Digital Markets, Competition and Consumers Bill

Viscount Camrose Excerpts

Committee stage
Wednesday 24th January 2024 Grand Committee

[Lord Bassam of Brighton (Lab)]

My Lords, I thank the noble Lord, Lord Faulks, for his neat and precise analysis of the position in which we find ourselves in the discussion on this group of amendments. This debate is a prequel to that which will follow on penalties, and we should see it in that light; the two things are very much connected, as the noble Lord, Lord Clement-Jones, made clear. Like him, I completely agreed with the noble Lord, Lord Vaizey, when he warned about using stray words. Proportionality is probably one of the most contested terms in law, and in all the 25 years or so that I have been in this House, I must have heard it in all the legal debates we have come across.

These are the first amendments seeking to restore some of the Bill’s original wording, which, as we have heard, was changed late in the day in the Commons. We are yet to receive a full explanation from the Minister of the reasons for that. The noble Lord, Lord Faulks, asked why, and we on these Benches pose the same question. Were Ministers lobbied into this and, if so, why? We support Amendments 16 and 53 in the name of the noble Lord, Lord Faulks, which, as he outlined, seek to restore the original wording of the Bill, taking out the word “proportionate”, removing proportionality as the determining factor behind a CMA pro-competition intervention and reinserting the word “appropriate”.

We have two, possibly three, sets of solutions to the problem that the Government have set. However, we also have added our names to Amendments 17 and 54, in the names of the noble Baronesses, Lady Stowell and Lady Harding, and the noble Lord, Lord Clement-Jones, with the intent of ensuring that clarifying that the condition for conduct requirements imposed by the CMA to be proportionate does not create that novel legal standard for appeals of decisions and the confusion that will flow from that. In our view, as the noble Baroness, Lady Harding, says, the original wording strikes the right balance, roughly speaking, whereas the Government’s version would weaken the intent of this part of the Bill.

The formulation of the noble Baroness, Lady Stowell, relies on prevailing public law standards—in other words, standards that are commonly understood. We take the view that we all need to know what rules we are working to, and if the Bill introduces or creates a new standard then that certainty is removed. Of course, when it comes to the issue of pre-emption, we will need to resolve the best way forward on this issue at the next stage of the Bill. For my part, I think that reversion might be the best route, but no doubt by negotiating round the Committee we can come up with a workable solution.

The amendments of the noble Lord, Lord Holmes, particularly Amendments 220 and 222, offer another way through it. However, on the face of it, for us they are useful in the context of reminding our Committee that guidance will need to be produced on the operation of this regime as it covers financial penalties and the countervailing benefits exemptions.

We have heard a lot about the new regime being flexible and participatory as a framework for regulation, and we agree with that principle. However, we think that, with this particular change, the Government strike at the heart of that and bring in a measure of uncertainty that is unwise, frankly, in this particular process. The intervention of the noble Lord, Lord Lansley, was very telling. What he told the Committee was extremely important and we should listen very carefully to what was said in that exchange of correspondence. He rather shot the Government’s fox.

In conclusion, the Minister has a bit of a difficult job on his hands here. He may feel the weight of the Committee against him. I rather hope that he can offer us a measure of reassurance and perhaps help us come to a point where the whole Committee can agree a sensible reversion or an amendment that makes the Bill as workable as it seemed when it was first drafted.

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

I thank the noble Lord, Lord Faulks, for raising the topic of proportionality in the digital markets regime and for doing so with such a clear and compelling analysis, which I think all of us, myself included, found deeply helpful. This is of course the requirement for the CMA to impose conduct requirements and pro-competition interventions on firms only where it is proportionate to do so.

First, I reassure my noble friend Lady Harding that this change is not about introducing a new standard or meaning of proportionality but about clarifying the scope of decisions that it applies to.

Amendments 16 and 53 from the noble Lord, Lord Faulks, seek to remove the explicit statutory requirement for PCIs and conduct requirements to be proportionate. Under these amendments, SMS firms would still be able to argue that their rights to peaceful enjoyment of property under Article 1 of the first protocol of the ECHR, or A1P1, were engaged in most cases, allowing them to appeal on the basis of proportionality. I refer noble Lords to the ECHR memorandum published by the department, which explains how the regime intersects with human rights and how this relates to property rights. A1P1 protects possessions, which can include enforceable rights such as contracts, and so regulating SMS firms under the regime would commonly affect possessions, and therefore engage A1P1.

The Government have always been clear that the CMA will need to act proportionately and comply with ECHR requirements, and that imposing obligations on SMS firms will very often engage the firm’s rights under A1P1. However, having a statutory requirement for proportionality in the Bill reinforces the Government’s expectations for how the CMA should design conduct requirements and PCIs, to place as little burden as possible on firms while still effectively addressing competition issues. This should be the case even when A1P1 property rights are not engaged, which this requirement provides for.

In particular, it is worth highlighting that A1P1 rights on their own would not amount to grounds to challenge interventions that impact a firm’s future contracts. It is right that these interventions should be proportionate. I understand the concern from many noble Lords about any extension to the grounds for appeal in the regime, but we are giving extensive new powers to the CMA to regulate digital markets.

[Lord Lansley (Con)]

Before we move away from this point, there was an interesting use of the word “reinforces”. Am I right in thinking that my noble friend is telling us that, if the original wording in the Bill were used and the word “appropriate” was there, it would none the less be his expectation that, in making decisions about conduct requirements or pro-competitive interventions, the CMA would in fact do so in a manner that was proportionate, because that is the appropriate way in which to make those decisions? Our worry is that by “reinforcing”, my noble friend is actually opening a door.

