Digital Markets, Competition and Consumers Bill
Wednesday 17th May 2023
(1 year, 2 months ago)
Commons ChamberRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
I beg to move, That the Bill be now read a Second time.
Digital technologies are a 21st-century miracle. They bring us closer together and connect us to the world. Today it is difficult to remember a time without answers at our fingertips, or the ability to buy goods and services from across the globe in just a few clicks. Technology has hugely increased our choices of goods and services and how they are delivered to us. It allows us to work in entirely new ways when we are on the move or in far-flung places abroad.
Just as digital technologies have profoundly altered our lives, they have also transformed the UK economy. We now have more tech unicorns than any other country in Europe: indeed, we have more than France and Germany combined. Eight cities in the UK are home to at least one unicorn, and this success continues. Last year, our tech start-ups and scale-ups also attracted more investment than those of France and Germany combined, creating jobs and opportunities throughout the United Kingdom. It is clear that tech will be key to achieving the Prime Minister’s priority of driving economic growth across the UK. Our figures forecast that the digital sector could expand by an additional £41 billion by 2025. However, the UK’s continued tech success depends on markets that are fiercely competitive, where the best companies can thrive and create innovations that spur growth.
Over the last decade, the UK’s digital markets have developed at an exponential rate, but our competition framework has failed to keep up. Its last legislative overhaul took place nearly a quarter of a century ago, when the internet was in its infancy and smartphones had not yet been invented. Since then competition across the broader economy has declined, and in the tech sector a small number of firms exert immense control across strategically critical services with practices such as self-preferencing, restricting operability, and exclusivity requirements.
Competitive markets are, of course, the best way to provide the best outcomes for consumers, and Governments and regulators should step in only when we see market failure or excessive market power. The International Monetary Fund has found that market power in the tech industry increased significantly between 1995 and 2016, which included increases of more than 30% in mark-ups and more than 10% in concentration globally. The Competition and Markets Authority estimates that in 2021 alone, Google and Apple made excess profits of more than £4 billion in the UK. Apple and Google determine which apps are in the App Store, how they are ranked and how they are discovered. They often charge significant levels of commission, up to 30% of revenue, and require all transactions to be made through in-app systems—which, as we all know, means that at the end of the day, all charges, commissions and taxes are paid for by consumers.
Dominance of display ads for Facebook and Google cost UK consumers about £2.4 billion a year. Between 2009 and 2019, GAFAM—Google, Apple, Facebook, Amazon and Microsoft—made more than 400 acquisitions without any regulatory intervention or referral through the voluntary mechanisms. This is why in recent years there has been an increasing acceptance of the need for new legislation that is fit for these dynamic and rapidly evolving markets. The Digital Competition Expert Panel, led by Harvard’s Professor Jason Furman, and the Digital Markets Taskforce have conducted independent assessments of how digital markets operate, noting that they have specific features which can allow them to tip in favour of one particular firm.
Colleagues on both sides of the House, including my hon. Friend the Member for Weston-super-Mare (John Penrose) and the hon. Member for Bristol North West (Darren Jones), have called for more to be done to allow consumers to benefit from greater competition in these markets. However, there is also a growing consensus that in a market which functions well, competition must work hand in hand with consumer protections. People must know that they can spend their money with confidence, safe in the knowledge that they have the right information and support if something goes wrong. That is critical, because when consumers feel that they risk losing their hard-earned cash, they also risk losing trust in markets as a whole. The Bill seeks to achieve all these goals and unleash the full opportunities of digital markets for the UK, so that every part of the country can reap the rewards. All told, under these measures we expect consumers to benefit to the tune of almost £10 billion over the next 10 years.
My right hon. Friend the Chancellor of the Exchequer recognises this legislation’s significance to the UK economy and its importance to consumers, particularly during a cost of living crisis, which is why he announced the earlier introduction of the Bill in his autumn statement. I should remind the House, however, that the majority of the Bill’s measures have been thoroughly scrutinised and analysed by experts and businesses over a number of years. This included a consultation in 2021 and a careful consideration of the responses.
I will now speak to the Bill’s measures in greater depth. Part 1 sets up a new pro-competition regime for digital markets, which will be overseen and enforced by the Competition and Markets Authority’s Digital Markets Unit. This legislation gives the DMU the ability to tackle the causes and consequences of market power, ensuring that people and businesses large and small are treated fairly by the most powerful tech firms. By encouraging greater competition, this work will lead to lower prices for everyday online goods and services and give consumers more choice and control.
The measures in part 2 will refine the CMA’s competition enforcement work so that it is better targeted, faster and more effective, allowing the free market to operate more efficiently.
Damian Collins (Folkestone and Hythe) (Con)
My hon. Friend got through part 1 a bit quicker than I thought he would—I have a question relating to part 1. Clause 38 creates a final offer mechanism for dispute resolution. The news media industry has been waiting for this legislation for a long time but it is not expressly referenced in the Bill. Can he confirm that the news industry and other industries could benefit from this final offer mechanism?
Kevin Hollinrake
My hon. Friend makes a good point. I wish him the best of luck in the election this afternoon. It is for a very important Committee that will scrutinise this legislation. The final offer mechanism is innovative and represents a positive way forward, in that it will bring parties to the table and they will both have to make sensible offers relating to how they see a fair resolution. This will avoid them putting unrealistic claims on the table, and it could well help the news industry and many other sectors.
John Penrose (Weston-super-Mare) (Con)
Like my hon. Friend the Member for Folkestone and Hythe (Damian Collins), I was concerned that the Minister might be moving on from part 1 a fraction early. This is a welcome Bill that will do an enormous amount of good, and it has allowed me to tick off a large number of the recommendations that I made in my report, which he referenced earlier. The concern about the Digital Markets Unit’s powers is not that they are not good enough; it is that they might over time add more and more of a regulatory burden as ex ante powers build up over the years. Does he have thoughts on how he can ensure that, after those ex ante powers have been in place for a couple of years as regulations, the CMA can analyse whether they could perhaps be replaced by pro-market reforms?
Kevin Hollinrake
I am grateful to my hon. Friend for his engagement on this. We have discussed this at length many times, both in my role as a Minister and in my previous role as a Back Bencher, when we looked at the best form of regulation. I think we both agree that ex post regulation is preferable to ex ante regulation, as is a pro-competitive environment, as I said earlier. We should step in only when there is market failure. Of course we should look at the powers and ensure that they are being used wisely, and I have confidence that the CMA will do that. There are a number of checks and balances on the CMA and the DMU, not least through the competition appeal tribunal and the courts, which ensure that decisions are valid and worthwhile, but we should also have a good debate on how we scrutinise the DMU and CMA generally. Obviously they report to Parliament every year, and the Select Committee work is also important. I think that my hon. Friend and I would agree that the best way to regulate markets is through competitive environments, and that is what we should always favour in this discussion.
Andy Carter (Warrington South) (Con)
I echo the comments of my colleagues who have welcomed the Bill. The Minister will know that the DMU will be regulating a highly specialised area and that detailed knowledge of the sector will be critically important. Can he assure me that the DMU will have sufficient powers to recruit people who really understand the sector? Will it be able to pay accordingly in order to recruit those people, and not be bound by civil service contracts and pay bands that might limit its ability to recruit very experienced people?
Kevin Hollinrake
My hon. Friend makes an important point. The tech industry is clearly very powerful in terms of its resources and its ability to recruit the best people. My experience of the CMA is that there are good people within it, and I expect that to be reflected in the DMU as well. People who have been connected to the CMA, including former chairs, have spoken highly of its abilities, but my hon. Friend makes the important point that we need to have the best people so that we can hold those powerful entities to account.
The legislation will be delivered through making market inquiries more efficient, focused and proportionate, updating the merger regime and amending existing legislation concerning anti-competitive conduct and abuse of a dominant position. The measures in parts 3 and 4 make important updates and improvements to consumer law. The UK is currently the only G7 country without civil penalties for common breaches of consumer protection such as unfair trading. Part 3 creates a new model that will allow the CMA to act faster, tackle more cases and protect consumers’ interests while creating a level playing field for businesses.
Part 4 tackles the subscription traps that cost consumers £1.6 billion a year. We expect there to be a £400 million saving for consumers as a result of the measures we have proposed. I am sure that many Members know constituents—
Kevin Hollinrake
I think I am going to hear about one in a moment. Many Members will know constituents who have received shock charges for a subscription or faced difficulties when trying to cancel one. The Bill contains new rights to subscription reminders and easier cancellations, so that those who want out can get out.
Craig Whittaker
The Minister is not going to hear about a constituent, but I would like to point out that charities’ lotteries, which are great fundraisers for great causes that put so much back into all our communities, are already heavily regulated by the Gambling Commission. Will my hon. Friend look at schedule 19 to see whether subscription-based charity lotteries can be excluded?
Kevin Hollinrake
That is an interesting point and I would be happy to look at the matter in detail. It is not something that I have considered thus far but perhaps we can have a discussion about it at a later stage. We will certainly pick it up if we can and make sure that it does not cut us across anything that my hon. Friend is concerned about.
This legislation includes other measures to help consumers to keep more of their hard-earned cash, including a power to add to the list of banned practices. We intend to use this power first to tackle the wild west of fake reviews, which can dupe customers into buying shoddy goods and services. There are also new protections for consumer prepayments to consumer saving schemes, so that devastating cases such as the collapse of the Farepak Christmas savings club, which left vulnerable consumers out of pocket, can never be repeated. Together, these measures deliver on our manifesto commitment to tackle consumer rip-offs and bad business practices, demonstrating that this is a Government who back consumers.
Alun Cairns (Vale of Glamorgan) (Con)
I recognise that the Bill would introduce enhanced competition and protect significant areas of consumer policy, but it would also extend the powers of the CMA significantly. May I draw my hon. Friend’s attention to the regulatory reform group that my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami) and other hon. and right hon. Members have sat on, which is seeking a cultural change among regulators to ensure that they have an interest in the wider industry as well as in consumers? For business and industry to be sustainable, the CMA must be able to respond in a proactive, business-friendly way.
Kevin Hollinrake
My right hon. Friend makes a strong point, and it is one reason why we are reviewing the economic regulators. The work has been ongoing for 18 months, and we are due to produce our thoughts this spring. It is important that regulators focus on consumer outcomes and, as others have said, a more competitive environment produces the best outcomes, so he is right to draw attention to that issue.
John Redwood (Wokingham) (Con)
Briefly, what will be the direct impact of the Bill on the cost to the state and to business?
Kevin Hollinrake
The annual cost to business is £178 million, which we must consider carefully when we bring forward new regulatory burdens, but most people will think that the measures are needed because there is a huge consumer benefit of roughly £1 billion a year over 10 years, so it is important that we strike that balance. I am not aware that the cost to the state has been calculated, but my right hon. Friend and I are probably most concerned about the cost to business.
John Penrose
I thank the Minister for his generosity in giving way again.
The Minister’s response to the question about regulatory burden mentioned the welcome, necessary and important review of economic regulators. However, he will understand that enormous regulatory burden is created by other regulators. There are only eight economic regulators, but there are dozens of other regulators, many of which create vastly more regulatory burden than the economic regulators, although the economic regulators are not exempt. What plans does he have to address those regulatory burdens, which are much broader and cover much more of the economy?
Kevin Hollinrake
My hon. Friend makes a very good point, and it is why only a few days ago we published a framework for better regulation to look at these things in the round and to make sure we have regulators that serve the public, rather than the interests of the regulator. We do not want to see regulatory creep for any purpose other than consumer benefit, and he and I will continue to have significant dialogue on those issues.
Some Members will argue that we should legislate more like the EU’s Digital Markets Act, by using this Bill to create sweeping, one-size-fits-all measures. However, our Brexit freedoms mean we can draft legislation that drives innovation without placing blanket obligations on firms or creating unnecessary regulatory burdens. Some will respond to the Bill by saying that we should go harder against big tech, but I remind them that the Bill’s primary purpose is to reduce economic harms, to boost competition, to create a fair and level playing field, and to give consumers greater choice and better prices.
We need to act, but we must act proportionally because tech firms make a valuable contribution to the economy and our lives. Big does not equal bad. A war on tech will not create growth. It has already been argued in this debate that the CMA has enough power, and my response is that technology is changing rapidly and our watchdogs need to be equipped to fully support businesses and consumers in this competitive world.
I look forward to engaging with colleagues as the Bill makes its way through the House, and I hope Members will give it their backing so that the Government can continue our work of protecting consumers, increasing competition in all markets and growing the UK economy.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is a pleasure to speak on the Second Reading of this important Bill on behalf of His Majesty’s Opposition. The world has changed enormously, as has technology. I thank my hon. Friend the Member for Bristol North West (Darren Jones), the hon. Member for Weston-super-Mare (John Penrose) and other colleagues for their important and influential work in the development of this Bill, which Labour welcomes, having led the way in calling for large tech companies to be properly regulated to ensure competition in digital markets. We have long called for measures to protect consumers, enhance innovation and promote competition in digital markets, to unlock growth and level the playing field for innovative smaller businesses.
In the midst of a cost of living crisis, the Bill could not be more important. As the Minister alluded to, fairer markets will save billions of pounds for consumers. This important Bill updates the UK’s competition and consumer rules, in line with a changing economy and changing consumer behaviours, through three main areas of reform.
First, it creates a new pro-competition regime for digital markets by putting the Digital Markets Unit on a statutory footing and establishing a process for designating the “strategic market status” of firms that meet specific criteria in relation to certain specific digital activities. These firms will be subject to regulated behaviour regarding such digital activities, in the form of conduct requirements to help ensure fair competition.
Secondly, the Competition and Markets Authority will have new powers on market investigations, enforcement of existing competition rules and enhanced mergers and anti-trust activity. Thirdly, there are updates to consumer law, reforming consumer policy to increase consumer protection.
As long ago as 1950, the Labour manifesto written by Michael Young promised:
“An independent Consumer Advice Centre will be set up to test and report on the various consumer goods on the market. Good manufacturers will be protected and unscrupulous advertising exposed.”
Since then, Labour has certainly been the champion of consumers. Consumer rights are a proud part of the Labour and Co-operative tradition and values.
The Government needlessly delayed this Bill as a result of infighting and the changing of Ministers and Secretaries of State. Since the Bill was announced a year ago we have had three Prime Ministers, four Business Secretaries and four small business Ministers. I congratulate the Under-Secretary of State for Science, Innovation and Technology, the hon. Member for Sutton and Cheam (Paul Scully), who has done a full circle. He was the first Minister I shadowed in my role, and he will be winding up this debate.
It has been a year since this Bill was promised and five years since the Government established their digital competition expert panel. With these delays, we have fallen behind our European neighbours in this vital policy area, so this is an important Bill and we will support its Second Reading.
I thank the Under-Secretary of State for Business and Trade, the hon. Member for Thirsk and Malton (Kevin Hollinrake), and his officials for their meetings with me and my hon. Friend the Member for Pontypridd (Alex Davies-Jones). I hope this is the spirit in which the Bill will be considered in Committee and in which we constructively debate the gaps we believe there to be in the Bill, which I will highlight today. I also thank those who have been involved in the development of this important policy and legislation, from the CMA, Which?, UKHospitality, the Chartered Trading Standards Institute, Citizens Advice, techUK and smaller enterprises.
In digital markets, a small number of large technology companies have an ever-increasing dominance. The subsequent lack of competition and regulation has acted as a barrier to entry and expansion in digital markets, preventing new entrants from bringing innovation and choice to the market. The seriousness of this for our economy and consumers has become apparent in the billions of pounds in penalties levied for anti-trust violations.
Legislators around the world are catching up with the challenges we face in relation to this abuse of dominance in digital markets. Indeed, the OECD’s global forum on competition highlighted this five years ago, outlining how many digital markets
“exhibit certain characteristics, such as low variable costs, high fixed costs and strong network effects, that result in high market shares for a small number of firms… Firms in these concentrated markets may possess market power, the ability to unilaterally and profitably raise prices or reduce quality beyond the level that would prevail under competition.”
In the UK, the Furman report concluded in 2019 that competition in digital markets needed a “new approach,” and in December 2020 the CMA convened a taskforce that recommended the creation of the Digital Markets Unit with a new regime for regulating digital firms with strategic market status.
The Office for National Statistics reports that, between 2008 and 2020, the percentage of adults reporting having shopped online in the previous 12 months increased from 53% to 87%. This ongoing trend has increased consumer exposure to the harms associated with the digital economy, including the use of consumer data, harmful online choice architecture and misleading information.
Those are reasons why the Bill needs to deliver on being a pro-competition, pro-consumer and pro-growth Bill. We welcome steps to address consumer harm resulting from monopolisation of our increasingly digital economy, while making sure that innovation is not stifled and that we are realising the benefits of new technology for social and economic progress. The interests and rights of consumers, and the enforcement of those rights through effective competition in this new, complex and evolving digital marketplace, need to be at the core of this legislation, which is vital for all of our constituents.
The challenge now is to get the legislation right. It is important that the new powers given to the CMA to ensure competition in digital markets are not watered down as the Bill progresses. Powers are needed to crack down on unfair practices. That means there must be clarity on how the new powers will be used, along with the right scrutiny, transparency and accountability, both of the CMA and of the Government to Parliament. In addition, there must be clarity on thresholds and the process of appeals. I am sure we will discuss the checks and balances in detail in Committee, not least because 35 new Henry VIII powers are in the Bill, as listed in the delegated powers memorandum. The November 2021 House of Lords Delegated Powers and Regulatory Reform Committee report noted:
“Henry VIII powers are controversial and for good reason. Every such power; and its scope, must always be fully justified.”
Let me say a few further words about what we welcome in this Bill. We support the approach taken to the legislation, which seeks to be targeted to specific anti-competitive digital activities and is arguably more flexible than the reforms brought about in the EU. If that allows a more proportionate and targeted set of interventions, that is welcome. Legislators across the world are all learning, and we all want to see this be an effective regulatory framework that helps innovation, rather than hinders it, and protects consumers.
An example of how this is beginning to work is how the CMA has worked with Google on its digital Sandbox. An issue relating to third-party cookies emerged during the CMA’s digital advertising market study and a Competition Act 1998 case was then opened. Google’s proposed changes could have had privacy benefits, but they could also have given Google an anti-competitive advantage, strengthening even further its position in digital advertising markets. The CMA reached legally binding commitments with Google to address these concerns. It is important to say that both sides continue to work together and with the Information Commissioner’s Office. This is about working in partnership with business, and in the public interest, and this Bill represents a pragmatic step towards achieving that. We also welcome the inclusion of proposals such as monetary penalties for failures to comply and making undertakings directly enforceable, which were raised at the consultation. We welcome the strengthening of the alternative dispute resolution provisions, although we believe they could be strengthened further.
However, there are notable gaps that we are concerned about—areas where we are surprised and concerned the Bill does not go further. Such areas include subscription traps, tackling fake reviews and other consumer harms. First, on subscription traps, it is always to be welcomed when the Government decide to adopt a Labour party policy, which seems to be happening increasingly often. In April, we announced Labour’s plans to crack down on rip-off subscription traps, which trap people into subscriptions they no longer want. We want to legislate to ensure that customers must opt in to, rather than opt out of, subscriptions that automatically renew. That will end automatic renewal as the default option, ensuring that consumers are offered an alternative. Instead, businesses would have to offer customers a default option without automatic renewal, with the option for customers to seek automatic renewal if they prefer. At present, consumers only need to be informed about their continued subscription, not given a genuine choice. That means they can end up trapped into contracts they no longer want or use. Citizens Advice estimates that £306 million per year is spent in the UK on unwanted subscriptions.
This Bill goes part of the way to addressing that by introducing new requirements to remind customers at the end of a trial and the beginning of an auto-renewed subscription charge. But it does not go far enough in tackling these traps and adopting Labour’s full proposals, which stakeholders also support. We will be seeking to strengthen the legislation in this area to make subscription auto-renewals opt-in, rather than opt-out.
Secondly, the Government, with much fanfare, announced that this Bill would introduce provisions outlawing fake reviews. News headlines last month trumpeted the Government’s briefing, saying:
“Buying, selling or hosting fake reviews will become illegal as part of changes planned in new laws.”
Fake reviews cause huge damage, both by encouraging consumers to buy unsafe or poor-quality products, and by ruining the reputation of hospitality venues in the UK. Such reviews are utterly unfair for honest businesses, which have no means of redress, but banning fake reviews is not mentioned in this legislation once. What has been lauded as a huge step in banning fake reviews appears to be a clause allowing the Secretary of State to add to the list of unfair trading practices in schedule 18. This is quite vague and so it could be very weak. I would therefore welcome clarification from the Minister on why this has been left out, and whether he is able to expand on what banning fake reviews will look like in practice?
On broader consumer harms, the Bill represents an opportunity to take action on a number of issues affecting consumers in the digital economy. That includes taking action against drip-pricing and misleading green claims, and requiring online marketplaces and social media platforms to make buyers aware of the status of a seller, none of which are dealt with in this Bill. Do we need stronger statutory consumer advocates? I ask the Minister: why does the legislation stop where it does? Should it not go further in addressing further consumer harms in the digital economy?
Finally, on delay, it has been a year since this legislation was promised in Parliament. The Government’s own impact assessment acknowledges:
“The Bill’s impacts are expected to begin in 2025 once the package of Bill measures has been implemented”.
That is the earliest it could be, but action is needed now. We are prepared to work with the Government not only to ensure effective scrutiny of the Bill, but to get it on to the statute book as soon as possible. That includes ensuring speed on guidance and codes of practice, and sufficiency of resources. There should be no more delays.
This legislation is welcomed by the Opposition but it is well overdue. It is a welcome step in creating a new competition and digital markets regime that will enable the competition authorities to work closely and fairly with business to ensure fair competition, and promote growth and innovation. Labour welcomes competition, consumer choice and protection as signs of a healthy, functioning market economy. We are committed to making the UK the best place in the world to start and grow a business. We believe there is a pro-business, pro-worker, pro-society agenda to be built for Britain, and that consumer and competition law play an essential part in that. I look forward to the Minister’s response.
John Redwood (Wokingham) (Con)
Competition is by far and away the best regulator, and I pay tribute to all those in the House, including my hon. Friend the Member for Weston-super-Mare (John Penrose), who have pointed that out; I am delighted there is cross-party agreement. The point he made needs stressing: we are dealing with a limited number of regulators here today, but there are many other regulators and much of their task could be better done by following competition as the prime means of enforcing choice. I should say that I have declared my business interests in the register and none of my comments relate to financial services as a result.
The regulators would be well advised to heed that advice and, instead of intervening in detail and trying to make very difficult distinctions and definitions that affect a complex marketplace, with the interplay of so many different consumers and suppliers, just stress that if there is effective choice and challenge in the market, normally there can be no harm.
Labour has said that it could be that an online supplier of goods and services was not offering a good deal, but I am less worried about that if there are shops in my local high street, because I do not have to use the offer by the online provider. The online provider themselves will anyway be subject to the challenge of other online providers. One advantage that the online retailer has is that the cost of entry is so much less than that required by those who wish to set up a formal shop with a property. If an online retailer, however large they might become, starts to offer very poor deals or offers, there will be plenty of challenge to that emerging in the marketplace.
In a fast-changing world where the market is extremely good at challenging, developing and changing offers overnight, we need to be careful about becoming too prescriptive. We may come up with a perfect solution to perceived problems of some suppliers at the moment only to find that, tomorrow, there are very different problems from different suppliers and that much of it can be taken care of by that pursuit of competition.
My main concern about all of this for our country is that competition only works, in the benign way that we know it can, if we have sufficient capacity. There is a danger, encouraged by the Opposition and pursued by the Government, that today we are so keen to regulate, to intervene and to tax anybody who makes a good profit; to provide a subsidy to anybody who has a failing business; and to decide that the Government know best about what consumers ought to buy and ought to want, that we end up with too little capacity in a number of crucial areas. That means that, instead of helping the consumer, we hinder them. Instead of having moderate prices with few rises, we have even higher price rises because there is insufficient capacity to meet the market demand. Instead of providing that perfect background for entrepreneurial businesses, which Labour and Conservatives are united in wanting, we send a hostile message to businesses. Those businesses then find other places with greater freedoms and lower taxes as the ideal place in which to experiment, to set up and to seek to export from, rather than from the United Kingdom.
Bim Afolami (Hitchin and Harpenden) (Con)
I thank my right hon. Friend for giving way. In relation to his very good point about capacity, what is his view about the need to ensure that we remain open for business internationally and remain an attractive place? Moreover, what is his view about the role of the regulators in that context, particularly the CMA, because of course capacity can come from other countries into our own market?
John Redwood
Indeed. I do not wish to go into the details of a recent case, because I have not studied all the documents, which would be necessary to do justice to both sides of the argument. Thinking back to when I was competition Minister—a good while ago now—when I was acting for the then Secretary of State, there was a difficult issue that arose over media challenge to the then existing limited number of media players where two of the new services wanted to merge together. I recommended, and we decided, that the two should be allowed to merge because they made a more effective competitor to what was already there, rather than taking the narrow pro-competition view that we needed to have two new challengers. The danger was that they would both fight each other to the death and leave the main media institutions—ITV and the BBC—unchallenged by alternative services.
The regulator has to understand that competition is not always furthered by blocking something; sometimes it can actually be furthered by encouraging the new. The main issue in competition law is often the definition of what is the market. I have already mentioned retail. If the market is online retail, we might want to stop a successful online retailer growing by acquisition, but if the market is retail, we might want a strong online competitor in order to challenge the previously dominant shop retailers. However, it is now coming to the point where it may be the other way around—where we need to be worried about the adequacy of the conventional retailer response.
Let me illustrate the importance of the central issue of capacity to the debate. One thing that has been extremely scarce—this has been blamed by many for the worst part of the inflation we have been experiencing—is energy. If the United Kingdom persists in saying that we do not want to get our own gas out of the North sea, we will not automatically transfer to green electricity; we will import gas from somewhere else. By doing so, not only will we damage our economy, as we forgo the jobs in the North sea and the cheaper gas, because the imported gas will be dearer; it will also be much worse for the environment, because by delaying or blocking the gas that we could get out, we will automatically import more liquefied natural gas. LNG generates at least twice as much CO2 as burning our own gas down a pipe because of all the energy entailed in compressing a gas, liquefying it, transporting it and then converting it back to the gas that we need to use. It is therefore a doubly foolish policy.
We need to expand our capacity in energy where it is available and we need to understand that there are huge economic gains to producing our own. We also need to be worried about national resilience. If we wish to say that we can defend our country and its allies, it is terribly important that we produce enough for ourselves. Having energy self-sufficiency is always critical to having a country with resilience and strong defences.
The electrical revolution seems to be popular in most parts of the House of Commons, with people urging the Government to achieve a faster electrical revolution, switching more and more people from being predominantly users of fossil fuel—most of us predominantly use fossil fuel with a petrol or diesel car and a gas boiler—to using electrical means for our main energy uses. If we are to pursue that electrical revolution, there needs to be a massive expansion in grid capacity and in cable capacity into everybody’s homes, offices and shops. It is simply not possible at the moment to generate the competition that we want for electricity against fossil fuels, and within electricity for renewables against more traditional ways of producing electricity, because the new renewable ways are so grid intensive and need so much more grid and cable capacity—we have to time shift them because they are often not available—that we are not going to get very far.
Already, I have helped with a major investment in my constituency, which was very welcome. One possible stumbling block was that the electricity companies could not offer enough power for the particular business development. There had to be an agreement over how much power the development could have available, because there was not limitless power for it to buy. The issue was to do with grid capacity. We will find that that becomes more and more common if we do not get on with dealing with this particular issue.
A very topical issue today is capacity in motor vehicles. If we are to have a full range of choice and enough domestic production, it is not a good idea to ban the sale and therefore the manufacture of petrol and diesel cars as early as 2030, when no other major country in the world is doing so and when there will still be quite a lot of buyers who want petrol and diesel cars. I urge the Government to understand what competition choice means. It means that people will buy electric cars when they want to buy them. They will buy electric cars when they are cheaper and better, and when they believe that the range is right and that the necessary back-up facilities are in place. I have no doubt that electric vehicle sales will grow, but it would be quite wrong to have an artificial injection of policy to ban older cars and prevent capacity and choice.
If the UK does not have battery production capacity, all we will do by banning petrol and diesel cars is destroy the successful industry that we have, which makes extremely good petrol and diesel cars, without having the replacement industry in place. It is not a simple matter of switching the production line from a diesel car one day to an electric car the next; it is a totally different product, built in a totally different way. An electric car needs a battery, which may be 40% of its value, and currently we cannot produce those batteries in any numbers to replace the capacity that we wish to cancel. I urge the Government to think again about consumer choice, competition and investment flows, because there is no way that people will want to invest serious money in the UK motor industry if its regulatory environment is more hostile than those elsewhere.
I was pleased to see my right hon. Friend the Prime Minister take a great personal interest in food production. I believe he held a very successful seminar yesterday and asked the Secretary of State for Environment, Food and Rural Affairs to go away and work up a series of measures. I do not doubt the enthusiasm of my right hon. Friend the Secretary of State, which I fully share and have often promoted, for us to grow much more of our own food in this country and to offer that much more choice to people in our supermarkets. However, when I look at the package of measures the Department has brought forward, there is hardly anything in it that would carry that ambition through.
The Department still intends to spend most of its subsidy money, most of its exhortation and a great deal of its regulation on encouraging farmers not to produce food, to wild their land and to achieve great things on managing the landscape for us all. That is all very nice, but it is possible to have perfectly attractive fields growing food, and that is clearly what we need rather more of.
We need to back the new robotics, artificial intelligence and electromechanical technologies that could transform the production of fruit and vegetables and other market garden products, as they used to be called, where we have allowed our market share to fall dramatically in the last 30 or 40 years. We are now reliant on imports, which limits choice, drives up prices and puts our national food resilience more in doubt because, were there to be problems with the supply from our normal suppliers abroad, I am sure we would be towards the back of the queue when it came to getting to what we needed.
I am conscious that others wish to speak in the debate, so I will not go into every sector, but the Government need to review sector by sector what they are doing that could help to increase capacity. Can they not reposition their subsidies, grants and direct investments, which they are making around the place on a pretty colossal scale, in a way that promotes that capacity and thus eases the position for competition? There is a particularly worrying trend at the moment—one that is bad for public spending and bad for business—that we make so many confused interventions that we need another intervention to deal with the previous intervention.
I will finish on the issue of high energy usage industries—steel, ceramics and other similar industries—which are gravely at risk. We have lost colossal capacity and market share under Governments of all parties since I have been around watching such things. The danger is that that loss will accelerate from here because we decide to impose the highest carbon taxes of any advanced-world country, as far as I can see—another major problem for the cost base of industries that are struggling to compete—and we then draw back in horror when we see that there could be closures and job losses, so the Government put some subsidies back in and we have a subsidy trying to countervail the tax. However, the subsidy is usually not as much as all the taxes combined, because when we add the 31% corporation tax—should there be any profits, and unfortunately there often are not—on top of the windfall taxes on the energy companies and on top of the carbon taxes on the steel and ceramics businesses, the tax burden is colossal and would be punitive were businesses to succeed and start making money. The demand for subsidy then becomes greater.
To have a competitive market would be extremely welcome. We have a market that is not nearly competitive enough. I ask the Government to look at what they are doing, because I think they are in danger of doing counterproductive and contradictory things: taxing too much, subsidising not quite enough and then inventing rules that stop people doing business.
Richard Thomson (Gordon) (SNP)
The SNP welcomes very much the aims and objectives of the Bill, which broadly speaking fit well with the enhanced protections we have been calling for in the online space for some years.
For markets to be effective, they need a number of things, chief among them good market information for those participating, low barriers to entry, trust, the rule of law and a means of enforcing contracts where they are made. As the Minister alluded to, when the online marketplace emerged, there was always a risk—especially as it deals with entities that span several jurisdictions—that, for all its opportunities, it would become if not exactly a dystopian wild west, then certainly a less well-regulated space than physical trading spaces, which are more visible and more easily influenced by existing regulations. Given all the leaps and bounds that there have been in e-commerce, there is a need for the regulation of that marketplace to catch up and to rebalance it in the interest of consumers.
The Minister was correct to say that big does not always equal bad, but it is past time that we recognised that large digital entities with a significant public affairs presence can go around and say the right things, and even if their practices are not at variance with that, they can appear to be beyond the reach of and unbound by the obligations placed on other smaller market actors outside the digital space. That has long been an issue of concern, and anything that helps to rebalance that situation is a good thing.
We believe that conferring powers and duties on the Competition and Markets Authority to regulate that competition responsibly; updating powers to investigate and enforce both competition law and consumer protection law, where needed, and to resolve disputes; and enhancing protections in respect of unfair practices such as subscription traps and prepayment savings schemes, are good things in and of themselves and we welcome them.
To set out the scope of why those powers are necessary, recent figures from Action Fraud estimate that elderly people lose £1 million a day in the UK through online scams. The consumer organisation Which? estimates that one third of people in the UK experience at least one problem with a product or service each year, at an estimated cost of £54 billion, which is a tremendous drag on the economy. It prevents that money from being spent more productively in the economy, it reduces confidence and in many ways it reduces the competition that we would all like to see.
It is important to ensure that when people engage in the online market space they can do so with confidence, and we must recognise the role that the state has to play in that. No amount of competition can ever replicate what the state can do to act as the referee where necessary in this space, using a light touch. We very much welcome what the Government are setting out, particularly in defining organisations that have strategic market status and the additional responsibilities that will accompany that status.
The Bill goes a considerable distance to achieving those things but, given the scale of scams and unfair practices that, sadly, we witness on a daily basis, we think more needs to be done and that the Bill needs to go further in some respects. Like those on the Labour Front Bench, we believe that there are other areas where the Bill needs to go further.
At the risk of being criticised for making an unfavourable comparison with the Beelzebubs at the European Commission, there are many provisions in this Bill regarding firms with strategic market status that are broadly similar to those in the EU’s Digital Markets Act. The Bill falls short in that it does not explicitly include an equivalent to the EU’s right to redress, which would allow consumers to be paid with damages where they are misled by traders. Although the Bill gives the Secretary of State the power to do that in future through secondary legislation, it leaves a gap now, and there is the risk that that right will, over time, be watered down or removed entirely because there is no commitment to introducing it. If the ministerial team offer me some assurance about that, we can maybe explore it further in Committee, but that matter threatens to leave UK consumers behind.
The dangers there ought to be clear. Just last month, it was revealed that thousands of people from the UK who found themselves stranded in Dover following delays in coach trips faced losing their entitlement to compensation amid what was being billed as the “bonfire” of EU regulations. Rocio Concha, the director of policy and advocacy at Which?, noted that it is clear—or it was at that point, at any rate—
“that the government does not…have a firm enough grip on the extent of legislation which is at risk of simply slipping off the statute books by mistake.”
I welcome the Government’s change in tone last week, but right to redress is nevertheless an important consumer protection, and we certainly do not want to be in a position where our consumers have less leverage in that sense than their counterparts elsewhere in Europe.
Another area in which we believe the Bill should be getting its feet wet is greenwashing. It is not just in financial losses or deficient goods and services that consumers can be badly let down; it is also in goods marketed under misleading pretences, particularly when it comes to their environmental credentials. The Bill does not set out standards and practices that should be adhered to when making environmental claims. To give an example, in February, the Corporate Climate Responsibility Monitor found that many companies were involved in making misleading claims about their plans to tackle global warming and climate change. Sustainability is increasingly important for consumers choosing where to spend their money—particularly younger consumers—so it is vital that measures are put in place to ensure that people can have confidence in the claims being made for products, rather than being misled, wittingly or otherwise.
In terms of how the European Union is tackling that, around 230 separate sustainability labels and 100 green energy labels are commonly used across the EU, each with vastly different levels of transparency. Half of them offer weak or non-existent verification and 40% have no supporting evidence at all. The situation in the UK will be similar. Ensuring that labels and claims can be treated as credible and trustworthy would allow consumers to make better-informed purchasing decisions and boost the competitiveness of businesses that want to play a responsible role in the marketplace in terms of driving up standards to meet consumer demand. I urge Ministers to look at what the Commission is doing in that respect because this is a sufficient deficiency and a missed opportunity to make the Bill better than it already is.
The next point that I wish to endorse is one that was made by the right hon. Member for Calder Valley (Craig Whittaker) about charity lotteries. They do an awful lot of good, they give people an awful lot of enjoyment and they raise an awful lot of money for good causes. They are already in a very highly regulated marketplace, but we are concerned that the legislation could, in its present form, have a detrimental impact on their ability to raise funding and to give money to good causes. That concern applies in particular to clauses 148 to 253, which would—at least in my reading of them—introduce a significant number of new requirements on subscription products and pre-contract information. Schedule 19 already rightly contains a number of operators in the economy that are deemed sufficiently well regulated to be exempt from the requirements that the Bill would place upon them. I suggest that charity lotteries also fall into that category, and I urge Ministers to give that due consideration and make the necessary changes to schedule 19 to make it crystal clear that charity lotteries are exempt.
Another missed opportunity is on drip pricing, whereby companies add additional fees and costs that were not clearly stated at the beginning of a transaction. That tactic is commonly used by some airlines: the price given at the start bears little resemblance to the price that appears at the end, once the consumer has paid for everything that they assumed would come automatically with stepping on an airliner. The US is planning a crackdown on that through the Junk Fee Prevention Act. It would be a missed opportunity if the UK Government did not follow suit in the legislation before us.
I welcome the commitment to tackling fake reviews, which can cause a great deal of distress and harm. Many can be absolutely malicious—not on a personal level but in trying to discredit competitors and therefore reduce competition. That practice certainly requires a different approach in legislation, but it is unclear at this stage how the Bill would seek to deter it. If any ban is to work, it will have to be enforceable, it will need to have teeth and there will need to be appropriate redress.
John Redwood
I think we are all united in wanting to stop fake and damaging reviews, which are so unfair, but has the hon. Gentleman thought about how we would actually do it? Defining them, and deciding who judges that they are such, is not easy.
Richard Thomson
The right hon. Member is absolutely right that it is not easy, but that does not mean it is something that we should avoid trying to tackle, or that we should not try to come up with a way of improving the competitive environment. I am certainly more than happy to engage on an open and constructive basis with anyone about how we might do so.
Kevin Hollinrake
Will the hon. Gentleman therefore support our approach, which is to consult in parallel with the passage of the Bill through both Houses about things like drip pricing and fake reviews, so that we can have that open dialogue and make sure that we get the answers right, including to the questions posed by my right hon. Friend the Member for Wokingham (John Redwood)?
Richard Thomson
I thank the Minister for his intervention. Indeed, I would be quite happy to see what comes back from that consultation, because there are areas of real concern. If we can find consensus on how those matters can best be tackled—we might not be able to please everybody, but we can address them as best we can—that would be a welcome step forward.
In closing, the Bill is important for growth and competition, but also for consumer protection. The exchange that we collectively had just now on those matters was encouraging, and I would certainly like that spirit to continue in Committee. I do not think I have ever managed to successfully get something passed in Committee; I look forward to that changing.
Richard Thomson
I hear the hon. Member for Pontypridd say “Good luck”, but we will see how it goes. The Bill certainly does much that it needs to, but there are quite a few things that it misses; let us see what we can make it hit over the period ahead. As the Bill progresses, I look forward to working with others where it is possible to do so, in order to do precisely that.
Damian Collins (Folkestone and Hythe) (Con)
I rise, as other Members have done, in support of the Bill. It is a very important piece of legislation that has been long discussed and much looked forward to. It is now safely on the Floor of the House and we wish it a safe passage as it goes through Parliament. The debate we are having is not dissimilar to debates being held in Parliaments around the world. In the United States Congress, there are very lively debates about what it calls anti-trust legislation in the tech sector. The European Union, as has been discussed, has already created its Digital Markets Act. In Australia, there has been a lot of concern about competition within digital markets and a lot of work to improve it.
I agree with other Members who have spoken so far that competition is often the best guarantee of higher standards for the consumer, lower prices and a more vibrant market economy. The reason we are concerned with regards to digital markets is that, in many of those strategic markets, there is evidence of a lack of competition—a lack of choice—that is restricting routes to business and will increase prices for customers. In his opening speech, the Minister rightly pointed to the market impact studies that the Competition and Markets Authority has done, looking at app stores and the mobile advertising market, which show a consumer detriment of over £6 billion. Those are just two market studies that the CMA has done and it is not surprising that that should be the case.
The app store market is important because most people, including most people in this Chamber, have a smart device that runs on one of two operating systems. There are two app stores, and most of what happens on those devices—not exclusively, but most of it—is not interoperable. There have already been investigations showing inconsistent pricing in the commission taken by those operating systems from app developers who sell through their devices. In a market such as that, it is not surprising that there might be constraints or evidence of overcharging, because there is simply nowhere else to go—there is no choice. When the ad tech market is dominated by two companies, Google and Meta, it is not surprising that there may be higher pricing in that market; there is certainly a great lack of transparency. Even some of the world’s biggest advertisers, such as Procter & Gamble, have raised concerns about this issue, but none of the advertisers themselves has enough market power within that market to challenge those incumbents.
Bob Stewart (Beckenham) (Con)
Does my hon. Friend agree that we should fully support what my right hon. Friend the Member for Wokingham (John Redwood) has suggested as a model for competition? Competition itself does require to be amended.
Damian Collins
I thank my right hon. Friend for his question, and my right hon. Friend the Member for Wokingham (John Redwood) made an excellent opening speech from the Back Benches. My concern is that in digital markets we have an imperfect market. We are at a point in time where the strategic nature of digital markets has developed to such an extent that people cannot not use these systems to reach their customers. For a business looking to sell online, yes, the world is its customer base, but it is using a relatively small number of tools to try to reach those customers, and those tools are controlled by a relatively small number of people. App-based businesses are selling through one of two operating systems. Someone buying ads is doing so largely from one of two companies that dominate the global market. If people are looking for cloud storage, they are probably buying it from Amazon or Google.
Booksellers are a good example. Many book publishers will say that, when they come to their contract renewal with a company such as Amazon, they can be offered very unfavourable terms, but such is the volume of their business that they put through that one retailer that, while in theory they could go elsewhere, in practice they cannot. No shareholder would understand why a business would just walk away from that particular market. In such situations, it is right that the regulator should have the power to say, “Are companies abusing their strategic market status? Is that leading to higher prices for consumers? Is that leading to unfair competition?”
Companies have been quick already to threaten denial of access to the market to people who challenge their status. The Australians have already created their news media bargaining code for the news industry, where the big Facebook-owned and Google-owned platforms have to pay compensation to the media industry for the distribution of its articles for free across their networks. That is now negotiated—there is a negotiation mechanism to make sure it happens. In response, Facebook threatened to withdraw news from the market. During a series of bushfires in Australia, Facebook cancelled all news distribution on its platforms. Such was the popular reaction, it withdrew and has now done these deals, but they would not have been done without the requirement for final agreement and independent arbitration. A book retailer cannot not do a deal with Amazon.
In terms of big app developers, there was a company called Vine. Many Members may be old enough to remember that app. Vine was a popular short-form video app, largely built on the back of the Facebook operating system and the Facebook Graph API. Facebook decided arbitrarily that Vine was requiring too much Facebook user data, and therefore might be a threat to Facebook itself, so it claimed Vine was in breach of its data policies and just kicked it off the platform. It did that for competitive reasons. In these digital markets, we see companies following an aggressive strategy. Where they see competitors, they look either to acquire them or to deny them access to the market and close them down. This is not unlike the debate that was had more than a century ago, particularly in America around the railways.
There was the big test case that President Theodore Roosevelt had against JP Morgan over his railway monopoly. We can imagine lobbyists for Morgan saying, “We may have a monopoly in the rail market, but the price is quite cheap. People do not spend very long on the trains, and you can always walk or use a horse and cart. It doesn’t really matter that we have this monopoly, because people can choose to travel in other ways.” Of course, Morgan’s railway monopoly gave him massive powers of self-preferencing when it came to moving coal and steel around and denying others access to the market. It gave him massive market power and the monopoly was broken up for that reason.
We should be concerned that, if we allow the major tech platforms to control access to the market and people’s ability to trade, that will lead to a constrained market and higher prices. The tech sector is looking to develop more all-encompassing systems, such as the metaverse for Meta, where people will have a VR experience where they can buy and sell and do everything, and we see smart devices now playing an increasingly central part in almost every service that we access. The amount we are charged to access those services and the ability to access that market are extremely important for having competitive markets in the future. That is why I think these elements are important.
In finishing, I will talk a bit about the news industry. We see how these new marketplaces are changing the distribution of traditional products so much that their business model may completely collapse. The collapse of regional journalism is because of the massive disruption of the localised ad market. It has taken advertising out of those products. It is not just transferred online; it is transferred to completely different methods of distribution.
Now, that is market economics. That is changing consumer behaviour and businesses must adapt to that. If a news publisher is being told, “Your product can be distributed for free through our systems,” but you get more ad money in the long run if you do not. The distributor collects the advertising revenue and the data, and the publisher benefits little. If the product is being used to attract users to the platform, but the platform monetises it and the publisher does not, that is an unfair and unbalanced level of competition that could have significant detriment in other areas. If journalism is hollowed out because it cannot access the market fairly for its products and services, journalism will die, and democracy and society will be the loser as a consequence.
We want competition to flourish. We want competition to be the best guarantee of high standards and lower prices, but we must recognise that digital markets involve a series of markets in which companies are not really competing against each other, because they create controlled monopolies or business environments with very limited access to competition. If we allow that to continue unchecked, it will be to the detriment of us all in the long run. That is why I welcome the Bill.
Several hon. Members rose—
Mr Deputy Speaker (Mr Nigel Evans)
Order. I will now announce the result of the ballot earlier today for the Chair of the Select Committee on Culture, Media and Sport. A total of 384 votes were cast, one of which was invalid. There was a single round of counting. With 383 valid votes, the quota to be reached was therefore 192 votes. Dame Caroline Dinenage was elected Chair with 198 votes. She will take up her post immediately, and I congratulate her on her election. The results of the count under the alternative vote system will be made as soon as possible in the Vote Office and published on the internet.
I call the Chair of the Business and Trade Committee.
Darren Jones (Bristol North West) (Lab)
I declare my interest as set out on the Register of Members’ Financial Interests. I am grateful to the Government for having reflected in the Bill so many of the recommendations in my Committee’s report on post-Brexit competition and consumer law policy. Although I am grateful to the Minister and shadow Minister, my hon. Friend the Member for Feltham and Heston (Seema Malhotra), for thanking me for my work, I should humbly put it on record that there would be no report were it not for my colleagues on the Committee, my Clerks, and the witnesses who gave evidence.
I will not test the patience of the House by listing all the Committee’s achievements in this respect, but I will focus on one area that our report talked about—oversight of the Competition and Markets Authority and other regulators that operate in the digital market space—where provisions are missing from the Bill. The CMA is an independent regulator, but it is directly accountable to Parliament for the performance of its functions and duties. Only yesterday, we welcomed its chair and chief executive officer to the Business and Trade Committee to answer questions on topical cases, its annual plan, the draft strategic steer from the Department and, indeed, this Bill.
In practice, Committees such as mine only really scrutinise regulators, agencies and arm’s-length bodies on their day-to-day performance perhaps on an annual basis at best, or once there has been a failure. We recognised that ourselves in respect of issues at the energy regulator, Ofgem, which we only uncovered once there had been a multibillion-pound failure in the market. We gave ourselves an action in that report, as well as in our post-Brexit competition and consumer law report, to enhance our oversight of the CMA and other regulators to avoid this happening again.
It is not a new problem. As many Members will know, the noble Lord Tyrie, who chaired the Treasury Committee during the banking crisis, has written and spoken extensively about this issue. It is a challenge for most Committees. Gov.uk helpfully lists the number of agencies and public bodies sponsored by each Department, and that of my Committee has 21, including the Competition and Markets Authority, the Land Registry, Companies House, the Insolvency Service, ACAS, the Financial Reporting Council, the Trade Remedies Authority, and the Pubs Code and Groceries Code Adjudicators. That does not even include the Post Office or the British Business Bank.
Bim Afolami
I agree with everything the hon. Member has said so far. Does he agree with the proposal of the Regulatory Reform Group, which I chair, that there should be a specialist Committee to look at the regulators on an ongoing basis, in addition to the work that his and other Select Committees do in this House?
Darren Jones
If I answered shortly with the word “Yes” it would ruin the rest of my speech, so I am going to keep reading through my notes. However, the hon. Member, having asked that question, will understand the direction of travel.
The Minister was pointing at himself, I think noting for the House that he of course has responsibility for all those organisations. He will know, from our Committee perspective and the role that Parliament has in the oversight and scrutiny of the Minister’s performance and that of his Department, that we can have capacity challenges. Other Committees have the same problem: the Culture, Media and Sport Committee covers 42 agencies and public bodies, while the Environment, Food and Rural Affairs Committee covers 33, and so on. The Bill before the House, which I welcome, is a great example of an agency being given new powers, a wider remit, more work to do and the job of taking ever more wide-ranging decisions, but there is nothing in the Bill about enhanced accountability and oversight of the CMA. The challenge there is that we have to get the balance right.
Parliament will want the CMA to be effective in its core duty of promoting and delivering competition. In our evidence session yesterday, there was an interesting tension about whether we deliver effective competition by regulation and intervention, or by deregulation and getting out of the way. I think that illustrated the interesting tension between oversight of the Competition and Markets Authority and its independence. While the regulator must take clear decisions based on its legal duties and the required technical assessments, what will Parliament think if, over time, a number of interventions taken together paint a picture of the UK as not being a good place to start, scale up or exit a business? How will we know in this House if that is the case, and how can regulators be held to account for the impact of their decisions over time?
This friction came up again only today. We took evidence yesterday on the Microsoft and Activision case, which is a major intervention by the Competition and Markets Authority, and I understand the Chancellor has said this afternoon, about the Competition and Markets Authority, that
“I do think it’s important all our regulators understand their wider responsibilities for economic growth.”
If the regulator does not already understand that and if the Chancellor does not have confidence in the regulator, we have a problem. What view should Parliament therefore take in the context of this Bill going through the House?
Clearly, independent regulators should not be interfered with by Parliament in making their day-to-day decisions. Parliament should be crystal clear that it is not our job to take those decisions. Expert regulators should not be told what they should do or think by, with the greatest respect to many colleagues in the House, generalist Members of the House of Commons. However, with increased powers and responsibilities—not least following our exit from the European Union, where there was inbuilt enhanced scrutiny in the European Parliament of these decisions—it is crucial that this Parliament steps up to provide the enhanced accountability required.
In short, the right to exercise independence and the requirement to be accountable are not mutually exclusive. As we have heard, there is a certain cross-party support for this position and an increased demand for reform, but there is not much in the Bill or from the Government that I have heard to facilitate that. There have been suggestions, which I generally support, that either we have enhanced capacity and resources for existing Select Committees to do more work in holding regulators and arm’s length bodies to account for their day-to-day work, or that we set up a new specialist Select Committee that takes on the job of having oversight of regulators across Whitehall. Some people will be concerned by the suggestion of additional Committees, either because of the perceived need for regulators to have to engage, inform and appease parliamentarians on a day-to-day basis and the amount of time that may take, or because of the influence that lobbyists may have on a fixed number of parliamentarians on the Committee tasked with oversight of the regulator.
John Redwood
Is there not a clear distinction? We and the Government should not intervene in individual decisions that under the law are in the regulators’ remit, but Parliament and Ministers should take a timely and regular interest in the overall achievement—the cost, whether they need more resource or less resource, and whether we need to change the legal framework under which they operate—which should be a regular review item.
Darren Jones
I find myself in the unusual situation of being in complete agreement with the right hon. Gentleman, and perhaps that shows the cross-party support for the points I am making about the Bill.
John Penrose
I echo the points about the need for a careful balance between not interfering from this place, while also ensuring accountability. I believe—parliamentary historians will put me right if I am wrong—that about a decade ago there used to be a Regulatory Reform Committee in this place. It was rarely attended and was basically dropped because it failed to command much interest—let me put it that way. May I caution the hon. Gentleman that more committees might not always be the right answer? Perhaps tightening up some of the statutory duties that we apply to economic and non-economic regulators could be a way to ensure that the powers we are handing over, which as he rightly points out can mushroom, are properly applied. That would give Parliament a clear a brief to say “We want you to use these powers in this way,” and Select Committees would have a clear way to gauge whether such powers were being used in the way that Parliament has set.
Darren Jones
I do not claim to be a parliamentary historian, but the Regulatory Reform Committee is very modern history. About two years ago I got a call from the Government Chief Whip, telling me that the Government were collapsing the Regulatory Reform Committee and merging it with mine, but that I should not ask for any additional resource. The Business and Trade Committee now holds, by legacy, responsibility to scrutinise good regulation across the whole of Government. That is the problem. We do not have capacity to do that effectively beyond the remit of our own Department for Business and Trade. The hon. Gentleman is right that if we were to end up with a new Select Committee, being clear about what good outcomes or performance means, how that should be measured, and how regulators should be held to account against those measures, is an important conversation for us to have. If there were to be a new committee, there should be a requirement for it to meet and do that work, and it should be clear about how it was performing those duties.
The concerns that some have expressed about additional Committee oversight, administrative demand on regulators, or the influence of lobbyists, can be anticipated and mitigated. As we have discussed, the House is perfectly capable of drafting Standing Orders that make clear the powers and remits of a Select Committee, and the Committee would not be able to change or interfere with decisions of the Competition and Markets Authority. That clarity would, in turn, reduce the impact of lobbying that some people might be concerned about, and Members would need to declare their interests in the normal way. Even if a Joint Committee of both Houses—I will come to that in a second—were tasked with the oversight of regulators and other agencies across Whitehall, its capacity would be limited to a certain extent because of how many bodies and agencies it would need to look at. The amount of inevitable workload for an individual organisation would be fairly self-contained.
If there were to be a new Committee, I would have the normal expectation of collaboration and co-operation between Committees. Departmental Select Committees would still be able to call and engage with regulators when looking at particular issues, but we would be able to work with it to extend the scope of day-to-day co-operation. I am therefore most worried about whether the House, and by extension the Government, would support establishing such oversight and giving it sufficient resource to do the job properly. We would need additional budgets for additional staff and specialists to do that work; some have suggested that a smaller version of the National Audit Office could be one solution.
It is not only the Competition and Markets Authority that operates as a regulator in the digital market space. That is why a number of regulators have created the digital regulation cooperation forum, which is a welcome intervention and allows for co-ordination between digital regulators. Some have called for that to be on a statutory footing, but my Committee thought that was not necessary. Which Committee of this House is the DRCF directly accountable to? I do not think there is a clear answer. What is the cumulative impact of regulatory interventions in digital markets across digital regulators who are collaborating on their interventions? When I served on the pre-legislative scrutiny Committee for the Online Safety Bill, we recommended that the House should consider a Joint Committee of both Houses. A number of noble Lords in the other place have great interest in this topic, and that could provide a space to consider such issues.
As I have mentioned on a number of occasions, any such enhanced scrutiny to assist Parliament in understanding the consequences of broader remits and decision-making regulators would require the support of Government, because we would need additional capacity to do so. I hope that when he sums up the debate, the Minister might be able to share the Government’s view in that regard.
While I have said that there is insufficient capacity and I have called for additional capacity, of course my Committee and I take our work on behalf of the House seriously. To mark our own performance, in recent years we have taken evidence from 11 of the current 21 and three of the previous additional 14 agencies and public bodies within our remit. I hope that hon. Members concur with my conclusions and that we can persuade the Government to take further action in this space.
Matt Warman (Boston and Skegness) (Con)
I enjoyed the Minister’s opening gambit about how much the internet has changed our lives over many years. He is right, but the House has now been regulating the internet and its effects for many years as well, and this is in some ways a long-overdue Bill. When I was the Minister, my great fear was that Back Benchers would treat it like a Christmas tree and try to add many great ideas of their own. Now that I am on the Back Benches, that is precisely the approach that I intend to take.
I hope that the Minister—and you, Mr Deputy Speaker—will indulge me on a few issues that are somewhat in the weeds of the Bill as well as on two broader points. This is fundamentally a welcome Bill. It is hugely consequential in the effects that it will have on the digital landscape and Britain’s ability to regulate in a new and different, fundamentally pro-competition way in an age that will be affected by markets that operate very differently online from those that we have been used to regulating.
There are a couple of relatively small issues. First, on subscription traps, we have heard a little from other hon. Members about auto-renewal. I think that it should simply not be the default. That is worth looking at. The Minister may take the view that it is for the CMA or the DMU to look at that rather than for the Government to take a view, but that fundamentally could protect consumers.
Secondly, the Minister has made really welcome moves on protecting consumers from online scams. Such scams operate fundamentally differently from the scams of the past, so his new approach is welcome. There is, however, a key interaction in scams and unsafe goods. People who knowingly sell unsafe goods online are surely, by some definition, scammers, yet the Bill does not appear to do quite the whole job. He may be able to offer reassurance on that.
Kevin Hollinrake
My hon. Friend raised a fair point. A fair and level playing field is important for our wider economy and opportunity. Alongside the Bill, we are keen to bring forward the product safety review, which looks at online marketplaces and how they sell and distribute products compared with our normal high-street locations, which have far more stringent product safety requirements. So a body of work is going on alongside this one.
Matt Warman
I welcome that. The Minister will know that that body of work has been going on in parallel with this one for some time. It is welcome, and I hope that its results will be presented relatively quickly.
The new judicial review standards for CMA and DMU decisions have been welcomed by the Coalition for App Fairness, which is a good and credible group. But, simultaneously, this is a big shift and we need to be confident that it will genuinely protect both larger operators in the right way and smaller operators. I think we will hear more about that from hon. Members in this place as well as in the House of Lords.
I have two larger points. First, it is DMU mission creep, which we heard about briefly from my hon. Friend the Member for Weston-super-Mare (John Penrose), that we should fundamentally be most nervous about. It was certainly my concern a little while ago that the Bill gives the regulator the flexibility it needs to deal with the modern world in the right way. That is absolutely the right approach and I am pleased that it has persisted, but it is important that it is appropriately regulated—if I can use that word about a regulator—so that it does not end up potentially going further than any Minister or Government might wish. It is important that the CMA and the DMU operate in the way that this House intends, with all the independence that this House also intends.
My final broader point is that the Bill does some excellent work on interoperability of software. What it does not do, at least on the face of the Bill, is consider that interoperable software is fundamentally linked to interoperable harm. If I can try to turn that into real terms, it is obviously great that operators such as Apple are able to build their own superb and unique ecosystems. The same goes for Android and so on—there are other equivalent versions. What would be useful to try to guard against, probably via the DMU rather than directly via Government, is the current situation whereby, to take one example, the way we use iMessage or video calls is fundamentally limited if we seek to do it on a different platform. We have all seen the different blue and green bubbles on Apple iMessage. That is partly because of the interoperability of hardware and software. I am somewhat conflicted about whether that should be a point of differentiation for Apple, Android, WhatsApp or other operators, or whether we see it as part of a problem within emerging monopolies. I therefore suggest it is exactly the sort of thing that an independent regulator might wish to take a view on.
We heard, furthermore, about the metaverse. What we do not want, surely, is a series of emerging and conflicting metaverses—if that were to be the case—that fundamentally embed monopolistic behaviour, because they will be some of the largest economies of the future. Again, it is potentially hugely beneficial to have a unique and brilliant metaverse under the personal command of Mark Zuckerberg and one under the personal command of Tim Cook, as a competitor. However, a regulator may take a different view and it is important that we think through these emerging opportunities. The Bill is a place where we may start some of that work. It is right that it seeks to be future-proofed against some of those interesting challenges, but at the moment there are a small number of potential opportunities that the Minister may yet seek to seize—shall we put it like that?—rather than allow them to pass by and have to address them later on.
Fundamentally, I welcome the Bill. It already embodies some huge opportunities to make real progress and there are some more that we may be able to take forward. I look forward to supporting its passage through the House.
Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)
As co-chair of the all-party parliamentary group on ticket abuse, I believe the Digital Markets, Competition and Consumers Bill has real potential to overhaul the secondary ticketing market, which is rife with fraud and scamming, affecting consumers every day.
The Minister will be aware of the issues in the ticketing market. They are far from being rectified by current legislation, with tickets being obtained in large quantities from the primary market using specialised software and fraudulent means, and regular consumers missing out before then being fleeced on the secondary market. That is why I was concerned last week to read that the Department for Business and Trade had, after sitting on it for 19 months, decided not to implement the proposals from the CMA’s 2021 report, which would have improved its capacity to enforce legislation and made life much harder for professional touts, and made the CMA’s consumer enforcement powers sufficiently strong enough to tackle illegal bulk-buying and speculative selling. But instead, sadly, the Government effectively gave the bad actors a free pass, ignoring the overwhelming evidence of the uncontrolled black market, with unlawful practices still rife on websites such as Viagogo and StubHub.
There is enough available evidence to indicate that consumers are still being ripped off and harmed as a result, and still will be, sadly, after this Bill becomes law in its current form. For example, three particular Viagogo sellers attempting to speculatively sell thousands of festival tickets that they had not bought; or the Golden Circle, an online rent-a-bot group illegally buying masses of tickets for Eurovision, Beyoncé and others, resulting in less availability at face value for genuine fans, who are then priced out when the touts put these ill-gotten tickets for sale on the secondary platforms—blatant profiteering.
The Government’s recent approach, ignoring the recommendations of the CMA, seems to rely on the conviction of just two touts some three years ago as a deterrent. This conviction—important and groundbreaking though it was—actually relied upon the Companies Act 2006 and the Fraud Act 2006, not the purpose-built Consumer Rights Act 2015 that I was involved in, or the Digital Economy Act 2017. That suggests that the actual enforcement of legislation is insufficient—something that this Bill must surely look to fix. I will say more about that later in my remarks.
Even in a negative outlook whereby we might believe that ticket touting will never be completely eradicated, the fact that artists and fans are equally appalled by how touting goes unchecked must surely put fire behind the need for policymakers to take further action. Otherwise, we should assume that the Government want to control the loopholes, corruption and profiteering that is rife within this marketplace.
The Government are failing consumers, as bad-faith actors and harmful practices continue to harm them with industrial-scale touting. I worry that this is because of a widespread lack of knowledge of the industrial scale of touts and the bad-faith actors engaged in the practice. The fact is that between 1,200 and as many as 1,600 professional touts still operate, committing the exact same offences that those two were convicted for. That is an appalling track record, and not at all evidence that the current laws or law enforcement in this area are working, regardless of what the Minister would have us believe.
Consumers face an unfair market in primary sale, before then being ripped off in the secondary market. Most of us in this House will know the injustice that fans feel. At times, we are those fans who miss out when we try to get tickets. As MPs, we see the often heartbreaking letters from constituents who have been ripped off. This is genuine consumer detriment—exactly what this Bill is supposed to try and fix. It is detriment and harm that this Bill will not help or bring to an end in its current form, as the Government have refused to implement the small but much-needed proposals requested by the CMA in this area.
It is important to point out that these activities also pejoratively affect the live music industry and the value chain, with knock-ons for not only consumers but that vital part of the UK economy. Touting is not limited to live music or theatres; it affects sporting events too. Take football, for example, where touting is already supposed to be illegal. There are, on average, 20 to 30 active touts selling tickets for premier league fixtures with impunity. This is illegal. Let us bear in mind that the inconspicuous nature of touting means that this number is likely to be a large underestimation. According to Home Office figures, yearly arrests of football ticket touts have been decreasing, dropping from 107 arrests in 2011-12 to only 28 in the 2019-20 season.
What real assessment would the Government make of the capacity of enforcement agencies, such as National Trading Standards, Action Fraud or even the police, to clamp down on this malpractice? Two prosecuted touts is hardly the bragging rights that the Minister thinks.
Kevin Hollinrake
I certainly do not ask for any bragging rights. May I thank the hon. Lady for the work she does on the all-party parliamentary group on ticket abuse? On the case she refers to, she is right to say that it is three years since the conviction took place, but the confiscation order, which was for £6.1 million, took place only in December last year. Does she think that sends a strong message to the cohort of people she refers to that there are strict and strong penalties for people who engage in that kind of activity?
Mrs Hodgson
We would all like to think that it would with right-minded people, but I do not think professional touts think like the Minister or any of us in this House, so they probably have not seen it as a deterrent. From what I am hearing from the experts I work with, it is still going on—it is business as usual for the touts. We really need more enforcement in this area. More laws are good, but laws without enforcement just do not work.
The UK is rightly proud of its live event industry, but do the Government really know what the consumer experience often is? I would be interested to learn which experts, campaigners or live music representatives the Government worked with or consulted when they rejected the CMA’s advice so firmly. I have written to the Minister to ask him that, so he can respond in writing if he does not have that information to hand or in his memory from those meetings.
The Minister rejected the advice on this area, saying that resale sites like Viagogo may
“still provide a service of value to some consumers”.
The many tens of thousands of victims of Viagogo may disagree. That misses the point entirely. Resale sites allow touts to commit fraud every single day and permit them to charge inexplicably high prices for such tickets. Illegal activity is happening on those sites right now, as we sit here discussing the issue. Such sites are profiting from that, and the CMA has no power to do anything about it, which is why the Bill needs additional measures. I hope the Department for Science, Innovation and Technology will take a different approach to its forerunner Department, because the Bill is a perfect and timely opportunity to rectify the situation.
If, as the Minister has said, broader changes to consumer law are the priority, I look forward to learning what changes to the proposed legislation his Government will allow. At present, despite the enhanced consumer protection in the Bill, which he spoke of in his opening remarks, it will not be able to tackle all the problems in the online secondary ticketing market, as the enforcement is just not there. Speak to any National Trading Standards officer: they want to go after the touts, but their budget of circa £16 million is for everything they need to do and is not sufficient. I am sure they could spend that on enforcement against illegal ticket touting alone.
The Bill looks to provide the CMA with stronger tools to investigate competition problems and take faster, more effective action, including where companies collude to bump up prices at the expense of UK consumers. Is that not exactly the case in the secondary ticketing market, where sites like Viagogo allow individuals, as well as themselves, to profiteer from a manner of resale that contradicts legislation? As part of the Bill, will the Government take the necessary steps to make sure that laws, including those in the Bill, are upheld and enforced properly?
I look forward to hearing the Minister’s response on this matter. Our cross-party group, the all-party parliamentary group on ticket abuse, would be delighted to work with him and his Department to strengthen the legislation and to protect consumers from the abomination of ticket abuse.
Andy Carter (Warrington South) (Con)
It is a pleasure to be called to speak on Second Reading of this important and much anticipated piece of legislation.
I will start by making one or two comments from a consumer perspective. I particularly welcome the steps to address rip-off scams and rogue traders. For too long, they have been allowed, and in some cases encouraged, by platforms that have not always policed this area in a proactive manner. They have been able to post fake reviews online and to tie people into subscription contracts when they simply did not know that they had signed up. Every Member will have received correspondence from constituents who have been caught in such traps, and I welcome the steps that the Bill takes to address this issue.
I am keen for us to improve consumer rights and, at the same time, the enforcement of those rights, which I hope will drive competition and spur growth. I see the Bill as a welcome addition that will facilitate the right market conditions to encourage innovation, while protecting consumers from modern harms. This morning, I met representatives of Amazon here in Parliament, and I was struck by the fact that although it has been in the UK for only 25 years, over that period it has transformed retailing in the digital space and people’s engagement with media on digital platforms. However, its impact on global dominance has consequences, and it is therefore right that we introduce legislation to respond to that changed market.
As chair of the all-party parliamentary media group, I want to say a little about how the Bill addresses issues in the media publishing industry. I was very struck by the comments of my hon. Friend the Member for Folkestone and Hythe (Damian Collins), but I do not intend to repeat them because he made them incredibly well, and that will allow me to shorten my speech somewhat. The media publishing sector has for some time considered the need for legislation, and I have chaired a number of sessions examining the Digital Markets Unit and the impact that it can have within the sector.
I should make it clear that I welcome much of what is in the Bill. I want it to be passed without delay and, crucially, without any watering down of its provisions. It is needed to ensure that British businesses and consumers do not remain at the mercy of super-companies which, while providing services for consumers, can stifle growth and innovation in the UK economy. The Competition and Markets Authority estimates that Google and Meta together made excess profits of about £4 billion in 2021 alone, and I am sure that the figure for 2022 will be even higher. Big tech platforms extract these excess profits not by being the best businesses on the basis of free-market competition, but by leveraging their market power.
Digital markets are particularly susceptible to tipping, whereby one firm becomes dominant and entrenched with little prospective challenge. I am therefore pleased that the Bill allows the Digital Markets Unit to designate the very largest digital firms with substantial and entrenched market power as having strategic market status. The DMU will be able to enforce conduct requirements tailored to the business models of those strategic market firms, which will ensure that big tech firms act in a way that ensures fair dealing, trust and transparency in their interactions with smaller businesses and individual consumers who rely on their services.
It would be helpful if the Minister could provide further clarity on a couple of specific points. I am keen to explore the interaction between news publishers and organisations such as Google. As my hon. Friend the Member for Folkestone and Hythe pointed out, local newspapers are particularly challenged. The final offer mechanism will allow the DMU to select bids from a strategic market firm and a publisher for the value of news content. That will be a very protracted process. Will the Minister consider introducing interim measures to avoid the risk of local newspapers going bust before some form of resolution is agreed? Will he also consider a requirement to ensure that the final offer mechanism is initiated and completed at an early stage?
I urge the Government to look at ways of expediting the processes, which would enable the DMU to prioritise platform-publisher disputes in the interests of ensuring a sustainable news media industry. In other jurisdictions, platforms have either restricted or threatened to restrict news content to avoid payments, and there is evidence that Google has reduced the share of domestic news sources on its platforms, particularly when the content can be replaced with English language alternatives, as is the case with international news. Will the Minister provide an assurance that the fair dealing objective and the conduct requirements that allow the DMU to prevent a service from being withdrawn in a discriminatory way could be used to prevent Google or Meta from withdrawing or reducing the volume of UK news to reduce the value of deals with news publishers?
Getting really into the weeds, it is important that the countervailing benefits exemption in clause 29 should not be drawn too broadly. The exemption allows designated SMS firms to continue conduct that contravenes the conduct requirements if they can prove that it has an overriding public benefit. I gently suggest to the Minister that if the exemption is too broad, SMS firms will be able to regularly avoid complying with conduct requirements by citing things such as security and privacy claims, as well as, frankly, by spamming the CMA with numerous studies, thus diverting resources to addressing those studies rather than tackling the issues at hand. This would undermine the entire regime by severely limiting the efficacy of the conduct requirements.
I am keen to ask the Minister if he would be willing to consider placing a non-exhaustive list of acceptable grounds for exemptions in the Bill. While the great advantage of the Digital Markets Unit is its agency and ability to write tailored conduct requirements for SMS firms, that leaves it open to regulatory capture. Can the Minister can give me an assurance that there are adequate provisions requiring the DMU to consult third parties so that SMS firms are not able to write their own conduct requirements or construct their own remedies in cases of conduct requirement breaches?
I welcome the measures the Government have brought forward in the Bill. This is strong, forward-looking digital market regulation and it will ensure that digital markets can live up to their potential, allowing consumers to enjoy the full benefits that technology can deliver. It is also important that we look at this Bill alongside the media Bill, because so many of the issues that are addressed across the wider digital industry are covered in the two Bills and it is good that this legislation is coming through hand in hand with that Bill. By giving the Digital Markets Unit new powers to tackle the dominance of monopolistic big tech platforms, we will be able to unlock the growth and innovation that have been stifled by a severe lack of competition, which will hopefully give start-ups and smaller firms proper access to markets and consumers.
Rebecca Long Bailey (Salford and Eccles) (Lab)
I want to limit my comments on the Bill to how it affects journalism. The National Union of Journalists has long called for the enforcement of levies on tech giants that unfairly consume editorial content without contributing to its production. That point was highlighted in the Cairncross review:
“Publishers frequently complain that the relationship is excessively weighted in favour of the online platforms. In most cases, the latter do not directly remunerate news publishers for placing their content on their platforms, although there are some exceptions.”
The review went on to state:
“Platforms are not subject to the same press rules of accuracy and fairness as news publishers are. And in all these ways, argue publishers, the increasing grip of certain platforms over news distribution channels is threatening the future of high-quality news.”
Without adequate regulation of news provision beyond the regulated news titles or compensation for publishers whose content is used, we risk a wild west of news provision that is chopped, coiffured or skewed without a publisher’s consent and outside the scope of normal news regulation. That should worry us all, because journalism is critical to upholding democracy, to holding local and national politicians like myself to account, and to holding Government and local government to account.
None the less, the Bill’s provisions that will provide a mechanism for payments to publishers from tech giants are welcome. They have been called for by the NUJ, including in its news recovery plan. I also welcome the Bill’s efforts to provide publishers with data that allows for a better understanding of how content performs on platforms. I stress that these provisions must be implemented without any further delay or weakening of conditions, but I fear that the Government will already be under pressure. Indeed, Google and Meta have attempted to ward off similar negotiations in Australia and Canada by restricting or threatening to restrict access to trusted domestic news.
The News Media Association has said:
“Denying citizens access to reliable information to avoid payment serves only to emphasise the primacy that these firms place on profits rather than citizens’ interests. The government should not give in to similar threats in the UK.”
I stress that the Government must not bow to pressure to water down these provisions—in fact, quite the opposite. There are a number of areas where they could strengthen the Bill or provide much-needed clarity. The hon. Member for Warrington South (Andy Carter) highlighted a few areas where we are on the same page, so there is clearly cross-party support.
First, there appears to be a protracted process to reach the final offer mechanism in the Bill that allows the Digital Markets Unit to select bids from a strategic market status firm and a publisher for the value of a news contract. That means that, even if an SMS firm has no intention of complying with a conduct requirement to negotiate with a news publisher, it could take years from the issuing of such a conduct requirement for the final offer process to be initiated and completed. What will the Government do to expedite this process?
Secondly, as I have already mentioned, in other jurisdictions, platforms have restricted or threatened to restrict national news content to avoid payments. What assurances can the Minister give today that the fair dealing objective and the conduct requirement that allows the Digital Markets Unit to prevent a service from being withdrawn in a discriminatory way, could be used to prevent a platform from withdrawing or reducing the volume of UK news sources to reduce the value of payments to UK publishers?
Thirdly, the hon. Gentleman gently suggested it, but I am strongly suggesting that clause 29 is not satisfactorily drafted. It allows for a firm with significant market status to continue conduct that contravenes a conduct requirement if it can prove the conduct has an overriding public benefit, but that overriding public benefit is not defined in the Bill. This presents a glaring loophole that could be significantly abused. I hope this is just an oversight on the Minister’s part, and that the clause is not deliberately drafted in that way, but will he clarify this by adding a clear list of acceptable grounds for exemption?
Finally, as we have heard, there is a concern that, although the DMU is able to write tailored conduct requirements for firms with significant market status, not consulting a wider stakeholder base risks leaving it open to regulatory capture. Like the hon. Member for Warrington South, I would be grateful if the Minister considered adding provisions to the Bill to require the DMU to consult third parties to avoid such risks.
The Bill will go some way towards rectifying a murky quagmire, but there is much more beyond the scope of this Bill that needs to be addressed. Members will no doubt be aware that BBC members of the National Union of Journalists will walk out on strike on 7 and 8 June over plans to cut local radio provision. Cuts to local news provision matter because local journalism is vital to democracy by enabling people to hold local government and public services to account at a time when national news outlets primarily focus their attention on the latest Westminster scandal. Local journalism matters because it helps to build strong, happy communities by allowing local people to hear about the things that matter in their area and by giving them a voice to raise things about which they are unhappy. Local journalism matters because it supports local economic activity by celebrating local businesses and giving young journalists a chance to cut their teeth and gain the skills they need for a career in broadcasting.
Sadly, we know what happens when local news services are eroded. We have watched as the local, community-driven newspaper sector has collapsed over the past 10 years. In my constituency, we no longer have a dedicated Salford newspaper, and when publicly funded news providers such as the BBC also start to curtail their local offering, there is a risk of there being no democratic scrutiny or local news coverage at all. So the Government must recognise that, although the Bill is a welcome step forward, they must urgently turn the tide and act upon the local journalism sustainability recommendations made this year by the Digital, Culture, Media and Sport Committee. If they do not do so, we risk continuing centralisation of news coverage and erosion of democratic scrutiny, where only the most sensational—
Rebecca Long Bailey
I am coming to the end of my comments—I do apologise. Where only the most sensational news stories that drive the most clicks make it to our computer screens.
Bim Afolami (Hitchin and Harpenden) (Con)
It is an honour to follow the hon. Member for Salford and Eccles (Rebecca Long Bailey) and I cannot think of a subject that would generate more clicks than digital markets and the CMA. With that in mind, I mention that David Lloyd George, a long-serving and respected Member of this place, was known to remark to young Members who asked him in his later years how they should get on, make a speech and behave, that he had one main rule: Cabinet Ministers can make three points in a speech, junior Ministers can make two and Back Benchers can make one. So I shall try to make one fundamental point in my speech, which is about the accountability of the CMA.
Many Members, on both sides of the House, including the Chair of the Select Committee, have said—there was a session for Members of Parliament earlier this week at which I made similar points to the Ministers on the Treasury Bench—that, when we give power to an arm’s length body, we have to very careful about the use of that power. Members of Parliament, and the Government, must make sure it is exercised in the right way, as intended by primary legislation and by the policies of the Government of the day, in broad strategic terms. I do not mean we should do that day-by-day, decision-by-decision, where we second-guess our regulators. If we were to do that, we would get the worst of all worlds. Nobody sensible thinks that that is a good idea.
I chair the Regulatory Reform Group and I refer to my entry in the Register of Members’ Financial Interests. In recent weeks and months, my colleagues on that group and I have been thinking seriously about the broader regulatory system and how it can be improved to get the best outcome for our economy, and for individuals and businesses in this country. This is a good Bill. It does important things. I welcome the more flexible, less dogmatic, less box-ticky approach embodied in the Digital Markets Unit. That is a good thing. The Government are right to have taken into account a lot of work and thinking that has been done by many different people, both in this House and outside, over the past 18 months or so, and they should be commended for that.
However, I am worried about giving a lot more power to the CMA, if it is not checked. If it is not held to account more by this House and by the Government, we could inadvertently—the CMA has brilliant people who are trying to do their best job for the country—create an image of this country, or indeed of digital markets or any other market, that is not to the overall benefit of this country in comparison with our competitors.
In particular, I am thinking of the appeals mechanism. The Bill contains an appeals mechanism that is given a judicial review standard. That will mean—I can see two former Lord Chancellors next to me, who will correct me if this is wrong—that any appeal has to be broadly on judicial review grounds, which are on process, illegality and various other aspects that do not relate per se to the merits of the decision. In effect, if the Competition and Markets Authority has made a decision, having followed the correct process, not been irrational or done something illegal, and a party or parties do not agree with that decision, that decision cannot be challenged on its merits.
This suggestion has been pushed back in previous Bills that have come to this House when there has been discussion about whether the appeal standard should be a judicial review or a merit standard. In previous iterations, the House has always decided to take a merit standard. In this instance, we have taken a judicial review standard. That sends a subtle, but very important, signal to companies and investors outside of this country. They will say, “If something goes awry with the regulator in Britain, what is our appeal right?” They may feel that that appeal right is not sufficient compared with, say, the European Union, Singapore, the United States or wherever it is they are also thinking of investing. If they compare the two and we come off unfavourably, that will have a damaging impact on this country. That particular aspect of the Bill—the accountability—is very important.
Sir Robert Buckland (South Swindon) (Con)
I apologise, Mr Deputy Speaker, for not being able to join the debate until now.
Does my hon. Friend agree that one problem is that there seems to be a bit of a misreading from Ofcom to this appeals mechanism? The Government will have to look again at merit-based appeals, because judicial review principles are just too narrow, in order to deal with the potentially powerful and wide remit of the CMA. On the point about undertakings and breaches of undertakings, it seems that, on the current reading of the Bill, this will have a retrospective effect on undertakings prior to this legislation coming into force. I support the legislation, but does he agree that this needs very careful reading to make sure that we do not have either unintended consequences, or too big a reach for what will be a very important process?
Bim Afolami
I thank my right hon. and learned Friend for those points, which he made incredibly well. Retrospective decision making is worrying—reaching back to decisions that have already been made, notwithstanding whatever the future holds. That, again, goes to my central point about the impact of the Bill and the impression of this country as somewhere to invest and to do business in areas where the CMA will have considerable power.
To go back to the Lloyd George maxim and the one point that I want to make in this speech on accountability, a key part of the work of the Regulatory Reform Group, to which the Chair of the Select Committee referred, is to point out that this Parliament—both Houses—needs to have an enhanced view in looking at our regulators. We need to consider, on a day-by-day basis, how the regulator is performing. Is it applying the strategic policy statement that the Government have given it? Is it doing things in the right way? How is it dealing with stakeholders? We should not just have what happens currently: a Select Committee gets involved and calls the big boss—the chief executive officer, or the chair—when there is a big mistake, a mess-up, and it is in the newspapers. That is not sufficient. We need to enhance that. Both Houses should be involved. We have made some detailed proposals as to how to do that in our first report and we will continue to do that.
This point of accountability may seem academic, it may seem legal, and it may even seem political at times, but it is fundamentally about the economy and the competitiveness of this country. If we can have greater accountability, our excellent regulators’ authority will be enhanced because they will know, business will know, people will know and consumers will know that we have a better functioning system. In that context, with those changes, I strongly support the Bill.
Sarah Olney (Richmond Park) (LD)
The Liberal Democrats warmly welcome the measures in this Bill that will enable the Competition and Markets Authority to counter the dominance of big tech firms and encourage real competition and dynamism across the sector. It is a real pleasure to speak in such a good debate on well-drafted legislation that has broad support from across the House. Credit is due not only to the hon. Member for Weston-super-Mare (John Penrose) and the hon. Member for Bristol North West (Darren Jones), who are not in their places but who have worked very hard on this Bill, but to the Competition and Markets Authority for all its work throughout the consultation stages and in designing this pro-competition regime.
I am pleased the Government have acted on the CMA’s recommendations and are introducing this Bill to the House. The Liberal Democrats want to see a thriving British tech sector, where start-ups can innovate, create good jobs and launch new products that will benefit consumers, and a strong competition framework that pushes back on the dominance of the tech giants is essential for that.
For too long, smaller, dynamic start-up companies have been driven out of the market or swallowed up by big tech firms that see the existence of other players in the market as a potential threat. We are therefore pleased to see greater powers awarded to the CMA to investigate the takeover of small but promising start-ups that do not meet the usual merger control thresholds, as well as the other key pro-competition interventions. The update to the competition framework provided for in the Bill is also particularly important for growth industries such as artificial intelligence and virtual reality, which are in their infancy but have great potential both for positive contributions to our economy and for competition disadvantage.
Consumer protections form another part of the Bill; the new rules and powers awarded to the CMA to protect consumers in parts 3 and 4 of the Bill are well overdue and will benefit many of our constituents. In particular, like many hon. Members who have spoken already, the Liberal Democrats are pleased to see the measures designed to tackle subscription traps by increasing transparency, making it easier for consumers to end those sorts of contracts and clamping down on fake reviews.
While we are glad that most of the CMA’s recommendations are included in the Bill, we have concerns over certain aspects that would benefit from further consideration and clarification. I think I join with the hon. Members for Warrington South (Andy Carter) and for Salford and Eccles (Rebecca Long Bailey) —we have proper cross-party agreement here—when I say that I am very concerned about the Bill’s countervailing benefits exemption. It might allow some large tech firms to get away with anti-competitive practices and to evade conduct requirements by arguing that the benefits to users outweigh the negative consequences for competition. The broad nature of the exemption risks significantly undermining the entire regime by limiting the efficacy of the conduct requirements. We will therefore seek to tighten the definition of what benefits are valid as the Bill progresses through the House.
The Liberal Democrats are also concerned that the Digital Markets Unit will designate firms as having strategic market status based on an assessment of their entrenched market dominance five years into the future. Future dominance is hard to predict and we have seen rapid change in the tech sector over the past 20 years. We would never have imagined in the late ’80s or early ’90s the dominance that firms such as Google and Apple would have in the market at the turn of the century.
We are concerned that that ambiguity could allow firms wide scope to challenge their SMS designation and fall outside the Digital Markets Unit’s regulatory framework. Above all, we urge the Government to resist pressure to water down the measures in the Bill, which could allow tech giants to continue anti-competitive behaviour. In other countries such as Canada and Australia, we have seen how firms such as Google have responded to tougher regulation of big tech by restricting access to domestic news on their platforms. It is imperative that the UK Government do not bend to any such pressure and reject attempts to water down legislation or weaken it through loopholes.
As the Bill progresses, we must also ensure that there is no ambiguity in its drafting that could be open to exploitation. It is important to remember that it is not only tech companies that require a level playing field to operate in the digital economy; small businesses across the country are increasingly moving their operations online, and many now rely on digital platforms such as online marketplaces, yet current unfair market practices mean that many find themselves vulnerable to exploitation, causing economic harm and stifling innovation. Unlike larger firms, many small and microbusinesses do not have the resources to take action when they are treated badly, and Trading Standards is powerless to act on their behalf due to a significant lack of resource and an outdated operating model still based on local authorities.
One key concern of small businesses operating online, and the best example of that power imbalance, is infringement of intellectual property rights. Intellectual property rights are absolutely central to the success of small businesses and individual creators, protecting the integrity of original work and ensuring that individuals are fairly compensated. However, IP theft is all too common in the digital environment, which causes significant economic harm.
Yasemin Guzeler, a constituent of mine, has been a victim of such infringement and has allowed me to share her story. Yasemin owns her own small business, Blooms of London, which sells bespoke umbrellas featuring trademarked designs. Around October last year, Yasemin noticed that the manufacturer of her products, based in China, had copied her designs and was selling the items directly via online platforms at half the price of the original items. Yasemin has since faced a momentous battle with online platforms such as Amazon to try to remove counterfeit links. After months of emails, complaints, referrals and untold financial and emotional distress, there remain almost 40 counterfeit links on Amazon. Yasemin’s business is now facing bankruptcy, and there is seemingly nowhere else she can turn for help and no mechanism through which she can effectively enforce her rights against Amazon.
I am therefore pleased to see
“effective processes for handling complaints and disputes with users”
listed under
“Permitted types of conduct requirements”
for SMS firms, but much more must be done to protect our small businesses and individual creators and uphold their intellectual property rights when they engage in digital activity. I would like an explicit reference to “intellectual property theft” in the Bill, and for reducing economic harm on their service to be included in the list of permitted types of conduct requirements for SMS firms in clause 20. I would also welcome further comment from, and engagement with, the Minister on how we can best protect small business owners such as Yasemin when they operate online. It is essential that we get this right to support our entrepreneurs and small businesses, and allow them to remain competitive in the digital economy.
The Liberal Democrats are pleased that the Government are finally acting on the CMA’s recommendation and bringing forward measures that will allow the regulator to prevent tech giants from putting our digital sector in a stranglehold. We hope that the Government will be robust in their defence of the Bill against lobbying by tech giants, and we hope to see the Bill progress through the House without being watered down or weakened through the addition of loopholes that might be ripe for exploitation. I hope that the Minister will also reflect on my comments about the additional measures needed to support small businesses online. I would welcome further opportunity to engage with the Government on that. Although competition is crucial for Britain’s tech sector, we hope that the Government will move to tackle the fundamental issues that are holding it back, such as the skills gap, a shortage of skilled workers and weak investment.
James Wild (North West Norfolk) (Con)
I am pleased to have the opportunity to talk about the Bill, which will drive innovation, growth and productivity by reforming digital market regulation, the competition regime and consumer protection.
Let me begin with the digital market elements. Technology permeates every aspect of our lives. The businesses that develop and apply new technologies—be they social media platforms, online marketplaces or innovation-driven firms—create huge benefits for consumers and make a major economic contribution. As the Chancellor frequently reminds us, the UK is the only country outside the US and China to have a tech sector with companies valued at more than £1 trillion—companies that have developed their businesses and attracted customers.
We must always be mindful that regulation and intervention in markets come at a cost. My starting point is to trust the invisible hand of the market as much as possible to drive competition, but markets require rules, and where those rules exist, they need to be enforced. We must be careful in how we approach regulation, and not penalise firms for being successful.
As has been said, digital markets have features, including the importance of data and network effects, that tend towards a few large players. It is certainly not the case, however, that having a small number of players with large market power is in itself a bad thing—it can represent the reward for innovation and investment. However, the CMA concluded in its review of online advertising that Facebook and Google’s market position meant that consumers and businesses faced increased costs, there was less innovation, and consumers had unfavourable terms imposed on them owing to competition.
The Bill will give the CMA the tools to designate firms with that strategic market status and apply conduct requirements for fair dealing, open choices and trust, which all sounds reasonable—for example, ensuring that there is a clear appeal process if a user’s marketplace access is terminated, or giving consumers choices and the ability to easily switch between services. However, it could easily become a burdensome requirement, so we must ensure that the regime is proportionate and that the cumulative impact of such requirements is regularly reviewed. Perhaps the Bill could be further improved by including something on its face to require the CMA to do so.
As a member of the Regulatory Reform Group, ably chaired by my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami), I share his concern about the accountability of regulators and the systematic underperformance that we see. Given the significant power that regulators wield and the impact of their decisions on the lives of our constituents, they must be accountable for those decisions. My hon. Friend set out very clearly and powerfully the case for our first report’s recommendations to promote greater accountability, as well as introducing standardised metrics so that we can judge regulators’ performance. I hope those recommendations will be taken forward.
I will briefly focus on the consumer regulation part of the Bill. Where companies breach consumer protection rules, there should be swift and proportionate action, but currently that does not happen, as the CMA lacks the powers to rapidly act: it has to go to court when it considers there has been a breach of consumer law. Which? has pointed out that a lack of powers meant that it took nearly six years to get the online secondary ticketing market to change its practices, although as we have heard from the hon. Member for Washington and Sunderland West (Mrs Hodgson), there are still problems in that sector. That is why the new powers in the Bill are to be welcomed: there will be a direct enforcement regime, so that the CMA can investigate suspected breaches and issue enforcement notices and fines. That brings us into line with other major jurisdictions.
Others have referred to subscription services. About £30 billion is spent annually on those services, and consumer groups have identified that as another area of potential abuse. We will all have had different experiences: in some cases, it has been simple to unsubscribe from a service, and in others, it has been far more difficult—perhaps deliberately so, to make customers stick. Sky has raised concerns about the level of prescriptiveness on the face of the Bill regarding this issue, and has pointed out that in some cases, the requirements are more onerous than those that apply in regulated sectors. I hope the Minister will carefully consider those concerns, while ensuring that it is simple for customers to unsubscribe from services they no longer wish to pay for.
