. If that helps in the EU, it may also be deemed satisfactory in other jurisdictions--including, but not limited to, the United Kingdom. At any rate, I hope the CMA will take the same holistic perspective on digital markets when making a decision on Microsoft-ActivisionBlizzard (and will take the potential benefits to app developers into account) as Mrs. Cardell did in her speech yesterday, which covered a lot of ground (and in which she mentioned that so far the CMA has actually blocked only one tech merger, Facebook-Giphy, which is easily distinguishable from Microsoft-ABK).