[Viscount Camrose (Con)]

I will go on to speak more about this. The intention of the Government in “reinforcing” is to bring clarity, particularly since, as I say, A1P1 is not universally applicable to these cases. It brings clarity, and therefore I hope that the effect will be as much closing the door as anything else.

[Lord Faulks (Non-Afl)]

The Minister has talked about A1P1 and the right to peaceful enjoyment of possessions. That may come into the analysis or it may not, but he has taken the view that it may not. If it does, then it is covered by the normal doctrines of judicial review, which include proportionality. If it does not, and he says it may not, why have proportionality in at all?

[Viscount Camrose (Con)]

I believe that, in most cases, A1P1 rights would be invoked, but there are cases where A1P1 would not necessarily be invoked, rare as those cases are. The intention of the Government is to treat all those cases in the same way. As I say, it is important that we also consider the safeguards around the new powers. Having an explicit requirement for proportionality, rather than just the implicit link to A1P1, sets a framework for the CMA as to how it must design and implement significant remedies. A proportionate approach to regulation supports a pro-innovation regulatory environment and investor confidence. I am also aware, of course, that later we are due to debate concerns noble Lords may have about the accountability of the CMA. Without pre-empting that debate, it is worth pointing out that setting out the requirement for proportionality explicitly will help ensure that the CMA uses its powers responsibly.

[Lord Clement-Jones (LD)]

This all sounds as though, really, the Minister should come clean and say that what he is trying to do is bring in merits by the back door.

[Viscount Camrose (Con)]

It is not my intention to bring in merits by the back door, nor is it my intention not to come clean, or to conceal from Members of this Committee any intentions of the Government. All this is about producing the clarity that we need to safely deliver the wide-ranging new powers of the CMA.

[Lord Vaizey of Didcot (Con)]

Can the Minister clarify for the Committee at some point, perhaps by letter, at what point the penny dropped within the department, with officials, that the word “proportionate” was necessary? If the word “proportionate” is removed, does this give the CMA permission to act disproportionately?

[Viscount Camrose (Con)]

I am happy to provide that information in the form of a letter, and I will leave it at that for now.

[Lord Tyrie (Non-Afl)]

Perhaps I could answer the question: the CMA never has scope to act disproportionately in law.

[Viscount Camrose (Con)]

In respect of my noble friend Lord Vaizey’s concern that proportionality will affect how the CAT conducts an appeal, the retention of judicial review in Clause 103 will still apply to the CAT, which will still have to conduct an appeal when a firm raises non-ECHR proportionality arguments in a JR style. It will not become a full merits appeal.

Amendments 33 and 52, from my noble friend Lord Holmes of Richmond, also remove the statutory requirement for proportionality but, in doing so, create greater impacts on the regime. Amendment 33 would remove the obligation on the CMA to set out, in its conduct requirement notice, the objective in relation to which it must consider proportionality. However, this is a key feature for setting a conduct requirement and it is important to include it in the notice for both the SMS firm and third parties.

Amendment 52, by removing Clause 46(1)(b), would reduce the Bill’s clarity that the primary objective of PCIs is to address competition problems. It is important that the Bill is clear on the objective that PCIs must pursue. Additionally, proportionality provisions will ensure that the CMA addresses its objectives without placing unnecessary burdens on firms and harming consumers.

I turn to my noble friend Lady Stowell’s Amendments 17 and 54. As she set out in her explanatory statement, these amendments seek to clarify that the use of “proportionate” does not create a novel legal standard. The amendment would state that it is defined in accordance with prevailing public law standards. Of course, I agree with her that it is important to be clear about what we expect from the CMA and concur with the spirit of her amendments. However, I hope my explanation of this provision as currently drafted will satisfy my noble friend’s concerns.

These amendments assume that there is a single public law definition of proportionality, when there is not. However, proportionality is also not a novel concept for either the CMA or the domestic courts to apply. There is domestic case law about how proportionality requirements have been interpreted. We expect that the CMA, the CAT and courts would follow the broad approach set out in the Bank Mellat 2 case, which considered proportionality in relation to the application of ECHR rights, as well as fundamental rights at common law. This is relevant when considering whether an infringement of a qualified ECHR right and/or a fundamental common-law right is justified. Noble Lords with an interest in this area will be familiar with the four-limb test set out by Lords Sumption and Reed. Previously, our domestic courts applied a separate, but broadly similar, test when considering proportionality under EU law.

In the event of an appeal against CMA interventions, it is the role of the courts to provide a definitive interpretation of the legislation, but they will likely give a certain amount of deference to the CMA as the expert regulator. When an intervention has engaged A1P1, there would be a clear link with the approach of the domestic courts to the ECHR proportionality requirements that I have already discussed. In the rare situation when an intervention did not engage A1P1, it seems logical that the courts would take an approach consistent with how they approach digital markets cases which do engage A1P1, although this could involve some modifications on a case-by-case basis.

The basic requirements of proportionality—that it balances private interests adversely affected against the public interests that the measure seeks to achieve—is well understood. As such, I hope my noble friend can appreciate that although I agree with the spirit of her amendments, in practice I do not believe they would provide the clarity they seek.