The final element I will focus on is that of fake reviews, and the detriment they cause to consumers and businesses. According to research by Which?, fake reviews make consumers more than twice as likely to choose poor-quality products, and people can be put off from making choices, whether about restaurants or about somewhere to stay. That is a particular issue for my constituency of North West Norfolk, which has a vibrant tourism and hospitality sector. UKHospitality welcomed the Bill’s helping to deliver fairness for hospitality venues and customers in that area, so I would be grateful if the Minister confirmed when the consultation he has referred to, which will get into the detail of how we tackle fake reviews, will be published so that we can act rapidly to close down those unfair practices.
To conclude, I support the intention of the Bill: to give the CMA powers to act rapidly against breaches of consumer law, to strengthen competition, and to crack down on abuses.
John McDonnell (Hayes and Harlington) (Lab)
Thank you, Mr Deputy Speaker; I will be relatively brief. Like my hon. Friend the Member for Salford and Eccles (Rebecca Long Bailey), I am a member of the National Union of Journalists’ parliamentary group—in fact, I am its secretary. It is really pleasing that there have been so many references to the issues around journalism and publishing from the hon. Members for Warrington South (Andy Carter), for Folkestone and Hythe (Damian Collins) and for Richmond Park (Sarah Olney), as well as my hon. Friend the Member for Salford and Eccles.
The NUJ welcomes the Bill wholeheartedly; Members who may not have been interested in the journalistic or publishing side of this issue will want to understand why. My hon. Friend the Member for Salford and Eccles has described the way in which there has been erosion of local media and local press, as well as national cutbacks. While journalists have been losing their jobs, what has infuriated them is that where they are producing work—quality, reliable, regular news—that news is then being effectively ripped off on to other platforms and used to attract customers to advertising, and they get no recompense whatever. Members can understand why there is a depth of anger that has built up, and why the NUJ welcomes the Bill. We have been working with the News Media Association as well, which also welcomes it, because we see it as restoring some elements of the balance of power between the big tech giants and the journalists and publishers themselves.
To a certain extent, I agree with the hon. Member for Hitchin and Harpenden (Bim Afolami) about the importance of the accountability of regulators and ensuring that they can play their role effectively. Part of the problem on regulation at the moment is the forest of regulators that we have and their accountability. About five years ago, my hon. Friend the Member for Salford and Eccles and I commissioned a report from Lord Prem Sikka. I will send the hon. Member for Hitchin and Harpenden a copy, because it identified something like 50 different regulators in the finance sector stumbling over each other, not being held particularly to account by this place. I see the solution as being more about shifting the balance of power not to regulators, although they should be held accountable, but to the journalists and publishers themselves. That is why part 3 of the Bill is key for us. It demonstrates a firmness of purpose by the Government in ensuring proper regulation and the restoration of the balance of power, but the devil will be in the detail of the implementation of these regulations and clauses in particular.
I am anxious, like others, about clause 29. It just looks like a gaping loophole that could emerge in the coming period. The NUJ stands ready to engage in any discussions and consultations on the implementation of all the clauses in part 3, particularly in regard to guidelines, the final offer mechanism, the issues around timescales of the implementation and, if necessary, the sanctions that could be brought forward for any individual organisation that is dragging its feet and delaying an agreement on the final offer so that people are properly rewarded.
The hon. Member for Richmond Park raised the issue of intellectual property. That is an issue not only for journalists and others, but for performers. It has been raised with Equity, and Equity stands willing to engage in the discussions with the Government on these matters.
Overall, the significance of this legislation, for us and for the NUJ in particular, is that it could be another brick in the wall of restoring some of the infrastructure and architecture that we had for quality journalism in this country. In that sense, that is why we welcome it. I agree with my hon. Friend the Member for Salford and Eccles that it is one part and much more needs to be done, including investment in the BBC and elsewhere, such as local radio services. Instead, we have this dispute.
We also need to ensure proper investment in local journalism. There have been some developments under this Government to support local journalism. Money has been hived into particular support for community journalism, but there is a lot more to do, and that is why the union wishes to engage in a full consultation with the Government about the long-time future of quality journalism in this country. With those few remarks, I welcome the legislation. We will work on the detail. As I say, we and the unions stand ready to involve ourselves in the consultation on the guidelines for implementation.
Alex Davies-Jones (Pontypridd) (Lab)
As ever, it is an honour to close this debate on behalf of the Opposition. I thank colleagues from all parts of the House for their contributions in what has been a genuinely interesting and insightful debate. I thank in particular my hon. Friends the Members for Washington and Sunderland West (Mrs Hodgson), for Bristol North West (Darren Jones) and for Salford and Eccles (Rebecca Long Bailey), and my right hon. Friend the Member for Hayes and Harlington (John McDonnell), but also the hon. Members for Hitchin and Harpenden (Bim Afolami), for Boston and Skegness (Matt Warman), for Warrington South (Andy Carter) and for Folkestone and Hythe (Damian Collins) for their contributions. The strength of cross-party feeling in the House today shows that there is a lot we can do together to enhance the Bill, to make it work and to make it effective, and I look forward to pressing further in Committee many of the issues that have been raised this afternoon, with cross-party support from all Members.
We all know that there is a need for change and that regulation of the digital market is vitally needed. That is why Labour supports and welcomes this Bill in principle, delayed though it may be. Since the intentions of this Bill were first mooted in the Queen’s Speech back in May 2022, we have seen the digital world continue to change, to grow and to expand at an incredible rate. We have seen sustained growth in AI technology hitting the mainstream, and tech continues to be a central feature of our homes, workplaces and social lives. At the same time, stories depicting the dominance of social media and online platforms continue to hit headlines on what feels like a daily, if not weekly basis. This Government have failed to keep up, let alone rise and face the challenges of competition in digital markets, and consumers and businesses are left in a state of flux.
Just last year, Google was hit by the largest-ever fine by a European court for thwarting competition and pre-installing its Chrome search engine and apps on handsets as a condition for carrying its Google Play app store. The penalty was colossal, amounting to over €4 billion—the largest ever fine for an antitrust violation.
This failure to encourage more competition in our online space is having a significant impact on both businesses and in terms of stifled opportunities for innovation and consumers, who are now paying the price of online scams and fraud becoming a persistent risk. The cost of this Government’s inaction is significant. That is why Labour broadly welcomes this Bill and will support its progression. If pro-competition legislation is done correctly, the Bill could change the online space for the better, but it is crucial that we first dismantle our understanding of exactly what the digital market even is.
As we have heard this afternoon, businesses operating in digital markets range from social media platforms, such as Meta and Twitter; marketplaces, such as eBay, Tripadvisor and Amazon; and tech-driven companies, such as Google and Apple. We can all agree that we are living through a digital and tech revolution, and the digital economy is transforming how we live our lives. In fact, I am confident in saying that all of us in this place regularly interact with these companies on a daily, if not hourly, basis—it is almost impossible not to. While their business models and innovations change at pace, it is vital that our legislation keeps up too.
Make no mistake: Labour recognises that our lives are clearly enhanced in many ways through digital developments. For one, consumers can seemingly make more informed decisions with greater access to information, and businesses can easily reach mass markets at lower cost. But we are also clear that competition is vital to ensuring that companies continue to innovate, and that markets do not become saturated by monopolies. Ultimately, we all want to ensure that consumers can access legitimate information about, and fair prices for, the goods they buy online.
Businesses operating in digital markets contribute a significant amount to the UK economy each year. They are market leaders, and have more often than not been at the heart of historic innovation and modernisation. Indeed, the Government’s own impact assessment suggested that the UK’s digital sector accounted for more than 1.8 million jobs in 2021 and contributed over £150 billion to the UK economy in 2019. We also know that online platforms typically seek to attract consumers by offering their core services—whether a Google search or a profile on a social media platform—for free. Once they have attracted a significant number of users, or consumers, these businesses then seek to make money from users on another side of the platform, commonly through advertising revenues. It is here that the significant dominance and subsequent need to regulate these digital markets is most obvious.
The CMA’s own research into online platforms and digital advertising from 2020 found that around £14 billion is spent on digital advertising each year in the UK. In the search advertising market, which encompasses search services such as Google and Microsoft’s Bing, Google enjoys more than 90% of the £7.3 billion UK market. It is a similar picture across the display advertising market, where Facebook has more than 50% of the £5.5 billion market. Those incredibly high figures present a clear picture when it comes to the significant market dominance that a few companies have and maintain in the digital space, yet these are relatively unsurprising truths.
I see from my own behaviour, and from talking with colleagues and constituents, that all of us are spending more and more time online and that includes our shopping habits, such as buying tickets. I pay tribute here to my hon. Friend the Member for Washington and Sunderland West for all the work on fair ticketing that her all-party parliamentary group on ticket abuse has done. I look forward to pressing the Government further on some of her points, because there is a definite need to act in this space.
The Under-Secretary of State for Science, Innovation and Technology, the hon. Member for Sutton and Cheam (Paul Scully), will know that I have a lot to say when it comes to the Government’s failures to keep us all safe online, but perhaps I will keep those comments for another day when the Online Safety Bill finally returns to this House. Unfortunately for him, much of Labour’s frustration with this digital markets Bill are similar to those that we have with this Government’s approach to regulating the online space more widely. Change and regulation of digital markets is much needed, because the current model, which sees tech giants able to dominate across multiple fields, is entirely unsustainable. I urge the Minister to consider what message this Government are sending to start-ups that are struggling to break through in the market. In fact, I do not need him to consider it, because I can tell him directly now.
As I have grappled with this overly complex Bill over the past few weeks and months, I have, like the Minister, met with a huge range of stakeholders. A common theme is that many of the small and medium-sized enterprises that currently have no option other than to rely on the market opportunities afforded to them by the likes of Amazon and Google fear negative consequences if they are seen to be speaking out against them. That is an incredibly unique situation, but ultimately it points to the real dominance that certain companies have over a huge range of sectors. From Amazon’s power in the book, e-book and audiobook market, to Apple’s stronghold on gaming and app development, we certainly do not have to look far to see examples of exactly how dominant a few of the big giants truly are.
In 2021, the CMA found that Apple and Google were able to earn more than £4 billion of profits that year from their mobile businesses in the UK over and above what was required to sufficiently reward investors with a fair return. That is an incredible figure and—make no mistake—it is only going to get worse as these companies seek to dominate new industries well into the future. That is why Labour welcomes this Bill, and it is good and right that it is making progress today.
However, we do have significant concerns that the legislation could be watered down later on, as has been expressed by hon. Members on all sides of this House. First, we know the dominance that big companies have in our markets and economy, but their dominance absolutely should not extend to writing our legislation. As with so many other policies announced by this Government in recent years, I have genuine concerns that this Bill will be watered down during its passage, and that small businesses and consumers will continue to pay the price because the Government are simply too scared to do the right thing.
I share the concerns of Members on both sides of the House—namely, my hon. Friend the Member for Bristol North West and the hon. Member for Hitchin and Harpenden—about parliamentary scrutiny and oversight of the regulatory body. It is absolutely vital that the CMA has a direction from this Parliament of what policies should be in its primary focus, and I am keen to explore that further in Committee. I hope the Minister can give us some reassurance on this particular point, because I know it is a concern that, as I have said, is shared by many Members.
Secondly, I am also keen to seek some reassurance from the Minister that the Digital Markets Unit will be empowered to draw on the work that has been done in the past few years, so that once this Bill is finally on the statute book, it can hit the ground running. As the shadow Minister, my hon. Friend the Member for Feltham and Heston (Seema Malhotra), stated, the Government first established a digital competition expert panel tasked with examining competition in digital markets way back in 2018, which is over five years ago. None of us wants to see any more time wasted, so I hope the Minister can assure us all that he will work hard to enable this regime to get going from day one.
Thirdly, there is some ambiguity in this Bill about how effective the appeals process is in its current form and whether it will actually force change at the heart of big tech companies. I am keen to hear why he has chosen not to place a statutory time limit on the appeals process. We know that the big tech companies are often able to buy time for themselves, so I am interested to hear why the Bill has failed to introduce a formal time constraint to ensure total compliance by those at the heart of Silicon valley.
Lastly, thanks to the Government’s delay in bringing forward this Bill, the sector is unlikely to see any real change for some time to come. Even once this is over the line having reached Royal Assent, the regime will likely take another 12 months, as a minimum, to truly start having an impact. This cannot be news to the Minister. Given how much time has passed and how much this Government have previously pandered to top bosses in Silicon valley, he must do more research and do more to reassure us that this Bill really will have the teeth to change and dismantle the digital monopolies. We recognise that this is difficult—it is a difficult balance—but a pro-competition regime is urgently needed, and that need not be mutually exclusive of an appreciation and understanding of the huge contributions that platforms such as Google and Amazon have had in our daily lives.
To conclude, as with issues related to online harm and data regulation, it is a shame it has taken so long for the Government to act on yet another issue that we all knew of many years ago. This Bill is needed, but we need to make sure that it looks to the future and is sufficiently well future-proofed and flexible to deal with the incredibly fast-paced industry that it seeks to look at. I look forward to working with colleagues to address some of these serious shortcomings in Committee, and I look forward to working with Ministers as the Bill progresses.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
It is a pleasure to follow what has been an excellent debate. We have had some great contributions from the hon. Member for Feltham and Heston (Seema Malhotra), my right hon. Friend the Member for Wokingham (John Redwood), the hon. Member for Gordon (Richard Thomson), my hon. Friend the Member for Folkestone and Hythe (Damian Collins), the hon. Member for Bristol North West (Darren Jones), my right hon. Friend the Member for Calder Valley (Craig Whittaker)—he made an important intervention, which I will come back to in a minute—my hon. Friend the Member for Boston and Skegness (Matt Warman), the hon. Member for Washington and Sunderland West (Mrs Hodgson), my hon. Friend the Member for Warrington South (Andy Carter), the hon. Member for Salford and Eccles (Rebecca Long Bailey), my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami), the hon. Member for Richmond Park (Sarah Olney), my hon. Friend the Member for North West Norfolk (James Wild), the right hon. Member for Hayes and Harlington (John McDonnell) and, of course, the hon. Member for Pontypridd (Alex Davies-Jones).
I will cover some of the issues, but I just want to say that it is great that we are holding this debate on the 100-day anniversary of the formation of the Department for Science, Innovation and Technology—and indeed on the Secretary of State’s birthday. That gives us the sharp focus we need as we bring in this important legislation, which I am glad to say has been welcomed right across the House. It is no exaggeration to say that the world is looking on at us in this forum. Yes, the European Union has the Digital Markets Act, but we have a less prescriptive, more flexible approach that other countries are looking at. If we get this right—it is important that we get it right, but also that we bring the Bill in quickly so that we get its effects quickly—hopefully there will be fewer regulatory environments around the world and we will give businesses certainty, rather than having 120 different regulatory environments, which makes it even more confusing for companies in adhering to them.
We heard Labour’s position on subscription traps, and my hon. Friend the Member for North West Norfolk gave the other side of the argument in saying that our approach to subscription traps was a little too prescriptive. The Government analysed consultation responses from last year, and we believe we are implementing measures that best balance the benefits to consumers and the associated cost to businesses. We have drawn the delegated powers as tightly as possible, and any broad or major change to the law will be subject to the draft affirmative procedure and must be laid before Parliament and approved by both Houses—we have been careful about that.
The hon. Member for Gordon raised a couple of measures including the right to redress. A range of consumer-related measures come under the scope of the Retained EU Law (Revocation and Reform) Bill, but the core protections in the Consumer Rights Act 2015 continue to apply. We have been careful and clear that we maintain measures that are necessary to fulfil our international commitments, and that will definitely apply to consumer protection. We have always set the highest standards for consumer protection.
The hon. Gentleman also talked about greenwashing and drip pricing. Under current legislation, the CMA is able to tackle those harms, and it is committed to doing so. For example, it has issued guidance to help businesses comply with their existing obligations under consumer protection law when making environmental claims, and in recent years it has acted on drip pricing, particularly in the holiday and travel sectors. The Government are undertaking research to understand the prevalence of drip pricing and its impact on UK consumers. The power to add to the list of banned commercial practices in the Bill will allow us to act swiftly to tackle specific online harms should there be sufficient evidence to warrant further action on specific practices in future.
My right hon. Friend the Member for Calder Valley, who is not in his place, intervened to ask about charity lotteries. In that instance, because a consumer donates regularly to a charity but does not have receipt of a good, a product or digital content in return, that will not meet the definition of a subscription contract. Therefore, those charitable donations do not need to be included in the exclusions set out in schedule 19, as they are not in scope in the first place.
The hon. Member for Bristol North West spoke about growth duties. Driving innovation, investment and growth should be at the heart of what our regulators do. The growth duty does not currently apply to Ofwat, Ofgem and Ofcom, which regulate sectors that account for 13% of annual private UK investment. As I announced on 10 May, in the coming months the Government intend to consult on reforms to regulation with economic regulators, and on how best to promote growth with utilities regulators. That might include consideration of a growth duty, or it may be done via other routes. The hon. Gentleman also asked about the digital regulation cooperation forum, and regulators that comprise the DRCF are already accountable to the Government and Parliament on an individual basis. We engage closely with them at every level through official channels to understand and inform its strategic priorities and identify opportunities for collaboration and knowledge sharing.
My hon. Friend the Member for Boston and Skegness spoke about the possibility for mission creep at the CMA and about interoperability. I agree that interoperability is important for making digital markets more competitive. Conduct requirements in the Bill could be used by the DMU to set clear expectations about interoperability and to prevent an SMS firm from restricting it between designated digital activities and products offered by other firms. If there is evidence of a specific competition problem, pro-competitive interventions will allow the DMU to design targeted interventions. It could, for example, require an SMS firm to allow app stores other than its own to be downloaded and used on its mobile devices.
John Redwood
Do Ministers as a matter of course invite in leading regulators for at least annual reviews of corporate plans, budgets and performance?
Paul Scully
Many of the regulators will be under the remit of the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake). Indeed, that is something that I did—
Paul Scully
I just heard the verbal nod from him to say that he continues to do that.
I will come to the CMA in a second. In answer to the hon. Member for Washington and Sunderland West, whom I congratulate for the APPG’s work, the CMA is continuing to monitor the online secondary ticketing market, including the issues that have been reported about refunds and cancellations as a result of the pandemic. The Government welcome the CMA’s report, but we believe that we have the measures in place to ensure that consumers have the information that they need to make informed decisions on ticket resales. The Bill will give the CMA significant new civil powers to tackle bad businesses ripping off consumers, so we do not see the need for additional regulatory powers. However, I agree with her that enforcing the existing regulations is key. I thank her for her work in this area.
I will briefly cover some of the other issues. On judicial review, which was raised by my hon. Friend the Member for Hitchin and Harpenden, we have heard that the entire purpose of the Bill is to ensure that we tackle an area where a small number of companies have dominance in many parts of our lives. That is not necessarily a bad thing, so this is not an attack on big tech. None the less, some of the challenger firms mentioned by the hon. Member for Pontypridd, although they may be household names, are rightly scared because of the relationship they have with big tech. We must get the balance right by ensuring that there can be an appeal on judicial review standards, but it must not be something that a company with deep pockets can extend and extend. Because the harms happen so quickly in a tech business, the remediation needs to take place as quickly as possible.
Paul Scully
I will finish the point and then I will happily give way. Judicial review will still subject decisions to careful scrutiny. The CMA will have to justify how it arrives at its decisions, and the competition appeal tribunal will be able to quash decisions if there have been flaws in the decision making or if processes have not been adhered to. There will be a participative approach to regulating the sector, with SMS firms being consulted formally and informally to help ensure that actions are reasonable and proportionate. The CMA will also be required to publish guidance on how it will take major decisions and publicly consult before making decisions such as designating a firm with SMS, making PCI orders and imposing conduct requirements. Indeed, companies will be able to make a full merits appeal should there be a penalty. Does my hon. Friend wish to intervene?
Paul Scully
The CMA remains accountable to Parliament. That will not change. The CMA already has to present its annual plan to Parliament following a consultation, and that will continue. The CMA’s board and staff may also be called to give evidence before parliamentary Select Committees. The Government will continue to appoint the CMA’s key decision makers, including its board, as well as providing the CMA with a strategic steer, highlighting key areas of focus. It will continue to be accountable for its individual decisions via appeals to the competition appeal tribunal, the specialist judicial body with existing expertise, and, in relation to its new powers to inform consumer protection laws, via appeals to the High Court. I have talked about how the CMA is operationally independent, but if the DMU is seen or felt to be going off track, the CMA’s board is accountable to Parliament, so it will be responsible for all decisions in the new regime.
Dominic Raab (Esher and Walton) (Con)
I certainly support the Bill. The Minister is talking about the importance of checks as well as agility in how the CMA operates. It is unclear, and there are different views about, whether AI will increase concentration in the digital and tech sector or increase competition. Is he confident that the CMA will have the tools to deal with whatever effect AI has on the market in five to 10 years’ time?
Paul Scully
Indeed, we have to keep this under review because AI is moving at such a pace. The AI White Paper is under consultation at the moment, and we are looking at its impact and how we will regulate it. The Bill has the flexibility to be able to cope with a number of issues, but clearly we must keep this area under review. Indeed, the DMU must be able to cope with that as well. Many people asked about that.
There are currently about 70 people working in DMU roles, with many more working on digital markets issues across the CMA. The CMA itself will continue to assess what level of staffing it will need. It has the data, technology and analytics unit, which is a world leader in technical expertise and has invested heavily in building its capability ahead of the new regime coming into force. I therefore think it has the expertise, know-how and wherewithal to be able to respond to AI and so on.
Finally, I will quickly address some of the other issues that have been raised. One question from a number of Members was whether technology giants could avoid anti-trust action if they proved that their behaviour benefits consumers and whether the DMU is being given sufficient powers. The DMU will combine a participative approach with the use of formal enforcement powers. The conduct requirements are tailored rules that govern how the most powerful tech firms designated with SMS are expected to behave. The conduct requirements will prevent practices that exploit consumers and businesses, or exclude innovative competitors. Where urgent action is needed on a suspected breach of conduct requirements, the DMU will have the power to make an interim enforcement order to protect consumers before irreversible harm occurs, so a court injunction is not always necessary. If a firm fails to comply, the DMU will be able to use a robust toolkit of financial, reputational and legal mechanisms to deter and punish non-compliance, so we do not have to stretch out the timescale right to the very maximums.
I think we have the balance right, but I look forward to working with colleagues throughout the passage of the Bill. We want to get it right, but we have to get it in place as quickly as possible so we can operationalise it and really see the benefits. There is innovation that is at risk of being lost if we do not allow, as best we can, challenger techs to have a level playing field to proceed in the years to come.
Question put and agreed to.
Bill accordingly read a Second time.
Digital Markets, Competition and Consumers Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Digital Markets, Competition and Consumers Bill:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 18 July.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Consideration and Third Reading
(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.
Other proceedings
(7) Any other proceedings on the Bill may be programmed.—(Julie Marson.)
Question agreed to.
Digital Markets, Competition and Consumers Bill (Money)
King’s recommendation signified.
Motion made, and Question put forthwith (Standing Order. No. 52(1)(a)),
That, for the purposes of any Act resulting from the Digital Markets, Competition and Consumers Bill, it is expedient to authorise the payment out of money provided by Parliament of:
(1) any expenditure incurred under or by virtue of the Act by the Secretary of State or the Competition and Markets Authority; and
(2) any increase attributable to the Act in the sums payable under or by virtue of any other Act out of money provided by Parliament.—(Julie Marson.)
Question agreed to.
Digital Markets, Competition and Consumers Bill (Ways and Means)
Motion made, and Question put forthwith (Standing Order. No. 52(1)(a)),
That, for the purposes of any Act resulting from the Digital Markets, Competition and Consumers Bill, it is expedient to authorise:
(1) the charging of a levy by the Competition and Markets Authority in connection with the regulation of competition in digital markets; and
(2) the payment of sums into the Consolidated Fund.—(Julie Marson.)
Question agreed to.
Digital Markets, Competition and Consumers Bill (Carry-over)
Motion made, and Question put forthwith (Standing Order. No. 80A(1)(a)),
That if, at the conclusion of this Session of Parliament, proceedings on the Digital Markets, Competition and Consumers Bill have not been completed, they shall be resumed in the next Session.—(Julie Marson.)
Question agreed to.
Digital Markets, Competition and Consumers Bill (First sitting)
Tuesday 13th June 2023
(1 year, 1 month ago)
Public Bill CommitteesRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 13 June 2023 - (13 Jun 2023)
The Chair
We are now sitting in public and the proceedings are being broadcast. I have a few preliminary announcements that Mr Speaker has asked me to draw to your attention. Hansard colleagues will be grateful if Members could email their speaking notes to hansardnotes@parliament.uk. Please switch electronic devices to silent. Date Time Witness Tuesday 13 June Until no later than 9.55 am Competition and Markets Authority Tuesday 13 June Until no later than 10.25 am Which?; Citizens Advice Tuesday 13 June Until no later than 10.55 am Chartered Trading Standards Institute; National Trading Standards Tuesday 13 June Until no later than 11.25 am News Media Association; Publishers Association; DMG Media Tuesday 13 June Until no later than 2.45 pm Professor Jason Furman, Harvard University; Professor Philip Marsden, College of Europe; Professor Amelia Fletcher, University of East Anglia Tuesday 13 June Until no later than 3.30 pm The Consumer Council; Consumer Scotland; National Consumer Federation Tuesday 13 June Until no later than 3.45 pm Professor Geoffrey Myers, London School of Economics and Political Science Tuesday 13 June Until no later than 4.00 pm British Retail Consortium Tuesday 13 June Until no later than 4.15 pm Open Markets Institute Thursday 15 June Until no later than 11.45 am techUK Thursday 15 June Until no later than 12.15 pm Coalition for App Fairness; Geradin Partners Thursday 15 June Until no later than 1.00 pm Match Group; Gener8; Kelkoo Thursday 15 June Until no later than 2.30 pm XigXag; Paddle Thursday 15 June Until no later than 2.45 pm Google
Today, we will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication and a motion to allow us to deliberate in private about our questions before the oral evidence session. In view of the time available, I hope that we can take those matters formally, without debate.
Ordered,
That—
1. the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 13 June) meet—
(a) at 2.00 pm on Tuesday 13 June;
(b) at 11.30 am and 2.00 pm on Thursday 15 June;
(c) at 9.25 am and 2.00 pm on Tuesday 20 June;
(d) at 11.30 am and 2.00 pm on Thursday 22 June;
(e) at 9.25 am and 2.00 pm on Tuesday 27 June;
(f) at 11.30 am and 2.00 pm on Thursday 29 June;
(g) at 9.25 am and 2.00 pm on Tuesday 4 July;
(h) at 11.30 am and 2.00 pm on Thursday 6 July;
(i) at 9.25 am and 2.00 pm on Tuesday 11 July;
(j) at 11.30 am and 2.00 pm on Thursday 13 July;
(k) at 9.25 am and 2.00 pm on Tuesday 18 July;
2. the Committee shall hear oral evidence in accordance with the following Table:
3. proceedings on consideration of the Bill in Committee shall be taken in the following order: Clauses 1 to 36; Schedule 1; Clauses 37 to 59; Schedule 2; Clauses 60 to 121; Schedule 3; Clauses 122 to 124; Schedule 4; Clause 125; Schedule 5; Clauses 126 to 131; Schedule 6; Clause 132; Schedule 7; Clauses 133 to 136; Schedules 8 to 10; Clause 137; Schedule 11; Clause 138; Schedule 12; Clauses 139 to 142; Schedules 13 and 14; Clauses 143 to 200; Schedule 15; Clauses 201 to 207; Schedule 16; Clause 208; Schedule 17; Clauses 209 to 217; Schedule 18; Clauses 218 to 247; Schedule 19; Clause 248; Schedule 20; Clauses 249 to 276; Schedule 21; Clauses 277 to 287; Schedule 22; Clauses 288 to 292; Schedule 23; Clauses 293 to 300; Schedule 24; Clauses 301 to 308; Schedule 25; Clauses 309 and 310; Schedule 26; Clauses 311 to 317; new Clauses; new Schedules; remaining proceedings on the Bill;
4. the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Tuesday 18 July.—(Kevin Hollinrake.)
The Chair
The Committee will therefore proceed to line-by-line consideration of the Bill on Tuesday 20 June at 9.25 am.
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Kevin Hollinrake.)
The Chair
Copies of written evidence that the Committee receives will be made available in the Committee Room and circulated to Members by email.
Resolved,
That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Kevin Hollinrake.)
The Chair
Before we start hearing from the witnesses, do any Members wish to make declarations of interest in connection with the Bill? No.
We will move straight on then to hear oral evidence from the Competition and Markets Authority. This morning, we are privileged to have a trio of stellar CMA executives: Sarah Cardell, the chief executive; George Lusty, the senior director for consumer protection; and Will Hayter from the digital markets unit.
Before calling the first Member to ask a question, I remind all Members that questions should be limited to matters within the scope of the Bill, and that we must stick to the timings in the programme motion that the Committee has agreed. For this session, we have until 9.55 am. Could I ask our three witnesses, starting with the chief executive, to introduce themselves for the record?
Sarah Cardell: I am Sarah Cardell, chief executive of the CMA.
George Lusty: I am George Lusty, senior director for consumer protection at the CMA.
Will Hayter: I am Will Hayter, senior director for the digital markets unit at the CMA.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Q
Sarah Cardell: I will start off, and Will might come in with a specific example. We are talking here specifically about the provisions around digital markets in the Bill. What we have got with the design of the provisions here is exactly as you say—something that is really quite bespoke, quite targeted and flexible. I think that is really important. When we look at the issues that we are seeking to tackle in digital markets, there are many benefits that come from them, but there are real competition concerns. We see a concentration of market power. We see the characteristics of these markets, where there are substantial economies of scope and of scale, and the aggregation of data, and that results in potential harm, both for consumers, in terms of their ability to access a broad range of products and services, and for competing businesses that want to be able to compete and grow and innovate on a level playing field.
What does the Bill do? The Bill enables us to tackle those concerns in a very targeted way. That is critical. You asked about the comparison with the European Union’s Digital Markets Act. In terms of the underlying concern, what we have in the EU is designed similarly—there is no fundamental difference there—but it is a more blanket approach, with a blanket list of prohibited conduct, whereas what we have here is a Bill that enables the CMA to designate particular companies in relation to particular activities, and then to design conduct requirements to manage their market power in relation to those specific activities. That is a much more bespoke system from the outset—it is targeted at the individual company and the individual conduct that is a cause of concern.
I think this Bill also has a greater degree of future-proofing. That is obviously critical in these markets, because they evolve so rapidly. The system in the EU is a slightly more static approach. You have a set of provisions that prohibit certain conduct as things stand at the moment. What we will have is the ability to bring in new conduct requirements if we see new concerns emerging, and to vary those or remove them when they no longer apply. That means that the system over time will be much more responsive and much more future-proofed. Will might want to come in with a couple of specific examples.
Seema Malhotra
Q
Sarah Cardell: My view is that it is entirely the opposite. Competition and open competitive markets are the foundation of an economy that encourages investment, innovation and growth. We see that from a vast range of economic literature and economic research. The work that the CMA already does is very much tied to driving innovation, investment and growth.
So the starting point is that open competitive markets are good for innovation, good for investor confidence and good for growth. We then need to make sure that the design of the regime delivers that, and that the implementation of the regime, by the CMA, delivers that. I think the design does, for the reasons that I broadly outlined, and obviously the scrutiny is then, rightly, on the CMA to make sure that in practice we deliver the regime in a way that inspires that confidence.
I think we will do that in a number of ways. The first is to look at the outcomes that we deliver, which will ensure that businesses, large and small, are able to grow, invest and thrive in these markets. The second way is to make sure that we have really strong stakeholder engagement. This is not a regime where we want to operate behind closed doors. The whole design of the regime is a participative approach where we will engage with a broad range of stakeholders, businesses and consumers as we consult on designation, design the conduct requirements, and then enforce against them.
Seema Malhotra
Q
Sarah Cardell: If I quickly take accountability, George might come in on secondary tickets. Accountability is key. The Bill gives us greater responsibility and power, and with that must come greater accountability. That comes in a number of forms. Parliamentary accountability is critical. We are accountable to Parliament. We do that already through a number of appearances and engagement with Committees, but I am sure that there is more that we could do in the design of that, and we are very keen to work with colleagues in Government and across Parliament to ensure that that happens. Accountability for our decisions through the courts is another important element, and accountability to stakeholders, going back to the previous point, is key as well.
George Lusty: On secondary tickets, the CMA has taken a lot of action in this area. It has taken Viagogo to court. We found ourselves up against some of the inherent weaknesses in the existing consumer protection toolkit when we did that. We effectively had to initiate an attempt to start contempt of court proceedings to get Viagogo to comply with the court order that we had secured. We think that many of the changes in the Bill will address those weaknesses directly by giving us civil fining powers for the first time. We set out specific recommendations back in August 2021 about other things that we think could be done, but ultimately it is a matter for the Government to decide what they want to include in the legislation.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
Q
Sarah Cardell: On digital markets, the design works very well, because you have an engaged approach where we will work with businesses to secure compliance with the conduct requirements. We hope that that will be a constructive engagement, and that much of that compliance will be achieved without any enforcement activity. That is the aspiration and the goal. Of course it is important to have enforcement as an effective backstop and that that enforcement happens rapidly for the reasons that you stated. The Bill envisages a six-month time limit for enforcement, which is important so that everybody knows that that timing is ringfenced.
On appeals, let me take a minute to talk through the JR standard and why I think that it is effective, because there has been a lot of debate about that. It is critical that the CMA faces effective judicial scrutiny for our work. That should go on the record. We think that the JR standard achieves that. The JR standard applies to much of our work already, including our merger control and market investigations. It applies to a number of regulators for their regulatory work already, so there is an established approach for JR.
What JR is not, certainly in our experience, is a very light-touch procedural review. It looks at process questions, but it also looks fundamentally at whether we have applied the right analytical approach, the kind of evidence that we have reviewed, how we have weighed that evidence, and the rationality—the reasonableness—of our decision making. Take the example of the Competition Appeal Tribunal review of our merger decision, which was a review of the acquisition by Meta of Giphy. We had 100-plus pages in that judgment, with 50-plus pages looking at our analytic framework, how we looked at the effect on competition, the kind of evidence that we took into account and whether we weighed it effectively. It was a very detailed critique of our assessment.
What JR does not do is start a full merits from first instance court process. It does not say, “Back to the drawing board—we are going to set the CMA’s decision to one side and then conduct the process all over again.” That is much more similar to the full merits review that we have at the moment on Competition Act 1998 cases. Our experience there is that it results in very protracted litigation—we often have cases that are in court for five or six weeks. But, fundamentally, it also changes the incentives to the parties that we are engaging with, because all eyes are on that litigation process. That means that, in our process and our own investigations, it is a lot harder to reach constructive, collaborative outcomes, because every point that we are investigating is thrown into an adversarial contest. It means that we have to turn every stone, check every piece of evidence and make sure that every point is covered, which means that our investigations themselves are more protracted and the litigation is much longer.
The benefit of judicial review in this process is that it provides absolutely robust and effective scrutiny, but it also supports an environment that is aligned with the aspirations of the Bill more broadly—to encourage engagement early on and to encourage constructive, collaborative outcomes. Then, of course, parties absolutely have the right to challenge and appeal our decisions and, where they do so, that is resolved effectively through a JR process.
Paul Scully
Q
Sarah Cardell: Absolutely.
Alex Davies-Jones (Pontypridd) (Lab)
Q
Sarah Cardell: I will give a high-level response, and Will might come in on some of the specific priorities for the DMU. It is really important to highlight the difference between accountability and independence. The CMA is independent when we take our individual decisions, but, as you say, it is absolutely accountable for those decisions, both to Parliament and to the courts. That is accountability for the choices that we make about where we set our priorities, accountability for the decisions that we take when we are exercising our functions, and accountability for the way that we go about doing that work. I think it is important to have accountability across all three areas.
On the strategic priorities, since I came into the role as chief executive and our new chair, Marcus Bokkerink, came into post, we have put a lot of focus on really setting out very clearly what our strategic priorities are, looking at impact and beneficial outcomes for people, businesses and the economy as a whole. We see those as a trio of objectives that are fundamentally reinforcing, rather than in tension with one another.
We also take account of the Government’s strategic steer. That is in draft at the moment. You can see that there is a lot of commonality between our own strategic priorities that we set out in our annual plan and in the Government’s strategic steer. That sets a very clear framework for our prioritisation.
Will might want to come in on how we will set the priorities for the DMU.
Will Hayter: We are obviously thinking very carefully about where to prioritise action under the strategic market status regime. We cannot jump too far ahead with that, because Parliament is going through this process now and we have to see where the Bill comes out, but, as Sarah says, we will be targeting our effort very firmly at those areas where the biggest problems and the biggest current harmful impacts on people, businesses and the economy are likely to be.
You can get a bit of a sense of what those areas might be from the areas we have looked at already, particularly the digital advertising market, search, social media, interactions between the platforms and news publishers, and also mobile ecosystems. We did a big study there, where we see a range of problems stemming from the market power of the two big operating systems.
We will continue to update our thinking as we go through the next year-plus, building on our horizon-scanning work and understanding of how developments in the markets are shaping up and what that might mean for where the problems are.
The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
Q
My question is about innovation. If you speak to some of those who are likely to be designated SMS—strategic market status—businesses, many of them might say, “Well, this will inhibit innovation from our businesses.” I think part of that is about the power to look ahead at where this may take us. What do you say to that? If one of those platforms was opening a new type of supermarket, for example, it might be claimed that this would limit innovation. How would you respond to that?
Sarah Cardell: I have a couple of points, and Will might come in. The general point is that this regime is very much pro-competition and pro-innovation, both from the major platforms, which are likely to be designated in relation to some of their activities, and across the economy. It is important that we encourage innovation that supports competing businesses, large and small. You can have innovation that supports an incumbent by allowing that incumbent to offer additional services, but sometimes at the cost of entrenching their market position. We want to ensure that we have an environment that enables those major players to continue to innovate, sparked and incentivised by the competitive pressure that they are facing, but equally allows smaller competitors to thrive and innovate too. That is the broad point.
As we have said, it is a very targeted and bespoke regime. We will be focusing only on areas where there is substantial and entrenched market power already. Therefore, the principal point is that businesses, large and small, will continue to be free to innovate and to develop their products and services. Of course we want to ensure that that happens in a way that does not reinforce positions of market power. Will, you might want to come in on that.
Will Hayter: As Sarah says, this is all about creating a fertile environment for innovation, and you can think about that at at least three levels. First, it might be that those companies are innovating on top of the platforms that we are talking about here—in mobile ecosystems, through app stores, mobile browsers, and so on. Secondly, there are companies that are seeking to compete directly against some of the big platforms, and we want to ensure that there is a possibility that the current incumbents will be knocked off their perch by tomorrow’s innovators. Finally, increasing competition should increase the pressure on the incumbents—the most powerful firms—to innovate further themselves, in a way that delivers the greatest benefits for people, businesses and the economy.
Kevin Hollinrake
Q
Sarah Cardell: I do not think that there is anything in the Bill that prohibits innovation. The fundamental design, and certainly the way that we would intend to operate it, is entirely pro-innovation. We want to ensure that, as the designated companies continue to seek to develop and grow their businesses—of course they will want to, and that brings many benefits—that happens in a way that does not entrench their position, which is disadvantageous either to consumers or to competing businesses. That does not inhibit innovation, but it puts some guardrails around that innovation to ensure that the impact of that is beneficial and positive.
The Chair
We now come to a quick-fire round. We have six minutes left and four Members seeking to ask questions, so we want quick questions and quick answers.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Q
Sarah Cardell: The short answer is yes. We are well funded in terms of our budget. We are carrying out significant recruitment, and we have a good breadth of expertise, which is particularly important to developing our digital data technology expertise. We have done a lot of that already, but it remains a key focus.
Neil Coyle
Q
Sarah Cardell: We have very substantial legal resources internally. We have a legal directorate of around 150 people. We will be growing our resource by more than 200 people over the next two years, and growing substantially outside London, which will be key for us.
Vicky Ford (Chelmsford) (Con)
Q
Sarah Cardell: The brief answer is that in our annual plan we set out our measure of outcomes: benefits for people in terms of great choices and fair deals; benefits for businesses in terms of enabling them to compete, innovate and thrive; and benefits for the economy as a whole in terms of growing productively and sustainably. That applies across the new suite of roles, powers and responsibilities. If you are looking at outcomes for people, what is the impact on prices and choice? Can people access their data? Can they move between services more effectively? What is the impact on businesses? Can they get fair and reasonable terms when they are reliant on the infrastructure of some of these major players in order to innovate and grow? Are we seeing innovation coming from smaller businesses as well as the incumbents? When we look at the benefit for the economy as a whole, do we see the flow-through of greater competition, improving productivity and improving growth? We have our “State of UK competition” report, which reports on that, and that will continue to be an important metric.
We are taking on responsibility for an annual consumer protection study, again looking at areas of consumer concern and the impact of interventions we are taking. You mentioned international benchmarks; I think that is really important. Obviously, a lot of these issues, especially on the digital side, are international in nature. We want to see benefits in terms of changes in international trends—there is a real opportunity here for the UK to set the model for positive regulatory intervention in digital markets, and for that to be adopted by others—and real benefits for UK businesses in terms of their ability to grow and innovate, and the investment that that attracts from overseas.
Vicky Ford
Q
Sarah Cardell: As one of our factors, absolutely.
Jerome Mayhew (Broadland) (Con)
Q
Sarah Cardell: I firmly believe it will draw investment in. Will, do you have a couple of examples of people you have spoken to?
Will Hayter: You have app developers who are wanting to provide a service through these mobile ecosystems that have pent-up business—I think you are talking to one of them later—waiting to be invested in and to grow. There is also a UK-based search engine looking for opportunities to expand. Those are exactly the kind of businesses that are trying to grow and want this kind of regulatory infrastructure to create the conditions to do that.
Dean Russell (Watford) (Con)
Q
Sarah Cardell: It is opening up choice; it is opening up access to the fullest range of services. It is enabling them to have confidence that their data will be used in an effective way and that they can move between different products and services so that they do not get locked in. When we think about the consumer side, daily we hear and see so much about consumer detriment. We are working as hard as we can to address that, but the consumer reforms will enable us to take a massive step up in terms of the impact we can deliver, the speed with which we can tackle their concern,s and the effectiveness with which we can deliver improved outcomes for people.
Dean Russell
Q
Sarah Cardell: Both. On engagement, we work very much with bodies such as Which? and Citizens Advice, which I know you are hearing from shortly, so we have a lot coming in. That is really important, because when we make the choices about the work we are doing, they need to be informed directly by consumer concerns, not be something that we just think is the right thing to do. We want to deliver that visible impact.
George Lusty: I think your constituents will see the CMA directly taking decisions. When we find that something has broken the law, they will find that we are taking direct orders to get their money back for them, and we will be imposing deterrent fines on the firms that do not do the right thing.
The Chair
I thank our three stellar witnesses very much indeed for their time this morning. We wish you continued success at the CMA.
Examination of Witnesses
Rocio Concha and Matthew Upton gave evidence.
The Chair
I welcome Rocio Concha, director of policy and advocacy and chief economist at Which?, and Matthew Upton, acting executive director of policy and advocacy at Citizens Advice. Thank you for coming this morning. Would you be kind enough to introduce yourselves to the Committee for the record?
Rocio Concha: I am Rocio Concha, the director of policy and advocacy, and the chief economist at Which?.
Matthew Upton: I am Matthew Upton. I am the acting executive director of policy and advocacy at Citizens Advice.
Seema Malhotra
Q
Rocio Concha: Let me start by saying that we are fully supportive of the Bill. We think that it will modernise competition policy and consumer policy in the UK, and that it will deliver clear benefit for consumers, businesses and the economy.
We are very supportive of part 1 of the Bill, which you discussed with the previous panel and which is about the additional powers to introduce a pro-competition regime. That is very important and we think that the regime will be proportionate and flexible, and will deliver benefit to consumers by providing more choice and lower prices.
One thing to say is that it important to look at the regime in its totality. The CMA explained that the regime is very proportionate and consultative. For it to work, it is important that the appeal process is on a judicial review basis, which is what is proposed in the Bill. That should be maintained as the Bill goes through Parliament. Obviously, we are very supportive of the new powers for the CMA to fine directly companies that breach consumer law. Why? Because that is a stronger deterrent to those businesses that may decide to ignore the law.
We are also very supportive of the Secretary of State having the power to act on the practices set out in schedule 18 that are clearly unfair. Why? Because we need a flexible system, particularly in the digital space where things move very quickly. We need that flexibility in the system as we identify additional areas.
You mentioned fake reviews. We welcome the commitment to include fake reviews in the Bill, but basically the commitment is that that will be introduced by the Secretary of State. We do not think that we should wait. Clearly, fake reviews are harmful, so the buying, selling and hosting of fake reviews should be included in schedule 18. We think that drip pricing is another practice that is very harmful. There is a lot of evidence that that is the case, and it should be included on the face of the Bill.
How will we measure this? When we look at our work and at the areas we want to focus on, we do quite a lot on consumer detriment; we also work with the Government and the CMA to see what the big areas of detriment are. We expect to see changes in the behaviours of some companies that decide not to follow the law. With the previous panel, you talked about, for example, the measures that the CMA took in the past on secondary ticketing companies, such as Viagogo. That took six years—six years of harm for consumers. We expect that, after the Bill becomes an Act, we will see action and that all those crimes that do harm will be resolved more quickly.
Seema Malhotra
Q
Matthew Upton: We have been asking for action on subscription traps for a long time. Any action is positive, but we are seeing this in the context of a cost of living crisis, where anything that takes cash out of people’s pockets stops them getting by from day to day. To be honest, we think that the intent is right, but this is potentially a huge missed opportunity for action on subscription traps. We have to understand how high the incentive is for firms to trap people in subscriptions. There is a huge amount of money to be made, to the extent that it changes the whole incentive structure so that for many firms, rather than thinking about how to provide a quality subscription, the rational thing to do is think about how to design the worst possible customer journey and to trap someone, whether through an online process that makes it difficult to cancel something—you will all have experience of this—or, to give a slightly facetious example, a process whereby you can cancel only when you ring between 2 and 2.30 on a Tuesday and you have wait for 45 minutes in the queue.
Obviously, we want to change that incentive structure so that we have a flourishing subscription economy, which should be encouraged, where consumers want to stay in subscriptions and firms focus on providing quality subscriptions. We do not think that the Bill as it stands will do that. For example, it says that exit has to be timely and straightforward. We do not think that that will work. We have been here before, if we think back to utility bills four or five years ago, when there was a big push to stop people rolling on to expensive contracts and to get them to switch. Regulators were focused on trying to dictate what went into letters to consumers about their renewals. Firms could make so much money by obeying the letter but not the spirit of the regulation that they would find ways round it, and switching rates did not go up. We think that the same will happen here.
The specific change that would make a huge difference and is legislatively straightforward is to provide that, at the end of an annual trial subscription, the default is that the consumer opts out. That is not about things like car insurance, where there is a detriment to people opting out, but for basic subscriptions, opt-out should be the default. That would allow firms to use all their ingenuity, power and influence to persuade consumers to stay in. They could go for it—send as many reminders as they wanted; that is absolutely fine. If the subscription is good, a consumer will stay in. That change will make the difference. We have done some polling on this and about 80% of people agree that that should happen. We think that it will put millions of pounds back in people’s pockets, that it is proportionate and that it will encourage a flourishing subscription economy.
Kevin Hollinrake
Q
Rocio Concha: A provision on fake reviews in the Bill should apply to both products and services. There is evidence to show that fake reviews also harm services. I do not think that there is a major risk. We and the CMA have produced a lot of evidence about how fake reviews are endemic on some sites. We have demonstrated the harm that they cause. It is clear what is needed. We know that we need to look at selling, buying and hosting. I do not see a risk to including such a provision on the face of the Bill. Then, in secondary legislation—
Kevin Hollinrake
Q
Rocio Concha: If there is something that needs to be improved, you can always do it with the Secretary of State’s power later. There is quite clear evidence to provide a clear steer on what is an unfair practice. Obviously, as with anything in schedule 18, you have that power to modify, to add to the practice as more evidence comes in. We will provide enough evidence to the Committee to show that it can be introduced on the face of the Bill.
Kevin Hollinrake
Q
Matthew Upton: I think it could, but we worry that it will not in reality. It is quite difficult to decide, for example, what constitutes easy and timely exit from a contract. You cannot necessarily measure it incredibly specifically, and I could imagine enforcement being really complicated. I could imagine firms dragging their feet, despite the way powers would speed up the ability of the CMA to act, as I say, because the incentive structure is so great.
One reason for the growth of the subscription economy is that it is a great way to provide services, but another is that it is such an easy way to make money by trapping people in. That is our firm belief and what our evidence shows. I just think a simple default would be much more effective than basically having the CMA chasing its tail and chasing firms. It would not be of any detriment to good firms who want to provide really solid subscriptions that people should want to stay in.
Richard Thomson (Gordon) (SNP)
Q
Rocio Concha: Our view is that it should be on the face of the Bill. We do not know why the right to redress has not been transposed into the Bill. From our perspective, we do not want to leave it for the Secretary of State to decide once we have an Act. It should be included.
The other thing is that the right of redress does not cover all the practice in schedule 18, only misleading practice and aggressive practice. It does not really cover all the list of unfair practice in schedule 18. I think that the right to redress should also cover that.
Richard Thomson
Q
Rocio Concha: You mean how—
Richard Thomson
How could we legislate create the framework by which the problem of fake reviews could be best addressed?
Rocio Concha: I think it needs to be in the list on schedule 18, and there is a very simple way to draft that amendment. We are going to suggest an amendment to help you with that, so I do not think that it is a major difficulty to include it on the face of the Bill.
Dean Russell
Q
Rocio Concha: I can give you some examples from the past so that you can see what consumers face. I already talked about the secondary ticketing problem, but I will give you another example. During covid, there were a lot of issues about people getting their refunds that they were entitled to by law. Many people could not really get them. I will give you another example on the digital side—that was on the consumer side.
At the moment, as you have heard from the CMA, digital advertising is basically controlled by two companies, Google and Facebook. Google has doubled its revenue from digital advertising since 2011 and Facebook used to make less than £5 per user—more recently, it has been around £50 per user. Google charges around 30% more for paid-for advertising than other search engines. All that cost translates into the products that we buy. We expect that once this pro-innovation, pro-competitive regulatory framework is put in place we will see it translate into prices.
We will also see it translate into more choice, in particular on data. At the moment, it is very difficult for consumers to have a choice on how much of our data is used for targeted advertising. You will have seen examples of that. When we talk to consumers in particular on the issues surrounding data, they feel disempowered. When we talk to consumers about the problems that they face in some of the markets where there are high levels of detriment, they also feel disempowered.
Matthew Upton: To be clear, there is a lot of good in the Bill. I echo Rocio’s first comments that there are a lot of positives. It has been a long time coming, and is a testament to the civil servants in the Department who have stuck with it. The main lens through which we see the impacts of the potential changes in the Bill is the cost of living. It is not exactly headline news that people are struggling with their bills. One of the main measures that we look at is whether one of our clients is in a negative budget: whether their income meets their essential outgoings. About 52% of our debt advice clients can no longer meet their essential—not desirable—outgoings with their income.
There are two areas where the Bill can make a real difference. One of the frustrations is that a debt adviser will go in detail through someone’s income and where they spend their money, helping them to balance their bills, and so on. You see the impact of other Government interventions, such as energy price support, putting money in their pockets and uprating benefits. You are combing through their expenditure and you find something like a subscription trial taking £10 a month—a huge amount for a lot of our clients—unnecessarily out of their account. They did not even know that it was there. Often, it is people who are not online, are not savvy, and are not combing their bills every month because they have a lot on. That is hugely frustrating, and things like this, especially if strengthened, could tackle that.
You will see similar things where people are just about balancing their monthly income with their expenditure and they get hit by some big scam bill or are let down by a company. Such companies are too often not held to account in the right way. It is a bit of a tangential example in some ways, but the hope is that the CMA’s increased ability to act and, in effect, to disincentivise poor behaviour towards consumers will lessen such instances as well.
The Chair
We have 12 minutes left, and five Members are seeking to ask questions, so we need to increase the pace.
Neil Coyle
Q
Rocio Concha: Definitely. Legislation is required to ensure that online platforms take responsibility for the products that they sell on their platforms. We have done lots of reviews and gathered evidence that shows that consumers in the UK can buy very unsafe products on those platforms. Online platforms should be doing more to tackle that issue. The issue probably requires separate legislation, but I want to make it clear that we need legislation, and we need it now.
Neil Coyle
Q
Rocio Concha: No, I do not think that what is in the Bill will really tackle the issue.
Jerome Mayhew
Q
Matthew Upton: In a sense, I disagree with you because I agree with your point about it being outcomes-focused. In a sense, you are right; it leaves it fairly open, which gives some space for people to interpret, but I think what will end up happening is that firms will get around those provisions in various ways. They will tweak the subscriptions to find other ways to find people to step in. We will have a game of whack-a-mole, where we chase around trying to clamp down, a little bit like we had in the utility-switching space of four or five years ago. Ultimately, whether people agree or not, that led to much heavier intervention in the market.
Just taking one step to move towards opt-out—in a sense, you are right; it is a process step—is incredibly simple in terms of aligning the incentives. I think that would mean you would have to do less of the tweaking, constant interventions and prodding of firms. It just sets up the incentives in a much more simple way.
Jerome Mayhew
Q
Matthew Upton: I disagree, because I think the simplicity of simply saying, “You opt out at the end of a period” gives clarity. I think it is easier for firms to interpret. In reality, under the current set-up, I do not think you will see a lot of firms thinking in a positive way about how to interpret it. I think they will think about how they can push as far as possible.
Customer journey design is so complex—this is the challenge of emerging digital markets. It is not a case of being able to say, “You have two click-through screens versus three,” so that constitutes easy or hard. There are incredibly subtle ways to make it difficult. I think a lot of firms would continue to put their efforts into thinking about how they can stay as close as possible to the law to avoid CMA sanctions, while effectively still making it psychologically and in reality difficult for consumers. An opt-out would just simplify it, and would take that thought process off the table for firms.
Alex Davies-Jones
Q
Rocio Concha: In what respect? On why we want them there?
Alex Davies-Jones
Yes. What you would like to be in there.
Rocio Concha: As I said, we would like to see fake reviews and drip pricing included, because there is clear evidence on them. There is also this issue of greenwashing. That should also be considered to be put in schedule 18 —we feel that we know enough to include it there. We have not done as much work in that area as we have on drip pricing and fake reviews, but we would be very supportive of including it in schedule 18.
Why do we want these areas in the Bill, versus them being included later under the Secretary of State’s powers? If they are not in the Bill, they will not be criminal offences, and they should be, because that will be a more credible deterrent for stopping these practices.
Vicky Ford
Q
Rocio Concha: Absolutely. That is one of the powers of that power. Basically, companies will know that they will not be able to drag the system for years, as happened with Viagogo and some anti-virus subscriptions. They will know that the CMA will be able to act directly. Hopefully, that will make businesses that do not want to comply with the law think twice.
Matthew Upton: I really agree. I cannot share a specific example, but we have had a lot of conversations with regulators and competition authorities after we have uncovered bad practice. We have said, “Listen—go after them.” We were met with a frustrated shrug of the shoulders—“There’s no point because they will run rings around us for a huge amount of time and we will end up with nothing. We have to use our powers where we can more clearly have impact.” As you say, that should now end. In a sense, we are more positive about the disincentive for poor behaviour than the fines themselves.
Rocio Concha: There is an opportunity in the Bill to make that deterrent even stronger. At the moment, in part 1 of the Bill there is the opportunity for private redress, which will allow businesses or consumers to apply to the court for compensation from companies that have breached the conduct requirements in part 1. It is very unlikely that consumers like each of us or a small business will use that power in the courts. But if we allowed collective redress—the co-ordination of consumers and businesses to get redress—that would be for those companies a credible additional deterrent against breaking the law. That is in part 1, in relation to competition.
There is also the opportunity to include a provision within the breaches of consumer law. At the moment, collective redress is allowed for breaches of competition law, but not for breaches of consumer law.
Anna Firth (Southend West) (Con)
You have given us a simple, practical way to end subscription traps through the opt-out. Do you have any other simple, practical amendments in the locker that would help better protect my consumers in Southend-on-Sea?
Matthew Upton: I have a very simple one, which echoes what Rocio said earlier: to add drip pricing to the list of banned practices.
Rocio Concha: For me, it would be fake reviews. As I said, we will suggest the drafting of amendments, to make that easy to include in the Bill.
The Chair
I thank our witnesses very much indeed for your precious time this morning; we appreciate it.
Ordered, That further consideration be now adjourned. —(Mike Wood.)
Digital Markets, Competition and Consumers Bill (Second sitting)
Tuesday 13th June 2023
(1 year, 1 month ago)
Public Bill CommitteesRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 13 June 2023 - (13 Jun 2023)
The Chair
Good afternoon, everyone. I need to call the Government Whip to move a motion to amend the Programme Order agreed this morning. The purpose of the motion is to enable us to hear from the witnesses who were unable to give evidence earlier today. Tuesday 13 June Until no later than 4.45 pm Chartered Trading Standards Institute Tuesday 13 June Until no later than 5.15 pm News Media Association; Publishers Association; DMG Media
Ordered,
That the Order of the Committee of 13 June 2023 be varied by the insertion of the following words at the end of the Table in paragraph 2—
—(Mike Wood.)
The Committee deliberated in private.
Examination of Witnesses
Professor Jason Furman, Professor Amelia Fletcher CBE and Professor Philip Marsden gave evidence.
The Chair
Good afternoon, everyone. Could each of the witnesses introduce themselves, please? One witness is in the room and two are joining us virtually.
Professor Fletcher: I am Amelia Fletcher, Professor of Competition Policy at the University of East Anglia. I should mention that I am also a non-executive director of the Competition and Markets Authority; I know you heard from our chief executive officer this morning. I am very much here, I believe, with my academic hat on and because of my role on what has become known as the Furman review, which kicked all this off.
Professor Furman: I am Jason Furman, Professor of Economic Policy at Harvard University; I am jointly at the Harvard Kennedy School and in the economics department. I was chair of the expert panel on digital competition, and I am thrilled to be with you—this morning for me, and this afternoon for you.
Professor Marsden: I am Philip Marsden, Professor of Law and Economics at the College of Europe in Bruges. I am deputy chair for enforcement at the Bank of England. I was a member of the panel here and was formerly inquiry chair at the Competition and Markets Authority.
The Chair
Thank you all very much for joining us. I call shadow Minister Alex Davies-Jones to kick off with questions.
Alex Davies-Jones (Pontypridd) (Lab)
Q
Professor Marsden: In the branch of legislation being considered internationally in this area, this is the only Bill with a pro-innovation approach written into it. That was our original intention in the Furman review—not to sacrifice any innovation by large tech platforms, but simply to unlock the opportunities for innovation from smaller, more diverse firms so that there were more ideas and more flow. I do not see any correct arguments at all that this will hinder innovation; if anything, it will do the opposite.
Alex Davies-Jones
Q
Professor Fletcher: I fully endorse that. When we did the review, we spoke to a lot of firms that were seeking to innovate in the digital space but were struggling. We heard that they really needed access to a whole number of things such as data. They needed access to customers and to be interoperable with systems out there. They needed access to finance. They found, essentially—some of them, at least—that the way in which the biggest platforms were working was making all that very difficult. They were concerned that although there had been a huge amount of innovation, at that point—and still, I think—firms’ ability to innovate was being gradually increasingly stymied by the conduct of the biggest tech platforms. We very much saw the Bill as a pro-innovation piece of regulation.
Professor Furman: This question is so fundamental. This legislation would have benefits for consumers in terms of price and choice, but far and away the most important benefit would be innovation. It was designed with that in mind; our recommendations, which the legislation took on, established firms with strategic market status. They would fall under these rules, which would give a lot of leeway to small and medium-sized UK businesses to really innovate and come up with their own models rather than being constrained. More competition would help innovation by the large platforms as well.
The other thing that is so important is that the speed in the digital sector is just so much faster than in other parts of the economy, so traditional anti-trust rules just take too long: by the time a case is settled or decided, everyone has moved on. Getting there at the front end and having something that is much more flexible and faster is critical in this sector.
The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
Q
Professor Fletcher: Amazon would have to be more precise about what it thought in the Bill would stop that. I think the Bill has trod a very careful, innovation- focused line between stopping the biggest tech platforms from inhibiting innovation by third parties and facilitating them to innovate themselves. The Bill is designed to only address the very biggest platforms in the first place, but also only to address the elements of their business where they have very strong market positions and entrenched market power. I think that way is the right way. As far as I know, Amazon would not be inhibited by the Bill from setting up those stores.
Kevin Hollinrake
Q
Professor Fletcher: I think the concern is to ensure that it is entrenched market power that we are addressing. The CMA recognises, as do we, that these are intrusive measures and you do not want to do them unless you are trying to address entrenched market power.
Professor Marsden: Personally, I agree that there is an aspect where the five-year period, which I find a bit too long, can be gamed by some of the potentially SMS—strategic market status—firms, but I understand why it is in there. I probably would have been more comfortable with a two or three-year period, because that is traditional for competition authorities and as far as they can look ahead in terms of crystal ball gazing. But I understand why it is there.
Kevin Hollinrake
Q
Professor Marsden: They could game the system in the sense of one thing being done by just slowly walking backwards, for example—“We are introducing so many innovations and having so many thoughts and thanks from various small businesses.” They could drown the CMA with a range of evidence that actually does not go to the point, which is: who is being excluded, who is being locked out and what are we as consumers and citizens missing by relying only on three or four types of seed in the environment, as opposed to a whole globe of seeds? That is the metaphor I would like to use.
Professor Fletcher: It is worth highlighting that if you compare the UK regulation with the equivalent in the EU, the EU has taken a less bespoke, less evidence-based approach. It basically gets a quantitative presumption, and that presumption is going to be relatively hard to shake. What we have done is much more evidence-based, bespoke and proportionate. Whenever you do that, it makes it slightly less administrable and slightly harder to actually make stick.
Again, I think a very delicate balance has been trodden, and it is the right balance. I think all of us would agree on that, and on the fact that Brussels has made it easier for itself, but it is arguably then not proportionate nor sufficiently bespoke. It is a very delicate thing, but I think it is in the right place.
Kevin Hollinrake
Q
Professor Furman: Look at the tools that the Digital Markets Unit would have under these provisions; the conduct requirements, such as fair dealing and open choices, are not brand new inventions. They largely draw on existing roles under anti-trust measures. It is just that they would be more explicit and clearer up front, and enforced more quickly. To some degree, at least in terms of the conduct requirements, this is not about imposing some brand new set of rules; a lot of it is about taking existing things and ensuring that they can be enforced in a clear and transparent manner.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Q
Some conversations that we have had have been more explicit about the increased costs of innovation, and the difficulties when there is no interoperability or access, and increased costs being passed on to customers. Is that consistent with your experience, and what are the likely economic benefits to businesses and consumers of this legislation? I will take Professor Fletcher first, and then we will come back to Professor Furman and Professor Marsden.
Professor Fletcher: That was exactly our experience. We heard about the importance of interoperability with systems, and access to data and consumers, and how all those things were not always effective. Some innovation was fostered by big tech and some was less fostered by it, but the point is that they were in control of what happened in a way that we felt was not right for a proper, innovative environment, and certainly not right if you want to see real, disruptive innovation coming through—and I think that is what we do want to see.
We also thought that interoperability, data portability and data access were all pretty intrusive interventions. Therefore—unlike what has been done in the EU, where they have particular rules that require interoperability and require data portability on a fairly widespread basis—we instead thought that that should not be part of the core code of conduct, and that the aim could be achieved via pro-competitive interventions that were evidenced, bespoke and really well targeted. Again, that has been taken through into the Bill’s design, and shows that it is targeted at the barriers to innovation that we identified.
Seema Malhotra
Q
Professor Furman: The short answer is yes, I think it gets it right. It strikes what my colleagues have described—and I agree—as a delicate balance. It depends on who is the head of the DMU and who is the head of the CMA.
In general, my experience with the regulators in the UK is that they are very thoughtful in understanding the importance of markets, competition and taking evidence seriously. The legislation gives them a certain amount of discretion. As my colleagues have testified, that is unavoidable; in a market and an environment where things are changing very rapidly, it would be very difficult to try to write into the legislation every single detail. This sets the standard for what the world should do. Frankly, part of the reason I agreed to do this project is that I would love to see the United States following legislation like this. I hope the UK serves as a model for the world in this regard, and I think it is doing so.
On innovation, I agree with Amelia that what we heard from businesses and reviewed in the academic research is that it is not just a question of how much innovation, but what type of innovation. Are you trying to innovate so you can be acquired by Google or are you trying to become the next Google? There is one thing that motivated us. It is very hard to see the future of this space, but four years ago we thought the next big thing would involve artificial intelligence and machine learning. Unlike the past waves of innovation—where IBM was dominant, and then it became about PCs so it was Microsoft, and then it was about the internet so it became Google, and we saw one wave after the next displacing the previous—we were very worried that because artificial intelligence required large amounts of data, it would not necessarily lend itself to a new upstart competitor, but would instead entrench the power of the existing ones. So far, what we are seeing with OpenAI and the role that Microsoft plays in it, and with what Google is doing in this space, is that it is largely playing out along the lines that we were concerned about. That is partly motivating us looking forward.
Seema Malhotra
Q
Professor Marsden: Let me take your first point with respect to evidence related to economic benefits. We had a natural experiment before this, called open banking. You will have heard things about this before. No matter what hopes or disappointments people had about open banking, we seemingly had the power at the time to investigate a market that had competitive problems but no anti-trust violations, so there was nothing we could address with anti-trust law. We identified certain competitive structure problems, and there was an expectation on us perhaps to break up the banks, and we hear that with respect to some platforms.
That power is there in the Bill, but with the Furman review and this Bill, which has been kindly carried forward by the excellent civil servants, our emphasis is on the idea of opening up these markets with the same kinds of ex ante obligations on the larger platforms that we imposed on the big banks. Did we break up the banks? No. Did we see massive amounts of switching from one bank to another? No, but we have evidence that British people switch their spouse more frequently than they switch their bank.
What we want is more engagement. We want customers, users and small businesses to be engaged with their platform—with their bank—and that is what we will be seeing. We saw new offers coming in without the extensive capital requirements to bring in a full new entry, but there were new services offers in real intermediation and disintermediation of various products. If anything, open banking allowed consumers and users to—I hate this term—have affairs. It allowed them to check out where they could get the best mortgage, the best loan and those kind of things. That disciplines the incumbents, especially HSBC and Barclays, to provide competitive offers themselves. That is an example, to me at least, about how a pro-competitive, ex ante set of rules on very large platforms with a lot of data can help diversify the economy without harming the platforms. If anything, it puts a little bit of heat under them. I think that was a good achievement, whatever people think politically about it. It was supposed to be a balanced, gradual attempt to try to fix a market that had competitive structure problems, and I believe that is what the Bill does here.
In terms of global leadership, the UK is definitely still leading, despite a bit of a delay. It is the most bespoke, nuanced and balanced bit of legislation that has been proposed so far that I have seen, as we have already discussed this afternoon. At the same time—I completely understand your jurisdictional point—there is a real zeitgeist politically around the world to introduce measures like these of some sort. Of course, they depend on the economic, political and legal backgrounds of the society, but I cannot imagine like-minded authorities and Governments not trying to work hard or co-operate in this space.
We are seeing some examples of that already in the digital space. It is not really an area where there is a competition of competition laws; it is more that this is a regulated solution that we are putting forward in various jurisdictions through a democratic process. It does not depend too much on the discretion of the authority. It depends on the process that the authority undergoes to understand the markets and to then work with the tech platforms to find out which remedies would be available. That participative nature is a very important part of this, rather than an adversarial nature where we just chase after the companies after they have done something that is alleged to be wrong.
Seema Malhotra
Professor Fletcher and Professor Furman, do you want to add anything?
Professor Fletcher: A lot of jurisdictions around the world are looking at this space. We talked earlier about how some of what we will achieve through this is stuff that can be achieved through competition law, and almost all jurisdictions have competition law. In a way, the more jurisdictions that have regulation, the easier it becomes for other jurisdictions to achieve some of the same things through competition law, because it changes the costs and benefits for the firms to change their business model.
The firms have quite an interesting decision to make on a global basis anyway about how much they do the same thing globally as they are required to do locally. I think it will vary depending on what thing it is. If it is terms and conditions, they can easily change that on a local basis. If it is interoperability, it is quite hard or rather more hard to design a system so that it has different interoperability standards in different places. We may well see an extraterritorial effect—not a deliberate one—because of the cost considerations and reputational considerations of the firms themselves. That will have a positive benefit in terms of providing a more consistent framework globally for the third parties that we are hoping to innovate. The more consistent global framework they have to compete upon, the better it is for innovation.
Professor Furman: The ideal thing would be if the whole world sat down and agreed how it was going to approach this problem and there was a single global system, or lots of countries co-ordinated and did the same thing. In practice, that is impossible, so what one should aspire towards is having essentially correlated actions in different countries, where different countries have similar rules and are looking at each other and learning from each other.
This puts the UK in a position to be a leader in that global process, and that, frankly, is the way mergers work already. It is not like there is a single global merger authority; there are merger authorities in economies around the world, but they use similar rules, are looking at similar evidence, come up with similar decisions and all, to some degree, talk to each other. That is what this is—an emerging correlation of approach.
We have seen in the United States in both the House of Representatives and the Senate legislation being put forward and in some cases being passed out of Committee that would accomplish some of the different pieces of what this legislation would do, frankly, more comprehensively than anything I have seen in the United States.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
Q
Professor Fletcher: I know this is something that Philip cares a great deal about. I will come in first and then let him have a go. We have talked about it being a delicate balance. I discussed the EU regulation, where they have gone very far towards ensuring administrability and enforceability by having the rules set out in the legislation with quantitative thresholds. That is how they have dealt with the need for administrability and enforceability.
We have tried to be more bespoke, as I have said, and more evidence based, but there is a real risk in terms of administrability and enforceability that we end up in the same place as we have been with competition law, whereby the cases get hugely burdensome and hard to bring to a conclusion within a sensible timescale, and there are insufficient agency resources really to do everything that is needed.
I think there is a real risk that if you play around with what might seem like tiny changes to the legislation, that could really threaten the administrability and enforceability of it, and we could lose the benefits of it over competition law and put us in a bad place relative to the EU—whereas at the moment I think we could show ourselves to be better in terms of getting the right balance by being more bespoke and evidence based. The appeals standard goes to that point. I strongly support the JR appeals standard because if we went for a full merit standard, it would be too far and would become inadministrable. I am sure the CMA would find a way to try to administer it, but I do not think it would be the right balance. I feel the same way about the customer benefits exception.
Paul Scully
Professor Marsden or Professor Furman, do you have any views on that? Professor Marsden, your screen has frozen. Professor Furman?
Professor Furman: That is unfortunate because everything I know about this topic has come from him. [Laughter.] I do not have anything to add.
Dean Russell (Watford) (Con)
Q
Professor Fletcher: It would make quite a lot of difference, but quite small differences. It would depend on the business that you were in. You might be an app developer. First of all, at the moment we have categories of rules rather than specific rules, so I cannot say exactly what it would do. For example, it could give you fairer access to app stores. If you were a seller through Amazon, which we were talking about earlier, it could give you fairer access to your own data on your own sales. I could probably talk for a long time about all the things that it could do, but I will highlight that you are, in that role, exactly who the law is targeted at helping.
Dean Russell
Thank you. I notice that we have lost one of our witnesses, so I will go to Professor Marsden—I mean Professor Furman. My apologies; I forget my own name sometimes!
Professor Furman: Fair dealing, open choices, and trust and transparency are three of the main conduct requirements. They are all designed to make sure you could not have a search engine hiding searches from your business, and that you could not have them preferencing themselves and directing to themselves instead of to you. You might benefit from some of the interoperability and data access by being given access to the data or access to a system that you could operate on, which right now one of your bigger competitors is doing, so I think it is preventing harmful and unfair things being done to you, but also affirmatively opening up some options. By the way, all that is good not just for innovation but for the consumer, because it will make things easier and more streamlined for them.
Dean Russell
Q
Professor Marsden: I will deal with that first, then I can go back to the appeal point, if you would like my views.
The Bill will make those big platforms compete, basically for the first time. You will hear a lot of guff about how they are in some sort of monogopoly competition with each other all the time, and some of that might be true, but they are not really—they really are not. We see that in the competitive structure of the market, in the profits and in the concentration levels and so on. We are not trying to reduce profits or anything like that; we are trying to allow others to have a chance. If anything, like with open banking, that will light a fire underneath some of the big platforms, which are telling you they are innovative, and they are, but they are usually innovative in a way that makes us more dependent on them. We are not that fond of dependence in such markets; we are fond of diversity, choices and allowing competition on the merits—for products to rise and fall based on their merits, rather than on whether they have satisfied the terms and conditions of a particular platform.
On appeal, briefly—I am sorry for cutting out; Zoom might not be a platform of strategic market status—I have heard many advisers to tech platforms that might be subject to the Bill argue that the appeal issue is not just a small thing in the legislation, but absolutely fundamental. I agree with them on two things: first, the Bill itself and the ex ante approach that we have been discussing are absolutely fundamental—that is the big change. Secondly, the change with respect to ex post enforcement—the review of the conduct requirements, the investigations, anything imposed on the platforms and so on—to me involves such an involved, open and participative process between the platform, the digital markets unit and other entities that it gives me a lot of comfort about due process. If anything, if there were a full appeal standard, we might as well move to a prosecutorial approach, where the DMU is a prosecutor and everything is adversarial, and takes 18 years in court.
That is kind of what we have now so, if anything, this is an opportunity really to understand the business models, to put in bespoke requirements, to test ably the remedies—that is an important aspect—and to release remedies if they are not working or if they need to be tightened up. That therefore shows internationally what the UK thinks about such practices, which might help with the global spread that Amelia was mentioning. However, I have to state firmly that I believe that judicial review takes a lot longer than a substantive appeal, and I think that if the Bill were amended to allow a substantive appeal or even a few years of substantive appeal, we might as well have not done the study at all and might as well not pass the Bill in respect of the digital prior arrangements, because it will just return us to what we have seen before, basically.
In contrast, the European Commission is allowing substantive appeal rights. If anything, I think that means that they will code for prohibitions. As Amelia said, the law is not as bespoke, so we are going to see: “Here’s your general obligation. I don’t think you are satisfying it.” Then there will be an appeal to the Court and a wait of 18 years for Luxembourg to make a ruling. Here, those issues we hope will be dealt with at the administrative stage, and whether the authority of the DMU or the process itself was fair and reasonable is something that the courts should obviously review. We welcome that scrutiny. In fact, if I were involved in any of this, I would very much welcome that kind of scrutiny at the judicial review level, which is itself a very intense form of review, so it feels perfect to have this JR standard, but I appreciate that you will have already heard a lot against that and will in future.
Jerome Mayhew (Broadland) (Con)
Q
Professor Furman: Political accountability is very much the broad approach. It is important that you have a body that approaches this transparently and predictably. I have a lot of respect for the role that you all play in the political system. You think that you should set the goals for consumer choice, innovation and so on, but it is important that what ultimately gets done is done in a much more judicial, regulatory way so that it is predictable for all the parties involved and does not change dramatically over time. In that, there is obviously the appeals process that was just discussed. That is not a political appeals process; it would be within the legal system.
I confess that I am not familiar with exactly how things would work in the UK. In the United States, Congress would have the head of the Federal Trade Commission, or whatever body was charged with this, up to testify. Generally, Congress would not ask, “Why did you bring that case yesterday?” but “Why aren’t you being more aggressive?” or “Why aren’t you being less aggressive?” They would try to oversee things at a strategic level, while leaving each case, decision and regulation to the regulator. Something like that system—I do not know exactly how you would do it in the UK—would be ideal.
Jerome Mayhew
Q
Professor Fletcher: I fully agree. I can see why there is concern about discretion, but the CMA has shown that it takes its responsibilities seriously. It also understands that it is answerable to the Government of the day on a strategic level, rather than on individual cases.
To follow what Philip said, JR is not a walk in the park. It is a pretty serious test, which the CMA has faced occasionally in the past. It is a very serious expectation on the CMA. I support the view that if you want investment and open and competitive markets, you must have a transparent, consistent framework, which has lots of legal certainty. I worry that too much political intervention risks undermining that.
Andy Carter
Q
Professor Fletcher: I have to confess that I am not aware of work that has specifically been done on that. It is worth seeing this as a global thing, and we are trying to play our part in creating a global environment that will foster global innovation. I think that by doing it here, we will set rules that foster much of that innovation and encourage it to come here. There will be people who have made estimates; my hunch is that most of them will be pretty back-of-the-envelope, but I confess that I have not seen them.
The Chair
Thank you very much. That brings the allotted time for this witness panel to an end. On behalf of the Committee, I thank you all very much for giving us your time.
Examination of Witnesses
Noyona Chundur, Peter Eisenegger and Tracey Reilly gave evidence.
The Chair
We will now hear from our next panel of witnesses. We have Noyona Chundur, chief executive of the Consumer Council; Peter Eisenegger, board member, National Consumer Federation; and, via Zoom, Tracey Reilly, head of policy and markets, Consumer Scotland. May I ask you to introduce yourselves for the record?
Noyona Chundur: I am the chief executive of the Consumer Council.
Peter Eisenegger: I am the director of the National Consumer Federation with responsibility for the digital perspective in the consumer world. From the nature of our response, you will see that we have also commented a lot on the standards world, so I think it is appropriate that I indicate my background there: I have participated in digital standardisation in the UK through the British Standards Institution, in Europe through CEN and CENELEC, and internationally through the International Organisation for Standardisation. We do our best to represent the consumer voice in those arenas.
Tracey Reilly: I am head of policy and markets at Consumer Scotland.
Seema Malhotra
Q
Noyona Chundur: Thank you for the great question. Perhaps I can start with a little bit of context. We believe that confident consumers will drive competitive markets. There is a lot that the Bill does really well. It is great progress, and I commend the work of colleagues in the Department, as well as partners in the CMA and Tracey from Consumer Scotland for their input in getting us to this point. There are eight areas that could be strengthened or clarified. There is building consumer confidence. There is the potential risk of only the CMA having direct enforcement powers. It is around the supervision of enforceable standards, practice and conduct of businesses. It is the ability to add and remove—
Vicky Ford (Chelmsford) (Con)
Slow down!
Noyona Chundur: Sorry, would you like me to step through each one? Would that be easier?
Seema Malhotra
You are going through them quite well, but could you go you through them slightly more slowly, because colleagues will want to write them down?
Noyona Chundur: The first thing for us is building consumer confidence as a priority, because prioritising consumer protection to build the foundations that create confidence in competitive markets will benefit both the consumer and the economy. We are looking at this through the prism of the cost of living crisis and through the heightened prism of vulnerability. In the packs that we provided, you can see that vulnerability has certainly increased in the last 12 months. The Consumer Council has dealt with over 33,000 consumers, and they are showing increasingly more complex and multifaceted needs. Income in Northern Ireland has—
Seema Malhotra
Q
Noyona Chundur: Understood. Did I get to adding to or removing from the list of banned practices in the Consumer Protection from Unfair Trading Regulations 2008?
Seema Malhotra
Could you start the list again?
Noyona Chundur: Okay. Building consumer confidence is a key priority for us. The second thing is the potential risk of only the CMA having direct enforcement powers. The third is perhaps expanding the Bill in some way to include the supervision of enforceable, standards, practice and conduct. The fourth is adding to or removing from the CPR list of banned practices.
Next is establishing enforceable minimum standards to alternative dispute resolution schemes. We welcome the mandatory accreditation as part of the Bill, but we would like to take it a step further. Then there is a question around better regulation of firms that exploit behavioural bias or nudge techniques for negative effect. Finally, we recommend going further on subscription traps with opt-in clauses after the trial or end-of-contract period.
Seema Malhotra
Q
Noyona Chundur: The key thing for us comes from research that the Government have published. I think the Department for Business and Trade estimated that 81% of UK households signed up to at least one subscription last year, and consumers are spending £1.6 billion per year on subscriptions that they do not want. That is a huge amount of money that a lot of consumers do not have in the current cost of living crisis. Our own research highlights the lived experience. In the online detriment research that we carried out, one consumer told us that they signed up for a 30-day trial but it took them six months to get the subscription cancelled. In the light of that, I think that it is appropriate for us to recommend that legislating for opt-in clauses after the initial trial or end-of-contract period is reasonable. I also believe that that may deliver the most immediate and material benefit to consumers in the short term, given the vast quantities involved.
Seema Malhotra
Q
Peter Eisenegger: Our overall approach here, at the more strategic level, is that the Bill contains lots of good stuff. It is a significant step forward. What we do not want is, as has happened with the Online Safety Bill, for it to hang around forever and not enter law. Our view is that we can talk about improvements in some areas. You mentioned one—the way that fake reviews are handled. To delve into that detail, however, would just prolong the process of getting it into law. We recommend that the Bill gets enacted as soon as possible, that we recognise it as a step forward, and that the CMA and this Committee look at areas of improvement beyond it. There is something that would relate to online reviews in terms of whether the information being provided is accurate, but it is good enough. Let us press on and get it done.
That said, I have not heard a discussion about the role of standards and supporting regulation. We are in the digital world, and an awful lot of regulation is supported by standards. You will find that General Data Protection Regulation is leaning very heavily on work in Europe to adapt and put some final European tweaks on the work that has gone on at the ISO level, and similarly with AI. If you want to be a leading player in this area, particularly an innovative one, from our perspective—we play in international, European and UK standards—you have to be very well aware of, and participating in, all those arenas.
To make an innovation comment—having spent two thirds of my career in product management and innovation, I am now doffing the consumer cap and putting the real-life innovation one on—good innovation practice is to look at what other people are doing and pinch as many legitimate ideas as you can from them. Quite honestly, the fact that the EU has the same sort of intent but a slightly different approach is great. Just keep an eye on its members to see whether there is good stuff. To be fair, I will say the same to them, because I am participating in the AI standardisation at the moment.
Seema Malhotra
Q
Tracey Reilly: Broadly speaking, we welcome the Bill. As your previous panellists said, it has lots of good stuff in it. It should provide the CMA with more flexible powers, which can be used in a more responsive and timely way to prevent detriment. On how the Bill will affect individual consumers, we hope that it will lead to consumers experiencing lower levels of detriment and being less subject to unfair, misleading or aggressive trade practices so that if and when such practices occur, they can be stamped out more quickly and easily, and it is easier for consumers to seek redress through ADR systems that are appropriately regulated and standardised.
In terms of how the Bill will affect Scottish interests, in many ways the level of detriment experienced by consumers across the UK is similar. The consumer protection survey is UK-wide and the patterns of detriment for Scottish consumers are generally not hugely different from those experienced in the rest of the UK. That said, there are obviously differences between the two nations in the regulatory enforcement and judicial landscapes, and it is important that we understand and pay attention to them. Equally, I understand that the Department has been engaging with Scottish stakeholders. We welcome that and would obviously like that to continue through the implementation process.
Some markets operate differently in Scotland, either because they are entirely devolved because there are fewer providers and therefore lower levels of competition, or because consumers access services differently, for example, due to geography. It is important that, within the overall UK framework, the system can respond to those regional differences or local issues. We hope that the additional levels of flexibility granted to the CMA under the Bill will allow for a more flexible and targeted response, particularly if any local practices cause detriment. We look forward to liaising with the CMA on that. Noyona may wish to make additional comments, given that she is in Northern Ireland.
Kevin Hollinrake
Q
Noyona Chundur: There is a heightened risk, Minister, if the new direct enforcement powers sit only with the CMA. Ultimately, the purpose of those powers is to be much more agile, flexible and responsive to consumer detriment in the market. Is there a heightened risk that enforcement will default to the CMA because perhaps it may deliver a solution that is much more agile and responsive and much more in keeping with the pace of detriment in the marketplace compared with a courts-based system? The sector regulators and trading standards could therefore have the same or similar powers. The question is about agility and responsiveness to detriment, which is exploding in the marketplace. We see it increasingly, particularly in digital markets, which evolve so quickly. That is our perspective.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Q
Peter Eisenegger: The Bill has clauses that allow us to address that in terms of, “Has the information put before the consumer been complete and accurate?” If something does not comply with safety standards, that has been omitted. It is a question of interpretation that we would have to nail down and make clear.
Neil Coyle
Q
Peter Eisenegger: This is an area where I have had a lot of conversation with Electrical Safety First, which is very concerned about it. We have started to outline, at a very preliminary stage, what constitutes an online market set of functionality for which people should be held responsible and—what do you know—Amazon fits that. We find that online retailers do not perform all the functions, but they perform enough to be reasonably interpreted as having a retailing responsibility in the traditional physical world. But they have to do the heavy lifting of getting stuck into the detail and mapping it out.
I am afraid I come back to the standards world, which tends to be set up to provide that level of detail for the regulation to lean on. There are standards for complaints handling, for alternative dispute resolution, for dealing with vulnerable consumers and for online reviews—all issues that touch on what we have said. They are there, and mainly my UK consumer colleagues in British Standards either instituted them or were very influential in getting them taken forward.
A personal expert view? Yes, I think it can be interpreted that people like Amazon have a retail responsibility. To provide the evidence and analysis to support that position, however, is work that we have started with Electrical Safety First, but we are a bit busy and neither of us has had the time to finish it off.
Neil Coyle
Q
Noyona Chundur: May I add something? Electrical standards are not my area of expertise, unlike consumer expectations around standards generally, so I will make a comment about that. Consumers expect minimum standards, particularly in new markets. It is worth saying that when we are talking about new digital markets, everyone is vulnerable, so there is no “vulnerable consumer” per se.
An interesting point to make is that we did a joint project with the Utility Regulator for Northern Ireland on what consumer expectations might be of future regulation and decarbonisation. Consumers were very clear that, in addition to trusted accessible information and concerns about costs or financial health, they wanted absolute protection from safety fraud, obsolescence or mis-selling, but they also wanted clear and robust standards on certification, registration and standards for installers, and protection against damage and disruption during installation. That is moving away from something that is perhaps more price-led and economic to where we need to have a minimum enforceable standard that works for everyone, so that we bolster the safety net and create confidence in markets. The more that we do that, the more consumer spending we have in the economy, which is good for everyone.
Peter Eisenegger: May I make a comment about enforcement? A backstop is in action at the moment: the class actions that our law now allows for the consumer world. My colleague Arnold Pindar, the chair of the NCF, is part of an advisory group that is taking on Mastercard at the moment. Another colleague, Julie Hunter, is fronting the case against Amazon about the way it presents its own products unfairly in its online marketplace. These names are in the public domain; I would not mention them otherwise. To a certain extent, the powers being provided to the CMA to be a bit more responsive and active make sense where we have class actions, which really is a major “after the horse has bolted” situation. We hope that the CMA will prevent more horses from escaping. Thank you for the opportunity to comment.
Vicky Ford
Q
Peter Eisenegger: Okay. The industry-led—
Vicky Ford
Are they industry-led?
Peter Eisenegger: You only get good standards when you have proper stakeholder engagement—that is a comment that we address in our supporting paper. You need standardisation bodies that actually work hard at getting their stakeholders involved. BSI is good at that, and the European system is pretty good. In the digital area, because there are so few of us with the right background and expertise, you find that the consumer voice is not getting through. I have two consumer colleagues who are on the BSI mirror committee for AI; they feel that the international standard is not reflecting what they are trying to input, because we do not really have anyone effective at the international level on the consumer side.
You need very careful insight into where there is decent stakeholder engagement and where there is not. Where there is, you are quite right: I have worked on a number of committees where the good guys and gals from industry have just been saying the right thing, and you end up just tweaking a little of what they already understand in their industry is good practice. There is no problem with working with the good people in industry, but—particularly in the digital space—you do get the big players coming in and influencing things, whereas the small and medium-sized enterprise stakeholders are not as fully represented. When a standard is put forward, careful understanding is needed of who the people are who are really contributing to it.
Vicky Ford
Q
Peter Eisenegger: Exactly.
Vicky Ford
Q
Peter Eisenegger: Yes, I can. It was a consumer-initiated standard on complaints handling. If you want the number, I can blind you with it: it was ISO 10002. It was initiated by the consumer side of ISO. It is clearly written for the big company: it has lots of good practice where you divide all the responsibilities, the analysis of the complaints and things like that. There is an annex for SMEs. I have been through the main part of the document and counted the number of requirements: there are more than 250. For the SMEs, there are eight.
Where you look at the consumer and it is your small local trader, you go, “That’s fine,” because they know you personally—you know where they live, basically, and that changes the whole local relationship. But you do not really see that many standards where the practicalities for the smaller company are reflected. I am quite pleased that the consumer world did a decent job for the SMEs there, because they are very important to us in terms of local service and providing competition to the big guys.
Seema Malhotra
Q
Peter Eisenegger: Do as much as you feel you can make time for, while getting the Bill implemented as quickly as possible. I come back to the key clauses that relate to the appropriateness of the information provided. Is it complete? Is it misleading? As a charity, we have looked at how heat pumps are being advertised at the moment. About 80% of the online information did not provide the right contextual information for your heat pump decision; some did not even mention it at all, and a few hid it away behind several layers of interaction with the website before you found it out. That would fall under the incompleteness clause, but again, you are going to come back. The CMA would be able to apply an interpretation, which would probably go through some sort of intense dialogue with the industry people concerned, but if you do not have time to cover all those other aspects as explicitly as you would wish in the Bill, I think there is a clause that gives the CMA some capability for addressing it.
Noyona Chundur: Maybe I can add to that. This talks to the point in the earlier session on how quickly or whether fake reviews should be automatically added to the list of bad practices, or should we go through full consultation. In all these things, we need to have appropriate consultation and the appropriate due diligence carried out. It needs to be done as quickly and thoroughly as possible so there is no doubt. I am completely supportive of what was said earlier today that there is a lot of detriment as a result of fake reviews, and the sooner that is resolved, the better. None the less, we need to be careful about setting the right precedents. We need to have consistency in procedural application. For all those things—I believe we are all in agreement that drip pricing is of huge concern, as are misleading green claims—we need to follow the right process and get through it as quickly as possible.
Seema Malhotra
I think Ms Reilly wants to come in as well.
Tracey Reilly: I simply want to endorse much of what Noyona said. There are issues around fake reviews, drip pricing and greenwashing that we all want to see addressed, and for that to happen as soon as possible. However, there is also a need to ensure that the definitions are right and the provisions are effective. We would hugely support the Secretary of State having the power, which is in the Bill, to amend the schedule by regulation. I realise that is a Henry VIII clause, which is not always popular, but in this case I think it is an acceptable use of that power, and it comes with appropriate safeguards in terms of the affirmative statutory instrument procedure and the requirement to consult first.
Touching briefly on greenwashing in particular, we acknowledge that existing regulators have powers to tackle that and that there are existing programmes of both education and enforcement. However, greenwashing claims are hugely prevalent and there is a lot of work to be done. It is an issue that, for us, has real risks associated with the net zero transition, because we are going to get consumers to make quite different choices around what they eat, what clothes they buy, how they heat their houses and what vehicles they drive. Some of those are quite big-ticket items in terms of cost, so there is a real risk for consumers and a real need for them to be able to trust the information they are given, which links back to the points my colleague Noyona was making about consumer confidence.
Seema Malhotra
Q
Tracey Reilly: Just a couple of quick points. There is a need to produce very clear guidance on the new plans and have very clear referral processes to the CMA for the use of those plans, so that advocacy and advice bodies have almost a direct line, if you like, into the points of contact. Essentially, it is about pathways and signposting, and ensuring that the routes from an individual consumer experiencing detriment to those who are able to take action on it are as quick and flexible as possible.
Noyona Chundur: From my perspective, I would ask for two things. The first is greater connectivity across the ecosystem. We all have a lot of data; we all have a lot of intelligence; we all have a lot of on-the-ground insights that should be shared and published in a more connected and co-ordinated way. Ultimately, that is more holistic, but it gives the level of granularity we need on a four nations basis. The other is greater focus on the broader issues of online behavioural bias and the exploitation of behavioural bias—you know, nudge techniques—to negative effect. To my mind, the Bill does not adequately cover that, so I believe this is an area of potential development.
As has been touched on already, vulnerability is not just about personal characteristics or social circumstances; the behaviour of organisations can cause harm and put you in a vulnerable position. That is a key area that we would love to see explored in more detail as the Bill passes through scrutiny.
Peter Eisenegger: In terms of support, having mentioned standards, there is a Government mechanism for providing the consumer arm of BSI with money to support its experts. Keep a careful eye on that, and work with BSI and its consumer arm to ensure that that is suitable for the level of really important issues we need to address.
There is another area of the consumer world, which is about the smaller, really voluntary charities, such as ourselves and the Child Accident Prevention Trust, which have no regular income and live hand to mouth. We have been on the brink of extinction every now and then, and although we have managed to haul ourselves back, it is a very precarious position. When we and others in a similar position contribute to this sort of arena or talk to regulators, our voice is valued and has something to offer, but we are very precarious. If Parliament looks at the people who really represent the grassroots and different perspectives and are without a regular income, and if something can be done, that would be extremely useful. Some of these voices drop out.
Vicky Ford
Q
Tracey Reilly: I think that is a very difficult question. Without remotely passing the buck, I think that ultimately it is a judgment for your Committee to take as to whether it considers there is sufficient clarity in the definitions proposed during the amending stages to allow for those decisions to be made now. If the Committee is confident that there is sufficient clarity, and the soundings you are receiving from stakeholders indicate that they are content, it is a matter for the Committee to decide. Ultimately, our position is that we want to see it as soon as possible, but we also want to see it done correctly, because as we all know it is very difficult to amend primary legislation once that is in place.
Vicky Ford
Q
Tracey Reilly: It is a very complicated area, not just in terms of how you define fake reviews but in terms of the precise powers that regulators need in order to determine where, how and when fake reviews are occurring. AI will make that an even more complicated picture, so it is important to get that right.
Jerome Mayhew
Q
“may hinder the provision of improved subscription offers that are in the best interest of the consumer”.
Can you comment on that? I will test the NMA if no one else does regarding what exactly it meant by that, and ask for examples of how it might hinder improved consumer engagement, but if the NMA can substantiate that, would you accept that it has a point?
Noyona Chundur: Perhaps, but I agree with what Citizens Advice said this morning: if your product is good enough and consumers want it, they will seek it out. Another point made this morning was that the consumer journey sits across multiple markets and is quite complex. That is where we are coming from. We are looking at the end-to-end consumer journey. In that context, consumers also want minimum standards. If you do not have minimum standards—if the default position is that you are just rolled on to another contract, and there is no opportunity to review whether that contract is the best for you, has the best price, is the best product or suits your particular circumstances—I am afraid that that does not necessarily give the consumer the best deal from a price or quality perspective.
Jerome Mayhew
Q
Noyona Chundur: Respectfully, I would say that most people will want the reassurance that the deal that they are getting every year is the best deal possible, is coming at the best price, is being delivered with the best service in mind and meets their needs, rather than the assumption that an algorithm or someone else has made that decision for them. Certainly the consumers we speak to want transparency, accessible communication and more choice. This is one way of giving them exactly what they want. I echo the sentiment of what was said this morning: if the product or service is good enough, people will sign up to it. It is nothing to fear, but it will raise standards and make for better competition and a more sustainable economy. Those are all good things, because they are being viewed through the prism of consumer accessibility and affordability.
Andy Carter
Q
Tracey Reilly: I probably had two or three examples in mind. One would be legal services, which are entirely devolved, so they are regulated entirely differently. Key parts of that market around complaints are regulated differently. Another would be one that we share in common with Northern Irish colleagues: the prevalence of off-grid heating systems. There may be ones where how you access services is simply different according to where you live; for example, there is the perennial issue of postal delivery in Scotland and Northern Ireland. Those were the types of thing that I had in mind.
We have regular and very constructive dialogue with the CMA about local issues, and about regional and sub-national issues. We hope that the Bill’s provisions will enable the CMA to deal flexibly and responsibly with those concerns. The framework that they operate, as with any body that has limited resources, makes prioritisation decisions on a UK-wide basis. We would like to ensure that regional and national differences, and differences for specific communities within the nations, can be dealt with as part of that. I think Noyona would probably welcome coming in on that point.
Andy Carter
Q
Noyona Chundur: Absolutely. A key regional difference, both for Tracey and for me, is the microbusiness economy. In Northern Ireland, 89% of our businesses employ 10 people or fewer. We are absolutely a microbusiness economy. We know that the experiences of many consumers and of many small businesses and microbusinesses mirror each other in multiple markets. Tracey’s point is about ensuring that the prioritisation principles, or the applications of how the Bill is operationalised on the ground, need to be mindful of the diverse experiences that can happen among the four nations.
Andy Carter
Q
Noyona Chundur: It is when you are pressurised into purchasing a product or service without even knowing that it is being served up to you because of an algorithm.
Andy Carter
Q
Noyona Chundur: It can happen in retail; it can happen in any digital market; it can happen in telecoms. It is a technique that is growing, and there needs to be further investigation and exploration of what that means for regulation. That is not just the job of the CMA; it will need sector regulators to play a part. It needs the whole ecosystem to coalesce, but also trading standards and trading standards in Northern Ireland.
Andy Carter
Q
Noyona Chundur: That is probably an algorithm. A nudge technique is perhaps a little bit more sinister than that: it is where you are being prompted to purchase products and services that you never thought you might need, based on your previous purchasing patterns and purchasing decisions. That may not come at the best cost or the best specification, and it certainly may not be the best offer to use.
Dean Russell
Q
Noyona Chundur: A communications campaign is fundamental. The language that is used, how the messaging is framed and how it is targeted to the various consumer groups will be key, as will consistency of messaging across the regions, not just from a UK perspective. It needs to be mindful of how consumers absorb information and who they engage with, as well as being mindful of communities. Consumers want clear, transparent information in plain English, so we need to make it simple for them. We need to be careful not to just push the onus on consumers to make decisions. The job of the Bill, and of Government, is to make lives better, so that is what we want to do.
Dean Russell
I will leave my second question, because I am conscious of time.
The Chair
Thank you.
That brings us to the end of the time allocated for this witness panel. On behalf of the Committee, thank you all very much for taking the time to give evidence.
Peter Eisenegger: Thank you for listening.
Examination of Witness
Professor Geoffrey Myers gave evidence.
The Chair
We will now hear oral evidence from Professor Geoffrey Myers, visiting professor in practice at the London School of Economics and Political Science. For the record, Professor, could you introduce yourself?
Professor Myers: In addition to my role at the London School of Economics, I had a prior 30-year career working for public authorities, competition authorities and regulators, particularly Ofcom, so I have hands-on experience of being a regulator. For full disclosure, I should say that I am one of the independent digital experts whom the CMA has appointed to assist it in preparing to take on the duties should this Bill become law. But I am representing my own point of view, not the CMA’s.
Alex Davies-Jones
Q
Professor Myers: I think on balance it will help improve innovation, and I largely agree with the comments made by the witnesses in the first session this afternoon, Professors Fletcher, Marsden and Furman. We need to think about innovation by big tech companies, which are the targets of the regulation here. They are likely to become the firms with strategic market status and to become regulated companies, but there is also innovation by their customers, by their competitors and by new starters.
On the innovation incentives and the ease of innovation, I think the playing field has been tilted a bit too far towards big tech and against the other set of players, so making it easier for that other set of players to innovate is very valuable. One of the tasks in implementing this regime, which I think is about the CMA doing its job well, is taking seriously potential concerns about deterring innovation from the SMS firms and making sure that the potential risks are minimised. I think that goes beyond what is on the face of the Bill and is really a task for implementation by the CMA.
Alex Davies-Jones
Q
Professor Myers: I think it strikes a sensible balance. As you have already heard, there are great advantages in having flexibility and future-proofing because of that flexibility. That implies a structure—a framework—that is laid out in this legislation, which will put quite a bit of onus on regulatory discretion to implement it, and then there are sets of regulatory capabilities and accountability that are needed to make that all work. But I think the Bill is a very good attempt at striking a good balance there.
Alex Davies-Jones
Q
Professor Myers: I think it does, because it heightens those points about flexibility and future-proofing. There is always a trade-off, so it is not that one system is uniquely better than another in every respect. The Digital Markets Act is more prescriptive and lays down specific dos and don’ts, whereas this approach—the UK approach, which I very much favour—does not. It sets the framework and objectives, and then it is for the CMA to develop specific regulations, both on conduct requirements and on pro-competitor interventions, in a way that is more tailored to the individual circumstances. I think that aspect is highly valuable.
Alex Davies-Jones
Q
Professor Myers: I do not think I have seen that full timeline to 2025, but I guess what I would say in that respect is that, yes, this legislation has taken a while to come to fruition. At one point the UK looked like it was going to legislate before the European Union, but the CMA has done a lot of preparatory work, and I am sure that it recognises that it needs to hit the ground running as soon as this legislation is passed. It is doing market studies and other work now. It is a well-resourced regulator in this area. The digital markets unit is up and running and doing active work, and obviously my digital expert role is trying to assist them in that work. There will undoubtedly be a time for implementation, but the CMA is well aware of the need to get on with it.
Kevin Hollinrake
Q
Professor Myers: I do not think it is that likely. It would be interesting to hear specific examples. As for the one that was commented on earlier, I did not quite see why this Bill would prevent that, as Professor Fletcher outlined. It may be that I have not heard the full set of reasons as to why it might prevent Amazon’s innovation in the very different area of retail outlets. The reason, which again goes back to the targeted and tailored approach in the UK, is that when the CMA designates specific digital activities where there is substantial entrenched market power and indeed a position of strategic significance, that is not going to include peripheral areas. It is going to be focused on what some people call the core areas of market power of the large tech companies, because that is where the market power concerns are largest. There is significant freedom outside that.
There are concerns about leveraging market power in the core markets into other markets, and it is appropriate for there to be an ability to address that through things like conduct requirements. However, you cannot introduce a new regulatory regime without some risk around how the incumbents—the regulated companies—are going to respond. Obviously you are looking for good responses, but it is almost impossible to avoid some undesirable effects. The way this Bill is set up, however, looks to minimise those adverse effects.
Kevin Hollinrake
Q
Professor Myers: Again, I think the Bill strikes quite a good balance with the judicial review approach. To bring in some practical experience from my days at Ofcom, I have had a role as an expert witness in quite a number of appeals of Ofcom decisions, in front of both the Competition Appeal Tribunal and the High Court. At the Competition Appeal Tribunal, those have been under different standards: there used to be a full-merits review, but recently that was changed to a judicial review.
I think what matters, as well as the legal standard of review as laid out in this legislation, is the nature of the appeal body. In this case, it is the Competition Appeal Tribunal. Compared with the High Court, these are specialists—both judges and lay members—with specialist knowledge and experience of dealing with both competition and regulatory cases. They have a greater appetite to get into the detail and merit issues, to the extent that that is compatible with the judicial review standard, than the High Court would. Having appeared in front of the Competition Appeal Tribunal under a judicial review standard, I can say, as I think Professor Fletcher did, that that is not a walk in the park for the regulator. You get a thorough testing, and what the Competition Appeal Tribunal is looking to identify is clear errors of either law or reasoning. I think that that is an appropriate way to strike a balance here.
Seema Malhotra
Q
Professor Myers: You heard some evidence earlier this afternoon about the relationship between jurisdictions in different countries. Clearly, the Digital Markets Act in the European Union is being implemented at the moment and the effects of that will come in. The longer the UK legislation takes, the more that will condition the context within which the CMA will have to operate in implementing this regime. That is probably the most likely thing. There are obviously some other countries that are looking into that, but that is probably the main issue I would point to.
Seema Malhotra
Q
Professor Myers: I do not think that that kind of timeline of 2025 means it is all a waste of time and we should not bother; I think it will still be important. It is not a complete all or nothing. There are some digital services where the platforms will want to standardise globally, but there are others where they will be interested in making national variations. I think the CMA can influence things using its competition powers. An example of that at the moment is the competition case it has had about Google’s Privacy Sandbox and the use of third-party cookies on Chrome. That is a Competition Act case where the commitments that Google has agreed with the CMA are actually influencing how it is operating Chrome globally, so there is still some scope for the UK to have a role even before this Bill comes in. Then when it does, obviously that will increase.
Seema Malhotra
Q
Professor Myers: Perhaps one of the few things I did not entirely agree with in the evidence room was when Professor Marsden talked about the participative approach which, again, is obviously not in the legislation, but is envisaged in how the CMA will operate. I do not think what you want out of that is a cosy relationship between the regulator and the SMS firms. You need to have a constructive relationship, but that is going to be adversarial. To expect it not to be adversarial to some extent is probably over-optimistic and, indeed, probably undesirable, but it is also very important for the CMA to build a wider set of relationships with the industry, consumers and smaller stakeholders, who are not so used to dealing with a regulator. It is important for the CMA as a regulator to have a good overview of a cross-section of all the views in the industry and not just be captured by the SMS firms, which they are inevitably talking to an awful lot.
The Chair
That brings us to the end of this session. On behalf of the Committee, I thank you, Professor, for taking the time to give evidence.
Professor Myers: Thank you very much.
Examination of Witness
Graham Wynn gave evidence.
The Chair
We will now hear oral evidence via Zoom from Graham Wynn, assistant director for consumer competition and regulatory affairs at the British Retail Consortium. Graham, will you introduce yourself for the record?
Graham Wynn: I am Graham Wynn. I am assistant director at the British Retail Consortium, dealing with consumer affairs mainly and a number of other issues for some years now—about 20, I think. Today, I am representing the views of members.
Seema Malhotra
Q
Graham Wynn: As far as the Bill is concerned, it is about 50:50. We would like the Committee to examine about 50% of the issues particularly carefully. Generally, we support the Bill—we think it does some useful things—but there are one or two matters of detail. On the other hand, we think that some omissions need to be looked at, whether in the Bill or elsewhere; they are necessary for the Bill to succeed.
We have some concerns about the enforcement landscape as a whole, the resources available to trading standards, and whether the Bill and its focus on the CMA will mean that trading standards go even more into the background. Members tell me they find that enforcement activity by trading standards has declined quite dramatically over the years. The other day, someone said to me, “Online, it is the wild west out there.” Although people try to comply with all the regulations, they find that many businesses—many of their rivals—do not do so, and that no one enforces anything. One of the issues retailers hope will be looked at is whether the whole regime, with the CMA’s new powers, will lead to better enforcement to create a level playing field for consumers and for businesses.
We are concerned about fake reviews. We support the banning of them. We wish that what the Government propose for them was on the face of the Bill. It is also important that people understand exactly what a review or a website should and should not include. They should include both negative and positive reviews, but it is very difficult to define what a fake review is and to ensure that whatever we come up with is enforced. The key theme is enforcement. It is no good giving people protections if they are not enforced.
The other thing is the CMA’s new approach to consumer issues and admin powers. We have a good relationship with the CMA. Members are more—let us say—acquiescent with the proposal to move towards an administrative-based regime. They accept that it has been debated over many years now, and that the Government are determined, so the key thing is to make it work. The real thing is to make sure that there is a good appeals system, independent of the CMA at the end of the day.
Another concern about what is missing from the Bill is the requirement for the CMA to accept primary authority advice. The CMA refuses to do that. When a business has been given primary authority advice—assured advice—that governs what other local authorities and trading standards do in the area, but that is not the CMA approach. We think that with its new powers, it is important for the CMA to accept primary authority advice, or indeed, to devise its own system by which it gives advice to businesses that is assured advice. It will do that in the competition area—on sustainability—but we think it would be very important in the consumer area as well.
There are other issues, of course. The review of the blacklist is another that I would pick out as one we are slightly concerned about. One of the dangers in all politics is a knee-jerk reaction to a political issue, and we think that one such danger is in adding to and subtracting from the blacklist in schedule 18 by statutory instrument, rather than right up front in primary legislation. We argued this in the EU when it first came out with the unfair commercial practices directive. We argued that successfully in relation to much retail and commerce across Europe. The point is that we want to make sure that anything that goes into or comes out of the blacklist is properly debated and analysed and so on, rather than going through virtually on the nod, which is likely even with affirmative resolution. Those are some of the things you might want to bring out, such as unit pricing, and you might want to ask about those.
Seema Malhotra
Q
Graham Wynn: Yes.
Seema Malhotra
Q
Graham Wynn: I think it is important that they co-operate and that there is a clear line of responsibility for each and a clear demarcation. The real problem with trading standards is not so much their powers but their lack of resources. One business with over 2,000 stores —not a supermarket—said the other day that the number of inspections and the number of times they see a trading standards officer has come down dramatically in the last few years. It makes it very difficult for those who are responsible for compliance in the business to persuade those who are responsible for, say, marketing and promotions to keep in line. The lack of trading standards activity makes that more difficult and also leads to a playing field that is not totally level. The problem is resources.
Kevin Hollinrake
Q
Graham Wynn: The view is, as I said, that we do not want to see what I call knee-jerk reactions to Daily Mail items that are politically sensitive or are political problems. The obvious answer is to say, “Let’s add it to schedule 18 as a banned practice.” It really is important that the schedule and what is in it is clear, clearly understood and that we do not add or subtract from it just on the basis of needing to get over a political problem, for example.
You can make sure that you do proper consultation and all that sort of thing, but we can understand why the Government would want to be able to add to it more quickly—obviously, primary legislation takes a while. In Europe, we certainly argued against Governments or the Commission being able to add to it willy-nilly. We were keen to keep it as something that had to be put in the directive originally. On balance, we would rather it was debated fully and that it amended legislation. Alternatively, you could decide to make changes once a year, say, rather than as you go along. That might be an alternative answer to the danger of a knee-jerk reaction.
Neil Coyle
Q
Graham Wynn: I should say that Amazon is a member of the BRC, so I preface my comments with that. Amazon does tell me that it is using AI and other means of ensuring there are not fake reviews, and that it takes as much responsibility as it can for product safety on its sites and for illegal products. Clearly others have a different view and think that it would be possible to go further and Amazon should be legally obliged to take more responsibility.
Again, throughout the Bill, the issue will be resources for enforcement, as it is in general. Be it fake reviews, subscription traps or the responsibilities of marketplaces and platforms, unless there is real, effective enforcement, people get the impression that something has been done without really having the rights that the Government say they have—when I say people, I mean consumers.
Kevin Hollinrake
Q
Graham Wynn: Yes. I think it needs to be done, but without committing us, we would expect it to be done in the context of a product safety review and how you are going to deal with product safety issues in the future. It needs a thorough examination, including the role of marketplaces, their general obligations and what is practical and proportionate. I would not add that to this Bill now, because it requires more of an assessment and consideration than would be possible.
Seema Malhotra
Q
Graham Wynn: ADR is not something that our members are exercised about in the same way as some other people are. Those who are responsible for selling high-value items tend to be members of ADR schemes. Their criticism of the current arrangement has been that they are not convinced that there is a full assessment of the ADR providers, so everything that is necessary to give them the confidence to use the systems. They believe that that perhaps has held back ADR schemes from really taking off in some places.
Those who sell high-value items—kitchens, some white goods and furniture items—generally are members of ADR schemes. Those who sell groceries, as they are generally called these days, including food and non-food, tend to feel that it is not really appropriate for them because of the cost. When dealing with something worth only a few pounds, it is much cheaper and much more sensible to just deal with the consumer and, ideally, give them their money back if there is a problem, rather than take everyone through ADR. It is not necessarily the best approach. However, the accreditation system and making sure that companies abide by what they are supposed to do in ADR is vital to have confidence in general.
The Chair
I am afraid that brings us to the end of this witness session. Thank you very much for your evidence.
Examination of Witness
Max von Thun gave evidence.
The Chair
We will hear now from Max von Thun, Europe director of Open Markets. Max, would you introduce yourself for the record?
Max von Thun: Thank you for the opportunity to give evidence on this important piece of legislation. I am Max von Thun, the Europe director at the Open Markets Institute, which is a competition policy think- tank. We focus on the risks that arise from corporate concentration, and advocate for policies to tackle that. Prior to working at the Open Markets Institute, I spent several years in the private sector advising on competition and tech policy, and also here in Parliament advising MPs on economic policy. I have been following the UK digital competition debate for quite some time now.
Alex Davies-Jones
Q
Max von Thun: That is very important. We think the legislation as it currently stands is very strong. It very much represents the approach that has been recommended initially by the Furman review and then by the Digital Markets Taskforce, and will go a long way towards promoting competition in digital markets. There are a couple of areas where we have seen some campaigning—particularly from some of the larger platforms—including on the review standard, which a lot of people have talked about today.
There are a couple of other areas of the legislation that, although not necessarily designed to be loopholes, could have that effect. Other speakers have talked about the countervailing benefits exemption. You might want to see some changes to prevent that from being abused or from stymieing the enforcement of the new system. Similarly, I point to the five-year criteria that the CMA will need to use to establish whether a platform has entrenched market power. Although it makes sense to base market power not just on a platform’s dominance in any one year, at the same time making it forward-looking with such a long timeframe will give platforms opportunities to put forward arguments as to why they should not be designated as SMS. For example, they might point to new technologies like generative AI and say, “We look dominant now, but there’s all this disruption coming down the future, so you shouldn’t designate us.” That is another area you will want to make sure is fit for purpose. Overall, it is a strong Bill and the priority should be getting it through as quickly as possible.
Alex Davies-Jones
Q
Max von Thun: Sure. I mainly refer to some examples given by previous witnesses. I am thinking, for example, about issues we have seen with data in the digital economy, where dominant platforms such as marketplaces collect data on the sellers using their platforms and use that to compete against them or produce products that compete against them. The flipside of the coin is restricting data—sometimes generated by the users of the platform —by not allowing those users to use it to improve their business operations. Self-preferencing is another problem. That can be everything from a large dominant firm pre-installing its own app on its operating system and making it hard for competing providers to get their app on to the system. You see interoperability restrictions—for example, where it can be hard for a third party or a competing platform to have access to the fundamental software or hardware it needs to produce a good product.
With those sorts of practices, which we have seen over the past decade or so, there have been lots of competition investigations, particularly in Brussels, to try to solve them, but we have not really seen much success or the introduction of much competition in the market. With the conduct requirements and especially the pro-competition interventions, hopefully the Bill will be able to address that and help smaller players to really compete in the market.
Vicky Ford
Q
Max von Thun: Obviously if someone has produced a particular product or service that you can buy in a game, they should be entitled to profit from it. The main issue that we have seen with purchases from app stores, which are increasingly what people use to access these games through their phone, is that a small number of companies—basically Apple and Google—are using their control of the app stores to take a very big cut. They take up to 30%, which is not what you would be seeing in a competitive market. Sure, it is fair that they get a share of the proceeds, because they are putting in the time to maintain these app stores, but 30% seems quite steep.
Another issue is that it is hard for alternative payment providers to offer their services on these systems, because you will be forced to use Apple or Google’s payment solution, for example. That also makes it easier to charge high commission rates. I think it is about allowing the large platforms to play their role, but making sure that they are not using that power to exclude people.
Vicky Ford
Q
Max von Thun: I would say yes.
Vicky Ford
Interesting.
Max von Thun: But you do have games where one company will provide the fundamental game—the world that you play in—but allow third parties to interact with it and sell you an outfit to wear in the game, a weapon or something like that. That kind of interoperability is very feasible, and you can have different companies co-existing.
Vicky Ford
Thank you—and sorry, colleagues, for the family discussions.
Max von Thun: I am not a huge gamer, but that is my take.
Andy Carter
Q
Max von Thun: Overall, I think it would be very positive for those types of firm. As others have said, this Bill is very targeted: the actual regulatory obligations apply to only a very small handful of dominant firms. It is not legislation like the Online Safety Bill or privacy regulation, where you are creating a compliance burden for the whole tech sector; it is very targeted at dominant firms.
As I mentioned earlier, if you look at what the Bill is trying to do, it is very pro-innovation. It is really about introducing contestability into the market. The combination of the conduct requirements, which are more about stamping out some of the problematic anti-competitive practices that we have seen over a long period, and the PCIs, which we think are a more significant tool because they allow you to inject competition into the market through interoperability and opening up data, will be very good for start-ups. I think it will give them more confidence to launch businesses that directly take on the dominant tech platforms.
At the moment, if you are a smaller firm, your strategy will often be to grow to a certain point and then get bought up. That is how firms design their business model, and investors will often look at it that way, but if through legislation you change the picture, you will change the incentives and create more opportunities for companies in the UK to scale up to a global level.
Andy Carter
Q
Max von Thun: Yes, to an extent. The merger requirements for SMS firms are really just about reporting. They require SMS firms to let the CMA know if they are acquiring companies that meet certain thresholds. That will allow the CMA to avoid things slipping under its radar. Another part of the Bill is about what is called an acquirer-focused threshold, which is basically designed to prevent what have often been called killer acquisitions from taking place. Those are acquisitions that do not meet the UK’s merger control thresholds when it comes to turnover or market share, because they are very small start-ups that do not generate much revenue but that often produce very innovative technology.
The tech giants buy them up either to prevent eventual rivals from emerging or to use that technology to extend their dominance into new markets. The Bill will prevent some of that. That means, to an extent, that in some cases involving very large platforms it will be harder to be bought up if you are a start-up. It is important to acknowledge that to an individual founder being bought up by a big tech firm can often be attractive. Big tech firms can pay a lot of money to acquire you. They can offer all sorts of technical and logistical expertise to help you to grow, but if we look at the wider ecosystem, those deals can be very harmful, essentially by eliminating competition.
Think of what Instagram might have become had it not been bought up by Facebook. Rather than just being part of Meta’s business model, it could be challenging Facebook. To take a more local example, DeepMind, a leading AI company, was bought by Google in 2014. Had it not been, it would be an independent AI company. That would have put the UK at the forefront of a lot of the development in general AI. Obviously, the UK is already doing well in AI, but now DeepMind is part of Google’s empire and subordinate to Google’s business objectives. Those are some of the reasons we should care about this.
Also, if you make it a little harder for these companies to buy up start-ups, the market will respond. The UK already has a lot of alternatives. It has a very healthy venture capital scene—I think the best in Europe. If it is harder for big tech purchases to take place, investors will partly fill that space. I am sure that there are things that the Government can do as well to incentivise private investment—maybe investing themselves in some cases, as they did with the Future Fund, and so on. There are a lot of other routes that, in the long run, are better for the tech sector than these types of deals.
Kevin Hollinrake
Q
Max von Thun: Honestly, not really. If I look at what is in the legislation, focusing on the conduct requirements and the PCIs that the large firms will have to comply with, what I see is something that says, “You’re allowed to operate in the UK. You’re allowed to grow in the UK. You’re allowed to invest. You just have to play by the rules. You can’t use your dominance to unfairly exploit small businesses or prevent rivals from emerging.” It does not stop them investing lots of money in R&D or hiring top talent. We are seeing all the innovation that they are doing now, and I do not see anything in the Bill that will stop that.
More broadly, there is quite a lot of evidence, not just in tech but in other sectors, that more competitive and less concentrated markets are better for innovation because challengers invest a lot of money in trying to take on the incumbents because they believe that they can replace them. The dominant firms have to defend themselves, and they invest more to protect themselves. The Bill will have that effect.
Lastly, particularly since the whole debate around Microsoft and Activision, we have seen to an extent an attempt to conflate the interests of a small subset of dominant firms with the wider tech sector. That is often a mistake. What is good for a large majority of tech start-ups may not necessarily be good for big tech firms. It may be, but it is important to separate out the two.
The Chair
Are there any further questions? In that case, on behalf of the Committee, thank you very much for coming to give evidence.
Examination of Witnesses
John Herriman and David MacKenzie gave evidence.
The Chair
Thank you all very much. We will move on to our next session to hear from John Herriman, chief executive, and David MacKenzie, lead officer, from the Chartered Trading Standards Institute. Could you introduce yourselves for the record?
John Herriman: I am John Herriman, chief executive of the Chartered Trading Standards Institute.
David MacKenzie: I am David MacKenzie. My day job is with the Highland Council on trading standards, in the sunny north of Scotland. I also have a role with the CTSI across the UK for free commerce and related issues.
Seema Malhotra
Q
John Herriman: Obviously, as you have heard, we have been very publicly supportive of the Bill. The key point, which I know others have made, is that in the online marketplace and the landscape, it feels like a bit of a wild west out there—I know that term was used this morning—and there has been a lack of protection for consumers and clarity for businesses. We have also seen that dramatic change in business and consumer behaviours, particularly during the pandemic, which is good for consumers, businesses and the economy. Trading standards absolutely sees that first hand. Trading standards plays a very unique role in this discussion; we are at that interface between the business and the consumer, so the lens through which we look at this is consumer confidence. Essentially, that is what we are really taking a perspective on.
We very much welcome the Bill and the new powers, particularly for the scope of the CMA, which we work with closely. We think it provides clearer legislation and changes to CPRs. We think it will enable quicker and stronger action, and we think it is very supportive of competition and innovation but, as you have alluded to, we do think there are some opportunities in the Bill where it could go further and where it would not impact on competition and innovation, and also where it would be more supportive of consumer confidence. We are happy to talk in more detail about those.
It is probably best to explain that we are both here because I can take that very strategic view and answer questions about that. David is our lead officer for the online marketplaces, so when we get into more of the technical detail he will be able to answer some of those questions. Essentially, in those areas around drip pricing, fake reviews, subscription traps and greenwashing, we think there are opportunities to go further or for some further discussion.
We also think the Bill addresses the national issues around the CMA’s powers, but we do not think it is sufficiently robust in some areas to enable trading standards which, in the context of this conversation, does the place-based and local regulatory enforcement and support for local businesses and enterprise. That national system does not work effectively if you do not have the local system working effectively alongside it, because they are mutually supportive of each other as part of that same system.
Seema Malhotra
Q
John Herriman: It is a combination of both. David will be best placed to comment on the powers. Essentially, there are some issues there that we would like to consider, but it is also a factor of capacity. If I just focus on that, David can answer the second part of the question. From a capacity point of view, trading standards over the last 10 years or so—I think the National Audit Office reported back in 2021; it has also just done a very recent report—has been hit by about 50%. Relative to other regulatory services and local governments, regulatory services—according to the latest National Audit Office report—have been hit by about 25% cuts.
Trading standards has been hit exponentially harder than some of those other services. If we do not have enough capacity, we cannot do the enforcement activity. If we cannot do the enforcement activity, we cannot ensure that there is a level playing field for businesses. There is a definite capacity issue there. This Bill will make the legislation more robust, but we also need the capacity alongside that to make that system work effectively, because regulatory systems do not work effectively unless you have the right levels of enforcement capacity. David, do you want to answer the other part of that question?
David MacKenzie: We really welcome the strengthening of civil enforcement in the Bill. It introduces a range of potential punitive sanctions that can be imposed on businesses. That potentially strengthens our position, and we really welcome that.
At the same time, as John says, that is really dependent on our guys up and down the country being able to utilise that through civil enforcement, which is still a relatively newish thing for us. Our officers are very well versed, over many decades, in criminal law investigations and going for prosecutions. The civil law is relatively newer. Along with these new powers, there needs to be a bit of a campaign across the whole UK to ensure that local authorities have the skills and necessary legal backing to take these cases. I have certainly discussed that with the Department and will continue to do so.
Those are the good things in the Bill—giving us more powers and more sanctions. Our disappointment is what is not included: officers’ powers. The way that I like to characterise it is that the existing powers are very good, but are they very good for a world that is changing all the time? They are essentially based on one of our officers being on physical premises, doing the work.
The powers are all really good: powers of entry, of inspection, to test, to get documents, and all that kind of stuff. But we increasingly find that, when it comes to the documents side of things, if somebody still has a filing cabinet with bits of paper in it, that is fine—we can get that and use it as part of our investigation—but, as we would all expect nowadays, even small business do not operate in that way anymore. The information will be in the cloud; it will be somewhere else that is not necessarily accessible from those premises.
Seema Malhotra
Q
David MacKenzie: The current powers do not give us direct access to that—they just don’t. The Bill addresses that to a degree in that, in terms of entry under a warrant, as long as the files are accessible—again, from that physical premises—there is an extra power there. We welcome that. That is good progress. But it is important to realise that the vast majority of our investigations are done not under warrant, but using normal powers of entry, so the vast majority of situations are not covered by the change.
Even when the power is exercised through warrant, and we are able to use the new provision, that is only when the files are accessible from that premises, but we are increasingly finding that the local branch manager just does not have access to that information. I suppose that we are calling for a general power to access that information, in the same way as if it happened to physically be on those premises, and to be able to use it in all cases, including criminal prosecutions.
The other point that goes along with that is about online enforcement and takedown powers. I think it would really surprise the public if we told them that we do not have any formal powers of takedown at all for any online content. The only way we can do that is through ways and means—trying to get platforms to do the right thing and all that kind of stuff. It is long past time that we got a formal takedown power.
Seema Malhotra
Q
David MacKenzie: Absolutely, yes. It could be a whole website, an account on a website or just a narrow bit of content. The Bill contains the concept of online interface orders that the CMA can apply to the court for, and we think that that should be applied to other regulators—particularly trading standards, from my point of view, but to other regulators as well. I think that if we are to be taken seriously in—
Seema Malhotra
Q
David MacKenzie: Absolutely. A lot of the stuff in the Bill that replaces the consumer protection regulations is really good, and we really welcome it. There is still some stuff around the definition of “trader” that we think is a little bit of a missed opportunity.
There are two angles. When does a consumer become a trader? How many things do you have to sell in an online marketplace before you become a trader? That is a difficult judgment for us to make and we feel that some work should be done on that. The point you have made is equally important: the status of the seller in an online marketplace. We think there should be a requirement for the online marketplace to declare whether the seller is a consumer or a business because that makes a massive difference to the consumer rights of the buyer and it also makes a difference to what we do.
If someone is a business seller, they have to comply with all consumer law; if they are a private seller, they do not really have to comply with anything, so this is for both consumers and for us. To be fair to other businesses that operate on the site, we think this is a necessary change that is not in the Bill.
Kevin Hollinrake
Q
John Herriman: That was another point that we wanted to make. This is not the only legislation that impacts on the landscape: the product safety review is fundamentally important in this space. The key point there is being clear on where those boundaries are.
We will be contributing to the product safety review. It is fundamentally important that it should come out quickly, so that we can address it and respond to the consultation. We can then look at that in the context of this Bill and others that it might impact on as well. We think that some things would be best placed in the product safety review—anything to do with legislation there—and would not appear here. But it is important that those provisions work hand in hand over a similar period, so that we can make sure that there are not any gaps. Consumers will then be better protected and businesses will have the clarity that they need, which is really important for them.
David MacKenzie: I agree with everything John said, but if we leave all these issues to the product safety review, presumably that would apply only to unsafe products. There is a wider range of situations for which we need these take-down powers when it comes to fair trading—scams and so on.
Kevin Hollinrake
Q
David MacKenzie: No.
The Chair
If there are no other brief questions, I bring this session to a close. I thank the panel on behalf of the Committee. This is perfectly timed as there will be votes shortly and we will be away for quite a long time. Thank you very much. We have spared you having to wait an hour or so.
Examination of Witnesses
Owen Meredith, Peter Wright and Dan Conway gave evidence.
The Chair
Q
Owen Meredith: Hi. I am Owen Meredith, chief executive of the News Media Association. We represent companies across local, regional and national news media in about 900 brands across the UK.
Peter Wright: I am Peter Wright. I am editor emeritus of DMG Media. We are a major British and international news publisher.
Dan Conway: Hello, everyone. I am Dan Conway. I am chief executive of the Publishers Association. We represent publishers of books, journals and educational materials of all shapes and sizes in the UK.
Alex Davies-Jones
Q
Owen Meredith: First, it is important to welcome the Bill. As many people around the room know, alongside many other organisations across the economy we have been pushing for this Bill for some time, so it is pleasing to see it. It is in very good shape, albeit we will want some parliamentary scrutiny no doubt and the opportunity to tighten up some of the policy intent to ensure that it is fully reflected in the language on the face of the Bill.
Clearly, the imbalance of power that exists between news publishers and platforms is self-evident. It has been documented extensively from the Cairncross and Furman reviews through to various CMA reviews. At the moment, a handful of tech platforms are an essential gateway and a key discovery route for consumers to find news online. As consumers increasingly shift their consumption of news online, rather than from print—in the local market, north of 70%, and in the national market, north of 80% of consumers read news online—that is not fairly renumerated and rewarded back to the original investors and content creators of that journalism.
For society, we all understand the importance of that journalism, particularly in the online world combating mis and disinformation, but we just do not have a balance of power between those two players. On the one side, we have in particular smaller, local, independent news publishers, even up to large multinationals, but on the other, we do not have access to the right information or data about how our news is being surfaced and used on the platforms, including search and across social. We do not have an asymmetry of information to be able to negotiate fairly, so it is a take-it-or-leave-it approach by the tech platforms to how our content is used by them.
Peter Wright: You asked where the Bill possibly does not do the job. I would agree with Owen: it is a very good Bill and long overdue. I was on the Cairncross review five years ago, and it is great to see some of the things we were talking about bearing fruit.
One area you might want to look at is the final offer mechanism; there is a helpful table on page 38 of the explanatory notes. You can see it is a 13-stage process, and I think what to us might be the most important bit is information sharing, which comes at stage 8. If that process can be speeded up in any way, that would be immensely helpful.
The other thing that I would like to flag up and the thing that concerns most of us in the industry most of all is that you are likely to face concerted lobbying from the online platforms over the review process. From our point of view, that will not truthfully be about the justice of decisions made by the CMA; it is a delaying tactic. We hear that the platforms and the big City law firms will get together and to ask for a merits-based process, which would mean that every decision by the DMU is subject to appeals that are likely to involve weeks in court, with months or even years before decisions are taken.
If that happens, the whole purpose of the Bill—this whole structure, which we believe to be very good, and a great deal of work has gone into it; it is legislation that is likely to be copied around the world—will simply be nullified. It is vital that we stick with the judicial review process that is in the Bill.
Alex Davies-Jones
Q
Peter Wright: The crossover between the two Bills is not that great. The real risk regarding fake news is that the most expensive news to produce is the high-quality public interest journalism that I am sure everybody in this room wants to encourage. If you cannot fund it, and at the moment it is a great struggle to fund it, the space will be taken by people who are not proper journalists and are not working for responsible news organisations with complaints procedures and people you can sue if you get it wrong.
The really serious danger is that because the online platforms have over the last 20 years sucked billions of pounds out of the news production in this country, the internet will be filled with conspiracy theorists and people producing cheap, easy-to-manufacture news, largely copied from other outlets.
Kevin Hollinrake
Q
Owen Meredith: We broadly support the Government’s policy and intent as I understand it in terms of helping consumers to manage subscriptions, particularly subscriptions that they are not aware they are in or for services they are not using. My concern and our organisational concern is that currently it is set out in the Bill too prescriptively, and there is a real danger that you end up in a situation where consumers are being bombarded by subscription notices and they become blind to them.
I would put the analogy out there of the cookie banner, which I think they are hoping to get rid of through different legislation before the House at the moment. There is a danger that consumers are just blinded by the amount of information they are being presented with as stand-alone notices, with the frequency and nature in which they have been spelt out in legislation. While I do not fundamentally disagree with the Government’s policy intent, I do not think how it has been crafted in the Bill at the moment necessarily achieves that in the way we would need it to.
Kevin Hollinrake
Q
Owen Meredith: It would not make it more difficult for people to exit contracts; it would ensure that consumers still have access—
Kevin Hollinrake
The cooling off period was—
Owen Meredith: It would ensure that consumers still have access to the offers that would be available to them in the current system of processing. If you subscribe to a service that you are using and you wish to terminate it, there are multiple ways you can do that, either via online touchpoints for most of our subscribed services at the moment or via a call centre. If a call centre phoned you and said, “You’ve been using this service for 12 months. We can identify through data that you have been reading the content. Can we ask you what the reason for cancelling is and if we can retain you as a customer with the right promotion?”, I think that would be in the consumer’s interest.
Kevin Hollinrake
Q
Owen Meredith: The removal of the cooling off period for us is a concern around how that technically applies and whether consumers have had benefit that they are then seeking to be refunded for, despite having engaged with and received the benefit.
Dean Russell
Q
Peter Wright: They will benefit through the quality of the journalism they are offered. Every news organisation —we are no exception; we went through a period of redundancies earlier this year—is having to trim their editorial budgets, because you cannot make sufficient revenue in the present digital advertising market to support the scale of editorial resource that you would really like.
Commercial news publishers have seen revenues falling, despite inflation, over the last two decades. At some point, we need to have a mechanism that gives us—this particularly applies to smaller and regional publishers—a level playing field and levers we can pull to bargain with these vast companies. I have colleagues who work at not inconsiderable regional publishing companies, who do not even have a telephone number they can ring at Google, so they just have to accept whatever terms Google offers. We are slightly more fortunate in that we can ring Google, but we do not necessarily get an answer.
Dean Russell
Q
Peter Wright: Absolutely. I once worked as a local paper journalist in Watford. Tristan Garel-Jones was the MP then; he used to pop into our office once a week. He was very assiduous—I would recommend it! I do see this legislation benefiting them. It is more important to them than to anybody else.
The Chair
I will bring in Andy Carter to ask a brief question. I would like us to be able to wrap up soon to avoid detaining our witnesses for up to an hour. If everybody is agreed and there are no further questions other than Andy Carter’s, I will call him to ask his question.
Andy Carter
It is a question to Dan. I am very conscious that you have sat here and not had an opportunity to say anything. Could you give us a broad overview of how the Bill might affect the publishing sector?
Dan Conway: Thank you for the question. I will keep it brief, as I am conscious of everybody’s time. I am primarily here to talk about the role of Amazon in our area of publishing. Amazon has done great things to expand digital markets in books, has great partnerships with UK publishers and has got books into the hands of readers all over the world—and that is a great thing. But we firmly believe that we are now at a tipping point in terms of regulation with Amazon, as they have such entrenched market power in the book market that we need modern proportionate regulation to make sure that that entrenched market power does not lead to anti-competitive outcomes.
By our best estimates, Amazons sell over 50% of the print books in the UK market and about 90% of the e-books and audiobooks. That is monopoly power in selling print books and monopsony power as the sole buyer in retail books. It makes them a gateway company for my members; they are an unavoidable trading partner for any UK publishing company in the UK market, and we strongly support the Bill because we think it will help.
We think Amazon should be assigned strategic market status with the code of conduct that goes alongside it. We particularly support clause 20(2)(a) on trading on “fair and reasonable terms”. It is our view that currently, because of Amazon’s role in the market, publishers are not often able to trade on fair and reasonable terms. We heard from other witnesses about “take it or leave it” terms; effectively, if you are a small publishing business in the UK market, if you enter into a negotiation with Amazon, you are offered “take it or leave it” terms and you cannot negotiate with a retailer of that size.
Andy Carter
Q
Dan Conway: Yes, absolutely. As a trade association, we have to be one stage removed from that for obvious legal reasons, but our members have fed back to us on areas of concern, and we hear that Amazon is removing buy buttons, labelling products as out of stock, delisting products and refusing to stock products without reasonable cause—and all that is in the middle of a commercial negotiation. You have a major retailer that is able to use its size effectively to distort upstream competition through those kinds of tactics. I can absolutely look and see what we can write to you about that.
The Chair
Unless there is anything else, I will bring this session to a close. On behalf of the Committee, I am grateful to you all for the rapid responses you have provided. Thank you very much.
Ordered, That further consideration be now adjourned. —(Mike Wood.)
Digital Markets, Competition and Consumers Bill (Third sitting)
Thursday 15th June 2023
(1 year, 1 month ago)
Public Bill CommitteesRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 15 June 2023 - (15 Jun 2023)
The Chair
Good morning. We are sitting in public and the proceedings are being broadcast. We have Mr Ross with us; thank you for your kind attendance. Will you introduce yourself to the Committee for the record, please?
Neil Ross: Yes. My name is Neil Ross. I am associate director for policy at techUK, which is a trade association that represents about 1,000 technology companies that operate in the UK.
Alex Davies-Jones (Pontypridd) (Lab)
Q
Neil Ross: As you rightly said, techUK represents the wide breadth of the tech sector. Our members fall broadly into three categories: the likely strategic market status or SMS firms, which will be regulated; their immediate challengers, which stand to benefit the most from the Bill and which I think you will hear from later; and a third group, the wider tech sector, which sees the benefits of the Bill but is perhaps not engaging as deeply as others.
The Bill sets up a structure and confers on the digital markets unit powers to boost competition in digital markets. The way those powers are set out is sound, but how they are exercised is something that happens after the legislation has passed. Ultimately, whether the Bill results in a positive regime depends on a number of things: how the regime has its priorities set; how it is held accountable by this House and by Government; how proportionate the regime is, in terms of when guidance is consulted on and who is engaged with after the scheme is up and running; and how we ensure that the checks and balances in the regime—such as the appeal standard—work for the Bill.
Alex Davies-Jones
Q
Neil Ross: The key thing that the digital markets unit will have to do is to ensure that it is actually consulting those companies and engaging with them throughout the process. At the moment, the rules for how the digital markets unit will consult are not set out in legislation—the Bill just gives a duty to consult, and subsequently the digital markets unit will issue guidance on how it will do that—but, ultimately, we want to ensure that those companies are involved at pretty much every single stage of the discussion and that they are able to submit evidence privately to engage with the DMU informally. Competition regulation often uses requests for information, which can be quite heavy-handed tools to extract information from firms, but we think that the DMU will have to come up with a much more sophisticated way of doing its stakeholder engagement, which is likely to involve a blend of panels, stakeholder engagement and those RFIs, to make sure that it does not overburden smaller and challenger firms, which will want to feed in but will be cautious about going through the legal mechanisms.
Alex Davies-Jones
Q
Neil Ross: We have seen this throughout the process of consultation on the Bill and in submitting evidence to the Committee. We have found that smaller and challenger firms, which often have very tight commercial relationships with the larger companies and often rely on and benefit from them for scale and various things, are very sensitive about what they can and cannot submit. The Bill says very little about confidentiality requirements, so the DMU will have to set out in a lot of detail how that is going to work. We really encourage it to ensure that it consults those firms closely, to make sure that there are clear guardrails around what confidentiality marks are put on evidence that is submitted, what could be shared in summaries, and so on. That is going to be absolutely critical to make sure that the DMU can actually gather the information it needs to do its job.
The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
Q
Neil Ross: There is a risk of that, so we have put forward a position that aligns with what the Government want, which is an appeal standard that is principally based on judicial review principles, but has the flexibility to consider the different requirements of the case. Both techUK and the Government have pointed to the standard used by Ofcom as one that would be suitable in this case. The issue is that we are not sure that with the way the Government are applying the standard in the Bill, it will actually meet that test. As far as I understand it, the Government have set out a legal position that the appeal standard will be flexible because the Competition Appeal Tribunal will be able to look at human rights law, as well as private property rights, to consider how that standard will flex. We have tested that legal argument very widely with members—in-house legal counsel as well as other lawyers—and, to be blunt, a very limited number of people share that view.
Ultimately, what we want to do is work with the Government to see where we can go further to provide additional clarity on how that appeal standard would work—what the flex would look like. Ultimately, the standard will have to principally sit in JR principles, but have that flex higher up.
The point you made about speed is also hugely important. We set out a position saying we would like to see a standard that makes sure that any appeals are limited to about six months in length, because these are very fast-moving markets. If the standard means that things are bogged down, you know that the market might move on and the benefits might not be conferred across. We understand why hard limits might not be possible as part of the regime, but you could take steps in the Bill to try to encourage the courts to move a bit quicker, especially in more dynamic or high-impact cases.
Kevin Hollinrake
Q
Neil Ross: Yes.
Kevin Hollinrake
Q
Neil Ross: It is a concern that has been raised. There is nothing in the legislation that would mean that that was what happened. It is going to rely much more on how the digital markets unit itself exercises its powers. I think that if we can make sure that the regime is proportionate, is accountable to Parliament and has a pro-innovation focus, we can get over that. But it could happen. It is just that it is much more dependent on the subsequent guidance and the role that the DMU itself plays.
Kevin Hollinrake
Q
Neil Ross: If the digital markets unit, as I think the Government and the CMA intend, is focusing on a small number of firms with very significant market share in a select number of markets, then yes, that will be the case. However, some concerns have been brought by other companies, which are perhaps leading in their market but would not consider themselves as having a strategic position or causing serious consumer harms and which look at the Bill and think, “At its widest possible scope, I could be included.” That is why we have to make sure that, in exercising the powers, the regime is being held to account.
The Chair
Mr Ross, we will now have a quickfire round, because we have you for only another five minutes and there are three Members seeking to ask questions. It will be one question each and one answer each.
Jerome Mayhew (Broadland) (Con)
Q
Neil Ross: We put out a position paper ahead of the Bill being published and we did not argue in favour of full merits; we argued in favour of what is often referred to as a judicial review-plus system, which is a blended system that gives a bit more flexibility for the CAT to decide what factors to take into account.
Jerome Mayhew
Q
Neil Ross: I am not 100% sure of exactly how it would work in practice. We are just reporting back that what our members are really keen to see happen is that they move forward at speed. There is a lot of debate about exactly how you speed up that process, and we are pretty open to what solutions might be brought forward.
Jerome Mayhew
Q
Neil Ross: Yes, absolutely.
Jerome Mayhew
Q
Neil Ross: I think there is a balance to be struck depending on what the case is and what is being discussed. Ultimately, the aim would be speed and flexibility. There are going to be trade-offs between the two, depending on what is happening. We want to give the CAT as much discretion as it needs to make that judgment, depending on what is being put before it. Because this regime has enormously flexible and very invasive powers at the upper end, we do not know exactly what kind of cases are likely to be brought forward or discussed. That is why we will want that focus on flexibility as well as speed.
Andy Carter (Warrington South) (Con)
Q
Neil Ross: Yes. Sorry to repeat points I have made before. I think it depends on exactly how the DMU exercises the power. They have to look ahead five years when making an SMS designation, which puts a lot of pressure on the digital markets unit to make an assessment about how a market is going to be used.
Andy Carter
Q
Neil Ross: It is as much as five years; it could be longer. It is really how the digital markets unit looks at that. Companies in the broader sector would be given a lot of certainty if the DMU came out fairly early on and set up a priority list of where it is likely to look first. There is quite a good precedent in the Communications Act 2003 of the reporting powers conferred on Ofcom. I know the CMA has some reporting capabilities, but given the wide-reaching powers of the Bill, it might make sense to also think about applying the same standards to the digital markets unit.
Vicky Ford (Chelmsford) (Con)
Q
Neil Ross: With this Parliament, the CMA is here quite a lot and so are the other regulators, so there is regular scrutiny of the regulators themselves. As the various different Bills go forward, whether that is the Online Safety Bill, the Digital Markets, Competition and Consumers Bill or the Data Protection and Digital Information (No. 2) Bill, we might have to think again about exactly how we are scrutinising those interrelated bits of digital regulation. That is a decision for this House and how you want a change of structures. It would be important to make sure—
Vicky Ford
Q
Neil Ross: That is certainly one example to look at. I know a number of people in this House are actively thinking about that, given the loss of those Committees following the referendum.
Vicky Ford
Q
Neil Ross: Not really. I do not think we would necessarily go so far as to advise Parliament on how to set up a Committee structure.
Vicky Ford
Q
Neil Ross: They certainly do, and we can get back to you on that if that is something you wanted in more detail.
The Chair
Mr Ross, you have been a complete star. Thank you very much indeed for your time.
Examination of Witnesses
Gene Burrus and Tom Smith gave evidence
The Chair
We move on to the next panel. Gene Burrus is coming in by Zoom. Tom Smith is in the room with us. Mr Burrus, please introduce yourself to the Committee briefly.
Gene Burrus: My name is Gene Burrus and I am here on behalf of the Coalition for App Fairness, which is a coalition of mobile app developers numbering over 70 at this point, from the UK, the US, the EU and around the world. I have been a competition lawyer for 30 years and have worked for the last two decades in dominant digital platforms, with time at Microsoft, Spotify and now in private practice.
The Chair
You sound dangerously overqualified. Mr Smith.
Tom Smith: I am a competition lawyer and have been for 17 years. I most recently spent seven years as legal director at the CMA, including working on the digital markets taskforce that recommended these proposals. Two years ago, I went into private practice and launched the London office of a competition boutique firm called Geradin Partners. I advise a lot of companies on competition and digital regulation.
Alex Davies-Jones
Q
Gene Burrus: If properly enforced, I think this Bill will break the distribution monopoly that currently exists with respect to mobile devices. Currently, app developers have no choice but to use the existing app stores of the dominant firms, Apple and Google, if they want to get their products to consumers. This Bill holds the promise that that monopoly will be broken, so that if the fees are too high in any given instance or for a particular developer, they will have other options and other ways to get their products to consumers. We think it is a great step forward. It is a problem that has been recognised around the world and various approaches have been tried to get at that problem. This gives the DMU the flexibility to both develop bespoke solutions to this problem, as well as the ability to future-proof what is going on, which will take us a great deal forward on avoiding that specific problem and, I think, the broader problems that come with the distribution monopoly that exists.
Alex Davies-Jones
Q
Tom Smith: From my point of view, the Bill is very well drafted indeed. It gets it exactly right; I think a lot of careful thought has gone into it. It is really a very modest approach. The CMA cannot do anything at all unless it can prove its case to a high standard, which can withstand the appeals in court, but the Bill gives the CMA the right amount of discretion. There is a list of categories, for example, in clause 20, which gives it enough discretion without giving it unbounded discretion to roam over the strategic market status firms’ wider groups, for example.
Alex Davies-Jones
Q
Tom Smith: It is a concern with existing competition law, and that is why this Bill is needed. The Bill as currently drafted is exactly right. For example, the judicial review standard is the right one. It is the well-established standard for UK regulators. It is the standard used for the CMA’s market investigations, for example, which has the exact same legal test as the pro-competitive interventions under this Bill. It would be quite strange to have a different standard. By definition, one party may not like the outcome of a given decision, but everyone benefits if there is a prompt outcome, because everyone can get on with running their businesses rather than fighting in court.
The best example of fighting in court forever is the Google Shopping case in Brussels. That was started by a complaint from a UK company, Foundem, back in 2009. Unbelievably, it is still going through the courts now. Foundem has long since stopped operating, so whatever the outcome in the courts, it is not really going to benefit them. This Bill will enable the DMU to intervene before harm materialises, so that businesses do not go out of business so quickly.
Alex Davies-Jones
Q
Gene Burrus: I think the opposite is actually true. We will see immediate benefits in terms of costs to consumers, when the taxes that the dominant players are able to extract are eliminated. We will see immediate benefits in terms of innovations and features that can appear in apps that right now are being prohibited by the dominant platforms. Those things can appear immediately.
Longer term, too, the opportunity to truly unleash innovation on mobile devices is key. We are in a place in history much like we were in the late 1990s when one company owned access to the internet. As mobile devices have taken over as the way consumers access the internet, we are now in a similar position where two firms manage access to the internet. Just as intervention with Microsoft 25 years ago led to the explosion of firms just like Apple and Google that could reliably build their businesses on PC computers, we will see firms able to reliably build their businesses on mobile devices. The long-term unleashing of innovation will be key here.
Kevin Hollinrake
Q
Gene Burrus: I am not sure that those concerns are really valid. There is a consultation process in place. I agree with the prior witness that it is important for third-party input to be part of that process with the DMU, so it can fully understand what it is implementing and the ways in which it is doing that. We have seen problems emerge in the past in competition law cases with respect to trying to craft orders without sufficient input from industry, and those have fallen on the rocks as being ineffective or unwise. We saw that, for instance, when the European Commission attempted to settle cases with Google long ago. They would reach a settlement, then finally market test that settlement that they thought was great, and industry would pan it. I think that is why, with sufficient third-party input into the process with the DMU, those concerns can be addressed
Kevin Hollinrake
Q
Gene Burrus: Quite the opposite. I think it will drive their innovation as well. Right now they are in a position where they are not often faced with competitive constraints with respect to innovating on things such as the privacy and security of their app stores and features that they need to put out. Or, when they self-reference their own products, sometimes that means that they do not have to make the best product; they just have to make the product that they can ensure users will get whether they want it or not.
The Bill will not only unleash innovation for third parties, but force the SMS firms to innovate more in order to keep up. I think history proves that is true. I will go back again to that point in time 25 years ago. Even with all the constraints that were put on Microsoft, nothing has prevented it from innovating. In fact, Microsoft is still a great innovative company today.
Kevin Hollinrake
Q
Tom Smith: May I add something quickly on the JR-plus proposal? I think it is strange to come up with a whole new appeal standard when we have perfectly good ones already. Also, the JR-plus standard came in, as far as I understand it, to comply with an EU telecoms directive. It is strange in this period in our country’s history to start putting that standard in place again. The direction of travel is in fact the opposite—to go from merits to JR—and another place in the Bill actually does that. It is the same for Ofcom; that went from merits to JR in the Digital Economy Act. I really do not see the JR-plus standard working.
Also, it is all very well putting a deadline on an appeal, but you need to explain how you will complete the process in that time. It will not work if you just put a deadline on it, then expect everyone to do 18 months’ work in six months. I think you need to explain how on earth that would work, because I do not see it working.
Andy Carter
Q
Gene Burrus: I think that ignores and rewrites the history of how these platforms got to be as powerful as they are today. If you go back in time to 2008, for example, when there was intense competition among mobile platforms to be your phone, right? There were dozens of firms that you barely know exist any more, like Blackberry, like Nokia, like Microsoft. There were lots of firms competing in that space. And the game then was actually to be as attractive as possible to developers, to the point where those platforms were paying developers to be on their platform, because they were going to recoup that investment through the sale—in Apple’s case—of very expensive mobile devices. And that is where they have recouped—handsomely recouped. It is probably the best business in human history, actually. It is only after they gained a degree of market power that they then began to use that power to try to flip the game and try to extract. Once they had developers in a place where they could not leave, that is when they attempted to go and extract those rents from developers.
I think that argument is a false argument. Apple has recouped its investment in these markets through the sale of very expensive hardware, and Google has recouped its investment in Android through billions and billions of dollars in ad revenue that it has continued to generate. The recoupment argument is a false one, I think.
Andy Carter
Q
Gene Burrus: Yes. I think the reason we are at this place today in the UK and why the European Union has come to a place in seeking to ex ante regulate these markets, and why even the US is considering it, although unfortunately quite slowly, is because of the speed that these markets move and the reality we have experienced in the past that often the competition cases against these dominant digital firms end up being an archaeological dig for the dead bodies and bones of the companies that did not survive long enough to see the outcome of the cases.
It is also the case that continuing to flout the law is extremely profitable for these dominant digital platforms; there almost is not an ex post fine that is large enough to deter them from engaging in the conduct going forward. The ability to find a way to quickly impose the codes of conduct means that, first, it is of benefit to the companies that are actually being harmed today and, secondly, tit will bring certainty to the market in a way that allows firms to reliably make investments based on those codes of conduct, instead of where we are today, where there are probably lots of firms that are declining even to start on mobile devices today because they know that they might not be able to recoup their investment, even though they have great innovative ideas for products that they know people would love. They also know that, absent action, it is likely that all of their investments might eventually just flow to the dominant players.
Andy Carter
Q
Tom Smith: I think a lot of major economies are in the same place and moving forward in the same direction anyway. There are rulings against Google in India. There is app store legislation already in force in Korea. The Netherlands has a ruling against Apple’s app store. Australia is proposing a very similar regime to this one. There are lots of proposals, obviously, in America. Germany already has its regime in place and in force, as does the EU. There is a major benefit to all the major economies moving forward together because these are global issues.
As for deterring investment, I would say that monopolies do not stimulate innovation, competition does. That is the whole point of the Bill—to open up competition and get rid of artificial restrictions. When Apple bans alternative app stores on its devices, it is just holding the market to itself. If the DMU removes that ban, new app stores can come in and innovate. Maybe they will offer a better service than Apple; maybe they will not, and people can stick with Apple and Apple can make lots of money. That is great if it has a better product, but currently it is not being challenged.
Vicky Ford
Q
Gene Burrus: The problem bothering a great number of our members is the forcing of the use of an in-app payment system that comes along with a 30% tax on any apps that sell what are called “digital goods” from within their app. If it is a digital subscription for a gaming app, for a news app or for music streaming, that comes along with a 30% charge. Those digital platforms did not contribute anything to those products; they simply take it off the top.
Ten years ago, the game was the opposite. People were actually paying those developers to come on to the platforms. To some degree, it has been a bit of a bait and switch for these platforms. When they were facing competition, they had one business model and, once they achieved dominance, they altered their business model to try to extract those rents. Making the bet with that 30% is probably one of the best examples of that.
Vicky Ford
Q
Gene Burrus: In 2008, it was zero, and the 30% probably came in about 2012. Once the markets settled down and it was clear that there were two phone platforms to be had, that is when Apple began to try to extract that.
Tom Smith: We focus on the app store stuff, but there is potential at other SMS firms. There are a lot of allegations about Amazon’s fees going up over time for small sellers, for example, and them being pushed into buying Amazon’s logistics operations, which are said to be expensive. The DMU can go and investigate whether they are expensive and whether they should be freed up to competition more. The CMA published a very good market study report on Google’s advertising businesses. It was 2,000 pages long and detailed the excessive profits made. Google charges 30% to 40% more than Bing to reach the exact same eyeballs. Those prices are going up.
Jerome Mayhew
Q
Tom Smith: You may have seen yesterday that the European Commission is threatening to break up Google in the ad-tech business. The European Commission is formally alleging that Google is abusing its dominant position in ad tech. That is on the display side of the business. On the search side, Google has a 90%-plus market share in this country. It is a must-have product, and people are buying that product. There are lots of allegations about why it should be able to sustain such prices, but I do not want to make an unfounded allegation.
Kevin Hollinrake
Q
Tom Smith: No, I do not think so. In fact, one of the problems with subscriptions that are operated through mobile devices is that Apple inserts itself and Google inserts itself in between the developer and the customer. If you are a British person who subscribes to an app and then something goes wrong or you want to cancel your subscription, quite naturally you might want to contact the developer, such as Tinder or whatever other developer—you are talking to Mr Buse later. At that point the developer has to say, “I’m terribly sorry; you might think you are dealing with us, but you have a contract with Apple,” and that is a major source of complaints. It is pretty confusing for consumers.
Kevin Hollinrake
Q
Tom Smith: No, it is nowhere in the legislation. The idea that the CMA wants to stop SMS firms innovating is not based in any evidence that I can see anywhere. There is a leveraging principle in clause 20, which is extremely narrowly written and I think should be made slightly wider, but that is the only thing that could touch a non-SMS activity.
The Chair
I thank our witnesses for their evidence. If there are no further questions, we will move on to the next panel.
Examination of Witnesses
Tom Fish, Richard Stables and Mark Buse gave evidence.
The Chair
We will now hear oral evidence from Tom Fish, head of public policy and research at Gener8; Richard Stables, CEO of Kelkoo; and Mark Buse, senior vice president for global government relations and policy at the Match Group. Will you introduce yourselves for the record, please?
Mark Buse: I am Mark Buse, SVP for global Government affairs and policy at Match Group.
Richard Stables: I am Richard Stables, CEO of Kelkoo Group. I have been with Kelkoo for 14 years.
Tom Fish: I am Tom Fish, head of public policy and research at Gener8.
Alex Davies-Jones
Q
Richard Stables: I can jump in. Just to give you a little bit of background, Kelkoo was a shopping price comparison site—an internet darling. It started in ’99 and grew to be probably the most popular shopping comparison site in Europe, especially in the UK. Our industry and our company was decimated by the actions of Google, who decided to put themselves at the top of Google and remove the likes of us from the listings and put us on page 10 or page 20, which is pretty much in the wilderness. Why do you care? There are two big reasons. If you are a consumer, you want to see prices, and you want to see prices of lots of goods from lots of merchants.
I am a tennis player, and I want to buy a tennis racket. I am interested in what the cheapest tennis racket is, because I know that I am going to buy a Babolat or a HEAD racket. I want to see 30 to 40 merchants side-by-side, and I want to look at availability, brand and price. If I cannot see that, I am being hurt. I am not seeing the best price. With Google at the moment, you see 10 or 12 merchants. You do not see the entire industry. You can scroll to the right and see more, but what you see are the merchants that can afford to be on Google and pay the most to be in there at the top left. That is reason No. 1: you are seeing less prices.
As for the second, Google has created a complete monopoly on traffic. If I am a merchant or retailer, the only place I am going to get traffic from digitally is through Google. If I am only getting it from one place, I am basically in a monopoly. As we know, with a monopoly you are paying probably 25% to 30% more for the prices. What if I am a retailer in a cut-throat situation? What am I going to do with that price? I am going to pass it on to the likes of you and I. We are all paying a much higher mark-up to pay Google’s execs and Google for the massive amounts of money they extract from the UK economy. That is how consumers are hurt by not having proper competition in digital markets.
Alex Davies-Jones
Q
Richard Stables: I think the Bill is well written, well founded and I would not change it. The abuse started way back—according to the Commission’s shopping decision, in 2008. The first complaint came in 2009. It came from a company that we now own, Ciao, which has now disappeared, along with LeGuide, which is now part of our company. We basically have been in a fight with Google since 2010, when the investigation started with the Commission. In 2017, it made a decision and fined Google £2.4 billion. We are still in legal uncertainty, because Google has gone to a court of first instance and lost and has now gone to the European Court of Justice. That is why a merits appeal is absolutely loved by big tech. They want to delay, delay, delay—to kick the can down the road.
If there is one thing I would say to you guys today, it would be: do not move from JR. If you move from JR, you might as well go home. For businesses like mine, if we had had the Bill 10 or 12 years ago, the CMA could have looked at what happened and said, “You know what, we will do this in an ex ante fashion. We think there is a problem here. We will go and investigate. We know there is an issue, so let’s change it.” We have been going for 13 and a half years and we still do not have legal certainty because of the problem with ex post. That is the problem with antitrust regulation in digital, where markets move so quickly, so you are absolutely right. There will be a really vibrant market for price comparison today, but it would have been great for consumers if we had this legislation 10 or 15 years ago.
Alex Davies-Jones
Q
Richard Stables: I think it is long overdue. Governments in America, Europe and the UK have, frankly, been asleep at the wheel for the last 20 years in terms of big tech. There is a worldwide movement, and everybody recognises that there is a huge problem. They realise that you need ex ante regulation in digital. You have the Digital Markets Act in Europe, and this Bill is well founded, well thought through. From discussions I have had, it seems to be really well supported from both sides of the House. I implore you guys to pass it quickly.
Alex Davies-Jones
Q
Mark Buse: We believe the Bill has the flexibility to be future-proofed. When we look at how our users access our services, it is almost exclusively via an app. Desktop has no role. You can use our products, such as Tinder, cheaper if you go to the website and download it, but nobody does. The user behaviour is that they all use apps. Our fastest growing brand in the UK is called Hinge; Hinge does not even have a website. It was not worth the time or money to build one, because nobody uses it.
When I say nobody, I mean that less than 1% of Tinder’s users go to the website. That is also partially because Apple and Google have restrictions that they impose on us contractually. They do not allow us to tell our users that they can subscribe cheaper if they go to the website. In an ideal world—we think the Bill will go a long way in creating an open market—somebody who wants to subscribe to our product will have those options right there in front of them. They will be able to subscribe using our service, PayPal, or whatever else is available, and get it cheaper.
Apple, Google or big tech say, “This is all a myth. You are not going to have cheaper products”. Match has stated emphatically and publicly that we will drop our prices if we do not have to pay an artificially imposed 30%, which is what occurs today. We will drop our prices. We have also pledged that we will put more money into research and development, the hiring of employees and online safety, which we believe is crucial. By the way, the monopoly power that both Apple and Google exert over the store hinders online safety. That also has a negative pejorative impact on consumers today.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
Q
Mark Buse: Sure. There are a couple of issues when we look at safety. One is keeping bad actors off our platforms—for example, entities or individuals who intend to do harm. Another is under-age users; they do not intend any harm, but our platform is limited to 18 and over only. We do not allow people under the age of 18. We do not want them there and our users do not want them there. In both cases, we have a limited pot of data to try to assess whether somebody is a bad actor or under age. There is a lot of data that exists that could inform us about that. I am going to use this little device—my phone—when I fly home on Saturday as my boarding pass. I am going to pay my bills on it. I am incentivised to put truthful information into my phone, which is the most powerful computer that most people own. I use it for a multitude of services.
For us, 98% of our revenue is from subscriptions; ads have virtually no impact. When you look at our companies, when somebody subscribes to Tinder, we do not know who they are, because they do not actually have a subscription with us. That also has a pejorative consumer impact. Consumers cancel their subscriptions for perfectly good reasons, such as, “I have a three-month Tinder subscription and I met the love of my life. Neither of us want me on Tinder any more, so I am cancelling my subscription”.
As the consumer, I go to Tinder and say, “I have a Tinder subscription that I want to cancel. Tinder, cancel it”. We have to inform them, “You don’t actually have a subscription with us. You have a subscription with Apple or Google”, who artificially put themselves in the middle of this situation because they can—because they have a monopoly and they can demand and force it. As a result, they know who I am. They have my credit card and real address—all those identifiers that we could use at Match to keep a bad actor off our platform.
This Bill would change all that dynamic. The positive impacts, as I say, go much further than just increased competition; they go directly to lower prices and increased online safety.
Paul Scully
Q
Tom Fish: Absolutely. Before I dive in at the deep end, it is worth recognising that these big tech companies play an essential stewardship role within their ecosystems, but the flipside of that is they are operating as the de facto regulator for millions of businesses up and down the country in a whole range of important public policy areas, including advertising standards, consumer protection and data protection. One thing we know is that the commercial incentives of these companies are not perfectly aligned with the optimal outcomes that we would hope to see in those areas, regardless of how hard they say they are trying. In many cases, they are operating as the rule maker, the referee and the player in that game. As a result, there are, of course, conflicts of interest. It is undeniable that some degree of growing oversight and scrutiny will be needed if participants like us in those markets are to believe that there is a level playing field and that they will get a fair crack of the whip.
When it comes to the challenges that Gener8 is facing, we struggle with unpredictable and opaque review processes. We miss out on a potential revenue stream for our browser as a consequence of Google’s dominance in search. We lose users of our browser in Windows because Microsoft disrespects our users’ choices. We suffer from surprisingly confusing and random rejections of our ad campaigns by Meta, which makes planning our user growth and acquisition strategy impossible. We observe insurmountable barriers to entry in the mobile browser market, leading to us putting development of that product on ice. When it comes to data and your question, we face unnecessary friction at every turn as we try to access our users’ data on their behalf and earn money on it for them.
Collectively, these issues cause real harm to our business—they have consequences. We face increased costs and we divert resources away from product development to fight these fires. Missing out on revenue means our users missing out on gift cards and charity donations. It makes us a less attractive investment proposition. We have a drag placed on our ability to attract and then retain new users. Most alarmingly, in my opinion, is the way I have been witnessing it filtering through into internal discussions and thinking about what we should invest in and which innovations we should bring forward to market. From our perspective, the Bills urgently need to establish this regime and address these issues.
Paul Scully
Q
Tom Fish: Gener8 is a personal information management service. Essentially what we do is we enable our users to access their data from third-party services, bring it into the app and visualise it. If they want to, they can choose to earn from it, and we then put that data to work for them, just like a bank does with people’s monthly income. The crux of this issue is we need to be able to act as an agent for our users and to access that data. Unless that is possible in a streamlined, efficient way, users quickly get turned off. What we need is really for the companies that are hoovering up all this data to enable the data owners—the consumers—to be able to access it, and then ultimately share in its value.
Paul Scully
Q
Tom Fish: That is right. I think the excess profits of these companies, year after year, is an illustration that consumers are not necessarily getting a fair deal, even though it might look like it.
Paul Scully
Q
Tom Fish: Exactly. He was being pitched to on the basis of these companies having astronomical levels of granularity and detail about what people are up to online. That is filtering through in the advertising market to vast profits. He had the idea that people should be able to take a share of that value themselves.
Paul Scully
Q
Tom Fish: That is right.
Anna Firth
Q
Tom Fish: Shall I answer quickly and then pass over? I looked it up, and in Southend-on-Sea there are 372 active Gener8 users. At the micro level, they stand to benefit from Gener8 bringing forward new features more quickly, earning more revenue more quickly, and they will quickly start to earn more value from their data themselves.
Zooming out from Southend-on-Sea and Gener8 and looking at the big picture, all these excess profits in the advertising sector filter through into the prices people pay for all goods and services across the economy, whether that is hotels, flights or insurance. They miss out on choice and potential quality that is banned by big tech, but really the biggest issue here is innovation. It is those innovations that we do not know about that never make it through to disrupt the status quo—the unknown unknowns—which are the greatest value consumers are missing out on.
Richard Stables: You have probably read George Orwell; you have probably read “1984”. Later on today, you will hear some “1984”-type speak, because they will sit in front of you and they will say, “This Bill is going to hurt innovation. This Bill is going to hurt investment in the UK.” Basically, listen to what they say and think the complete opposite, because I can tell you now that if you are a businessman or businessperson trying to invest today in digital, your No. 1 question is, “How am I going to get keeled over by big tech?” If I am going to be keeled over, I am not going to invest in it. Why would you? It makes absolutely no sense.
By creating level playing fields, you will do the absolute opposite of what they are saying. You will get investment in the UK. People will look at the UK and say, “That is a place I want to be, because I know that I have got a level playing field against big tech, therefore I will invest in it,” so you get investment. What happens with investment? Innovation. Innovation comes from well-functioning markets.
Another myth you will get today is on security, or privacy, or China, or AI. If you look at what has happened in America when they tried to bring this type of legislation, big tech went out on the biggest expenditure—bigger than they did on even Medicaid, from big pharma—trying to rubbish the Bills. They said, “Amazon Prime will stop working. Google Maps will stop working”, but that is complete baloney; it is the opposite. None of that is going on.
For your constituency, you should be thinking, “We get lower prices, investment into the UK—why the hell weren’t we doing this 10 or 20 years ago?” Why have we got only five big huge titans running the internet today? Because we have not regulated them. These are winner-takes-all markets, and they have taken their power in one market to go and gobble up the rest.
Mark Buse: Let me put some real-world facts around what my colleague here is saying. Match has been very consistent when we have said, “We will invest in markets in countries where the regulatory regime encourages competition.” So we were very active working with the Korean National Assembly to make the law pass there that broke open the app store. The law said people could have alternative payments. We then moved employees out of Japan and into Korea. Now, as they were testifying, my friends over on the big tech side of the world, said, “No, people aren’t going to move,” or, “It’s going to stifle innovation,” but others said, “Well, Match did.” They say, “No, that’s not true.” I say, “Yes, we moved employees. We absolutely did.”
When we look at marketplaces, we want to operate and headquarter in marketplaces that allow maximum innovation, flexibility and competition. What we want on our product is what you see today on Uber. You can open up Uber and choose to pay in 10 different ways; if you open up our products, you can pay one way and one way only—that is by using Apple or Google, and they take their 30%. That is the first point.
The second point is that, when you are a start-up, you are just creating the next new, great product. If you have to look at that and say, “Wait a minute! The moment I go in, I have to start paying 30%,” that changes the economics.
To make another, fine point about how fast things move, Tinder is the largest online dating app in the world, with 3.5 billion swipes a day. Tinder is 10 years old—10! That is nothing in the real world. Tinder was invented at a hackathon. If the UK creates this marketplace, all of a sudden you will see everyone flowing into it. Match would view this—absolutely, and we are happy to state this publicly—as a huge opportunity to put jobs and potentially even broad decision-making and corporate authority into a marketplace where we do not have to have our relationship with our users dictated by a couple of select big-tech companies.
Anna Firth
Q
Mark Buse: I think there are unintended consequences in every piece of legislation, some of which are impossible to anticipate, but what the UK is doing with the Bill you are considering is unique, in that it gives flexibility to the CMA to adjust and adapt. Recently, Google submitted its proposal or response to the CMA, in which it said, okay, it could do a 26% fee, which we would have to pay instead of 30%, and that there could be some flexibility so a company like Match could put an alternative payment provider in. The CMA accepted Google’s proposal because it had no authority to demand anything more from Google.
Make no mistake: 26% is a specific number chosen by Google and Apple, and they have done this in Korea and the Netherlands. They know that if we are paying a 26% commission—originally, it was called an “in-app payment fee”; now it’s a commission—and then pay to have payments processed and handled, we will be paying over 30%. What developer is going to want to choose the option that is going to cost them more money? Nobody will.
This kind of flexibility means that you do not end up in a world where you have these companies who have all the data and all the ability to come up with what are essentially programmatic solutions that are not solutions. I think that that whole dynamic is encapsulated in this flexibility in the Bill, designed to avoid unintended consequences.
Richard Stables: My unintended consequences? More jobs for the UK, more investment and the UK maybe becoming a leading digital place to be. That may be unintended—[Laughter.]
Tom Fish: A lot has been said about the fact that it has taken quite a long time to get this legislation to this point. Well, I guess that an unintended consequence of that is that it has given people a lot of time to think about these issues and to think through the design very carefully. So, actually, I cannot say that I think there are any obvious unintended negative consequences. Ultimately, a lot of the nature of the impacts will be determined by the individual decisions that the CMA makes. I think it has shown itself in recent years to be very adept at assessing the full range of potential pros and cons of the decisions it makes.
Mary Kelly Foy
Q
Richard Stables: The biggest spender in the US on lobbying—they have to make this public—is Google. They spend millions. You must have heard what happened in the European Commission. There was a whole programme they were going to do in terms of trying to lobby on the Digital Markets Act, but it became public and it backfired massively. The Commission said, “Oh, we’re not going to speak to any of you in that sort of forum; we’re going to do it in a very clear fashion.”
I see this a lot, because I have been fighting this a long time. You will see institutions, education bodies and units that have been put up and that are sponsored by big tech. You will listen to what they are saying, and you are going, “Where did you get that from?” They go, “Oh, we’ve done all this research and evidence,” but it’s baloney. You get underneath it, and you are like, “That is not based on facts. That is based on you basically touting what they want you to tout.”
So, yes, I would be really suspicious of what these companies have to say. They have been on the biggest gravy train in history; they do not want to get off it. So they will say whatever it takes to try and obfuscate and persuade and stop this type of activity happening, because they know that the game is up.
Mark Buse: By publicly available numbers, and we obviously believe that the spending far outpaces that, Google, Apple, Microsoft and Amazon have spent well in excess of $300 million in the last two years on advertising alone against anti-trust change. They have spent another huge amount of money on direct lobbying, as well as on public relations efforts and so on around these issues, in the context of the US alone. They have been very strong on that and I do think, as somebody who used to work in Congress, that it has proven effective in slowing anything from occurring in the US.
As was said, if you have an assured pot of income coming in—if you are Apple and Google, in the store—every day that you can keep your walled garden intact is a good day, because even if the Bill passes tomorrow, companies like us are going to have to convince users to try something different. We believe we can drive users to alternatives by lowering price, and there are a lot of dynamics around that. However, in many cases, it is still going to be difficult to pull users out of that walled-off system that has been created.
Richard Stables: To add to what Mark has just said, when they were trying to pass the legislation in the US, there was one month where these companies spent $30 million on TV advertising. They specifically went to a couple of places where there were either Senate or congressional races happening and said exactly what I said earlier, which was, “Amazon Prime will stop working and your Google Maps will stop working.” It is just madness. I remember speaking to Senators and Congressmen, explaining to them that that is just rubbish and asking them to look at what is happening with the DMA in Europe. Amazon has not switched off its Amazon Prime and is never going to, and Google Maps works fine. They will do whatever it takes. I do not think they will try that in the UK, because they have recognised that parliamentarians are—well, they will not. I will not fill that; you can answer that yourselves. But they will try other, subtle things, and the most subtle one of all is innovation and investment. It is the absolute opposite of what they say.
Mary Kelly Foy
Q
Tom Fish: You certainly cannot blame the companies for wanting to put their points across to politicians who are potentially radically transforming their markets. I certainly echo the point about being wary of supposed bodies that represent small businesses in these areas. If you receive views from those types of organisation, think carefully about who they are really speaking for.
The one thing I would add is that knowing that those big companies will be lobbying hard is why companies such as Gener8 and others are willing to take the risk to speak out publicly and share our experience, because it is just so important that you hear both sides of the argument.
Kevin Hollinrake
Q
You are a very successful company. You own plenty of brands—Plenty Of Fish, as well as Tinder and the like. What do you make of the argument that, actually, far from inhibiting investment, these companies have encouraged investment by giving you a platform that can access lots of customers around the world?
Mark Buse: We do not deny, first, that what they have created is revolutionary and, secondly, that they should be paid for their intellectual property and their ongoing work. We have always stated that we support their ability to recoup and to profit off of this. There is no issue on that for Match. What causes us so much concern is that they make their decisions arbitrarily in a black box, with no transparency.
If you look at Tinder’s algorithm and Uber’s algorithm, they operate, at the base level, almost identically. We connect two strangers in real time for the purpose of a date. Uber connects two strangers in real time for the purpose of a ride. Uber does not own the car and it does not employ the driver; we encourage you to use an Uber, to not meet somebody in a dark alley in their car. Essentially, it works the same. Yet, on Uber, Uber pays nothing. We and our users have to only use Apple or Google and have to pay 30%. So there is a fundamental problem here.
Some of that is just due to a historical anomaly back when there was a competitive marketplace, but that competitive marketplace no longer exists. Again, we think this Bill gives flexibility, in that it does not have the CMA declare these companies as regulated utilities. Recently, a Minister in the Netherlands said that he believes Apple and Google should be treated like regulated utilities, such as a bank. That is not for me to decide; it is up to parliamentarians to decide. We would have concerns about that, just for precedent, but we think this Bill balances that and creates a flexible marketplace where, as long as Apple and Google are treating entities in a fair and transparent manner, they are entitled to earn profit.
Kevin Hollinrake
Q
Mark Buse: Absolutely. It has hampered it in an actual way, in that 30% of the money we should bring in goes to Apple and Google. To put it into context, we do a little over $3 billion a year in revenue. Last year we paid Apple and Google around $700 million, which we could be investing in employees, research and lowering prices. The question is, $700 million for what? What are we paying for? Are we subsidising Uber? We would say yes, in fact we are. What do our users get from that? To show you how the stores recognise the value, Apple buys ads within the app store search for Tinder. We do not buy ads for Tinder; Apple buys ads for Tinder. You might ask why. It is because Apple knows that the average user of an online dating product will have four or five different dating apps on their phone—us and all our competitors—and will bounce back and forth between them all non-stop. That is just the way the user behaviour is. Once you meet somebody, you do not use any of them, so it is a high-churn business.
With Tinder being the most well-known brand, Apple knows that if it can convince a 19-year-old to open a Tinder account, that 19-year-old will also then open a Bumble account, an OkCupid account, a Grindr account or whatever. Apple knows that they are going to start subscribing to all of them, so that is all free money. The system is already built. Uber is using it, Walmart is using it and Tesco is using it, but 16% of the companies are paying the extra 30%, which is subsidising all of this and enriching Google and Apple’s profits, so there are issues there.
The Chair
Minister Scully, do you want to come in on any of the points that have been made?
Paul Scully
Q
Tom Fish: I certainly am aware that other companies I have spoken to are reluctant to speak out publicly about the issues they face and the concerns they have. They are concerned about the risk that they might be penalised in the search engine, the app store or the marketplace. I will not name them, naturally, but those concerns are real. From my perspective, there is no choice. Unless this Bill is introduced, and the regime comes through and starts to address these issues, we will not be able to reach out for potential and the markets that we want to operate in will not be open and accessible. From our perspective, there is really no choice but to take this step.
Paul Scully
Q
Tom Fish: Exactly.
Richard Stables: I could give a bit of colour to that. When we started being hit by Google, we thought that it was just us. Eventually we realised that the whole market was suffering. We started talking to the commission. We were absolutely paranoid. We said, “Don’t tell Google because we think we might get the traffic back. If they know that we’re talking to you, that’s going to hurt us.” Eventually, they hurt us so much that it did not matter. I have spoken to so many firms—big firms as well as small firms—that have turned around and said, “We’re really glad about what you’re doing. I can’t come out and say this.” The power that these companies have is phenomenal. Companies can literally be put out of business overnight if one of these companies decides that that is what is going to happen.
Mark Buse: They believe in retribution. When we tried to offer Korean citizens in Korea a discounted price, Apple, instead of rejecting our app build, put every app build on hold. If you are not familiar with the concept of a build, it is where you update and change your app. You always get messages on your phone saying, “You need to update.” For 35 days, Apple froze every app build for every brand that we have that operates anywhere around the globe. We were unable to bring new products out, but more importantly we had bug fixes in all those builds. We have white-hat hackers: people we pay to show us what is wrong. We learned bug fixes internally. There were people who could not use the product right.
All those bug fixes sat on hold, so for UK citizens using our products, with no connection to Korea, those fixes did not take place for 35 days because Apple refused to let us move any builds. When we withdrew the build that would have given us the right to use alternative payment authorities, Apple then approved everything within 72 hours.
Tom Fish: On that point, it is important not always to get drawn into a polarised debate on these issues. It is not necessarily black and white—that big tech is good or evil. You can be a supporter of the Bill and the new regime without wanting to break up big tech. All that I am really asking for is a bit more scrutiny, oversight and transparency where obvious conflicts of interest exist.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Q
Mark Buse: We believe that the relationship should be between us and the customer—that Apple should not intermediate between us and the customer. Then we will, rightly, have the responsibility to ensure that there are not subscription traps or any other issues around subscription. At this point, generally what happens is that we are still blamed but the subscription is actually with Apple. We do not think that in an ideal world it should necessarily be just us. If some of our users want to subscribe via Apple, we are more than happy to let them use our service and continue to subscribe through Apple. If they believe that that is a safer, more private way to do it, great. We want to bring as many people as possible into our business. It is not about excluding; it is about different ways to include.
Andy Carter
Q
Mark Buse: It is a historical anomaly. When the store was created, in a brilliant move by Steve Jobs, he needed to get companies to build apps. Apps did not exist. People my age were bombarded with commercials. The slogan for Apple was, “There’s an app for that.” Apps have become the way we use our phones because they make it easier. He had to go to all these physical companies and say, “Build me an app. I’ll put it on the phone.” The Walmarts and Tescos of the world said, “We want people coming into our stores. Why on earth would we want them not to, and to use the app?”
What Jobs did, again because he was a brilliant man, is say, “Look—it won’t cost you anything. In essence, it will just increase sales. It’s you-branded. It’s yours. You operate it.” That is why apps are distinct. Uber had just come on to the scene and was the hottest thing going. It went into New York and into London—some would argue illegally, not abiding by the rules. What happened is that Jobs—you can see this from various biographies and public court documents—said to Uber, “Come into the store, but because you’re a digital product, and the whole idea of the walled garden is that they hold on to your digital data, you’re going to have to pay 30%.” Uber said, “No. We won’t do it.” Because the store was nascent and Uber was popular, Jobs said, “You know what? Go into the store anyway. It’s fine. I won’t make you pay.”
Match at the time was a fledgling, super-small company, and our business was not big and growing because there was a lot of stigma around online dating at the time. People thought that if you cannot meet a date in real life, in person, you go to the online dating world. Now online dating is the No. 1 way that people meet in the UK. More relationships start online than in any other way. In the LGBTQ community, over 70% of all relationships start online. The market has changed. If the store was being created today, our market power might enable us to say, “Don’t include us in that.”
Andy Carter
Q
Tom Fish: Largely speaking. The one issue that I raised in my written submission was a small concern around a degree of ambiguity regarding operating systems. It is critical that operating systems can be designated with strategic market status. Half the potential interventions that have been talked about for opening up markets will not be possible if you cannot designate operating systems. This is just a plea really to insert the words “operating systems” as an example. It will not cost anything, but it will solve a lot of problems.
The Chair
Thank you. I am sorry that we have run out of time. On behalf of the Committee, I thank our witnesses.
Ordered, That further consideration be now adjourned. —(Mike Wood.)
Digital Markets, Competition and Consumers Bill (Fourth sitting)
Thursday 15th June 2023
(1 year, 1 month ago)
Public Bill CommitteesRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 15 June 2023 - (15 Jun 2023)
The Chair
Q
Kelli Fairbrother: I am Kelli Fairbrother. I am the co-founder and CEO of xigxag.
Christian Owens: And I am Christian Owens. I am the founder and executive chairman of Paddle.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Q
I know that both of your businesses are players in the digital market sector. It would be useful to understand, with some illustrative examples, how the current market dominance of a few large tech companies affects how you do your business, and how it has perhaps affected how you have been able to innovate and the costs of innovation. Perhaps we can hear from Ms Fairbrother first?