Amendments 220 and 222 from my noble friend Lord Holmes of Richmond would require the Secretary of State to publish guidance on how the appeals standard for financial penalties, proportionality and countervailing benefits exemption would operate. The amendments set out that the CMA could not impose conduct requirements, pro-competition interventions or financial penalties before this guidance was published.

I thank my noble friend for these amendments. He should be pleased to hear that the CMA will, as part of its approach to implementing the regime, produce guidance outlining its approach to delivering the regime before it is implemented. We expect this guidance to include the CMA’s approach to proportionality and the countervailing benefits exemption. The Secretary of State will have oversight of the CMA’s approach through the approval of that guidance. The Government feel that this approach strikes the right balance between maintaining the independence of the CMA and the CAT, and providing appropriate government oversight and clarity about how the regime will work. Suitable guidance will already be in place before the regime commences; as such, these amendments are not required.

I hope this has helped to address the concerns of the noble Lord, Lord Faulks, and my noble friends Lady Stowell of Beeston and Lord Holmes of Richmond, and that, as a consequence, they feel able to withdraw, or not to press, their amendments.

[Lord Clement-Jones (LD)]

My Lords, what harms does the Minister think the inclusion of “proportionate” is designed to prevent? What does he really think would happen if that word was not included in the Bill?

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[Viscount Camrose (Con)]

As I said, for those cases where A1P1 cannot be engaged, they can be treated in the same way—equally proportionately to other cases under A1P1. In addition, it creates further clarity around the use of these extensive new powers for the firms that will be affected by their use. In addition, it creates another means for this newly powerful independent regulator to be held to account.

[Lord Vaizey of Didcot (Con)]

Forgive me for intervening to make what is more of a rhetorical point.

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[Lord Bassam of Brighton (Lab)]

My Lords, if I might help the Minister, this legislation has been knocking around for some time now, so what was it that provided that blinding flash of official or ministerial inspiration to bring this amendment about “proportionate” so late in the day in the other place that it was tabled right at the end of the Commons process? What was it that was so compelling as to make that dramatic change?

[Viscount Camrose (Con)]

If noble Lords will forgive me; that was a large variety or questions. First, I can confirm right away that I have not received any lobbying from any big tech firms on this topic—none; zero. Secondly, as with any Bill, this was part of an ongoing pattern of constantly looking for means of improving the Bill, to maximise its clarity and effectiveness. I recognise the concern voiced by the Committee about this. I am very happy to set out in detail all the arguments I have attempted to make. I hope that will go some way further towards satisfying the Committee.

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picked up by the noble Lord, are covered by much more detailed points in Clause 20(3), which talks about discrimination using positions to exercise powers. These are important, but they are very generic, and the noble Lord raises quite a good point here about whether the regulations, when they come forward, or the changes to Clause 20, if they are brought forward, will be dealt with by the affirmative resolution. Can we have a reassurance, either through amendments later to be taken or by some other measure, that the Minister will make sure that this particular section—although it is true of the whole Bill—means that the Select Committees of both Houses will have a chance to comment and think about them? This is the driving matter and the really important part of the Bill.

[Viscount Camrose (Con)]

I thank the noble Lord, Lord Clement-Jones, and my noble friend Lord Lansley for bringing these important amendments. It is enormously valuable and important to kick the tyres of Clause 20 and understand or assure ourselves that it works.

Amendment 18A, tabled by the noble Lord, Lord Clement-Jones, would create a new permitted type of conduct requirement, allowing the CMA to require an SMS firm to provide users with a way to pay for products and services that would provide consumer protection. I thank him for the amendment; it highlights the vital issue of ensuring that consumers are protected when using online marketplaces.

We feel that conduct requirements are already able to require that SMS firms have effective processes for handling complaints by and disputes with users or potential users. This will allow the CMA to intervene when competition issues arise in this area. My noble friend Lord Offord will be talking to the consumer provisions in Part 4 in a later sitting, and I will not tread on his toes here. However, those provisions put it beyond doubt that, where platforms promote or facilitate consumer transactions, they must act with professional diligence, in addition to more specific duties such as refraining from misleading omissions or actions or aggressive practices.

We recognise that public understanding of the requirements of professional diligence could be clearer, and we recently consulted on how price transparency and product information for consumers can be improved. The Government’s response to that consultation was published this morning, and, in the light of this, we will be undertaking further work with stakeholders to ensure that platforms’ obligations to consumers are more widely and easily understood. I would of course welcome the noble Lord’s input during that process.

Amendment 31, tabled by my noble friend Lord Lansley proposes to add a new permitted type of conduct requirement to deal with the issue of SMS firms attempting to stop third parties raising possible non-compliance with the CMA. I thank my noble friend for tabling this amendment and highlighting the importance of this issue, on which I have also received representation from affected firms.

Alongside information gathered through its own monitoring, the CMA will rely on information from third parties that will have direct knowledge of market conditions. It is therefore crucial that third parties have the confidence to speak to the regulator. I can provide assurances that the CMA will have strong powers to tackle discriminatory or unfair behaviour seeking to frustrate the regime or interfere with enforcement, where it occurs within the scope of a designated activity. Both conduct requirements and PCIs will be available to combat such behaviour, supported by the usual robust enforcement powers and penalties. I draw my noble friend’s attention specifically to Clause 20(3)(a), which, in addition to the conduct requirement

“on fair and reasonable terms”

in Clause 20(2)(a), can be used where relevant.