Kelli Fairbrother: I lead an independent business based in Cornwall that is challenging the incumbents’ dominance of digital books, which we believe have not been innovated on in decades. Our aim is to create an exceptional digital book experience that keeps young people engaged in books, makes books more accessible to the one in five people who struggle with traditional reading, and saves the 320 million or so books that end up in landfill every year.
The challenge that we face as a fast-growing, innovative business is that Apple and Google use their dominant positions in the mobile device and mobile app ecosystem as a means of forcing themselves into transactions between us and our customers. They do that to us in two ways: they force us to distribute our apps through the app stores, then, because we are distributed through the app stores, they force us to use their in-app payment services when we want to enable our customers to buy in-app, which is clearly the most obvious way in which customers would expect to transact with us, as we are an app-led business. They also prevent us from using alternative providers such as Paddle, which is a great UK business that we would love to use.
The challenge that that creates is that, by forcing us to use their in-app payment systems, they charge us about five to 10 times more than we would pay in the free and fair online payments ecosystem—we would be paying about 3%, versus the 15% to 30% they charge—and they pay us our own revenue at least a month late. That is our own revenue—
Seema Malhotra
Q
Kelli Fairbrother: For example, the revenue that I earned on 1 January this year I did not earn back from Apple until 9 March. By comparison, on average, online payments are paid to us in about seven days on a regular basis. The fees are effectively allocating all of the costs and generating excess profits from a minority of people who use the system to deliver digital content and services, which happen to compete with Apple and Google’s content services businesses. The behaviour you see in the market is the result of this behaviour. Companies either need to charge more for in-app purchase or they force customers on to a web experience to redeem their content in the app.
You heard earlier from Match explaining the difference between Uber and Match. It is the same. If I were selling physical books, I would not be subject to a 30% tax, even if I were selling them through the app, so that is interesting. As a very early-stage business, this hit to our margin and our cash flow is especially precarious. As you can imagine, it makes it difficult to access investment, especially in what is a very difficult fundraising environment at the moment.
The other thing we observe is that, as a non-subscription-based business, the app stores are not really fit for purpose for our needs. Up until about a month ago, we were allowed to choose—we have a catalogue of 50,000 titles—from approximately 90 price points, from 99p up to about 1,000. Our customers receive invoices that say, “Audiobook: £7.99”. They do not give them any more detail, which makes it difficult to know which books they have bought and which books they are trying to return. We do not control returns.
Seema Malhotra
Q
Kelli Fairbrother: In the receipts, yes, that is correct. I cannot merchandise—what we would call merchandise—or allocate the receipt to a particular title that the person bought to allow for the ability to reconcile transactions. It is not possible on Apple. Again, it is not fit for purpose. The way that the system works is that it is delivering you a receipt that says, “Audiobook: £7.99”. Those are the limitations of the system. Any discussion of it being a competitive product is quite misleading.
They offer us no control over our returns. Although there is some ability to control returns through the Apple system, it is difficult to understand exactly the process by which we are allowed to challenge returns. My co-founder is among the best in the world of digital media tech, a former director of production technology at ITV, and he is constantly frustrated by the limitations of the app store APIs. We get very little visibility into the transactions from Apple and Google. Our model for in-app payment where we sell these multiple thousands of different products is terribly supported by Apple and Google. We believe that it is either unintentionally—through neglect—unsupported, or intentionally, trying to force our customers to be on a subscription model.
Seema Malhotra
I will have to move on.
Christian Owens: I started Paddle about 11 years ago to help small software companies and developers to sell their products internationally. Today, we do that for around 5,000 businesses, a number of which are based in the UK. We provide payment services. We help those businesses to take payments all around the world and to pay local taxes and be compliant with the various regulations of wherever it is they sell.
For the last 10 years we have had constant inbound from our customers—who we support by processing payments and paying their taxes for them online for the web or desktop-based version of their products—saying, “Why can’t I use Paddle for my iOS or Android app?” We have tried on numerous occasions to figure out a solution to that, but we are simply prevented, on the basis of the terms and conditions of the app stores, from allowing those developers to process transactions via any mechanism that is not controlled by Apple and Google. For us, we are explicitly prevented from competing. I have no problem if Apple or Google build a better solution than us—that should win. Today, we are not even allowed to try.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
Q
Kelli Fairbrother: We are monitoring, on our own side, the transactions to be able to control entitlements, because we actually have to control the rights of the books for individuals who have purchased them. The risk for us is that a lack of ability to reconcile at the level of an individual transaction actually puts us at a degree of risk, in terms of our ability to manage the 100% accuracy of what we have delivered. The other interesting thing that happens, on the returns side, is that a customer could read the entire book and go to Google and get a return. I am only getting informed of that after the fact; I cannot really challenge the fact that the return was probably invalid. That is another example.
Paul Scully
Q
Kelli Fairbrother: I think the internet is global, and there are plenty of options out there. We are not convinced that we are not sending our own customers to Apple and Google, as an example. Customers are finding us, and they are being forced into particular ways to buy. Yes, there might be some benefit, but I am not convinced that the global internet would not provide me that same benefit and do it in a more competitive way.
Paul Scully
Q
Christian Owens: We have been doing this for 11 years, exclusively for digital products and for software companies; we have worked with thousands around the world and sell billions of pounds worth of digital and software products a year. This is something that we are very familiar with. Really, one of the main reasons that companies come to Paddle is so they can do that in a compliant manner. With the nature of digital commerce being so international, and dealing with various regulations and things like this around the world, coming to a trusted third party that is able to navigate all of those things for you—but, in our instance, do so in a way that is economically viable for these businesses—is what we have been doing for the last 10 years.
We have a tried and tested solution that has been working, and that many millions of consumers have used over the last 10 years. It is just that we are prevented from selling in this single medium.
Paul Scully
Q
Christian Owens: Absolutely.
Paul Scully
Q
Kelli Fairbrother: We think the Bill is a great first start. We think that it will give the digital markets unit the powers to move quickly. We would love to see timelines around the conduct requirements built in. We think this is a great opportunity for the UK to take a leading role in creating a free and fair ecosystem in the mobile space.
Christian Owens: I have nothing to add.
The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
I have no further questions.
Vicky Ford (Chelmsford) (Con)
Q
Kelli Fairbrother: Yes. It is interesting, because there are differences between the two ecosystems. Whereas I do get transaction-level data from Google, for example, I do not get it from Apple. Apple moved first to lower the price points from 30% to 15%, and Google took at least another six or 12 months after Apple moved to create that small business tier. Generally, they seem to be both on this path of using their dominant market positions to extract as much value from me. The question I would love to hear Google answer when they come in later is that these are our customers; my customers are also your customers. I just do not really understand why, if you can see that there is actual consumer harm happening, you are not working yourselves to address it.
Vicky Ford
Q
Christian Owens: I would not want to say that that is definitely happening. I think it is rather coincidental that within six to eight weeks of any price change happening in one ecosystem, it tends to happen in the other, as mentioned with the small business tier of 15%, with the subscription tier after one year also reducing to 15%. It does seem that way.
Vicky Ford
Q
Kelli Fairbrother: I am afraid that I am not a lawyer on the depth of confidentiality. From our side, we would love to see a little bit more transparency in the consultation process, so if there is action being taken by the DMU, we would love to make sure that we are being consulted if it affects our area. I am not sure I have a strong opinion on the confidentiality piece itself.
Vicky Ford
Q
Christian Owens: No, not any specific details on this.
Seema Malhotra
Q
Kelli Fairbrother: It is absolutely critical that judicial review is the standard that is used, because I think we have seen time and time again, in markets all around the world, that when Governments act, Apple and Google do their best to try to get around the work that is being done. They lawyer up—they have millions to spend on appeals slowing things down—and there really is a sense of urgency. This is existential for a lot of small app developers, so we would really urge that the Bill passes, it is not watered down and it passes without delay and without dilution, I think we would say.
Christian Owens: I agree.
Andy Carter (Warrington South) (Con)
Q
Andy Carter
I was interested in what you said about the cost of transactions. You suggested 3%. Where does that figure come from?
Kelli Fairbrother: Because of the constraints that Apple and Google put on us, we built a website, and on our website we use Stripe integration. The Stripe fees come out at about 3% to 4%, and it pays us every seven days. Again, this is where you can see competition; in the online payments ecosystem, there is healthy competition. Then you compare that with the app store monopolies and the control that it exerts over payments. The terms and conditions say that I am not allowed to use a prohibited payment method—for example, Christian is a prohibited payment method. That is not a free and fair ecosystem.
Andy Carter
Q
Christian Owens: We take the action that Apple and Google are taking, in terms of processing a transaction. We do this for thousands of companies outside the realms of the app store. The average price that a business will pay us will be somewhere in the region of 5%, and we are able to provide all the same services. We do payment processing. We are able to pay local sales taxes. We are able to deal with fraud. We review, with a human, every product that we sell before we sell it to ensure consumer safety. We are able to do all that in a profitable way by charging 5% on transactions.
Andy Carter
Q
Kelli Fairbrother: For our site, because of the 15%, we tend to break even on most of our transactions—on a transactional basis. So for us, there actually is not a great deal of room, because we also pay the content providers. The challenge that we have at the moment is that we are trying to raise investment and look as investible as possible. The reason why we built the website is that we were given a really difficult decision: should we force people into a web-based experience, to try to regain the margin that we have lost, or should we raise our prices? For us, it may not be that you will see this immediately delivered back to the customer. For us, the position is that we are going to continue to deliver an exceptional experience to the customer and we are going to be able to afford to do that. That is the crux of it for us.
Andy Carter
Q
Christian Owens: In its current form—as it is now—this is a very good Bill, and I really encourage it to go through without being watered down any further. It is great as it stands; it is a great start. I think that it is going to allow small businesses in this country to be more competitive and not be giving away a third of their revenue, effectively, to Apple and Google.
Kelli Fairbrother: I agree.
Paul Scully
Q
Kelli Fairbrother: It is regular in the sense that the company takes a month of data and then pays me a month and some days later. So it happens every month, but it is happening every month on a timeline that is, again, at least five times as long as what I would be getting—using Stripe as an example.
The Chair
I thank our witnesses for giving evidence today. We will move on to the next panel. Thank you very much.
Examination of Witness
Tom Morrison-Bell gave evidence.
The Chair
Thank you very much for coming, and welcome. We will now hear oral evidence from Tom Morrison-Bell, Government affairs and public policy manager at Google. We have until 2.45 pm. Could the witness please introduce himself for the record?
Tom Morrison-Bell: I am Tom Morrison-Bell. I am a public policy manager at Google, and I work on a range of competition and media policy issues.
Seema Malhotra
Q
Tom Morrison-Bell: Thank you for the question. Let me just take a step back and look at how search and this question fit in with the current regime. A huge amount of consumer benefit comes from products such as Google Search. By and large, Google’s products are free, and there are also paid services that support around 700,000 small businesses in the UK. If you look at the financial aspects of search—so, advertising—the revenues generated are in a very small subsection of that. The market might be e-commerce or retail, for example, rather than general search. If you look at retail—people will place an ad next to a keyword such as “buy trainers”—you will see in the market that most retail searches do not start on Google Search. Also, advertising revenues on other e-commerce platforms are growing much faster than Google. So it is important to understand it specifically: yes, there is a general search engine, but in the case of markets, that can often be a different story.
Seema Malhotra
Q
Tom Morrison-Bell: With respect, I do believe that Google is one of the most innovative companies and largest investors in innovation. Between 2018 and 2022, Google spent $145 billion on research and development. That includes amazing stuff that happens here in the UK. For example, Google DeepMind, which is probably the world’s foremost artificial intelligence research institute, is based here and is solving incredible problems such as protein folding.
Seema Malhotra
Q
Tom Morrison-Bell: Yes, I can. I am happy to touch on some of those issues with regard to the Bill. As you will have heard by now, the Bill gives very extensive powers to the DMU that will be highly discretionary and very open-ended. That is how the Bill has been drafted. In Google’s case, those will be powers to direct how complex products are designed, and critically the regime will be forward-looking rather than backward-looking, which is how traditional competition policy works. As I have said, Google’s products and services drive a huge amount of consumer benefit in the UK, and these markets are fast-moving and complex.
With the Bill specifically, our key point is that in relation to products that provide a substantial amount of consumer benefit, that are innovative and that are complex, it is important that these very open-ended powers for the regulator have appropriate checks and balances. I wanted to bring to the Committee three specific areas in which we think the Bill can be strengthened. I am sure that you will have heard about these in other sessions.
First, I think there are strong grounds for making sure that the appeals standard is aligned with that in the Competition Act 1998, which is appeal on the merits as opposed to judicial review. Secondly, the Bill should ensure that consumer benefits can appropriately be considered by the regulator in the regime by adding a bit more coherence to the way the countervailing benefits exemption is constructed. Thirdly, one of the really innovative things that is designed to drive the Government’s ambition of ensuring that it is a speedy regime with innovation at its heart is this idea of a participative approach, whereby all parties involved in the market are encouraged into dialogue with the regulator.
One thing that the Bill provides for is for private cases to be brought before the digital markets unit has found any breach of a requirement on a firm. If that is the case, we think it is important that the digital markets unit is given the opportunity to make the decision first. Otherwise, there is a risk of the courts deciding something and the digital markets unit deciding something else, so that we end up with potentially conflicting compliance requirements on regulated firms.
Seema Malhotra
Q
I want to come back to a specific point. You have talked about consumer benefit, and I think we all see the consumer benefit that can and does come from the innovation of Google. However, given your dominance and market power, do you accept that the way in which Google works with other companies is actually contributing to consumer harm as well?
Tom Morrison-Bell: As a general statement, no: I would not agree with that, straight up. We deliver huge amounts of consumer benefit. There are numerous areas where we are and have been in dialogue with the CMA. We really want to continue to be able to deliver that.
Seema Malhotra
Q
Tom Morrison-Bell: Well, I think there are some things to unpack. For example, payment systems have been mentioned. We have agreed commitments with the CMA—I believe they are out to market testing at the moment—on offering a range of payment systems. When it comes to app stores, 99% of app users pay 15% or less on fees. There are important details here.
Paul Scully
Q
Tom Morrison-Bell: Generally speaking, Google is estimated to provide around £55 billion of economic activity a year in the UK, as a starting figure. We have multiple products. It depends where you look. Workspace is our productivity suite, with word processing and similar, and is estimated to have saved 600 million hours for workers around the UK through more effective communication and speedier software. As I have said, tools like search and maps are free, and they also support businesses across the country to be more effective. That drives £55 billion in economic activity.
There is also our Play store. Android is open source and a free operating system that is available free to mobile device manufacturers, and they can make their own versions. That has substantially driven down the cost of handsets around the world and has been a huge contributor to making sure that people can have access to the internet at lower rates. The Play store itself is estimated to support about 240,000 developer jobs in the UK alone. That drives revenues for them of about £2.8 billion. Across the board, there is substantial benefit.
Paul Scully
Q
Tom Morrison-Bell: There are two things there. First, what is most important about the regime is that consumers are at the heart of it, and that it is for the regulator, with the powers that it is given, to make the assessments as to whether practices are pro-consumer or not.
What we also think is important is that on one side we have very large and open-ended powers, with products and markets that drive a lot of consumer benefit, and on the other a need for more robust checks and balances to ensure that consumers really are at the heart of the regime. In a sense, it is less about what company X says about company Y than about the coherence of a regime to ensure that consumers are at its heart and that the Government’s ambition for driving innovation without blanket requirements on firms or unduly burdensome regulation is realised.
Paul Scully
Q
Tom Morrison-Bell: Of course. There are two questions about appeals to address. One is speed, which I will come to, and the other is why there are good, principled reasons for that being the right standard.
As I said, the Competition Act has appeal on the merits as the appeal standard. These interventions are much more akin to what the Competition Act does. In both 2013 and 2019, the Government consulted on whether to lower the threshold in the Competition Act to judicial review. In both cases, it was decided not to do so. Indeed, in 2013, the competition appeal tribunal itself made a submission that that would not be appropriate, because it had seen cases overturned or sent back to the CMA.
Furthermore, in recent weeks, an interesting paper by the former head of the Government Legal Service, Sir Jonathan Jones, appeared as a law article. He said specifically with regard to the DMU that, with those very open-ended powers on the one side, the current proposals—his quote, not ours—give rise to “concerns about due process”, because of the imbalance. There are strong and principled reasons why.
There is also the speed point, which needs to be addressed. That is in line with the regime and, as when we worked on the Privacy Sandbox, we want this to be a speedy regime, to accelerate it. We have shown good will in real examples of how we have tried to make that participative approach work. But there are other existing regimes in which, by and large, the CMA is given time limits to which it has to respond. That is evident in gas or electricity prices, postal services, civil aviation, parts of financial services, parts of water and numerous other precedents in the UK of time-limited appeals. There is, however, scope to ensure that we end up with consumers at the heart. It is important—these are complex products—that at the end of the day we are able to have a system in which someone can scrutinise whether the decisions are right or wrong for consumers and companies. It is not just about whether due process has been followed.
Kevin Hollinrake
Q
On innovation, we are keen that you continue your R&D spend and innovate. Is there anything in the Bill that will make you think twice about innovation? We asked other witnesses and they cannot see any issue, but some concerns have been raised with us. Do you feel that you might have to talk to the regulator or CMA before you develop a new product? Is that a rational concern that you have?
Tom Morrison-Bell: The Privacy Sandbox is probably the best example of perhaps any company, as far as I am aware. That is the only model to date that could be a bit like the participative approach. That is a really good example of where we were able to come to the regulator to say, “Look, when it comes to competition, there are trade-offs. In this case, it is privacy, with us phasing out cookies, with competition, because maybe you have to use different Google advertising technologies.” We would like the competition authority and the privacy authority to make sure that both their concerns are met before we roll things out. That is good, because it prevents costly roll-outs that might have to be rolled back, and regulators are aware, consumers have clarity and other businesses in the ecosystem have clarity as well. It is true that that required numerous months of consultation with the regulator, but I think there is the opportunity for the participative approach to work well. Again, because you have this open-ended and flexible system, it is important that there are checks and balances in place.
Kevin Hollinrake
Q
Tom Morrison-Bell: No. We are really committed to the UK, which is a special market for us. We employ 6,500 people here. But those checks and balances are important to make sure that you know that your decision is right or wrong, not just whether due process has been followed.
Anna Firth (Southend West) (Con)
Q
Tom Morrison-Bell: With respect, I think that if you look at the broader Play system as a whole, 99% of all users of the Play store—those developers—pay 15% or less on their fees. By and large, the fees are staggered. That means that companies that make less money get to enjoy the benefits of the ecosystem in the same way as larger companies, which may pay larger fees.
On the payments point specifically, we are in discussions with the CMA, as I said. There are two different billing models, which are being agreed on and are out for market testing, so there is ongoing discussion in a constructive way with the CMA that will bring forward those two new payment methods.
Anna Firth
Q
Tom Morrison-Bell: I do not think we do. This is what the CMA process is going to yield: something called user choice billing or developer choice billing. In developer choice billing, developers can pick their billing system; with user choice billing, it is users who have the choice.
Anna Firth
Q
Tom Morrison-Bell: It is being reformed. The developers will have those choices, and those choices are being scrutinised by the CMA to make sure that they are good for consumers, that they are good for companies like the ones you mentioned, and that they are appropriate in the ecosystem.
Vicky Ford
Q
Tom Morrison-Bell: I think there are a few things to unpack there. With respect, the Kelkoo case refers to the Google Shopping case with the European Commission. The remedy that was agreed by the European Commission as the competition authority was rolled out by Google in 2017, around 60 days after the finding was heard. The appeals are still going on, because there are different points of law that are being considered, but the remedy—
Vicky Ford
Q
Tom Morrison-Bell: But, importantly, the remedy that was agreed by the Commission has been in place for six years. That is not necessarily going to change if the points of law change. The remedy has been in place for that time, and the courts considered the opinions of various different complainants and Google as part of that appeal process.
Vicky Ford
Q
Tom Morrison-Bell: The Commission’s inquiry process has been going on for two years, rather than a legal process.
Vicky Ford
Q
Tom Morrison-Bell: The proposed participative approach in the UK is different from how the competition system works in Europe.
The Chair
Order. I am afraid that that brings us to the end of the time allocated for this session. On behalf of the Committee, may I thank our witness for giving evidence today?
Ordered, That further consideration be now adjourned. —(Mike Wood.)
Digital Markets, Competition and Consumers Bill (Fifth sitting)
Tuesday 20th June 2023
(1 year, 1 month ago)
Public Bill CommitteesRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 20 June 2023 - (20 Jun 2023)
The Committee divided: - Ayes: 6 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 7 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 8 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 8 - Question accordingly negatived.
The Chair
To avoid anybody expiring, please remove your jackets, if that would help. Please ensure that electronic devices are in silent mode. No food or drink is permitted during the sittings of the Committee, except for the water provided. Hansard colleagues would be incredibly grateful if Members could email their speaking notes or pass their written speaking notes on to the Hansard colleague in the room.
Today, we begin line-by-line consideration of the Bill. The selection list for today’s sitting is available on the table in front of me. It shows how the selected amendments have been grouped together for debate, and I urge colleagues to examine it carefully, because some clauses are grouped together, which will make things a little more complicated as we move forward. Amendments grouped together are generally on the same or a similar issue. Please note that decisions on amendments do not take place in the order they are debated, but in the order that they appear on the amendment paper. The selection and grouping list shows the order of debates.
Decisions on each amendment are taken when we come to the clause to which the amendment relates. Decisions on new clauses will be taken once we have completed consideration of the existing clauses of the Bill. Members wishing to press a grouped amendment or new clause to a Division should indicate when speaking to it that they wish to do so. If colleagues want to speak to an amendment or take part in a stand-part debate, they should indicate that to me in the normal way, so that I can ensure that everybody who wishes to participate does so.
Clause 1
Overview
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
It is a pleasure to serve under your chairmanship, Dame Maria, and to address the Committee today. I thank all its members for volunteering to serve on this Committee, and I look forward to our discussions over the coming days and weeks.
Part 1 of the Bill provides for the pro-competition regime for digital markets. This is a targeted regime that will establish new, more effective tools for the Competition and Markets Authority and, in turn, the digital markets unit. That will allow them to proactively drive more dynamic digital markets and prevent harmful practices.
Clause 1 is purely introductory and provides an overview of part 1. I hope that hon. Members agree that this clause will therefore assist readers to navigate this part. I will briefly explain some of the language I will use in this series of debates. First, the Committee will hear me referring to the digital markets unit, or the DMU, which is a new administrative unit of the Competition and Markets Authority—the CMA. While the legal functions of the regulator under part 1 of this Bill remain those of the CMA, in practice it is likely that most of the responsibilities under part 1 will be carried out by staff within the DMU. Therefore, for consistency and ease, I will be referring to the DMU throughout the debates. The exception to that is the merger functions in chapter 5 of part 1, which will generally be carried out by those staff who deal with mergers more broadly.
Secondly, I will use the words “firm” and “undertaking” interchangeably. “Undertaking” is the word used in this part of the Bill and is an economic concept that is already used in the Competition Act 1998. The concept of an undertaking covers any person engaged in economic activity, regardless of its legal status and the way in which it is financed. “Persons” may be corporate bodies, and an undertaking may encompass multiple corporate bodies when they form a single economic unit under competition law. The Government’s view is that an undertaking will often encompass the entirety of the relevant corporate group, but it may sometimes be a smaller subset of the corporate group.
I hope that that helps to clarify the language that the Committee will hear over the coming days.
Alex Davies-Jones (Pontypridd) (Lab)
It is a genuine privilege to serve under your chairship, Dame Maria. I look forward to the weeks ahead. I imagine that the debates will be healthy but, in a real rarity for this place, relatively collegiate too. With that in mind, I will keep my comments on this clause brief. We all agree that this is an important that we will not seek to delay. Competition is vital to encourage innovation, and consumers deserve the best possible protections and value. We all want to get this right, and the Minister knows that. I want to say clearly that the Opposition welcome the Bill in principle. However, it will come as no surprise that we have some concerns that the Bill is lacking in some areas and could go further. We will explore those concerns in the hours and weeks ahead, and I look forward to debating the Bill further.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2
Designation of undertaking
Alex Davies-Jones (Pontypridd) (Lab)
I beg to move amendment 55, in clause 2, page 2, line 25, at end insert—
“(5) An SMS investigation in subsection (4) may take account of analysis undertaken by the CMA, on similar issues, that has been the subject of public consultation, within the five years prior to Royal Assent of this Act.”
This amendment and Amendments 56 and 57 ensure that the CMA is able to draw upon analysis and consultations that took place before the passing of this Act.
The Chair
With this it will be convenient to discuss the following:
Amendment 56, in clause 13, page 7, line 18, at end insert—
“(3) Consultation on matters relevant to a decision under section 14(1) undertaken before this Act is passed is as effective for the purposes of subsection (1) as consultation undertaken after it is passed, unless the CMA considers that there has been a material change of circumstances.”
See statement for Amendment 55.
Amendment 57, in clause 47, page 26, line 10, at end insert—
“(3) Consultation on matters relevant to a decision under section 14(1) undertaken before this Act is passed is as effective for the purposes of subsection (1) as consultation undertaken after it is passed, unless the CMA considers that there has been a material change of circumstances.”
See statement for Amendment 55.
Alex Davies-Jones
With your permission, Dame Maria, I will make some general points about clause 2 before turning to the amendments. Clause 2 gives the CMA the power to designate undertakings, as defined in clause 115, as having strategic market status in respect of a digital activity. Of course, only those undertakings designated with SMS will be subject to the digital markets regime.
The clause is vital in establishing the CMA’s new functions that will allow it to regulate digital markets. We welcome efforts to put the previously established digital markets unit on a statutory footing, and we see it as a key step in establishing the CMA’s responsibility for overseeing digital businesses of a certain size and status operating in the UK. As colleagues will note, this part of the Bill is seen by many as the UK’s version of the EU Digital Markets Act as it has many similarities to it. For an undertaking to be designated as having SMS, the following conditions need to be met: the undertaking carries out a digital activity, which means either providing an internet service or digital content; that digital activity is linked to the UK; and the undertaking must have substantial and entrenched market power. The latter condition requires the CMA to look five years ahead and imagine future developments. The undertaking must also have a position of strategic significance in that it generates £25 billion in global turnover or £1 billion turnover in the UK.
We see those as sensible barometers for SMS status, but I want to take this brief opportunity to press the Minister further on the CMA’s ability to look to the future. He will know—and, I am sure, agree—that the sectors we seek to regulate are often incredibly fast moving. We will debate this further shortly in clause 5, but I would be grateful for the Minister’s thoughts on this particular point, especially around his assessment of the CMA’s capacity and ability to essentially predict how changes across industries will emerge.
Amendments 55 to 57 would ensure that the CMA would be able to draw on analysis and consultations that took place before the passing of this Act. The amendments are critical to ensuring that the CMA is able to draw on the work that it did in shadow form once the Bill lands on the statute books. We cannot risk further delay to implementing this regime when we already know that the lack of competition regulation is having a significant impact on both consumers and businesses.
Last week we heard evidence from Professor Myers, who is a visiting professor in practice at the London School of Economics and Political Science. He had some interesting comments to make on the timeline for the Bill so far which I feel are worth reiterating here. Professor Myers said that
“this legislation has taken a while to come to fruition. At one point the UK looked like it was going to legislate before the European Union, but the CMA has done a lot of preparatory work, and I am sure that it recognises that it needs to hit the ground running as soon as this legislation is passed.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 46, Q72.]
That is why the amendments are so important, because they would allow the CMA to reflect on the lessons learned in the various consultations and analysis that it has already undertaken. I hope the Minister can see that these simple amendments would make sense for all involved.
The Chair
Before we proceed, I note that the shadow Minister has efficiently covered clause 2 stand part, so perhaps the Minister could also do so in his response, in the interests of time.
Paul Scully
Amendments 55 to 57 relate to ensuring that the DMU will be able to use, in its digital markets investigation, evidence that was gathered and consultations that were undertaken before the Bill becomes an Act. I am grateful for the opportunity to explain this really important aspect of the regime.
To provide some context, clause 2 will give the DMU the power to designate undertakings with strategic market status with regard to a specific digital activity. It sets out that, to designate a firm with SMS in respect of a digital activity, the DMU will need to be satisfied that a number of conditions detailed in clauses 3 to 8 are met. SMS designation is the gateway into the digital markets regime. Only the very small number of firms that are designated will be subject to the rules of the regime. The DMU will only be able to designate a firm following an evidence-based SMS investigation, which must include a public consultation that allows the firm itself and wider stakeholders to provide input on the designation decision. I explained earlier that I would use “firm” and “undertaking” interchangeably. Accordingly, when I say a “firm with SMS” or an “SMS firm”, that is the same thing as a “designated undertaking”.
Turning to amendment 55, I strongly support the point that the CMA should not have to repeat work that it has already done. It is for the DMU to decide what is and is not relevant analysis to its investigations, and it should be able to draw on insight from previous analysis or consultations when carrying out an SMS investigation where it is appropriate and lawful to do so. I am happy to confirm that the Bill does not prevent the DMU from doing that, provided that it acts in accordance with general public law principles, which would, for example, require it to ensure that evidence remained relevant. As such, I do not believe this amendment is necessary to ensure the DMU can reflect its existing evidence, understanding and expertise in its designation investigations. Further, the amendment could restrict the DMU’s ability to draw on analysis that had not been the subject of consultation, even if the DMU considered that analysis to be relevant to an investigation.
Amendments 56 and 57 relate specifically to consultations on proposed decisions as part of the DMU’s SMS and pro-competition intervention investigations respectively. The DMU can launch PCI investigations into suspected adverse effects on competition. We will return to PCIs when debating the clauses in chapter 4.
Consultation is a fundamental feature of the regime. It ensures that the decisions are based on the best available evidence and that the regime is transparent. For SMS and PCI investigations, the DMU must consult on the specific decisions that it intends to take at the end of its investigation. That will ensure that all relevant parties have an opportunity to feed in views and perspectives on what the DMU is proposing on the decision at hand, not simply on the general operation of the market.
As I have highlighted, it is absolutely right that the DMU will be able to draw on broader knowledge during the course of its investigations, but it should not be able to do away with the consultations entirely. The consultations are a necessary part of the procedural safeguards that ensure good decision making. I know that the Coalition for App Fairness said that it would raise that in its evidence. I am grateful for its evidence. I totally agree with it that the consumer should not start with a blank piece of paper, but I do not think that it is necessary to amend the Bill in order to be able to be able to use that existing analysis where it is there.
I will now turn to clause 2, which will give the DMU the power to designate undertakings with SMS with regard to a specific digital activity. To do that, the DMU will need to be satisfied that a number of conditions are met. The concept of “digital activities” is detailed in clause 3. To be in scope of the regime, the turnover condition must be met. That is explained in clauses 7 and 8.
The DMU must also consider that the digital activity is linked to the UK, and that the undertakings meet the SMS conditions in respect of the digital activity. That is to say that the firm has, in respect of the digital activity, substantial and entrenched market power, and a position of strategic significance.
Jerome Mayhew
It is a pleasure to serve under your chairmanship, Dame Maria. I will deal first with whether clause 2 should stand part of the Bill. It is of course axiomatic. Right at the heart of the purpose of the Bill is the designation of undertaking. Importantly, it references clause 7, which deals with the turnover of an undertaking. I am looking forward to what the Minister has to say about clause 7, particularly with reference to the levels of revenue or turnover for an undertaking. The Minister has given definitions for “undertaking” and “firm”. I look forward to his further comments about those definitions, particularly when it comes to the classification of worldwide turnover and the revenue being undertaken within the United Kingdom. I am straying slightly into clause 7, but because there is reference to it in clause 2, I hope that is acceptable.
I am just flagging that there may be consideration under clause 7 as to the possibility of the manipulation of turnover where there is a global undertaking with global turnover of less than £25 billion, but where the turnover associated with the United Kingdom is approaching the £1 billion mark. It is foreseeable that we could start to have economically significant manipulation associated with the definition of turnover—I flag that because it is referred to in clause 2. Of course, the main body of clause 2 is right at the heart of the Bill. I welcome the constructive opening comments from the hon. Member for Pontypridd, and I look forward to engaging with her and the other Members of the Committee on that basis over the coming days and, I am afraid to say, probably weeks. [Laughter.]
I turn to amendment 55. This Bill is already hundreds of pages long, and it was often noted in my former career at the Bar that legislation gets longer and longer as it seeks to become more and more specific. However, there is a risk with seeking to list all the elements that we wish to cover. By having a list, we encourage exemptions and the seeking out of elements that are not quite on the list. Through that mechanism, undertakings can avoid the intention while complying with the letter. In my submission, the approach taken by the Government in the current drafting of clause 2 is the right one, because, as the Minister has already mentioned, it gives the DMU the wide scope it needs to take account of work that has already been done without constraining it by having a specific list, as amendment 55 would require. Proposed subsection (5), which the amendment would insert, says that an SMS investigation
“may take account of analysis undertaken by the CMA, on similar issues, that has been the subject of public consultation, within the five years prior to Royal Assent of this Act.”
Who could object to that? However, the Minister made the point that it is already encompassed within the powers of the DMU under the current drafting of the Bill. If we say that this is specifically included in the body of text, it prompts the question: what if someone is just outside that but would otherwise properly be within the consideration of the DMU? It raises arguments that will be explored via litigation, particularly by organisations that have substantial turnover and considerable economic interests to defend, as we heard in oral evidence over the past week.
The last thing we want is to have legislation that invites clarification by the courts. Although I and the Minister are very sympathetic to the intentions behind amendment 55, I fear that it might have the unintended consequence of increasing the chances of prolonged litigation as we seek to explore what exactly is and is not within scope of the DMU. For that reason, I do not support the amendment.
Alex Davies-Jones
I welcome the comments from the hon. Gentleman and the Minister, but we would like to press the amendment.
Alex Davies-Jones
We do not oppose clauses 3 to 8, on the basis that they set out what constitutes a digital activity for the purpose of part 1 of the Bill. Clause 3 is an important clause with a number of subsections that clarify the exact definitions of digital activities and provision of services. These are all critical to empowering the DMU, which, if properly supported, has the potential to be a world-leading regulator and is ultimately the critical first step in modernising our competition policy.
We can all agree that the UK has the potential to be recognised as a global leader in technology and innovation, and capitalising on that is vital to our economic growth, yet the current situation, which sees a small number of firms dominate digital markets, is reducing competition for other businesses. Ultimately, it is consumers who are paying the price in the products and services we all receive.
This clause is crucial to defining exactly which digital activity will fall under the regulation, and it is welcome. After all, Labour has been clear and has long called for measures to regulate the digital space more widely. We specifically support the clause, as it gives us all clarity on how we can define digital activity.
Subsection (3), which outlines how the regime will give the CMA the power to treat multiple digital activities carried out by a single undertaking as a single digital activity, is particularly welcome. For different activities to be grouped together, they must either have substantially the same or similar purposes—for example, a social media provider offering a number of internet services under different brands with a common function, allowing users, such as advertisers and publishers, to interact and communicate with each other; or can be carried out together to fulfil a specific purpose—for example, services and products that are part of the same supply chain, such as services selling advertisements and the provision of an advertising platform. We all know the rapid rate at which companies can develop and expand, so it is particularly welcome to see this subsection.
Subsection (4), which sets out that where the CMA is required to give or publish a notice or other document under part 1 of the Bill, it may describe the digital activity by reference to the nature of that activity, brand names, or a combination of these, is also vital to the success of the regime. We clearly support the clause, which we regard as crucial to establishing the barometers of the CMA’s regulatory powers, and we have therefore not sought to amend it at this stage.
Clause 4 sets out the ways in which a digital activity could be linked to the UK for the purposes of designation. We are pleased to see that the clause considers the number of UK users in its criteria, as we have all read the reports of tech firms threatening to leave the UK if other legislation places requirements on them in future. That is why, with regard to pro-competition law, the UK user base must be considered when it comes to implementing this regime.
Once on the statute book, the DMU will be empowered to oversee a new regulatory regime for the most powerful digital firms, promoting greater competition and innovation in these markets and protecting consumers and businesses from unfair practices. It is vital that UK-specific connections are established in the Bill. The clause is also an important opportunity to highlight the significant impact that inaction is having on our digital markets in the UK. As we know, these markets are characterised by having just a few big tech firms with entrenched market power and the ability to shape the market to the detriment of consumers and smaller businesses. The 2020 CMA market study said:
“Both Google and Facebook grew by offering better products than their rivals. However, they are now protected by such strong incumbency advantages—including network effects, economies of scale and unmatchable access to user data—that potential rivals can no longer compete on equal terms.”
The current balance of power means the big tech companies often have an unfair advantage over their competitors and dominate key markets. For example, virtually all UK smartphones run either Apple or Google operating systems. In 2018, Google had a more than 90% share of the UK search advertising market, and Meta owns 50% of the UK’s digital display advertising space. Thanks to their dominance, Apple and Google made in excess of £4 billion of profits from their mobile businesses in 2021. The CMA estimates that Facebook and Google made profits of £2.4 billion above what would be considered a fair return in the digital advertising market in 2018. On Meta’s market dominance, the CMA noted:
“Facebook’s average revenue per user in the UK has increased from less than £5 in 2011 to over £50 in 2019.”
The consequence is worse outcomes for smaller businesses and consumers. That is why we welcome the clarity in the clause and support its inclusion.
Clause 5 requires the CMA to look at the next five years when assessing whether an undertaking has substantial and entrenched market power in respect of a digital activity. Specifically, it must be satisfied that the undertaking’s market power and influence in the digital activity is neither small nor transient. Although we welcome that requirement—ultimately, none of us wants companies to be stifled to their detriment—I hope the Minister will flesh out exactly how he thinks the clause will work in practice. The CMA is clearly well placed to assess digital firms’ plans for progression and development over the next five years, but we are concerned that the clause is broadly asking the impossible, given the rate at which technological developments and expansion can occur in this space. I would therefore welcome the Minister’s assessment.
The clause further outlines that the CMA must take into account expected or foreseeable developments if it does not designate the undertaking as having strategic market status in respect of the digital activity to which the investigation relates. Again, that is the kind of welcome and balanced approach to designation that we would expect of a new regulatory regime, but will the Minister confirm how the Bill will ensure that such decisions and designations are made public so that the transparency of the regime as a whole is enhanced? It would be helpful for all of us—parliamentarians, firms, civil society bodies and stakeholders in the sector—to understand how designations are made, and transparency is central to that. I hope the Minister will address those points. We seek some assurances, but I am sure we will be happy to support the clause as it stands.
Clause 6 sets out the terms by which an undertaking has a position of strategic significance. It sets out a number of conditions, including size, scale and the role the firm plays in terms of digital activity more widely. We support the need for flexibility in the regime, so paragraphs (c) and (d) are particularly welcome. Paragraph (c) is intended to cover circumstances in which the undertaking can use its position in the digital activity to leverage or expand into a range of other activities. That is vital, because companies have to be agile to dominate a variety of markets, and they can abuse that. Paragraph (d), which is intended to cover scenarios where an undertaking’s position enables it to determine or substantially influence how other undertakings operate—in other words, to set the rules of the game—is equally important.
It would, however, be remiss of me not to highlight our slight concerns about subsection (2), which gives the Secretary of State the power to vary the conditions set out in the Bill. The success of the regime relies on scrutiny and direction from the Government, but will the Minister clarify exactly what type of scenario would require the Secretary of State of the day to vary the conditions?
As I have said, we support an agile approach to regulation. After all, even across other jurisdictions, the idea of regulation and encouraging pro-competition across our digital markets is a complex process for legislation. We wholeheartedly support the need to get this Bill on the statute book—it is something Labour has long called for—but none of us wants the regulator to be undermined or constrained by the opinions of the Secretary of State of the day, so I would appreciate some reassurance from the Minister on that point before proceeding.
Clause 7 outlines the turnover conditions that must be met for the CMA to designate an undertaking as having strategic market status in respect of a digital activity. Subsection (2) sets out that the turnover condition is met if the CMA reasonably estimates that the undertaking’s UK turnover in the relevant period exceeds £1 billion or that its global turnover in the relevant period exceeds £25 billion. We welcome the clarity that only one of these thresholds needs to be met for the turnover condition to be met and, if the undertaking is part of a group, the turnover of that pooled group should be considered, which is a matter we will come to when we debate clause 114.
I will take this opportunity to highlight the fact that while the £1 billion and £25 billion turnover figures may seem high, they show the sheer market dominance that certain firms have over our digital markets. Setting the conditions at the current rate will not act as a deterrent for growth, which, of course, none of us want to see. We particularly welcome subsection (5), which requires the CMA to keep the thresholds under review and, from time to time, to advise the Secretary of State as to whether they are still appropriate and proportionate.
It would be helpful for all of us in the room and those listening elsewhere to understand how the Minister envisions that this will work in practice. Will it be on an annual review basis, and when will we have clarity on that? Will the reviews be made public to ensure proper and appropriate scrutiny? These are small points, but given the lack of transparency around the regime as it stands, I would be grateful for the Minister’s assurances. Despite that, again, we support the clause as it stands and do not seek to amend it at this stage.
Finally—thank you for your indulgence, Dame Maria—clause 8 makes provision about the value of an undertaking’s or a group’s UK or global turnover in the relevant period for the purposes of the turnover condition. We see this as a fairly procedural clause, which outlines the definition of global turnover by which the CMA will make its decisions on designation. We note that subsection (4) gives the Secretary of State the power to make regulations providing further detail about how the total value of an undertaking’s or a group’s UK turnover or global turnover is to be estimated for the purposes of the turnover condition. Again, we feel that this could be problematic, and I would welcome the Minister’s reasoning as to why and in what instance the Secretary of State would need to make regulations to provide that further detail.
If the CMA is to be trusted to make reasonable decisions on a group’s turnover for the purposes of the turnover condition, it seems odd to give the Secretary of State the power to provide further detail when the merits or even the content of such further detail is so ambiguous. I hope the Minister can provide clarity and expand on that point. That aside, we support the clause because the turnover point is crucial for designation. The clause should remain and it should stand part of the Bill.
Jerome Mayhew
I briefly made mention of clause 7 in my earlier remarks. I am interested in the Minister’s view, particularly on clause 7(2)(b) and the definition of UK-related turnover being £1 billion or more. There is a legitimate question to be asked, because while that is a substantial amount of money, it is not that great in terms of global business. As I mentioned, I could foresee a situation whereby when a global undertaking’s global turnover is substantially less than £25 billion and its UK-related turnover is approaching the billion-pound mark, there might be a perverse incentive to direct investment and activity away from the United Kingdom because of that cliff-edge definition. I would love to propose a better alternative—it is above my pay grade—but I highlight that as being an issue we might need to take into account.
Paul Scully
I will cover most of the points in my main speech, but the reasons for designation of SMS status will be published, so that will be public. I will cover the points on the Secretary of State and on turnover. Clause 3 sets out what constitutes a digital activity for the purposes of the digital markets regime. Digital activities are defined as the provision of digital content, such as software, operating systems or applications; services provided by means of the internet, such as an e-commerce platform; and any other activity carried out for the purposes of providing digital content or internet services, such as background processes.
A firm can only be designated with SMS in respect of a digital activity. The restriction to digital activities is appropriate for the new regime, which responds to the specific characteristics of digital markets, such as network effects and data consolidation, which makes them extremely fast-changing as well as prone to tip in favour of a few firms. With all of this, the definition of digital activities has been designed so that our regime will be able to handle the complexities of different and fast-evolving digital business models, and that is reflected in the powers given to the Secretary of State.
Clause 4 sets out when the DMU will be able to consider a digital activity as being linked to the UK for the purposes of designation. As we have heard, the global nature of digital markets means that business actions in other countries can impact on consumers and businesses in the UK, so it is important to allow the DMU to address harm to competition in the UK, even when all or part of a firm’s physical operations are located elsewhere.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
The Minister may have explained this elsewhere, but I am wondering about the thresholds of £1 billion and £25 billion. Will those thresholds be assessed over time, because firms’ turnover and so on can change from year to year? When is the point at which assessment is made, and will the threshold change subsequently if turnover drops?
Paul Scully
The hon. Lady makes a good point, which relates to what my hon. Friend the Member for Broadland said about fluctuation of turnover and what companies may do with their turnover. It might be a good time to tackle that.
First, the turnover of the whole corporate group needs to be considered. That approach will help to avoid complications in revenue allocation, which could result in firms avoiding investigation and designation by virtue of their corporate structure or accounting practices. The DMU will be able to consider the past two periods of 12 months, not just the more recent one when calculating turnover—that should cover fluctuations, which the hon. Member for Feltham and Heston asked about. Markets can fluctuate, and turnover is not the same as market power; it is just part of the definition. The flexibility will also reduce the likelihood of the figures being manipulated and circumvented for the purposes of the turnover threshold.
Importantly, the use of the turnover thresholds will provide certainty to the vast majority of firms that they cannot be in scope of the regime, as they will easily be able to determine that their turnover is below the thresholds. However, if a firm meets the turnover threshold that does not necessarily mean that it will be subject to an investigation. The DMU will also need to have reasonable grounds to consider that the firm meets the two SMS conditions in respect of a digital activity that is linked to the UK—that is, that it has substantial and entrenched market power, and a position of strategic significance in respect of that activity.
Clause 7 will give power to the Secretary of State to amend those thresholds. That will ensure that they remain relevant as digital markets develop, evolve and grow over time. The DMU will be required to keep the thresholds under review and advise the Secretary of State whether they are still appropriate. The Government anticipate that the DMU may take into account factors such as inflation and currency fluctuation when doing so, using its expertise and while having its finger on the pulse of digital markets. As was the case for clause 6, the affirmative resolution procedure is the appropriate mechanism, as this is a significant power that would alter the scope of the regime.
Clause 8 relates to the turnover condition and sets out further details about the meaning of global and UK turnover. Any activity of the firm will be considered when estimating global turnover. Both digital and non-digital activities will be considered, making it easier for firms to know whether they are in scope without having to distinguish between different types of activity.
For UK turnover, any activity of the firm will be considered, but the turnover must relate to UK users or UK customers. The clause also gives the Secretary of State the power to make provision about how turnover should be estimated, including provision about amounts that should or should not be regarded as comprising turnover. That level of detail would not be suitable for primary legislation. We believe a negative procedure is most appropriate because of the technical and non-controversial nature of any regulations.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
Clauses 4 to 8 ordered to stand part of the Bill.
Clause 9
Initial SMS investigations
Question proposed, That the clause stand part of the Bill.
Paul Scully
Clause 9 relates to initial SMS investigations. It sets out the circumstances under which the DMU can start an initial SMS investigation. An initial SMS investigation is for circumstances in which a firm either is not designated at all or is designated but in a different digital activity. The DMU can open an investigation only if it has reasonable grounds for considering that the tests for designation may be met—that is to say, most importantly, the tests of substantial and entrenched market power and a position of strategic significance in respect of a digital activity. Clause 9 does not require the DMU to open an investigation as it should be able to prioritise investigations to ensure its resources are targeted at the most pressing competition issues.
Clause 10 relates to further SMS investigations—the other type of SMS investigation. A further investigation is an investigation into whether to revoke an existing designation or designate a firm again in respect of the same digital activity. A further SMS investigation may also look at whether to designate a firm in respect of a similar or connected digital activity. The investigation will consider whether to make provision about existing obligations, which I will say more about on clause 17.
It is important that a designation should not continue indefinitely. That is why the DMU must review any designation before the end of the five-year designation period. The DMU will need to open a further SMS investigation at least nine months before the end of the five-year designation period if it has not already done so. It will either revoke a designation, if the firm no longer meets the criteria, or decide to designate the firm again for another five-year period. The DMU will be able to open a further investigation at any point during an existing designation. For instance, if the DMU considers that a firm no longer has substantial and entrenched market power in the digital activity, then it is important that the designation can be reviewed and, if necessary, revoked early.
Clause 11 sets out the procedure that the DMU must follow for either an initial or a further SMS investigation. To ensure that the regime is fair and transparent, the DMU will be required to give the firm a notice when it starts an investigation, stating the purpose and scope of the investigation as well as its length. For initial SMS investigations, the notice must set out the DMU’s reasonable grounds for considering that the designation tests may be met. The DMU must also publish a statement summarising the notice in order to make the wider public aware that it is opening an investigation. That notice will trigger the start of the investigation period.
Clause 12 sets out that the DMU may close an initial SMS investigation at any point before reaching a final decision on designation. It is important that that option is available to the DMU for initial investigations as there may be situations where flexibility is needed. For instance, unexpected circumstances may arise while an investigation is ongoing. The Government believe that in order to reprioritise resources if needed, the DMU should have the discretion to close an initial SMS investigation before reaching a final decision.
Clause 13 sets out that the DMU must consult on its proposed decisions as part of an SMS investigation. It is important that the firm under investigation, as well as all relevant parties, has an opportunity to feed in views and perspectives to the DMU’s investigation process. That consultation is also important in providing for a transparent regime that builds on the best evidence available.
Clause 14 sets out what the DMU must do at the end of an SMS investigation. For a further SMS investigation, the DMU must decide whether the existing designation should be revoked or whether the firm should continue to be designated in the same activity. The DMU must also decide whether to make provision in relation to existing obligations. If relevant, the DMU must decide whether the firm should be designated in a similar or connected activity.
For an initial investigation, the DMU should also reach a decision when it has not closed the investigation early under clause 12. The DMU will need to give the firm a notice of its decision on or before the last day of the investigation period, which lasts up to nine months. It must also publish a summary statement. If for some reason the DMU does not give the decision notice to the firm by the deadline, by default the firm is not designated, or is no longer designated, in the relevant digital activity.
Clause 15 sets out the requirements for decision notices when the DMU decides to designate a firm as having SMS in respect of a digital activity. The decision notice needs to be given to the firm. Among other things, the notice should include a description of the firm, a description of the digital activity, any provision made regarding existing obligations, per clause 17, and the DMU’s reasons for its decisions.
Clause 16 sets out the requirements for decision notices when the DMU decides to revoke an existing designation following a further investigation. A designation will no longer be appropriate once a competitive environment has developed. The decision notice needs to be given to the firm, as set out in clause 14(2).
Clause 17 gives the DMU the power to apply transitional arrangements to obligations revoked as a result of the DMU’s ending an SMS firm’s designation in relation to a digital activity, but only for the purpose of managing impacts of the revocation on persons who benefited from those obligations, and only in a way that appears to the DMU to be fair and reasonable. That will help ensure a smooth transition for wider market participants.
Clause 17 also allows the DMU to continue to apply existing obligations, such as conduct requirements or pro-competition orders. That is for cases where the new designation is in respect of the same digital activity, or an activity that is similar or connected to the previous designated digital activity. The clause will ensure that existing obligations do not automatically end where they still remain appropriate following a further SMS designation. The power to continue to apply obligations will be subject to the DMU’s ongoing duty to monitor and review obligations, which means that the DMU cannot continue to apply obligations that are no longer appropriate.
Finally, clause 18 sets out that a firm will be designated as having SMS in respect of a digital activity for five years, beginning with the day after the day on which the SMS decision notice is given. We believe that five years strikes the right balance between giving enough time for the regulatory interventions to have an impact on the one hand, and making sure the obligations on the firm do not last longer than necessary on the other.
Alex Davies-Jones
Labour broadly welcomes this grouping. I will make some brief comments about clauses 9, 10 and 11 before addressing my amendments, and will then come on to clauses 12 to 18.
As we know, and as the Minister has outlined, clause 9 concerns initial SMS investigations. We see the clause as an important start point that will allow the CMA to have clarity over exactly how it will begin the designation process for the regulatory regime. Subsection (1) sets out that the CMA may begin an initial SMS investigation where it has reasonable grounds to consider that it may be able to designate an undertaking in accordance with clause 2. We believe that that is vital and that the CMA is given the statutory powers to investigate fully. We agree that “reasonable grounds” are an important way to capture the beginnings of the process.
It is clear that the regime will apply only to firms with significant market dominance, as we have already discussed, but it is right that the CMA should use a logical approach to establish SMS firms from the outset. We also agree that it is right that where the CMA considers that the digital activity is similar or connected to a digital activity in respect of which the undertaking is already designated, it may instead begin a further SMS investigation.
Similarly, we agree with the wording of subsection (3), which clarifies that the CMA has the power to open a designation investigation in respect of a digital activity even if it has previously decided not to designate the undertaking as having SMS in respect of that digital activity. That would include circumstances where a previous designation had ended or where a previous decision had been taken not to designate the undertaking in respect of that digital activity. It is incredibly important that the CMA should not be restricted in terms of its designations, so this clarity is welcome.
The Chair
Order. I ask the hon. Lady to restrict her comments to the stand part debate on clauses 10 to 18. We debate the amendments a little later.
Alex Davies-Jones
Yes, Dame Maria.
I turn to clause 11. We see the clause as important in establishing exactly how the CMA should carry out an SMS investigation. It is important for all involved—from the CMA to regulated firms—that there should be some transparency over exactly how the CMA will begin an SMS investigation, and under what circumstances. We particularly welcome provisions for investigation notices; it is important that all parties are given adequate time and notice in order for this regime to fully succeed.
As I have already noted, we particularly welcome subsection (5), which sets out that as soon as reasonably practicable after giving an SMS investigation notice, or a revised version of the notice, the CMA must publish a statement summarising the contents of the notice and give a copy of the statement to the Financial Conduct Authority, the Office of Communications, the Information Commissioner, the Bank of England and the Prudential Regulation Authority. That is an important point for transparency—a common theme, I am afraid, to which I will continue to return as the Bill progresses through Committee.
As we all know, there are certain aspects of digital markets that make them prone to creating tipping points, where very large online platforms have huge and entrenched market power. The lack of transparency is a particularly problematic issue, and one that the Bill must seek to address. For example, in online advertising a complicated bidding process may take place very quickly—advertisers may not able to scrutinise decisions about where their ads are placed and how much they cost. That has a knock-on impact by exacerbating other competition problems, as people and businesses are unable to make informed choices.
We see the transparency and publication of these investigation notices as an important part of the package around getting the regime right. We welcome the fact that the Financial Conduct Authority, Ofcom, the Information Commissioner, the Bank of England and the Prudential Regulation Authority will all have sight of such notices, but what assessment has the Minister made of making these notices public? Of course, Labour recognises that there is a difficult line to toe here in terms of publishing information that could impact markets and potentially cause detriment to companies’ market share or worth. However, could a sensible middle ground be reached?
I move on to clause 12. Labour welcomes clause 12, which outlines the circumstances in which an initial SMS investigation may be closed without a decision. We recognise that giving the CMA that flexibility is important. None of us wants undue time limits to be placed on its decision-making and designation process. Central to the success of the regime is that the CMA should be empowered to take decisions within its remit. We all recognise that the CMA is a proactive regulator that currently seeks to use its soft power alongside its formal powers, but it is currently being hampered by its existing legal powers. That is causing a disparity between its ability to enforce competition and consumer law—a significant issue that stakeholders, including Which?, Citizens Advice and others, have repeatedly raised, including during our evidence sessions.
We see clause 12 as an important clause that gives the CMA the ability to work in an agile manner, according to workload and priorities. As with previous clauses, we particularly welcome subsections (2) to (4), which set out that if the CMA decides to close an initial SMS investigation, it must give the undertaking under investigation notice of the closure, including the reasons, and publish a statement summarising the contents of the notice. Labour supports the clause, and we have not sought to amend it at this stage.
Clause 13 requires the CMA to consult on any decision that it is considering making as a result of an SMS investigation. Subsection (1) requires the CMA to carry out a public consultation and bring it to the attention of such persons as it considers appropriate. Of course, there is a balance to strike here: public consultation is an important part of any regulatory regime, but none of us wants to see the CMA bound by delays and, as a consequence, unable to regulate effectively. I would be grateful for some clarity from the Minister on his understanding of the “appropriate” person, as outlined in subsection (1), which reads:
“The CMA must—
(a) carry out a public consultation on any decision that it is considering making as a result of an SMS investigation (see section 14(1)), and
(b) bring the public consultation to the attention of such persons as it considers appropriate.”
I imagine the Secretary of State will be one such person, but will the Minister clarify who else he envisions will be privy to the public consultations? In addition, I would be grateful if the Minister again confirmed whether the public consultations will be published. Consultation is an important part of any regulatory regime, particularly this one, which aims to do a colossal thing in regulating our digital markets and, ultimately, to encourage competition. Labour recognises the extent of the challenge, and there is a fine balance to be struck between consultation and stifling action. We do not want to see consultations get in the way of the regime more widely. We have had enough delay as it is, and I am sure the Minister will not mind my highlighting just how many consultations the Bill has endured on its journey so far.
In 2018, the Government established a digital competition expert panel to examine competition in digital markets. In 2021, the DMU was set up within the CMA to oversee competition in the digital markets sector. Between July and October of that year, the Government ran a consultation on plans for a new regime. Almost a year on, in May 2022, the Government responded to the consultation, setting out the final position on a new regime. There has already been significant delay to getting the Bill to this stage, and we already know from its impact assessment that the regime is unlikely to be fully operational until 2025, so I would be grateful if the Minister could reassure us all that the CMA will not be delayed by consultations, as the Government seemingly have been. That point aside, we understand the value of the clause and will support it.
Clause 14 sets out what the CMA must do at the end of an SMS investigation. It broadly clarifies the actions and decisions that the CMA must take in deciding whether an undertaking will be designated as SMS in respect of its digital activity. Again, we welcome subsection (2). We also support subsection (5), which sets out that the CMA must publish a statement summarising its contents as soon as reasonably practicable after giving an SMS decision notice. This is an important clause, which we see as a practical outline of how the CMA will be empowered to act on concluding its initial SMS investigations.
Clause 15 sets out a requirement for SMS decision notices where the CMA decides to designate an undertaking as having SMS in respect of a digital activity. We welcome the clarity afforded in subsection (2), which outlines on the face of the Bill the exact contents that the SMS decision notice must include. This ranges from a description of the designated undertaking to a statement outlining the designation period and the circumstances in which the designation could be extended.
It is also worth referring specifically to subsection (4), which clarifies that giving a revised SMS decision notice to provide for the designation of an undertaking does not change the day on which the designation period in relation to that designation begins. That is a welcome clarification, which I know will be useful for undertakings and civil society to understand as we seek to establish the regime in full.
Although Labour supports the clause, I am interested to know the Minister’s thoughts on subsection (5), which states:
“As soon as reasonably practicable after giving a revised SMS decision notice, the CMA must publish a statement summarising the contents of the revised notice.”
Again, that is rather vague, so will the Minister clarify what he considers to be “reasonably practicable”? Ultimately, companies and consumers alike would benefit from a timely and transparent approach to the regulation. Although I am reassured by the CMA’s ability, we and many others have slight concerns about its capacity and resource, as I have previously outlined, so I would be grateful for the Minister’s assurances on that issue.
Clause 16 sets out the requirements for SMS decision notices where the CMA decides to revoke an existing designation as a result of a further SMS investigation. There is no need for me to repeat myself. We support the clause, and it is important for the CMA to be empowered to act flexibly, particularly given the ever-changing nature of digital markets. Again, we welcome clarification that the CMA will provide for the revocation to have effect from an earlier date—for example, where the undertaking has already ceased to engage in the relevant digital activity. None of us wants to see overregulation, so we support the clause and have not sought to amend it. While I am all for a collegiate approach to legislating, I assure the Minister and my Whip that we do not agree with the Bill in full, as can be seen from the amendment paper. However, on the points covering designation, we welcome the progress and clarity of the clauses, which we see as fundamental to the regime’s wider success.
Labour supports clause 17, which aims to define the nature of an existing obligation, which is any conduct requirement, enforcement order, final offer order or pro-competition order applying when a designation is revoked or another one is made after a further SMS investigation. We particularly welcome subsections (3) and (4), which set out that the CMA may apply any existing obligation in respect of a new designation, may modify that obligation in respect of a new designated activity, and may make transitional, transitory or saving provision in respect of that obligation. Again, we see that as standard procedure to allow the regime to operate in full and have not sought to amend the clause.
Finally—colleagues will be pleased to hear that—clause 18 establishes that where the CMA decides to designate an undertaking as having SMS in a digital activity, the designation period is five years, beginning the day after the day on which the SMS decision notice is given. We welcome other provisions later in the Bill on the circumstances in which the designation period may be extended or revoked. Labour recognises that assessing the regulatory regime in digital markets will take some time, so we believe a designation period of five years is a sensible approach. Given certain undertakings’ market dominance, we think five years is a reasonable timeframe to allow pro-competition mechanisms to take effect and consumers to see that reflected in the options and prices afforded to them. We therefore support the clause and have not sought to amend it.
Paul Scully
On the two questions of what is reasonably practical and practicable in terms of time, we do not want to set an artificial deadline but want to make sure that the DMU can act as quickly as possible. As the hon. Member for Pontypridd rightly says, and we have said all the way through, technology and digital markets move really quickly. That is why we want to make sure that decisions are out of the door as quickly as possible, so that people can see what is happening as soon as possible. The decisions will go to the appropriate persons as described, which are relevant third parties and the SMS firms themselves. It is for the CMA to determine who is a relevant third party, but that will clearly include any challenger tech companies that may be affected by the initial SMS designation.
Question put and agreed to.
Clause 9 accordingly ordered to stand part of the Bill.
Clause 10 ordered to stand part of the Bill.
Alex Davies-Jones
I beg to move amendment 46, in clause 11, page 6, line 36, at end insert—
‘(6) The CMA must provide a copy of the SMS investigation notice to any person who requests a copy.’
This amendment and Amendments 47 to 52 aim to ensure access to information relevant to the regime is available publicly.
The Chair
With this it will be convenient to discuss the following:
Amendment 47, in clause 12, page 7, line 9, at end insert—
‘(5) The CMA must provide a copy of the notice under subsection (2) to any person who requests a copy.’
See the statement for Amendment 46.
Amendment 48, in clause 14, page 7, line 36, at end insert—
‘(5A) The CMA must provide a copy of the SMS decision notice to any person who requests a copy.’
See the statement for Amendment 46.
Amendment 49 in clause 26, page 14, line 19, at end insert—
‘(3A) The CMA must provide a copy of the SMS decision notice to any person who requests a copy.’
See the statement for Amendment 46.
Amendment 50 in clause 28, page 15, line 20, at end insert—
‘(5) The CMA must provide a copy of the notice to any person who requests a copy.’
See the statement for Amendment 46.
Amendment 51 in clause 30, page 16, line 13, at end insert—
‘(4A) The CMA must provide a copy of the notice to any person who requests a copy.’
See the statement for Amendment 46.
Amendment 52 in clause 46, page 25, line 38, at end insert—
‘(5) The CMA must provide a copy of the PCI investigation notice to any person who requests a copy.’
See the statement for Amendment 46.
Alex Davies-Jones
These important amendments to clause 11 that we have tabled are designed to encourage a more transparent approach to SMS investigations. As repeatedly stated, transparency, openness and accountability have to be central to the Bill working in practice and in reality. The Minister will note that this is a simple set of amendments, which will broaden the regime’s openness. Labour firmly believes that a transparent approach where possible and where the impact on markets is limited will be vital to its success. Will the Minister share his thoughts on our amendments? They seek to make the Bill more transparent for everyone and I look forward to some clarity.
Paul Scully
Amendments 46 to 52 would require that the notices the DMU must provide to an SMS firm in respect of an SMS designation, conduct requirements and PCIs should be made available on request to third parties. We agree with the hon. Member for Pontypridd that transparency and accountability are essential to the new regime, and we will always look for ways to make sure that it is open and at the core of what we do.
The Bill already provides that the DMU will be required to publish online a statement summarising the contents of those notices whenever they are provided to a firm. That is, it will need to set out required elements of the notice, such as describing its decisions and the reasoning behind them, in a shortened form. In the statements, the DMU will provide the key information from the notice about its decisions to other businesses, consumers and the wider public, in line with public law principles. The DMU may redact commercially sensitive information.
For example, the summary notice for a conduct investigation must give details about the conduct requirement and the behaviour suspected of breaching that requirement, and it must provide information about the investigation period and the timeframe for making representations for third parties.
Peter Dowd (Bootle) (Lab)
I completely understand where the Minister is coming from, but the Labour Front Bench is trying to push this question of transparency and I am concerned about what the Minister just said. The hon. Member for Broadland talked in relation to another issue about the courts becoming involved. The last thing we want is to create a need for clarification from the courts. Is there not a danger that, unless this area is transparent and the statements are more significant than just a summary, we will get into needing clarification by the courts?
Paul Scully
Third parties can clearly get involved and approach the DMU, which I will cover in a minute, so we do not necessarily need to get to court stage. I have talked about some of the specifics that will be in the summary notices, which will have quite a considerable amount of detail anyway. We do not want to add extra resource requirements that take away from the core tasks of the DMU.
The summary statements are just one of the ways in which the DMU will inform and involve stakeholders in its decision making. The DMU will be required to publicly consult before making major decisions, which include designating a firm with strategic market status in a digital activity, making pro-competition orders, and imposing conduct requirements. It will also be required to publish guidance on how it will take those decisions.
Should a third party be unsatisfied with the DMU’s summary statement, they can request the full notice through a freedom of information request. As a public authority, the CMA is required under the Freedom of Information Act 2000 to provide the public with information it holds when requested to do so, subject to the relevant exemptions, which include a requirement to protect commercially sensitive information. We agree that public transparency for the new digital markets regime is vital. The drafting ensures that the right information will be made publicly available. I hope I have set out our position to hon. Members and that they feel able to withdraw their amendments.
Alex Davies-Jones
I have listened to the Minister carefully outline the Government’s position. I do recognise that a balance needs to be struck, yet we feel that our amendments would seek to increase transparency, openness and accountability. For that reason, we will press them to a vote.
Question put, That the amendment be made.
Alex Davies-Jones
I beg to move amendment 54, in clause 19, page 11, line 17, after “CMA,” insert—
“(ab) where the designated undertaking has been given an SMS decision notice under section 14(2), must come into force no later than three months of the SMS decision notice being given”.
This amendment introduces a timeline for the enforcement of conduct requirements set out on the face of the Bill and in CMA Guidance.
With your permission, Dame Maria, I will also speak to clause 19, in the interests of efficiency.
Alex Davies-Jones
Clause 19, which outlines the CMA’s power to impose conduct requirements on a designated firm, is very welcome indeed. It is an important clause that aims to prevent harm that may result from the market position of undertakings with strategic market status.
In practice, these conduct requirements are essentially instructions given to a designated undertaking to conduct digital activities in a manner that promotes competition. The requirements can be prescriptive or prohibitive in nature; they are essentially the dos and don’ts, except that the requirements do not apply automatically to every undertaking having SMS and instead apply on a case-by-case basis. The DMU therefore has wide discretion to impose conduct requirements on specific SMS firms, as long as they fit within a list of purposes that are listed in clause 20.
Vicky Ford (Chelmsford) (Con)
I am very fond of the hon. Member and she has a beautiful voice, but she did complain earlier about how long it had taken this Bill to get to market. I urge her to remember that we want to get through the Bill as quickly as possible, for consumers. Repeating every single thing that we can already read in the explanatory notes and in the Bill does not seem to me to be the most efficient use of all of our time.
Alex Davies-Jones
I am grateful for that intervention. The hon. Member will know I am also fond of her and her voice. I think it is important to clarify exactly what we are debating, and why we are reasoning as we are. I will happily refer to certain clauses if that would please the hon. Member, but it is important that we outline exactly why we have come to the rationale that we have on the Bill as it stands before us.
Potential examples of prescriptive conduct requirements include having effective processes for handling complaints, trading on fair and reasonable terms, or giving users options or default settings. Conversely, some examples of prohibitive conduct requirements may be preventing abuse of dominance practices, such as treating its own products more favourably, using data unfairly, tying practices, restricting interoperability, refusal to grant access and so on.
We particularly welcome subsection (5), which provides that the CMA may impose conduct requirements only for certain objectives. However, we have concerns about subsection (10), which says that a conduct requirement
“(a) comes into force at a time determined by the CMA, and
(b) ceases to have effect—
(i) in accordance with a decision of the CMA”—
as Members can read in the Bill.
For swift implementation, it is right that the Bill’s approach allows for conduct requirements to be written alongside an SMS designation investigation, but we need a statutory time limit for the initial set of conduct requirements to be implemented. As it is likely that the DMU will have considered the three conduct objectives before the SMS designation decision is made, the DMU should be required to impose the initial set of conduct requirements either at the same time as the SMS designation or within three months of its date.
A central feature of the new regime is to enable the DMU to revise its rules as time goes on, so the deadline should apply only to the initial set of conduct requirements, so as not to hinder the DMU in revising or adding to them subsequently. Amendment 54 would introduce a timeline for the enforcement of conduct requirements set out in the Bill and in CMA guidance.
Peter Dowd
Given that subscription traps cost between £28 billion and £34 billion a year, my constituents in Bootle are perfectly entitled to listen to my hon. Friend ram home this point time after time, because £28 billion out of their pockets in someone else’s pocket is not appropriate, not reasonable and not fair, given the current cost of living crisis. My hon. Friend should speak as much and as long as she wants.
Alex Davies-Jones
I am grateful for that intervention. It is important that we get the Bill right. It is a very technical Bill. It is incredibly wordy—Members will have heard me trip over my words a number of times. It is important that we are able to portray the nature and benefits of the Bill to those listening at home or elsewhere, for the future and for the CMA, so that they understand what we as legislators mean when we speak in this place. That could influence decisions later. It is important for our constituents, who will be positively—we hope—impacted by the Bill. It will enable to have them more choice to hear exactly what we as legislators in this place mean.
The amendment introduces a timeline. It is important and we have given it some serious thought. I hope that the Minister has given it serious thought, too, because it would be helpful to ensure that the CMA is forced to act swiftly, as we have all discussed. I look forward to hearing his comments. I hope that he sees how beneficial this simple amendment could be. It is not meant to trick him; it is meant to make the legislation as positive and as beneficial as it can be.
Paul Scully
Thank you, Dame Maria. I will cover the clause first. It enables the DMU to introduce conduct requirements to govern the behaviour of SMS firms. That will help manage the effects of their market power by protecting the businesses and consumers that rely on their services. The tailored rules will be used to promote fair dealing, open choices, and trust and transparency, which mean that the DMU will be able to ensure that SMS firms treat consumers and other businesses fairly, not subjecting them to unreasonable terms and conditions. It will also mean that the regulator is able to intervene to ensure that users can choose freely and easily between different products and providers. Finally, the DMU will be able to intervene to ensure that users have the information they need to understand what is on offer, and to make their own decisions about whether they want to use the SMS firm’s products.
The clause sets out that, where the DMU imposes a conduct requirement, it must send a notice to the SMS firm and publish that notice online as soon as reasonably practicable. That will ensure that the obligations and responsibilities will be made clear to the SMS firm and to those businesses and consumers who rely on them.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
My hon. Friend the shadow Minister has been accused of repetition, but she made a point about resources. The Minister is making further comments about the capacity and tasks of the regulator, so perhaps he could come back to the earlier question on resourcing, about which a lot of concern was expressed last week in the evidence sessions. Will the Minister address some of that and tell us how the new body will be resourced to fulfil all the tasks that he is discussing?
Paul Scully
That is a good point. The hon. Gentleman will be aware that that is one of the reasons why we have set the DMU up in shadow form, to start building up its capacity and expanding on its expertise. Currently, the DMU stands at about 70 people, and it is able to lean in on expertise as required. In the evidence session last week, we heard from the chief executive of the CMA that she feels that they have the expertise and the resource able to make the clear decisions needed in a complicated area of competition. The whole point about digital markets is that they are not like the analogue competition regime that we have been used to for so many years. That is complex enough, but it is well established and matured; in digital markets, things happen very quickly.
The Opposition are absolutely right when they say that we need to make decisions quickly, transparently and in a way that holds the confidence of consumers and the challenge attackers, to ensure that this is a place where people can grow and scale a company, even to the size of those companies that are likely to have entrenched market power and to have SMS in the first place.
The clause enables the DMU to vary conduct requirements as firms and markets change, ensuring that they remain appropriately tailored and proportionate. Without the clause, the DMU would not have the means to regulate the most powerful tech firms appropriately, and consumers would continue to be not adequately protected from harms in digital markets.
Neil Coyle
The Minister made reference to the analogue competition. That equivalent is trading standards and physical competition, but last week they told us that they had had a cut of 50% in their capability to tackle problems. The Minister is talking about powers to investigate, to assess, to recall, to monitor and to review, all within a fixed timetable, against companies with very significant resources, so what capacity will there be to review the powers and resources of the new body and how will it be kept up to date in terms of its skills?
Paul Scully
I have talked about the fact that the CMA will publish on a regular basis—on an annual basis—its report about what it is doing and how it is working. The Under-Secretary of State for Business and Trade, my hon. Friend the Member for Thirsk and Malton, has regular meetings with the CMA and with the Competition Appeal Tribunal as well. We will meet regularly the digital markets unit to talk through the issues of capacity and its decision making, but it is not just for us to be talking to it “behind closed doors”, within the Department. The regular reports from the CMA and the decision-making reports, which will be published as well, will absolutely highlight why the decisions have been taken and how they have been taken, and therefore we can take a judgment on what resources it needs and whether it is under-resourced.
Over the three years of my ministerial career, I seem to have been giving the CMA jobs to do. I say that having done the Bills that became the United Kingdom Internal Market Act 2020 and the Subsidy Control Act 2022 and now this. The hon. Member for Bermondsey and Old Southwark is right to say that the CMA has expanded. But it has expanded in accordance with the expertise that it has.
Jerome Mayhew
We had three days of oral evidence last week and were lucky enough to have the chief executive of the CMA come and give evidence to us. I do not have a copy of Hansard with me, so I stand to be corrected, but I believe that I am right in saying that Ms Cardell, when she gave her evidence, was directly questioned about the level of resource that the CMA had and her degree of confidence as to whether it would be sufficient to carry out the tasks anticipated in the Bill. The words that stick in my mind and that I ascribe to Ms Cardell—again, I stand to be corrected—were that the CMA is well resourced and more than capable of undertaking these activities.
Peter Dowd
Does the Minister agree with me that we have to learn lessons from history? The Committee considering the Bill that became the Criminal Finances Act 2017, on which I served, took evidence from the enforcement and regulatory authorities and they said at the time, “Oh yes, we have all the resources we need,” but that proved not to be the case. If the chief executive of the CMA is saying that, let us come back in 12 or 18 months’ time and see whether it is actually correct. Will the Minister agree to a review of it in perhaps 12 or 18 months’ time, when this Bill has bedded in?
Paul Scully
The hon. Gentleman is absolutely right that we have to keep all these things in our purview, because if we get this wrong, that just embeds the entrenched power that we are talking about. It is absolutely the case that we have to ensure that the CMA, as an important body—I am thinking of not just the digital markets unit, which we are discussing here, but the entirety of its operation—has the capacity to do its work. As I said, we will clearly continue to look at the resources, capacity and expertise of the digital markets unit.
Amendment 54 would introduce a duty on the DMU to impose conduct requirements within three months of a decision notice being given, as we have heard. I absolutely share hon. Members’ interest in ensuring that conduct requirements are imposed quickly so that businesses and consumers can be protected. Indeed, we anticipate that conduct requirements will be in place from the day a firm is designated—or if not, much sooner than the three months proposed in the amendment. That is because the DMU can develop tailored conduct requirements informed by, and alongside, the designation investigation. That is facilitated by clauses 13(2) and 24(3), which enable the DMU to carry out the public consultation on strategic market status designation alongside the public consultation on any proposed conduct requirements.
Although we expect conduct requirements to be imposed as soon as a firm is designated, the Government have not included a statutory deadline. That is because the DMU needs the flexibility to deal with the complexities of developing targeted obligations. That includes taking the time necessary to consult and consider all the views shared by interested stakeholders.
Vicky Ford
I want to be quick. I really care about this Bill, because it is incredibly important for our constituents, who are consumers, to ensure that they are offered fair choices and fair prices. The clause is important, because it means that when a company acts inappropriately, the CMA, through the digital markets unit, can tell it what to do. Can the Minister give an example of a case where it might need more than three months for that telling it what to do to be done?
Paul Scully
That is a very good point. I do not think that I can give my right hon. Friend a specific example. If particular technicalities are involved, we do not want to put an arbitrary time limit such as three months, because we want the decision to be right. The Government absolutely expect the decision to be taken either on the day of designation or very shortly afterwards, but by binding ourselves there may be examples—I am afraid I am not nimble enough to think of a specific example, but I am sure one will come down the line. The whole point of this Bill is that it is flexible, proportionate and gets things right. At the end of the day, that is what we are trying to do, rather than putting in a timescale.
Vicky Ford
For the record, when the DMU tells a company what to do, does the Minister agree that that should always be done as quickly as possible, given that there may be technical changes to get things done as well? This is not a suggestion that decisions or actions should be delayed.
Paul Scully
I totally agree. That is exactly the point. Let us make it quickly, but we do not want an arbitrary timescale so that we rush and get the decision wrong. It is more important to get the answer right. For those reasons, I hope that the hon. Member for Pontypridd will withdraw her amendment.
Alex Davies-Jones
I have listened to the robust debate we have had. I still feel that having a timeline on the face of the Bill would provide transparency, clarity and certainty. Therefore, we will press the amendment to a vote.
Question put, That the amendment be made.
Alex Davies-Jones
I beg to move amendment 53, in clause 20, page 12, line 11, at end insert—
“(ca) carrying on activities in an area of its business other than the relevant digital activity, which if they were done in relation to the relevant digital activity would be prevented under the provisions of this section.”
This amendment prevents a designated undertaking from carrying on activities that would be prevented by the provisions of section 20 from being done in a different area of its business.
Amendment 53 aims to prevent a designated undertaking from carrying on activities that would be prevented by the provisions of section 20 from being done in a different area of its business. We feel that the amendment gets to the heart of the issues at hand, and we urge the Minister to consider it carefully. It will prevent a Whac-A-Mole situation in which the regulator is always having to define new activities to catch up, and we see it as an essential part of the Bill.
Paul Scully
I am trying to work out the intention of the amendment. It seems that it would add a permitted type of conduct requirement in order to expand the ability of the DMU to intervene outside the designated digital activity; I am not sure that I understand whether my understanding of that is clear.
The regime is explicitly designed to address competition issues in activities when a firm has strategic market status—that is, when it holds substantial and entrenched market power and a position of strategic significance. In some circumstances, SMS firms may use other, non-designated activities to further entrench their market power in the designated activity. Clause 20(3)(c) allows the DMU to create conduct requirements to address that; however, it is important that the DMU does not intervene in non-designated activities beyond that.
SMS firms are likely to be active in a large range of activities, and in many of them will face healthy competition from other firms. The amendment would allow the DMU to intervene outside the designated digital activity, without any requirement to show that there is a link to the firm’s market power in any given activity. That could be harmful to competition, consumers and innovation.
We are worried about whether the regime can tackle retaliatory conduct. It is important that that ability is built in, because a retaliatory action is likely to be captured under conduct requirement categories to ensure fair dealing, such as those that prevent discriminatory treatment or unfair terms and conditions. We want the DMU to be able to take firm action against retaliatory conduct, whether or not that is within the scope of designation, but only if it can prove the link between the two. It is really important that that step happens first.
Alex Davies-Jones
I appreciate the Minister’s comments, although I disagree with him on the reasoning. We see the leveraging principle as critical to the success of the pro-competition regime. It is important to clause 20, which is a mammoth clause. Our amendment would prevent a designated undertaking from carrying on activities that would be prevented by the provisions in the clause. It is really important that the amendment is included so we will press it to a vote.
Question put, That the amendment be made.
Alex Davies-Jones
I beg to move amendment 58, Clause 20, page 12, line 22, at end insert—
“(i) discriminating against a recognised news publisher by withholding from an internet service material produced by the recognised news publisher.”
This amendment would allow a conduct requirement to be used to stop a designated undertaking withholding news from a recognised news publisher from its platform.
The Chair
With this it will be convenient to discuss new clause 2—Recognised news publisher: definition—
“(1) In section 20, ‘recognised news publisher’ means any of the following entities—
(a) the British Broadcasting Corporation,
(b) Sianel Pedwar Cymru,
(c) the holder of a licence under the Broadcasting Act 1990 or 1996 who publishes news-related material in connection with the broadcasting activities authorised under the licence, and
(d) any other entity which—
(i) meets all of the conditions in subsection (2), and
(ii) is not an excluded entity (see subsection (3)).
(2) The conditions referred to in subsection (1)(d)(i) are that the entity—
(a) has as its principal purpose the publication of news-related material, and such material—
(i) is created by different persons, and
(ii) is subject to editorial control,
(b) publishes such material in the course of a business (whether or not carried on with a view to profit),
(c) is subject to a standards code,
(d) has policies and procedures for handling and resolving complaints,
(e) has a registered office or other business address in the United Kingdom,
(f) is the person with legal responsibility for material published by it in the United Kingdom, and
(g) publishes—
(i) the entity’s name, the address mentioned in paragraph (e) and the entity’s registered number (if any), and
(ii) the name and address of any person who controls the entity (including, where such a person is an entity, the address of that person’s registered or principal office and that person’s registered number (if any)).
(3) An ‘excluded entity’ is an entity—
(a) which is a proscribed organisation under the Terrorism Act 2000 (see section 3 of that Act), or
(b) the purpose of which is to support a proscribed organisation under that Act.
(4) For the purposes of subsection (2)—
(a) news-related material is “subject to editorial control” if there is a person (whether or not the publisher of the material) who has editorial or equivalent responsibility for the material, including responsibility for how it is presented and the decision to publish it;
(b) ‘control’ has the same meaning as it has in the Broadcasting Act 1990 by virtue of section 202 of that Act.
(5) In this section—
‘news-related material’ means material consisting of—
(a) news or information about current affairs,
(b) opinion about matters relating to the news or current affairs, or
(c) gossip about celebrities, other public figures or other persons in the news;
‘publish’ means publish by any means (including by broadcasting), and references to a publisher and publication are to be construed accordingly;
‘standards code’ means—
(a) a code of standards that regulates the conduct of publishers, that is published by an independent regulator, or
(b) a code of standards that regulates the conduct of the entity in question, that is published by the entity itself.”
This new clause is linked to Amendment 58.
Alex Davies-Jones
The amendment would allow a conduct requirement to be used to stop a designated undertaking withholding news from a recognised news publisher from its platform. None of us want to see in the UK situations like those occurring elsewhere across the globe. Colleagues will be aware that Google and Meta have attempted to ward off fair negotiations in Australia and Canada by restricting or threatening to restrict access to domestic trusted news that is the antidote to online disinformation. Denying citizens access to reliable information to avoid payment serves only to emphasise the primacy that such firms place on profits, rather than citizens’ interests. The Government must absolutely not give in to similar threats in the UK.
As the EU and other jurisdictions have forged ahead with similar but ultimately less agile and effective digital competition regulation, there is a danger that the UK will become a rule taker and not a rule maker. I urge the Minister to consider carefully the principles of the amendment and new clause 2, which further outlines a favourable definition of a recognised publisher that Labour supports. I look forward to hearing the Minister’s comments, but if we are not reassured, we will press the amendment to a vote.
Paul Scully
As we have heard, amendment 58 and new clause 2 are intended to strengthen the regime’s protections for news publishers by defining “recognised news publisher” and introducing a specific power to protect them from discrimination. I understand and appreciate the sentiment behind the amendment and what the hon. Member for Pontypridd is striving to do. It is important that news publishers can benefit from the robust protections offered by the new regime. I am confident that the Bill, as drafted, will make an important contribution to the sustainability of the press. I hope the hon. Lady will understand when I expand on that, because the DMU’s tools, including all permitted types of conduct requirement, are designed to rebalance the relationship between SMS firms and those who rely on them, including firms and sectors across the economy. They are drafted in a sector-neutral way for that reason.
Alex Davies-Jones
Is the Minister reassured that the Bill will not allow the emergence of a situation like those in Australia and Canada, where online disinformation is pumped around constantly because of the lack of clarity on platforms highlighting recognised news publishers?
Peter Dowd
Does the Minister agree that this is an exact replica of what happened when ITV tried to stop Sky advertising on ITV platforms, in terms of competition? That was stopped: it was not fair and it was not reasonable. Is this not sort of similar? We cannot give the power to the platform itself to decide what it does or does not do and what people’s access to news is.
Paul Scully
No, I do not agree. To answer the question asked by the hon. Member for Pontypridd, I absolutely believe that it does, because the conduct requirements can be tailored to instruct SMS firms on how they should treat consumers and other businesses, including publishers. In the case of publishers, that could, for example, include conduct requirements on SMS firms to give more transparency to third parties over the algorithms that drive traffic, or it could oblige firms to offer third parties fair payment terms for the use of their content. Examples of that have come up time and again, both in evidence and in my conversations with publishing representatives.
Freedom of contract is a crucial principle, but withdrawal of service by an SMS firm could be considered anti-competitive if the behaviour is discriminatory or sufficient notice is not given. In such a scenario, the DMU could take appropriate action through conduct requirements or PCIs. There are plenty of general examples, and the Bill very much accounts for the examples of Australia and Canada. We are just shaping it in a different way, in as flexible—
Neil Coyle
The Minister’s assertion is not shared by the News Media Association. The Opposition amendment tries to address some of the concerns around timeframes of designation and final offer mechanisms. Will the Minister tell us why he thinks the News Media Association’s briefing is inaccurate?
Paul Scully
At the end of the day, this is an interpretation of the Bill. The amendment names a number of specific news publishers; our approach is sector-unspecific. All those will come within the regime of the Bill, but specifying just one sector would risk skewing the conduct of the regime and the way it works towards that sector. I think the question that was asked was whether those news publishers and the kind of behaviour that has been described come under the regime of the Bill, as drafted. We believe they absolutely do.
Alex Davies-Jones
I appreciate the Minister’s rationale, but leaving the interpretation of the Bill so ambiguous could mean certain platforms allowing news publishers that are not relevant news publishers to cause harm and damage to society and the public, as we have seen elsewhere in the world. It is imperative on us as legislators to get it right, and we have that opportunity in the Bill.
We have always said that we want this law to be world-leading. We wanted to be able to do things differently from the EU. This amendment gives us the flexibility to make that change and do things differently, which is why we will press it to a vote.
Question put, That the amendment be made.
Paul Scully
The DMU will be able to use conduct requirements to address and prevent practices that exploit consumers and businesses or exclude innovative competitors. Clause 20 sets out an exhaustive list of permitted types of conduct requirement that the DMU can impose in order to address and prevent harm to businesses and consumers in digital markets. It ensures that the regime can adapt to future challenges by empowering the Secretary of State to amend this list, subject to parliamentary approval.
The list reflects insights drawn from the CMA’s market studies and regulatory expertise. It captures 13 well-evidenced types of anti-competitive behaviours including self-preferencing, tying and bundling, and the unfair use of data. Conduct requirements could be used to ensure that SMS firms interact with users of all kinds on fair and reasonable terms; that consumers are not discriminated against; or that competitors do not lose out because an SMS firm has used data unfairly. The list of permitted types of requirement reflects the competition issues we see in digital markets today, but these markets are fast-moving.
It is vital that the Secretary of State is able to amend the list in future, with Parliament’s approval, to ensure that consumers are protected from whatever new challenges arise. Setting out the types of permitted requirement in the legislation, rather than specifying the requirements themselves, means that the regime will be flexible and responsive. It will make it possible to impose targeted and tailored interventions that address harms to consumers, while avoiding unnecessary burdens and unintended consequences for SMS firms.
Alex Davies-Jones
Clause 20 is a mammoth clause that sets out an exhaustive list of permitted types of conduct requirement. Labour welcomes the clarity in the clause—as, I am sure, will the CMA and firms likely to be designated. Ultimately, pro-competitive interventions will tackle the causes of market power and are a necessary step to addressing the characteristics of these markets, such as network effects and economies of scale that tip some digital markets towards a single firm. Those interventions could also include mandating that consumers have greater choice over the collection and use of their personal data. They could even look at ownership separation. However, some digital markets cannot be made competitive, and in such cases the effects of market power must be managed. To do this, the DMU needs sufficient powers. We see the clause as central to getting that balance right.
Clause 20 states that conduct requirements may prevent the SMS firm from
“carrying on activities other than the relevant digital activity in a way that is likely to increase the undertaking’s market power materially, or bolster the strategic significance of its position, in relation to the relevant digital activity”.
The leveraging principle is critical to the success of the pro-competition regime. Without it, the DMU will find itself unable to address harmful conduct and will meet arguments about where—meaning in which activity—a piece of conduct occurs, because the DMU will be unable to touch conduct that occurs outside the SMS activity even if it is closely related to the SMS activity.
A stronger leveraging principle would prevent designated firms from simply moving their service fees from one location in the ecosystem to another, such as from app store service fees to an operating system licence—the stealth tax that we heard about during our evidence sessions. It would prevent a whack-a-mole situation in which the regulator always has to define new activities to catch up.
We have already debated our amendment, with which we were seeking a stronger principle. Sadly, it was not accepted by the Government, but we will push this further as the Bill progresses.
Question put and agreed to.
Clause 20 accordingly ordered to stand part of the Bill.
Clause 21
Content of notice imposing a conduct requirement
Question proposed, That the clause stand part of the Bill.
Paul Scully
Clauses 21 to 25 set out the procedural aspects in relation to conduct requirements, because it is really important that SMS firms, and the people and businesses who rely on them, understand what obligations are being imposed and why. The DMU is required to give notice to the SMS firm and then publish the notice online as soon as is reasonably practicable. Clause 21 sets out the information that must appear in the notice.
Given the rapid pace of change across businesses and digital markets, it is important that the DMU can adapt conduct requirements to ensure that they remain targeted and proportionate, so clause 22 will establish the DMU’s power to revoke a conduct requirement, helping to ensure that conduct requirements remain targeted and proportionate as markets and firms change.
Clause 23 will allow the DMU to facilitate the smooth transition into or out of a conduct requirement. Without the clause, there is a risk of disruption or harm to businesses and consumers where a conduct requirement comes into force or ceases to have effect without a sufficient transition period.
The conduct requirements in clause 24 will impose tailored, enforceable obligations on SMS firms. It is only right that consumers and businesses, including the SMS firms themselves, have a chance to share their perspective on those obligations, so clause 24 requires the DMU to carry out a public consultation on its proposed decision before it can impose, vary or revoke a conduct requirement.