The CMA will also be able to intervene outside the designated activity, but not in an unconstrained way: it can use conduct requirements to prevent leveraging, or a PCI to address an adverse effect on competition in a designated activity.

Input from third parties will be crucial in ensuring the success of this regime. However, some stakeholders may have concerns about sharing information or experiences for fear of retaliation. The CMA has well- established processes for handling information and maintaining the anonymity of those providing evidence, whether informally or as part of an investigation. Recognising the importance of engagement, the CMA has also announced plans to expand this approach; for example, by establishing representative panels—one for consumers and civil society, and one for businesses and investors. This will facilitate input from third parties, which in turn will support the design and implementation of interventions.

I therefore hope that the noble Lord will feel able to withdraw his amendment.

[Lord Stevenson of Balmacara (Lab)]

The Minister mentioned in his address—I was grateful to him for doing so—that there was a recent announcement from the department about sneaky hidden fees or drip prices that are unavoidable, and the press report that I am reading says that they will be banned. Does not this bear directly on points made during this debate, and in particular on Clause 20? Does this mean that the Minister will bring forward amendments at a later stage?

[Viscount Camrose (Con)]

My preference would be to consider so doing once the Committee has had a chance to debate later sections of the Bill which go directly to consumers.

[Lord Stevenson of Balmacara (Lab)]

So it is not ruled out at this stage.

[Viscount Camrose (Con)]

I am ruling nothing out at this stage.

[Lord Stevenson of Balmacara (Lab)]

The Minister is very generous.

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[Viscount Camrose (Con)]

As ever, I start by thanking all noble Lords who have spoken so powerfully in this group.

I turn first to the series of amendments on the countervailing benefits exemption. I start by addressing the proposal to remove Clause 29 as drafted, Amendment 36 from the noble Baroness, Lady Jones of Whitchurch, and Amendment 38 from the noble Lord, Lord Clement-Jones—in his absence.

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[Lord Fox (LD)]

The Minister has already introduced a difference between the two. There is a difference between “there is no other reasonable or practicable way” and “indispensable”. They are not the same—they are not synonymous. If I have to prove that something is not practicable, that is not the same as indispensable. The Minister has absolutely proved the point.

[Viscount Camrose (Con)]

Again, in my opinion, the two sentences are indistinguishable in their meaning.

[Baroness Stowell of Beeston (Con)]

My Lords, one of the arguments that has been advanced—I did not make it in my remarks because I forgot—is that part of the problem with changing the word from “indispensable” to what is now in the Bill is that the current phrase has not been tested in the courts, whereas “indispensable” has. The argument that changing from “indispensable” to what we have now provides clarity is one that is really hard for people to accept, because the clarity it is providing is not, seemingly, in everyone’s interests. That is part of the problem here.

[Baroness Kidron (CB)]

I was really interested in the introduction of the word “unknown”. The noble Lord, Lord Lansley, set out all the different stages and interactions. Does it not incentivise the companies to call back information to this very last stage, and the whole need-for-speed issue then comes into play?

[Viscount Camrose (Con)]

I will revert first to the questions about the word “indispensable”. As I have said, the Government consulted very widely, and one of the findings of the consultation was that, for a variety of stakeholders, the word “indispensable” reduced the clarity of the legislation.

[Viscount Colville of Culross (CB)]

So it is not the same?

[Baroness Harding of Winscombe (Con)]

Before my noble friend answers that, can he shed some light on which stakeholders feel that this is unclear?

[Viscount Camrose (Con)]

I cannot give a full account of the individual stakeholders right now; I am happy to ask the department to clarify further in that area. My contention is that the effect of the two sentences are the same, with the new one being clearer than the old one. I am very happy to continue to look at that and listen to the arguments of noble Lords, but that is the position. Personally, when I look at the two sentences, I find it very difficult to discern any difference in meaning between them. As I say, I am very happy to receive further arguments on that.

With respect to the participative arrangements by which a decision is reached around, for example, a conduct requirement, during the period of conduct requirement design, and during the decision-making period, it is, as my noble friend Lord Lansley has stated, highly to be expected that firms will make representations about the consumer benefits of their product. During a breach investigation, on the other hand, later on in the process, a consumer benefits exemption can be used as a safeguard or defence against a finding of breach.

Sorry, but there were so many questions that I have completely lost track. Perhaps the noble Baroness, Lady Kidron, will restate her question.

[Baroness Kidron (CB)]

I think the Minister was in the middle of answering it and saying why something might be “unknown” right at the last.

[Viscount Camrose (Con)]

As many noble Lords in the debate have alluded to, we have to be clear that this is a fast-moving field, and we have to at least allow for the possibility that new technologies can provide new consumer benefits and that it is okay to argue that a new and emerging technology that was not part of the original consideration can be considered as part of the defence against a finding of breach. The fact that the intended meaning is intended to be clearer in the current drafting is aiming to provide greater certainty to all businesses while ensuring that consumers continue to get the best outcomes.

Amendment 41, from the noble Lord, Lord Clement-Jones, would change the current drafting of the countervailing benefits exemption in several ways that together are intended to ensure that the CMA is provided as soon as possible with information relating to an SMS firm’s intention to rely on the exemption. We agree with noble Lords who have spoken today that it is important that the exemption cannot be used to avoid or delay enforcement action. The conduct investigation will operate in parallel to the assessment of whether the exemption applies, meaning that the investigation deadline of six months is not affected by the exemption process. The regime has been designed to encourage an open dialogue between the CMA and SMS firms, helping to avoid delays, unintended consequences and surprises on all sides. Therefore, in many cases, if a firm intends to rely on the exemption, we anticipate that this will be clear to all parties from early on in the process.

[Lord Fox (LD)]

I appreciate what the Minister said. By “early on in the process” does he mean after the process has been instigated, or before? A lot of this information is needed in order to understand whether there needs to be a process in the first place. There is a chicken and an egg here, in that some of this information is up front before we get to actions and enforcement.

[Viscount Camrose (Con)]

Indeed. It is an important point. Right from the beginning of potential conduct requirement design or PCI design, it would be consulting very widely with all stakeholders, including SMS firms and tech challengers. As part of that consultation, consumer benefits would be expected to be stated, in what is designed to be a participative process on all sides. As I was saying, the CMA is required to consider consumer benefits early on, when setting conduct requirements. The SMS firms will therefore outline the consumer benefits associated with their conduct at that stage, long before a conduct investigation.

Finally, adding further evidential requirements risks overburdening the regulator with more documentation than necessary, and therefore potentially delaying any enforcement action. For the reasons I have set out, I hope the amendment will not be pressed.

I come now to the discussion on the powers of the CMA to enforce obligations where they have been breached by SMS firms. Amendment 43, from the noble Lord, Lord Clement-Jones, would provide the CMA with a power to impose an enforcement order requiring an SMS firm to offer fair and reasonable payment and non-payment terms to third parties for goods or services. I can confirm that, under Clause 19, the CMA already has the power to require a firm to offer fair and reasonable terms through conduct requirements, and, where these are breached, the CMA has power under Clause 31 to make an enforcement order obliging the firm to stop the breach. As such, this amendment would not give the CMA any additional powers and could risk a narrower reading of its powers by raising the question of why other types of orders are not mentioned.

Amendment 107, also from the noble Lord, Lord Clement-Jones, would allow the CMA to apply to the High Court where a firm was breaching, or attempting to breach, an obligation or one of the conduct requirement objectives set out in Clause 19(5). The objectives in Clause 19(5) are not intended to be binding on SMS firms. Their purpose is to guide the design of conduct requirements by the CMA. It would therefore not be appropriate for the CMA to find a firm in breach of these objectives.

However, I agree with the noble Lord, and others who have spoken today, that it is important that the regulator can respond quickly before irreversible harm results from SMS-firm conduct. Where urgent action is needed in relation to a suspected breach of conduct requirements, the CMA will have the power under Clause 32 to make an interim enforcement order before irreversible harm occurs. For PCIs, the CMA will be able to issue directions setting out specific steps that a firm must take to become compliant with a pro-competition order. Failures to comply with orders under either conduct requirements or PCIs can be enforced through robust penalties. There is also the possibility of affected persons applying to court to enforce relevant requirements, and to apply for injunctions under Clause 101.

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[Viscount Camrose (Con)]

I said that the purpose of Clause 19(5) is to set the parameters for the design of conduct requirements by the CMA. Its purpose is to guide the CMA, not to bind the recipients of conduct requirements.

Amendment 48 from the noble Baroness, Lady Jones of Whitchurch, would allow the final offer mechanism tool to be used earlier in the enforcement process. The final offer mechanism is a backstop tool designed to incentivise sincere negotiations about fair and reasonable payment terms between the SMS firm and third parties. It is crucial that there is room for good faith negotiation where disputes arise from sincere differences of understanding rather than deliberate non-compliance. Overly shortening the enforcement process would greatly reduce these opportunities.

We recognise, however, that some stakeholders may be concerned about SMS firms frustrating the process and refusing to comply with these conduct requirements and any subsequent enforcement. Here, the CMA could seek to accelerate the stages before the final offer mechanism, making use of urgent deadlines for compliance with enforcement orders and significant financial penalties where appropriate, ensuring that parties will also not be able to drag their feet and delay the process. In addition, interim enforcement orders can be issued on a temporary basis during a conduct investigation, before a breach has been found. They could be used to prevent significant damage, such as a company going bust, to prevent conduct that would reduce effectiveness of future remedies or to protect the public interest. Our regime aims to tackle the far-reaching power of the most powerful tech firms.

I know that my noble friend Lord Black noted the Australian legislation. Our regime contrasts the Australian legislation in that it has been designed to protect businesses and consumers across the economy including, but not limited to, news publishers. Alongside the final offer mechanism, the DMU will have other powers to tackle unfair and unreasonable payment terms via conduct requirements, ensuring that the final offer mechanism will rarely, if ever, need to be used.

Amendments 49, 50 and 51 from the noble Lord, Lord Clement-Jones, would allow parties to submit further final offers if the CMA considers that the first were not fair and reasonable. The final offer mechanism involves a binary choice between the two final offers submitted by the parties. It is the finality of the process that creates such a strong incentive for the parties to submit fair and reasonable offers. An unreasonable offer only increases the likelihood of the CMA choosing the other party’s proposal.

Introducing scope for an additional round of bidding would undermine these incentives and would only serve to delay the securing of fair and reasonable terms for the third party. As a result, we hope, for the reasons set out, that the noble Lord feels able not to press these amendments.