Clause 25 requires the DMU to keep conduct requirements under review, ensuring that requirements remain effective, targeted and proportionate. It also ensures that the DMU monitors where breaches may have taken place.
Alex Davies-Jones
Clause 21 sets out the information that the CMA is required to publish as part of the notice imposing or varying a conduct requirement. Labour supports the clause, which we feel is important for clarifying the details around the content of potential conduct requirements. Again, I am keen to understand exactly who will have access to such information. As ever, I would appreciate the Minister’s thoughts on that point. That aside, we see the clause as integral to the Bill, so we have not sought to amend it at this stage.
As with clause 21, we support clause 22 and its intentions in full. The only point that I feel is worth raising with the Minister is the slight ambiguity around the timeframes. It will be helpful for all involved if the regime is not only flexible, but rapid and able to evolve for changing markets. Can the Minister assure us that the clause will support this in practice?
Clause 23 is important and serves a vital function in establishing the transitional provisions related to conduct requirements. An example would be if a conduct requirement were imposed from a particular date, but some allowances were made in relation to certain aspects of that conduct requirement so that they had effect from a later date to smooth the transition for the benefit of a designated undertaking. That speaks to the nature of the regime: we all want to see it as flexible and fair, but it is therefore only right that the CMA be given appropriate statutory powers to vary its conduct requirements where required. We also welcome subsection (2), the details of which will enable and empower the CMA to investigate and enforce against historical breaches. That is vital, as we seek to establish a regime that will be sufficiently agile for breaches both past and present.
Clause 24 is also incredibly welcome. It imposes a duty on the CMA to consult publicly before imposing, varying or revoking a conduct requirement. The consultation must be brought to the attention of such persons as the CMA considers appropriate. We have already discussed who is an appropriate person, but sadly the transparency and commitment to consultation is not mirrored elsewhere in the Bill, which is frustrating. Given the broadly collegiate nature of our debate thus far, I hope that the Minister can consider some adjustments, and I look forward to hearing from him shortly. By and large, though, Labour welcomes the provisions in subsection (3), which provide that the CMA will be allowed to carry out a consultation on proposed conduct requirements before making a decision on designation. As we know, that makes it possible for the CMA to impose conduct requirements at the same time as issuing a decision on designation, or very shortly afterwards. We consider that to be a sensible approach, and we therefore support the clause.
Again, there is no need to repeat myself. Labour supports clause 25, which places a duty on the CMA to consider, on an ongoing basis, the effectiveness of any conduct requirements in place and how far the designated undertaking is complying with them. The CMA will also need to consider, on an ongoing basis, whether to impose, vary or revoke a conduct requirement, and whether it would be appropriate to take action against a breach of any conduct requirement. It would be helpful for us all to have an idea of how regularly the reviews will happen. It cannot and should not be the case that one SMS firm has its conduct requirements reviewed more regularly than any other, so I am keen to hear the Minister’s assessment of how that will work fairly and equitably in practice.
Question put and agreed to.
Clause 21 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Mike Wood.)
Digital Markets, Competition and Consumers Bill (Sixth sitting)
Tuesday 20th June 2023
(1 year, 1 month ago)
Public Bill CommitteesRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 20 June 2023 - (20 Jun 2023)
The Chair
Clauses 22 to 25 were debated this morning. With the leave of the Committee, I will put the Questions together on clauses 22 to 25 stand part.
Clauses 22 to 25 ordered to stand part of the Bill.
Clause 26
Power to begin a conduct investigation
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
It is a pleasure to serve under your chairmanship, Mr Hollobone. Clauses 26 to 35 are about the enforcement of conduct requirements. The participative approach within the pro-competition regime means that the digital markets unit will aim to resolve issues with firms with strategic market status without the need for formal enforcement action. Where that is not possible, clause 26 will empower the DMU to investigate suspected breaches of conduct requirements by SMS firms and, where it finds a breach, consider what action can be taken. That is necessary to ensure that SMS firms comply with requirements.
Opening an investigation allows the DMU to make use of the full range of information-gathering powers set out in chapter 6. Where the DMU begins an investigation, certain information must be given via a notice to the SMS firm, and a summary of that notice must be published. Clause 27 will require that before the DMU can make a finding of the breach, it must consider any representations that an SMS firm makes in relation to the conduct investigation.
Clause 28 will allow the DMU to close a conduct investigation at any time without making a finding as to whether a breach has occurred. The DMU will need to explain why it is closing the investigation and account for its decision. That power is needed as it allows the DMU to react to changes during the investigation process. That could be, for example, needing to divert resources to an emerging high-priority competition issue elsewhere.
Clause 29 sets out the countervailing benefits exemption. The DMU’s objective is to promote competition for the benefit of consumers, and that will shape the design of its regulatory interventions, meaning that the DMU will take consumer benefits into account when designing conduct requirements in the first place. However, the inclusion of the countervailing benefits exemption provides a backstop to ensure that, if needed, consumer benefits can be explicitly considered at the enforcement stage, too.
During a conduct investigation, an SMS firm will be able to put forward evidence that its action brings about benefits for consumers that outweigh the potential harm to competition. That will reinforce that consumers are at the heart of the regime. The clause is not about pursuing textbook-perfect economic outcomes; it is about real-world outcomes for consumers.
Clause 30 will place the DMU under a duty to notify an SMS firm of the outcome of a conduct investigation within a six-month investigation period. That will ensure that investigations are executed within reasonable timeframes. That does not apply if the DMU has accepted a voluntary binding commitment from the firm relating to the conduct under investigation, or if the investigation is closed with no findings made. The duty to give a notice to an SMS firm and subsequently publish a summary online is vital to inform the firm under investigation of the outcome and keep relevant parties informed of DMU action.
Clause 31 will give power to the DMU to impose an enforcement order on an SMS firm where it has found a breach of a conduct requirement. Those orders will most often be cease-and-desist orders requiring bad behaviour to stop, but they can also require more complex behavioural changes where that is a more appropriate way to remedy a breach. When imposing or varying an enforcement order, the DMU has a power, rather than a duty, to consult those persons it considers appropriate. That will allow the DMU to consider relevant third-party and SMS representations on proposed enforcement action, while ensuring that enforcement orders requiring the SMS firm to simply stop bad behaviour are not delayed by a requirement to consult.
Clause 32 will grant a power to the DMU to introduce enforcement orders on an interim basis. The DMU needs to be able quickly to address immediate harms that may occur from suspected conduct breaches in order to prevent significant damage, prevent action that would make subsequent remedies ineffective, or protect the public interest. The clause will enable intervention before irreversible change occurs and will ensure that options to restore competition are maintained.
Clause 33 makes provision for the duration of enforcement orders and interim enforcement orders, and for the circumstances in which they cease to have effect. Clause 34 will establish the DMU’s power to revoke an enforcement order, ensuring that the enforcement orders in place remain targeted and proportionate. The DMU needs the flexibility to remove enforcement orders where they are no longer appropriate, so that SMS firms are not subject to unnecessary or inappropriate rules.
Finally, to ensure that enforcement orders are effective, targeted and proportionate, it is important that the DMU considers how they function and whether changes are necessary. Clause 35 will require that the DMU monitors the effectiveness of the enforcement orders in place. That includes assessing whether SMS firms are complying with existing enforcement orders, whether variation of an order is required and whether further enforcement action is needed.
In conclusion, clauses 26 to 35 set out robust enforcement provisions to make sure that the impacts of conduct requirements are realised.
Alex Davies-Jones (Pontypridd) (Lab)
It is an honour to serve under your chairship this afternoon, Mr Hollobone. With your permission, I will make some brief comments on the clauses, in response to the Minister.
Clause 26 is very welcome. It is an important clause that outlines the circumstances in which the CMA will be able to begin an investigation into a suspected breach of a conduct requirement, more formally referred to in the Bill as a conduct investigation. It is an important and positive addition. For too long, the CMA has not had the legislative teeth to make positive change in our digital markets. Ensuring that it has reasonable and sufficient powers such as those outlined in the clause is central.
Labour particularly welcomes the provisions and thresholds outlined in subsection (1), which make it clear that the decision to begin a conduct investigation will be grounded in empirical evidence, whether from complaints submitted by third parties or from the CMA’s own market studies. None of us wants to see overregulation or businesses stifled, but it is important that when the CMA has reasonable grounds to carry out a breach of conduct requirement, it has the tools available to act swiftly.
We note that subsections (3) and (4) outline the requirement for the CMA to give a notice to the undertaking about the investigation and set out the content required for that notice. We welcome the provisions entirely, as we do the clarification on the period in which a statutory investigation can take place. We think six months is reasonable, and we are pleased to see clarity on when the timeframe can be extended—a matter we will come to later when we address clause 102.
The current wording of subsection (6) states:
“As soon as reasonably practicable after giving a conduct investigation notice, the CMA must publish a statement summarising the contents of the conduct investigation notice.”
Could the Minister clarify exactly where, and to whom, that notice will be published? As I have previously stated in reference to other parts of the Bill, there are some grounds for making that information public, at least to those who request it. We appreciate the market sensitivities, but ultimately it is businesses that will be facing regulation over their digital practices, broadly for the first time, and they deserve access to that information. It will be a valuable tool for learning and best practice.
I will keep my comments on clause 27 brief because I think, or at least hope, that we all agree that it is an important clause that makes sure that the CMA is required to consider representations from the undertaking being investigated before making a decision on whether the undertaking has breached conduct requirements. I am keen to hear from the Minister exactly what sort of information he believes will be appropriate for the CMA to consider. A balanced approach to the regime is critical, but we do not want the CMA’s investigatory powers delayed by big firms who may choose to delay or overwhelm the process in any way. That aside, we support the clause and have not sought to amend it at this stage. Sincere apologies to Committee members for my repetition, but this is a far more collegiate Committee than others I have sat on.
We support clause 28 and its intentions. As we know, the clause provides that the CMA can choose to close a conduct investigation without making a decision about a breach, and sets out the process and timing for giving a notice to the undertaking about the closure and publishing a summary of the notice. We welcome provisions and clarity over this process. The CMA could summarise the contents of the notice provided to the relevant designated undertaking, while allowing it to redact some information for confidentiality purposes. However, we feel that there is a strong argument, once again, for making that information public to anyone who wishes to request a copy.
Labour welcomes the intentions of clause 29, which outlines the procedure that the CMA must follow where a breach of a firm’s conduct requirement results in net benefits for consumers. This is an important clause, and it is vital that we have such an exemption to ensure that the regime does not inadvertently harmfully impact consumers. However, the countervailing benefits exemption must not be drawn too broadly. If the exemption is too broad, SMS firms will be able regularly to avoid conduct requirement compliance by citing security and privacy claims, as well as spamming the CMA with numerous studies, thus diverting its resources, which, as we have discussed, are very precious. This would undermine the entire regime by severely limiting the efficacy and efficiency of the conduct requirements. I therefore wonder whether the Minister has considered including in the Bill an exhaustive or non-exhaustive list of acceptable grounds for exemption.
Broadly speaking, though, Labour welcomes the Government’s approach, which has similarities with the approach taken in the Competition Act 1998. It would be remiss of me not to remind the Minister that that important Act came into being thanks to a Labour Government. The reality is that Labour has always been committed to getting this balance right. We want to support big businesses, while also protecting consumers and encouraging innovation. These principles do not have to be mutually exclusive. That is why we particularly welcome clause 29(2), which sets out the criteria for the exemption, including that the benefits need to be
“to users or potential users of the digital activity in respect of which the conduct requirement in question applies,”
and must
“outweigh any actual or likely detrimental impact on competition resulting from a breach of the conduct requirement”.
As we know, some examples of benefits may include lower prices, higher-quality goods or services, or greater innovation in relation to goods or services.
Clause 29 also makes it clear that it must not be possible to realise the benefits without the conduct, which means that the CMA must be satisfied that there is no other reasonable or practical way for the designated undertaking to achieve the same benefits with less anti-competitive effect. That is an important clarification, which is once again a sensible approach that we feel is crucial to getting the balance of this regime right.
Although I know that colleagues will be aware of the example highlighted to us all in the Bill’s explanatory notes about a default internet browser receiving security updates possibly being an exemption, I wonder whether the Minister can give us additional examples of situations in which he would see the clause coming into effect. That aside, we support the intentions of clause 29 and see it as a positive step in terms of putting consumers and common sense first.
We see clause 30 as being fairly procedural, in that it outlines the circumstances in which the CMA must give notice about the findings of a conduct investigation. We are pleased to see that a period of six months has been established; none of us wants to see this process going on unnecessarily. We note, however, that in subsection (1), and in the Bill generally, we truly believe that more transparency is required. As it stands, the Bill is missing an opportunity to afford civil society, academics, businesses and consumers alike the opportunity to learn from the regime and ultimately to improve best practice in our digital markets more widely.
We welcome clause 31. However, we note that subsection (4) specifies information that the enforcement must contain, while subsection (5) requires that the CMA
“may consult such persons as the CMA considers appropriate before making an enforcement order”,
or varying one. Again, the wording is very subtle, but I am most interested to hear from the Minister exactly why the consultation process is a “may” rather than a “must”.
Throughout the Bill in its current form, there appears to be a lack of points for stakeholders to engage with the CMA decisions through consultation. Although the CMA being able to design rules and interventions for each firm could result in more effective remedies, it also increases the risk of regulatory capture, whereby SMS firms write their own rules and get them rubber-stamped by the regulator. That makes proper consultation essential. I would appreciate clarification on that point from the Minister.
Clause 32, as its title suggests, gives the CMA the power to make enforcement orders on an interim basis. This is an important tool to allow the CMA to act rapidly where a potential breach is concerned. It is particularly welcome that subsection (1)(b) lists the circumstances under which interim enforcement orders can be made, and that these are broadly around preventing damage to a person or people, preventing conduct that could reduce the effectiveness of the CMA, or protecting the public interest. It is important for all of us with an interest in the Bill that that is clearly outlined in the Bill, so that is very welcome indeed.
Clause 33 makes provision for enforcement orders and interim enforcement orders to come into force, and outlines the circumstances in which they cease to have effect. We see this clause as, again, a fairly procedural one. We welcome the clarity of subsection (4), which will ultimately enable the CMA to take action against historic breaches. That is imperative, given the pace at which our digital markets and regulated firms can shift. We therefore support the clause and believe that it should stand part of the Bill.
On clause 34, as with previous clauses, there is no need for me to elaborate at great length. In essence, we agree with the clause.
As we know, clause 35 outlines that the CMA must keep the enforcement orders and interim enforcement orders that it has made under review, including whether to vary or revoke them, and also the extent to which undertakings are complying with them and whether further enforcement action needs to be taken. This is an incredibly important point. The CMA must review its own homework, as we expect all regulators to do. However, I wonder what assessment the Minister has made of making those reviews public. The CMA must have a degree of accountability, particularly to Parliament. We feel that that is somewhat lacking in the Bill as it stands.
More widely, that points to the lack of opportunities for stakeholders to engage with the CMA and its decisions through consultation, as I have previously said. This is a significant problem, given the nature of the regime. On the one hand, the flexibility and agency that the DMU has to tailor its regulatory approach depending on the nature of the firm should allow it to design more effective remedies. On the other, it increases the danger of regulatory capture by SMS firms. I would appreciate the Minister clarifying that point so that we get this right.
Paul Scully
The publication of notices will be online. The reason that there will be two separate versions is that one might be redacted, for example for things like commercial sensitivity, but it is right that the SMS firm understands the full reasons. Beyond that redaction, there will be one separate online publication for people to see, including the challenger firms themselves.
The hon. Lady spoke about the length of time. The DMU will decide the length of the period during which an SMS firm can make representations, because it will vary from case to case. It is not for us to set an arbitrary timeline, because some will be comparatively simple and others will be incredibly complex and technical. That will ensure that the DMU can run investigations efficiently, without unnecessary delays due to late representations, but the DMU has to tell the SMS firm in the notice opening the investigation about the length of the period.
The implementation of any conduct requirements will be preceded by a public consultation, alongside ongoing engagement between the SMS firm and the DMU about compliance with those requirements as part of the regime’s participative approach. However, there is no statutory requirement to consult on enforcement orders, because we are giving the DMU the discretion to consult where appropriate. Requiring consultation would not be proportionate for straightforward cease-and-desist orders, for example. Such orders, which we expect to be the majority of orders made, simply require firms to stop breaching the original conduct requirement that has already been consulted on, meaning that undertaking a consultation would be unnecessary.
That is where we are coming from on that—there is no deeper reason beyond ensuring that we can keep things proportionate for all sides. Third parties with a view or with evidence will be able to communicate those to the DMU during the conduct investigation itself, or once the enforcement order statement is published.
Question put and agreed to.
Clause 26 accordingly ordered to stand part of the Bill.
Clauses 27 to 35 ordered to stand part of the Bill.
Clause 36
Commitments
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
That schedule 1 be the First schedule to the Bill.
Clause 37 stand part.
Paul Scully
I turn to the clauses on commitments related to conduct requirements. The ability of the DMU to accept commitments, which are voluntary and binding obligations, from SMS firms is important to support the participative approach to regulation that I have spoken about. That approach promotes greater efficiency and the swift resolution of investigations.
Clause 36 will allow the DMU to accept commitments from a firm during a conduct investigation. Firms will be able to offer commitments to the DMU to propose a solution to a suspected breach of conduct requirements. There will be robust safeguards in place to ensure that commitments are used appropriately. The DMU will need to publicly consult on any proposal to accept a commitment. Commitments can be varied to reflect changes in circumstances and will remain in force until either the DMU decides to release the SMS firm from the commitment or the conduct requirement to which the commitment relates comes to an end.
Clause 37 will ensure that the DMU is required to monitor the commitments that are accepted. That includes assessing the appropriateness of the commitments; whether SMS firms are complying with the commitments; and whether further enforcement actions are needed. To ensure that commitments are accepted, varied or revoked in a transparent way, schedule 1 sets out the procedures relating to commitments.
The procedures in schedule 1 also apply in relation to commitments for pro-competition interventions, but I will speak about those at a later stage. Schedule 1 ensures that the DMU publishes a notice detailing the commitment or proposed varying or revocation of the commitment and the reasons for its decision. The DMU must also consider any representations made in accordance with the notice before accepting, varying or revoking commitments. Without the ability to accept commitments, the DMU would have to use greater resources to further investigate breaches, and then develop and impose enforcement orders to fix them. The swift and effective resolution through binding commitments will be beneficial for the DMU, affected firms and ultimately consumers.
Alex Davies-Jones
Labour supports the intentions of clause 36, which ensures that the CMA can accept binding voluntary commitments from an undertaking during a conduct investigation to bring the investigation to an end. Once again, we feel that that is critical to a flexible and fair regulatory regime. It is only right that the CMA is empowered to continue an investigation into other behaviour and, when it can, investigate the same behaviour again. Therefore, we particularly welcome subsection (4).
That being said, there is no mention of consultation regarding the accepting of commitments from SMS firms, even though that will close a conduct requirement investigation and the commitments accepted will impact stakeholders. There is also no consultation when the CMA chooses to release an SMS firm from the commitments. Again, we feel that those points are worth clarifying. I would be grateful if the Minister could outline exactly why the Bill fails to place a duty on the CMA to consult appropriately on that important point.
Schedule 1 and its provisions relate to the commitments on firms, and it is very welcome. The schedule outlines the duty on the CMA to publish a notice, and consider any representations made in accordance with the notice that are not withdrawn. That is a logical and sensible approach. We also welcome the range of provisions in the schedule that provide extensive clarity on the CMA’s responsibilities in relation to its decision making. We have repeatedly called for more clarity with a number of amendments, so I hope the Minister will carefully consider our reasonable requests. Overall, schedule 1 is an important part of the Bill that further clarifies the CMA’s responsibilities, and we support its inclusion.
Without mirroring the comments that were made when we considered clause 25, Labour supports clause 37. It is vital for the regime to function now and into the future that the CMA has a duty to review those commitments. I am interested to know the Minister’s thoughts on how frequent the reviews should be, but ultimately this is the right approach if we are to ensure and encourage total compliance. I hope that the Minister will assure us that the Government are open to improving the Bill when it comes to transparency, including parliamentary oversight. With that in mind, we do not have any specific amendments to clause 37 at this stage, but that could change.
Paul Scully
To answer the hon. Lady’s point about consultation in clause 36, I will point her to schedule 1(2), which requires the DMU to consult on commitments before they are accepted or varied. Although that requirement is not in clause 36, it is in schedule 1.
Question put and agreed to.
Clause 36 accordingly ordered to stand part of the Bill.
Schedule 1 agreed to.
Clause 37 ordered to stand part of the Bill.
Clause 38
Power to adopt final offer mechanism
Paul Scully
I beg to move amendment 1, in clause 38, page 20, line 32, leave out “proposed”.
See the explanatory statement for Amendment 4.
The Chair
With this it will be convenient to discuss the following:
Government amendments 2 to 4.
Government amendment 45.
Government amendment 6.
Government amendments 8 and 9.
Government amendment 11.
Paul Scully
Government amendment 4 redefines what transactions can be dealt with under the final offer mechanism. It is accompanied by several consequential amendments to clauses 38 to 41. One of the conditions for the use of the final offer mechanism as currently drafted is that it can be used only in relation to a “proposed” transaction, where an SMS firm provides goods or services to the third party, or uses or acquires goods or services from the third party.
However, for the final offer mechanism to be most effective, it is crucial that the definition of “transaction” includes the future performance of an existing transaction, as well as new transactions that will happen in the future. That will ensure that parties who are already transacting with each other but on unfair and unreasonable payment terms are not excluded by the conditions for using the final offer mechanism. These are consequential, technical amendments that have been produced alongside feedback from the CMA.
Alex Davies-Jones
We welcome the first group of Government amendments, which we see as important clarifications to ensure that the final offer mechanism can be applied in relation to the future performance of an ongoing transaction. We support their inclusion, as those changes should stand part of the Bill.
Amendment 1 agreed to.
Amendments made: 2, in clause 38, page 21, line 1, leave out “proposed”.
See the explanatory statement for Amendment 4.
Amendment 3, in clause 38, page 21, line 7, leave out “proposed”.
See the explanatory statement for Amendment 4.
Amendment 4, in clause 38, page 21, line 13, at end insert—
“(4A) In subsection (1), ‘transaction’ means—
(a) a future transaction, or
(b) the future performance of an ongoing transaction,
whether in accordance with a contract or otherwise.”
This amendment, together with Amendments 1, 2, 3, 6, 8, 9, 11 and 45 means that the final offer mechanism could be applied in relation to the future performance of an ongoing transaction.
Amendment 45, in clause 38, page 21, leave out line 20 and insert—
“‘the transaction’ means the transaction mentioned”—(Paul Scully.)
See the explanatory statement for Amendment 4.
Question proposed, That the clause, as amended, stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clause 39 stand part.
Government amendment 7.
Government amendment 10.
Clauses 40 to 43 stand part.
Government new clause 1—Decision not to make final offer order—
New clause 3—CMA annual report on final offer mechanism—
‘(1) The CMA must, once a year, produce a report about the final offer mechanism.
(2) Each report must include information about—
(a) the number of final offer orders the CMA has made over the previous year;
(b) for each final offer order—
(i) the amount of time taken between final offer initiation notice being given and the final offer order being made.
(ii) whether bids were submitted by both the undertaking and the third party, and
(iii) the outcome of the process; and
(3) The CMA may provide the information in such a way as to withhold any details that the CMA considers to be commercially sensitive.
(4) The first report must be published and laid before both Houses of Parliament within one year of this Act being passed.’
This new clause requires the CMA to publish an annual report on the workings of the final offer mechanism. The report will be made publicly available and will be laid in both Houses of Parliament.
Paul Scully
Clauses 38 to 43 will allow the DMU to use the final offer mechanism as a backstop enforcement measure to other regulatory tools. The final offer mechanism will help the DMU to resolve breaches of conduct requirements requiring fair and reasonable payment terms when there has been sustained non-compliance by an SMS firm. The inclusion of these clauses in the Bill is essential to provide the DMU with a more effective alternative to setting prices directly, which could be complex and time-consuming in fast-moving digital markets.
The final offer mechanism is a backstop that can be used when normal enforcement processes have not brought about a timely resolution. The DMU must prevent SMS firms from imposing unfair and unreasonable terms in the first place and incentivise constructive negotiations. That will ultimately drive the best outcomes for consumers, which is why there is a high threshold set out in clause 38 for the use of the final offer mechanism.
On the occasions when the tool is used, the DMU will ask the SMS firm and relevant third party to each submit what they believe are fair payment terms—their final offers—and the DMU will then choose one. The regulator will not be able to amend or replace the offers. To ensure the timely resolution of the breach, clause 40 establishes that the upper time limit for the entire final offer process is six months, as well as providing for a power for the Secretary of State to amend that time limit in future. The clauses also establish clear requirements on the DMU to publish key notices and statements upon issuing any orders, ensuring public transparency and accountability about the tool’s use.
It is important when discussing these clauses to mention the role of the DMU in facilitating the preparation of the final offers. Under clause 39, the DMU can both gather and share crucial information between the two parties, allowing both sides to prepare a well evidenced final offer. The outcome of the final offer mechanism will be confirmed through a final offer order, which will instruct the SMS firm to give effect to the terms decided through the tool.
Government amendment 7 makes provision for how final offer payment terms are to be given effect for the purposes of the transaction. The amendment makes explicit that the final offer order will not set out specific terms that must be incorporated word for word into the terms of the transaction; rather it will set out the outcome for the transaction for the SMS firm to achieve. I therefore encourage Members to support its inclusion. The clauses also contain key provisions for ensuring that the use of this tool is proportionate, allowing the DMU to revoke a final offer order where there has been a material change in circumstances.
On that topic, I turn to Government amendment 10 and new clause 1. Taken together, they will ensure that the DMU can end the final offer mechanism without making a final offer order, at any time after giving a final offer initiation notice where there has been a material change in circumstances. Such a change in circumstances may include a privately negotiated agreement being reached between the disputing parties, or evidence of duress becoming known to the DMU. This amendment will therefore ensure the tool is not used where it is not appropriate to do so, and that the DMU has suitable flexibility to make that decision. I therefore invite the Committee to support these clauses and the relevant Government amendments.
Alex Davies-Jones
As we know, there are several provisions contained in the Bill that could form the basis of new rules regulating agreements between UK news media and digital platforms, akin to the news media bargaining code in Australia. However, the formulation of those rules will be at the discretion of the DMU, and would apply on a case-by-case basis. As we have debated, the Bill currently enables the DMU to impose conduct requirements that are for the purposes of obliging undertakings to
“trade on fair and reasonable terms”.
Those undertakings could also be obliged by the DMU to not carry on activities other than their digital activities in a way that could be anti-competitive. That could be the case where carrying out that non-digital activity is likely to increase an undertaking’s market power materially or bolster the strategic significance of its position in relation to its digital activity.
The Bill also provides an arbitration process called a final offer mechanism. Under that mechanism, the DMU will invite the SMS firms and third parties to submit a payment terms offer that they regard as fair and reasonable. The DMU is then required to choose one party’s offer only, without any ability to determine alternative offers. That process has been adopted in Australia for the purpose of arbitrating bargains between digital platforms and news media providers, although it has not yet been used. While there is no provision for a media bargaining code in the Bill, the mere existence of this mechanism will hopefully drive tech platforms to negotiate sincerely with media providers in that context to reach an agreement independently, rather than risk the CMA choosing the final offer. We entirely welcome this clause, and the additional relevant ones to follow.
In the digital media sector, Google and Meta’s overwhelming market power means that publishers are not compensated fairly for the significant value that their content creates for platforms, which is estimated at about £1 billion per year here in the UK. Google Search and Meta’s Facebook rely on news publishers to attract and engage users, as professional news content is reliable and regularly updated. It is absolutely right that the CMA will be empowered to make pro-competition interventions. While the conduct reviews will hopefully prevent the worst abuses of market power, PCIs will allow the DMU to implement remedies that address the root cause of that market power. For example, a CR could prevent an SMS firm from self-preferencing its own businesses in the digital advertising market, which has negative impacts including locking businesses into products and taking an unfairly large cut of revenues, whereas a PCI could require a functional separation to remove the incentive for self-preferencing. Labour sees that as a hugely important tool. We want to see and support an empowered DMU, so we are pleased to support the clause and believe it should stand part of the Bill.
Again, we see clause 39 as important: it sets out the process that the CMA must follow if it decides to use a final offer mechanism. In theory, the DMU should support publishers, who will now be able to negotiate fair and reasonable terms for the value that news content brings to platforms. If SMS firms refuse to comply, a final offer mechanism will be available, with each party submitting bids and the fairest offer being selected. The DMU will ensure that publishers receive a fair share of revenues for the advertising that is shown around their content. Publishers will also be able to receive user data when consumers interact with their content on platform services, in a manner compliant with data protection law. In theory, unfair commissions on app store sales will be prevented, ensuring that publishers can build sustainable digital subscription businesses.
These are all very welcome developments indeed. We particularly welcome subsection (3), under which the CMA must specify if it is considering taking any other action to address the underlying cause of the breach that led to the use of the FOM—for example, a pro-competition order instructing a designated undertaking to provide access for third parties to consumer data held by that undertaking, which could rebalance bargaining power within that digital activity. It will come as no surprise that I ask the Minister, once again, to clarify whether such statements will be published in the public domain. This important point is worth clarifying, so I look forward to hearing about the adequacy of the transparency provisions in this part of the Bill.
Government amendments 7 and 10 are linked to Government new clause 1. They clarify that parties can still settle outside formal processes once the FOM stage has begun. Given that the aim of the final offer mechanism is to incentivise parties to come to a deal without direct CMA intervention, it seems right that parties are still able to come to a deal outside this formal process. This may allow for more favourable terms to be reached, as the platforms will be under pressure in the FOM process, and it will mean that publishers can avoid the uncertainty of the CMA picking one of the two offers.
There will always be a concern that the asymmetry of resources might mean that publishers compromise too far when faced with the uncertainty of an FOM decision but, ultimately, Labour supported these provisions when they appeared in clause 40, and moving them to ensure that a deal can be reached outside the FOM at any time after a final offer intention notice has been issued seems to make good sense. We therefore support the Government amendments.
Unsurprisingly, Labour also welcomes clause 40, which establishes the process that the CMA must follow with regard to the outcome of the FOM process. We need not go into much detail on this clause, as we view it as a fairly standard and effective way of ensuring that proposed transactions are fairly processed by the CMA.
At this point, I must press home the wider importance of these final offer mechanisms because, if they are implemented correctly, they could have incredibly positive benefits. Indeed, we know that Google and Meta have attempted to ward off fair negotiations in Australia and Canada by restricting, or threatening to restrict, access to domestic trusted news, which is the antidote to online disinformation. Denying citizens access to reliable information to avoid payment serves only to emphasise the primacy that these firms place on profit, rather than citizens’ interests. The Government should not give in to similar threats here in the UK, and I hope the Minister is listening.
As the EU and other jurisdictions have forged ahead with similar, but less agile and effective, digital competition regulations, there is a danger that the UK will become a rule taker, not a rule maker. Delayed or weakened legislation will leave UK businesses at a competitive disadvantage internationally, and will deny UK consumers lower prices and more innovative products. In contrast, a strong, forward-looking DMU regulation will ensure that digital markets live up to their potential, allowing consumers to enjoy the full benefits that technology can deliver. I hope that the Minister can reassure us that the Government will not bow to pressure and that the CMA will rightly be compelled to intervene where necessary.
Labour supports the intention of clause 41, which we also see as standard practice. Colleagues will note that subsection (1) provides that a final offer order must impose obligations on the designated undertaking that the CMA considers appropriate for giving effect to the final offer payment terms it has decided, and they must be included in the proposed transaction.
Again, subsection (2) sets out exactly what information the CMA must give to the parties, and we welcome the provision. I further note that subsection (3) requires the CMA to publish a statement summarising the final offer order, and this transparency is also welcome. It is unclear who will have access to these statements, so I am keen to hear the Minister’s assessment of the value of making such documents public to anyone who wishes to seek them. This aside, we support clause 41 and believe it should stand part of the Bill.
Labour supports clause 42 and particularly welcomes subsection (3). This is an important clause as it empowers the CMA to take action on both historical and live breaches. Concerns reported to us by tech companies include requiring clarity on the terms of these final offer mechanisms. It is well known that many users sign up to digital platforms, via terms and conditions, to access a service with no monetary exchange as part of the agreement. Does the Minister see this counting as a contract that is challengeable via the final offer mechanism under the DMU regime? Although the regime appears clear, the final offer mechanism relates to pricing disputes and there are concerns that it could be drawn wider. Clarity on this point is vital and is worth establishing on the record, so I am keen for the Minister to address it.
I do not have any specific comments to make on clause 43. As we have previously said, Labour believes it is important that the CMA must be legally obliged to keep these final offer orders under constant review. This is the nature of a workable, agile regime, and we therefore support the clause standing part.
We tabled new clause 3 to require the CMA to publish an annual report on the workings of the final offer mechanism. This report should be made publicly available and should be laid in both Houses so that Parliament has its say.
We recognise that the final offer mechanism is fairly unique, and it is therefore only right that the CMA is required to update the House each year, with findings on the number of SMS firms that are subject to these investigations. The Minister mentioned that the CMA will be obliged to provide an annual report to Parliament; I want it to be clear that what we have set out in new clause 1 on the final offer mechanism would be part of that report so that Parliament could scrutinise how many were made, for example. This would add to and support the other transparency measures we have pursued, so I hope the Minister not dismiss the new clause, but will consider it carefully. We feel that that is an important matter to get on record in any annual review.
Paul Scully
I appreciate the spirit in which the hon. Lady has engaged in our debate on these clauses. I shall try to answer her questions in turn.
Publication will be online, so people will be able to see it. It will be public. The hon. Lady’s second question was: will I listen? Absolutely yes, I will. On her third question—will I not bow? I will bow to her, but not to pressure, because I think we have largely got this right. I cannot remember her last question—
Paul Scully
Oh yes. It is important that we examine the efficacy of the final offer mechanism, so it is appropriate that that will be covered in the CMA’s review of all its work, and that we will get to see and assess that work as well. I can stand here and tell the Committee that I think we have got it right now, but things change. Yes, it is flexible, and yes, it is proportionate, but we want to make sure that it stays world beating.
Question put and agreed to.
Clause 38 accordingly ordered to stand part of the Bill.
Clause 39
Final offer mechanism
Amendment made: 6, in clause 39, page 21, line 32, leave out “proposed”.—(Paul Scully.)
See the explanatory statement for Amendment 4.
Clause 39, as amended, ordered to stand part of the Bill.
Clause 40
Final offers: outcome
Amendments made: 7, in clause 40, page 22, line 25, leave out
“included as terms of”
and insert
“given effect for the purposes of”.
This amendment means that terms as to payment are to be given effect for the purposes of the transaction, or of any substantially similar transaction, rather than having to be “included” as terms of the transaction.
Amendment 8, in clause 40, page 22, line 26, leave out “proposed”.
See the explanatory statement for Amendment 4.
Amendment 9, in clause 40, page 22, line 28, leave out “proposed”.
See the explanatory statement for Amendment 4.
Amendment 10, in clause 40, page 22, line 36, leave out subsections (6) to (10).—(Paul Scully.)
See the explanatory statement for NC1.
Clause 40, as amended, ordered to stand part of the Bill.
Clause 41
Final offer orders: supplementary
Amendment made: 11, in clause 41, page 23, line 19, leave out “proposed”.—(Paul Scully.)
See the explanatory statement for Amendment 4.
Clause 41, as amended, ordered to stand part of the Bill.
Clauses 42 and 43 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Mike Wood.)
Digital Markets, Competition and Consumers Bill (Seventh sitting)
Thursday 22nd June 2023
(1 year, 1 month ago)
Public Bill CommitteesRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 22 June 2023 - (22 Jun 2023)
The Chair
Before we begin, I have a few reminders: please switch electronic devices to silent, no food or drinks apart from the water provided, and please send speaking notes to hansardnotes@parliament.uk.
Clause 44
Power to make pro-competition interventions
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Government amendment 12.
Clauses 45 to 54 stand part.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
To create self-sustaining and dynamic competition in UK digital markets, we must address the sources of SMS—strategic market status— firms’ substantial and entrenched power in digital markets. Clause 44 gives the digital markets unit the power to address competition problems in digital markets through pro-competition interventions, which the DMU can make where factors relating to a digital activity undertaken by a SMS firm prevent, restrict or distort competition in that digital activity. That is known as an adverse effect on competition. The concept is already used for market investigations under the Competition and Markets Authority’s existing markets regime. Government amendment 12 is a technical amendment relating to PCI investigations.
Turning to clauses 45 to 54, PCIs are fundamental to the new digital markets regime. They will address the root causes of market power that can lead to one or two large firms dominating, to the detriment of consumers and businesses in the UK. Clause 45 empowers the DMU to open a PCI investigation into suspected competition problems related to designated digital activities.
Clause 46 describes the process relating to PCI investigations. Under clause 47, the DMU will be required to carry out a public consultation on a proposed PCI decision before concluding its investigation and giving notice of final PCI decisions. Clause 48 provides the procedure for the DMU to give notice of its decision when concluding a PCI investigation. When the DMU decides to make a PCI, it must do so within four months of the PCI decision.
Pro-competition orders, set out in clause 49, are the means by which the DMU can require a firm to take, or refrain from taking, specific actions. That includes orders on a trial basis. They are vital in converting the DMU’s PCI decision, from clause 48, into an operationable remedy.
To effectively address the sources of competition problems in digital markets, PCIs should be iterative and targeted, so the DMU will be able to replace pro-competition orders. That is provided for in clause 50, which will allow the DMU to initially apply lighter touch remedies and then assess their effectiveness before introducing stronger measures if necessary.
Clause 51 gives the DMU the power to revoke a pro-competition order where it deems it inappropriate to vary the order through replacement, or where the order has addressed the competition problem and is no longer required. That ensures that PCIs remain effective and proportionate and can respond to changes in the market.
Clause 52 provides that before making or revoking a pro-competition order, the DMU must carry out a public consultation. The DMU will be under both a general and specific duty to monitor and review pro-competition orders provided for in clause 53.
Finally, SMS firms should be able to offer commitments to the DMU to propose a solution to a competition problem. That supports a participative approach to regulation, which is set out in clause 54.
Alex Davies-Jones (Pontypridd) (Lab)
We will of course look properly at the issue of consumer protections later in the Bill, and my hon. Friend the Member for Feltham and Heston has a number of contributions to add on that topic.
Clause 44 is important in putting consumer rights at the heart of the Bill, as it enables the CMA to remedy competition problems by making direct interventions. In contrast to conduct requirements, PCIs are interventions by the CMA to remedy an adverse effect on competition by addressing the root causes of an undertaking’s entrenched market power. The CMA will need to take into account the benefits that UK users may get from the factors having an adverse effect on competition.
We note that there is no defined list of PCI remedies, but that they may include behavioural and structural remedies. Will the Minister update us on his assessment of the value of adding a list of potential remedies to the Bill? Some companies we have spoken to feel that that would be helpful to understand just how these interventions will work in practice. However, we believe that the PCI is an exceptionally useful tool and a big advantage over the EU Digital Markets Act, as it will be able to go further than the conduct requirements and address the root causes of entrenched market power.
As it stands, the Bill outlines that the CMA may make a PCI where it considers that a factor or combination of factors relating to a relevant digital activity is having an adverse effect on competition, also known as the AEC test. The AEC test is in line with the legal test in the existing market investigation regime; by contrast, the digital markets taskforce recommended an AECC test—an adverse effect on competition or consumers test—enabling the CMA to address consumer harm without always needing to show that competition has been undermined. Similar to a supplementary duty to have regard for the interests of citizens, that would give the DMU broader scope to intervene beyond its traditional focus on competition. Can the Minister outline exactly why the AEC test was chosen over the AECC test?
Labour supports the intention behind Government amendment 12, which confirms that the CMA will be able to begin a PCI investigation into a designated firm, even when it has previously made a decision not to do so. We see that as integral to the CMA’s powers, and we will support the amendment.
We see clause 45 as fleshing out the legal powers that the CMA will need to draw on in the event of a formal investigation. We welcome clarification that the CMA will form its initial view of the competition problem on the basis of available evidence, such as that arising from complaints submitted by third parties, from the CMA’s market studies or from referrals of information from other regulators. Labour has heard from some tech companies that although pro-competition interventions are viewed as a major advantage of the UK’s regime, companies are concerned about the broader effects they could have on markets, and urge for thorough consultation and for a graduated approach to the potential severity of the intervention. I am therefore keen to hear the Minister’s thoughts about this issue, as it is important for all concerned that we get some clarity.
Clause 46 is an important clause for designated undertakings that may find themselves subject to a PCI investigation. We welcome provisions that ensure the CMA will be under a duty to publish a summary of the PCI notice as soon as it is able to do so. The Minister will not be surprised that we are keen to understand more about that and what it will look like in practice. Where exactly will the summary be published? Will it be made available to others who wish to view it? We welcome subsection (2), because it is important that the CMA has the power to update a PCI investigation notice when it needs to do so. That is outlined in subsection (3), which is an important point to note.
Lastly, clause 46(4) places a duty on the CMA to publish a notice of investigation as soon as practicable. Again, can the Minister confirm whether that will be public? There is a theme in my questions to the Minister about the public transparency of such documents. Naturally, we understand that some information will obviously need to be redacted, but there is plenty of value in improving transparency.
We welcome the principles in clause 47, which we have long called for, because the regime will be effective only if consultation is truly at its heart. However, we have concerns about how the conduct requirements and PCIs will run alongside one another. In the Bill’s current drafting, it is unclear by what metrics the CMA will determine whether a CR or PCI is appropriate, and it will have discretion to choose. We could very well find ourselves in a position whereby the CMA will generally implement a CR first and see whether it is having an impact, before beginning a PCI investigation. If the CMA chooses to focus on CRs initially, it could allow SMS firms to maintain much of their entrenched market power before taking action. To improve the effectiveness of the regime, one potential option that has been raised with us is for the CMA to be required to consider whether a PCI investigation and PCI remedy may be more effective early on, or complementary to a CR, when constructing a CR. I would be grateful if the Minister could give us some thoughts on that and explain whether he will be able to instruct the CMA on which one would be best to carry out first.
Other issues that have been raised with us relate to clarity on a number of points, and I hope the Minister can provide that clarity. First, can PCIs be introduced only after conduct requirements have been imposed, rather than the alternative that is alongside them? Secondly, what is the exact purpose of the revocation process? Does it mean that PCIs cannot be adapted while they are in effect, as indicated in the Government’s consultation process, and that the CMA would have to restart the process—meaning there would be an investigation, a consultation, a decision and then an order—before introducing a new PCI? It feels like that could cause delay and uncertainty in the regime, which could ultimately impact its effectiveness. I look forward to hearing the Minister’s thoughts on those specific points.
Labour sees clause 48 as fairly standard in outlining the procedure for concluding a PCI investigation. It is important that the process is outlined on the face of the Bill, and we welcome confirmation of the length and period of investigation, and of the period in which the CMA has to consult and issue a pro-competition order where required. Those are important timeframes, which Labour supports.
We note clause 48(7), which states:
“As soon as reasonably practicable after giving a notice under subsection (1) or (6), the CMA must publish a copy of the notice.”
Again, that is a key point that I want to prod the Minister on. What is his assessment of
“as soon as reasonably practicable”?
What will that be and who will the CMA be publishing the statement for?
We welcome clause 49, which outlines the way in which pro-competition orders will work in practice. In relation to clause 50, I would be grateful if the Minister could confirm whether the replacement of a PCI as outlined in the clause will require revocation, as set out in clause 51, and a fresh process involving an investigation, consultation, decision and order? Alternatively, will the process be to revise an existing PCI and will that be sped up? We do not want any delay in that happening. That is the point I am trying to make, so will the Minister elaborate on what evidence is needed to justify a revocation of that kind?
I hope the Minister will respond to my points. We support the broad intentions of the remaining clauses in this group and are therefore happy to support their full inclusion in the Bill.
The Chair
Order. I am a bear of little brain. If somebody does not stand, I do not know that they want to speak.
Seema Malhotra
I just wanted to make a general point in relation to the DMU’s powers, because they are wider and there is a question about mechanisms to address the scrutiny and accountability of DMU decisions. We support the PCI framework and the flexibility, but on the way in which decisions can be made about PCI notices, the changes to allow greater flexibility and changes to orders made, there is the potential for a lot more flexibility, but there is the balance of certainty and scrutiny. Can the Minister address how there will be greater opportunity for scrutiny, transparency and accountability over the DMU’s use of the greater powers?
Paul Scully
I will try to cover as many of those points as I can. On the difference between AEC and AECC and adverse effects on consumers and competition, that is effectively built into the regime, anyway. The DMU’s objective is to promote competition for the benefit of consumers, and that must shape the design of all its regulatory interventions, including for PCIs. Under the current drafting, the DMU is able to address the detrimental effects of a competition problem on consumers. The issue is terminology rather than anything else.
The hon. Lady asked about how PCIs will be published. They can be introduced after CR and can be published alongside them, because speed is important, which it is important to highlight. She also asked about where PCIs will be published, which I can summarise. A PCI notice launches an investigation and a summary of that will be published, with the firm having had the full notice.
Seema Malhotra
Will the Minister confirm how soon that will happen? There is a four-month timeline after that full consultation and then the pro-competition orders or alternatives. In terms of the public—
Paul Scully
That is a fair point. The best I can say is as soon as is practicable. I talked about the fact that speed is important, but it really depends on the complexity of the case and what needs to be in the summary, how quickly it will take to summarise and so on. There is a drive to get on with this as quickly as possible. The theme throughout the entire framework of the Bill is that detriment happens at speed in digital markets and we have to crack on and get those PCIs in place should they be required.
The decision notices for PCIs will go to the firm first. The full document will be published and an order will be introduced. A summary will be published. Should the PCI be replaced, an order revoked or should there be an acceptance of varying commitments on a PCI, the full document will be published.
The CMA can consult on an order as part of the earlier PCI decision, so the four months may not be necessary. Those timetables are there as a maximum, depending on the complexities.
Seema Malhotra
I would like to pick up on the point about pro-competition orders and the consultation. Clause 49(4) states:
“The provision that may be made in reliance on subsection (3) includes provision requiring an undertaking to act differently in respect of different users or customers (and such provision may be by reference to a description of users or customers, to absolute numbers of users or customers, or to a proportion of the undertaking’s total number of users or customers).”
That appears both broad and specific. Interested parties may want clarity, so is it expected that that detail will be discussed and consulted on?
Paul Scully
The way that consultation is done depends. If there is something starkly obvious to everyone, it may be that only minimal consultation is needed. If it is more technical, it will need to be more in depth, which is why we are not being prescriptive from the centre. It is up to the DMU to consider this.
The hon. Lady also asked about a list of PCIs and potential PCIs. It is very much for the DMU to address the recourse to a designated firm’s market dominance. Examples of PCIs that could be introduced include choice remedies that will allow users to make an active choice in the digital services that they use. PCIs could, for example, compel a designated firm to present users with different options for their preferred web browser, and we heard evidence on that from Gener8. Instead of defaulting to a particular browser, PCIs could include interoperability remedies that will enable users to use goods and services from different providers as opposed to being locked into one provider. For example, the DMU might require users of different instant messaging services to be able to communicate with one another.
The DMU could introduce data portability remedies, which would make it easier for users to switch providers. Such remedies could, for example, require a designated firm to make it possible for its users to download and export data to a new phone with a different operating system. PCIs could include data access remedies, which would level the playing field by requiring designated firms to share their data with competitors, which could include the data that large search engines have on users’ search history. Separation remedies would require designated firms to run different aspects of their businesses independently, so that dominant firms cannot use market power in one part of the business to gain power in another, which might involve requiring data stores for different services to be separated. It could require the firm to sell off a part of its business altogether.
Those are examples, but that was not a prescriptive or exhaustive list of PCIs. They are very much up to the DMU to frame depending on the technology and the market dominance that they are trying to remedy.
Seema Malhotra
I seek your guidance, Mr Hollobone. I was just wondering about process. I had one last question for the Minister; I thought that he was continuing his speech, but he has finished it.
Seema Malhotra
I seek clarification from the Minister on clause 51(8), which reads:
“The fact that a pro-competition order ceases to have effect does not affect the exercise of any functions in relation to a breach or possible breach of that order.”
I assume that is referring to historical breaches, but I seek clarification on that because it is not in the wording of the clause.
Paul Scully
Yes, that is the case.
Question put and agreed to.
Clause 44 accordingly ordered to stand part of the Bill.
Clause 45
Power to begin a PCI investigation etc
Amendment made: 12, in clause 45, page 25, line 18, at end insert—
“(3) The CMA may begin a PCI investigation in relation to a designated undertaking even if it has previously made a decision not to make a PCI in respect of that undertaking.”—(Paul Scully.)
This amendment confirms that the CMA can begin a PCI investigation in relation to a designated undertaking even if it has previously made a decision not to make a PCI in respect of that undertaking.
Clause 45, as amended, ordered to stand part of the Bill.
Clauses 46 to 54 ordered to stand part of the Bill.
Clause 55
Duty to report possible mergers etc
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 56 to 59 stand part.
That schedule 2 be the Second schedule to the Bill.
Clauses 60 to 66 stand part.
Paul Scully
These clauses comprise chapter 5, “Mergers”, and schedule 2 provides further detail needed for chapter 5 to function smoothly.
Clause 55 establishes a requirement for SMS firms to report possible mergers involving them that have the potential to harm competition in the UK to the CMA before they can be completed. Unlike most merger regimes, at the moment there is no obligation in the UK to notify mergers to the CMA, but firms may choose to voluntarily notify the CMA of a merger in order to receive a binding decision from the CMA on it. In digital markets, this is a very different thing, because of the speed with which it can happen and the entrenchment of power, which we have discussed at length. That is why it is important that the CMA has the opportunity to review potentially harmful mergers involving SMS firms before it is too late. This light-touch reporting requirement is designed to focus on only those possible SMS firm mergers with the potential to give rise to competition concerns.
The mergers will need to be reported only if three conditions are met, such as when the SMS firms will obtain qualifying status through holding shares or voting rights in a target firm that is a UK-connected body corporate. I will set out further detail on the former when I explain clause 56. The latter means any body corporate that carries on activities in the UK or supplies goods or services to the UK, or which has a subsidiary that does so. The consideration provided by the SMS firm for the holding of shares or voting rights must also be at least £25 million. Similar conditions will also apply for the reporting of possible mergers involving an SMS firm participating in a joint venture. When an SMS firm is part of a larger corporate group, the requirement to report will instead apply to all the bodies corporate that make up the group. In those situations, the question will generally be whether the group as a whole will meet the conditions I have set out. When I say “an SMS firm” in debates on this chapter in part 1 of the Bill, it means an SMS firm or any larger corporate group it is part of.
The reporting process should take a maximum of 10 working days. Once a report has been submitted, the CMA will have up to five working days to determine whether the report is sufficient and must therefore be accepted. Following acceptance, the CMA will have a further five working days to review the information in the report before the possible merger can be completed. If the CMA identifies a reported merger as potentially problematic, it can use its powers under the general merger regime to investigate the merger as it would any other type of merger.
Clause 56 defines qualifying status. Under the merger regime, control over a target firm or joint venture vehicle must be acquired or increased for a merger to take place. That is for the CMA to determine on a case-by-case basis. One of the ways control can be exercised is through a shareholding or through voting rights. In order to capture acquisitions of control over target firms based on shares or voting rights, clause 56 provides that SMS firms will acquire qualifying status in a target firm when the percentage of the shares or voting rights they hold in the firm crosses any of the thresholds in subsection (1)—that is, when the percentage moves from less than 15% to 15% or more; from 25% or less to more than 25%; or from 50% or less to more than 50%. These thresholds have been chosen specifically to capture circumstances in which different levels of control recognised under the merger regime are likely to be acquired by an SMS firm.
Clause 57 sets out what is meant by the “value of consideration”, which is necessary to determine whether a possible merger meets the £25 million threshold for reporting set out in clause 55. Clause 58 places several requirements on the CMA with regard to the notice it is required to make, setting out the parameters of the report that SMS firms will be required to provide to the CMA about a possible merger. The clause requires the CMA—to pre-empt a possible question—to publish online a notice setting out what information must be included in a report and what form a report must take. We decided, in subsection (2), to limit what the CMA may require in the report to only that information considered necessary to decide whether to initiate a merger investigation or make a hold separate order under the general merger regime while an investigation is ongoing.
Clause 59 sets out further detail of when and how reporting requirements will apply. Schedule 2 provides further detail as to when interests like shareholdings and rights, such as voting rights, are treated as held in a target firm or joint venture vehicle for the purposes of the duty to report a possible merger in clause 55. Clause 60 places time limits and procedural requirements on the CMA once it has received a report. Clause 61 makes it clear that a reportable event must not take place until the reporting requirements set out in the chapter are met. Clause 62 clarifies when a possible merger is considered as taking place for the purposes of the reporting requirements. Clause 63 permits SMS firms to authorise third parties to act on their behalf—specifically, to give a report to the CMA about a possible merger and to receive the notice of acceptance or rejection from the CMA. In general, those third parties are likely to be legal representatives.
Clause 64 sets out the review process for non-penalty decisions made by the CMA in connection with the chapter. We will talk about appeals and the wider area later on, but if a person is aggrieved by the decision made by the CMA in connection with a reporting requirement that is not a penalty decision, they can apply to the Competition Appeal Tribunal for a review of that decision. The Competition Appeal Tribunal will apply the same principles as would be applied by a court on an application for judicial review. A full merits appeal process will apply to penalty decisions made by the CMA in connection with this chapter, as it does to penalty decisions under the wider merger regime.
Clause 65 provides the Secretary of State with powers to make regulations in relation to the duty to report. It also sets out which procedure-specific regulations are subject to that. It is appropriate that the Secretary of State has the power to make regulations on the duty to report. Operational experience may reveal that the criteria needs to be changed for the reporting process to continue to function effectively. Clause 66 places a duty on the CMA to monitor and enforce the merger reporting requirements. It goes no further than requiring the CMA to consider exercising its investigative and enforcement powers where it is aware of a basis for doing so.
Alex Davies-Jones
I am grateful to the Minister for outlining chapter 5 and we welcome the provisions. None of us want to see potential loopholes or designated undertakings being able to avoid their responsibilities thanks to a merger, so we see clause 55 and many of the clauses that follow in this chapter as being eminently important. More specifically, the clause sets out the circumstances in which designated undertakings or, where designated undertakings are part of a group, group members—see clause 114—will have a duty to report a possible merger involving a reportable event to the CMA before it takes place.
We welcome the clarification that there will be two categories. The first is concerned with designated undertakings or groups reaching certain percentage thresholds of the shares or voting rights held in certain bodies corporate with links to the United Kingdom. The second is concerned with designated undertakings or group members forming certain joint venture vehicles that are intended or expected to have links to the United Kingdom. We recognise the role of a minimum value requirement, which will also apply in relation to the consideration provided for the relevant shares or voting rights, or in relation to the formation of the joint venture vehicle.
We see the clause as important in clarifying where the line will be drawn for possible mergers in relation to this regime, and agree with the drafting, which sets the value of the merger as being at least £25 million. We feel that is a fair value, so we support the clause and have not sought to amend it at this stage. The same can be said for clauses 56 to 59. As we know, one of the strategic recommendations of the Digital Competition Expert Panel’s Furman report suggested that legislation adapting the merger control rules—so that the CMA could more effectively challenge mergers that could be detrimental to consumer welfare—was required. So we see clause 56, which sets out the circumstances in which a designated undertaking or group will have qualifying status in relation to a UK-connected body corporate or joint venture vehicle, as being vital to ensuring that mergers are covered by this legislation more widely.
Paul Scully
Regarding the hon. Member’s questions about the Secretary of State having the powers to amend things, I cannot give her an example but it very much goes back to what I was saying in a previous debate, namely that digital markets change really quickly and it is just so that the Secretary of State has the power to amend things quickly and so that the reporting criteria may develop and evolve over a period of time, so that they can remain relevant in the long term.
Clearly, we have safeguards in the process there, so the Secretary of State will need to consult the CMA. This is not just an isolated decision-making process; the CMA has expertise in this area, but it will be for the Secretary of State to focus on the decision. The CMA will be able to provide the expert advice, ensuring that amendments can correctly reflect the changing landscape, and Parliament will clearly need to approve any amendment.
Regarding the notice that the hon. Member was talking about, again it is appropriate for the CMA to set out by notice what a report must contain. The CMA has considerable expertise in the assessment of mergers, so it is well-placed to decide what information it needs to make an assessment. So, the approach that we are suggesting here is consistent with the wider merger regime, whereby the CMA sets out what information should be included in a voluntary merger notification.
Question put and agreed to.
Clause 55 accordingly ordered to stand part of the Bill.
Clauses 56 to 59 ordered to stand part of the Bill.
Schedule 2 agreed to.
Clauses 60 to 66 ordered to stand part of the Bill.
Clause 67
Power to require information
Question proposed, That the clause stand part of the Bill.
Paul Scully
Clearly the DMU needs to have access to the correct information to ensure its work is evidence-based. Clause 67 allows the DMU to request information it needs to either exercise, or decide whether to exercise, any of its digital markets functions. That includes information in any form, such as data, internal documents and forecasts. The clause also includes new powers to investigate the outputs of algorithms by requiring SMS firms to generate information and to carry out tests and demonstrations of technical processes.
Clause 68 allows the DMU to require that an SMS firm names a senior manager to be responsible for ensuring that the firm complies with a specific information request. The DMU will be able to impose a penalty on the named senior manager where they have failed, without reasonable excuse, to prevent the SMS firm from failing to comply with the request for information. Personal liability will help to embed a culture of compliance within strategic market status firms.
Alex Davies-Jones
Clause 67 is an important starting point as it gives the CMA powers to require the provision of information from designated undertakings and any other person believed to hold material needed for it to operate the regime. That includes any information in any form, which might include data, correspondence, forecasts and estimates.
We welcome the clarity that the CMA will be able to specify the format in which the information must be provided. That is a very important point that we feel will be critical to ensuring timely responses from designated undertakings. We have seen the dangers of what can happen when we allow these big firms to overwhelm with the provision of data in complex formats and in incredible quantities in legal proceedings around online safety, and we do not want to see the same negative consequences here.
We welcome subsection (4), which, importantly, includes provisions that will enable the CMA to compel evidence collection by requiring a person to collect and retain information that it may not otherwise collect and retain. In addition, subsection (7) specifies that the CMA can require the recipient of an information notice to give the CMA information, either in physical or electronic form, which is located outside the UK. That is an important point worth touching on.
We know that these SMS firms have a global reach. We do not want to be in a position whereby the CMA cannot access information just because it is held overseas. This is a sensible and crucial clause to ensure the CMA has the appropriate teeth and power to act when it needs to.
We are also pleased to see clause 68 included in the Bill, which references a point that Labour have repeatedly called for in other legislation. Without these provisions and the ability to name an individual, big companies will typically not take their responsibilities seriously. We therefore welcome confirmation that a penalty may be imposed on a named senior manager of a designated undertaking that fails to comply with an information notice—a point we will address later, when we discuss clause 85.
Ultimately, we feel that the provisions are in line with other regulated sectors, principally financial services, where regulation imposes specific duties on directors and senior management of financial institutions, and those responsible individuals face repercussions if they do not comply.
I feel we have lots to learn here from looking to other regulated industries. For example, in financial services regulation, the Financial Conduct Authority uses a range of personal accountability regimes, including the senior managers and certification regime, which is an overarching framework for all staff in financial services industries. The regime aims to
“encourage a culture of staff at all levels taking personal responsibility for their actions and make sure firms and staff clearly understand and can demonstrate where responsibility lies”.
If only we could have that approach to other legislation on online safety. We therefore support clause 68—we see it as standard—and have not sought to amend it at this stage.
Question put and agreed to.
Clause 67 accordingly ordered to stand part of the Bill.
Clause 68 ordered to stand part of the Bill.
Clause 69
Power of access
Paul Scully
I beg to move amendment 13, in clause 69, page 39, line 18, after “access” insert “business”.
This amendment limits the power of the CMA to require access to premises so that it may be used only in relation to business premises.
Paul Scully
Government amendments 13 to 24 remove possible ambiguities about the scope of the power of access, and of a firm’s duty to co-operate with a skilled person, so that they are aligned with similar Digital Markets Unit information-gathering tools. Clause 69 allows the DMU to require firm-led tests or demonstrations under the DMU’s supervision. That backstop power of access will be available when a strategic market status firm fails to comply with an information notice or with the duty to assist a skilled person. Clause 77 introduces a power for the DMU to appoint a skilled person to produce a report on an aspect of an SMS firm, or a firm subject to an SMS assessment. There will be a duty on the firm to co-operate with the skilled person, including by giving them access to their premises.
These essential clauses ensure that the DMU has the right powers, but it is important to ensure that those powers are proportionate and appropriately constrained. Government amendments 13 and 16 limit the DMU’s power of access to business premises, rather than allowing access to all premises. That ensures that the power cannot be interpreted as allowing access to domestic premises and maintains consistency with the restrictions on the DMU’s powers of entry. Government amendments 17 to 20 and 22 are consequential.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
The Minister will have heard the witnesses last week, including witnesses from trading standards. Will the amendments in this grouping be replicated to address the concerns of trading standards and ensure equivalence across the regulatory powers?
Paul Scully
We listened to the evidence and considered that, and we will reflect on that in our further consideration of the Bill. It was interesting to hear the evidence last week.
Neil Coyle
Is the Minister suggesting that the equivalent powers to access information, which were specifically addressed last week by trading standards representatives, will be covered by this legislation?
Paul Scully
I am saying that the amendments that we are discussing in this grouping are specifically about domestic and business premises. I am just keeping to the narrow scope of the amendments. As for the wider evidence that we heard last week, we will clearly reflect on that and work out any other parts of the legislation; I was being really specific about what these amendments do.
Government amendment 21 limits a firm’s duty to give access to a skilled person, so that it is access to business premises only, to ensure consistency with other DMU and wider CMA investigatory powers. Government amendment 14 to clause 69 limits the power of the DMU to access persons to a power to access individuals, and Government amendment 23 limits the firm’s duty to assist a skilled person to a duty to assist a skilled individual. Those changes clarify the scope of the power and the duty, as a person includes a legal person, such as a company. The clauses already specify that the DMU or skilled person can require access to a designated firm’s premises, equipment, services and information. Limiting access to individuals—or natural persons—is a more accurate reflection of the policy intention of the clauses.
Finally, Government amendments 15 and 24 clarify that the DMU may access individuals or business premises only in the UK, and similarly that a firm’s duty to assist a skilled person by giving them access applies only to individuals and business premises in the UK. The DMU’s powers of entry allow entry to domestic premises only under a warrant, under clause 73. Its interview and entry powers may also be exercised only in respect of individuals and premises in the UK. Government amendments 13 to 24 will preserve those important limits on the DMU’s powers and ensure consistency across the DMU’s information-gathering toolkit.
Neil Coyle
I am hoping for clarity. I think there were attempts to get information to the Minister when I intervened before. Last week, trading standards specifically asked for the powers that are being discussed in these amendments. I appreciate that this grouping is for a different regulatory body, but does the Minister aim to set up equivalence for regulatory bodies, or is the new body to have greater powers than an existing body with a similar purpose?
Paul Scully
I am trying to remain specific, rather than widening the discussion to other regulatory issues, because the provisions must be specific to the matter that we are discussing; I think I am correct in saying that. Effectively, this grouping tries to narrow down the enforcement powers; it clarifies that they relate to business premises, and apply within the UK, rather than extraterritorially. That is why I hope that hon. Members will support these Government amendments.
Alex Davies-Jones
The Opposition believe that clause 69 is crucial to the Government’s policy objective of empowering the Competition and Markets Authority, and ensuring that it can enforce its regime and proactively address the root causes of competition issues in digital markets.
The clause builds on clause 68 and gives the CMA the power to require a designated undertaking to obtain, generate, collect or retain specified information or to conduct a specified demonstration or test of a business system or process under the supervision of the CMA. Specifically, the power can be exercised when the designated undertaking has failed to comply with a previous request for information under an information notice or to provide sufficient assistance to a skilled person. We welcome those provisions. We also welcome the clarity provided by the clause about when the CMA can use the powers, which is when companies have failed to comply with other requirements. None of us wants the CMA to take an overly heavy-handed approach, but it must be compelled and empowered to act where necessary.
We understand that the powers in subsections (2) and (3) will be used rarely, but it is important that they be in the Bill. They are also an important step in ensuring that big strategic market status firms, which for too long have gone unregulated, cannot bypass the regime by concealing information or operating systems. It is vital that the Government do not give in here, so I urge the Minister to ensure that they do not. I imagine that there is heavy pressure from firms that will be captured by the provisions, but the Government must not cave in or weaken this regime; I hope the Minister can reassure us that they will not. That being said, we welcome the clause and have not sought to amend it at this stage.
Government amendments 13 and 14 clarify that the CMA’s access rights will be used only in relation to business premises. We see that as appropriate. Government amendments 15 to 23 are technical changes that we are happy to support. Government amendment 24 is an important clarification that limits duties to inside the UK, which again is a sensible inclusion that Labour supports.
Mr Hollobone, would you like me to discuss clause 70, or finish there?
Paul Scully
To answer the one easier question that the hon. Lady asked, I can assure her that we will not weaken the provisions.
Amendment 13 agreed to.
Amendments made: 14, in clause 69, page 39, line 18, leave out “persons” and insert “individuals”.
This amendment limits the power of the CMA to require access to persons so that it may be used only in relation to persons who are individuals.
Amendment 15, in clause 69, page 39, line 33, at end insert—
“(5) The powers conferred by this section are not exercisable in relation to premises, equipment or individuals outside the United Kingdom.
(6) But the powers conferred by this section are exercisable in relation to information and services whether stored or provided within or outside the United Kingdom.”
This amendment limits the power of the CMA to require access to premises, equipment or individuals so that it may not be used to require access to premises, equipment or individuals outside the United Kingdom.
Amendment 16, in clause 69, page 39, line 33, at end insert—
“(7) In this Chapter, ‘business premises’ means premises (or any part of premises) not used as a dwelling.”—(Paul Scully.)
This amendment is consequential on Amendment 13 and moves the definition of “business premises” from clause 72 to clause 69.
Question proposed, That the clause, as amended, stand part of the Bill.
Paul Scully
Clause 69 is a backstop power enabling the Digital Markets Unit to supervise firm-led tests and demonstrations, either at a firm’s premises or remotely. It will be available only in limited cases in which an SMS firm has not complied with an information notice or a duty to assist a skilled person. It provides an efficient way for the DMU to get the information that it needs without placing an undue burden on firms.
Clause 70 allows the DMU to require an interview with any individual in the UK with information relevant to a digital markets investigation. That will enable the DMU to gather vital evidence that is held by individuals with relevant knowledge, rather than in digital or physical forms. Clause 71 protects individuals who are compelled to give testimony under clause 70 from self-incrimination. It limits the circumstances in which the DMU can use an individual’s interview statement as evidence against them in a criminal prosecution. Clause 72 allows the DMU to enter business premises without a warrant for the purposes of a breach investigation. It ensures that the DMU can collect information that is being withheld by an SMS firm that is accessible only on the premises. Without that power, there would be greater risk that a firm could destroy or interfere with material relevant to an investigation.
Clause 73 allows the DMU to enter business and domestic premises for the purposes of a breach investigation, after obtaining a warrant from the High Court, Court of Session or Competition Appeal Tribunal. The DMU must also establish that a firm has failed to comply with previous information requests, or that no other powers would secure the necessary evidence, and establish reasonable suspicion that the information is relevant to the investigation. Clause 74 contains supplementary requirements for how the DMU must exercise its power to enter premises under a warrant. It also clarifies the extraterritorial scope of that power. The DMU will not be able to enter premises outside the United Kingdom under clause 73, but it can access information regardless of where it is physically stored.
Clause 75 allows the DMU to take copies of, or extracts from, information and sift it off site when exercising its power to enter either business or domestic premises under a warrant, if it is unsure whether the information falls within the scope of the investigation. Clause 76 ensures that the DMU follows established judicial procedures when applying for a warrant to enter premises. It requires the DMU to follow the rules of the High Court, Court of Session or Competition Appeal Tribunal; that provides vital checks and balances.
These clauses are largely modelled on the CMA’s existing information-gathering powers, and they will be subject to the same robust safeguards. They also give the DMU new powers to scrutinise the output of algorithms in clause 69, and enhanced powers in clause 73 to access information that is stored on remote servers but accessible over the internet. It is important to recognise that without those powers, the DMU’s interventions would not be well evidenced or enforceable.
Alex Davies-Jones
I was champing at the bit to talk about these clauses. However, I will keep my comments brief because much of Labour’s thoughts align with our thoughts on previous clauses.
Clause 70 gives the CMA the power to require any individual to attend an interview and answer questions for the purposes of a digital markets investigation. That is consistent with the amendments to section 26A of the Competition Act 1998. We welcome those, so it is only right that the powers appear in this legislation, too. These are basic powers and the clause is fairly procedural. The CMA must have the power to give notice to any individual with information relevant to a digital markets investigation, requiring them to answer relevant questions at a place or in a manner specified in the notice. That is fundamental for an empowered regulator. We support the approach, so we have not sought to amend the clause at this stage. We also support the intentions of clause 71, and we believe that the approach is fair and reasonable. The clause is important for clarity. We welcome its inclusion in the Bill and we have not sought to amend it at this stage.
Turning to clause 72, it is right and proper that the CMA must have reasonable grounds to suspect that information relevant to the breach investigation can be accessed from or on the premises. We support that common- sense approach. The provisions are in line with those for other regimes, and will be important in ensuring that if the CMA is required take action for the purposes of a breach investigation, it can do so in a timely and effective manner. We support the clause and have not sought to amend it.
We also support the intentions of clause 73, which gives the CMA the power to enter business and domestic premises under a warrant, without notice and using reasonable force, for the purposes of a breach investigation. Again, the CMA has powers of entry under a warrant through sections 28 and 28A of the Competition Act 1998. It will come as no surprise, given that we support provisions for the CMA to act without a warrant, that we agree that it should be able to act with one. We value the clarification that the CMA must prove that there are reasonable grounds to act. If it has to, it can call on individuals who have expertise that is not available in the CMA but is required if the terms of the warrant are to be fully carried out. That will allow the CMA to act rapidly, which, given the level of these breaches, is vital. We therefore support this clause standing part of the Bill.
Clause 74 sets out the supplementary requirements to the CMA’s power to enter premises under a warrant. We welcome the transparency afforded by subsection (1), and the clarification that although the CMA cannot enter premises outside the United Kingdom, as outlined in subsection (6), it can access information regardless of where it is physically stored. That is an important point, given the nature of SMS firms and their global holdings. For those reasons, Labour is happy to support the clause standing part of the Bill.
Clause 75 makes necessary amendments to a range of sections of the Criminal and Justice and Police Act 2001 to enable the CMA to seize information and take copies of, or extracts from, information when exercising its power under clause 73 to enter business and domestic premises with a warrant. It is a practical clause that aligns with the CMA’s power to seize documents from business premises under section 28 of the Competition Act 1998. We therefore believe that the clause should stand part of the Bill.
Clause 76 requires the CMA to follow the rules of the High Court, the Court of Session or the CAT when making an application. We see it as a natural consequential clause and will therefore support it.
Seema Malhotra
May I make one additional comment? We received evidence from trading standards about their access to information that could be stored online in order for them to undertake some of their responsibilities. Has any consideration been given to whether the search powers that the CMA will be given could be extended to trading standards, which sometimes undertake very similar areas of work?
Paul Scully
I note that if there were a word cloud of comments from the hon. Member for Pontypridd, “We are not amending at this stage” would be quite high up. Duly noted.
On the matter raised by the hon. Member for Feltham and Heston, I will write to her with more detail, because I think we are talking about two different regimes across two different Departments. I do not want to pre-empt what my hon. Friend the Member for Thirsk and Malton may do with trading standards. These provisions relate specifically to CMA powers, which is why I am remaining in that narrow tramline. I will write to the hon. Member for Feltham and Heston about the wider trading standards regime.
Question put and agreed to.
Clause 69, as amended, accordingly ordered to stand part of the Bill.
Clauses 70 and 71 ordered to stand part of the Bill.
Clause 72
Power to enter business premises without a warrant
Amendments made: 17, in clause 72, page 40, line 31, after “premises” insert “(see section 69(7))”.
This amendment is consequential on Amendment 16.
Amendment 18, in clause 72, page 41, leave out lines 40 and 41.—(Paul Scully.)
This amendment is consequential on Amendment 16.
Clause 72, as amended, ordered to stand part of the Bill.
Clause 73
Power to enter premises under a warrant
Amendments made: 19, in clause 73, page 43, leave out line 22.
This amendment is consequential on Amendment 16.
Amendment 20, in clause 73, page 43, line 33, after “business premises” insert “(see section 69(7))”.—(Paul Scully.)
This amendment is consequential on Amendment 16.
Clause 73, as amended, ordered to stand part of the Bill.
Clauses 74 to 76 ordered to stand part of the Bill.
Clause 77
Reports by skilled persons
Amendments made: 21, in clause 77, page 47, line 3, after “such” insert “business”.
This amendment limits the duty to assist a skilled person by giving access to premises so that it applies only in relation to business premises.
Amendment 22, in clause 77, page 47, line 3, after “premises” insert “(see section 69(7))”.
This amendment is consequential on Amendment 16.
Amendment 23, in clause 77, page 47, line 4, leave out “persons” and insert “individuals”.
This amendment limits the duty to assist a skilled person by giving access to persons so that it applies only in relation to persons who are individuals.
Amendment 24, in clause 77, page 47, line 5, at end insert—
“(13) The duty in section 77(12) does not include a duty to give access to premises, equipment or individuals outside the United Kingdom.
(14) But the duty in section 77(12) does include a duty to give access to information and services whether stored or provided within or outside the United Kingdom.”—(Paul Scully.)
This amendment limits the duty to assist a skilled person by giving access to premises, equipment or individuals so that it does not include a duty to give access to premises, equipment or individuals outside the United Kingdom.
Question proposed, That the clause, as amended, stand part of the Bill.
Paul Scully
Clauses 77 to 80 introduce the final elements to support the DMU’s investigatory powers.
Clause 77 will give the DMU the power to authorise a skilled person to provide a report to it in relation to an SMS firm, or firm subject to an SMS investigation, on a matter relevant to the operation of the regime. That is needed to give the DMU access to expert reports to enable it to interpret technical information gathered when carrying out its digital markets functions.
Clause 78 will impose a legal duty on certain people to preserve evidence that is relevant to a digital markets investigation or to a compliance report in relation to an SMS firm. That duty will also apply when the DMU is providing investigative assistance to an overseas regulator. That will ensure that no party may destroy, conceal or falsify any relevant evidence without reasonable excuse.
Seema Malhotra
It is a pleasure to speak to this group of clauses on behalf of my hon. Friend the Member for Pontypridd, who is speaking in another debate.
We support clause 77, which will give the CMA the power to require a skilled person, which could be a legal or other person, to provide a report to it on a matter relevant to the operation of the regime. That is in line with other regimes of that nature, and we therefore support its inclusion.
The clarity afforded by subsection (1), which sets out that the CMA can use this power in
“exercising, or deciding whether to exercise, any of its digital markets functions”,
is welcome. It is also right that the CMA can exercise the power only in relation to a designated undertaking or an undertaking subject to an SMS investigation.
In order to ensure no unnecessary delay, subsections (2) and (3), which will give the CMA the power to appoint a skilled person to provide a report and give notice of the appointment and other relevant matters to the undertaking in question, while also specifying the form of a report, are an important inclusion. That aligns well with subsection (12), which imposes a duty on the designated undertaking or undertaking subject to an SMS investigation, and any person connected to those undertakings, to assist the skilled person in any way reasonably required to prepare the report.
One hopes that designated undertakings would co-operate in such instances, but it is welcome and helpful to have their obligations outlined as they are in clause 77. Clarity on the consequences of failing to comply, in the form of penalties or other enforcement provisions, is also an important and positive step. Labour has therefore not sought to amend the clause at this stage; we believe it should stand part of the Bill, as drafted.
As with any regulatory regime, the CMA should of course preserve relevant evidence. Clause 78 is integral, because it places a legal duty to preserve evidence that is relevant to a digital markets investigation, a compliance report by a designated undertaking, and evidence where the CMA is providing investigative assistance to an overseas regulator. The Bill also confirms that where the CMA has made a formal request for information, there are penalties for non-compliance, or for falsifying, concealing or destroying information.
Labour supports the purpose of clause 78, which is to preserve evidence before and after the CMA has made a formal request. We believe that it is consistent with the existing duty to preserve evidence under section 201(4) of the Enterprise Act 2002 on cartel offence investigations. We note, however, that the duties within this clause do not apply
“where the person has a reasonable excuse to do so.”
I—and, I am sure, others—would welcome clarification from the Minister on that point. We support the intentions of the clause and have therefore not sought to amend it at this stage, but I would appreciate further clarity on the definition and how it will work in practice.
Clause 79 is helpful because it specifies that the CMA cannot require any information subject to legal and professional privilege, or, in Scotland, confidentiality of communications. That is an important point to make and is in line with similar regimes. We support the clarity outlined in subsection (2), which specifies that the limitation applies to producing, taking possession of, and taking copies of or extracts from a privileged communication. I do not need to elaborate much further here. Labour considers this to be a fairly standard procedure and we therefore support clause 79 stand part.
Finally, clause 80 gives the CMA the power to publish a notice of any decision to use its investigatory powers under the digital markets regime to assist an investigation by the regulator in another jurisdiction. The notice may include the regulator that the CMA is assisting, the undertaking that is the subject of investigation, and the matter for which the undertaking is under investigation. Labour welcomes the transparency measures here.
My question is about why that approach has not been afforded to the CMA’s domestic work on digital markets. If the CMA is able to support overseas regulators in ways that might identify the undertaking, I am unclear as to why the CMA is not compelled in the same way for issues that might arise in the UK. I am interested to hear the Minister’s thoughts on that point, because it is an important one for companies likely to be captured in the SMS definition and for challenger firms that might one day find themselves subject to these regulations, too.
Paul Scully
I thank the hon. Lady. I will probably write to her with examples of where that measure might come in. As I have said, it does not come in if there is an exemption for people with a reasonable excuse. I am not fleet enough of foot to come up with a good example for her at the moment, but I will certainly write to her.
On the domestic situation for the DMU, I will, again, probably write to the hon. Lady, but my interpretation is that it is easier to deal with the potential for defamation and so on when someone has full control of the case in one jurisdiction. If we are working across jurisdictions internationally it is more complex, so the protections need to be there.
Question put and agreed to.
Clause 77, as amended, ordered to stand part of the Bill.
Clauses 78 to 80 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Mike Wood.)
Digital Markets, Competition and Consumers Bill (Eighth sitting)
Thursday 22nd June 2023
(1 year, 1 month ago)
Public Bill CommitteesRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 22 June 2023 - (22 Jun 2023)
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
I beg to move amendment 25, clause 81, page 49, line 15, at end insert—
“(d) a requirement in a direction under section 87 of EA 2002 (delegated power of directions) given by virtue of a pro-competition order (see section 49(1)).”
This amendment makes a requirement in a direction under section 87 of the Enterprise Act 2002 given by virtue of a pro-competition order a related requirement for the purposes of this clause.
The Chair
With this it will be convenient to discuss the following:
Clause stand part.
Clause 82 stand part.
Paul Scully
Government amendment 25 seeks to correct the list of “related requirements” in clause 81 to include pro-competition order directions. The Competition and Markets Authority has the power to impose directions on a firm with strategic market status to take specific action to come into regulatory compliance with a PCO, under section 87 of the Enterprise Act 2002.
As currently drafted, a nominated officer would not be responsible for a direction issued in relation to a PCO because this is not listed as a “related requirement”. The amendment will clarify that nominated officers will be responsible for directions issued in relation to a PCO to which they are assigned by the SMS firm, and that compliance reports in clause 82 will have to cover these directions. The amendment will ensure that the digital markets unit is able to monitor whether an undertaking is complying with directions issued in relation to a PCO. I hope that the Committee will accept the amendment.
Clauses 81 places requirements on SMS firms to assign appropriate senior managers as “nominated officers” to monitor compliance with specific regulatory requirements. That will help to facilitate co-operation between SMS firms and the DMU and ensure that information included in compliance reports is accurate and complete, and that reports are submitted to the DMU in a timely manner. SMS firms will be required to assign nominated officers in respect of each conduct requirement, pro-competition order or commitment made in lieu of a pro-competition order. A nominated officer appointed in relation to a conduct requirement will be automatically responsible for overseeing compliance with any subsequent orders that are imposed by the DMU in relation to that conduct requirement.
Clause 82 place requirements on SMS firms to submit compliance reports to the DMU. A compliance reporting obligation can be imposed by the DMU in relation to conduct requirements and PCOs, and can be extended to cover additional requirements related to those requirements, such as an enforcement order in relation to a conduct requirement. Compliance reports can also be imposed when a firm has had a binding commitment accepted by the DMU, in lieu of the DMU imposing a pro-competition order. A compliance report will include details of how the firm has complied and will continue to comply with the regulatory requirement and any related requirements. Reports will also set out the extent to which the nominated officer assigned to the particular regulatory requirement considers that the firm has complied with that requirement. Information in compliance reports will be essential to the DMU’s assessment of whether an SMS firm is complying with the regime, and will enable the DMU to take swift where it identifies risk of non-compliance.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is a pleasure to speak to the amendment and clauses on behalf of my hon. Friend the Member for Pontypridd, and I will be brief. Government amendment makes a requirement in a direction under section 87 of the Enterprise Act, given by virtue of a pro-competition order a related requirement for the purposes of clause 82.
Labour supports clause 81, which requires a designated undertaking to assign an appropriate senior manager to the role of “nominated officer” when the CMA imposes a digital markets requirement, for the purpose of monitoring the undertaking’s compliance with that requirement. We strongly believe this level of personal liability is required for big tech firms, which have dominated for too long, to listen and engage fully with this regime. We welcome clarity such as that in subsection (2), which sets out the tasks of the nominated officer and requires them to carry out those tasks in relation to
“digital markets requirements and all related requirements”.
It makes sense that if a nominated officer is assigned to a conduct requirement, they are automatically assigned to any subsequent enforcement orders made in connection to it. We therefore support clause 81 and have not sought to amend it at this stage.
Government amendment 25 makes a change to the Enterprise Act to bring the provisions in line with the current Bill. We support its inclusion. It is vital that existing legislation is brought in line if this regime is going to work to its full effect.
Labour sees compliance reports and the formal duties outlined in clause 82, which ultimately require designated undertakings to provide the CMA with reports setting out how they are complying with requirements imposed upon them, as a natural step in the implementation of this regime. For transparency, accountability and fairness all round it is right that the CMA has a duty to notify a designated undertaking of any compliance reporting requirements and will specify in the notice when reports should be submitted, what information they should contain and what form they should take. Labour has long called for those powers, and we have also argued that they should be flexible, so we are pleased to see provisions that allow the CMA to alter the reporting requirements on a designated undertaking by giving the undertaking a further notice.
Specifically interesting to see in the Bill are the provisions around subsection (5), which permit the CMA to require a designated undertaking to publish a compliance report or a summary of that report. Will the Minister confirm the form and the location that he feels would be suitable for such reports to be published?
We recognise that the provisions in clause 82 allow for the version the designated undertaking is required to publish to be different from the version provided in private to the CMA under subsection (1). For example, some information may be redacted for confidentiality purposes. It is still unclear, though, exactly where the report will be published, so it would be helpful to have the Minister’s response on that point.
Paul Scully
The CMA could ask for a public version to be published on its website. It will be reported to the firm in full, but the majority of the publication in all such things will be online.
Amendment 25 agreed to.
Clause 81, as amended, ordered to stand part of the Bill.
Clause 82 ordered to stand part of the Bill.
Clause 83
Penalties for failure to comply with competition requirements
Paul Scully
I beg to move amendment 26, in clause 83, page 50, line 11, leave out “a designated” and insert “an”.
This amendment, together with Amendments 27, 28, 29, 30, 31, 32 and 33 confirms that a penalty can be imposed on an undertaking that has ceased to be a designated undertaking in respect of things done (or not done) while the undertaking was a designated undertaking.
Paul Scully
Government amendment 26 seeks to clarify that the CMA can impose a penalty on a former SMS firm that no longer has strategic market status in relation to conduct that occurred before the designation ended or in relation to breaches of obligations that exist after the designation ends. With that aim, the amendment, together with its related amendments, replace the wording “a designated undertaking” with “an undertaking” in clauses 83 and 86. That ensures the change relates to penalties for failure to comply with competition requirements, as well as any penalties for failure to comply with investigative requirements. I hope the Committee will support the amendments.
Seema Malhotra
I thank the Minister for his remarks. We certainly support these Government amendments, and I will reserve the rest of my comments for the clause stand part debate.
Amendment 26 agreed to.
Amendments made: 27, in clause 83, page 50, line 23, leave out “a designated” and insert “an”.
See the explanatory statement for Amendment 26.
Amendment 28, in clause 83, page 50, line 24, leave out “designated”.
See the explanatory statement for Amendment 26.
Amendment 29, in clause 83, page 50, line 26, leave out “a designated” and insert “an”.
See the explanatory statement for Amendment 26.
Amendment 30, in clause 83, page 50, line 28, leave out “designated”. —(Paul Scully.)
See the explanatory statement for Amendment 26.
Question proposed, That the clause stand part of the Bill.
Paul Scully
Clause 83 allows the DMU to impose penalties on SMS firms where it is satisfied that the firm breached a regulatory requirement without reasonable excuse. Clause 84 sets the maximum penalties that the DMU can impose under clause 83. Substantial financial penalties are necessary to deter and tackle non-compliance, especially given the size of the firms in scope and the significant advantages that such firms could accrue from breaching the regime. Where an SMS firm has failed to comply with a conduct requirement or a merger reporting requirement, the DMU will be able to fine the firm by up to 10% of its worldwide turnover.
For other types of breaches, such as breaches of remedies, the DMU can impose a penalty of up to 5% of a firm’s daily worldwide turnover for each day of continue non-compliance, in addition to fixed penalties of up to 10% of worldwide turnover. That is needed, because remedies represent specific actions that an SMS firm should carry out once an investigation has found an issue. Breaches should be addressed promptly, and punished accordingly if they are not. The DMU will have the discretion to choose whether to impose a fixed penalty, a daily rate or a combination of both, depending on the breach, and it will be expected to take a proportionate approach when imposing penalties. The penalty levels will help prevent SMS firms from absorbing financial penalties as a cost of doing business.
Clause 85 sets out that the DMU can impose penalties on firms or individuals where they have, without reasonable excuse, failed to comply with an investigatory power or a compliance reporting obligation, or provided false or misleading information to the DMU or another person while knowing that the information would be given to the DMU to be used in connection with any of its functions. In certain circumstances, the DMU will be able to impose financial penalties on senior managers assigned to an information request that has not been complied with, nominated officers assigned to a regulatory requirement for which a compliance reporting requirement has not been complied with, and individuals who have obstructed an officer of the DMU while entering premises under the powers set out in chapter 6 of the Bill. Having senior liability for the provision of information will help to ensure that a culture of compliance is embedded in SMS firms.
Clause 86 sets the maximum fixed and daily-rate penalties that the DMU can impose under clause 85. For firms, the DMU can impose a fixed penalty of up to 1% of a firm’s worldwide turnover, a daily penalty of up to 5% of a firm’s daily turnover for each day that non-compliance continues, or a combination of both. For individuals, the DMU can impose fixed penalties of up to £30,000, daily penalties of up to £15,000 each day, or a combination of both. The clause also grants the Secretary of State the power to amend the maximum penalties.
Clause 87 sets out the procedural requirements that the DMU must follow when issuing a penalty notice. It also sets out provisions relating to the payment and recovery of penalties. The clause applies sections 112, 113 and 115 of the Enterprise Act 2002 to penalties imposed by the DMU under clauses 83 and 85. Those sections cover procedural requirements when issuing a penalty, the payment of a penalty and interest by instalments, and the procedure for recovering a penalty that has not been paid. Clause 87 also states that challenges to merger-related penalty decisions made under clauses 83(4) and 85 should be brought under the existing merger review provisions set out in section 114 of the Enterprise Act.
Clause 88 sets out how the DMU will calculate the daily rates and turnover for the purpose of imposing a monetary penalty, so that there is clarity about the period of time that daily penalties will cover and when they will cease to accumulate. The ability to change how turnover is to be calculated is crucial to ensuring that the machine is flexible and can be updated in the future to reflect changes.
Seema Malhotra
It is a pleasure to speak to this group of amendments on behalf of my hon. Friend the Member for Pontypridd, who is still in the debate in the Chamber. As we know, the clause sets out that the CMA can impose monetary penalties on a designated undertaking where it is satisfied that the undertaking has breached a regulatory requirement, including for merger reporting and commitments, without reasonable excuse.
The clause’s wording affords substantial flexibility. Indeed, the provisions are in place only when the designated undertaking has failed to comply “without reasonable excuse”. None of us wants designated firms to be able to block action with excuses, so it would be helpful to hear how the Minister would quantify a reasonable excuse. That said, the Opposition welcome the clause, which is central to the regime. The ability to impose a penalty where appropriate is an important power that we hope will go some way towards encouraging companies to work with the regulator. For those reasons, we will not oppose it.
I turn to amendments 26 to 33, some of which we have already debated. It is helpful that we have made those amendments to ensure that a penalty can be imposed on an undertaking that was once designated and therefore captured by the regime but now no longer to subject to it. That will assist in capturing historical offences of failure to comply and goes to the heart of the importance of compliance.
Clause 84 outlines the maximum penalties that the CMA can impose. As we know, the CMA can impose penalties of up to 10% of worldwide turnover and, in the case of breaches of orders or commitments, of up to 5% of daily worldwide turnover for each day that a breach continues. Subsections (2) and (3) state that the CMA will, in most situations, have the discretion to choose whether to impose a fixed penalty, a daily-rate penalty or both. However, where an undertaking breaches a conduct requirement as opposed to an enforcement order or breaches any requirements under chapter 5 on mergers, the CMA will be able to impose only a fixed penalty.
The Opposition welcome these provisions. They afford the CMA flexibility and discretion, and we believe that financial penalties are an important power for any regulator to be able to impose. We therefore support the clause and do not seek to amend it. As with other formal liabilities, Labour believes that the CMA absolutely should be able to impose penalties on designated undertakings or individuals within them for failing to comply with certain investigative requirements. The powers are important to the regime and we welcome their inclusion.
In addition, clarity on exactly what will constitute, or be defined as failure to comply, is also helpful. We know that actions such as providing false or misleading information in the course of an investigation, or in relation to compliance reporting, will fall under this definition. That is a sensible approach, which we support.
Furthermore, clause 85(2) clearly sets out the circumstances in which the CMA can impose civil sanctions against either a named senior manager assigned to an information request or a nominated officer with relation to a compliance report. We feel that that personal duty is crucial to the success of the regime, as we hope that it will act as a deterrent, as companies will want to avoid personal duties, and that such a level of personal liability is crucial for SMS firms to take the CMA’s powers and regulatory regime seriously. We therefore support clause 85 and its intentions and believe it should stand part of the Bill.
Clause 86 establishes the maximum fixed and daily rate penalties that the CMA can impose under clause 85 on undertakings and individuals. As outlined in clause 86(3), under the provisions, the CMA may impose a fixed penalty on an undertaking of up to 1% of the undertaking’s worldwide turnover, or a daily penalty of up to 5% of the undertaking’s daily worldwide turnover for each day of non-compliance, or both. Similarly, subsection (6) sets out that the CMA may impose a fixed penalty on an individual of up to £30,000, or a daily penalty of £15,000, or both. We welcome that clarity on the face of the Bill. Labour has been clear for some time now that financial penalties are vital for compliance, and that the CMA must have the statutory footing to be able to impose them in the most severe cases of non-compliance.
We further note clause 86(7) to (9), setting out that the Secretary of State has the power to amend the maximum amounts of penalty that can be imposed on an individual. Naturally, that is a point that I must press the Minister on: in what circumstances does he imagine that the Secretary of State would make such changes? It is an interesting power to ascribe to one individual, therefore we welcome subsection (8), which states that the Secretary of State must consult the CMA and such other persons as the Secretary of State considers appropriate before making the regulations. We therefore support clause 86 and believe it should stand part of the Bill unamended. Labour sees clause 86 as fairly procedural, setting out which sections of the Enterprise Act 2002 apply for penalties imposed under clause 83 or clause 85 of the Bill.
I will keep my comments on clause 87 brief as we see it as clarification rather than contentious, in particular given that we agree with the Government’s approach more broadly on enforcement and appeals. My one plea to the Minister is that he and his colleagues in the Department do not bow down to likely pressure from big SMS firms.
We appreciate that in recent months we have faced headlines about some tech companies threatening to withdraw from the UK if provisions on online safety become—as they see it—too cumbersome. However, when it comes to regulating the online space more widely, whether in our digital markets or through safety provisions, we know that companies have remained unregulated for too long, and that that is having a massive impact on consumers. That applies to all of us in Committee and the hundreds of thousands of constituents across the country we represent. That said, we support clause 87 and have not sought to amend it.
Clause 88, too, we see as fairly standard, in that it sets out exactly how the CMA will calculate daily rates and turnover for the purpose of imposing a monetary penalty. This clause clarifies that daily penalties will accumulate until the person complies with the requirement—for example that the requested information is provided—or, where the penalty is incurred in relation to an overseas investigation, when the overseas regulator no longer requires assistance.
Labour further welcomes the fact that clause 88 will give the CMA the discretion to determine an earlier date for the amount payable in order to prevent that amount from accumulating. We of course hope that application of the provisions will rarely be required, but they are welcome additions to have on the face of the Bill.
Lastly, we note that clause 88(2) to (4) gives the Secretary of State the power to specify how turnover is calculated in secondary legislation. Again, I would welcome some clarity on this point. I wonder whether the Minister can further clarify in exactly what circumstances he envisions these powers will be required and, if he can confirm whether, when the Secretary of State has to draw upon those powers, what action will be taken to ensure the secondary legislation required is not subject to further delay? That point aside, we understand the need for clause 88 and welcome its inclusion in the Bill.
Clause 89 is important in that it places a statutory duty on the CMA to prepare and publish a statement of policy in relation to the exercise of powers to impose a penalty under clauses 83 and 85. In doing so, the statement must include considerations around whether a penalty should be imposed, as well as details of the nature and amount of any such penalty. We welcome the provisions in subsection (3) that confirm that the CMA may revise its statement of policy and, where it does so, must publish the revised statement.
We also feel that the requirement of the CMA to consult the Secretary of State before publishing a statement is an important step. However, Labour feels some clarity is needed here to establish exactly when and where that statement will be published. Will the Minister confirm the timelines for when the CMA will be required to publish the statements? It is important that there is no delay; any specific timelines will be gratefully received. Following those assurances from the Minister, I am sure we will be happy to support the clause standing part of the Bill.
Lastly, we see clause 90 as a standard clarification that ensures that where a person has been found guilty of a criminal offence committed under clauses 91, 92 or 93, which we will soon debate, they will not be required to pay a civil penalty for that same offence. It is also right that where a person has paid a civil penalty for an act of the kind referenced under clause 85, they cannot be criminally convicted for that same offence. We also welcome the clarity that the clause does not prevent criminal or civil proceedings from being started where, respectively, a penalty has been imposed but not paid or someone has been charged but not convicted.
Again, we hope that these clauses will never have to be enforced in reality, but they are important additions and Labour support them, given the importance of ensuring the CMA has the teeth to implement this regulatory regime in full.
Paul Scully
The hon. Lady mentioned “without reasonable excuse”. The onus is on SMS firms to prove that they have an excuse for committing a breach. That approach reflects the bespoke targeted nature of the regime, which means that firms should be fully aware of whether they are compliant. That same threshold is used in the competition regime already for breaches of specific directions and commitments; other prohibitions in the competition regime are more high level than any other obligations within the digital markets regime, making it harder for firms to assess their own compliance and therefore requiring a different legal threshold.
On updating penalty limits, and the Secretary of State’s power to do so, it is important that the new regulatory regime is agile, flexible and can be adapted to changing circumstances. The power is the same as is already used under the Enterprise Act 2002, which ensures consistency across the legislation and will ensure that the power remains an effective enforcement mechanism in the future. The Secretary of State must consult the DMU and other persons before making changes to the penalty levels. Importantly, proposed changes will be subject to the affirmative procedure and will need to be approved in Parliament. Another hon. Member asked about where the policy will be published; again, that will be online and in full. Clearly, that will be as soon as is practicable, because we want to keep the pace of the policy as fast as possible, in order to keep up to date with any detriment to especially challenging tech, and obviously to consumers as a consequence.
The hon. Member for Feltham and Heston asked about the power to update turnover and how that might be calculated. It is really important that in this area the regulatory regime remains agile and flexible, and granting the Secretary of State the power to specify how turnover is calculated in secondary legislation will allow any future changes in accounting principles, for example, to be taken into account to ensure that these calculations remain relevant. Again, that power is the same as that already used under section 94A of the Enterprise Act 2002, ensuring consistency across the two pieces of legislation.
Question put and agreed to.
Clause 83, as amended, accordingly ordered to stand part of the Bill.
Clauses 84 and 85 ordered to stand part of the Bill.
Clause 86
Amount of penalties under section 85
Amendments made: 31, in clause 86, page 52, line 29, leave out “a designated” and insert “an”.
See the explanatory statement for Amendment 26.
Amendment 32, in clause 86, page 52, line 31, leave out “designated”.
See the explanatory statement for Amendment 26.
Amendment 33, in clause 86, page 52, line 33, leave out “designated”.—(Paul Scully.)
See the explanatory statement for Amendment 26.
Clause 86, as amended, ordered to stand part of the Bill.
Clauses 87 to 90 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Mike Wood.)
Digital Markets, Competition and Consumers Bill (Ninth sitting)
Tuesday 27th June 2023
(1 year, 1 month ago)
Public Bill CommitteesRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 27 June 2023 - (27 Jun 2023)
The Chair
Before we begin, I remind Members to please switch electronic devices to silent. There is to be no food or drinks, except the water provided. Please send speaking notes to hansardnotes@parliament.uk.
Clause 91
Destroying or falsifying information
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 92 and 93 stand part.
Government amendment 34.
Clauses 94 to 96 stand part.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
Let me cover the criminal offences in the regime, which largely mirror existing powers that the Competition and Markets Authority has in the Competition Act 1998. Criminal liability is important for deterring serious acts of misconduct in the context of information gathering and compliance monitoring, and will help to ensure that the digital markets unit can access relevant information.
Clause 91 makes it a criminal offence for an individual or firm to intentionally or recklessly destroy information, conceal information, provide false information, or cause or permit any of those actions. Those offences apply in relation to any of the powers provided for in chapter 6, which concerns information gathering and compliance reports.
Clause 92 makes it a criminal offence for a person to knowingly or recklessly give false or misleading information to the DMU in connection with any of its digital markets functions. It is also an offence for a person to knowingly or recklessly give false or misleading information to another person, knowing that it will be used by the DMU.
Clause 93 makes it a criminal offence for an individual to intentionally obstruct an officer of the DMU when lawfully entering a premises with or without a warrant.
Government amendment 34 seeks to clarify that named senior managers for information requests and nominated officers cannot be held criminally liable for not fulfilling their duties in those roles. As drafted, clause 94(2) broadens the definition of an officer of a body corporate. That would mean that individuals assigned to those roles could risk facing criminal proceedings on the basis of their assignment to the role. It has always been the policy intention that a named senior manager or nominated officer should face a civil penalty only where a firm with strategic market status has failed to comply with a relevant information request or compliance report and where the named individual failed, without reasonable excuse, to prevent that failure from occurring. The amendment would not prevent a senior manager or a nominated officer from facing criminal proceedings if they happen to also qualify as an officer of a body corporate under clause 94. I therefore hope that the Committee will support the amendment.
Clause 94 sets out that, in certain circumstances, where a body corporate commits a criminal offence, an officer of the body corporate can also be held criminally responsible. An officer of a body corporate can be, but is not limited to, a director, manager or secretary. An officer can be held criminally liable where the body corporate commits a criminal offence and the offence is attributable to that officer’s consent, connivance or neglect on their part. That will help to encourage officers in firms to take personal responsibility for their actions and will ensure that they are held accountable for any serious information offences.
Clause 95 limits the extraterritorial application of certain offences in the Bill, and I will set out our wider approach to extraterritoriality when we debate clause 110. Specifically, clause 95 states that a person cannot commit any of the part 1 criminal offences unless they have a UK connection, which is established when the person is a UK national, is habitually resident in the UK, or is a body incorporated under UK law. We have carefully considered the options and implications of restricting the extraterritorial application of criminal offences in this way. Although it is crucial that the CMA may apply its powers extraterritorially, they must be used only when strictly necessary and when a sufficient connection exists with the UK. In circumstances in which the person does not have a sufficient connection with the UK for the purpose of committing an offence, the CMA will still be able to enforce breaches of information requirements using civil penalties. That approach will ensure that, in exercising its powers, the CMA is respectful of the territorial jurisdiction of other nations.
Finally, clause 96 sets out the punishments that can be imposed by the relevant courts on conviction of a criminal offence under clauses 91 to 93. Any person found guilty of one of those offences is liable on summary conviction to a fine. In England and Wales, that will be of an unlimited amount, and in Scotland or Northern Ireland it will be up to the statutory maximum. On conviction on indictment, a person is liable to imprisonment for up to two years, a fine or both.
Alex Davies-Jones (Pontypridd) (Lab)
I welcome the clauses in this grouping that outline the criminal offences, as the Minister has explained. We welcome their inclusion for clarity, and we are also grateful that they broaden the scope of the Bill to include specific provisions, particularly in clause 94.
We support the clarity and intention of Government amendment 34. It is important that the term “officer” has its usual meaning in relation to offences committed by officers as well as bodies corporate. This is an important clarification and we are grateful to the Minister for tabling the amendment.
Question put and agreed to.
Clause 91 accordingly ordered to stand part of the Bill.
Clauses 92 and 93 ordered to stand part of the Bill.
Clause 94
Offences by officers of a body corporate etc
Amendment made: 34, in clause 94, page 56, line 14, leave out subsection (2).—(Paul Scully.)
This amendment removes a gloss on the definition of “officer” of a body corporate so that the term has its usual meaning in relation to offences committed by officers as well as bodies corporate.
Clause 94, as amended, ordered to stand part of the Bill.
Clauses 95 and 96 ordered to stand part of the Bill.
Clause 97
Director disqualification
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Government amendments 35 and 36.
Clauses 98 to 101 stand part.
Paul Scully
I will now cover the remaining enforcement measures in the regime, and the appeals process. Clause 97 gives power to the DMU to apply to the court to disqualify a director of a UK-registered company that forms part of a firm with strategic market status, where that firm has breached the digital markets regime. That will allow the DMU to use the Company Directors Disqualification Act 1986, as the CMA does currently under the Competition Act 1998, when an SMS firm infringes the regime and the director’s conduct makes them unfit to be involved in the management of a company. That helps to protect UK businesses and the public from individuals who abuse their role and status as directors.
Government amendment 35 clarifies that costs relating to a court order under clause 98 can be made against any person that has breached the relevant requirement, whether or not they are an undertaking. The amendment changes the wording in subsection (3) to reflect the rest of the clause, which applies to persons—in practice, meaning a legal entity forming part of an SMS firm. I hope the Committee supports the amendment.
Government amendment 36 seeks to clarify in clause 98 that where a firm is responsible for the failure to comply with a relevant requirement, a costs order can be made against any officer of the relevant firm.
Clause 98 allows the DMU to apply for a court order where an SMS firm fails to comply with a regulatory requirement and, where relevant, a subsequent order or commitment intended to bring them back into compliance. A breach of a court order is a serious offence that can eventually lead to an unlimited fine and/or imprisonment for officers of the undertaking in question if it is not complied with. The threat of a court order is a key backstop for ensuring SMS firms comply with the regime.
Clause 99 makes explicit provision to allow parties to seek redress privately if they suffer harm or loss when an SMS firm breaches a requirement imposed by the DMU. Redress will be available when an SMS firm breaches a conduct requirement, pro-competition intervention or commitment to the DMU.
Clause 100 sets out that the CMA’s final breach decisions are binding on the courts and the Competition Appeal Tribunal to which redress claims can be made. The court or tribunal will only consider what a suitable remedy would be. That will encourage harmed parties to assist the DMU during investigations into suspected breaches of the regime.
Clauses 99 and 100 strike the right balance of ensuring there is a clear and effective route to redress, while ensuring that the regime’s focus is on public enforcement.
Clause 101 provides that decisions of the DMU, made in connection with its digital markets functions, can be appealed to the Competition Appeal Tribunal. When deciding these challenges, the CAT will apply judicial review principles. Valid grounds for appealing decisions of the DMU could include challenging whether it acted lawfully and within its powers, applied proper reasoning or followed due process, as well as, in some circumstances, whether the DMU’s decision was proportionate. That is with the exception of decisions relating to mergers, which will be brought under the existing process for merger appeals set out in the Enterprise Act 2002. That will ensure that there is a consistent appeals regime for all merger decisions.
Judicial review will allow for appropriate scrutiny of the DMU’s decisions in the digital markets regime, ensuring that the DMU is accountable for those decisions, that they are fairly and lawfully taken, and that the rights of businesses are protected. I am sure we all remember the oral evidence: the majority of people in front of us were clear that this was the right approach, and was proportionate.
Alex Davies-Jones
Clause 97 is important in that, as the Minister said, it enables the disqualification of a person from being a director as a consequence of their involvement in an infringement of a requirement relating to conduct requirements or pro-competition interventions. Labour sees that as an important step in ensuring that individuals who have not abided by the terms of this regime are not able to continue in their role. The clause specifically inserts new text into the Company Directors Disqualification Act which allows for these provisions. We welcome that this disqualification can be for up to 15 years—a significant yet fair period—and support the Government’s approach. We therefore support clause 97 in its entirety and think that it should stand part of the Bill. I am pleased to confirm that we also support Government amendments 35 and 36.
I will now move on to clauses 98 to 101. On clause 98, we particularly agree with the logical step set out in subsection (1). Its clarification means that, in the event of any initial breach of a conduct requirement that occurs before an enforcement order has been put in place or a commitment has been accepted, it cannot be enforced with a court order. We also agree with the intentions of subsection (3). Again, these are sensible approaches which we support. On the whole, we believe clause 98 to be an important step in establishing and rooting the CMA’s powers on a statutory footing. For that reason, we are happy to support it standing part of the Bill.
A fair regulatory regime must include provisions around seeking compensation, so we welcome clause 99. We particularly welcome subsection (2). We further welcome the clarity that subsection (4) affords. Again, these are simple clauses that we see as logical and sensible. We are happy to see their inclusion.
I now come to the most important clause in the Bill: clause 101. The Minister will be pleased to know that I have plenty to say on it. Subsections (8) to (10) provide that decisions of the CAT may be appealed to the appellate court for that jurisdiction. That is an incredibly important point and one which the Government must maintain. The DMU will ultimately have the power to make pro-competitive interventions to reduce SMS firms’ market power and to review more of their mergers. That means that they will be able to make significant changes to SMS firms’ business models with the objective of opening up their ecosystems and levelling the playing field for other businesses. The benefits of doing so are significant, and I am sure we will touch on them in sessions to come.
In the current version of this Bill, the standard of review that applies to DMU decisions is the judicial review standard generally used for authorities that make forward-looking assessments, rather than the “merits” standard used for certain competition law enforcement decisions by the CMA. That means that parties will be able to apply to the Competition Appeal Tribunal to review the legality of the DMU’s decisions, focusing on the principles of irrationality, illegality and procedural impropriety. That is an extremely important point and is consistent with other regimes, so the Government must not bow down to pressure here and adopt a “merits” appeals approach. As the Minister quite rightly said, we heard from countless witnesses during our oral evidence sessions who said the same.
We know that judicial review appeals are more streamlined than merits appeals and they can last a matter of days, rather than weeks, years or even decades. Under this Government, our courts are already facing significant backlogs—perhaps the less said about that the better—but there is no reason why we should subject this regime and the appeals principle to even further delay. We recognise the pressure that the Government are under here; clearly, potential SMS firms and their advocates oppose the adoption of the JR standard. It is obvious that a company that may be negatively impacted by this new regime would seek to obstruct or delay it by arguing for an appeals process that incorporates a consideration of the merits of the case.
However, Labour strongly believes that the current drafting is fair and well aligned with other regulatory regimes. For far too long, big tech has had the ear of this Government and has been able to force the hand of many of the Minister’s colleagues when it comes to online safety provisions. The Minister must reassure us that that will not be the case. I look forward to his confirmation.
Paul Scully
I appreciate the hon. Lady’s approach to the appeals standard, which she has taken in regard to the measures throughout the Bill. The Government speak to larger companies and smaller challenger companies, because it is really important that we get this right. I can assure the hon. Lady that there is no way we are going to weaken the appeals structure. We will always make sure that we listen and do things fairly. In no way will the structure be watered down such that challenger tech cannot come through. It is important we ensure that the Bill in its final form is the best it can be and is fair and proportionate.
Question put and agreed to.
Clause 97 accordingly ordered to stand part of the Bill.
Clause 98
Enforcement of requirements
Amendments made: 35, in clause 98, page 58, line 23, leave out “undertaking” and insert “person”.
The requirements to which clause 98 relates can apply to persons other than undertakings. This amendment clarifies that a costs order under this clause can be made against any person, whether or not they are an undertaking, who fails to comply with a requirement.
Amendment 36, in clause 98, page 58, line 25, leave out paragraph (b) and insert—
“(b) where the person responsible for the failure is an undertaking, any officer of a body corporate that is or is comprised in that undertaking.”—(Paul Scully.)
This amendment clarifies the circumstances in which a costs order under this clause can be made against an officer of a body corporate.
Clause 98, as amended, ordered to stand part of the Bill.
Clauses 99 to 101 ordered to stand part of the Bill.
Clause 102
Extension etc of periods
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clause 103 stand part.
Government amendment 37.
Clauses 104 to 109 stand part.
Government amendment 38.
Clauses 110 to 114 stand part.
Government amendment 39.
Clause 115 stand part.
New clause 4—Annual report on operation of CMA functions—
“(1) The Secretary of State must, at least once a year, produce a report on the operation of the CMA’s functions under Part 1 of this Act.
(2) Each report must include an assessment of the following matters—
(a) the outcomes of SMS investigations carried out by the CMA, with regard to the number of undertakings found—
(i) to have SMS, and
(ii) not to have SMS;
(b) the extent to which designated undertakings have fulfilled any conduct requirements imposed by the CMA; and
(c) the effectiveness of any pro-competition interventions made by the CMA.
(3) The first report must be published and laid before Parliament within one year of this Act being passed.”
This new clause requires the Secretary of State to produce an annual report on the operation of the CMA’s functions under Part 1. The report will be made publicly available and will be laid in Parliament.
Paul Scully
Clauses 102 to 115 deal with the administration of the regime and some technical matters. Clause 102 provides the DMU with the ability to extend investigations for strategic market status, conduct and pro-competition interventions, including the use of the final offer mechanism, for up to three months for special reasons. If a firm does not comply with information or interview requests, the deadlines can be extended until compliance is achieved. Clause 103 supports that measure by clarifying that special reasons extensions can be used once per investigation and specifying how total extension periods are calculated. Together, that provides clarity for firms on how investigations will be run and ensures that the implementation of extensions by the DMU is consistent.
Clause 104 sets out who will be permitted to take decisions in the new regime. It reserves the launch of strategic market status and pro-competition investigations to the CMA board, and further specified regulatory decisions to the board and one of its committees. The committee’s membership is constrained to provide a balance of independence and expertise.
Government amendment 37 amends clause 104 and requires that the continued application of existing obligations at the point of further designation, or transitional arrangements at the end of designation, are decisions reserved for the CMA board or its committees. That will ensure consistency across the introduction of obligations on firms.
Clause 105 sets out the manner in which a notice may be given to SMS firms or other relevant parties in relation to its functions under the digital markets regime. The provision is necessary to prevent parties frustrating investigations by claiming that they have not received a notice or that it has not been given to them in the proper way.
Clause 106 creates a statutory duty for the DMU to consult key regulators on significant proposed actions that engage their regulatory interests where it is relevant and proportionate to do so. Those regulators are the Information Commissioner, Financial Conduct Authority, Ofcom, Prudential Regulation Authority and the Bank of England. That ensures that the DMU can draw on expertise, avoid negatively impacting the interests of other regulators and prevent conflicting interventions.
Clause 107 creates a formal mechanism for the Financial Conduct Authority or Ofcom to make a recommendation to the CMA for it to exercise a significant digital markets function. That will ensure that the FCA and Ofcom, as concurrent competition regulators, have a clear and transparent process to refer cases to the DMU.
Clause 108 extends existing information-sharing provisions in part 9 of the Enterprise Act 2002. It ensures that information can be shared between the CMA and other relevant regulators to help them to carry out their statutory functions. The CMA will be able to disclose information to SMS firms or third parties to enable them to respond to allegations, seek legal advice or make appeals.
Alex Davies-Jones
Clause 102 is incredibly important if the CMA and, subsequently, the DMU are to be able to be an accountable body that consumers and businesses—and parliamentarians—have confidence in. This clause allows the CMA to extend various deadlines in part 1 of the Bill by up to three months where there are “special reasons” to do so. Those may include, for example, illness in the CMA investigation team. These are important provisions to ensure that the CMA is able to extend relevant investigations by up to three months.
We think it reasonable that the clause does not define the exact parameters of “special reasons”. We support a common-sense approach and therefore anticipate that those would include matters such as the illness or incapacity of members of an investigation team that has seriously impeded their work, and an unexpected event such as a merger of competitors. We further support the need for the CMA to publish a notice to trigger an extension under this clause. However, the Minister knows how important it is that these notices are made public, so I hope that he can clarify that that will be the case here.
It is right and proper that subsection (7) outlines the interaction between SMS investigations and active SMS designations. If the CMA is carrying out a further SMS investigation for a designated undertaking and needs to extend it, that investigation may not conclude until the original designation has expired, meaning the undertaking would fall outside the regime before the need for continued SMS designation is confirmed. The clause enables the SMS designation to be extended to match the length of the SMS investigation period and is a sensible approach that Labour supports.
We also welcome the provisions around clause 103, allowing the CMA to extend an SMS designation by up to three months. That speaks to the nature of an agile and flexible regime, which we ultimately all want and support. Government amendment 37 prevents decisions about whether and how to exercise the power in clause 17 being delegated to a member of the CMA’s board or a member of staff of the CMA. We consider that to be an appropriate response.
Clause 104 is crucial all round because it explains how decisions will be made under the digital markets regime and has practical applications in establishing exactly how the functions within the CMA will be able to operate when implementing the legislation. Notably, subsections (1) to (5) provide the CMA with the ability to create groups. The CMA must state the function for which such a group is established and the group will be required to fulfil that function. Can the Minister confirm where that information will be reported? Again, it will be helpful for us all to understand how that will work in practice.
We also value the clarifications outlined in the clause, which establish that to be eligible to carry out the functions under subsection (2A), a committee must include at least two CMA board members, which can include the chair. Furthermore, a majority of the committee’s membership must be non-staff or CMA panel members. We welcome the clarification that any changes of this nature would need to be laid before and approved by each House of Parliament before being enacted. Can the Minister confirm whether the Secretary of State will be required to be consulted under the provisions? That aside, we support the clause and believe it should stand part of the Bill.
We support clause 105 and welcome the clarification that a notice may be given to the particular individuals specified in subsections (3) to (5). This is an important clause that will allow the CMA to fulfil its obligations as the regulator. We also welcome clause 106, which outlines the requirements that will ensure the CMA has to consult specific named regulators, and welcome the clarity that those five regulators are the Bank of England, the Financial Conduct Authority, the Information Commissioner, the Prudential Regulation Authority and Ofcom. It is positive that they are outlined in the Bill. They are all established and relevant regulators that are subject to their own vast regulatory regimes, so Labour supports their involvement in assisting the CMA to regulate the regime proposed in the Bill. Again, we feel that subsection (6) is fair and reasonable. We particularly approve the fact that it is proportionate and we are happy to support it.
If clause 106 forces the CMA to consult the specific named regulators, it is only right that clause 107 sets out the formal mechanisms to be exercised under their regulatory digital markets function and that they are in the Bill too. We welcome the clarification on the timeframes, particularly around the fact that the CMA must respond to each relevant regulator within 90 days, setting out what action, if any, it has taken or will take and the reasons for that decision. It is important that those time periods are established in the Bill so as not to delay the CMA in taking action on a firm that is not operating in alignment with the regime.
For transparency purposes, we are also pleased to see the summaries of the CMA’s responses and that they must be published online. I am sure the Minister is pleased that that is included. We will come on to that matter as we address further clauses, particularly clause 112.
We welcome clause 108, which we see as a procedural clause that additionally extends current provisions to enable information sharing between the CMA and the Information Commissioner’s Office where that facilitates the exercising of one of their respective statutory functions, and we support the clause’s intentions. Information sharing must be encouraged between the agencies to allow for a regulatory regime to work in practice and be robust. It is right that the clause makes amendments to the Communications Act 2003 and the Enterprise Act 2002, which we see as vital for the regime to work in practice. We therefore support the clauses and believe they should stand part of the Bill as fully drafted.
Labour fully supports the provisions in the Bill to ensure the CMA has sufficient power to collect a levy from designated undertakings to recoup the costs associated with delivering the digital markets regime. We see that as a positive and effective way of encouraging compliance, but also an important way of generating funds to ensure the sustainability of the digital markets regime more widely. The polluter pays model is commonplace in a wide range of policy areas and it can be immensely effective. We therefore welcome the provisions in full. I do not need to address each subsection individually because the overall message is the same. SMS firms should absolutely pay a levy. For far too long they have got away with having considerable power and profit, and the time for them to have a statutory obligation to support measures such as those outlined in the Bill is well overdue.
We support the provisions in Government amendment 38, which we hope will go some way to assist should penalties have to be invoked by the CMA. The amendment permits notices to be served on people outside the UK if the CMA is considering imposing a penalty. Again, that is appropriate, and the Minister can be assured of our support. We feel that the provisions in clause 110 are fair and in alignment with similar regimes already in place, so we are happy to support it too. This is all becoming very collegiate.
Clause 111 protects the CMA against legal action for defamation as a result of its exercise of functions under the digital markets provisions in this part, and we support it entirely.
We welcome the provisions outlined in clause 112, which confirms the CMA’s duties to consult and publish statements online. As the Minister will be aware, any measures around transparency must factor in an element of consultation and transparency, so we welcome the clarifications that clause 112 affords. Colleagues will note that subsection (1) makes provision for when the CMA consults and publishes a statement. We think that it makes perfect sense. We are happy to support it, and wish to see that transparency echoed throughout the Bill.
Clause 113 is again welcome because it sets out the CMA’s obligation to publish guidance. It is important to have confirmation that the CMA will be able to revise or replace any guidance that it publishes, but must publish the revised or replacement guidance. While we recognise that that could include industry associations with a particular interest in the specific guidance in question, I would be grateful if the Minister would clarify whether others may be consulted in the instance of revised guidance being published? That aside, we support the intention behind clause 113 and believe that it should stand part of the Bill.
Clause 114 is particularly important. In the case of a large corporate group whereby a designated undertaking may be part of a wider body, it is important that that is defined within the Bill and interpreted when used throughout the Bill. Turning to Government amendment 39, we of course support the need to ensure that the definition of
“relevant service or digital content”
is consistent with the definition of “digital activity”, so we will support the amendment. We welcome clause 115 and do not disagree with any of the definitions outlined therein. We see them as fairly standard, as long as they are applied with common sense. We therefore fully support the clause.
Lastly, turning to new clause 4, we have already touched on this to some extent in previous debates. The aim of the new clause is clear: we want there to be more transparency over the function of the CMA’s regime. Particularly when it is in its infancy, the information will be extremely useful to businesses, civil society, academics and parliamentarians alike. It will also be important for other jurisdictions to have a meaningful way of understanding the regime, particularly if we want it to be world leading, when considering options for their own legislation.
I hear the Minister’s comments regarding replication of work and the need for the independence of the CMA, but it is right that Parliament has that scrutiny and overview. I would welcome his commitment to ensure that Parliament will have a mechanism by which to review the activity of the CMA via a regular report. If he could commit to me that that will be the case, we will not need to press the new clause to a vote.
Paul Scully
I thank the hon. Lady for her approach. Let me answer some of her questions. Notices will be made public, and information about the groups will be reported online. Under clause 104, the Secretary of State would not need to be consulted because, again, it is an independent regulator, so mandatory consultation with the Secretary of State is not necessarily appropriate. On clause 113 and who will be consulted on the revised guidance beyond industry, it will be relevant stakeholders, such as SMS firms themselves, other regulators such as Ofcom and the ICO, businesses likely to be affected by the decisions, and consumer groups. A wide-ranging consultation will be required to ensure that the regime works properly.
I think I can give the hon. Lady the assurance that she is looking for on new clause 4. It is really important that Parliament continues to be able to scrutinise the regime effectively. I do not think that it is appropriate to take the approach that the Secretary of State needs to do another form. It is less to do with duplication; it is more to do with the fact that if the Secretary of State is putting forward his or her own report, that might undermine the report that the CMA is doing. The CMA has an annual report, which it will publish at the end of each financial year. It will include a survey of developments relating to its functions, assessments of its performance against its objectives and enforcement activity, and a summary of key decisions and financial expenditure. That should be enough for Parliament to scrutinise that report and the work of the CMA and the DMU. I am happy to give that assurance that Parliament has that scrutiny and oversight.
The Chair
With this it will be convenient to discuss the following:
Clauses 117 to 121 stand part.
That schedule 3 be the Third schedule to the Bill.
Clauses 122 and 123 stand part.
Clauses 134 and 135 stand part.
Paul Scully
I hope my voice will stand up to this level of scrutiny. Part 2 of the Bill focuses on the UK’s existing competition regime. First, I will explain that while the CMA is the principal regulator responsible for the public enforcement of the prohibitions in part 1 of the Competition Act 1998, its functions are also exercisable concurrently by sector regulators, such as Ofgem and Ofcom, among others. The measures in clauses 116 to 120 and clause 135, and when we reach them clauses 136 and 137 and schedules 8, 9 and 11, affect the CMA and sector regulators. For the sake of brevity, I will just refer to the CMA.
Clause 116 extends the territorial reach of the chapter 1 prohibition in the Competition Act 1998. The prohibition relates to anti-competitive agreements, decisions by associations of undertakings or concerted practices, hereafter simply referred to as agreements. The chapter 1 prohibition captures agreements that have as their object or effect the prevention, restriction or distortion of competition within the UK, and which may affect trade within the UK. Currently, it is limited to agreements that are, or are intended to be, implemented within the UK. The extension in reach of the chapter 1 prohibition means that agreements implemented, or intended to be implemented, outside the UK are also captured, but only where they would be likely to have immediate, substantial and foreseeable effects on trade within the UK.
Clause 117 introduces a new duty to preserve documents on persons who know or suspect that an investigation is being, or is likely to be, carried out under the Competition Act 1998. The duty will apply from when a person knows or suspects that an investigation by the CMA is under way or likely to occur. Where a person has a reasonable excuse for not complying with the duty, no liability for a penalty will arise. A reasonable excuse could include something out of an individual’s control, such as an IT failure.
Clause 118 strengthens the CMA’s powers to require the production of electronic information stored remotely—for example, in the cloud—when executing warrants to enter business or domestic premises. Under this reform, the CMA will be able to require the production of information for the purposes of its investigation without needing to demonstrate when making the request the specific relevance of the particular dataset to be produced. It will then be able to take copies or extracts only of information that is relevant to the investigation. The CMA will also be able to operate equipment to produce remotely stored information itself. Clause 134 makes similar amendments to the CMA’s power to require the production of electronic information when executing a warrant during an investigation into a suspected criminal cartel offence under part 6 of the Enterprise Act 2002.
Clause 119 amends part 1 of schedule 1 to the Criminal Justice and Police Act 2001, to include the power of the CMA to undertake an inspection of domestic premises, under section 28A of the Competition Act 1998. That means that when the CMA undertakes an inspection of domestic premises, it will have access to the same seize and sift powers as are already available to it when it inspects business premises under a warrant.
Clause 135 also concerns the CMA’s investigative powers. First, it expands the CMA’s power to require persons to answer questions for the purposes of a Competition Act 1998 investigation, so that it applies regardless of whether the person has a connection to a business under investigation. The CMA will be able to require individuals to answer questions only where they have information that is relevant to an investigation. Secondly, the clause amends the CMA’s powers to require individuals to answer questions across its Enterprise Act 2002 markets and mergers and Competition Act 1998 functions, so that it can specify that interviews for those purposes should take place remotely.
Clause 120 amends the standard of review applied by the Competition Appeal Tribunal in appeals against interim measure decisions from full merits to judicial review. Interim measures are temporary directions that the CMA has the power to give during an investigation under the Competition Act 1998. To be an effective tool in fast-moving modern markets, it is essential that interim measures can be implemented efficiently. Judicial review will provide a flexible and proportionate standard of review, ensuring the CMA is held accountable appropriately for its decisions.
Clause 121 introduces schedule 3 to the Bill, which amends the Competition Act 1998 to empower the Competition Appeal Tribunal to grant declaratory relief in private actions claims under the Competition Act 1998. Declaratory relief is a remedy that involves a court making a legally binding statement on the application of the law to a set of facts.
Clause 122 gives the Competition Appeal Tribunal, the High Court of England and Wales, the Court of Session and sheriff courts in Scotland and the High Court in Northern Ireland the ability to award exemplary damages in private competition claims. This will help deter and punish particularly egregious conduct and ensure that those impacted by the most reckless breaches of competition law can be awarded additional damages.
Clause 123 amends section 71 of the Serious Organised Crime and Police Act 2005 to designate the CMA as a specified prosecutor. This designation will allow the CMA to enter into formal agreements with an offender who has assisted or offered to assist its criminal cartel offence investigations. For example, if it considered it appropriate, the CMA could agree not to use specified information against them in any criminal proceedings. Agreements to provide assistance can also be taken into account by the courts when sentencing an offender, or their sentence could be referred back to the court for review. These measures do not enable the CMA to offer immunity from prosecution.
Alex Davies-Jones
Part 2 focuses on the competition elements of the Bill. I am pleased to see clause 116, which expands the territorial reach of parts of the Competition Act 1998. Labour recognises the importance of ensuring that legislation already on the statute book is aligned with the intentions behind the Bill, because we understand that regulation of our digital markets will draw on existing competition law. We therefore welcome the clause, which will expand chapter 1 of the 1998 Act. The chapter 1 of the 1998 Act considers only undertakings and decisions that might affect trade within the UK, and which have as their object or effect the prevention, restriction or distortion of competition. At the moment, those behaviours are prohibited only where they are, or are intended to be, implemented in the United Kingdom, but we need to consider the impact of agreements, decisions and practices that might affect trade within the United Kingdom. Subsection (2) of the clause will replace the existing section of the 1998 Act to ensure that a consideration of the effect on trade will be considered. That is particularly important in the context of digital markets because they operate on a global level.
The clause goes some way to address the lack of futureproofing in the Bill more widely. The Minister knows my thoughts on that, and knows the Bill should go further in that regard. That aside, we welcome subsection (3), which will repeal the existing equivalent in the 1998 Act. The introduction of the qualified test will ensure that UK trade and businesses and consumers based in the United Kingdom, are protected from any detrimental effects of anti-competitive conduct, regardless of where that conduct takes place. That is welcome, and we consider the measure to strike a positive balance.
We welcome the clarity and the changes to the 1998 Act that will bring important provisions of the Bill into line with existing legislation. We have therefore not sought to amend the Bill, and we support those measures being part of it.
Clause 117 is important in that, once again, it will amend part 1 of the 1998 Act. We know that big companies can often be smart in concealing, or even overloading, information relevant to regulatory regimes, and we have seen that happen time and again when it comes to online safety. Labour does not want the same detrimental behaviours to be allowed to continue within this regime. We therefore welcome the provisions in the clause, particularly proposed new section 25B, which sets it out that the duty applies where
“a person knows or suspects that an investigation by the CMA… is… or is likely to be carried out.”
The inclusion of a person “suspecting” is important, and, in theory, it will push companies to abide by their duties. Recently, we have seen those at the heart of Government in the news owing to their failure to produce vital documents in investigations of the covid-19 pandemic, so it is very welcome indeed that the Government appear to have learned their lessons and worked to ensure that designated companies will not be able to circumvent the regime, as a former Prime Minister has attempted to do.
Let me get back to the Bill and the matters at hand. In practice, those duties will arise where a business receives a case initiation letter from the CMA, so it will be perfectly aware that its conduct is under investigation. Such duties might further arise when, for example, an individual working for a business is aware that a customer has reported their suspicions of price fixing, and that the customer has been interviewed by the CMA, or members of an anti-competitive agreement have been “tipped off” that a member of the agreement has blown the whistle to the CMA. Those are important clarifications, which we welcome. We therefore support their inclusion in the Bill.
We support clause 118, which specifically amends sections 28 and 28A of the 1998 Act, and we support the clarity with respect to the execution of such warrants—for example, a named CMA officer has the power to require the production of information that is held electronically and is accessible from the premises. It is a positive step to have these amendments to the 1998 Act, which will expand the powers of the court or the CAT to grant a warrant to the CMA based on the fact that there are reasonable grounds to suspect that there are documents relating to an investigation that are accessible from the premises, when the other criteria set out in the section are met. Those powers will apply to any information stored electronically, and we hope and expect that the provisions of the clause will rarely be used. Despite that, we fully support their inclusion. It is right and appropriate that businesses and other jurisdictions looking closely at the Bill have a sense of the process that will result in the event of the CMA being forced to act on a warrant. The clause and others in this part of the Bill are an important part of ensuring compliance, and we therefore welcome the provisions in full.
Clause 119 is, once again, an important clause that will amend existing legislation. The powers of seizure conferred by section 28 of the 1998 Act are already specified for the purposes of section 50 of the Criminal Justice and Police Act 2001, so the amendment will align the powers available to the CMA whether it is inspecting business or domestic premises under a warrant, and it will make consequential changes in the light of those made by clause 118. These practical clauses will make important changes to legislation to bring other provisions in line with the Bill.
The Chair
With this it will be convenient to discuss the following:
That schedule 4 be the Fourth schedule to the Bill.
Clause 125 stand part.
That schedule 5 be the Fifth schedule to the Bill.
Clauses 126 to 128 stand part.
Paul Scully
Chapter 2 of part 2 upgrades and refines UK merger control to ensure it remains the best in class. Clause 124 and schedule 4 amend the thresholds for merger review to focus the UK’s merger regime on reviewing the transactions that have the potential to have the most marked impact on competition in UK markets.
The Bill makes three changes to those thresholds. First, it introduces a new acquirer-focused threshold, which gives the CMA clear jurisdiction over transactions in which a very large business with a UK turnover of more than £350 million, and at least a 33% share of supply, acquires another business. The new threshold will allow the CMA to review potentially harmful transactions—for example, a business with significant market power in one part of a supply chain acquiring a business in another and then being able to leverage its market power across that supply chain.
Secondly, the Bill increases the turnover test level from £70 million to £100 million. That adjustment limits merger review of cases that are less likely to be harmful, maintaining the balance intended when the UK’s merger regime was created. Thirdly, it introduces a safe harbour for transactions where all parties have a UK turnover of no more than £10 million. For the first time, therefore, small and micro enterprises merging with each other can be certain that they will not be captured by UK merger control.
Clause 125 and schedule 5 introduce a fast-track procedure to allow certain mergers to be expedited to an in-depth, or phase 2, investigation. That is intended to increase flexibility and deliver more efficient merger investigations. Now, when the CMA investigates a merger, initially it has to undertake a phase 1 investigation lasting up to 40 working days before it can refer the transaction for an in-depth phase 2 investigation. Merger parties, however, may be aware early in the process that their merger is likely to require an in-depth investigation by the CMA. In such cases, moving quickly to phase 2 will significantly speed up the overall process. Let me be clear: the fast track is not a suitable process for all mergers that the CMA reviews. However, in some cases, it will be a valuable tool to save time and resources for all involved, especially if parties request a fast track early on.
Clause 126 enables merger parties and the CMA to extend existing statutory time limits for merger reviews by mutual agreement where appropriate. The increased flexibility that that provides will ultimately help to resolve cases more effectively and, in some cases, more quickly. Clause 127 enables the CMA and merger parties to extend the time limits of merger review in public interest cases. Unlike in a normal merger review, however, the Secretary of State has an important role in decision making in public interest cases. This clause therefore sets up a key additional requirement for such cases: the CMA can only make or cancel an extension if the Secretary of State also consents. Clause 128 replaces the requirement for the CMA to publish the merger notice in the London Gazette, Edinburgh Gazette and Belfast Gazette with a requirement to do so online.
Alex Davies-Jones
Labour welcomes the provisions in the clause which establish that transactions within jurisdiction can be reviewed by the CMA, although no obligations or requirements are imposed on businesses by being in scope. Schedule 4 introduces the new acquirer-focused threshold, as well as introducing a small merger safe harbour that is primarily targeted at reducing the regulatory burden faced by small and micro businesses—the burden that we heard about in our evidence sessions. We support the clause standing part.
Schedule 4 makes several changes to the thresholds, which determine what transactions are within the jurisdiction of UK merger control. As I have noted already, the UK’s merger control regime is voluntary, meaning that there is never on obligation to notify a transaction to the CMA. However, when the existing jurisdictional thresholds in the Enterprise Act 2002 are met, the CMA may review a transaction even if it is not notified. The CMA has such jurisdiction if: the target’s UK turnover in its most recently completed financial year exceeded £70 million; or the parties have a combined share of supply of 25% or more in relation to any product or service in the UK or a substantial part of the UK. This schedule will clarify some significant changes to those thresholds, which Labour welcomes.
Schedule 4 introduces a new threshold that will grant the CMA jurisdiction to review transactions where one party has a UK share supply of at least 33% and UK turnover exceeding £350 million. We see the new threshold as largely capturing killer acquisitions, in which a larger firm acquires a smaller and possibly innovative firm, potentially with a view to eliminating the threat of future competition. The CMA’s existing 25% share-of-supply threshold has already shown itself to be flexible in capturing many such transactions, but it is estimated that the new threshold will lead to an increase of between two and five phase 1 cases per year. That is to be applauded.
The new £350 million threshold is aimed at expanding the CMA’s jurisdiction, but other sections of schedule 4 seek to reduce the burden on merging companies by removing certain transactions from the CMA’s jurisdiction. By increasing the target turnover threshold from £70 million to £100 million, it is estimated that the changes to the turnover test will lead to a reduction of two or three phase 1 cases per year. In addition, the Government have proposed an interesting solution with the introduction of a safe harbour threshold to the existing share-of-supply test where, even if the 25% share of supply threshold is met, the CMA would not have jurisdiction if no party to the transaction had more than £10 million of UK turnover.
Labour recognises that it would be inappropriate to burden the CMA unnecessarily, but we are keen to have an understanding of how schedule 4 will operate in practice. Has the Minister considered introducing an annual reporting mechanism that would allow for more transparency on whether the approach is working? That aside, we certainly and carefully support the intentions of this schedule.
We welcome the provisions of clause 125 and are pleased to see that particular attention has been given to merger situations. Labour recognises that designated companies often buy other companies or merge with them, so it is only right that the CMA is empowered with the appropriate tools to investigate in such circumstances, where necessary. As we know, at present the UK’s merger control regime is voluntary, meaning that there is never an obligation to notify the CMA of a transaction. However, as I have said, when the thresholds in the Enterprise Act are met, the CMA may review a transaction despite not having being notified of it.
Clause 125 is relevant because it amends part 3 of the Enterprise Act to enable the CMA to fast-track a merger to an in-depth phase 2 investigation if it receives a request from the parties involved to do so. That is an important step in streamlining merger review procedures and timelines by removing certain statutory duties on the CMA that currently limit the benefits and use of the existing, non-statutory fast-track procedures. This fast-track process gives the CMA more flexibility to deliver quicker and more efficient merger investigations without prejudicing the quality of the review. We welcome the clarifications in clause 125 and support its standing part of the Bill.
We welcome schedule 5, which amends the Enterprise Act to enable the CMA to fast-track these mergers. In particular, we support the clarification that the CMA may launch a phase 2 investigation only if it believes that a completed or anticipated merger has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom. We also support the clarification of the circumstances in which the CMA can accept a fast-track reference request.
When making these decisions, the CMA must have regard to whether the merger could raise public interest issues or whether a special public interest intervention has been launched under provisions in the Enterprise Act, to ensure that no case is unduly fast-tracked. Schedule 5 is important and will be central to ensuring the CMA can work at pace in the case of any merger requiring investigation. We welcome and support it.
Labour fully supports the intentions of clause 126. The timetable for phase 2 investigations is important for the timely resolution of merger investigations, and we believe the approach outlined to be sensible. As it stands, section 39 of the Enterprise Act, which outlines time limits, requires the CMA to publish its report on a merger reference within 24 weeks of the date of the reference. Clause 126(2) amends that provision to give the CMA the power to extend the period if necessary. We welcome the clarity that the length of an extension has to be agreed between the CMA and parties involved in the potential merger.
We also acknowledge that, while the Bill does not specify circumstances in which the CMA and the parties involved in a merger can agree an extension, an extension is most likely to be helpful in support of early consideration of remedies or in multi-jurisdictional mergers that are being reviewed in other countries in parallel to the UK. We welcome that distinction. Labour has consistently said that for the regime to work in practice it must be flexible. We see clause 126 as an important step towards that aim and are therefore happy to support its inclusion in the Bill.
As I said with respect to clause 126, Labour supports flexibility to extend time limits, and we feel that is particularly important where there is a public interest to do so. That is why we support clause 127. The clause amends chapter 2 of part 3 of the Enterprise Act, which sets out that the Secretary of State may intervene in the consideration of a merger where the Secretary of State believes it raises a public interest consideration that needs to be taken into account. We feel that this is an appropriate and proportionate way of ensuring accountability for public interest interventions, and that the Secretary of State should be empowered to do so. We therefore support the intentions of clause 127 and, again, believe that it should stand part of the Bill.
Finally, clause 128 replaces the obligation on the CMA in section 96(5) of the Enterprise Act to publish the latest form of the merger notice
“in the London, Edinburgh and Belfast Gazettes”
with an obligation to publish it online. We welcome that transparency. The Minister knows my views on transparency with respect to the Bill more widely. I wish that provision about online publication was replicated elsewhere in the Bill, so that information is available to anyone who wishes to see it. We welcome clause 128 and hope to see it replicated.
Paul Scully
Indeed, a lot of the publication is done online, as we have discussed, even if that is not stated specifically in the Bill. I hope the hon. Lady takes heart in that.
The hon. Lady asked specifically about schedule 4 and safe harbours. Clearly, we would expect the CMA and the Government to review the merger review thresholds regularly, and there are powers to amend the thresholds if and when it is considered appropriate to reflect economic developments or, indeed, because of the experience of enforcing the thresholds, as she rightly said. The CMA board is accountable to Parliament, as we have described. We expect that, through its annual plan and performance reports, Parliament will be able to scrutinise the decisions that have been taken.
Question put and agreed to.
Clause 124 accordingly ordered to stand part of the Bill.
Schedule 4 agreed to.
Clause 125 ordered to stand part of the Bill.
Schedule 5 agreed to.
Clauses 126 to 128 ordered to stand part of the Bill.
Clause 129
Market studies: removal of time-limit on pre-reference consultation
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 130 and 131 stand part.
That schedule 6 be the Sixth schedule to the Bill.
Clause 132 stand part.
That schedule 7 be the Seventh schedule to the Bill.
Clause 133 stand part.
Paul Scully
The UK’s markets regime is the CMA’s most powerful tool for promoting competition in UK markets. Clauses 129 to 133 reform the markets regime, ensuring that it is effective, focused and proportionate.
Clause 129 reforms the market study process. Currently, the CMA or sector regulator must start a consultation on making a market investigation reference, or decide not to make a reference, within six months of the start of a market study. That timeframe is unduly restrictive. The clause removes the six-month time limit, giving flexibility for the consultation to start at the most appropriate point. It allows extra time to gather evidence, ensuring that information that comes to light later on can be considered.
Clause 130 makes amendments so that references can be targeted appropriately, to better define the scope of the investigation required. It further narrows the questions that the CMA group must consider, reflecting the scope set out in the reference. This will allow the CMA to ensure that its work is targeted effectively, which will benefit businesses and investors.
Clause 131 introduces schedule 6, which expands the use of voluntary undertakings that remedy competition harms. The clause allows the CMA to accept such undertakings at any stage in the market inquiries process. This includes the acceptance of partial undertakings that address some features causing concerns in a market, but not all. The flexibility to take issues “off the table” by accepting such undertakings, alongside the amendments made by clause 132 regarding narrowing the scope of investigations, will help to provide greater flexibility in the regime. We recognise that voluntary undertakings will not be appropriate in every case. Where they are appropriate, they will drive efficiencies and enable faster results. They will also help to tackle competition problems and any resulting consumer harm as quickly as possible.
Clause 132 introduces schedule 7, which gives new powers to the CMA to conduct trials of certain types of remedies at the conclusion of a market investigation where an adverse effect on competition has been identified. That will help to ensure that any final remedy is suitable and effective. For now, the power to trial remedies will be limited to solutions that relate to the provision or publication of information to consumers. That is the area where trials are most likely to be useful and enables a proportionate approach to introducing this new power. The Secretary of State will be able to expand the scope of remedies to trial in future, subject to the draft affirmative procedure.
Clause 133 gives the CMA new powers to amend ineffective remedies where less than 10 years has passed since the original market investigation. Where the CMA decides that remedies have been ineffective and should be varied, it will be required to consult with affected businesses before reaching a final decision on whether to vary a remedy, and to conclude the variation within six months. In cases where the Secretary of State has accepted or imposed remedies, the CMA will provide advice to the Secretary of State. This new power will be constrained by a mandatory two-year cooling-off period, beginning at the end of a remedy review.
Alex Davies-Jones
I will speak briefly to clause 129 before addressing our thoughts on the rest of the group. Labour supports the intentions of the measures in the group, and we have not sought to amend them at this stage.
The removal of the time restriction outlined in clause 129 gives the CMA flexibility and more time to gather evidence to determine when the consultation process should commence. That is something I think we can all get behind and fully support.
Schedule 6 outlines the process by which the CMA will be able to accept voluntary commitments during all stages of a market study and a market investigation. It allows the CMA to accept partial undertakings, to narrow the issues that require further investigation. We see these features as central to a flexible regime that firms want to easily engage with. That must be at the heart of any fully functioning and appropriate regime.
Clause 132 and schedule 7, which are incredibly welcome, provide that the CMA may be required by the Secretary of State to conduct trials of remedies before setting a final remedy package. We recognise that since this is a new regime, the regulator may benefit from such trial remedies, and it is important that the CMA has the legislative teeth and support to do so.
We therefore support the measures in the group. We have not sought to amend them, and we believe that they should stand part of the Bill.
Question put and agreed to.
Clause 129 accordingly ordered to stand part of the Bill.
Clauses 130 and 131 ordered to stand part of the Bill.
Schedule 6 agreed to.
Clause 132 ordered to stand part of the Bill.
Schedule 7 agreed to.
Clauses 133 to 135 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Mike Wood.)
Digital Markets, Competition and Consumers Bill (Tenth sitting)
Tuesday 27th June 2023
(1 year, 1 month ago)
Public Bill CommitteesRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 27 June 2023 - (27 Jun 2023)
The Chair
With this it will be convenient to discuss the following:
That schedule 8 be the Eighth schedule to the Bill.
That schedule 9 be the Ninth schedule to the Bill.
That schedule 10 be the Tenth schedule to the Bill.
Clause 137 stand part.
That schedule 11 be the Eleventh schedule to the Bill.
Clause 138 stand part.
Government amendments 40 to 44.
That schedule 12 be the Twelfth schedule to the Bill.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
The final clauses in part 2 concern measures that cut across the Competition and Markets Authority’s competition tools. Clause 136 introduces schedules 8 to 10 to the Bill. The Competition Act 1998 and parts 3 and 4 of the Enterprise Act 2002 already allow the CMA to impose civil penalties for non-compliance with information requirements. The destruction of documents that have been required to be produced, and the provision of false or misleading information, are criminal offences, but schedule 8 introduces powers for that conduct to be subject to civil penalties. It also reforms existing civil penalties to ensure that the maximum penalties are set at an appropriate level.
Schedule 9 introduces powers enabling civil penalties to be imposed for breaches of competition remedies. Competition remedies are interim measures, commitments and directions under the Competition Act 1998 and interim measures, undertakings or orders under parts 3 and 4 of the Enterprise Act 2002. Schedules 8 and 9 also enable the Secretary of State and Ofcom to impose penalties if they are given false or misleading information in relation to their functions under the relevant regimes. They also give the Secretary of State the power to impose penalties to enforce compliance with remedies accepted or imposed in relation to mergers and markets with public interest considerations. Civil penalties will be applicable unless the party has a reasonable excuse, and that will be assessed case by case.
The maximum penalty for an undertaking or person who owns or controls an enterprise that is not complying with information requirements is 1% of the business’s worldwide turnover. Daily penalties of up to 5% of worldwide daily turnover will also be available in some cases while the non-compliance continues. For breach of remedies, the maximum penalty is set at 5% of worldwide turnover and daily penalties of up to 5% of worldwide daily turnover while the breach continues. The penalties imposed on other persons, who will generally be individuals, are capped at £30,000, or up to £15,000 daily while the breach continues. The CMA is required to produce statements of policy regarding the operation of its penalty powers. In doing so, it must consult the sector regulators and receive approval from the Secretary of State. Schedule 10 amends the legislation that gives the sector regulators their concurrent competition powers, so that they need not unnecessarily duplicate the work that they need to do to prepare statements of policy.
Clause 137 introduces schedule 11, which amends the Competition Act 1998 and parts 3 and 4 of the Enterprise Act 2002 to make express provision regarding the giving of information notices outside the United Kingdom. The schedule enables the CMA to give an information notice to a person who is the subject of a Competition Act 1998 investigation, or a person who is or has been a party to a merger review. The schedule also enables the CMA to give information notices to third parties with a defined UK connection. Compliance will be enforceable through the civil penalty regime. The schedule also amends provisions on methods of serving documents to reflect modern business practices; for example, it allows service of documents via email.
Government amendments 40 to 44 are technical drafting amendments to schedule 12. The schedule, which is introduced by clause 138, applies appropriate parliamentary procedures to new regulation-making powers created by the Bill, and makes other consequential and technical amendments. I commend the amendments to the Committee and hope that the clauses will stand part of the Bill.
Alex Davies-Jones (Pontypridd) (Lab)
Labour supports the intention behind the provisions in this grouping. Of course there should be provisions about the attendance of witnesses, as outlined in clause 135. The same can be said about ensuring that the Bill has sufficient legal powers on civil penalties, should the need for them arise in the regime. The provisions in clause 136 and schedules 8 to 10 are adequate, and we support them. The same can be said for clause 137 and schedule 11, which make provisions regarding the service of documents and the extraterrestrial—sorry, extraterritorial; I know we are talking about digital markets, but we have not reached that far yet—application of notices under part 1 of the Competition Act 1998 and parts 3 and 4 of the Enterprise Act 2002. Of course those laws must work in alignment with the intentions of the Bill. Clause 138, Government amendments 40 to 44 and schedule 12 are all sensible, and part of a rigorous procedure, so we do not oppose them.
Question put and agreed to.
Clause 136 accordingly ordered to stand part of the Bill.
Schedules 8 to 10 agreed to.
Clause 137 ordered to stand part of the Bill.
Schedule 11 agreed to.
Clause 138 ordered to stand part of the Bill.
Schedule 12
Orders and regulations under CA 1998 and EA 2002
Amendments made: 40, in schedule 12, page 284, line 5, at end insert—
“(1A) In subsection (4) omit ‘, 94A(6)’.”
This amendment removes a reference in section 124(4) of the Enterprise Act 2002 to section 94A(6) of that Act, which is being repealed by paragraph 11 of Schedule 9 to the Bill.
Amendment 41, in schedule 12, page 284, line 7, at end insert—
“(aa) omit ‘, 94A(3) or (6)’;”.
This amendment removes a reference in section 124(5) of the Enterprise Act 2002 to section 94A(3) and (6) of that Act, which are being repealed by paragraph 11 of Schedule 9 to the Bill.
Amendment 42, in schedule 12, page 284, line 12, after “section” insert “94AB(9) or”.
This amendment corrects a drafting omission by providing that regulations under section 94AB(9) of the Enterprise Act 2002 (inserted by paragraph 11 of Schedule 9 to the Bill) are subject to annulment in pursuance of a resolution of either House of Parliament.
Amendment 43, in schedule 12, page 285, line 10, after “section” insert “167B(9) or”.
This amendment corrects a drafting omission by providing that regulations under section 167B(9) of the Enterprise Act 2002 (inserted by paragraph 17 of Schedule 9 to the Bill) are subject to annulment in pursuance of a resolution of either House of Parliament.
Amendment 44, in schedule 12, page 285, line 23, at end insert—
“(8A) In subsection (10), for ‘174D’ substitute ‘174A(10)’.”—(Paul Scully.)
Paragraph 26 of Schedule 8 to the Bill inserts a new subsection (10) into section 174A of the Enterprise Act 2002 which replaces the existing provision made by section 174D(10) of that Act (which is being repealed by paragraph 28(12) of that Schedule). This amendment amends the Enterprise Act 2002 to replace a reference in section 181(10) of that Act to the latter provision with a reference to the former.
Schedule 12, as amended, agreed to.
Clause 139
Overview
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Government amendment 59.
Clauses 140 to 142 stand part.
That schedule 13 be the Thirteenth schedule to the Bill.
That schedule 14 be the Fourteenth schedule to the Bill.
Clause 201 stand part.
Paul Scully
Part 3 of the Bill provides for two regimes for the civil enforcement of consumer protection law: a court-based regime and a direct enforcement regime for the CMA.
Clause 139 provides an overview of part 3. Clause 140 sets out the scope of the court-based and CMA direct enforcement regimes. First, the regimes are limited broadly to the trader’s acts or omissions that amount to commercial practices—that is, interactions between traders and consumers. Secondly, to be subject to enforcement action, a commercial practice must harm the collective interests of consumers. Thirdly, the scope of the laws that can be enforced remains broadly the same as that which can be enforced under current law. Government amendment 59 ensures that the Bill reflects existing law, namely the Consumer Protection from Unfair Trading Regulations 2008.
Clause 141 provides for an infringing practice to be in scope of enforcement if the trader committing it meets at least one of the following conditions: the trader has a place of business in the UK; the trader carries on business in the UK; or where the infringing commercial practice occurs as part of activities directed to consumers in the UK by any means. Those tests mean that the jurisdictional scope of the current court-based enforcement regime for consumer law is replicated.
Clause 142 limits the application of the enforcement regimes to a commercial practice that breaches an enactment, obligation or rule of law listed in schedules 13 or 14 to the Bill.
Clause 201 gives a delegated power to the Secretary of State to amend schedules 13 and 14—that is, to add, remove or vary the enactments and enforcer authorisations listed in those schedules. The continuing effectiveness of both regimes will depend on their ability to adapt to reflect the evolution of consumer protection law over time. As new consumer protection laws are made and old ones repealed, there must be a mechanism to ensure that they fall into or out of the scope of the enforcement regimes. If the enforcement landscape and the remits of individual enforcers change, there must be a facility to reflect those changes in the statutory framework. The power is subject to the affirmative procedure, so hon. Members will have due opportunity to scrutinise any provisions made under it.
Schedule 13 lists the enactments, obligations and rules of law that may be enforced through the court-based regime, which replaces part 8 of the Enterprise Act 2002 for conduct going forward. The schedule also makes clear which enforcers may enforce each enactment.
Schedule 14 sets out which enactments the CMA may enforce through its new direct enforcement powers. Its scope comprises core consumer protection legislation and a limited number of sector-specific regulations where CMA direct enforcement is desirable. That reflects the CMA’s specific remit and competence to tackle market-level issues that adversely affect consumers or affect their ability to make choices.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is a pleasure to serve under your chairship, Ms Ali. I thank the Minister for his opening remarks, and it is a pleasure to follow my hon. Friend the Member for Pontypridd in speaking on this important Bill.
Clause 139 provides an overview of the structure of part 3, which sets out the court-based regime for the civil enforcement of consumer protection law to protect the collective interests of consumers. As the Minister said, that allows for two regimes of civil enforcement—a simplified courts-based regime and the CMA’s direct enforcement regime.
The regime provides for consumer law enforcers to apply for, and the courts to make, enforcement orders, interim enforcement orders, online interface orders, to which only the CMA may apply, and interim online interface orders to which, again, only the CMA may apply. An enforcer or the court could decide to accept an undertaking from the enforcement subject instead of issuing an order, a mechanism that there should be the option for and is in line with the participative approach of working in the Bill.
Chapter 3 would also provide for certain enforcers—defined in clause 143, which we will go on to debate—and the court to attach remedies, known as “enhanced consumer measures”, to enforcement orders and undertakings. Importantly, chapter 3 would provide new powers for the courts to impose monetary penalties on enforcement subjects who have infringed the consumer protection laws within scope of part 3.
I wish to signal the Opposition’s broad support for part 3 and the measures it introduces to ensure swifter enforcement of consumer protection law and more effective redress for consumers. That is a sentiment shared by consumer groups. As one example, the written evidence submitted by Consumer Scotland expressed broad support for part 3, noting how it:
“simplifies and bolsters the enforcement of penalties for relevant infringements of consumer protection law under part 8 of the Enterprise Act 2002.”
I hope we will work constructively through the Committee to ensure that the consumer provisions in the Bill are as robust and fair as possible, and that we will not see the watering down of any measures currently drafted.
Clause 140 defines the scope of the enforcement regime set out by part 3. It sets out how a trader has committed an infringement of the part 3 enforcement regime if their act or omission harms the collective interests of consumers, as well as meeting the UK connection conditions set out in clauses 141, and the specified prohibition condition set out in clause 142.
The Opposition support clause 140 as a necessary element in introducing a robust enforcement regime. It is a stronger consumer protection, which acts where a continuation or repetition of an act, such as misleading information or an omission of information, could continue to harm future customers unless remedied. However, I ask the Minister for clarity on one aspect of the provision. As well as setting out the scope of enforcement, the clause in subsection (2) also defines relevant terms such as “trader” and “consumer”. The explanatory note states that in relation to the definition of “consumer”:
“A consumer must be an individual and so excludes body corporates. The individual must be acting wholly or mainly outside of their business.”
While it is welcome that individual consumers are being protected through the enforcement regime, could the Minister clarify where that leaves small businesses or the self-employed? The notes suggest that the individual is still a consumer when acting for dual purposes. It is clear to me, as a shadow Minister for business looking at the needs of small businesses in particular, that plenty of British businesses are negatively impacted by rogue traders supplying them, whether with office equipment or digital services. There is a segment of those businesses that could be caught inside or outside the definition depending on its interpretation.
It would be helpful if the Minister clarified whether the Government plan, for example, for microbusiness customers to be included in the consumer protection regime. Who would decide if it was 60% consumer or 60% business for the purposes of this legislation? It may be a product that is being delivered, and the business may be run from home. I would be grateful for the Minister’s comment and clarification on that point.
Amendment 59 replaces “trader” with “person”. It ensures that the definition of commercial practice for the purposes of part 3 of the Bill includes an act or omission by a trader relating to the promotion or supply of a consumer’s product to another consumer. I would welcome some clarification from the Minister. Will the amendment mean that where a consumer or private individual commits what would be an infringement by a trader when selling a product to another consumer—for instance through eBay or Facebook Marketplace—they are liable for enforcement action, as a business would be? This is an important area of protection for consumers, so I would be interested to hear more about how it would work in practice. If I understand the provision correctly, it could significantly expand the enforcement regime beyond just businesses.
Clause 141 sets out how traders meet the UK connection condition, which, as set out in clause 140, forms part of the scope of the enforcement regime. It sets out how a commercial practice meets the UK connection condition if at least one of three conditions are met. Those conditions are that the trader has a place of business in the UK, that the trader carries on business in the UK, meaning that their business operates in the UK, perhaps without an office, or that the trader carries on activities that are in any way directed to consumers in the UK. The conditions are necessarily broad but important for the protection of UK consumers. We support clause 141.
Clause 142 defines the specified prohibition condition, which is the final condition setting out the scope of the enforcement regime in part 3. In short, the clause sets out that a commercial practice meets this condition if it breaches provisions listed in schedule 13 and 14. Schedule 13 sets out the enactments, obligations and rules of law to which the court-based enforcement regime applies. The list is very comprehensive, and we support its contents. In particular, we note that chapters 1 to 4 of part 4 of the Bill are included in the schedule, which is welcome. I would welcome assurances from the Minister that the Government consulted widely among stakeholders regarding the compiling of the enactments of the schedule, so that we can be confident that there are no omissions. In addition, I invite the Minister to correct me if I am wrong in my understanding of how the schedule could be amended. There are other schedules with delegated powers, but I wanted to understand what the process would be here if there was a question of needing to amend the schedule if legislation were updated in the future. I would be grateful for clarification on that.
Similarly to schedule 13, schedule 14 lists the enactments to which the CMA’s direct enforcement regime applies. Like schedule 13, this schedule appears to be comprehensively drawn and is thus supported by the Opposition. I note that it also makes reference to other measures of the Bill that will be going through. On the theme of seeking clarity from the Minister, I would welcome assurances that a wide range of stakeholders and legislation has been consulted and reviewed to ensure that this is a comprehensive schedule. I would also ask what the process is for updating the schedule if required in the future.
Clause 143 lists public designated enforcers who would be able to use the court-based enforcement regime. We are pleased to see that this includes the CMA, trading standards, the Financial Conduct Authority, the Information Commissioner’s Office and Ofcom, among others. Certain private designated enforcers would also be able to use the court-based regime, such as the Consumers’ Association. We welcome the clause and the inclusion of a comprehensive list of public designated enforcers, but have the Government consulted with the groups they are planning to include in the clause? Were any groups or bodies that expressed an interest in being designated enforcers omitted from the clause?
Subsection (3) gives the Secretary of State a delegated power to add to or remove a body as a public or private designated enforcer, or to amend its entry. Regulations made under the clause would be subject to the affirmative procedure. However, the power could not be used to remove or vary the enforcement powers of the CMA, trading standards or the Department for the Economy in Northern Ireland. We welcome the protection of those bodies’ powers, but I would like clarification from the Minister on private designated enforcers.
The clause names the Consumers’ Association as a private designated enforcer, but no other group. While I note the criteria in clause 144 for designating a body as a private designated enforcer, it would nevertheless be helpful if the Minister spelled out how a body becomes a private designated enforcer. Would it have to apply? I would also be grateful for clarification of the basis on which the Secretary of State may remove, or seek to remove, a public or private designated enforcer—an issue that I will discuss further.
Clause 144 specifies the criteria that must be satisfied for the Secretary of State to designate a body as a private designated enforcer. This is an important clause. The criteria establish certain minimum standards of governance, transparency and competence that a person must meet to carry out enforcement action, and we welcome the clause. However, I refer the Minister to my question about how the Government expect people to become private enforcers. Would there be an application? Perhaps he would set out the process, and the basis on which he envisages withdrawing designation from an enforcer. Would that be because some conditions are no longer met? Would it be because some sort of complaint is received? It would be helpful to understand how those changes could be made.
Clause 145 identifies the categories of person an application for an enforcement order could be made against, and the types of infringements that they must have committed. An enforcer, as designated by clauses 143 or 144, would be able to apply to the court for an enforcement order or an interim enforcement order if the enforcer considers that they have engaged in, are engaging in or are likely to engage in a commercial practice that constitutes a relevant infringement, or if they are an accessory to such a practice.
We welcome the clause, but I would welcome further clarification on a few issues. First, the legislation states that
“an enforcer may make an application in respect of a relevant infringement”.
Did the Government consider changing “may” to “must”, or are they confident that enforcers will always apply for enforcement in cases where they have identified an infringement? I would welcome hearing the reasoning behind the choice made. Secondly, subsection (4) limits the power to apply for the imposition of a monetary penalty to public designated enforcers. Would the Minister clarify why that power has been withheld from private designated enforcers?
Paul Scully
Let me try to cover some of those questions. On microbusinesses and small business, this is effectively a standard definition that, yes, does exclude microbusinesses, because it replicates provisions in the Enterprise Act. The obvious question then is, “How do microbusinesses and small businesses get any redress in these examples?” but the business protection regulations would cover that, and they are not within the scope of this change. However, any of the changes that the hon. Lady requested would largely come under the affirmative procedure.
The hon. Lady also asked whether the Government had consulted widely on these enactments. Although we consulted widely on the Bill when I was a Minister in the Department for Business, Energy and Industrial Strategy, these provisions just restate existing law, so we just wrote that into the Bill, instead of spreading the provisions across statutory instruments. It would therefore not necessarily have been particularly informative to have consulted on them.
The hon. Lady asked about private designated enforcers and how an enforcer might be added to the list. The Secretary of State can by regulations add applicants as private designated enforcers that are able to use the court-based enforcement regime. Again, those regulations would be subject to the affirmative procedure, to ensure appropriate parliamentary scrutiny. Any organisation applying for that status would need to provide evidence to the Secretary of State that it meets the designation criteria in clause 144(1), which would likely include evidence as to its legal status and constitution, a list of directors, examples of where it has protected the collective interests of consumers, and so on.
The Secretary of State will in due course set out more detailed guidance on the evidence and information that applicant organisations should provide when seeking designation. The Government clearly want to guarantee that those designated are able to protect the collective interests of consumers but are prevented from using that privileged position to seek any commercial gain or competitive advantage. They therefore intend that any private designated enforcer that fails to meet the criteria would have its designation altered or withdrawn by the Secretary of State.
Question put and agreed to.
Clause 139 accordingly ordered to stand part of the Bill.
Clause 140
Relevant infringements
Amendment made: 59, in clause 140, page 88, line 18, leave out “trader” and insert “person”.—(Paul Scully.)
This amendment ensures that the definition of “commercial practice” for the purposes of Part 3 of the Bill includes an act or omission by a trader relating to the promotion or supply of a consumer’s product to another consumer.
Clause 140, as amended, ordered to stand part of the Bill.
Clauses 141 and 142 ordered to stand part of the Bill.
Schedules 13 and 14 agreed to.
Clause 143
Enforcers
Question proposed, That the clause stand part of the Bill.
Paul Scully
Clauses 143 and 144 set out the public and private bodies that have enforcement powers under the court-based enforcement regime, which we have touched on, and restate and update part 8 of the Enterprise Act 2002.
Clause 143 sets out two categories of enforcer: public designated enforcers and private designated enforcers. The clause also gives the Secretary of State powers to add or remove a public designated enforcer or to amend its entry, and to add, remove or vary the entry of a person as private designated enforcer. These powers are subject to criteria set out in clause 144.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Is there a reason why trading standards is not on this list? It would be the go-to for a consumer or business under existing law, so why is it absent from this list?
Paul Scully
As I say, we are essentially bringing across the existing law, but there is no reason why the Secretary of State cannot look at that in time. In clause 144, we are setting out the detail and criteria that must be met when a person who is not a public body is added by the Secretary of State as a private designated enforcer.
Neil Coyle
If a consumer believes that they have been sold something that is counterfeit or damaging, which might meet the “detrimental effects” test, where would they go to find out how to address that issue? If a British company has a licence and a trademark, and it sees someone selling fake goods online, thereby undermining the company’s work and trademark in the UK, how does it go about addressing that? In the evidence session, a question was asked about raising awareness of changes to legislation. Could the Minister take a brief moment to explain those two routes to getting change?
Paul Scully
If I have got this right, that goes back to the hon. Gentleman’s previous example. Let me correct my earlier comments. I talked about the fact that we are bringing existing legislation across into the Bill. The local trading standards enforcement regime comes under weights and measures, which is specified in the Bill. It is an old term for a modern-day service, and it is encapsulated in the regime. Clearly, businesses will go through the traditional routes to get consumer redress, which can include going through the trading standards regime.
Neil Coyle
When witnesses from trading standards sat here two weeks ago, John Herriman and David MacKenzie told us that there needed to be an awareness-raising campaign about the changes. Has the Minister done that, or is that intended to come after the enactment of the Bill? How will that come about?
Paul Scully
A lot of that will be done through our relationship with Citizens Advice and trading standards. When I covered this brief a year ago and held the position currently held by the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), we continually did work for consumers, whether that was on this kind of redress, work through the CMA or work through Citizens Advice and trading standards. Clearly, given that we are changing the regime to make things faster and more effective, we will want to shout about it, because people need to be aware of it, and that will be part of a wider awareness scheme. I cannot give the hon. Gentleman chapter and verse on the campaign, because I am not running it.
Neil Coyle
Perhaps rather than chapter and verse, just one sentence would be fine. Will the Government resource Citizens Advice to provide the new information on a whole new legislative change in consumer rights?
Paul Scully
As I say, the Government do a lot of work jointly with Citizens Advice to market, campaign on, and raise awareness of these regimes.
Neil Coyle
Apologies for coming back on this, but that is not an answer. Citizens Advice came to the Work and Pensions Committee just a few weeks ago to say that its advisers, many of whom are volunteers, face the most dire circumstances of their 80-year history; the circumstances are worse than they were during the second world war. That is its assessment of the financial situation that its bureaux face in trying to help people. Is the Minister saying that Citizens Advice will be resourced to provide the additional information?
Paul Scully
I will not conflate this issue with the matter of the resources for Citizens Advice’s broader work, but we already work with Citizens Advice to raise awareness of its work, and will continue to do that together. On any additional duties, clearly we want to make sure that Citizens Advice is as well resourced as it can be. A lot of its work is essentially similar to what is proposed, but we are trying to make it faster for it to offer remediation. That is the whole purpose of this work. We are simplifying and consolidating the criteria that apply under the current court-based regime. That guarantees that those designated as private enforcers will have the independence, competence and expertise required to protect consumers and their independence.
Question put and agreed to.
Clause 143 accordingly ordered to stand part of the Bill.
Clause 144 ordered to stand part of the Bill.
Clause 145
Applications
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 146 to 154 stand part.
Clause 169 stand part.
Paul Scully
Clauses 145 to 154 restate and update provisions in part 8 of the Enterprise Act 2002. They empower consumer enforcers to apply for, and the civil courts to make, court orders to prevent or stop infringing practices.
Clause 145 provides enforcers with the power to apply to court for an enforcement order or an interim enforcement order. An application may be made where a person has engaged in, is engaging in or is likely to engage in an infringing practice, or is an accessory to such a practice. The clause also gives public designated enforcers a new power to apply for the imposition of a monetary penalty for past or continuing infringing practices.
Clause 146 maintains the CMA’s leadership and co-ordination role by empowering it to give directions to other enforcers regarding who can make an application to court.
To ensure applications to court are made only when necessary, clause 147 requires enforcers to engage in appropriate consultation with the suspected infringing party or accessory before making an application for an enforcement order or interim enforcement order.
Clause 148 empowers the court, in response to an application under clause 145, to make an enforcement order against a person it finds has engaged, is engaging or is likely to engage in an infringing practice or is an accessory to such. As an alternative to making an order, the court may accept an undertaking from the infringer or accessory. Orders or undertakings must direct the subject to achieve compliance with the law.
Clause 149 gives the court a discretionary power to include enhanced consumer measures that it considers to be just, reasonable and proportionate in an enforcement order or an undertaking. Enhanced consumer measures, which are defined in clause 213, are steps an infringer or accessory may be required to take to provide redress to affected consumers, ensure compliance with the law, or offer consumers more effective choice. They are vital to ensuring that consumers are compensated and that infringements are remedied.
Clause 150 gives the court a new power to impose a monetary penalty of up to £300,000 or 10% of the recipient’s global turnover—whichever is higher—for past or continuing infringing practices. This provision is at the heart of the Bill’s reforms to consumer protection. It is imperative that there are consequences for breaking UK consumer law to signal that illegal practices will not be tolerated. Recognising that these penalties may be significant, the clause gives the recipient the right to appeal the decision to impose the penalty, its nature or the amount on the merits, in addition to their existing appeal rights.
Clause 151 empowers the court to make an interim enforcement order or accept an undertaking against a suspected infringer or accessory. To exercise the power, the court must consider it expedient that the infringing practice is prohibited or prevented immediately, and a final order must be likely to be granted.
Clause 152 gives the CMA the power to apply to court for an online interface order, or an interim online interface order. It can do that where it considers a person has engaged in, is engaging in, or is likely to engage in, an infringing practice. The reach of online traders and the complexity of the online marketplace has increased. That makes it more critical than ever that the CMA has the power to apply to the court to address infringing content online.
Clause 153 provides for courts to make online interface orders to require changes to online content and interfaces. This could include content removal, displaying warnings, restricting access or deleting a domain name. These powers are available only when the order is necessary to avoid the risk of serious harm to the collective interests of consumers and when there are no other available means within this chapter that would be wholly effective in stopping the infringement.
Clause 154 empowers the court to make interim online interface orders where it is expedient that the infringing practice is stopped or prohibited immediately and a final online interface order would be likely to be granted.
Clause 169 sets out two conditions that must be met before enhanced consumer measures can be included: in an undertaking given to a private designated enforcer, or in an undertaking given to the court or an order made by the court following an application by a private designated enforcer. The clause provides the framework to ensure that where enhanced consumer measures are used by private designated enforcers, it is done appropriately and with the end goal of solely benefiting consumers.
Seema Malhotra
I have already made some remarks on clause 145, but I will just echo my final question. I asked the Minister about the power for public designated enforcers to apply for the imposition of a monetary penalty and why that power has been withheld from private designated enforcers. Clause 146 refers to CMA directions to other enforcers. As the Minister has outlined, the clause introduces provisions such that if an enforcer other than the CMA seeks similar action on applying for an enforcement order for a particular infringement, it may direct which enforcer can make the application. That could lead to, for example, the CMA directing that an application for an order can be made only by itself.
We support the clause, but does the Minister’s Department expect the CMA to engage constructively with other enforcers to ensure that the most suitable enforcer is the one that is allowed to make the application? The underlying policy argument is important; we would not want to see multiple enforcers seeking to take action against the same business for the same infringement. I would like some clarity on how that is expected to work.
Clause 147 would provide that where an enforcer thinks a relevant infringement has occurred or is likely to occur, it must consult the enforcement subject before making an application for an enforcement. Subsection (2) introduces a requirement on the enforcer to alert the enforcement subject to the possibility of a monetary penalty being sought alongside an enforcement order. The explanatory notes state that the policy intent is that prior consultation may quickly lead to the relevant infringement ending and make court action unnecessary. We welcome the clause as a necessary part of the enforcement process, and in the spirit of opportunity for co-operation that underpins the new regime.
Under clause 148, the court would be able to make an enforcement order if, on an application from an enforcer under clause 145, it finds that the enforcement subject has engaged, is engaging or is likely to engage in a commercial practice that constitutes a relevant infringement or is an accessory to the infringing practice. As an alternative to an order, the court would be able to accept an undertaking. Under subsection (3), in determining whether to make an enforcement order the court would have to take into consideration whether the enforcement subject had given an undertaking under clause 155 to a public designated enforcer, or clause 177 in respect of the infringing practice. Where the court makes an enforcement order, it would be required under this clause to indicate the nature of the infringing practice and direct the enforcement subject to comply. We strongly welcome the clause. It is a necessary step in ensuring that the courts have adequate enforcement powers over companies that are causing detriment to consumers.
I have a question for the Minister regarding clause 148(8). It states that as part of an enforcement order, an undertaking may include a further undertaking by the respondent to publish “the order” and “a corrective statement”. As the explanatory notes state, the policy intent behind the subsection is to prevent the company
“further distorting consumers’ purchasing decisions”
by making them aware that a company has had to change its practices. I welcome the subsection as a common-sense step to ensure full clarity for consumers in instances in which enforcement action has been taken, but will the Minister clarify whether he expects the court always to require the publication of the order and a corrective statement? Surely, it would be simpler and better for the consumer for that undertaking to be included in every enforcement order, so that there was confidence that the consumer will be as informed as possible.
Clause 149 will enable the court to include, in an enforcement order or interim order, a requirement to take, as part of enforcement orders,
“such enhanced consumer measures as the court considers just and reasonable.”
The court would first have to consider whether the proposed measures were proportionate and in doing so consider
“the likely benefit of the measures to consumers…the costs likely to be incurred by”
the enforcement agent and
“the likely cost to consumers of obtaining the benefit of the measures.”
We welcome the clause as a further necessary element of the consumer protection and enforcement regime that we are seeking to deliver.
Clause 150 confers a new power on courts to impose a monetary penalty on a company for infringing consumer protection regulations. The Opposition welcome the clause, but why has it taken so long to get to this point? Turning to the details of the monetary penalties, subsection (5) sets out that, where the enforcement subject has a turnover that can be determined, a fixed amount penalty must not exceed £300,000 or, if higher, 10% of the total value of the enforcement subject’s turnover. We support those penalty thresholds, but could the Minister expand on why the legislation has landed on £300,000 as a maximum penalty if it is less than 10% of the company’s turnover? Is that an arbitrary figure or one that has been consulted on and calculated to ensure the maximum deterrent so that companies do not infringe the legislation? Will the Minister clarify the source of the figure?
Finally, I would welcome further clarification from the Minister on clause 150(8), which provides an enforcement subject who is required to pay a monetary penalty with a right to appeal the decision to impose a penalty, its nature or amount on the merits, in addition to their existing appeal rights. I would be grateful if the Minister could clarify the appeals threshold, which appears to be different from the judicial review threshold for companies with strategic market status, as set out earlier in the Bill. Was the threshold set for an informed reason? There seems to be a lower threshold for consumer protection infringements.
In addition, has the Minister considered whether the more merits-based approach could lead to companies, particularly larger ones with significant legal capacity, drawing out the process of monetary penalties being imposed on them by pursuing lengthy court appeals? I want to ensure that we have understood the matter correctly, so I would welcome the Minister’s clarifying the point and saying whether those are unfounded concerns. If they are well founded, we want to have a look at the issue more closely. In short, the Opposition welcome the clause, because we want to ensure that the measure is a robust as possible in deterring companies from engaging in practices that harm consumers.
Under clause 151, the court will be able to make an interim enforcement order on an enforcement subject. It will be able to make such an order if it considers that the subject
“has engaged…or is likely to engage in a commercial practice which constitutes a relevant infringement”.
In addition, interim orders can be made if
“it appears to the court that if the application had been an application for an enforcement order it would be likely to be granted, and…the court considers it is expedient that the infringing practice is prohibited or prevented immediately.”
That includes being able to make an interim enforcement order without notice.
We welcome the clause in principle, as a positive contribution to ensuring that swift action is taken where necessary to protect consumers. However, it would be helpful if the Minister could clarify the scope or give examples of how the power may be used. Examples specified in the Bill papers include preventing a misleading advert from being made public and enforcing the withdrawal of unsafe goods, but it would be helpful to understand the threshold for an order to be made without notice. Is it, for example, where there is current or imminent harm? It is important that that is clarified so that consumers and those who would be enforcement subjects can understand how the power could be used by the court, and so that there is no question about scope.
Clause 152 enables the CMA to apply to the court for an online interface order or interim online interface order in respect of a person that it considers has engaged, is engaging or is likely to engage in a practice that constitutes a relevant infringement. Subsection (3) sets out a jurisdictional test that limits the CMA’s power to apply for an order in respect of a third party overseas; it may do so only if the person is a UK national, the person is habitually resident in the UK, the firm is established in the UK, or the firm carries on business in the UK.
Is the Minister confident that those criteria cover all scenarios in which companies could be involved in misleading practices towards UK consumers, whether they are resident here or not? Why is it just the CMA that has the power to make such applications, and not other public or private enforcers, such as trading standards or local weights and measures authorities? We welcome clause 152, but it would be helpful to understand that further. There has been some discussion of the important role of local trading standards in our enforcement regimes.
Clause 153, which necessarily follows clause 152, gives the court a discretionary power to make an online interface order in response to an application from the CMA under clause 152. We welcome clause 153 and recognise the importance of including digital practices that harm consumers. However, as with clause 152, will the Minister expand on why local weights and measures authorities will not be given powers to apply for orders alongside the CMA?
The Bill represents an opportunity to update the powers of trading standards so that they can operate more effectively in the 21st century. The Chartered Trading Standards Institute notes that officers regularly have to exercise powers of physical entry in order to seize documents that they may wish to use in criminal proceedings, but it also raises the issues that officers have accessing filed documents that are not physical. My question is about how trading standards powers should be reviewed and updated in line with those of other enforcers, and the opportunity to do that in the context of the Bill.
Finally, under clause 154, following an application from the CMA, the court will be able to grant an interim online interface order, where it is considered that a final online interface order would likely be granted but that an interim order is needed to end an infringement immediately. Subsection (2) will permit the court to grant an interim order without giving notice to the enforcement target.
We welcome the provisions, but I have similar questions —they are relevant—to those I asked about the earlier clauses.
Paul Scully
Let me try to cover as many of those questions as I can. The hon. Lady asked about the possibility of multiple enforcers in process at the same time. In effect, we are restating the existing arrangements, which have been working. They work with the CMA as the gatekeeper, so the CMA would have to be notified when action has been taken—it can filter anything going on in that regard—and it would have to co-ordinate the approach.
On clause 148, and court powers to make orders and penalties, the hon. Lady talked about subsection (9) on whether an undertaking may include a trader publishing it in a corrective statement and whether I, as a Minister, would always expect that to happen. It is discretionary. The enforcer may require that as appropriate.
On the penalties, the £300,000 basically sits in the middle of the pack internationally. If we look at the regimes around the world, where penalties are imposed on individuals, New Zealand’s consumer protection system has £100,000 and Canada’s consumer regime has £450,000. We sit within that, looking at the international comparators.
Seema Malhotra
Is the Minister saying that the decision to go with the £300,000 was just because it was in the middle of the pack?
Paul Scully
It was a fair balance after looking at international regimes—a fair comparison with similar regimes around the world. Similarly, the 10% penalty is reflected in penalties across other regimes.
The hon. Lady also asked about the CMA being able to enforce and why private enforcers did not have the same powers. Only the CMA may impose penalties. Private enforcers may seek a penalty in court, but the CMA is the only body able to issue penalties directly.
Finally—I have probably missed a couple of questions, but I will review them later just in case—on the interim notes, the hon. Lady made a fair point about stopping the immediate harm. I talked about domain names, as well as removing adverts and such things. It is about being able to act quickly. The whole point about the changes to the regime is to ensure that we make it not only as effective as possible in the modern world, but as fast as possible.
Question put and agreed to.
Clause 145 accordingly ordered to stand part of the Bill.
Clauses 146 to 154 ordered to stand part of the Bill.
Clause 155
Acceptance of undertakings by enforcers
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to debate clauses 156 to 160 stand part of the Bill.
Paul Scully
Clauses 155 to 160 restate and enhance provisions in part 8 of the Enterprise Act 2002 that govern the acceptance and enforcement of undertakings by enforcers and the courts.
Clause 155 provides a power for enforcers to accept, vary and release an undertaking from an infringer or accessory. Undertakings may be accepted only where they include provisions that will stop or prevent the allegedly infringing practices. The clause will allow enforcers to continue using co-operative enforcement means, which can lead to faster resolution of consumer harms and reduce the volume of applications for court orders.
Clause 156 enables enforcers to include enhanced consumer measures in undertakings accepted under clause 155. Enforcers must consider those measures to be just, reasonable and proportionate. Clause 157 sets out requirements for enforcers when varying or releasing undertakings that ensure procedural fairness for enforcement subjects. Clause 158 allows for further court proceedings for breaches of undertakings and orders made by the court, giving the court a new power to impose a civil monetary penalty for the breach of an undertaking given to the court.
Clause 159 allows a public designated enforcer to make an application to the court for a consumer protection order if it considers that an undertaking given to it has been breached. If the court is satisfied that that is the case, it may make the requested order, impose a monetary penalty or both. A penalty may be imposed only in cases where the breach was without reasonable excuse.
Clause 160 sets out the types of penalties and the maximum penalty amounts that can be imposed by the court for failure to comply with undertakings given to it or to public designated enforcers. The court has the discretion to impose a fixed amount penalty of up to £150,000 or 5% of global turnover, or a daily rate penalty of up to £15,000 or 5% of global turnover accruing over the days when non-compliance continues, or a combination of both.