Finally, this group includes two government amendments, which are both minor and technical in nature, relating to Clauses 38 and 117. These amendments clarify that digital content is included in the meaning of the phrase “goods or services” when used in Part 1 of the Bill, including when mentioned under the final offer mechanism. I hope that noble Lords will support these amendments.

[Lord Kamall (Con)]

I apologise—I should have maybe intervened earlier but I did not want to join the barrage, as it were. When my noble friend the Minister writes to us, as he inevitably will, I wonder whether he can help us to understand the Government’s position on countervailing benefits by outlining what they really mean by that and giving some real or hypothetical examples of where consumers may be harmed by a pro-competitive intervention by the CMA.

[Viscount Camrose (Con)]

Yes, indeed. I thank my noble friend for repeating the question and I apologise that I did not get to it earlier. I would be delighted to write and provide such examples.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank all noble Lords who spoke in support of our amendments. It is worth saying at the outset that it sounds like we are being very critical of the potential SMS firms. This is not about being critical but about getting the balance right. That is what we are aiming to do. A lot of the discussion that we have had in Committee today has been about feeling that that has become out of kilter. We are trying to get the very careful balance that the noble Baroness, Lady Stowell, talked about. Her committee felt, having agonised over it, that the original wording was about right. A lot of us feel that, which is why we are so anxious and testing of the changes that have come along more recently.

As we debated and identified in the previous discussion, the CMA already has a responsibility to act proportionately. This ought to apply to its judgments about countervailing benefits as well. The noble Baroness, Lady Stowell, said that it is designed as a backstop. It is important that the threshold remains high; that is one of the key issues.

The noble Lord, Lord Fox, said that because of the word “must”—that the CMA must desist if there are countervailing benefits—it becomes almost mandatory, so there will be no opportunities for the CMA to make balanced judgments. We agree that it is far too prescriptive.

I rather liked the canter through all the preceding clauses from the noble Lord, Lord Lansley, before he concluded: why do we need Clause 29, because all those provisions are already there? He made an important point about all of that.

I listened carefully to the Minister. He repeated what he said at Second Reading: that this clause on countervailing benefits is only to pick up new, unknown consumer benefits that have not been identified before. Try as I might, I have looked at the wording of Clause 29 and I do not see that it says that there. As the noble Baroness, Lady Kidron, quite rightly pointed out, as it is worded there is a danger that the SMS companies could hold back evidence to that last backstop and then start challenging at that point. It would then be very difficult for the challenger firms to come forward with different evidence. The current wording opens up a disturbing void.

We have had a really good discussion about whether the previous wording or the new wording maintains the high threshold. I think most of us remain unclear about that. I think it was the noble Baroness, Lady Harding, who said that this new wording has not been tested in the courts, so it gives us not more certainty but more uncertainty. That is the last thing that we want at this point.

The Minister said that this was put in partly because stakeholders were confused. I would push back and say that the Select Committee chaired by the noble Baroness, Lady Stowell, looked at this in a lot more detail than some of those stakeholders have and concluded that the original wording is clearer and more robust than anything he has come back with. I hope the Minister will take that point away. I do not think he was particularly convincing about why that new wording was necessary.

On Clause 48, I have considerable sympathy with the case made by the noble Lord, Lord Black, and very much support his arguments. We do not want companies to be put in a situation where they have to accept suboptimal deals because they are running out of time and money when, if we are not careful, it could take many years for the process to be completed.

The Minister tried to reassure us, because if there was an anxiety about the time we could have interim enforcement orders, for example. However, the difference is that the final offer mechanism is more of a collaborative process. When we met with representatives from the CMA, they said that that is how they like to work: they do not want to go to court, they want to reach collaborative agreements. I feel that that our Amendment 48 would allow some of that collaboration to work along the system before it gets to the final, final offer. Again, I am not convinced by the Minister’s response on all of that. We want to keep it out of court as much as we can but he is tying the hands of the CMA too much in the way this is worded at the moment.

I am sure I have not picked up all the points but I think the Minister gets the idea that he is not really taking us with him. I therefore hope that he will reflect on these issues again but, in the meantime, I beg leave to withdraw the amendment.

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I therefore look forward to the Minister explaining why this greater clarity and transparency is not already covered in the Bill, and if it is not, I am sure he will want to support these very simple and direct amendments. We find that we are in great sympathy with them, and, as other noble Lords have argued, between now and Report I am sure we will want to see this issue progressed in a way that benefits consumers, brings that greater clarity and transparency, and makes sure that we get the best from this legislation.

[Viscount Camrose (Con)]

I very much thank the noble Lords, Lord Vaux and Lord Fox, speaking on behalf of the noble Lord, Lord Clement-Jones, and my noble friend Lord Lansley for using these amendments to raise the very important and quite subtle issues of merger reporting and assessment in digital markets. I also thank the noble Lords, Lord Tyrie and Lord Bassam, and my noble friend Lady Harding for their thoughtful contributions.

Amendment 59, tabled by the noble Lord, Lord Vaux, would extend the duty to report possible mergers, provided for in Chapter 5 of Part 1, beyond firms designated with SMS to also include firms that are subject to a designation investigation. Firms can use anti-competitive mergers to further entrench their powerful market positions, especially in digital markets, where fast-acting damage to competition can be difficult or impossible to reverse. That is why SMS firms will be required to report certain possible mergers to the CMA before they complete. However—this may be a philosophical objection as much as anything else—it would not be proportionate or in keeping with the targeted and evidence-based approach of our regime to apply this duty to firms before the conclusion of a designation investigation.