Seema Malhotra
Clause 155 provides that where an enforcer could make an application to the court for an enforcement order or an interim enforcement order, it may accept an undertaking from the enforcement subject. Subsection (2) sets out the scope of such an undertaking, which is the infringer or the accessory agreeing not to continue or repeat the infringing practice. The Opposition strongly support the clause as it provides necessary flexibility in the consumer protection regime.
We heard during evidence, particularly from the CMA, that the ability for companies to work co-operatively with enforcers to comply with the new regime is an important part of having the fairest and best possible enforcement regime. Where possible, we should ensure that enforcement is done through co-operation. In evidence to the Committee, the CMA said:
“This is not a regime where we want to operate behind closed doors. The whole design of the regime is a participative approach where we will engage with a broad range of stakeholders, businesses and consumers as we consult on designation, design the conduct requirements, and then enforce against them.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 6, Q2.]
As a result, we welcome the clause.
Clause 156 enables an enforcer to include enhanced consumer measures as part of an undertaking from a company, if the enforcer considers them just and reasonable. The enforcer will be obliged to consider the likely benefits and costs of the measures as part of its assessment of their proportionality. In particular, it will consider the costs of the measures themselves to the enforcement subject, as well as the administrative costs. As with clause 149, we welcome clause 156 as a further necessary element of the new consumer protection regime.
Clause 157 sets out the process to be followed when an enforcer proposes to materially vary or release an undertaking that it has previously accepted. Specifically, the process requires the enforcer to give notice to the respondent of its intention to vary or release an undertaking, and to consider any representations made in accordance with the notice. The notice must include the time by which representations may be made to the enforcer. We welcome this clause, which provides clarity for the enforcement regime, the enforcement subject and the consumer in the event of a necessary change. What timescale does the Minister expect the process to work to in most cases, or will it be entirely up to the enforcer? It would help both Parliament and the enforcement bodies to understand the timings envisaged in this process, to be sure that they strike the right balance between being flexible and proportionate and are fair to both the enforcement subject and consumers.
Clause 158 would apply in circumstances where the court makes a consumer protection order against an enforcement subject or a member of its corporate group, or where it has accepted an undertaking. In the event of a failure to comply with the order or undertaking, the clause enables the enforcer that made the original application or any other enforcer to make a further application to the same court. In effect, the court will be able to act in respect of not only non-compliance with an undertaking, but the infringing practice and any related consent or connivance with it by an accessory. The court will be empowered to impose a monetary penalty, regardless of whether the enforcement subject has a reasonable excuse for non-compliance, reflecting the serious nature of breaching an undertaking given to the court. We welcome the clause as a way of providing robust enforcement and punishment mechanisms for failure to comply with the regime, but I would welcome clarification from the Minister on subsection (8). Like clause 150, that subsection provides an enforcement subject who is required to pay a monetary penalty the right to appeal the decision to impose a penalty, its nature or amount on the merits, in relation to their existing appeal rights. I am not sure I completely grasped his previous argument on whether there is a lower appeals standard for those elements of the Bill?
Clause 159, similar to clause 158, sets out the process for when a company fails to comply with an undertaking accepted by the enforcer or the courts. The powers granted to the courts and the process by which the enforcer must apply reflect the provisions in clause 158 and, in the same way, we welcome them. However, the same question is raised about what looks like a lower threshold for appeals than in other parts of the Bill.
Finally, clause 160 sets out further details around the monetary penalties the courts may impose for failures to comply under clauses 158 and 159. We welcome any steps to improve enforcement action through the imposition of monetary penalties and therefore support the clause in principle. Despite that welcome, I must ask the Minister why, when it comes to failure to comply with undertakings, the monetary penalty in the clause, which is £150,000, is less than that in clause 150, where the court can issue penalties of up to £300,000? Similarly, clause 160 refers to 5% of the company’s turnover versus 10% in clause 150. I may not understand some of the Government’s rationale behind those different amounts. What are the reasons for the differences in the thresholds and those lower amounts?
Paul Scully
I picked up three questions. The reason the hon. Lady could not follow my argument about appeals from the first bit was because that was the bit I forgot to answer. I will cover that because they relate to the same thing.
Timescales will be up to the enforcer. None is set, but there is a general duty of expedition on the CMA set by the Bill overall. On appeals as they relate to both sections—
Seema Malhotra
Is the timescale deliberate, or has the question simply not been fully addressed? It is important to ensure clear expectations of the timing of some of these processes.
Paul Scully
I think the reason is the wide range of remediation events that may come before the enforcer to tackle, so they are being given that flexibility, but with an understanding that there is a general rule of expedition on the CMA. That is why we have approached this as we have.
The appeals regime is very different from the bits of the digital markets regime that we talked about earlier. In that case we were talking about a small number of firms with strategic market status, whereas any trader can be subject to this regime. The new monetary penalties that we are introducing are significant. A merits-based appeal is therefore important, because of the range of different-sized companies involved, to ensure fairness and to make sure that the issues involved relate to settled law rather than novel regulations covering digital conduct. Appeals are less likely to be disproportionately lengthy, because the digital market involves a more novel approach, which is why we were worried about extended appeal processes.
As for why thresholds are lower in this part of the Bill than for infringements, infringements, at £300,000, are clearly more serious. What we are talking about here—a breach of undertaking to a court—is still serious, but if someone is stepping down, we believe it is more proportionate to set the threshold at the slightly lower amount of £150,000.
Question put and agreed to.
Clause 155 accordingly ordered to stand part of the Bill.
Clauses 156 to 160 ordered to stand part of the Bill.
Clause 161
Notification requirements: applications
Question proposed, That the clause stand part of the Bill.
Paul Scully
Clauses 161 to 164 restate and update provisions in part 8 of the Enterprise Act 2002 that enable the CMA to perform co-ordination functions across the consumer enforcement landscape. This will help to prevent duplication of enforcement, which imposes an unnecessary burden on traders and wastes public money.
Clause 161 requires enforcers to notify the CMA of their intention to apply for certain court orders. Clause 162 imposes a requirement on enforcers to inform the CMA of any undertakings given to them. Clause 163 imposes a requirement on trading standards departments in England and Wales to notify the CMA if they intend to start proceedings for an offence under an enactment listed in part 1 of schedule 13 to the Bill. Clause 164 empowers UK courts to notify the CMA of relevant convictions and judgments. Bringing convictions and judgments to the attention of the CMA that it might not otherwise be aware of will allow the CMA to consider exercising its enforcement power under this part of the Bill.
Seema Malhotra
It is a pleasure to speak to clause 161 and the other clauses in this group. Under clause 161, as the Minister outlined, enforcers would be able to notify the CMA before applying for an enforcement order, and could only apply for an order 14 days later, or seven days later when applying for an interim order. The powers also allow the CMA to agree to shorten these wait times. The Bill’s explanatory notes explain:
“The policy intent underlying the notification requirement in this clause is for the CMA to be able to perform a coordinating role in relation to enforcement under this Part. The notification requirement will enable the CMA to facilitate the sharing of information between enforcers”,
and that is outlined as mitigating
“the risk of traders facing multiple actions in relation to the same infringing practice”
—a point that we have raised before. We are supportive of the clause and the principle of enabling the enforcement regime and ensuring that it is joined up and efficient in practice. I seek the Minister’s clarification on whether the Government have had discussions with other public enforcers on the provisions in the clause. Is it the case, as he has said before, that the CMA broadly has a co-ordinating role and other powers, and is that carrying on an existing practice and pattern of engagement between those enforcing bodies?
Clause 162 requires enforcers to notify the CMA of the terms of any undertaking given to it under clause 155 and of the identity of the persons giving it. Again, that is important to enable the CMA to fulfil its co-ordination role. As with clause 161, we support the provisions in the clause. Clause 163 introduces provisions requiring local weights and measures authorities, such as local trading standards bodies, to give the CMA notice of its intention to start proceedings for an offence under schedule 13, which we have debated. The authority must also notify the CMA of the outcome of those proceedings.
The policy intent, as explained by the explanatory notes, is to enable the CMA to play its co-ordinated role granted to it in previous clauses. The notes provide a potential example whereby the CMA could inform one authority that another is prosecuting, or that an enforcement order has been granted in respect of the same infringing practice. That is an important part of the co-ordinating role because it demonstrates that it is not just about the CMA being informed, but the CMA ensuring that other relevant enforcers are informed of what other enforcers are doing. That is then a streamlined and efficient process that does not hit the enforcement subject more than once on the same matter.
Clause 164 confers a power on the courts to notify the CMA of convictions and judgments it makes that may not have been bought to its attention. That is a common-sense provision. However, I would welcome further clarification from the Minister specifically on subsection (2). It states that the court
“may make arrangements to bring the… judgment to the attention of the CMA”.
We know the strain and pressures that our court system is under. I ask the Minister why the provision introduces a power as opposed to a duty. If the CMA is to have, as is intended, a co-ordinating role where it is in the picture on all the relevant information related to those enforcement subjects, are there any circumstances in which the Government believe the courts may not need to inform the CMA? In that case, could the Government clarify what those circumstances might be, or where they might consider it not necessary for the CMA to have this information if it considers it to not be relevant to the function it carries out?
We need to remember that this is not just a function being carried out for today; this is where the CMA will be able to have a record of enforcement measures, any breaches and any other information that would be relevant to any considerations in the future. I would be grateful to understand from the Minister why that important and common-sense provision is a power as opposed to a duty.
Paul Scully
The CMA being able to issue permission to bring enforcement procedures is consistent with the position under part 8 of the Enterprise Act 2002. We respect and understand the expertise of all enforcers, including sector regulators, so the CMA is playing a co-ordination role to effectively share information between enforcers, and guarantee that enforcement actions are not duplicated. That will mitigate the risk of a trader facing multiple actions for the same infringement practices. The Government have discussed the provisions with other enforcers, and the CMA already has memorandums of understanding with other enforcers.
On the question of why there is a new reporting requirement in clause 164, actually it is not new. It was already established under part 8 of the Enterprise Act. Again, it ensures that the CMA can consider exercising its enforcement powers where appropriate. It only gives the court the power to notify judgments and convictions to the CMA. It is already there under the Enterprise Act, and that is why we have brought it in here.
Seema Malhotra
Perhaps I could put the point about power versus duty to the Minister again? I understand that many aspects of the Bill have been brought together from other areas of legislation. We have to ask the question within the context of the new regime, which is different to how the situation was prior to the legislation coming in, whether that is worth reviewing. We are talking about a regime in which the CMA is now a co-ordinating body, in which there may be different ways action can be taken and where information from the court could be material. There is not as much of a duty to pass that information on under clause 164, but that could be relevant information that is not there for a matter in the future.
I again draw the Minister’s attention to the massive backlog we have in the courts, and the administrative challenges with some of those procedures. The best intentions may not be a reality, and that may then have consequences for the regime we are trying to set up to be as robust, predictable and efficient as possible.
Paul Scully
I take the hon. Lady’s point, but I would say that it has been directly transposed. It is a power not a duty in the Enterprise Act, and that is where we have worked from.
Neil Coyle
There is an alternative. There was a suggestion from trading standards representatives of a take-down power, which would bypass the longer route that adds an administrative burden and places the onus on businesses and individuals. Can the Minister explain or furnish us in writing as to the rationale for not seeking the take-down power and a more immediate means of addressing a problem?
Paul Scully
I or the relevant Minister will certainly write to the hon. Gentleman on that basis.
Question put and agreed to.
Clause 161 accordingly ordered to stand part of the Bill.
Clauses 162 to 164 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Mike Wood.)
Digital Markets, Competition and Consumers Bill (Eleventh sitting)
Thursday 29th June 2023
(1 year ago)
Public Bill CommitteesRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 29 June 2023 - (29 Jun 2023)
The Chair
I have a few reminders. Members should switch all electronic devices to silent. No food or drink is permitted except the water provided. As ever, Hansard colleagues would be grateful for Members’ speaking notes.
Clause 165
Appropriate court
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 166 to 168 stand part.
Clauses 170 and 171 stand part.
The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
It is a pleasure to see you in the Chair, Dame Maria. The clauses restate and update the Enterprise Act 2002. Clause 165 sets out which courts in the UK have jurisdiction to hear and determine applications for consumer protection orders. The globalised nature of modern business means that a trader with UK consumers may well not have a place of business or carry on business in any part of the UK. The clause provides that in those circumstances the relevant consumer’s place of domicile will determine which UK court has jurisdiction.
Clause 166 will extend the effect of consumer protection orders made by a court with jurisdiction in one part of the UK to other parts of the UK, as if the order were made in those other parts. That eliminates any jurisdictional gap within the UK and restates and consolidates relevant sections of the Enterprise Act 2002.
Clause 167 will allow evidence from previous court proceedings to be admitted in evidence for the purpose of proving that infringing conduct has occurred under this part. Convictions in the criminal courts and any relevant findings in the civil courts are admissible to prove that a person has engaged in an infringing practice or has been an accessory to such a practice.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
I wonder whether the Minister could pinpoint where in the Bill’s impact assessment documents the estimates are for the number of cases that the Government expect under this legislation, the average time for a case to be heard and the amount that the Government will be resourcing courts?
Kevin Hollinrake
What a helpful question. I do not have those figures to hand, but I am happy to write to the hon. Member if we cannot find the information for him today. I am grateful for his intervention.
Clause 168 will give the court a discretionary power to make some or all of the requirements of a consumer protection order, including monetary penalties, binding on other members of the interconnected corporate group of the infringer. This power will prevent complex corporate structures from frustrating the ability of enforcement interventions to protect consumers and law-abiding traders. The exercise of the power is subject to two important conditions: first, that the infringing company meets the definition of a member of an interconnected corporate group at the time the order is made or at any time when the order is in force, and secondly that the court may make an order binding on other members of the same corporate group only if it considers it just, reasonable and proportionate. That will require an objective assessment on the facts of each case.
Clause 170 will apply where the court is considering an application for a consumer protection order made in relation to a suspected breach of unfair trading prohibitions. It will empower the court to compel traders to substantiate any factual claim made as part of their commercial practices. The burden of proving the accuracy of claims is on the trader. The clause is crucial to stopping unscrupulous traders making wild promises or getting the enforcer bogged down in disproving claims that should be backed up by evidence.
Clause 171 makes an exception to exempt the Crown from the monetary penalties that the court may impose under chapter 3 when it is engaging as a trader in commercial transactions with consumers.
I commend the clauses to the Committee.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is a pleasure to serve under your chairship today, Dame Maria. I thank the Minister for his opening remarks.
The Opposition recognise that clauses 165 to 167 are technical clauses. Clause 165 will provide the criteria to determine which courts within the UK have jurisdiction to hear and determine applications for consumer protection orders. It provides that where the respondent does not have a place of business in the UK, the appropriate court is where a relevant consumer is domiciled. This is a common-sense clause, and we support its inclusion in the Bill.
Clause 166 will have the effect of enabling a consumer protection order made in a court in England and Wales, Scotland or Northern Ireland to have effect in each of the constituent nations of the UK. This is a technical clause that the Opposition support.
Clause 167 will allow convictions in criminal courts and findings in civil courts to be admitted in evidence for the purpose of proving that infringing conduct has occurred. The explanatory notes confirm that it will still be necessary to prove that the conduct harmed the collective interests of consumers.
We recognise that these technical clauses are important for the implementation and operation of the new consumer protection regime enacted by this part of the Bill. We therefore support their inclusion.
My hon. Friend the Member for Bermondsey and Old Southwark made a point about case numbers and court resourcing. We expect demand on the courts to increase. The last thing that the Minister will want to see is the effective implementation of the regime, or confidence in it, being undermined because the courts cannot take on cases at speed when they might need to do so. I would welcome the Minister’s response on the issue of court capacity, support and resources.
Clause 168 will introduce provisions such that when a court makes a consumer protection order against a corporate body that is or becomes a member of a group of interconnected bodies corporate, the court has a discretionary power to direct that the order is binding upon one or more other members of the same corporate group. Subsection (6) defines two or more bodies corporate as interconnected bodies corporate
“if one of them is a subsidiary of the other, or…if both of them are subsidiaries of the same body corporate.”
Under the clause, a court would be able to make part or all of the order binding on other members of the group where the court considers it just, reasonable and proportionate to do so. The explanatory notes state that when considering whether to extend an order to another group member, the court might take into consideration whether the other member was the brains behind or benefited from the infringement, and whether the extension would help to ensure that financial penalties are paid.
Clause 168 will provide a more robust consumer enforcement regime, helping to prevent companies from restructuring to avoid liabilities and ensuring that significant deterrents are in place to prevent companies from infringing regulations of the new regime. We support the clause.
Clause 169, “Enhanced consumer measures: private designated enforcers”, sets out two conditions that must be met before enhanced consumer measures can be included in an undertaking either given to a private designated enforcer or given through the court via an application from a private enforcer.
The first condition
“is that the private designated enforcer is specified…in regulations made by the Secretary of State”
to act as a private enforcer. In our debates on clauses 143 and 144, I raised questions with the Minister’s colleague the hon. Member for Sutton and Cheam about the process of becoming a private designated enforcer. However, I would welcome further clarification from the Minister of how he envisages the process of a private enforcer working in practice. I am not very clear on whether that is through an application or via the discretion of the Secretary of State; it would be helpful and important to clarify that point to ensure that clause 169 is effective in enabling private designated enforcers, so we can be sure we know who they may be in future, and to include enhanced consumer measures in an undertaking.
The second condition, rightly,
“is that the enhanced consumer measures do not directly benefit the private designated enforcer or an associated undertaking.”
Will the Minister clarify some matters in relation to subsections (7) and (8)? Private designated enforcers must have regard to any relevant advice or guidance given by a primary authority. Could he perhaps illustrate that with an example of a primary authority within the meaning of subsection (7)(a) and a situation in which that may occur, so we are clear about the intentions for how the clause will be used?
Clause 170, “Substantiation of claims”, will enable the court to require evidence from traders to substantiate the factual claims used in their commercial practices with consumers when an application for a consumer protection order has been made against those traders. Under subsection (3), it is for the court to decide whether any evidence provided is adequate. If the court decides that it is not, or if no evidence is produced, the court can determine that the claim is inaccurate. This provision will ensure that the burden of proof regarding the accuracy of claims rests with the trader. In effect, claims must be based on evidence that can be verified by the court.
The explanatory notes specifically mention environmental claims—sometimes referred to as greenwashing—and claims about the health benefits of goods as examples where substantiation of claims may be required. Greenwashing generally refers to claims made about the positive impact of a product or service on the environment that could be seen as misleading or untrue. This is a growing area of concern under competition law. We have not tabled amendments at this point, but it is an important area in this and other legislation.
The Government and the EU have announced proposals to introduce new legal instruments to address alleged greenwashing. Ultimately, legislation to regulate claims that businesses in Europe can make in their consumer communications would come into force, as is already the case in France. A European Commission study in 2020 highlighted that 53.3% of examined environmental claims in the EU were found to be vague, misleading or unfounded, and 40% were unsubstantiated. This policy issue has highlighted the absence of common rules for companies making voluntary green claims, which, in a sense, leads to greenwashing. The uneven playing field in the market is to the disadvantage of genuinely sustainable companies. It also has an impact on how effectively consumers can make their purchase decisions.
EU proposals for the green claims directive outline that before companies communicate any of the covered types of green claims to consumers, any such claims would need to be independently verified and proven with scientific evidence. As part of scientific analysis, companies would identify the environmental impacts that are actually relevant to their products, as well as any possible trade-offs, in order to give a full and accurate picture.
There have been calls to review how comparisons between products and organisations should be made, based on equivalent information and data. There have also been calls to look at regulating environmental labels, outlining the fact that there are over 230 different labels, which, according to evidence, leads to consumer confusion and distrust. The Competition and Markets Authority published the green claims code in September 2021. It has also been investigating the sustainability claims of major household brands, and how products and services claiming to be eco-friendly are marketed.
This is a newer area, and as we move towards achieving our net zero targets it is going to become increasingly important to how the marketplace is defined. It is important to know and be ahead of where consumers might be being misled. Some of the work in the run-up to COP26 and since has been welcome, but we cannot take our foot off the accelerator.
Neil Coyle
I did not intend to speak, but I want to press the Minister on the approach that the Government are choosing to adopt in this group of clauses. What the Bill intends is welcome, as we have heard from witnesses and from elsewhere. Fundamentally, customers want quick redress, and businesses want justice and the removal of counterfeit or fake products that undermine their licences and appropriate trading. The Government’s approach—specifically in these clauses, heading for the courts—ignores the backlog that my hon. Friend the Member for Feltham and Heston has spoken about.
On Tuesday, we heard from the Minister for London that the Government did not have an agreement with Citizens Advice, or funding set aside for Citizens Advice, to support people to take a case through the courts. I was promised some further information that has not arrived yet; I do not know whether it is in the snail mail or the Minister’s crayons ran out or something, but I hope it is coming.
As has been raised this morning, there is no information yet from the Government about their expectations for how many cases will be taken to court, how that will have an impact on the backlog, or what the cost will be to Government or individuals. The reason people will end up at Citizens Advice is that they are seeking legal information; Citizens Advice needs to be resourced to support people and to take cases. In connection with this group of clauses, we are not hearing what the Government intend to do to support cases that need to be taken.
And, of course, it takes time. In the time that someone is going through the process—potentially for months and months—products that are dangerous to individuals might still be online. I am keen to hear from the Minister what will happen in the interim. What is to stop sellers and online marketplaces continuing to retail products that are dangerous to individuals or are counterfeit goods?
We will come to this next week, I think, but there is an alternative: the take-down power suggested by trading standards. With what is out there currently and what the Bill intends, we hear lots of analogies about the wild west, but it all feels a bit as if, instead of getting a Clint Eastwood figure to address the problems, we are getting a Deputy Dawg. Will the Minister say why the Government chose a costly court process—costly to Government and to individuals, as well as more time-consuming—rather than a specific measure that allows for a body already set out in a schedule to require the removal of information on products that are known to be faulty or counterfeit?
Kevin Hollinrake
On resourcing, the hon. Members for Feltham and Heston and for Bermondsey and Old Southwark were both right to mention the courts backlog. If my ministerial colleague, the Under-Secretary of State for Science, Innovation and Technology, the hon. Member for Sutton and Cheam, committed to write to the hon. Gentleman, I am sure that he will do that. It has not come across my desk yet, but there will be no delay when it does, short of ensuring that it answers the hon. Gentleman’s questions.
One thing to say about that, of course, is that the fact that we are putting in place a direct enforcement regime may well ease the pressures on the courts, because the CMA can take action without recourse to them. That should help by ensuring that not all such cases need to go to court.
On private enforcement, and how it would work, it could happen on the basis of an enforcer’s application, or on the Secretary of State’s initiative after consultation with a proposed enforcer. I think that the only private designated enforcer currently is Which?. I hope that that answers the question of the hon. Member for Feltham and Heston.
On the hon. Lady’s points about a primary authority, a primary authority can be a local authority, it could provide information about the business to enforcing authorities and help direct their efforts to improve regulatory efficiencies.
On greenwashing, she is right that the CMA is conducting an investigation into ASOS, Boohoo and Asda. We have the green claims code to try to ensure that there are standards in this area. The Government policy in this area, of course, is that misleading information is already a breach of existing consumer laws. The CMA has issued guidance to help businesses to comply with existing obligations in that green claims code.
The hon. Member for Bermondsey and Old Southwark asked about product safety. Rather than Deputy Dawg, I would use the analogy of Clint Eastwood in “The Good, the Bad and the Ugly”. We are working very hard on this, in terms of product safety. The Office for Product Safety and Standards, which I work very closely with, comes under my remit. It has put a huge amount of time and effort into market surveillance and ensuring that products online are safe.
We have real concerns over whether that is the case, of course, and we recently met with Amazon to discuss that issue. We have also met with eBay, Wish and other platforms to point out their responsibilities. As far as we are concerned, as distributors they have responsibilities to proactively remove unsafe content. As the hon. Gentleman knows—I have said this to him before—we intend to look at that again through the product safety review, which we are about to announce, and that should clarify those responsibilities and ensure that unsafe products do not hit the marketplace in the first place.
I take the points on takedown powers very seriously, and I heard the same evidence from trading standards that the hon. Gentleman heard. We are keen to look at that matter and, again, it might involve another layer of enforcement so that we can then try to prevent those unsafe products from hitting marketplaces across the UK. Trading standards has the capacity to do that for individual websites, but I understand that there are wider concerns regarding other areas of online activity that we are keen to address.
Seema Malhotra
I thank the Minister for his comments relating to the calls from trading standards to strengthen the legislation, which I also support. Could the Minister perhaps clarify a couple of points?
On greenwashing, my point was about how robust our regime will be in making sure that the green claims code, and how that is implemented, will be sufficient to ensure more compliance—either with the code or with any other ways in which we are going to be taking forward legislation on this—so that we do not have to do a lot more by way of enforcement. That would clearly not be the best outcome in the long term for consumers. Having the information up front and ensuring that labelling and other matters are much more robust is better than having challenges later on, with the associated costs of taking things through the courts. My question was more about how this all sits together, and whether the Government have an overall strategy, which I think is quite important.
Finally, on the product safety review, it has been “about to be published shortly” for quite a long time. Is it coming shortly?
Kevin Hollinrake
Yes, it is coming shortly.
Turning to greenwashing, we take the matter very seriously, and there are two ways to deal with it. We can do ex ante regulation, which involves building a huge bureaucracy around a certain system and people checking everything, or we can put in an ex post regulation deterrent regime, which involves a code or set of standards that companies should adhere to, and then an enforcement regime that takes breaches of the code very seriously and applies penalties to organisations that do not meet the standards. The latter is a more efficient and effective way to regulate, and that is the approach we are taking. That should prove a deterrent and prevent people from doing the wrong thing in the first place.
Question put and agreed to.
Clause 165 accordingly ordered to stand part of the Bill.
Clauses 166 to 171 ordered to stand part of the Bill.
Clause 172
Power of CMA to investigate suspected infringements
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss that clauses 173 to 176 stand part.
Kevin Hollinrake
Clauses 172 to 176 set out a range of new enforcement powers for the CMA to determine whether certain consumer laws have been breached and, if so, to direct compliance and impose remedies and penalties. These powers correspond to powers available to the civil courts under chapter 3 of this part of the Bill to make consumer protection orders, but are available in relation to certain consumer protection laws only.
Clause 172 gives power to the CMA to conduct an investigation into suspected infringements under its direct enforcement regime. This acts as a trigger for the use of the CMA’s direct enforcement powers under chapter 4 of part 3. To use its direct enforcement powers, the CMA must have reasonable grounds for suspecting an infringing practice has occurred, is occurring, or is likely to occur.
Clause 173 allows the CMA to issue provisional infringement notices to enforcement subjects. It provides that enforcement subjects have a right to know the claims against them and be given an opportunity to make representations in a meaningful manner before a final decision is taken by the CMA. That ensures that the direct enforcement process is fair, with appropriate safeguards to protect the legitimate rights of the enforcement subject.
Clause 174 is fundamental to the direct enforcement regime and gives the CMA a discretionary power to issue a final infringement notice. To do so, the CMA must be satisfied that the infringing conduct has occurred, is occurring or is likely to occur. As well as giving directions to prevent or stop infringing practices or require enhanced consumer measures, a final infringement order may impose monetary penalties. That may be up to £300,000 or, if it is higher, 10% of the subject’s total turnover, in relation to past or ongoing infringing conduct.
Clause 175 empowers the CMA to include enhanced consumer measures as part of a final infringement notice if it considers them to be just, reasonable and proportionate.
Clause 176 empowers the CMA to issue an online interface notice to avoid the risk of serious harm to the collective interest of consumers. To exercise that power, the CMA needs to be satisfied that no other tools under the direct enforcement regime, nor the court’s power to make interim online interface orders, would be wholly effective.
An online interface notice may be given to the infringer or to any relevant third party. For example, an online interface notice may require a third party to remove, modify or restrict access to content that can be found on an online interface, such as a website. An online interface notice may be given to an overseas third party if the third party satisfies the UK connection test at subsection (3)(c). This clause therefore takes into account the global nature of online commerce, but does not give the CMA unfettered extraterritorial jurisdiction. I hope hon. Members will agree that it is appropriate that this provision has cross-border reach to websites, platforms and applications that direct their business activities to consumers in the United Kingdom.
Seema Malhotra
Clause 172 introduces provisions empowering the CMA to begin an investigation where it has reasonable grounds for expecting that a person has engaged, is engaging or is likely to engage in a commercial practice that would be considered a relevant infringement. That power acts as a trigger for the use of the CMA’s direct enforcement powers. Under subsection (3), the CMA would be able to publish a notice of investigations setting out what and whom it is investigating and indicating the investigation timetable. If, after giving such a notice, the CMA decides to close the investigation, it would be required to publish a notice of termination.
The clause is welcome. It is a vital part of the new consumer protection regime, and we need to ensure is properly enforced. While I am glad the provisions are being introduced, I note again that it will be a long time before they are in operation. It is not until 2025 that some of the provisions come into force.
It does not appear that publishing of the notice of investigation would be mandatory in all cases. Are there any times or examples of when a notice should not be published? If so, could the Minister share those with the Committee?
Under clause 173, the CMA would be empowered to give an enforcement subject a provisional infringement notice where the CMA has started an investigation under clause 172, which continues. The provisional infringement notice would need to contain certain information, including the grounds on which it is given and the enforcement subject’s acts or omissions that give rise to the CMA belief that there has been an infringement. It must also include the CMA’s proposed directions specifying the conduct required to ensure compliance. If the proposed directions include enhanced consumer measures considered by the CMA to be just, reasonable and proportionate, the notice will also need to state that and include details of those measures.
The notice must also include the process for the enforcement subject to make representations to the CMA about the notice, including the means by which and the time by which representations must be made by the enforcement subject. That must also include a hearing if the enforcement subject decides to make an oral representation and, if the CMA is considering monetary penalties, the detail of that penalty.
This is an important clause in enabling co-operation through the enforcement regime, but I would welcome clarification in a few areas. Subsection (3) sets out how the CMA may give the respondent a notice. Are there any scenarios in which the CMA will not need to give the respondent an infringement notice? If not, is this intended to be a power rather than a duty?
Subsection (4) states that the infringement notice must specify the time by which representations must be made. Does the Minister have in mind an expected time range for those representations to be made? I am sure that there is an intention that this all happens as quickly as possible, but there is no specification or guidance as to what some of the timelines might be. It would be helpful to understand the Minister’s intentions on that further.
Clause 174 grants the CMA a discretionary power to issue a final infringement notice to the enforcement subject. In deciding whether to issue a final infringement notice, the CMA will be required, under the clause, to consider whether an undertaking has been given and, if so, whether the enforcement subject has complied with its terms. A final infringement notice may impose on the enforcement subject a requirement to comply with such directions as the CMA considers appropriate to rectify an infringement and achieve compliance, and/or a requirement to pay a monetary penalty. Subsection (6) sets out that the monetary penalty must be a fixed amount not exceeding £300,000—I think that was described in earlier discussions as the middle of the pack—or, if higher, 10% of the total value of the enforcement subject’s turnover.
Under subsection (8), a final infringement notice could require the enforcement subject to publish the notice and a corrective statement. I ask the Minister—again, in the interests of transparency—why this subsection says “may require” rather than “will require”. I ask in the interests of consistency and transparency for consumers, so I would be grateful for the Minister’s response.
Clause 175 empowers the CMA to include in a final infringement notice enhanced consumer measures that it considers to be just, reasonable and proportionate. This clause is welcomed by the Opposition as an important part of the consumer protection regime.
Under clause 176, the CMA will be able to issue an online interface notice to any person whom the CMA believes has engaged, is engaging or is likely to engage in a relevant infringement. This includes third parties with a connection to the UK—for example, UK nationals and residents, UK-established businesses, and businesses carrying on business in the UK or targeting UK consumers. The purpose of this notice would be to prevent serious harm to consumers where there has been or is likely to be an infringing practice. In effect, the notice would force the infringer or any third party to take down content that is harmful to consumers. Subsection (4) sets out what the directions could include: removing content from, or modifying content on, an online interface; disabling or restricting access to an online interface; displaying a warning to consumers accessing an online interface; and deleting a fully qualified domain name.
Use of those powers has been described as a last resort. Will the Minister clarify whether this would therefore be after a period of notices and whether there is a timeline in which it might be undertaken? If a business was not responsive, would the Minister expect relatively quick use of the powers in order to protect consumers and to deter any further consumer detriment? Also, is it the Minister’s intention that the powers are just for the CMA? Considering some of the discussion that we have been having in relation to trading standards, I wonder whether use of the powers may be open in the future to other enforcers.
Kevin Hollinrake
In terms of publication of a notice, I think that that is a judgment for the CMA. There may be public interest in making a notice public—for example, to inform traders or consumers about practices of concern. Why would it not publish a notice? Well, it might be, for example, that that might prejudice the CMA’s investigation, which is clearly not something that we would want to happen.
The hon. Lady asked about the timescale for response. That will be something that the CMA consults on, in terms of how the process will happen, and stakeholders will be able to input into that consultation. However, we expect clear timelines to be set for responses.
Why would the CMA not give an infringement notice? Well, it might be that it decides, for example, that another enforcer might be better placed to take forward enforcement in that area. Circumstances will vary widely from case to case, and the CMA will be the best judge of whether publication is desirable in any given situation.
What about other consumer enforcers? We believe that the CMA has a leading and co-ordinating role in both the public enforcement of consumer law and in tackling market-wide practices that hinder consumer choice. The new direct enforcement model will enable the CMA to act faster and take on more cases on behalf of the public, resulting in an estimated further tens of millions—or potentially hundreds of millions—of pounds of direct benefit to consumers. Improving the speed and responsiveness of the CMA’s interventions has the greatest potential to safeguard the wider interests of consumers right across the economy.
Question put and agreed to.
Clause 172 accordingly ordered to stand part of the Bill.
Clauses 173 to 176 ordered to stand part of the Bill.
Clause 177
Undertakings
Kevin Hollinrake
I beg to move amendment 60, in clause 177, page 118, line 12, at end insert—
“(2A) Subsections (1) to (6) of section 156 (inclusion of enhanced consumer measures in undertakings) apply to an undertaking under this section as they apply to an undertaking under section 155(2).”
This amendment ensures that requirements imposed by undertakings given under clause 177 may include the taking of enhanced consumer measures (as defined by clause 213).
The Chair
With this it will be convenient to discuss the following:
Clauses 177 to 180 stand part.
Government amendment 61.
Clauses 181 and 182 stand part.
Kevin Hollinrake
Government amendments 60 and 61, and clauses 177 to 182, govern the acceptance and enforcement of undertakings by the CMA under its direct enforcement regime. Clause 177 provides a framework for the CMA to accept an undertaking as an alternative to giving a final infringement notice or online interface notice. The CMA may not accept undertakings unless they include provisions that effectively stop the conduct of concern. The more co-operative nature of the undertakings procedure can lead to faster resolution of consumer protection concerns and shorten the enforcement process.
Government amendment 60 adds a provision to clause 177 empowering the CMA to include enhanced consumer measures—or ECMs—in undertakings that it accepts under its direct enforcement powers. The power to add ECMs to undertakings is available to the CMA, and other enforcers in the court-based regime, under clauses 155(3) and 156 of the Bill. The inclusion of ECMs in undertakings has been a valuable part of the toolkit available under the court-based regime. The amendment makes it expressly clear that the power already available in the court-based regime is also available to the CMA under its direct enforcement powers under chapter 4 of part 3.
Clause 178 prevents the CMA, once it accepts an undertaking under clause 177, from giving a final infringement notice or an online interface notice to the same enforcement subject in relation to the same matter. The CMA can still give those notices if they relate to matters or persons not addressed in the undertaking, if circumstances have materially changed since the undertaking was accepted, or if the CMA suspects the undertaking has been breached or was based on false or misleading information.
Clause 179 sets out the process that the CMA must follow to make a material variation or to release a person from an undertaking once it has been accepted. The clause is important for procedural fairness, and ensures that the CMA cannot significantly modify or release persons from undertakings without giving notice to the other party and considering their views. Clause 180 allows the CMA to start a process to enforce compliance if it has reasonable grounds to believe that a person has breached at least one term of an undertaking. As with the majority of the CMA’s direct enforcement powers under this part, any assertion or sanctions for wrongdoing must be preceded by a provisional notice. That includes, for example, proposed directions and proposed penalties, and an invitation to make representations.
Neil Coyle
Within clause 181 there is the option for someone who is potentially identified as selling rogue or dangerous products to use a reasonable excuse. Can the Minister better define what a reasonable excuse might be? Companies and individuals could choose to prolong the timeframe involved in order to sell more goods that are hooky while the process is followed.
Kevin Hollinrake
As I said earlier, there are measures to ensure that any representations are given earnestly. A reasonable excuse might be that the trader was not aware of some of the difficulties surrounding the product. There may be various circumstances. When implementing and enforcing legislation, we always try to ensure that the CMA can apply discretion in different circumstances where an honest mistake has occurred.
Neil Coyle
To be clear, I am not looking for a list of what companies or individuals might use as an excuse for selling dangerous goods; I wondered whether the Minister would set out the timeframe, as the clause, and associated clauses, are not clear about how long companies and individuals get to provide information or remove dangerous products. What is there to prevent someone from saying, for example, “We have this product on our online marketplace, but it is manufactured in another country. We have been trying to contact the manufacturer, and it has taken some time to identify the specific individual.”? In that time, of course, the individual could have sold more counterfeit and dangerous goods, or have changed their email and other addresses in order to avoid the removal of their products online.
Kevin Hollinrake
We are now getting into the weeds of this. We have similar views about online marketplaces and their responsibilities. In our view, their responsibility as a distributor requires them to ensure that products are safe before they are placed on the marketplace in the first place. There should be no excuse for a distributor not checking the validity of a standards marking, for example. That is a responsibility that I have discussed with various platforms. We want to get to the position where products are verified before they enter the marketplace, through checks and balances. Rather than working reactively, platforms should work proactively in such instances, but part of that crosses over into work that we are doing in the product safety review, which we have discussed previously and will, I am sure, discuss again.
If the CMA is satisfied that a breach occurred without a reasonable excuse it can impose a penalty. That ensures that there are meaningful consequences to breaching an undertaking, to deter unscrupulous traders. Clause 182 states the types of penalties and the maximum penalty amounts that can be imposed by the CMA through a final breach of undertakings enforcement notice. The penalty imposed can be the higher of a fixed amount up to £150,000 or 5% of total turnover. A daily rate penalty can be up to £15,000 or 5% of the total value of the daily turnover, whichever is higher, accruing over the days in which non-compliance continues. Both a fixed amount and a daily rate penalty may be imposed, but they must not exceed the fixed amounts that I have just referenced. I hope that hon. Members will support Government amendment 60, and clauses 177 to 182 standing part of the Bill.
Seema Malhotra
The Opposition support the inclusion of clause 177. We welcome any measures that enable co-operation between enforcement bodies and subjects. I will, however, ask the Minister about timescales. The legislation as it stands contains little in the way of specifying timescales. The Minister might tell me again that this might be relevant for the consultation that the CMA undertakes on the process, but I think this will end up being relevant also for the resources that are in place, the expectations of how quickly all the procedures will be able to operate, and certainly how long it could take during the course of an initial infringement notice and a final infringement notice to reach an undertaking.
Although the inclusion of these provisions is necessary to make the regime a co-operative one, it is important that their inclusion in the Bill does not lead to unnecessary delay by enforcement subjects who might have no genuine intention to reach a commitment with the CMA. I would welcome the Minister explaining how he believes that will operate effectively.
Government amendment 60 ensures that the requirements imposed by undertakings given under clause 177 may include the taking of enhanced consumer measures, as defined by clause 213. We welcome this amendment, which should bring further consistency in the enforcement regime.
Clause 178 is consequential on clause 177. It prevents the CMA, once it has accepted an undertaking under clause 177, from giving a final infringement notice or an online interface notice to the same enforcement subject in relation to the same matter. The explanatory notes explain that the underlying policy intent is that undertakings are an alternative to final infringement or online interface notices and therefore the effect is that a person cannot be subjected to multiple enforcement resolutions of the same matter. Subsection (3) provides the necessary flexibility for the CMA. The CMA can still give a final infringement notice or an online interface notice to the extent that it deals with different matters from the undertaking. We welcome the clause.
Clause 179 sets out the process to be followed when the CMA needs to change or end an undertaking. Where the CMA proposes to accept a material variation of an undertaking or to discharge an undertaking, under this clause the CMA would be required to first give notice to the enforcement subject. If, after considering any representations made in accordance with the notice the CMA decides to take the proposed action, it would have to give further notice to the enforcement subject of that decision. We think this is an important clause.
Under clause 180, the CMA would be able to give a provisional breach of the undertakings enforcement notice where it has reasonable grounds to believe that the enforcement subject has failed to comply with one or more of the terms of the undertaking. It also sets out what the provisional breach of an enforcement notice must include. We welcome this clause as an important provision. It is important for the CMA to be clear on its intentions, for the enforcement subject to have no means of saying it was a misunderstanding, and for transparency for consumers.
Clause 181 introduces provisions enabling the CMA to issue a final breach of undertakings enforcement notice in circumstances where the deadline for the enforcement subject to make representations to the CMA in accordance with the first notice has expired, and if, after considering representations, the CMA is satisfied that the enforcement subject has committed an infringement. The clause also lists what must be included in the enforcement notice.
Subsection (4) lays out the threshold for a monetary penalty. It states that the penalty
“may be imposed only if the CMA is satisfied that the failure in question is without reasonable excuse.”
Like my hon. Friend the Member for Bermondsey and Old Southwark, I want the Minister to expand on the word “reasonable”. Will further definition be required? Does he think there will be some case law or further guidance? This is an important matter, because it can lead to questions about whether the CMA’s interpretation of “reasonable” is reasonable. We do not want to go down that route; we want a clear regime that provides less wriggle room for enforcement subjects that have no intention of complying and will use any excuse not to do so. I hope the Minister will look at that further and will give the House confidence that the apparent vagueness of the term will not enable companies that are in breach of their undertaking to escape the monetary penalties that, under the regime, they ought to pay.
Government amendment 61 requires that the information contained in a final breach of undertakings enforcement notice includes information about rights of appeal. We welcome it as a common-sense addition to what must be included in the final breach notice.
Clause 182 sets out the maximum monetary penalty that can be imposed for a breach of undertakings notice under clause 181. It amounts to a fixed amount of £150,000 or, if higher, 5% of the total value of the enforcement subject’s turnover. In the case of a daily rate, it is £15,000 or, if higher, 5% of the total value of the daily turnover of the enforcement subject. We have debated that previously. I assume that that amount relates to this being an enforcement penalty. Will the CMA continue to be the only body that has such fining powers? Will other enforcers, such as trading standards, be able to pursue penalties only through other routes? I would appreciate clarification from the Minister on that.
Kevin Hollinrake
The Opposition make a reasonable point about the reasonable excuse. We have left the threshold pretty broad to reflect the range of situations that could prevent compliance. We feel that a closed list on the face of the Bill would bind the CMA’s hands and make the measure less effective. As hon. Members know, the Bill requires the CMA, in the guidance on exercising its direct enforcement functions that it produces under clause 205, to provide information about the factors it takes into account in determining whether a reasonable excuse exists, and that will include examples.
The hon. Lady asked how soon after a provisional notice the CMA will issue a final breach of undertakings enforcement notice. She pre-empted my response to that: it will, again, be subject to consultation. Of course, it is at the discretion of the CMA. The CMA will set out its approach to determining the period within which representations have to be made in forthcoming guidance, preceded by the public consultation.
Seema Malhotra
I will take what the Minister said on reasonableness, and we will have a look at it. We may return to this matter, in order to ensure that there is not a gap between what an enforcement subject could argue and what the CMA intends, but I thank him for his response.
Kevin Hollinrake
It is perfectly reasonable that we have that debate, but we will do so we when we discuss clause 205. It is right that the Opposition challenge us and the CMA to ensure that the guidance is clear, and covers all bases.
Amendment 60 agreed to.
Clause 177, as amended, ordered to stand part of the Bill.
Clauses 178 to 180 ordered to stand part of the Bill.
Clause 181
Final breach of undertakings enforcement notice
Amendment made: 61, in clause 181, page 121, line 28, at end insert—
“(e) state that the respondent has a right to appeal against the notice and the main details of that right (so far as not stated in accordance with paragraph (d)).”—(Kevin Hollinrake.)
This amendment requires that the information contained in a final breach of undertakings enforcement notice includes information about rights of appeal.
Clause 181, as amended, ordered to stand part of the Bill.
Clause 182 ordered to stand part of the Bill.
Clause 183
Provisional breach of directions enforcement notice
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss that clauses 184 to 188 stand part.
Kevin Hollinrake
Clauses 183 to 188 principally deal with the enforcement of directions imposed by the CMA in its final infringement notices, online interface notices, and final breach of undertakings enforcement notices. Clause 183 empowers the CMA to enforce compliance with enforcement directions by giving a provisional breach of directions enforcement notice. That allows the enforcement subject to know the case against them and to make representations.
Clause 184 allows the CMA to give a final breach of directions enforcement notice, if it is satisfied that a direction has been fully or partially breached without a reasonable excuse. The notice must follow a provisional breach of directions enforcement notice and can be given only after the period to make representations has expired and the CMA has considered any representations received. Given the seriousness of the situation and the late stage in the process of enforcing compliance with consumer protection law, the Bill sets out that the CMA will impose a monetary penalty each time it gives a final notice under the clause.
Clause 185 provides for the types of penalties and the maximum penalty amounts that can be imposed by the CMA through a final breach of directions enforcement notice. The total penalty amount can be a fixed amount up to £150,000 or 5% of total turnover, whichever is higher. It can also be a daily rate penalty up to £15,000 or 5% of the total value of the daily turnover, whichever is higher, and accruing over the days while non-compliance continues. It can also be a combination of both, but that must not exceed the maximum penalty amounts in both separate cases.
Clause 186 gives the CMA an alternative means of enforcing compliance with directions given in final infringement notices, online interface notices and final breach of undertakings enforcement notices by enabling applications to court for an order to require compliance. It also provides a backstop power for the CMA to apply for a court order where it considers a person has failed to comply with a direction given in a final breach of directions enforcement notice.
Clause 187 gives the CMA the power to require evidence from the enforcement subject to substantiate factual claims made as part of its commercial practices under investigation. This applies where the CMA gives a provisional notice concerning a suspected breach of the unfair trading prohibitions in chapter 1 of part 4 of the Bill. By placing the burden of proving the accuracy of claims on the trader, the clause is crucial in stopping unscrupulous traders from spreading wild promises or getting the CMA bogged down in disproving claims that should be backed up by evidence.
Clause 188 sets out the process that the CMA must follow for proposing to materially vary or revoke any directions. The clause gives flexibility to the CMA to direct compliance while requiring it to provide a sufficient notice period and clear information to guarantee fairness to the person involved.
Seema Malhotra
Clause 183, in conjunction with clause 184, sets out the CMA’s powers to enforce compliance with enforcement directions. It introduces provisions enabling the CMA to issue a provisional breach of directions enforcement notice where it has reasonable grounds to believe that the enforcement subject has without reasonable excuse failed to comply with the direction. We support the clause.
Under clause 184, the CMA would be able issue a final breach of directions enforcement notice requiring the payment of a monetary penalty upon completion of the process laid out in the clause. We support this clause. Clause 185 is consequential on clause 184 and sets out the maximum monetary penalty that the CMA may impose for a breach under clause 184. Again, we support the clause.
Clause 186 provides the CMA with the power to apply to an appropriate court when a person or company has failed to comply with a direction given under clause 184. Under the clause, the CMA would be able to apply to the court for an enforcement order, an interim enforcement order, an online interface order or an interim online interface order. That would enable the court to act in respect of any practice or conduct that would amount to a “relevant infringement” by making a consumer protection order in addition to or instead of making an order in respect of the breach of directions. We welcome this clause, as it provides a necessary backstop for the CMA to enforce its judgments and penalties.
Clause 187 would enable the CMA to require evidence from traders substantiating the factual claims used in their commercial practices with consumers, which are at issue in a provisional notice involving alleged contravention of the new consumer protection regime. Where the CMA has issued a provisional notice to an enforcement subject and the enforcement subject makes representations to the CMA in response to that notice, the CMA may require the enforcement subject to provide evidence as to the accuracy of any claim made. For the reasons that we debated earlier, we welcome this clause and this power as they will enable the CMA to carry out its functions more effectively on behalf of consumers.
Clause 188 introduces provisions enabling the CMA to make a material variation of, or to revoke, directions that it has given under other clauses as specified. We support the inclusion of clause 188 in the Bill. I hope that what the clause provides for will be able to be done at speed and that we do not see any delays in the use of these powers where needed.
Question put and agreed to.
Clause 183 accordingly ordered to stand part of the Bill.
Clauses 184 to 188 ordered to stand part of the Bill.
Clause 189
Provisional false information enforcement notice
Question proposed, That the clause stand part of the Bill.
Kevin Hollinrake
I notice that England just bowled Australia out, which is very good news.
Kevin Hollinrake
Of course—sorry, Dame Maria.
Clauses 189 and 190 empower the CMA to give a provisional false information enforcement notice, followed by a final notice imposing a monetary penalty of up to £30,000 or, if higher, 1% of total turnover. They allow the CMA to enforce against, and penalise, the provision of materially false or misleading information to the CMA without reasonable excuse.
Seema Malhotra
Clause 189 introduces provisions granting the CMA a discretionary power to issue a provisional false information enforcement notice if it has reasonable grounds to believe that a person has provided to the CMA materially false or misleading information. It also lists what would be included in this enforcement notice. It would obviously be a really serious matter if false or misleading information was provided to the CMA. We therefore support this clause.
Clause 190 enables the CMA to issue a final false information enforcement notice. This clause is consequent on clause 189 and we therefore welcome its inclusion in the Bill. Clause 190(4) sets out the maximum monetary penalty for a false information infringement. It is important that there is a sufficient deterrent and also the ability for significant enforcement where it is found that false information has been provided to the CMA and that has been proven.
Question put and agreed to.
Clause 189 accordingly ordered to stand part of the Bill.
Clause 190 ordered to stand part of the Bill.
Clause 191
Statement of policy in relation to monetary penalties
Question proposed, That the clause stand part of the Bill.
Kevin Hollinrake
Clauses 191 to 194 cover appeal rights and other requirements for the CMA that will ensure that it exercises its direct enforcement powers proportionately and transparently. I will also discuss clauses 195 to 199, which make supplementary provision for the monetary penalties imposable by the CMA and the civil courts under part 3 of the Bill.
Clause 191 requires the CMA to produce and publish a statement of policy relating to its exercise of powers to impose monetary penalties. The statement of policy must cover the considerations relevant to whether to impose a penalty and the nature and amount of the penalty. When preparing or revising that statement, the CMA must consult the Secretary of State and other relevant stakeholders. The statement, or its revised form, cannot be published without the Secretary of State’s approval. Finally, the CMA will be required to have regard to the most recent published statement approved by the Secretary of State when deciding whether to impose penalties under this chapter, as well as deciding the penalty’s nature and amount.
Seema Malhotra
Clause 191 requires the CMA to produce and publish a statement of policy regarding its powers to impose monetary penalties under this part. When the CMA decides on a penalty, it must take into account the statement. The Opposition strongly welcome the clause because it greatly increases the transparency of the monetary penalty system. It should ensure that there is clarity around the regime, thereby increasing its legitimacy. I would be grateful if the Minister will comment on the timeframe to which he expects the statement of policy to be published, whether it will follow a period of consultation, and where it will be published. Will it be publicly available, and will it be laid before this House?
Clause 192 introduces provisions giving the CMA a discretionary power to make the requirements of a final enforcement notice binding upon one or more members of the same interconnected corporate group, where the CMA considers it just, reasonable and proportionate to do so. We welcome that common-sense addition to the Bill. Clause 193 on record-keeping and reporting requirements introduces important transparency into the enforcement process. As such, we welcome its inclusion. It requires the CMA to keep a record of the undertakings that it has accepted, the enforcement directions that it has given, and reviews that it has carried out in relation to the effectiveness of such undertakings and directions.
Subsection (2) introduces provisions requiring the CMA to prepare a report for the Secretary of State on the effectiveness of undertakings and enforcement directions, and the number and outcome of appeals under clause 194. That again is important because it will enable the Government to continue to monitor the effectiveness of the new regime after Royal Assent. The question is whether it goes far enough. We have not tabled amendments to the clause. It is important to begin a discussion, which we will continue as we consider further parts of the Bill, about the reporting, and the transparency of how the measures are used in the CMA’s operations in practice.
Subsection (2) states:
“If requested to do so by the Secretary of State, the CMA must prepare a report on…the effectiveness of undertakings and…the number and outcome of appeals brought under section 194”,
yet we do not know what the Secretary of State might intend in relation to that. The wording implies that the report is not a duty on the CMA, but that the CMA has a duty to keep the information. If somebody deems that information to be in the public interest, or parliamentarians want to know what is happening under the regime, would they be required to undertake freedom of information requests? That does not seem appropriate. If the CMA collects that information, it ought to prepare a report to which Parliament has access.
It would be helpful for the Minister to inform the Committee what the Government intend in terms of report requests by the Secretary of State, and what information he would expect the CMA to share in relation to the regime, and the operation of some of the powers in the Bill. Does he agree that it would be in Parliament’s interest to have sight of that information? I would be grateful for his response on whether clause 193(2) should go further.
Clause 194 introduces provisions that would ensure that all appeals of CMA first-instance direct enforcement decisions are heard by the court. Under the clause, a person may appeal against a decision to impose a monetary penalty, the nature or amount of any such penalty and the giving of directions. We welcome the principle of the clause in allowing for a right of appeal. Again, we have questions on a timeframe for that and whether it will be part of the CMA’s consultations, as the Minister has alluded to, in relation to some of the operations of the regime.
Clause 195 sets out the information that must be included in an order made by the court, or a final notice given by the CMA, that includes a requirement to pay a monetary penalty. The information includes the amount of the penalty, the grounds of the penalty, details such as when it is to be paid and so on. Subsections (3) and (4) additionally set a time limit of 14 days from when the order is imposed for enforcement subjects to apply to change the date or dates by which the penalty must be paid. We welcome the inclusion of the clause in the Bill.
Clause 196 introduces a definition of turnover into the bill for the purpose of calculating a penalty based on turnover. This appears to be a technical clause, specifically in the inclusion of turnover both in and outside the United Kingdom in applying the definition. Subsections (3) and (4) grant the Secretary of State delegated powers to make further regulations on how a person is to be treated as controlled by another person, and to make provision for determining the turnover of a person for the purposes of this part. I must ask the Minister: why is it that these further regulations have been left to secondary legislation and are not on the face of the Bill? I would be grateful if he could confirm and explain that, and also clarify why these powers are subject to the negative procedure rather than the affirmative. We have not sought to amend the clause, but we want to understand the reasons behind it so that we are confident that it should go forward unamended.
Clause 197 introduces a delegated power to the Secretary of State to make regulations to amend the maximum fixed penalties and daily penalties in this part. The regulations will be laid subject to the affirmative procedure, which we welcome. The explanatory notes state:
“The effect would be that any updated amounts specified by the Secretary of State will offset the erosion of the real value of the fixed maxima through inflation.”
That is important, particularly in the current context of spiralling inflation after the disastrous economic management of successive Governments over the last 13 years. Can the Minister provide any clarification on how regularly the amendments will be made? Will it be yearly, or more or less frequently? I would be grateful for the Minister’s confirmation of that, so that it is clear for the House and the CMA.
Under clause 198, “Recovery of monetary penalties”, when the deadline for an enforcement subject to make an appeal against a monetary penalty has expired, or when an appeal has been made and rejected, the CMA would be able to commence proceedings to recover the penalty and any unpaid interest as a civil debt. We welcome the clause and its detail as a necessary element of a new, more robust regime.
Clause 199 introduces provisions setting out further details regarding the payment of monetary penalties. It provides for interest at the statutory rate to be incurred on the balance if the penalty imposed is not paid by the deadline. In addition, it sets out how the penalty is not payable while an appeal application is ongoing. We welcome the clause, but I seek some assurance from the Minister that appeal applications will have a timeline, and will not lead to lengthy, protracted processes, and payments going unpaid because of them.
Kevin Hollinrake
I fear that I may have missed one or two of the hon. Lady’s points, but I think I got most of them. Guidance under clause 191 will be publicly consulted on, giving those potentially affected by it an opportunity to comment directly. That consultation will happen post Royal Assent, and when finalised it will be published on the CMA’s website. On the Secretary of State requesting reports, clearly we do not know what we do not know. The Secretary of State has flexibility on when they might consider that a report is required under clause 193. The CMA already publishes regular impact assessments and other public reports, including its annual report to Parliament, and scrutiny will continue by traditional means, such as through Select Committees.
Seema Malhotra
The Minister will know that so much has gone to the Business and Trade Committee that there will be great concern about how frequently, and in what level of detail, it will be able to scrutinise all the work done under the regime. It will be a pretty tall order to do that job. I have a question for the Minister that I think is important. We have heard in previous debates about the frequency of reporting and what would be in the CMA’s report for all the new regimes and units that it will undertake. We obviously do not want to overload the CMA with unnecessary reporting, but there should be an expectation about what might be in the annual report, and there should be clarity on what the Secretary of State might expect in a report on the new regime.
Surely Ministers will want to have confidence in what is happening under the regime, and to have some data reported to them if the CMA is collecting it. Will the Secretary of State expect a, perhaps annual, report on the new regime, perhaps for a few years, to know whether it is operating effectively? Secondly, will clause 193(2) give the Secretary of State the ability to request additional or more detailed reports if there are concerns about aspects of the regime’s implementation? I understand the power to ask for more reports, but not having any report requested through the course of the implementation of the operations strikes me as a serious gap, particularly—
Kevin Hollinrake
I thought that perhaps I had to intervene on the hon. Lady.
Seema Malhotra
Particularly in relation to the early implementation of the regime—I was on my last sentence.
Kevin Hollinrake
That was a very comprehensive intervention. I think that we are saying the same thing. Of course the CMA will continue to report annually, and of course we would expect it to report on the new powers that it has been granted through the Bill. In addition to that, the Bill gives the Secretary of State the power to request additional reports as he or she sees fit. We think that that achieves an appropriate balance. We do not think that it is right to get in the way of the CMA doing its job by obliging it to report on a more frequent basis. Of course, as part of my role, or my successor’s role if I move from this position back to the Back Benches or wherever, we regularly have meetings with the CMA to discuss its activities and where it is using its powers. Indeed, we write an annual letter to the CMA, which sets out where we expect its focus to lie.
The hon. Lady asked a fair question about the appeals timelines. They will not be consulted on, but they will be subject to the civil procedure rules, and relevant rules in other UK jurisdictions. The civil procedure rules will be amended as part of the implementation of the provisions through the Civil Procedure Rule Committee in the usual way. Of course, we will want appeals to take place as expeditiously as possible, provided that they are fair.
Question put and agreed to.
Clause 191 accordingly ordered to stand part of the Bill.
Clauses 192 to 199 ordered to stand part of the Bill.
Clause 200
Investigatory powers of enforcers
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss that schedule 15 be the Fifteenth schedule to the Bill.
Kevin Hollinrake
Clause 200 introduces schedule 15 to the Bill, which contains amendments to schedule 5 to the Consumer Rights Act 2015, relating to the investigatory powers of consumer protection enforcers. Schedule 15 amends provisions in schedule 5 to the Consumer Rights Act to ensure the enforceability of statutory information notices given to a person under paragraph 14 of schedule 5.
The amendments made through schedule 15 come in two parts. First, we are providing the courts with a new power to impose a civil monetary penalty where the court finds there has been non-compliance, without reasonable excuse, with an information notice given by any consumer enforcer. Secondly, we are providing a new direct enforcement power for the CMA to decide whether an enforcement notice it has issued has been complied with and, if not, to impose a civil monetary penalty for any non-compliance without reasonable excuse.
The schedule also sets out the extraterritorial reach of enforcers’ power to request information by notice. We are legislating to ensure that enforcers can obtain all the necessary information from parties in and outside the UK to inform their analysis and ascertain breaches of the law, subject to certain conditions. The schedule also ensures that a warrant may be granted in relation to material that may be remotely stored in the cloud but still be accessible from the premises. I hope hon. Members agree that the schedule completes the largely successful modernisation of the investigatory powers of consumer law enforcers made by the Consumer Rights Act in 2015.
Seema Malhotra
Clause 200 introduces schedule 15 to the Bill, which amends schedule 5 of the Consumer Rights Act 2015, which in turn details the information-gathering powers available to consumer enforcers for the purposes of civil enforcement of consumer protection law. We support the clause, but I will make a few more remarks on schedule 15.
Schedule 15 makes limited amendments to schedule 5 of the Consumer Rights Act 2015 so that an enforcement notice would have to specify the circumstances in which non-compliance with the enforcement notice could result in a financial penalty. The amendments would apply where an enforcer has given an information notice to a person and the enforcer considers that the respondent has, without reasonable excuse, failed to comply with the notice. In such circumstances, the enforcer would be able to make an application to the court.
The Opposition welcome the schedule, but there are questions related to those we have asked in relation to other clauses, specifically around the absence in the Bill of the updating of trading standards authorities’ powers for the digital economy and the 21st century. That is important. We have raised before the ability for trading standards to obtain information online and so on. Can the Minister have a look at that in more detail? In the course of further clauses next week, we may come on to some other amendments as well, but I would be grateful for the Minister’s response.
Kevin Hollinrake
It is our contention that trading standards do have the powers that they need to access information. There are concerns; I have concerns—I want to ensure that trading standards have sufficient powers in terms of take-down powers. That is something that we are looking at and, as the hon. Lady says, is probably something that we will discuss as the Bill proceeds.
Question put and agreed to.
Clause 200 accordingly ordered to stand part of the Bill.
Schedule 15 agreed to.
Clause 201 ordered to stand part of the Bill.
Clause 202
Notices under this Part
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 203 to 207 stand part.
Government amendments 62 to 64.
That schedule 16 be the Sixteenth schedule to the Bill.
Clause 208 stand part.
Government amendment 65.
That schedule 17 be the Seventeenth schedule to the Bill.
Clauses 209 to 215 stand part.
Kevin Hollinrake
Clause 202 provides for the practicalities of giving notices. It sets out the permissible means for the CMA and other enforcers to give a notice: by delivering it to the person; by leaving it at the person’s address; by post; or by email.
Clause 203 empowers the CMA to make rules about procedural and other matters in connection with its direct enforcement functions. This clause expressly permits the CMA to delegate decision making for its direct enforcement functions to its board, panel and/or staff. The clause provides the CMA with a vital tool with which it can establish the technical details of a robust and predictable direct enforcement process that will achieve the stronger enforcement that we need without compromising fair process or certainty for traders.
Clause 204 requires that the CMA’s rules must be publicly consulted on, and given the approval of the Secretary of State through regulations, before coming into force. Public consultation will ensure that the views of all stakeholders, including consumer groups and traders, are adequately considered as rules are prepared. The Secretary of State also has the ongoing power to vary or revoke rules, which will ensure that the wider needs of the economy continue to be reflected in the operation of the direct enforcement regime. This clause ensures that the CMA’s discretion to make technical rules governing its direct enforcement functions is exercised in a balanced way that serves the needs of the economy.
Clause 205 requires the CMA to prepare and publish guidance about its general approach to the carrying out of its direct enforcement functions, and to keep under review the guidance, which it may update from time to time. The CMA is required to publicly consult, and obtain the Secretary of State’s approval, before issuing its first guidance.
Clause 206 provides that, for the purposes of the law of defamation, absolute privilege applies to anything done by the CMA in the exercise of its direct enforcement functions. There are strong precedents for that approach: judicial or tribunal proceedings are protected from defamation. There is also protection from defamation for the CMA’s direct enforcement regime for competition law and its merger and market investigation powers. Those suspected of infringing are not unfairly prejudiced by this clause, which merely reflects the long-standing principle that the exercise of regulatory and judicial functions should not give rise to defamation claims.
Clause 207 formally introduces schedule 16 and its contents within the body of the Bill. Schedule 16 makes numerous minor and consequential amendments to other legislation. This schedule is important to provide for the smooth functioning of the enforcement regimes and to ensure legislative consistency.
Government amendments 62 and 63 add a reference to chapters 3 and 4 of part 3 of the Bill to schedule 14 to the Enterprise Act 2002. These amendments will ensure legislative consistency.
Government amendment 64 is a consequential amendment. It includes part 4 of the Bill in the list of enactments in respect of which investigatory powers under schedule 5 to the Consumer Rights Act 2015 are conferred.
Clause 208 introduces schedule 17, which makes transitional and saving provision in relation to the court-based and CMA direct enforcement regimes. Schedule 17 provides for the general rule that the new law will apply to conduct that takes place on or after the commencement date of chapters 3 and 4 of part 3 of the Bill. Conversely, as a general rule, the “old law”—that is, part 8 of the Enterprise Act 2002 and related provisions—will continue to apply to conduct that takes place before the commencement date of chapters 3 and 4 in part 3 of the Bill.
Schedule 17 also makes specific rules for continuing conduct that is essentially an act or omission that starts before the new law has commenced but is repeated or continues after the new law’s commencement. In such a scenario, as well as applying to the post-commencement conduct, the new law will apply to the pre-commencement conduct for the purpose of enabling enforcement action under part 3 of the Bill.
However, no requirements or penalties can be imposed on a person for the pre-commencement parts of the continuing conduct, unless such a requirement is already imposable under part 8 of the Enterprise Act 2002. Similarly, the court and the CMA will not be able to use their new powers to impose penalties for breaches of any undertakings given under part 8 of the 2002 Act.
Seema Malhotra
Clause 202 sets out the process for giving notices under part 3 to persons within and outside of the UK, including business entities registered or operating outside the UK. It defines acceptable means of service and the meaning of a recipient’s proper address. We welcome the clause.
Clause 203 allows the CMA to make rules, subject to approval by the Secretary of State through secondary legislation, to set out the procedural administrative details of the CMA’s enforcement regime. The rules supplement the framework provided in chapter 4 of part 3. We welcome the clause and the clarification, and also the important points made in the explanatory notes, including the point that the rules will cover “arrangements for complaints’ handling”. The clause is a common-sense provision.
Clause 204 sets out the process for the exercise of the rule-making power under clause 203. We welcome the fact that the CMA will be required to consult with stakeholders during the preparation of the rules, and we discussed that in relation to earlier clauses. The CMA will also be required to obtain the Secretary of State’s approval before bringing any rule into operation or varying a rule. We welcome that measure too.
Under 204(5), the Secretary of State will be empowered to vary or revoke rules or to direct the CMA to vary or revoke rules, and regulations made under the clause will be subject to the negative parliamentary procedure. Although we welcome the clause, will the Minister clarify why that has been left to the negative procedure? The inclusion of affirmative and negative procedures in the Bill seems to be slightly random, so I would be grateful for that clarification.
Under clause 205, the CMA will be required to prepare and publish guidance about its general approach to carrying out its direct enforcement functions. The guidance will provide more detailed information to traders and other stakeholders about how the direct enforcement regime would work in practice. The Opposition welcome the clause because it introduces more transparency and clarity into the regime, but will the Minister tell the Committee what timeframe is considered appropriate for the publication of the guidance? He said that he saw publication happening after Royal Assent, but does he expect it to happen within a certain period of time? I am sure that he wants the legislation to be implemented as soon as possible, as do I.
Clause 206 would protect the CMA against actions for defamation as a result of the exercise of functions under part 3. We welcome the clause. It is important that the CMA is protected in carrying out its job as the co-ordinating enforcement authority.
Clause 207 introduces schedule 16, which contains minor and consequential amendment in relation to part 3. We support schedule 16 and do not consider the consequential amendments contentious. We also support Government amendments 62 and 63.
Clause 208 introduces schedule 17, which provides transitional and saving provisions in connection with part 3. Those provisions concern the operation of the new law introduced by chapter 3 and CMA direct enforcement powers under chapter 4 of part 3. They also relate to the operation of the old law, which constitutes part 8 of the Enterprise Act 2002. It lays out how the new law would apply to conduct that takes place on or after the commencement date of the Bill, and to conduct of concern that a person is likely to engage in, where such conduct is likely to take place on or after the commencement date. The old law would continue to apply to conduct that takes place before the commencement date, as well as to various other forms of conduct. We welcome this technical schedule and clarification, and we support amendment 65.
Clause 209 introduces definitions for references to supply of goods or digital content as used across part 3 and we support the clause. Clause 210 defines how references to the supply of services should be construed across part 3 and we support the clause. Clause 211 defines what is meant by an accessory to the commercial practice of a body corporate. Will the Minister clarify whether he is confident the clause adequately captures anyone who may act as an accessory and how the definition was brought together? Was it through consultation? That will provide full clarity on what constitutes an accessory.
Clause 212 defines what constitutes having a special relationship with a body corporate, covering two scenarios outlined by the Minister. As such, we support its inclusion in the Bill. Clause 213 defines three types of enhanced consumer measures, referred to as redress, compliance and choice measures. I am grateful to the Minister for outlining some detail on that and the definitions, so that those set out in subsections (2) to (4) are straightforward and clear, and that that also applies to their interpretation by consumers. We thus welcome the clause’s inclusion in the Bill.
Clause 214 defines other terms for the purposes of this part, including the definitions of “businesses”, “goods”, “enforcement orders”, “subsidiary” and “supply”, which are important, and we support their inclusion. Further, clause 215 sets out an index of defined expressions and we welcome and support it.
Kevin Hollinrake
I will make a couple of points, the first of which is on the negative procedure. On regulations, there is a combination in clause 204 of public consultation followed by review by the Secretary of State, which will allow for a significant level of scrutiny. On that basis, we feel the negative procedure is justified and appropriate.
On the guidance, the CMA must undertake several actions, including a public consultation on the practices. This may take some time, and we expect that the guidance may be ready by autumn 2024, but that will depend upon a number of factors. We clearly want it in place as quickly as possible, but we must ensure that it is fit for purpose.
The definition of “accessory” in clause 211 is consistent with, and restates with minor clarifications, the current definition in part 8 of the Enterprise Act 2002.
Question put and agreed to.
Clause 202 accordingly ordered to stand part of the Bill.
Clauses 203 to 207 ordered to stand part of the Bill.
Schedule 16
Part 3: minor and consequential amendments
Amendments made: 62, in schedule 16, page 329, line 17, leave out sub-paragraph (b).
See explanatory statement for Amendment 63.
Amendment 63, in schedule 16, page 329, line 23, at end insert—
“5A In Schedule 14 (provisions about disclosure of information) at the appropriate place insert—
‘Chapters 3 and 4 of Part 3 of the Digital Markets, Competition and Consumers Act 2023.’”.
This amendment, which is made for drafting consistency, inserts a reference to Chapters 3 and 4 of Part 3 of the Bill into Schedule 14 to the Enterprise Act 2002 instead of achieving the same effect by adding that reference into section 238(1) of that Act.
Amendment 64, in schedule 16, page 337, line 2, at end insert—
“Part 4 of the Digital Markets, Competition and Consumers Act 2023.”.—(Kevin Hollinrake.)
This amendment adds Part 4 of the Bill to the list of enactments in the new paragraph 20A of Schedule 5 to the Consumer Rights Act 2015 (inserted by paragraph 8(10) of Schedule 16), with the effect that authorised enforcers will be able to exercise the investigatory powers conferred by Part 4 of Schedule 5 to CRA 2015 in connection with infringements of Part 4 of the Bill.
Schedule 16, as amended, agreed to.
Clause 208 ordered to stand part of the Bill.
Schedule 17
Part 3: transitional and saving provisions in relation to Part 3
Amendment made: 65, in schedule 17, page 338, line 1, leave out from “means” to end of line 11 and insert “—
(a) Part 8 of EA 2002, as that Part had effect immediately before the commencement date, and
(b) any provisions of law (including in particular Schedule 5 to CRA 2015) relating to Part 8 of EA 2002, as those provisions had effect immediately before the commencement date.”.—(Kevin Hollinrake.)
This amendment clarifies that the definition of “the old law” for the purposes of the transitional provisions in Schedule 17 to the Bill includes Schedule 5 to the Consumer Rights Act 2015 (which confers investigatory powers on enforcers).
Schedule 17, as amended, agreed to.
Clauses 209 to 215 ordered to stand part of the Bill.
Ordered,
That the Order of the Committee of 13 June be varied by the omission from paragraph 1(f) of “and 2.00 pm”.—(Mike Wood.)
Ordered, That further consideration be now adjourned. —(Mike Wood.)
Digital Markets, Competition and Consumers Bill (Twelfth sitting)
Tuesday 4th July 2023
(1 year ago)
Public Bill CommitteesRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 4 July 2023 - (4 Jul 2023)
The Committee divided: - Ayes: 5 / Noes: 6 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 6 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 6 - Question accordingly negatived.
The Committee divided: - Ayes: 5 / Noes: 6 - Question accordingly negatived.
The Chair
I have the usual preliminaries before we begin. Remember to switch your electronic devices to silent. The Speaker does not permit food or drinks, other than the water provided, to be consumed during the sitting. If Members could email their speaking notes to hansardnotes@parliament.uk or pass them on when they have finished speaking, that would be extremely helpful.
You may have spotted at the top of today’s amendment paper that there is a supplementary programme motion in the name of Mr Wood, the Government Whip. I understand that he does not intend to move it at this point in the proceedings, but that he may move it at the end of the sitting. Is that correct?
Mike Wood (Dudley South) (Con)
Yes, Chair, either this morning or at the start of the afternoon—whichever is appropriate.
The Chair
Okay, we will take it later. That is fine.
Clause 216 ordered to stand part of the Bill.
Clause 217
Prohibition of unfair commercial practices
The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
I beg to move amendment 71, in clause 217, page 146, line 5, leave out second “trader” and insert “person”.
This amendment ensures that the definition of “commercial practice” for the purposes of Chapter 1 of Part 4 of the Bill includes an act or omission by a trader relating to the promotion or supply of a consumer’s product to another consumer.
The Chair
With this it will be convenient to discuss the following:
Clause stand part.
Clauses 218 to 222 stand part.
Kevin Hollinrake
It is a pleasure to serve with you in the Chair, Mr McCabe.
Clause 217 sets out the unfair commercial practices that are prohibited. Those include misleading actions, misleading omissions, aggressive practices, contravention of the requirements of professional diligence, the omission of material information from an invitation to purchase, and the practices listed in schedule 18.
The clause also defines important terms for the purpose of this chapter, including “commercial practice”, “consumer” and “trader”. Commercial practice is defined as any act or omission by a trader relating to the promotion or supply of any trader’s product to a consumer or of a consumer’s product to another person. As such, a business providing a platform on which products are promoted or supplied may fall within the scope of this chapter.
Government amendment 71 is a technical amendment to clause 217. It ensures that the Bill reflects acts or omissions by traders that are currently covered by the Consumer Protection from Unfair Trading Regulations 2008, or the CPRs for short. It ensures that traders that enable private individuals to sell products to each other are within the scope of this chapter, reflecting the scope of current law.
Clause 218 defines and prohibits commercial practices that are misleading actions and restates the equivalent provisions from the CPRs. It protects consumers from traders who deceive through the provision of false and misleading information.
Clause 219 defines and prohibits commercial practices that are misleading omissions. It requires traders to provide consumers with the information they need in an up front, clear and timely manner to make an informed transactional decision.
Clause 220 defines and prohibits commercial practices that are aggressive and restates the equivalent provisions from the CPRs.
Clause 221 defines and prohibits commercial practices that contravene the requirements of professional diligence and restates the equivalent provisions from the CPRs. It requires that traders do not engage in practices that fall below the standard of skill and care they may be reasonably expected to have provided.
Clause 222 lists what information must be provided to consumers when a commercial practice is an invitation to purchase. The information is deemed material.
I hope hon. Members will support Government amendment 71, and I propose that clauses 217 to 222 stand part of the Bill.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Is it not the shadow Minister first?
The Chair
I thought you were indicating. This is what happens when you are drafted in at the last moment, isn’t it? I will eventually wake up; do not worry.
Neil Coyle
Thank you, Mr McCabe. It is a pleasure to serve with you in the Chair.
In speaking to the amendments, may I thank the organisations that have contributed? There is a whole range of them, but I would particularly like to thank the British Toy and Hobby Association and Electrical Safety First, not least because they are based in the best constituency in the country: Bermondsey and Old Southwark. The other organisations include Which? and trading standards bodies. There is a range of amendments in my name covering a range of issues. They have at their core the need to protect British consumers, British businesses and British standards. I want to air a lot of issues. I hope I will not need to force votes and I am keen to hear what the Minister has to say in response.
Amendment 118 would make a person marketing goods online a trader for the purposes of the Act. Amendment 119 would make it an unfair commercial practice to sell goods online unless the specified safety requirements have been complied with. Amendment 123 should be self—
The Chair
Order. Mr Coyle, we seem to have got out of sync. You are currently speaking to your amendments, but we have not quite got to them,
Neil Coyle
Are we not there yet, Mr McCabe? It looks like it is me who needs to wake up.
The Chair
It has been an early start for all of us. Why not just pause there and we can return to you later?
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is a pleasure to serve under your chairship, Mr McCabe.
Before we turn to the group led by amendment 118, I will make some brief remarks on clause 217 stand part and speak to Government amendment 71. Clause 217 sets out a general prohibition on unfair commercial practices. As the Minister has outlined, it defines commercial practice as
“any act or omission by a trader relating to the promotion or supply of—
the trader’s product to a consumer
another trader’s product to a consumer, or,
a consumer’s product to the trader or another trader”.
Subsection (4) introduces provisions outlining what constitutes an unfair commercial practice, which may include a misleading action, a misleading omission or an aggressive practice, and those are dealt with in the following clauses. In addition, the subsection states that a commercial practice is unfair if it is listed in schedule 18, which we will debate in detail shortly.
We welcome the clause as a necessary provision in prohibiting unfair commercial practice, and I reiterate that we look forward to working with the Minister, including in today’s debate. If there are ways in which we can improve the Bill, we are very happy to work collaboratively so that it is as robust as possible. The amendments tabled by my hon. Friend the Member for Bermondsey and Old Southwark in the light of our discussions with stakeholders will play an important part in those deliberations.
Amendment 71 ensures that the definition of commercial practice for the purposes of chapter 1 of part 4 of the Bill includes an act or omission by a trader relating to the promotion or supply of a consumer’s product to another consumer. We welcome this amendment, which importantly ensures that the actions of rogue traders still fall under the definition of commercial practice and supports the integrity of the regime.
Clause 218 introduces provisions defining commercial practices that are misleading actions. We welcome the clause, which provides a necessary definition of a misleading action, and support its inclusion in the Bill.
Clause 219 introduces a definition of commercial practices that count as misleading omissions. Under the clause, a misleading omission would constitute the omission of material information and information that the trader is required by another enactment to provide. As with clause 218, it is a common-sense, straightforward clause and we support it.
Clause 220 sets out how an aggressive practice could constitute harassment, coercion or undue influence. That can involve behaviour before a contract or purchase is made, but it can also occur after a transaction has taken place. We support the definition’s inclusion in the Bill, but I ask for clarification. I draw the Minister’s attention to subsection (3)(a), where the Bill states that
“‘coercion’ includes the use or threat of physical force”.
Does the Minister intend that coercion includes many other threats, be they financial or personal blackmail, to suggest just a couple? Is there a wider definition or guidance on interpretation that would be helpful in providing clarification for the consumer as well as for those making a decision under the clause? I would welcome clarity from the Minister on that.
Clause 221 defines commercial practices that contravene the requirements of professional diligence. That includes practices that fall short of the standard of skill and care that a trader may reasonably be expected to exercise towards consumers and that is commensurate in the trader’s field with honest market practice or the general principle of good faith. That is important for rooting out rogue traders who may not be qualified for their profession, whether they are builders, electricians or other experts. We welcome the definition.
Clause 222 sets out where a commercial practice would be considered to have omitted material information. Subsection (2) lists what would constitute an omission, including the main characteristics of a product, the business address and the delivery price, among other things. Although we support the list of omissions and welcome its inclusion in the Bill, elements of the clause could go further to provide more protection to consumers, as reflected in amendment 127, tabled by Opposition Front Benchers, and amendment 126, tabled by my hon. Friend the Member for Bermondsey and Old Southwark, which we will come to.
Kevin Hollinrake
I think there is just one key point that the hon. Lady asked me to address, which is about other types of coercion. Looking at the definition with regard to practices, clause 220 talks about “coercion or undue influence”. Under subsection (3),
“‘undue influence’ means exploiting a position of power in relation to consumers so as to apply pressure in any way”.
I think that covers the definition, as she requested.
Amendment 71 agreed to.
Neil Coyle
I beg to move amendment 118, in clause 217, page 146, line 11, at end insert—
“(c) a person marketing P’s goods for sale online.”
This amendment makes a person marketing goods online a trader, for the purposes of this Act.
The Chair
With this it will be convenient to discuss the following:
Amendment 119, in clause 217, page 146, line 22, after “222),” insert—
“(ba) a product is sold online, and the operator of the online marketplace has not taken reasonable steps, as defined by regulations made under section 234 of this Act, to ensure that the goods offered for sale in the online marketplace comply with—
(i) the General Product Safety Regulations 2005 (SI 2005 No 1803) (‘the 2005 Regulations’), and
(ii) such other safety requirements as the Secretary of State may specify.”
This amendment makes it an unfair commercial practice to sell goods online unless the specified safety requirements have been complied with.
Amendment 123, in schedule 18, page 343, line 2, at end insert—
“32 Marketing online products that are either—
(a) counterfeit; or
(b) dangerous.”
Amendment 120, in clause 218, page 147, line 9, at end insert—
“(e) an operator of an online marketplace failing to take reasonable steps, as defined by regulations made under section 234 of this Act, to ensure that no goods offered for sale in the marketplace have been the subject of a notification to an enforcement authority under regulation 9 of the 2005 Regulations.”
This amendment makes it a misleading action to sell goods online without taking reasonable steps to ensure that those goods have not been subject to a recall.
Amendment 124, in clause 223, page 150, line 27, at end insert—
“(4A) Where a commercial practice has been found to be unfair under paragraph 32 of Schedule 18 of this Act, the authorities under this section have the power to require the removal of the relevant online marketing from the internet.”
Amendment 121, in clause 234, page 158, line 4, at end insert—
“(4A) The Secretary of State must by regulations define ‘reasonable steps’ for the purposes of sections 217 and 218 of this Act.”
This amendment requires the Secretary of State to make regulations to define “reasonable steps” for the purposes of clauses 217 and 218 of this Act.
Amendment 122, in clause 241, page 160, line 14, at end insert—
“‘online marketplace’ means a service using software, including a website, part of a website or an application, operated by or on behalf of a trader, which allows consumers to conclude distance contracts with other traders or consumers;
‘safety requirement’ includes—
(a) any relevant enactment governing the safety of products or of a specific type of products,
(b) any voluntary national standard of the United Kingdom, and
(c) any standard adopted by an international standardising body.”
This amendment defines the terms “Online Marketplace”, and “Safety Requirements”.
Neil Coyle
It will surprise no one that I wish to speak to these amendments; I am sorry for being rusty. Having been on Bill Committees previously and managed to get amendments through, or at least poached by the Government, I feel embarrassed to have slipped up on this one.
I went through the amendments previously, so I hope Members can copy and paste from previous debates. Amendment 123 is self-explanatory. Amendment 120 would make it a misleading action to sell goods online without taking reasonable steps to ensure that the goods have not been subject to a recall. Amendment 124 would create the takedown power—the power to remove dangerous or counterfeit goods from online sales. Amendment 121 defines reasonable steps. Amendment 122 defines an online marketplace and safety requirements, in line with the bodies who have contributed who are still concerned about where things are at in the Bill.
I think the Government’s original aim was to publish a draft Bill; this Bill took some organisations by surprise, and I think a lot are playing catch-up, hoping that issues will be aired here and that Ministers will be meeting with them soon, ahead of the Lords stages. They hope to see a bit more progress on some measures in the Bill. Most accept the need for this legislation, but very few seem convinced that the Bill does the complete job.
Mr McCabe, you were not in the Chair for our evidence sessions, where we had all the “wild west” references. The Minister suggested a Clint Eastwood in “The Good, the Bad and the Ugly” character to help take action. For those not familiar with the genre, that is the third film of Sergio Leone’s trilogy, and Clint played an antihero. He takes Tuco in to claim the reward, and then shoots him down from the noose, in order to claim further, higher rewards down the line—so that is an intriguing analogy from the Minister.
The first film in the trilogy was “A Fistful of Dollars”. I am here with “For a Few Dollars More”—the second in the trilogy—to offer a better system, with some improvements to what the Government have put forward, to try to do a better job. For those who are familiar with “The Good, the Bad and the Ugly”, there are only two kinds of people in this world—those who have seen the film, and those who have not.
The main amendment that I wish to speak to is amendment 124, and the takedown power to require the removal from online trade of counterfeit or dangerous products. This would deliver, in part, what the Minister, the hon. Member for Thirsk and Malton, said on Second Reading of the Online Sale of Goods (Safety) Bill, in response to my hon. Friend the Member for Gateshead (Ian Mearns), when pressed about taking items offline. He said that,
“we should go further than that and require marketplaces to ensure that such products are not on their sites at all, ever, and that they check to ensure that they do not appear and, indeed, remove retailers who have transgressed.”—[Official Report, 20 January 2023; Vol. 726, c. 715.]
This group of amendments, and particularly amendment 124, help deliver what the Minister said he would like to achieve, and what I hope the Bill will achieve by the point it completes its progress through both Houses.
Fundamentally, it comes back to what customers believe. My constituents, and customers, believe whether they are shopping at Argos on the Old Kent Road or on Amazon online that the goods they are buying will meet the required UK standards. That is simply not what is happening.
Some 90% of toy sales online are through Amazon, eBay and AliExpress. I have referred to Amazon previously, and I do not want to pick on Amazon, but it is one of the big three. It has done some work to try to address the concerns of organisations and trade bodies, but it is simply not enough. In its US annual report a couple of years ago, Amazon acknowledged that it was, in its own words,
“unable to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated or stolen goods”.
I use Amazon to represent online marketplaces more generally, because of the familiarity of customers. They believe it is a reputable organisation and trust that it meets standards, but that is not the case.
Of course, Amazon also has an ongoing battle with the GMB on recognition, which it should have resolved some time ago. Ministers should have been supportive on that issue: they say they want a high-skills, high-wage economy, and that is what trade unions set about to deliver, and that is certainly what the GMB is seeking, in partnership with the Amazon workforce.
Frankly, it is a bit shocking that some of these amendments are necessary, but they are. The British Toy and Hobby Association survey “Don’t Toy with Children’s Safety” highlights some significant concerns. The toy industry is worth £3.2 billion to the UK economy—it is a massive sector. The survey showed that, in 2021, 60% of the toys tested were unsafe for a child to play with, and 86% of the toys freely available online were illegal to sell in the UK. That is appalling for lots of reasons, including because some of it is counterfeit.
We touched on this point in previous debates. British companies trade legitimately in goods that they are licensed to provide and make. They hold a trademark. It is insulting for them to have others trading on profitable sites such as Amazon and others with contempt for UK law, in a way that would be tackled if it was happening in a physical shop or even down a market. The truth is that Del Boy’s products would meet higher standards than some of those sold online. Platforms have been accommodating counterfeit, hooky, shoddy and dangerous goods for far too long.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
I can confirm that the letter went out yesterday morning.
Neil Coyle
Maybe it is still in the internal post. I thank the Minister for the letter; it would be nice to know what it says. The point is that the Bill does not make clear how customers will secure redress. It presents a convoluted route of multiple agencies and potential court action that people simply will not want to take.
My amendment does not go as far as some have suggested. It is a moderate suggestion. There have been suggestions that there is full and shared liability for platforms for any product sold and that some of the measures should be retrospectively implemented so that there should be penalties on those who have sold goods that they know to be counterfeit or dangerous going back for years. I hope that amendment 121 in particular, but also other amendments in this group, are useful to the Government in delivering their aims and defending customers and businesses.
The wording of amendment 124 is crucial; I hope that the Minister will come back to this when he responds to the debate. It would “require the removal”. It is not a request to remove a product; it is a requirement to remove a product. It could be put in the hands of all the bodies in clause 143, with penalties and timely action to prevent a fatality if this is not done quickly enough. The use of the word “require” is deliberate, because the power to request is in other legislation. For example, the police can request the removal of video footage from YouTube that is incitement to violence or hatred, is homophobic or is incitement to violence between gangs. One meeting I had with the Met revealed that more than 300 requests to take down videos had been ignored by YouTube. They included calling for revenge and the murder of specific individuals in revenge attacks between gangs in London. The police should have a stronger power than that, but as with this legislation, the power to request that something is removed is insufficient; it must be the power to compel the removal, similar to—for those familiar with local authority powers—a cease and desist order by a planning body. That would be a comparable power if the Government are keen to have something stronger than that offered in the current legislation.
I hope that amendment 124 helps British businesses, jobs, standards and customers and helps the Government —that is why I am here today. Ministers claim that they want to make the UK the “safest” place in the world to be online, and here are the means to deliver that laudable aim.
Seema Malhotra
I congratulate my hon. Friend on his tour de force in going through his amendments and the reasons for tabling them. We can all agree that as a package, the amendments move us further forward in ensuring that there is adequate regulation of products sold in online marketplaces. My hon. Friend also made reference to the work of Electrical Safety First and its research. Having met the organisation, spoken at its event in Parliament and seen the important work it does through the all-party parliamentary group on online and home electrical safety, I think I can say that we all recognise that we must ensure the steps taken in the Bill will be adequate to deal with the challenges we know consumers face and which can put families, lives and businesses at risk.
My hon. Friend spoke to his amendments. Amendment 118 makes someone marketing goods online a trader. Amendment 119 makes it an unfair commercial practice to sell goods online unless the specified safety requirements have been complied with. Amendment 124 provides for a takedown power, about which the Minister has made some positive comments. We believe very strongly that that is needed, and I hope that he will give a commitment today about how we can take it forward, and whether the Government will accept the amendments tabled by my hon. Friend the Member for Bermondsey and Old Southwark, which we support, or introduce their own during the course of the Bill.