I agree with the noble Lord, Lord Vaux, that firms under designation investigation may hold powerful positions in the market; some may even have been the subject of previous CMA scrutiny. Nevertheless, it is right that the duty to report should apply only once a firm has been found to have substantial and entrenched market power following a rigorous assessment and SMS designation. To reassure noble Lords, firms under SMS designation investigation will of course remain subject to the economy-wide merger regime. The CMA will be able to intervene where their mergers would harm competition in the UK.

Amendment 60 from my noble friend Lord Lansley—

[Lord Vaux of Harrowden (CB)]

Before the noble Viscount moves on to the next amendment, there seems to be a slight logical problem here, in the sense that presumably the new enhanced regime was set at the level it was because those mergers are felt to be significant for a strategic market status entity. If it were to do such a merger during an investigation, it would presumably impact potentially on whether the CMA believes that it meets the SMS, and therefore it must be important that the CMA is informed about acquisitions that could impact the investigation itself. It seems that there is a circularity here, but the noble Viscount has not addressed that.

[Viscount Camrose (Con)]

I do indeed recognise it. As I say, it is a difficult one because equally, one cannot treat undesignated firms as designated until the designation has taken place. I am very happy to carry on considering this with the noble Lord, because the point is a powerful and important one. Before moving on, I just point out that over the course of the necessary consultation activities, it would of course emerge that a firm was considering or evaluating a merger.

[Lord Vaux of Harrowden (CB)]

As somebody who spent most of his life doing mergers and acquisitions, I can say that they are not always made public.

[Viscount Camrose (Con)]

As I said, I am very happy to carry on with this; there is a sense of rounding up the usual suspects otherwise.

Amendment 60 from my noble friend Lord Lansley is intended to give the CMA jurisdiction to intervene in a merger when an SMS firm seeks to remove or absorb a smaller firm that could reasonably be expected to compete with it in future. I agree that it is important to ensure that the CMA can act against harmful mergers, including so-called killer acquisitions. I reassure my noble friend that the CMA can and does do so under the current legislative framework.

When reviewing a merger, the CMA can already consider whether it removes a potential future competitor. This can be seen in the Meta/Giphy case where, in its forward-looking assessment, the CMA found that the merger removed Giphy as a potential challenger and consequently ordered Meta to sell Giphy. The decision was upheld by the CAT, which I hope and think shows that the CMA has the necessary legislative cover.

It has been suggested that the CMA and other regulators have not scrutinised mergers by large digital firms enough in the past. However, since the Furman review, the CMA has undertaken a comprehensive review of its merger assessment guidelines and updated them in 2021 to ensure that they more clearly reflect the CMA’s current thinking and practice on digital markets, drawing on conclusions from expert reports, analysis and cases.

[Lord Tyrie (Non-Afl)]

Before the Minister leaves that point, and further to the discussion we have had about the importance of the CMA taking advantage of its powers, is he able to signal that he is sympathetic to the approach that the noble Baroness, Lady Stowell, will take later on with her proposal to give Parliament much greater powers of scrutiny of the CMA, to give us a better prospect that the CMA will continue with its more activist approach to dealing with these mergers? The risk for all of us is that there is a boost in activity for a period, with this legislation and the focus and attention that we all are giving this issue, but that, over time, the CMA slips back to the very comfort zone-oriented place it seemed to be in when it implemented a number of its statutory obligations in the past.

[Viscount Camrose (Con)]

I thank the noble Lord for raising that point. He has alluded a number of times during our conversations to ensuring that the working culture within the CMA is suitably postured to deal with a fast-moving regime. I can indicate that I certainly have sympathy with the intent of enhancing the accountability both to Parliament and government of the CMA—with this and other ends in mind, but to ensure that it remains assiduous in its identification of opportunities to intervene.

The Bill will enhance the CMA’s ability to act to prevent harmful mergers by SMS firms. The reporting requirement will improve the transparency of merger activity in digital markets. Additionally, Clause 127 in Part 2 and Schedule 4 will introduce a new acquirer-focused jurisdiction threshold, which provides an additional basis for the CMA to review mergers involving large firms, including SMS firms.

For these reasons, I hope that the noble Lords, Lord Vaux and Lord Clement-Jones, and my noble friend Lord Lansley will be reassured for the time being and not press their amendments.

[Lord Vaux of Harrowden (CB)]

My Lords, I thank all noble Lords who have taken part in this short but interesting debate. I should say that I forgot to thank the noble Lord, Lord Clement-Jones, who sadly really is not here at the moment, for supporting my amendment. He is here in the spirit of the noble Lord, Lord Fox.

We have heard some excellent points—in particular the description from the noble Lords, Lord Lansley, Lord Fox and Lord Tyrie, of how regulating acquisitions in this sector is difficult and challenging. It is a sector where even quite small and apparently insignificant acquisitions can end up having a really substantial impact; we had the description from the noble Lord, Lord Tyrie, of the change in culture that will be required at the CMA to deal with that. This is an area that the Government will have to continue thinking about. We might want to discuss this further between now and Report.

I am also grateful to the noble Baroness, Lady Harding, for correcting me on Google’s desire to co-operate with the competition authorities, which is obviously most welcome. I am grateful for her correction. She is also right that my Amendment 59 is a small one, but I think that it is important, and I very much welcome the Minister’s offer to discuss it further as the process goes on. On that basis, I beg leave to withdraw Amendment 59.

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Moved by

[Viscount Camrose]

62: Clause 81, page 50, line 7, leave out from “communication” to the end of line 8 and insert “(but this is subject to Part 2 of the Criminal Justice and Police Act 2001, as amended by section 77 of this Act).”
Member’s explanatory statement
This amendment clarifies that this subsection is subject to Part 2 of the Criminal Justice and Police Act 2001 as that Part is amended by Clause 77.

[Viscount Camrose (Con)]

I shall speak to the amendments tabled in the name of my noble friend Lord Offord. The Government have put forward some amendments in this group to support clarity and enhance predictability. These amendments will make clear the conditions of the levy that will fund the new digital markets regime and improve consistency with information-handling under the regime.

Government Amendment 62 clarifies the safeguards that will apply to the CMA’s handling of legally privileged information when using its powers to seize information. Government Amendments 74 and 75 require the CMA to address payment of the levy in its rules—for example, setting out when levy payments are due. They also ensure that the CMA is able to charge interest on late payment of levy fees.

Amendment 78 prevents existing disclosure order restrictions in the Competition Act 1998 being undermined by limiting access to restricted information for private actions brought under the new digital markets regime. This amendment will ensure that sensitive information is dealt with consistently for private actions brought under the new digital markets regime and for breaches of the Competition Act 1998. The amendment extends the same effect of existing disclosure order restrictions. It will help to maintain the integrity of CMA investigations and ensure protections for information that the CMA receives from third parties. I hope, for the reasons I have set out, that noble Lords will support these government amendments.

I turn to Amendment 70, tabled by the noble and learned Lord, Lord Etherton, which would allow private actions relating to breaches of the digital markets regime to be brought on a collective basis in the Competition Appeal Tribunal. I thank him for his amendment, and I agree that it is vital that the CMA can take a clear lead in imposing and enforcing the requirements of the new regime. The CMA works on behalf of all consumers, so a CMA-led approach to enforcement will bring the greatest overall improvement in digital markets to the benefit of all.

It is right that harmed parties should be able to seek redress, which is why we have made explicit provision to bring private actions. However, there is the risk that lengthy and complex private litigation in the early years would create uncertainty and undermine the goals of the regime as a whole, with CMA resources diverted to engaging with lengthy private actions rather than reforming digital markets. As such, it is the Government’s position that it would not be helpful to introduce collective actions at this time.

Once again, I thank the noble and learned Lord for his amendment, but I hope he will feel able not to move it.

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[Viscount Camrose (Con)]

I thank the noble and learned Lord, Lord Etherton, for his amendment and, perhaps even more, for his articulation of it today, which was extremely helpful. I also thank other noble Lords who have spoken, including my noble friends Lord Wolfson, Lady Stowell and Lady Harding and the noble Lords, Lord Fox, Lord Tyrie and Lord Leong, for their valuable and thoughtful contributions.

I will start by shamelessly stealing my noble friend Lady Harding’s metaphor from earlier. We are looking here to achieve the Goldilocks spot when it comes to private redress. We recognise that if an SMS firm breaches a requirement imposed by the CMA, this could have serious implications for businesses and individuals. It is right that recourse to redress should be available for parties suffering harm or loss as a result of that unlawful behaviour. The right of redress is a long-standing part of common law and explicit provision is part of most regulatory regimes. Our Clause 101 makes this right explicit. Doing so will also incentivise compliance and support the credibility of the regime.

At the same time, it is also important that the CMA can take a clear lead in imposing and enforcing requirements to bring effective change in digital markets. This DMU-led approach is important in providing certainty for all parties and ensuring the regime is coherent and effective and delivers the best outcomes for consumers. We want the regime to be collaborative, but not litigious. This is why we have made provision for a public-led enforcement approach, which will ensure the CMA’s central role in ensuring the consistent application and enforcement of the regime, while still making explicit provision for parties to seek redress.

Lengthy and complex litigation in the early years of the regime in particular would run the risk of creating uncertainty for all stakeholders and could undermine the delivery of the regime as a whole, particularly where CMA resources are diverted to engage with private actions rather than focusing on reform.

The noble Lord, Lord Fox, made a very serious point about the enormous disparity in size, which I duly take seriously. Our argument is that in the formative stages of the existence of this regime, the best way to deal with that disparity in size and scale is to have public-led engagements taking primacy over collective ones.

My noble friend Lady Stowell asked about Ofcom’s role in private actions under Part 2 of the Communications Act 2003. I would be happy to write to her on this important issue, as she suggested, but I will now respond briefly to her remarks in advance of that letter.

Under the Communications Act, claimants must first seek consent from Ofcom to initiate a private action for certain breaches. We have given this model consideration but concluded that it would pose difficulties in a digital markets context. It could politicise the CMA, forcing it to make a deeply contentious decision at the outset of each private action. The decision itself would also be subject to challenge in the courts through judicial review, so it would not likely bring additional certainty or clarity. These issues are less prevalent for Ofcom’s regime, where redress is more commonly sought through the Communications Ombudsman than in the courts. For these reasons, we do not think that replicating the Communications Act mechanism would be appropriate in this regime, but, as I said, I am more than happy to write and set that out in more detail.

All of that said, I hope that noble Lords are content to accept these government amendments. I thank the noble and learned Lord, Lord Etherton, for his amendment, but I hope that he will not press it.

Amendment 62 agreed.