Kevin Hollinrake
I appreciate the continued spaghetti western analogies. In my case, “Pale Rider” might be a more apt example, as obviously my demographics mean that I am pale, stale and male, but we are keen to ensure that we have a proper shoot-out with the people the hon. Member for Bermondsey and Old Southwark describes. I am totally onside with the vast majority of what he says. He knows we need to make sure we take the right kind of action in this area, and his amendments would add provisions related to product safety to regulate the sale of dangerous and counterfeit goods in online marketplaces. Existing UK product law is clear: all products must be safe, including those sold online. However, we recognise the challenge the growth of online marketplaces has created for how we deliver product safety in a global economy. I gently say to the hon. Gentleman: these are not just UK-based problems: this is a global problem. As he knows, marketplaces operate around the globe and other jurisdictions are also seeking to tackle the issue.
I hosted a roundtable with major online marketplaces in April and was clear that, in addition to their current duties, they must do much more to keep unsafe products off their sites, including removing third-party sellers who supply unsafe goods. That point was mentioned on Second Reading of the Online Sale of Goods (Safety) Bill, as the hon. Gentleman referenced just now. The Office for Product Safety and Standards, which I visited in Teddington, is following up with a programme of test purchases. There I saw at first hand some of the potential products sold online, such as toy magnets that do not comply with UK product standards. My hon. Friend the Member for Stoke-on-Trent Central (Jo Gideon) has done fantastic campaigning in that area on button batteries. There is much we need to do. This is not just a consumer safety problem: it is about creating a fair and level playing field for UK retailers. The hon. Gentleman mentioned Argos and Amazon, but I would add our local high-street electrical stores, which have also been disadvantaged by online marketplaces being able to operate in the way they do.
Neil Coyle
I do not remember any western in which a sheriff held a roundtable. In terms of the outcome, what is the pace at which counterfeit or dangerous goods will be removed? That is the concern for consumers. Even if I buy something, discover that it is shoddy and report it through the process in the Bill, there is still a significant gap in time before something is taken off. The takedown power is crucial to prevent further hundreds, thousands or millions of that product being sold or marketed to people when it is known to be dangerous or faulty and could put lives at risk.
Kevin Hollinrake
I entirely agree. We do not think the marketplaces are going far enough. It is a key phrase that the likes of Amazon, Wish and so on just see themselves as marketplaces rather than distributors. Our point is that they are distributors. The key thing is making sure that is properly defined in law. The hon. Gentleman is right to point out some of the percentages. That is the work done by the OPSS, defining that between 60% and 80% of the products it sampled were unsafe. That is clearly and completely wrong.
Neil Coyle
The Minister is coming to it, but the takedown power is the crucial bit to do that and it is what the OPSS, which he refers to, says it wants.
Kevin Hollinrake
Perhaps if the hon. Gentleman allows me to go through my speech, I might be able to give some answers to his points. We are on exactly the same page on this and we have to get this right. He talks about getting the analysis right and raised a different analogy of where he considers we may have got that wrong in the past. It is important we get this right. From our perspective, the product safety route is the right way to do this. The whole product safety framework will be reformed, including online sales, and that holistic review of product safety, taking existing obligations into account—we believe there are distributor obligations—is the most appropriate vehicle for meeting concerns about unsafe goods sold online.
Neil Coyle
The shadow Minister also asked when the product safety review will take place.
Kevin Hollinrake
Very shortly. I just answered the shadow Minister; there is no prolonging this issue from my perspective. We are keen to get on with this but want to make sure the review is in the right place and the right shape when it happens. We want it to happen very soon.
The forthcoming consultation will include proposals to ensure that shopping online is as safe as on the high street and that there is a fairer playing field for law-abiding businesses. We anticipate publishing these proposals soon and look forward to continuing engagement with our stakeholders to inform and shape our proposals.
Amendment 124 would give powers to the Competition and Markets Authority and trading standards to require the removal of marketing material for counterfeit and dangerous products online. We believe, however, that extensive enforcement powers are already available. For example, when a trader markets misleading or faulty goods online, enforcers including the CMA and trading standards can apply to the court for an enforcement order to stop and prohibit the marketing and sale of the offending goods under part 3 of the Bill. [Interruption.] If the hon. Gentleman will let me get to the point where I think he wants me to get to, that will be the point made in the letter.
Part 3 of the Bill gives the CMA the power to impose an online interface order against the infringer or a third party. That type of order or notice may require the removal or alteration of online content on a website that gives access to or promotes the offending goods. The hon. Gentleman’s point was about similar powers for other enforcement bodies such as trading standards. As I said to him, however, in a letter that I think he received yesterday, that is something I am keen to explore, and will do so over the summer. I will give him a final chance to intervene, if he wants, and then I will conclude.
Neil Coyle
I am grateful to the Minister for giving way and for his reassurance that this will be looked at over the summer. As things stand, the Government are saying—the Minister has just said—that a product could cause a fire and potentially a fatality, but still the process would be to report it through a particular agency and possibly take court action, rather than what the regulators want to do and customers want to see, which is the take-down of the item to prevent any further dangerous incident or potential fatalities. I hope that the Minister gets to a point where that immediate power will be available.
Kevin Hollinrake
I totally understand the hon. Gentleman’s point, which is why I will look at it over the summer. It is not provided for in the Bill, but he makes a good point and I am keen to explore the options. We will come back to the House at some point to report what we will do in this space. I therefore very much hope that he will withdraw his amendments.
Neil Coyle
With that reassurance of looking at this further over the summer and to improve on where things stand, I will take the Minister at his word. The idea that we can support everything in a product safety review that will start we know not when feels a bit like missing the bus—or missing the stagecoach, to stick with the analogy. The powers need to be in the Bill to ensure that when the product safety review is done, the vehicle is already available to enable dangerous or counterfeit goods to be removed, but given his reassurance, I beg to ask to leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 217, as amended, ordered to stand part of the Bill.
Schedule 18
Commercial practices which are in all circumstances considered unfair
Richard Thomson (Gordon) (SNP)
I beg to move amendment 68, in schedule 18, page 343, line 2, at end insert—
“32 Making claims about—
(a) the environmental benefits, or
(b) the sustainability (as defined by section 234(1C)) of a product or service which are not based on evidence which can be verified by a court.”
This amendment seeks to ban the practice of “greenwashing”. It would include the making of unsubstantiated claims about the sustainability of products and services an unfair commercial practice.
The Chair
With this it will be convenient to discuss amendment 69, in clause 234, page 157, line 29, at end insert—
“(1A) The Secretary of State must consult on a definition of sustainability for the purposes of paragraph 32 of Schedule 18.
(1B) A consultation under subsection (1A) must—
(a) set out which products and services can be labelled sustainable; and
(b) require the definition to comply with international standards.
(1C) Following a consultation under subsection (1A) the Secretary of State must by regulations amend this Chapter to add a definition of sustainable.”
This amendment seeks to ban the practice of “greenwashing”. It requires the Government to define which products and services can be labelled “sustainable” and requires that this definition complies with international standards.
Richard Thomson
It is a pleasure to serve under your chairmanship, Mr McCabe. With your indulgence, if it is appropriate, I will also speak to amendment 69 and am happy to speak to amendments 115 and 116.
Richard Thomson
Thank you for your guidance, Mr McCabe.
I have not yet spoken in Committee, and the reason for that is simple. As I said on Second Reading, from a Scottish National party perspective, we think that the Bill is generally speaking a good Bill. Our concern is primarily with the bits that we feel are missing, so the amendments that I will speak to this morning and afternoon are with a view to fill in some of the potholes that we see in the road for the Bill.
Amendments 68 and 69 would tackle the phenomenon of greenwashing. By that, I mean the practice by which companies use advertising and/or public messaging to appear more eco-friendly, whether in the generality or with regard to specific products, than is actually the case. The amendments would compel the Secretary of State to consult on a definition of sustainability for these purposes that is in line with international standards and then to amend the relevant chapter to add that definition to the Bill, and to add greenwashing to the schedule 18 list of practices which are in all circumstances considered unfair.
Seema Malhotra
I will speak just briefly to schedule 18 and then to amendments 68 and 69. I thank the hon. Member for Gordon for his amendments and his explanation of them.
Schedule 18 introduces—
The Chair
Order. The general debate comes at the end. We need to stick with the amendment.
Seema Malhotra
That is fine. I have one line, but it can come later.
Amendment 68 would ban the practice of greenwashing. Making unsubstantiated claims about the sustainability of products and services would be an unfair commercial practice. Amendment 69 is consequential on amendment 68 and would require the Government to define which products and services can be labelled “sustainable”, and requires that the definition complies with international standards.
I support the principle of the amendments tabled and the arguments made. They are along the lines of the discussion that we had in Committee last week when I spoke to the issues around greenwashing, our standards and support for evidence. I asked the Minister what overall strategy he has to ensure that green claims are accurate and evidenced, and I asked that we have a strategy for the prevention of false claims as well as a mechanism for enforcement against them. As has been argued, that issue is on the increase, particularly for younger people.
Research has shown that those under 35 across the world make decisions about products, services and even their employment on how much they trust the information that they see in relation to sustainability and climate responsibility. If we do not tackle that issue, we will see a further increase in people misleadingly marketing products because they know that those issues drive consumer purchases. They have great influence on consumer purchases and decisions.
The Minister might refer to the green claims code introduced by the CMA. Important work has been done, but in the absence of any real leadership or strategy from the Government I want to ask the Minister whether they intend to put the green claims code, or its successor, on a statutory footing. Making sure that we have a robust legislative underpinning and strategy for such issues is increasingly important, because many stakeholders see a gap.
Greenwashing was also mentioned by consumer groups in the Committee’s evidence sessions. I would press the Minister on whether the Government have plans to introduce amendments on the issue, and to strengthen voluntary or other codes relating to green claims and expectations. In an increasingly green economy, consumers are at risk of falling victim to misleading green advertising, and legislation needs to catch up.
Kevin Hollinrake
Amendments 68 and 69 would add the practice of greenwashing to the list of banned practices in schedule 18, and would introduce a requirement for the Government to consult on the matter. I thank the hon. Member for Gordon for his amendments, and I absolutely agree that consumers should not be misled. I admire his commitment to recycling, which is admirable. I wondered whether I should touch on that, given the difficulties that the SNP has got into with its deposit return scheme, but—
Richard Thomson
I thank the Minister for that sideswipe, but it would be a great deal easier for the Scottish Government to comply with an English-designed scheme if that scheme was actually in existence for us to emulate. Absent our deposit return scheme, we are stuck with the recycling schemes that we have, and I wonder whether the Minister will get to the point.
Kevin Hollinrake
I was just referring to the hon. Gentleman’s point. I will briefly say that our perspective is that a nationwide scheme would be best for business.
Misleading consumers about the environmental qualities or impact of goods and services in a way that causes, or would likely cause, consumers to take a different decision is already against the law. Furthermore, under clause 187, when the CMA gives a provisional notice to a person in respect of an infringement of the unfair trading provisions, the CMA can require the respondent to provide evidence to substantiate the claims that they make to consumers. That meets the shadow Minister’s requirement. It is against the law to mislead, and as she says, the CMA’s draft guidance on sustainability agreements between businesses, which aim to ensure that environmental goals are achieved, will give greater clarity on these issues. Those interventions are already significant. The Government’s priority is to ensure that interventions support our environmental goals; we would then observe their impact before taking further steps. I hope the hon. Member will withdraw amendment 68 on that basis.
Richard Thomson
I am sorry to disappoint the Minister, but this is an issue of fundamental importance, and if I withdrew the amendment, it would be an opportunity missed. Of course, we could go through any number of proposed amendments to the Bill and say that there is already legislation in place that in some way tackles that issue. Of course it is true that there are measures on this issue, but there is still a proliferation of claims out there that have not been tackled by existing legislation. I know the Minister is a keen advocate for ensuring that markets work as effectively as they can, and for allowing markets to reach conclusions. The amendment is simply a tool that would allow Ministers to act in the interests of consumers. It would be a missed opportunity not to push it to a vote, and not to include it in the Bill.
Question put, That the amendment be made.
Seema Malhotra
I beg to move amendment 115, in schedule 18, page 343, line 2, at end insert—
“32 At any stage of a purchase process, presenting a price for a product which omits obligatory charges or fees (or an estimate thereof) which are payable by the majority of consumers, which are not revealed to the consumer until later in the purchase process.”
This amendment adds the practice of “drip-pricing”, a pricing technique in which traders advertise only part of a product’s price and reveal other obligatory charges later as the customer goes through the buying process, to the list of unfair commercial practices.
Amendment 115 would add the practice of drip pricing to the list of unfair commercial practices. Drip pricing is a pricing technique whereby traders advertise only part of a product’s price and reveal other obligatory charges later as the customer goes through the buying process. For example, an airline may advertise a flight abroad at a certain cost that does not include an obligatory seat charge. That is added only later in the purchasing process, by which point the consumer has already prepared to purchase the product and is less likely to stop the purchase. The argument that this practice should be included in the Bill was well documented during the Committee’s evidence sessions. The consumer group Which? stated:
“We think that drip pricing is another practice that is very harmful. There is a lot of evidence that that is the case, and it should be included on the face of the Bill.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 13, Q16.]
That sentiment was reflected in Committee by Citizens Advice, the National Consumers Federation and Consumer Scotland, all of which argued that schedule 18 could be improved by adding the practice of drip pricing. Which? provided evidence of consumer detriment in its written submission, which states:
“We know that in many online markets people overpay for products and services because only part of an item’s price is initially shown and the total amount to be paid is revealed only at the end of the buying process. For example, multiple hotel booking firms were shown to have failed to have displayed compulsory charges such as taxes, booking or resort fees in the headline price. However, while the use of these practices is common, the CMA has found its enforcement against drip pricing has been inhibited by the absence of an explicit ban.”
In its 2021 paper, “Reforming Competition and Consumer Policy”, the CMA notes:
“Drip pricing causes real detriment to consumers...Advertising of Prices market study concluded that of a series of different price framing practices, drip pricing was clearly the most harmful frame for consumers in terms of purchasing and search errors, and that raised levels of consumer learning did not fully mitigate issues with the practice. Lengthy transaction processes associated with drip pricing can ensure consumers gain a greater sense of ownership of a product and are less likely consider other offers once additional costs are revealed.”
It is clear that the introduction of drip pricing to the list of unfair commercial practices would be supported by consumer groups and the CMA, so I urge the Minister to consider supporting the amendment. I look forward to his response.
Kevin Hollinrake
I share the hon. Member’s concerns. That is why we commissioned research earlier this year, which we will publish shortly. It will detail how widespread and harmful the practice is. The Prime Minister has already said that we will gather evidence on what steps the Government should take to tackle drip pricing, so I think we are aligned in our commitment to tackling the issue.
One of the key challenges, which I do not think the hon. Lady addressed, is distinguishing drip pricing that is harmful or anti-competitive from practices that may offer greater value to the consumer—for example, a company offering optional extras such as faster postage or insurance. We will consult during the passage of the Bill on which elements of drip pricing might need tackling, and on whether further action is required. We believe it is important to conduct that exercise first, so that we have a proper, evidence-driven policy. I hope the hon. Member will withdraw the amendment.
Seema Malhotra
I thank the Minister for his comments. There are issues to consider in relation to the amendment, but I think the broad thrust of the argument for taking action is clear. The Minister says that the findings of the research will be published shortly; I am assuming that “shortly” is not in more than a year’s time. We need to clarify that with the Government. If shortly means shortly, however, then I would be grateful for confirmation that, on the basis of the research, the Minister intends to address drip pricing; that may determine the wording in the Bill. Can the Minister confirm that there is an intention to address the issue during the passage of the Bill, perhaps through a Government amendment? The Opposition are very willing to work with the Government on that.
Kevin Hollinrake
I am keen to make a commitment to work with the hon. Member on the issue, and to ensure that a measure is brought forward as quickly as possible. I cannot give a precise date, but it will be very shortly.
Seema Malhotra
On the basis that shortly means shortly, I am willing to withdraw the amendment. Will the Minister clarify that he expects the research to come forward before Report, so that we have time to look at it? That would be a good point at which to bring forward an amendment on the issue.
Kevin Hollinrake
I cannot say when Report will be, and I do not have the timetable for that, or for the consultation on the work that we may need to do on the issue. I cannot make that precise commitment, but we are very committed to delivering on drip pricing. As the hon. Member knows, the Prime Minister spoke on it, so I cannot imagine that there will be any undue delay.
Seema Malhotra
On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Seema Malhotra
I beg to move amendment 116, in schedule 18, page 343, line 2, at end insert—
“32 Commissioning, incentivising or authorising the writing or submission of false consumer reviews or endorsements, in order to promote products.
33 Offering or advertising to submit, commission or facilitate false consumer reviews or endorsements.
34 Displaying consumer reviews of products on an online interface—
(a) without taking reasonable and proportionate steps to ensure that such reviews are submitted by consumers who have used or purchased the products in question;
(b) where any consumers who provided reviews were incentivised to describe certain products in a particular way, without taking reasonable and proportionate steps to ensure this is not the case; or
(c) in a way that deceives or manipulates consumers, or where a practice has been undertaken in relation to reviews that otherwise materially distorts or impairs the ability of consumers to make free and informed decisions, without taking reasonable and proportionate steps to ensure this is not the case.”
This amendment adds the practice of commissioning fake reviews, offering services to write fake reviews, and displaying consumer reviews without taking reasonable steps to verify their accuracy, to the list of unfair commercial practices.
The Chair
With this it will be convenient to discuss amendment 125, in schedule 18, page 343, line 2, at end insert—
“32 Stating or otherwise creating the impression that reviews of a product are submitted by consumers who have actually used or purchased the product without taking reasonable and proportionate steps to check that they originate from such consumers.
33 Submitting or commissioning another legal or natural person to submit false consumer reviews or endorsements, or misrepresenting consumer reviews or social endorsements, in order to promote products.”
This amendment would add fake reviews to the list of banned practices.
Seema Malhotra
I am pleased to speak to amendment 116, tabled by my hon. Friend the Member for Pontypridd and me. I will also touch on amendment 125, tabled by my hon. Friend the Member for Bermondsey and Old Southwark. They are similar provisions, and he will want to make his own arguments for amendment 125.
Amendment 116 adds the practice of commissioning fake reviews, offering to provide the service of writing fake reviews, and displaying consumer reviews without taking reasonable steps to verify their accuracy to the list of unfair commercial practices. Amendment 125 would similarly add fake reviews to the list of banned practices. We support both the amendments, but I will speak to amendment 116 in more detail, as it provides a more comprehensive legislative basis for banning fake reviews, and was recommended by the consumer group Which?.
When the Bill was published, the Government announced with much fanfare that they would introduce provisions banning the unfair commercial practice of fake reviews. However, nowhere in the Bill is there any measure that bans fake reviews. The supposed banning of fake reviews can be found in clause 234, which gives the Secretary of State the power to add to the list of banned practices. Unless the Minister corrects me, all we have is a promise from the Government that at some point in the future—beyond 2025—fake reviews might be banned. As Which? said during the Committee’s evidence sessions,
“We do not think that we should wait. Clearly, fake reviews are harmful, so the buying, selling and hosting of fake reviews should be included in schedule 18.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 13, Q16.]
It was not just consumer groups that expressed that sentiment; the British Retail Consortium also stated:
“We are concerned about fake reviews. We support the banning of them. We wish that what the Government propose for them was on the face of the Bill.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 49, Q78.]
I would be grateful for the Minister’s explanation of why the Government have left a ban out of primary legislation. One view is that the Government intended to include a ban, but ran out of time. Well, we have time to catch up during the passage of the Bill. Retail and consumer groups consider this measure very much noticeable by its absence, and it is important and significant that we address it during the passage of the Bill.
I have no doubt that the Minister will stress the need for further work and consultation on the issue. If so, perhaps he could also reflect on the considerable evidence of consumer detriment caused by fake reviews. Which? research from 2020 found that consumers are far more than twice as likely to buy poor-quality products that have been boosted by fake reviews. That affects the Minister’s constituents, mine, and those of every Member of this Committee.
As the CMA has noted, the average UK household spends £900 a year as a result of being influenced by online reviews. That demonstrates how significant the financial damage of fake reviews can be. In the Department for Business and Trade’s research from April this year, 11% to 15% of reviews in the category that it assessed were fake. That is the Government’s own research. The evidence is clear: action on fake reviews is needed now to protect consumers from their negative consequences. I would go so far as to say that the Opposition are doing the Government a favour by introducing these amendments. We have done the Government’s work for them.
I urge the Minister to support the amendments. Perhaps he will want to bring forward his own, as the Government are known to take good ideas when they see them, many of which they take from the Opposition. We understand that there has been significant dysfunction in Government, which may have got in the way of their doing the work that the country needs them to do. I therefore urge the Minister to support the amendments. He may also want to bring forward his own amendments at a future stage of the Bill or in the other place. I jest, with good reason, but we are not precious; we just want the right thing to be done. I hope that in his response, the Minister will confirm what action the Government will take during the passage of the Bill.
Richard Thomson
I very much support amendment 116, to the extent that I withdrew my attempt at an amendment that would have countered fake reviews. It is clear that fake reviews are a matter of real concern, not just for reputable companies, but for consumers, who like to rely on customer feedback before making some of their most important financial choices. Schedule 18 defines and sets out unfair practices, and it is only right that fake reviews be added to them. We again come back to the fundamental principle that if a market is to work effectively and efficiently, people need access to timely and accurate information. That goal of having accurate information in the marketplace is subverted considerably when fake information and misinformation are allowed to abound.
Neil Coyle
My hon. Friend the Member for Feltham and Heston and the hon. Member for Gordon have already made some excellent points, so I will be brief.
Amendment 125 would add fake reviews to the list of banned practices. No customer should be hoodwinked by the deceitful practice of submitting a fake review. Fundamentally, many customers see fake reviews as fraud, which is the fastest-growing crime. Our police services are overstretched and sadly, under this Government, they do not have the resources to tackle fraud. The amendment examines alternative routes to securing action to tackle a problem that is leading to dangerous circumstances, as has been outlined.
Amendment 125 would provide a stronger power than the one proposed, and it has been called for by organisations representing British customers and responsible British businesses. It would be better for good business, better for customers and better for ensuring that standards were upheld. The charity Electrical Safety First, which is based in Bermondsey and Old Southwark, has said that in one of its investigations 93% of products bought from online marketplaces were unsafe—93%! In some significant part, that is down to fake reviews imposing a false legitimacy on goods. People buy because they believe other people have bought and have had an enjoyable experience or got the product they sought.
My hon. Friend the Member for Feltham and Heston has already provided examples of the need to protect consumers, and I draw the attention of the Committee these live examples, which are happening right now. “A portable heater” was on eBay and people were saying it was fine, but it had
“easy access to live parts with 240 volts running through the heating element, posing”
what ESF called
“an imminent risk to life.”
Another example is a
“‘water-proof’ extension lead… on Amazon.”
Guess what? There are
“no water-proof capabilities”
and this
“presents a significant risk of electric shock. This item has already been recalled as unsafe by the Office for Product Safety and Standards”.
A combination of the takedown power and the removal of fake reviews that claimed that these products were okay and good to use would be a significant step forward—one that, sadly, is not in the Bill.
One last example is the bargain beauty products—not something I buy often for myself—on eBay that had no fuse in the plugs. That is how dangerous they were. Those goods, known to be dangerous, are still online. Removing fake reviews might help to prevent people from buying such shoddy items, but removing the goods altogether should be the fundamental aim. I politely suggest that the Minister adds ESF and specific consumer groups such as Which? to his round of pending meetings, to ensure that the Bill is improved—and to tackle the problem that he previously acknowledged existed. He likened himself earlier to “Pale Rider”. He may think he is “Pale Rider”, but I am not convinced that he has turned up on a horse, or even on a pony. Given that there is no baron here, it is more as though he is on a rocking horse.
Kevin Hollinrake
I am not sure that I can take that analogy any further. I think we are all in agreement. They say that the art of originality is to remember what you have heard but forget where you heard it. The Opposition say that we are stealing their good ideas, but obviously we committed some time ago to taking action in this area. I am not averse to taking some of the good ideas that we hear from the Opposition from time to time, but we also have to ensure that we reject the many bad ideas we hear from them in debates.
The Government agree that legislation to tackle fake reviews should be strengthened. We anticipate doing so by adding to the list of banned practices. However, it is important to get the details of those proposals right. That includes defining what we mean by fake reviews and how “reasonable and proportionate” steps will be understood. Similarly, we want those rules to encompass the manipulation of reviews that may harm consumers, which also needs detailed work with stakeholders to define. For example, the issue is not just about people trying to boost reviews, as the hon. Member for Feltham and Heston stated; it is also to do with people removing negative reviews inappropriately, which might affect ratings on review sites. The Government will therefore be consulting on fake reviews during the passage of the Bill to ensure that these rules work as intended and are clear for businesses. We will be doing that shortly, in the autumn.
The hon. Member for Bermondsey and Old Southwark talked about ESF and Which?. I have spoken to both organisations and met them regularly. In fact, one of my first jobs in my ministerial role was to speak at an Electrical Safety First conference. On that note, I hope that hon. Members will withdraw their amendments.
Seema Malhotra
I am slightly disappointed by the Minister’s response; it does not sound as if there is anything other than long grass here. Significant groundwork has been done, both within Government and with stakeholders. Having another consultation in the autumn is like long grass: it is designed to spin things out until we reach 2025 and then there is something to add to the schedule. Unless the Minister wants to tell me that there is an intention to do more during the course of the Bill, we will be pushing this to a vote.
Seema Malhotra
Schedule 18 introduces a list of commercial practices that will automatically be considered unfair in all circumstances and will be prohibited. The list is long and comprehensive, and the Opposition welcome every practice listed, including a seller’s claiming to be a signatory to a code of conduct when they are not, falsely claiming that a product is able to prevent disease, providing inaccurate information about the availability of a product, and threatening a consumer if they do not buy a product.
However, we are concerned that there are significant omissions, which we addressed during our debates on the amendments. We will be happy to consider alternative wording, but we will continue to pursue additions that we believe would strengthen the Bill and its implementation. Nevertheless, we support the inclusion of this important schedule in the Bill.
Kevin Hollinrake
As has been said, the schedule protects consumers from the most prevalent and harmful commercial practices engaged in by deceitful traders. It largely replicates schedule 1 to the Consumer Protection from Unfair Trading Regulations 2008 and provides a list of 31 commercial practices that are banned in all circumstances due to their inherently unfair nature. Among those practices are operating pyramid promotional schemes, displaying trust marks without obtaining the necessary authorisation, and stating that a product can be legally sold when it cannot.
Question put and agreed to.
Schedule 18 accordingly agreed to.
Clauses 218 to 221 ordered to stand part of the Bill.
Seema Malhotra
I beg to move amendment 127, in clause 222, page 149, line 21, at end insert—
“(j) for goods and services offered on online marketplaces, whether the third party offering the products is a trader or not, on the basis of the declaration of that third party to the provider of the online marketplace.”
This amendment would add whether or not a third party seller on an online marketplace is a trader or a consumer to the list of omissions of material information in an invitation to purchase.
The Chair
With this it will be convenient to discuss amendment 126, in clause 222, page 150, line 11, leave out “and its price”.
This amendment expands the definition of an invitation to purchase to cases where the information provided to the consumer covers the characteristics of the product but not its price.
Seema Malhotra
It is a pleasure to speak to amendment 127, tabled by my hon. Friend the Member for Pontypridd, and to make some remarks about amendment 126, tabled by my hon. Friend the Member for Bermondsey and Old Southwark.
Amendment 127 would add whether a third-party seller on an online marketplace is a trader or a consumer to the list of omissions of material information in an invitation to purchase. We have already raised concerns about the safety of products sold in online marketplaces, specifically through third-party sellers, and these concerns are accentuated by the inexplicable delay—it has been over a year since its publication was first promised, as we have discussed—of the product safety review into precisely this issue. In the meantime, the amendment would provide an extra safeguard for the consumer by making it mandatory for them to be informed about the status of a seller when they purchase a product online. That is particularly important in an increasingly digital economy, in which almost every individual or business can sell but consumers are unaware that they have different rights and forms of redress, depending on the status of the seller.
Consumer rights groups regularly conduct studies of products sold by third-party sellers on online marketplaces to test whether they comply with UK safety requirements. For example, in February this year, Which? sent 10 plug-in mini-heaters bought from online marketplaces such as Amazon and eBay to be tested at its product safety lab. All of them failed and were illegal to sell in the UK. That is especially dangerous for consumers in the light of the Conservatives’ cost of living crisis, which is resulting in people being pushed to buy cheaper, less reliable products.
Although only comprehensive Government action on this front will lead to the issue being properly tackled, the amendment would go part of the way towards providing the consumer with more power in online marketplaces, by informing them of the status of a seller and that their rights of redress when purchasing some products will vary from the rights they have when buying from the high street. It is a common-sense amendment that will help inform consumers in our digital economy and subsequently reduce the risks they face when buying from online marketplaces, and I look forward to the Minister’s response.
Amendment 126 would expand the definition of an “invitation to purchase” to cases where the information provided to the consumer covers the characteristics of a product but not its price. My hon. Friend the Member for Bermondsey and Old Southwark will speak to the amendment, which raises important questions for the Government. Removing the price from the definition of an “invitation to purchase” would ensure that many rogue traders, and the services they offer, were in scope of the definition.
As the Chartered Trading Standards Institute has pointed out, many rogue traders who target vulnerable consumers do not give a price when offering to do work. This means that it would automatically not be considered an “invitation to purchase”, and the regulations in clause 222 would not apply. By removing the reference to “price” in the definition of an “invitation to purchase”, the amendment would ensure that more rogue traders fall under the definition and can be caught by the legislation. The Minister may have his own views on the amendment. This is a really important issue, so I would welcome his response on the effectiveness of the amendment in addressing the issue and on the impact it could have.
Neil Coyle
I have a few brief supplementary comments, further to the excellent speech of my hon. Friend the Member for Feltham and Heston. I just want to point out an anomaly and the problematic nature of the wording of the Bill, which I hope the Government will re-examine before they go further.
Amendment 126 would expand the definition of “invitation to purchase” to cases in which the information provided to a consumer covers the characteristics of a product, but not its price. That might sound counterintuitive, as it did to me when I first went through this with organisations, but it would expand the goods and services covered by the legislation. That is important, because the use of “price” in the wording of the Bill could prohibit action against a rogue trader. The existing wording might stop the Government meeting the aims that they are setting out to achieve.
The suggestion is that the specific requirement that the price be covered, if that is not the price paid, will potentially prevent action from being taken against a trader who deliberately advertises a price, but then changes it. An example might be where someone arranges for a person to come and fix a car part, a boiler or a pipe leak, and that person then arrives and says, “The product you’ve looked at online is not compatible with your boiler,”—or their fittings, their car or whatever it might be—“but guess what: I’ve got a different one in the van that’s a bit cheaper,” or a bit more expensive, “but will do the job better for you.”
By making a slight change to the wording of the Bill to remove the words “and its price” on page 150, amendment 126 would deal with that kind of rogue practice, which is out there and which has been raised by trading standards. The fear among the bodies that are trying to secure greater action against rogue traders is that the existing wording of the Bill allows wiggle room and will let the dodgy practices continue. I hope that airing that specific, possibly niche concern today will give us greater time to capture it and ensure that the Bill does not preclude action against rogue traders where specific prices are agreed up front but that is not the deal that takes place, because someone pays for a cheaper or even a more expensive alternative that does the same job.
Having flagged that concern, I hope that the Government will look again at the wording and at how they will meet their overall aim, which I support.
Kevin Hollinrake
It is an interesting point. We took the decision to strengthen the existing provisions in the Consumer Protection from Unfair Trading Regulations 2008 in relation to invitations to purchase by removing the need for enforcers to prove that the transactional decision test has been met. This significantly increases the criminal liability of unscrupulous traders.
Amendment 126 would expand the definition of an invitation to purchase still further to cases in which information about products is presented to consumers without a price shown. We are concerned that that would expand the definition too far. Moreover, other provisions in chapter 1 of the Bill will achieve a similar aim: they will prohibit traders from making misleading statements or omissions in respect of all commercial practices. We feel that that covers this issue. However, I am happy to have further conversations with the hon. Member for Bermondsey and Old Southwark, certainly based on the evidence he has received, which I am happy to look at.
Amendment 127 would require that information as to whether a third-party seller or online marketplace is a trader or a consumer be added to the list of material information in an invitation to purchase. We have the same aim. Clause 222(2)(c) will require
“the identity of the trader and the identity of any other person on whose behalf the trader is acting”
to be disclosed. Moreover, subsections (2)(d) and (e) will require a range of contact details to be provided to consumers about who they may be buying from.
Accordingly, I hope that hon. Members will not press their amendments.
Seema Malhotra
I thank the Minister for his comments. We still take the view that this needs to be tighter. In the light of his intentions, which we understand, we will take it away and look at it again. I do not want to lose our amendment, but we will not press it to a vote today. Perhaps we can come back to it at a future stage of the Bill.
Neil Coyle
I am grateful to the Minister for saying that he will look at the evidence. I am happy not to press amendment 126.
Seema Malhotra
I beg to ask leave to withdraw amendment 127.
Amendment, by leave, withdrawn.
Clause 222 ordered to stand part of the Bill.
Clause 223
Public enforcement
Question proposed, That the clause stand part of the Bill.
Kevin Hollinrake
Clause 223 sets out who is responsible for enforcing the prohibition on unfair commercial practices. Trading standards have a duty to enforce the prohibitions in their areas across Great Britain. The Department for the Economy in Northern Ireland has a duty to enforce the prohibitions in Northern Ireland. The CMA has the power to enforce the prohibitions on a civil and criminal basis in the UK.
Seema Malhotra
We welcome clause 223. As the Minister states, it introduces provisions relating to the enforcement of the prohibition of unfair commercial practices, setting out how local weights and measures authorities—trading standards—will have a duty to enforce the prohibitions. The CMA will also have enforcement powers. We have talked several times in this Committee about the importance of trading standards in enforcing the regime. How involved have the CMA and trading standards been in the discussion around the powers in the Bill?
Is the Minister confident that local trading standards officers have the resources to enforce the regulations, especially after 13 years of what can only be described as a managed decline of local trading standards authorities, with local services facing a 52% reduction in service capacity under the Government’s watch since 2010? It is important to know that, because where increased expectations are coming through in legislation the question is whether there will be capacity to deliver on the new demands. I would be grateful for his response.
Kevin Hollinrake
I have meetings with the national teams of trading standards, and indeed the CMA, on a regular basis. We have had numerous discussions about the legislation, if the hon. Lady means her question broadly. Indeed, she was able to question some of those witnesses in the recent evidence sessions. Clearly, resources for trading standards are a matter for local authorities, not central Government. It is for local authorities to determine where those resources are committed.
Question put and agreed to.
Clause 223 accordingly ordered to stand part of the Bill.
Clause 224
Rights of redress
Question proposed, That the clause stand part of the Bill.
Kevin Hollinrake
Clause 224 sets out the conditions under which consumers may exercise redress rights. The main condition is that misleading actions or aggressive practices must play a significant factor in the consumer’s decision to make payment for the supply of a good or enter a contract. Without the clause, victims of rogue traders who engage in lies and aggressive selling practices would be left with no private right of redress.
Seema Malhotra
Under clause 224, as the Minister says, the consumer will be able to enforce their right to redress relating to unfair commercial practices, subject to conditions, including that they have entered into a relevant contract, that the trader has engaged in a prohibited practice, that the prohibited practice was a significant factor in the consumer’s decision to make payment, and that the product concerned is not of an excluded type. Those are important provisions, including in the context of our debate about greenwashing. That is why it is important that we take forward the issues we have debated. None the less, we welcome the clause and these important provisions.
Question put and agreed to.
Clause 224 accordingly ordered to stand part of the Bill.
Clause 225
Rights of redress: further provision
Richard Thomson
I beg to move amendment 67, in clause 225, page 152, line 30, at end insert—
“(4A) The Secretary of State must by regulations make any further provision necessary to ensure that the rights of redress available under this Chapter are equivalent to, and not lesser than, those available under the Consumer Protection from Unfair Trading Regulations 2008 (S.I. 2008/1277).”
This amendment seeks to ensure that the “Consumer Rights to Redress” that will be set out through secondary legislation cannot offer a reduced level of the protection than the Consumer Protection from Unfair Trading Regulations 2008.
The Chair
With this it will be convenient to discuss amendment 114, in clause 225, page 152, line 33, at end insert—
“(7) The Secretary of State must—
(a) prepare a report on the merits of introducing a consumer right to individual and collective redress by regulations set out in 225(1), and
(b) lay a copy of this report before Parliament.
(8) The report must be laid within the period of 12 months beginning with the day on which this Act is passed.”
This amendment would require the Secretary of State to prepare and lay before Parliament a report on the merits of introducing a consumer right to individual and collective redress through secondary legislation, as is the case in EU member states.
Richard Thomson
As the explanatory statement sets out, amendment 67 seeks to ensure that the consumer rights to redress introduced through secondary legislation by Ministers cannot offer less protection than the Consumer Protection from Unfair Trading Regulations 2008. That statutory instrument was effectively the successor to the Trade Descriptions Act 1968 and was designed to implement the unfair commercial practices directive as part of a common set of European minimum standards for consumer protection. Consumers, not just in Europe but throughout the UK, have benefited immensely from those protections. It is important as a point of principle that as legislation is repealed or evolves, there should be no inadvertent reduction in baseline consumer protections. There should be a reduction in consumer protections only where the Government deliberately choose to do so and we have an open debate.
The amendment is very much about ensuring that nothing slips down the drain inadvertently in terms of consumer protection. If the Government are not minded to accept it, what existing protections will they unwittingly let fall by the wayside? The amendment would capture the baseline level of protection through future secondary legislation. I look forward to the Minister’s remarks.
Seema Malhotra
I am pleased to speak to amendment 114, which stands in my name and that of my hon. Friend the Member for Pontypridd. I will also make reference to amendment 67, tabled by the hon. Member for Gordon.
Amendment 114 would require that the Secretary of State prepare and lay before Parliament a report on the merits of introducing a consumer right to individual and collective redress through secondary legislation, as is the case in EU member states. Amendment 67 would ensure that the consumer rights to redress set out in secondary legislation cannot offer less protection than the Consumer Protection from Unfair Trading Regulations 2008. We support the principle of amendment 67, which would have a similar effect to amendment 114 by ensuring a more robust consumer right to redress.
More specifically on amendment 114, I refer the Minister to the written evidence of Which?, which notes that
“the Bill states that ‘Consumer Rights to Redress’ may be provided for in future secondary legislation, so it will give the Secretary of State powers to amend these rights. These rights are fundamentally important, as they include payment of damages when a trader misleads a consumer. We want assurances that they will not be downgraded as a result of this process, and a commitment from the Government to strengthen redress procedures when these new regulations are drafted.”
Amendment 114 would require a commitment from the Government to report on doing that, aiding the process of strengthening redress procedures when new regulations are drafted. I urge the Government to support amendments 114 and 67, and to ensure that consumer rights to redress are as strong as they can be, particularly in an increasingly digital economy.
Kevin Hollinrake
Amendments 67 and 114 deal with consumers’ private rights to redress. I agree with the hon. Members for Feltham and Heston and for Gordon that it is vital that consumers have robust private rights of redress.
Amendment 67 would limit changes by regulation to the consumer rights of redress to those that are equivalent to the remedies in the CPRs—the Consumer Protection from Unfair Trading Regulations 2008. The Bill includes powers to amend rights of redress. That could include how such rights are exercised; the powers could also be used to make those rights clearer and simpler. Those would be positive changes for consumers that might not meet the test of equivalence to the current regulations that the amendment would impose. We would like to retain the ability to exceed the existing private redress provisions, if appropriate, which may encourage more consumers to make use of these rights. The first regulations made using the power will be to create the new regime to replace the current private redress provisions in the CPRs. Accordingly, those regulations will be subject to parliamentary approval via the affirmative procedure, thereby providing for appropriate parliamentary oversight of use of the power.
I turn to amendment 114. The courts already have the power to make an enforcement order against an infringer, or to accept undertakings from them to provide redress to affected consumers, through the measures in part 3. Enforcers can also accept undertakings from infringers to provide redress to affected consumers. For example, in 2021 the CMA secured an undertaking from Teletext Holidays to pay over £7 million in outstanding refunds from package travel trips cancelled due to covid-19.
The Bill will make the power to require enhanced consumer measures directly available to the CMA. Consumers also already have individual private rights of redress. In the “Reforming competition and consumer policy” consultation, we consulted on whether to introduce a right for consumers to bring collective redress. Responses were mixed, with concerns raised about unintended consequences such as the creation of a claims culture and inadvertently disincentivising the bringing of proceedings by consumer groups.
The hon. Member for Feltham and Heston referred to the EU situation. The outcome, however, is similar to the desired situation under the EU’s directive on collective redress, which requires member states to designate entities, such as consumer organisations, that can bring actions for collective redress on consumers’ behalf. The EU does not mandate that member states introduce direct rights for individual consumers to bring an action for collective redress.
We will keep the evidence under review, but our priority is to embed the CMA direct enforcement regime and understand the impact that it makes. On that basis, I hope that hon. Members will not press their amendments.
Richard Thomson
With regret, I am not minded to withdraw amendment 67. I hear what the Minister says about how the Government may wish to go beyond existing levels of consumer protection. That is welcome where appropriate, but I do not see anything in the amendment that would prevent Ministers from doing that. The key element in the amendment is to capture a baseline level of protection, equivalent to what was in the 2008 regulations, to ensure that there is nothing that dips below that without a conscious decision to do so having been taken and debated. On the basis that there is nothing that would prevent the Government from enhancing the levels of protection at any time, I am keen to divide the Committee.
Question put, That the amendment be made.
Digital Markets, Competition and Consumers Bill (Fourteenth sitting)
Tuesday 11th July 2023
(1 year ago)
Public Bill CommitteesRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 11 July 2023 - (11 Jul 2023)
The Chair
Before we begin, I have a few reminders. Clearly, given the heat, please feel free to remove jackets. Please switch electronic devices to silent. No food or drink is permitted during the sitting, except for water. Any notes can be passed to Hansard colleagues.
Clause 283
Meaning of “ADR” and related terms
The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
I beg to move amendment 83, in clause 283, page 189, line 5, leave out subsection (9) and insert—
“(9) For the meaning of “exempt ADR provider” and “exempt redress scheme” see section 287.”
The amendment provides a signpost for the reader to clause 287, which identifies who are exempt ADR providers for the purposes of Chapter 4.
The Chair
With this it will be convenient to discuss the following:
Clause stand part.
Government amendments 84 to 89.
Clauses 284 and 285 stand part.
Government amendments 90 and 91.
Clause 286 stand part.
Kevin Hollinrake
It is a pleasure to serve under your chairmanship on hopefully the last day of this Bill Committee, Dame Maria. Chapter 4 of part 4 of the Bill aims to strengthen the quality of alternative dispute resolution available to consumers. The chapter replaces EU-derived regulations on ADR with a stronger regime that requires ADR providers to be accredited. Clause 283 defines ADR, which includes mediation, arbitration, early neutral evaluation and action under an ombudsman scheme, and who is an ADR provider. It applies only where ADR is provided in the context of a consumer contract dispute.
Government amendment 83 makes a consequential change to clause 283 in connection with amendments to clause 287. Clause 284 defines consumer contracts and consumer contract disputes. Consumer contracts include suppliers of electricity, gas, water and heat. Government amendments 84 to 88 add references to Scottish and Northern Irish legislation in relation to the supply of those utilities, which were omitted on introduction. Government amendment 89 removes a superfluous definition. Clause 285 prohibits ADR providers from carrying out ADR unless they are accredited or acting for someone who is. That is subject to the exemptions provided in clause 287. It also prohibits ADR providers arranging for third parties to carry out ADR on their behalf unless their accreditation or exemption permits that.
Clause 286 restricts the fees that accredited ADR providers may charge consumers to fees approved by the Secretary of State and those that are published. That will prevent excessive fees and ensure transparency in fee charging. Government amendments 90 and 91 clarify that the limited conditions under which fees may be charged apply only to accredited ADR providers. I commend the clauses to the Committee.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is a pleasure to serve under your chairship, Dame Maria. I thank the Minister for his opening remarks. This is an important part of the Bill. Clause 283 defines ADR and related terms for the purposes of the chapter. Part 4 makes accreditation of ADR providers compulsory unless an exception applies. It includes examples of ADR, such as mediation, arbitration, early neutral evaluation and action under an ombudsman scheme. In her evidence, Tracey Reilly from Consumer Scotland welcomed measures in the Bill as making it
“easier for consumers to seek redress through ADR systems that are appropriately regulated and standardised.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 36, Q49.]
We welcome the straightforward definitions, as well as the broader chapter, which will hopefully increase trust in and use of ADR services in disputes between businesses and consumers. The Government’s policy paper on ADR released in April highlights that
“46% of consumers using alternative dispute resolution had problems including concerns over the time the process took, customer service or a perception that the process favoured the business. 54% of cases took longer to resolve than the 3 months allowed—16% of consumers who went to court did so because the business refused to comply with a previous alternative dispute resolution decision.”
That demonstrates the scale of the challenge that we face in reforming ADR provisions so that they work for consumers. We welcome this chapter as a first step in seeking to meet that challenge.
As Graham Wynn, of the British Retail Consortium, noted in his evidence,
“the accreditation system and making sure that companies abide by what they are supposed to do in ADR is vital to have confidence in general.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 51, Q84.]
Not having a full assessment of ADR providers has been an issue with the current arrangements.
Amendment 83 provides a signpost to clause 287, which identifies who are the exempt ADR providers for the purposes of chapter 4. We recognise that this amendment provides greater clarity in the legislation.
Clause 284 defines other terms for the purposes of this chapter, and they include “Consumer contract” and “Consumer contract dispute”. We welcome these definitions, and we support amendments 84 to 89.
Clause 285 introduces provisions prohibiting a person from carrying out alternative dispute resolution in relation to a consumer contract dispute unless they are accredited or exempt, or acting under “special ADR arrangements”. The explanatory notes state:
“Special ADR arrangements are designed to cover ADR schemes under which the ADR is provided through persons who might, for instance, be styled as ‘case handlers’, ‘adjudicators’ or ‘ombudsmen’”—or women—
“who are employed, or engaged by, or on behalf of, an ADR provider running the scheme. In that case, the person providing the ADR would not need accreditation, so long as the ADR provider running the scheme is accredited or exempt and is permitted to make special ADR arrangements.”
We will need to ensure that there is clarity in distinction and that there is cover in terms of regulatory cover and also expectations of quality, and we recognise that this clarity about special ADR arrangements will be important for that purpose. This is a welcome clause, ensuring that ADR providers are accredited and not liable to act against the interest of a consumer seeking redress. With regard to the exemptions, I will make a few remarks on clause 287.
Clause 286 limits the fees that accredited ADR providers may charge consumers to those charged in accordance with provisions approved by the Secretary of State, and published in a way likely to come to the attention of consumers. Although the Opposition welcome the provisions limiting the fees that consumers can be charged, I would welcome the Minister expanding on this clause slightly. I would, for example, welcome further explanation of the process by which the fees will be approved by the Secretary of State, and their transparency. It is important that there is predictability, fairness, consistency and transparency for consumers when it comes to any fees around ADR, so it will be important to have clarity from the Minister in this regard.
Finally, we support amendments 90 and 91.
Kevin Hollinrake
Clearly, the Bill sets out the fact that ADR providers are restricted in what they can charge for. It is therefore very much the assumption that the fees that they charge will be fair and transparent; that is the basis of this. I am not sure what clarification the hon. Lady might be seeking other than on those particular points.
Seema Malhotra
This is more about ensuring that there is a fair process and that it is clear, so that we do not have a situation in which consumers are being charged more than they ought to be because there has not been clarity about the Government expectations as to how those fees will be set. I was just seeking clarity on that.
Kevin Hollinrake
I do not have anything further to add. Perhaps we can have a discussion about this offline.
Amendment 83 agreed to.
Clause 283, as amended, ordered to stand part of the Bill.
Clause 284
Other definitions
Amendments made: 84, in clause 284, page 189, line 34, leave out “(the gas code)” and insert “, or by section 12(1) or (2) of the Energy Act (Northern Ireland) 2011 (2011 c. 6),”.
The provisions of the Gas Act 1986 referred to in clause 284(3)(b) do not extend to Northern Ireland. This amendment would add a reference to the corresponding legislation in Northern Ireland.
Amendment 85, in clause 284, page 189, line 39, leave out “(the electricity code”) and insert “or by paragraph 3(1) or (2) of Schedule 6 to the Electricity (Northern Ireland) Order 1992 (S.I.1992/231 (N.I.1))”.
The provisions of the Electricity Act 1989 referred to in clause 284(3)(d) do not extend to Northern Ireland. This amendment would add a reference to the corresponding legislation in Northern Ireland.
Amendment 86, in clause 284, page 190, line 4, at end insert “or Part 2 of the Electricity (Northern Ireland) Order 1992”.
Part 1 of the Electricity Act 1989 does not extend to Northern Ireland. This amendment would add a reference to the corresponding legislation in Northern Ireland.
Amendment 87, in clause 284, page 190, line 6, at end insert “or Part 2 of the Gas (Northern Ireland) Order 1996 (S.I.1996/275 (N.I.2))”.
Part 1 of the Gas Act 1986 does not extend to Northern Ireland. This amendment would add a reference to the corresponding legislation in Northern Ireland.
Amendment 88, in clause 284, page 190, line 8, at end insert—
“(b) a person supplying water under a water services licence within the meaning of the Water Services etc. (Scotland) Act 2005 (asp 3), or
(c) a water undertaker within the meaning of the Water and Sewerage Services (Northern Ireland) Order 2006 (S.I.2006/3336 (N.I.21)).”
The definition of “water supplier” in Part 1 of the Water Industry Act 1991 only extends to England and Wales. This amendment would add references to the corresponding suppliers in Scotland and Northern Ireland. In the current text of the definition, the words after “means” will become paragraph (a).
Amendment 89, in clause 284, page 191, leave out line 4.—(Kevin Hollinrake.)
The amendment deletes an unnecessary word: the term “business” does not need to be defined as it is not used in Chapter 4 of Part 4 of the Bill.
Clause 284, as amended, ordered to stand part of the Bill.
Clause 285 ordered to stand part of the Bill.
Clause 286
Prohibitions relating to acting as ADR provider
Amendments made: 90, in clause 286, page 191, line 39, after “the” insert “accredited”.
This is a drafting amendment to clarify which ADR provider is referred to in clause 286(2)(a).
Amendment 91, in clause 286, page 192, line 4, after “the” insert “accredited”.—(Kevin Hollinrake.)
This is a drafting amendment to clarify which ADR provider is referred to in clause 286(2)(c).
Clause 286, as amended, ordered to stand part of the Bill.
Clause 287
Exempt ADR providers
Kevin Hollinrake
I beg to move amendment 92, in clause 287, page 192, line 11, leave out subsection (1) and insert—
“(1) In this Chapter—
“exempt ADR provider” means a person who—
(a) is listed (or of a description of persons listed) in Part 1 of Schedule 22, or
(b) is (when carrying out ADR or making special ADR arrangements) acting under or for the purposes of an exempt redress scheme;
“exempt redress scheme” means a scheme or other similar arrangement which is listed (or of a description listed) in Part 1A of Schedule 22.”
The amendment reflects the approach proposed by the government amendments to Schedule 22 to have two lists: Part 1 will list particular authorities (or descriptions of authorities) who are (if and to the extent they carry out ADR or make special ADR arrangements) exempt ADR providers. Part 1A will list “exempt redress schemes”. A person who carries out ADR or makes ADR arrangements under or for the purposes of an exempt redress scheme will be an exempt ADR provider.
The Chair
With this it will be convenient to discuss the following:
Government amendments 93 to 96.
Clause stand part.
Government amendments 108 to 111.
That schedule 22 be the Twenty-second schedule to the Bill.
Kevin Hollinrake
Clause 287 and schedule 22 exempt various bodies that, so far as they provide ADR, it is not considered appropriate to regulate, and also exempt ADR under statutory redress schemes regulated by other legislation. Clause 287 allows the exemptions to be reviewed and updated.
Government amendments 92 to 96 amend clause 287, and Government amendments 108 to 111 amend schedule 22. They distinguish more clearly between the two categories of exemption. They also add exemptions for the local government and social care ombudsman, the Independent Adjudicator for Higher Education, the Parliamentary Commissioner for Administration and redress schemes for social housing, lettings agencies and property management.
Seema Malhotra
Clause 287 introduces schedule 22 into the Bill, which sets out the persons exempt from ADR provisions. I will also make a few remarks on schedule 22. Clause 287 also introduces a provision for the Secretary of State to add or remove from the list of exemptions. I want to clarify with the Minister why this delegated power has been left to the negative procedure. There may be a good reason for that decision, but it would be helpful to understand that.
We support amendments 92 to 96; the Minister has spoken to them. Schedule 22 sets out the list of ADR providers exempt from the regulations. As the explanatory notes explain and the Minister said:
“These include persons or bodies providing, or administering, dispute resolution services which are regulated under other legislation, who are exempted in order to avoid duplication or conflict between statutory regimes”.
That is important because obviously we do not want to have over-regulation or confusion between different parts of statute.
I ask the Minister for assurances that consumers using exempt providers will be able to expect the same level of protection from those that are non-exempt ADR providers. We do not have time in Committee to go through all the comparable regulations that exempt providers will be subject to, but from a consumer perspective the expectation should be that the protections, in terms of expectations of service and the regulations, will be comparable. I would be grateful for the Minister’s confirmation of that, and an assurance that the analysis has been done, because legislation is passed at different times and we want to be sure of that consistency.
Amendment 108 alters the list of persons in part 1 of schedule 22. There are other changes within amendments 108 to 111. We have no issue with any of those amendments, and we support them.
Kevin Hollinrake
On the use of the negative procedure, we feel that these are technical and mechanical changes, just to ensure that the statute remains up to date and clear, and to prevent excessive use of parliamentary time. Clearly, ADR providers are regulated by other means. We see no duplication in their regulation. The Financial Ombudsman Service, for example, is already regulated and overseen by the Financial Conduct Authority. We think that it would be needless to duplicate that kind of oversight.
Amendment 92 agreed to.
Amendments made: 93, in clause 287, page 192, line 19, leave out subsection (3) and insert—
“(3) Regulations under subsection (2) may, in particular—
(a) provide for an entry in Part 1 of Schedule 22 to apply to a specified person or to any person of a specified description;
(b) provide for an entry in Part 1A of that Schedule to apply to a specified scheme or any scheme of a specified description;
(c) limit the scope of the exemption given to a person by virtue of an entry in Part 1 or IA of that Schedule, whether in relation to carrying out ADR or making special ADR arrangements (or both).”
This amendment clarifies the scope of the power to make regulations under clause 287(2). The effect of the exemption given to a person by an entry in Part 1 or 1A of Schedule may be limited, for example by reference to the purposes for which an otherwise prohibited activity is carried out or to the kinds of otherwise prohibited activity that are (or are not) exempt.
Amendment 94, in clause 287, page 192, line 34, leave out subsection (5) and insert—
“(5) Subject to any limitation on its scope provided for by Schedule 22—
(a) an exemption given to a person by virtue of an entry in Part 1 of that Schedule covers anything done by the person in the exercise of the person’s functions that would otherwise be prohibited, and
(b) an exemption given to a person by virtue of an entry in Part 1A of that Schedule covers anything done under or for the purposes of an exempted redress scheme that would otherwise be prohibited.”
The amendment clarifies the general scope of an exemption that will apply by default, unless there is provision in the Schedule for it to be more limited.
Amendment 95, in clause 287, page 192, line 37, after “section” insert
“—
‘prohibited’ means prohibited by section 285(1) or (2);”.
The amendment defines “prohibited” for the purposes of the clause by reference to clause 285.
Amendment 96, in clause 287, page 193, line 1, leave out subsection (8).—(Kevin Hollinrake.)
The amendment omits a subsection that is no longer needed as a result of the other government amendments to clause 287 and Schedule 22.
Clause 287, as amended, ordered to stand part of the Bill.
Seema Malhotra
On a point of order, Dame Maria. I would be grateful for your guidance. The Minister made some remarks in response to my questions and I did not get the chance to intervene on him. I know that we have moved on, so is it best that I write to him on the questions that he did not answer on comparable regulation?
The Chair
I think that it would be easier for the Committee were you to deal with those things outside of the Committee now that we have moved on, but obviously if pertinent issues are raised by further parts of the Bill, you might be able to cover some of those issues then.
Schedule 22
Exempt ADR Providers
Amendments made: 108, in schedule 22, page 356, leave out from beginning of line 31 to end of line 11 on page 357 and insert—
“List of exempt persons
The Commission for Local Administration in England (also known as the Local Government and Social Care Ombudsman) and each Local Commissioner within the meaning of section 23(3) of the Local Government Act 1974
The Consumer Council for Water
The Health Service Commissioner for England
The Legal Ombudsman
The Northern Ireland Public Services Ombudsman
The Office of the Independent Adjudicator for Higher Education (registered company number 04823842) in relation to its functions as the designated operator under section 13 of the Higher Education Act 2004
The Parliamentary Commissioner for Administration
The Pensions Ombudsman”.
This amendment alters the list of persons in Part 1 of Schedule 22. The listed persons will, subject to any limitation on their exemption provided for in the Schedule, be exempt from the prohibitions in clause 285. The first, sixth and seventh entries are new. Other entries currently in Part 1 are omitted because they are superseded by entries in Part 1A of Schedule 22 as proposed by Amendment 109.
Amendment 109, in schedule 22, page 357, line 15, at end insert—
“Part 1A
Exempt redress schemes
An approved estate agents redress scheme
An approved postal operators redress scheme
An approved social housing ombudsman scheme
Approved public communications provider dispute procedures
The Financial Ombudsman Scheme
A qualifying lettings agency work redress scheme
A qualifying property management work redress scheme
A qualifying redress scheme for the gas or electricity sector”.
The amendment inserts a Part 1A in Schedule 22 listing schemes or similar arrangements that are to be “exempt redress schemes” for the purposes of Chapter 4 of Part 4 (ADR).
Amendment 110, in schedule 22, page 357, line 18, leave out “Part 1” and insert “this Schedule”.
This amendment is consequential on the insertion of Part 1A of Schedule 22 proposed by Amendment 109.
Amendment 111, in schedule 22, page 357, line 28, at end insert—
“‘approved social housing ombudsman scheme’ means a scheme which is approved for the purposed of Schedule 2 to the Housing Act 1996;
‘qualifying lettings agency work redress scheme’ means a redress scheme which is approved as mentioned in section 83(1)(a), or is a government scheme for the purposes of section 83(1)(b), of the Enterprise and Regulatory Reform Act 2013;
‘qualifying property management work redress scheme’ means a redress scheme which is approved as mentioned in section 84(1)(a), or is a government administered redress scheme for the purposes of section 84(1)(b), of the Enterprise and Regulatory Reform Act 2013;”.—(Kevin Hollinrake.)
The amendment defines three expressions used in entries in Part 1A as proposed to be inserted by Amendment 109.
Schedule 22, as amended, agreed to.
Clause 288
Applications for accreditation etc
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to consider the following:
Government amendments 97 to 100.
Clauses 289 and 290 stand part.
Government amendment 101.
Clauses 291 and 292 stand part.
That schedule 23 be the Twenty-third schedule to the Bill.
Clause 293 stand part.
Government amendments 102 to 105.
Clause 294 stand part.
Government amendment 106.
Clause 295 stand part.
Government amendment 107.
Clause 296 to 300 stand part.
Government amendment 112.
That schedule 24 be the Twenty-fourth schedule to the Bill.
Clause 301 stand part.
Kevin Hollinrake
Clauses 288 to 292 and schedule 23 cover the accreditation process for ADR providers, which ensures that standards are high and providers perform well. Clause 288 covers the application process and application requirements, including fees, must be published.
Clause 289 covers the outcome of those applications. Applicants will be accredited only if they satisfy the accreditation criteria, which I will explain in the context of clause 292. The Secretary of State can reject, limit or impose conditions on an accreditation, and the applicant must be told why.
Government amendments 97, 98 and 99 clarify that, in extending a limited accreditation at a later date, the Secretary of State can impose new conditions or alter existing ones. Government amendment 100 provides that conditions can be imposed to make an ADR provider responsible for the acts of a third party carrying out ADR on its behalf.
Clause 290 sets out how non-compliant ADR providers can be suspended, or their accreditation limited or revoked. It contains safeguards, including the right for ADR providers to make representations before these sanctions are imposed. Clause 291 allows the Secretary of State to charge accredited ADR providers for the cost of their ongoing accreditation.
Government amendment 101 corrects a drafting error regarding those fee provisions. Clause 292 and schedule 23 specify the accreditation criteria. These encompass standards relating to accessibility, expertise, fairness, independence, impartiality and transparency. Clause 292 allows the criteria to be kept under review and, if necessary, modified.
Clause 293 empowers the Secretary of State to issue enforcement notices to ADR providers who operate without accreditation or violate key obligations. Non-compliance with that notice can be enforced as if it were a court order. The clause contains safeguards, including giving the ADR provider an opportunity to make representations before an enforcement notice is issued.
Clause 294 allows the Secretary of State to make regulations requiring ADR providers and others to provide information about ADR to the Secretary of State or publish it for consumer awareness. The clause limits the purposes for which the Secretary of State can require provision of information. Government amendments 102 to 105 ensure that those limits will apply if the Secretary of State’s functions are conferred on another person under clause 298.
Clause 295 allows the Secretary of State to direct ADR providers and regulators to provide information. This allows the provision of specific information from a person when circumstances require it.
Government amendment 106 removes a definition of data protection legislation that is not needed as it is defined elsewhere. Clause 296 allows the Secretary of State to publish or disclose information they hold in relation to this chapter, subject to data protection.
Government amendment 107 is a drafting improvement to recognise that clause 296 contains several disclosure powers. Clause 297 defines terms used in clauses 294 to 296.
Clause 298 allows regulations to confer functions on persons other than the Secretary of State. This might, for instance, be used to confer accreditation functions on a regulator within the sphere of its regulatory activities.
Clause 299 requires traders, when responding to a consumer contract complaint, to inform consumers about any ADR or dispute resolution arrangements in which that trader is required to participate. Clause 300 and schedule 24 revoke the EU-derived ADR regulations of 2015 and amend other legislation.
Government amendment 112 is a drafting amendment to ensure there is an accurate description of the content of paragraph 11 of schedule 5 to the Consumer Rights Act 2015. Clause 301 makes transitional arrangements, including to ensure that chapter 4 does not apply to ADR already in progress when it comes into force.
I hope that hon. Members will support Government amendments 97 to 107 and Government amendment 112. I commend the clauses and schedules to the Committee.
Seema Malhotra
As the Minister outlines, clause 288 sets out how persons or companies wishing to become accredited as ADR providers should apply for accreditation under chapter 4. Specifically, the clause sets out how a person wishing to be accredited must apply to the Secretary of State.
I want to raise a concern with the Minister about some of the details that are lacking in the Bill and, from what I could see, the Bill’s supporting documentation; he may want to direct me to other documentation that we have missed. My question concerns subsection (4), which states:
“The Secretary of State may determine the procedure to be followed in relation to an application for accreditation.”
Subsection (5) then lists some criteria, but the procedure is still very open. If a consumer wants to know how people or organisations are accredited, the Bill does not provide clarity. That gives rise to concerns about what scrutiny will be possible if the procedure is not, for example, set out in detailed regulations. I would therefore be grateful if the Minister could explain what further detail there is.
The providers will have quite a significant role in dealing with disputes. As I have said previously, we have heard about the Government’s research into consumers’ experiences, and the quality of ADR providers will be in part determined by the quality of the process by which they are accredited. That is why this issue is important. I would be grateful for the Minister’s response, because a lot could be left to the Secretary of State’s discretion. The Minister might become the Secretary of State—we do not know, although obviously that would be a great thing for the Minister—but we have to make legislation that is future proof for future regimes, so that people can have confidence in it.
If further detail on the procedure is to be published, when might that happen? Will it be after the Bill has attained Royal Assent, which, according to the impact assessment, may not happen until 2025? If further guidance is needed on what people need to do to be accredited, that will cause further delays. Are we potentially talking about 2026 before ADR providers are in place? That feels like quite a long way away.
The ADR provisions are important for increasing consumer protection, and we welcome them. However, this key part of how we ensure the quality of that provision, which would deal with the issues of confidence I referred to in my previous remarks, should be more clearly addressed. If necessary, more detail should be in the Bill itself.
Clause 289 deals with how the Secretary of State would determine applications for accreditation or for the extension of an accreditation, but does not provide us with detail about how those decisions will be made. That relates to the same points I raised in relation to clause 288, and the Minister may therefore want to address it directly.
Amendment 97 makes it clear that new accreditation conditions imposed when extending an accreditation are not limited to any particular part of the extended accreditation. We support the amendment.
Amendments 98 and 99 are drafting amendments to clarify which accreditation conditions can be varied or removed by the Secretary of State when extending an accreditation. I would be grateful to discover whether any of the changes that might be made for ADR providers will be published so that they are on the public record. I do not know whether there will be a public record of ADR providers, so perhaps the Minister will also clarify that. If there is to be a public list, where will it be? That point relates to other issues, such as how people will be aware of those who might be able to provide the service.
Government amendment 100 will make it clear
“that accreditation conditions can be worded so as to make an accredited ADR provider directly responsible for things done by another ADR provider who carries out ADR under special ADR arrangements made by the accredited provider under its accreditation. This could enable regulatory action under clause 290 or 293 to be taken against the accredited ADR provider in relation to acts of the other ADR provider.”
This is important. It is a common-sense amendment, and it will extend protections for consumers.
Clause 290 will enable the Secretary of State by notice to revoke, suspend or limit an accreditation, or impose further conditions on a previously accredited ADR provider. Will the Minister clarify how that might come about? I should say that ADR providers could apply to have their accreditation revoked, and there are grounds on which the Secretary of State could apply specified sanctions. How will the changes come about? How will the information need to be received to meet a condition under subsection (3), listing contraventions? Might one route be through a consumer complaints system on the ADR process? How will that work?
Perhaps I missed it, but I am not clear about when a consumer with concerns might challenge an ADR provider’s service or whether that is a route through which such matters might come to the notice of the Secretary of State in order to revoke, suspend or limit an accreditation or impose further conditions. Will the Minister clarify how the system is joined up from the perspective of the consumer and how the process will be managed? That would be extremely helpful. Otherwise, we welcome the clause as a necessary element of the new ADR provisions and as necessary to ensure that any ADR providers not fulfilling their duties to protect consumers can be stopped from acting as such a provider.
Clause 291 sets out how the fees that accredited ADR providers will be required to pay to the Secretary of State will be determined. We recognise the need for the clause, and the potential need for ADR providers to pay periodic fees to maintain their accreditation and commitment to remaining accredited. However, I would welcome further explanation from the Minister because we are not clear about the amount to be paid in fees, the frequency of the fees or their purpose—where they will go. That is not clearly set out in the Bill or in the accompanying paperwork. Will the Minister clarify whether some of these issues will come back in secondary legislation or whether we can identify the answers to those questions in other parts of the supporting paperwork?
I think the legislation might suggest that the fees cover the costs of the functions under the chapter, but it is important for legislative scrutiny that we have clarity on that. Small businesses might be involved, and we want clarity and fairness in the process.
Amendment 101, which we support, will correct a mistake in clause 291. We support clause 292. Schedule 23 sets out the criteria for an ADR provider to become accredited, including the provision of information to consumers, the independence and impartiality of the provider, and so on. We welcome the schedule in ensuring that there are important and clear criteria for people acting as ADR providers.
Kevin Hollinrake
The hon. Member for Feltham and Heston has raised a number of points for me to respond to. As an overarching point, we are moving from a voluntary to a mandatory system of ADR regulation, so we should not look at it as if we were starting from scratch. We are improving an existing system, which should give us some assurance that this is an improvement, not a step back from improving standards in this area.
One of the hon. Lady’s principal points was about the criteria that we apply for accrediting an ADR provider. They have to be kept high-level, because there are a wide variety of different providers, so it would be wrong to be too specific about the criteria we apply. However, clause 292 and schedule 23 both set out the principles behind what accreditation will look like at every scheme level, including standards on accessibility, expertise, fairness, independence, impartiality and transparency. Clause 292 will allow the criteria to be kept under review and to be modified if necessary and appropriate. On the public record, yes, there will be a list of ADR providers.
Seema Malhotra
I recognise what the Minister says about moving to a mandatory system and the improvements being made, which is why it is important that we do not leave gaps. However, I want to push him on my point about expertise.
Kevin Hollinrake
I will come to that. Criterion 3 in schedule 23 clearly sets out that a provider will be required to have the relevant expertise. Has the hon. Lady read that criterion?
Seema Malhotra
I have, and I quoted it to the Minister. What I asked him was how he will determine expertise, because in other legislation on ADR that we have debated, there has been some process. Have the providers been accredited? Is it based on experience? Do they have particular qualifications? Otherwise, expertise can be very subjective. That was the question I asked.
Kevin Hollinrake
And that was the question I answered. In response to the hon. Lady’s points, I said that the criteria have to be kept high-level. It would be wrong to be too specific about how we judge “expertise”, because of the wide variety of different ADR providers. What we all need to do is trust the process, which the Secretary of State oversees, of trying to make sure that each provider has the relevant expertise in each scheme area. As I said, there are schemes already in place that we are now putting under the mandatory regime. Of course, expertise will be judged on a scheme-by-scheme basis, but it is difficult to set out exactly what expertise we will require in any particular scheme, other than that we would expect the person to have the relevant experience and expertise.
Seema Malhotra
Of course I will trust the process, where I am sure that the process is a robust one. I do not think that we need to debate the issue much further, but it is not resolved, if I may say so. As I mentioned, I have been involved—it may have been with the Minister’s predecessor—with previous legislation relating to the ADR process. Anyone can say that they have expertise in something, but the important question is what their qualification is and how it is determined. I will look again at the issue, and I may follow up with the Minister in writing.
The Chair
May I just remind members of the Committee that interventions should be pithy?
Kevin Hollinrake
I am happy to continue the debate with the hon. Lady and to correspond with her on the matter.
There is a broader picture here, which I am trying to set out in my response to the hon. Lady. There will certainly be the public list of ADR providers that she referred to. Where people are most likely to find that list will be in dealing with a particular trader in a particular scheme, regarding the requirement set out in clause 299 for a trader responding to a consumer contract complaint to inform consumers about the ADR process. That is where we expect people to be most likely to find the ADR scheme available.
The hon. Lady asked how somebody can complain about ADR schemes. That ties in with a broader point about how we manage the whole process, and to other points that she made. People can, of course, complain directly to the Secretary of State if they are dissatisfied with an ADR provider. However, I think a complaint is more likely to come through other routes such as Citizens Advice, which is largely funded by the Government, through trading standards or through letters to Government Ministers from Members of this House; I often respond to such letters that raise concerns. That is how we build a picture of the efficacy or otherwise of a particular ADR scheme. We would expect that at that point, if there are a number of complaints about an ADR provider, the Secretary of State will intervene and use their capabilities under the Bill.
As the hon. Lady set out, the Bill provides for ADR providers to pay fees to cover the cost of processing applications and their ongoing accreditation. Under the existing accreditation regime, the Department for Business and Trade charges fees at a pro rata daily rate of £750. That is the context in which we expect fees to be set.
The hon. Lady asked what we will do about ADR providers who do not do the right thing and do not provide the proper service. Revocation is available to the Secretary of State. The accreditation criteria will ensure, among other things, that ADR providers meet standards of expertise, fairness and impartiality. If ADR providers do not meet those standards, their accreditation may be revoked or suspended, or additional conditions may be put in place to improve their performance. We have tackled the issue of sufficient expertise, on which we may agree to differ.
The hon. Lady raised clause 294, which allows the Secretary of State to make regulations requiring the provision of information about ADR. As clause 294 sets out, that can be for the benefit of consumers, but it can also be with regard to the operation of particular schemes. Again, that is a reason why the information might be requested. It might not be suitable for public consumption, or there could be other reasons, such as commercial sensitivity or data protection, why that information might not be published, but it can be published if the Secretary of State sees fit.
The hon. Lady referred to clause 298, which allows regulation to confer functions on persons other than the Secretary of State. That provision might be used, for instance, to confer accreditation functions on a regulator. It gives broad oversight of other areas of the ADR regime that are not directly covered by this legislation.
Question put and agreed to.
Clause 288 accordingly ordered to stand part of the Bill.
Clause 289
Determination of applications for accreditation or extension of accreditation
Amendments made: 97, in clause 289, page 195, line 3, leave out “as extended”.
This is a drafting amendment to make clear that new accreditation conditions imposed when extending an accreditation are not limited to any particular part of the extended accreditation.
Amendment 98, in clause 289, page 195, line 4, leave out “condition on the existing” and insert “existing condition on the”.
This amendment and Amendment 99 are drafting amendments to clarify which accreditation conditions can be varied or removed by the Secretary of State when extending an accreditation.
Amendment 99, in clause 289, page 195, line 21, leave out “condition on the existing” and insert “existing condition on the”.
See the member’s explanatory statement for Amendment 98.
Amendment 100, in clause 289, page 195, line 26, at end insert—
“(14) Where an accreditation covers the making of special ADR arrangements, conditions on the accreditation may be framed so as to secure that the accredited ADR provider is responsible for acts or omissions of other ADR providers who carry out ADR under special ADR arrangements made by the accredited ADR provider.”—(Kevin Hollinrake.)
This amendment would clarify that accreditation conditions can be worded so as to make an accredited ADR provider directly responsible for things done by another ADR provider who carries out ADR under special ADR arrangements made by the accredited provider under its accreditation. This could enable regulatory action under clause 290 or 293 to be taken against the accredited ADR provider in relation to acts of the other ADR provider.
Clause 289, as amended, ordered to stand part of the Bill.
Clause 290 ordered to stand part of the Bill.
Clause 291
Fees payable by accredited ADR providers
Amendment made: 101, in clause 291, page 197, line 9, leave out “potential applicants for accreditation” and insert “accredited ADR providers”.—(Kevin Hollinrake.)
The amendment would correct a mistake in clause 291(3) which should refer to accredited ADR providers, as they are the persons who pay fees under the clause.
Clause 291, as amended, ordered to stand part of the Bill.
Clause 292 ordered to stand part of the Bill.
Schedule 23 agreed to.
Clause 293 ordered to stand part of the Bill.
Clause 294
ADR information regulations
Amendments made: 102, in clause 294, page 199, line 1, after “(1)(a)” insert “or (b)”.
This amendment, with Amendments 103 to 105, would ensure that the power in subsection (1)(b) of clause 294 is subject to similar constraints to those currently provided for by subsection (3) in relation to the power in subsection (1)(a). The regulation making powers in clause 294(1) are not to be available for imposing requirements to provide information for purposes other than those set out in subsection (3)(a) to (c).
Amendment 103, in clause 294, page 199, line 3, leave out from “following” to end of line 4.
See the explanatory statement for Amendment 102.
Amendment 104, in clause 294, page 199, line 5, leave out
“provided to the Secretary of State”.
See the explanatory statement for Amendment 102.
Amendment 105, in clause 294, page 199, line 10, at end insert—
“(3A) It is immaterial for the purposes of subsection (3) whether the publication, monitoring or evaluation is carried out by the Secretary of State, by a person with functions conferred by regulations under section 298 or by any other person acting under arrangements made with that other person by the Secretary of State or a person with such functions.”—(Kevin Hollinrake.)
See the explanatory statement for Amendment 102.
Clause 294, as amended, ordered to stand part of the Bill.
Clause 295
ADR information directions
Amendment made: 106, in clause 295, page 200, line 13, leave out from “legislation” to end of line 14.—(Kevin Hollinrake.)
The amendment would omit words that unnecessarily duplicate a definition in clause 297(6).
Clause 295, as amended, ordered to stand part of the Bill.
Clause 296
Disclosure of ADR information by the Secretary of State
Amendment made: 107, in clause 296, page 200, line 35, leave out
“power conferred by this section is”
and insert
“powers conferred by this section are”.—(Kevin Hollinrake.)
The amendment would clarify that the words at the end of subsection (4) apply to both of the powers conferred by the clause.
Clause 296, as amended, ordered to stand part of the Bill.
Clauses 297 to 300 ordered to stand part of the Bill.
Schedule 24
Chapter 4 of Part 4: consequential amendments etc
Amendment made: 112, in schedule 24, page 360, line 22, leave out “duties and powers” and insert “legislation”.—(Kevin Hollinrake.)
This is a drafting amendment to ensure there is an accurate description of the content of paragraph 11 of Schedule 5 to the Consumer Rights Act 2015.
Schedule 24, as amended, agreed to.
Clause 301 ordered to stand part of the Bill.
Clause 302
Provision of investigative assistance to overseas regulators
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 303 to 308 stand part.
That schedule 25 be the Twenty-fifth schedule to the Bill.
Kevin Hollinrake
Chapter 1 of part 5 of the Bill enhances the UK’s ability to co-operate internationally on competition and consumer matters, as open and fair competition globally ensures the best opportunities for UK businesses and consumers. Clause 302 would introduce a new power for the Competition and Markets Authority and certain consumer protection regulators to provide investigative assistance to an overseas regulator. This power will apply to civil investigations or proceedings related to competition and digital markets and consumer protection.
The clause sets out three core requirements that must be met before investigative assistance is provided. First, the overseas regulator requesting assistance must be carrying out a function that corresponds to a function that the UK regulator has under UK law. Secondly, the UK regulator must assess whether it would be appropriate to provide the assistance requested by the overseas regulator, using the conditions set out in clause 304. Thirdly, the Secretary of State must have authorised the UK regulator to provide the assistance in accordance with clause 305.
Clause 303 sets out that the request must be made in writing by the overseas authority, describe the matter for which assistance is requested, and detail any potential penalties that might be imposed following the overseas investigation. Clause 304 provides a framework for UK authorities to assess whether it is appropriate to provide the investigative assistance requested by an overseas authority; it also sets out the circumstances in which a UK authority has no discretion and must reject an incoming request for investigative assistance—for example, if there is no reciprocity and no overriding public benefit to the UK in providing the assistance in any event.
Clause 305 outlines the factors that the Secretary of State must consider in deciding whether to approve a request for assistance. For example, the Secretary of State may reject a request for assistance where they consider that it would be more appropriate for any investigation to be carried out by the UK authority solely for its own purposes. Clause 306 requires the UK authority to notify the Secretary of State where it has received for assistance and considers it appropriate to provide the requested assistance.
Clause 307 places a duty on the CMA to publish guidance in connection with requests for investigative assistance and the provision of that assistance. Any regulator with the powers to provide investigative assistance must have regard to that guidance, which must be approved by the Secretary of State. Clause 308 and schedule 25 amend the existing legislative framework to ensure that the new investigative assistance regime slots in properly and runs smoothly. For example, the usual time limits for the CMA to be able to impose civil penalties for failures to comply with merger information notices would not work in cases where the CMA is providing assistance, so schedule 25 creates a bespoke time limit specifically for such cases.
Seema Malhotra
Clause 302 acts as a gateway to investigative assistance provisions. This is an important provision, enabling regulators in the UK to assist an overseas regulator. The Minister outlined the conditions under which the UK regulator may assist. We understand that the issues around consumer protection and competition must increasingly be dealt with internationally, because they are increasingly digital in nature and when they arise abroad can impact consumers here, as well as the other way around. As we have gone through these matters with short remarks today, my overall comment is that while we need this provision, the safeguards that might be needed and what is or is not to be published are less apparent.
Kevin Hollinrake
There are just a couple of points to make, I think. On clause 302, the hon. Lady asked whether the police would be involved in any of the investigations. The clause sets out clearly that those are civil matters, not criminal matters. The overseas regulator requesting system is supposed to carry out a function that corresponds to a function that the UK regulator has under UK law.
Seema Malhotra
Either I was not clear, or the Minister mistook me. I was not talking about the police being involved. I was asking whether there are processes of sharing information akin to the way that information is shared with police, so that it can be done in more confidence. The question was about what will be known to those whose information may be shared, if there is that request.
Kevin Hollinrake
In the course of anybody’s work, if there is evidence of criminal activity, we would expect an enforcement agency or regulator to share that with the relevant enforcement authorities, including the police. Was that the point the hon. Member was trying to make?
Seema Malhotra
If I can put it a bit more simply, my question was about how the information will be shared, who will know that the information is being shared, and what that information is being shared about?
Kevin Hollinrake
If the hon. Lady has any further points that she wants clarified, perhaps she will write to me, as I am not quite sure what she is referring to.
The hon. Lady asked about safeguards and the considerations to be taken into account when agreeing to requests for assistance. The clauses provide significant safeguards with regard to the conditions that the authority itself needs to consider and, when it comes to the authorisation by a Secretary of State, consideration of appropriate protections, for example, around confidentiality and other considerations set out in the Bill.
Further details about the process and how investigative assistance will work in practice will be set out in detailed guidance. That is another point that the hon. Lady referred to—discussions between the regulator and the Secretary of State—that we expect to see in guidance. We expect the regulators and the Secretary of State to engage closely in considering whether to provide assistance. Guidance will be put in place and agreed between the regulators and the Secretary of State to set out how the measure will work in practice.
Question put and agreed to.
Clause 302 accordingly ordered to stand part of the Bill.
Clauses 303 to 308 ordered to stand part of the Bill.
Schedule 25 agreed to.
Clause 309
Disclosing information overseas
Question proposed, That the clause stand part of the Bill.
Kevin Hollinrake
Clause 309 provides clearer rules and more efficient gateways for information sharing between UK authorities and their overseas counterparts. The powers will apply to all UK public authorities covered by part 9 of the Enterprise Act 2002—primarily authorities with functions in connection with competition and consumer protection law. The existing overseas disclosure gateway in part 9 will be replaced with three new gateways. Under the first, a relevant UK authority may share information with an overseas authority for the joint purpose of facilitating both its own statutory functions and the functions of the overseas authority.
Under the second new gateway, a relevant UK authority can share information only to facilitate the functions of an overseas authority. When deciding whether to make a disclosure under the two gateways, the UK public authority will need to have regard to a number of factors, such as whether the laws and the practices of the other country can ensure that confidential information is appropriately stored and protected.
When deciding whether to make a disclosure to facilitate the functions of the overseas public authority only, the UK authority must give due regard to an additional layer of considerations. That includes whether the reason for the request is sufficiently serious to justify the disclosure of information. The Secretary of State will retain a power to modify, add to, or remove any of the considerations for each gateway. That is to ensure that the list of considerations remains balanced and appropriate.
There are restrictions that apply to the use and further disclosure of any information that is shared under the two gateways. The restrictions mean that, unless the disclosing authority provides its consent, information disclosed must not be used by the overseas authority for any purpose other than the one for which the information was originally disclosed; nor may the information be passed on to a third party. The Secretary of State will retain the existing power to prevent overseas disclosure of information if they consider the relevant proceedings or investigation would be more appropriately brought or carried out by authorities in the UK or in another country.
Finally, the clause introduces a new gateway for overseas disclosures by a UK public authority for the purposes of facilitating the terms of a designated co-operation arrangement. The Secretary of State will have a power to designate suitable co-operation arrangements in regulations if they are satisfied that they meet the safeguards set out in the legislation.
Seema Malhotra
I thank the Minister for his detailed remarks on clause 309. I will keep my remarks brief. I have concerns about some of the detail. The clause deals with disclosing information overseas. It will amend part 9 of the Enterprise Act by replacing the current overseas disclosure gateway in section 243 with new provisions governing the ability of the CMA and other UK public authorities to exchange information with overseas public authorities.
As the Minister outlined, there will be three new gateways that allow for overseas disclosures in defined circumstances, with safeguards to protect specified information. We welcome the clause. It will be important to see how it is taken forward in the guidance. It is important to have this provision in legislation, not least because tackling competition issues requires us to play an active role in global competition and consumer protection policy.
Question put and agreed to.
Clause 309 accordingly ordered to stand part of the Bill.
Clause 310
Duty of expedition on the CMA and sectoral regulators
The Chair
With this it will be convenient to discuss that schedule 26 be the Twenty-sixth schedule to the Bill.
Kevin Hollinrake
Clause 310 introduces a statutory duty of expedition in relation to the CMA’s competition and consumer law functions, including the functions relating to the new digital competition regime. Schedule 26 makes changes to the legislation that empower the sector regulators to exercise their concurrent competition powers so that they are under an equivalent duty when they do so. The new duty will require the CMA to have regard to the need for making a decision, or taking action, as soon as is reasonably practicable. It will apply to casework functions and decision making, but will exclude auxiliary functions such as the publication of guidance.
The impact of the new duty of expedition will vary on a case-by-case basis. For example, if a business asks for repeated extensions to deadlines for providing information, the duty will bolster the CMA’s ability to move the investigation along. The CMA will need to continue to ensure fair process and make evidence-based robust decisions. Parties will continue to have a right to appeal against decisions made by the CMA.
Seema Malhotra
The Minister has outlined the detail of the clause. Again, I will keep my remarks brief. Clause 310 would insert a new schedule into the Enterprise and Regulatory Reform Act 2013 to provide for a statutory duty of expedition in relation to specified CMA competition, consumer law and digital markets functions. The new provisions expand and replace the duty that previously applied in relation to the CMA’s functions. A new provision inserted by the clause specifies that, in making any decision or taking any action for the purposes of any of its functions within the new schedule, the CMA must have regard to the need to do so as soon as is reasonably practicable. That obligation would apply to all steps of the relevant investigatory, regulatory or enforcement process. The clause also introduces schedule 26, which imposes a duty of expedition on sectoral regulators in respect of their competition functions that are exercisable concurrently with the CMA. We support the schedule.
Question put and agreed to.
Clause 310 accordingly ordered to stand part of the Bill.
Schedule 26 agreed to.
Clause 311
Interpretation
Question proposed, That the clause stand part of the Bill.
Kevin Hollinrake
Clause 311 defines various terms used throughout the Bill, such as “digital content” and “firm”.
Clause 312 provides that expenditure incurred by the Secretary of State or CMA as a result of the Bill is to be met from funds provided by Parliament.
Clause 313 gives the Secretary of State a power by regulations to make any provision that is consequential on the Bill or any provision made under it. The power can be used to amend any legislation, but it is limited to primary legislation passed or made before the end of the parliamentary Session in which this Bill is passed. This limitation also applies to any secondary legislation made under the primary legislation.
Clause 314 makes further provision in relation to powers to make regulations under the Bill, including interpretative provisions about the relevant parliamentary procedures. This clause does not apply to commencement regulations.
Clause 315 sets out that the Bill will apply to England, Wales, Scotland and Northern Ireland.
Alex Davies-Jones (Pontypridd) (Lab)
As we know and as the Minister said, the clause sets out the meanings of various terms used in the Bill. Throughout the debates in Committee, we have raised fundamental questions on several points where we feel that the interpretation of the Bill requires further confirmation. I welcome the Minister’s clarity on a number of those issues. In the rest of the clauses in the group, we see clarity around financial provisions, regulation, extent and the short title—all as is fairly standard.
We all understand the need for this Bill and welcome many of the provisions. That is why Labour has been generally supportive as we have proceeded through Committee. I hope we can also agree that the measures in the Bill must come into force as soon as is reasonably possible. That is particularly important when we know that the digital markets unit has essentially been operating in shadow form for a number of years. It must be compelled to draw on the lessons learned and able to act meaningfully from day one. All things said, we obviously support this grouping, and we look forward to the Third Reading of the Bill before supporting its progression to the other place.
Question put and agreed to.
Clause 311 accordingly ordered to stand part of the Bill.
Clauses 312 to 315 ordered to stand part of the Bill.
Clause 316
Commencement
Neil Coyle (Bermondsey and Old Southwark) (Lab)
I beg to move amendment 136, in clause 316, page 221, line 25, at end insert—
“(3) Sections 245 to 273 come into force from April 2026.”
This amendment provides an explicit implementation period for the subscription contract provisions.
The amendment suggests the need for an explicit implementation period for the subscription contract provisions debated earlier in clauses 245 to 273. That comes about for several reasons. The Government say and Ministers tell us that they have consulted businesses, but I note that the Federation of Small Businesses has raised concerns about the provisions in the Bill, including timing and coverage, as have Sky and other larger organisations. There seems to be a concern that there is no specific time or date. In an earlier sitting, we heard the Minister tell us that some provisions would be immediate and some provisions would be for new contracts, not for existing contracts, but business organisations and representative organisations were unaware of the Government’s plans, despite the need to prepare to implement provisions and allow for the costs of new regulations to take effect on businesses.
Businesses have said that the Bill goes further than the Government’s initial consultation expected, including on things such as clauses 245 to 273 and reminders. I think that this correspondence went to all members of the Committee, but Sky suggests that
“measures have shifted away from a high level, principles-based approach”—
which was in the consultation initially—
“with government opting instead for highly prescriptive requirements on the face of the Bill itself. This change was made without any substantive consultation with businesses, despite the material difference such an approach makes to compliance and implementation costs.”
That is from Sky, which has 12,000 jobs focused on this issue, so it is in a better position than smaller companies to get on with that work. Its concern is that the Bill does not do what the Government said it would do, and that new costs will be imposed.
It is not just the FSB that has raised concerns about the costs. Sky said that the Government’s impact assessment suggests that the new requirements
“will cost UK business £400 million to set up and £1.2 billion in the first year alone.”
This is not a benign set of requirements in legislation; it is a costly endeavour. The amendment seeks to give UK businesses space to prepare to implement the provisions and absorb some of the costs, which would not have been in their business plans if they were set some time ago.
In an earlier sitting, I asked the Minister about the timeframe, and the amendment attempts to achieve some clarity about that. It would be good to hear how the Government will address the concerns of the business community, which has been surprised—let me put it that way—by what the Government have come forward with, in terms of the level of the measures, the fact that the requirements are on the face of the Bill, and the lack of a timeframe to prepare to deliver them.
I politely suggest that Ministers take a bit more time to work with the business community before the Bill goes any further to ensure UK businesses are ready, are not hit with further costs, and are prepared to implement the provisions of the Bill.
Kevin Hollinrake
I thank the hon. Gentleman for his amendment, which is very sensibly thought out. It proposes that the new rules for subscription contracts come into effect from April 2026. I very much admire his wish to balance the needs of businesses and consumers; that is exactly what we should be doing. Competitive markets that rely on business investment are good for consumers too, so there is a delicate balance to strike.
The hon. Gentleman seeks to ensure that businesses have clarity about the start date and know when the new rules will come into effect so they can make appropriate preparations. We have listened very closely to the needs of business. I met Sky and others that will be affected by the change to hear their concerns.
The hon. Gentleman said that the proposal goes further than other measures set out previously. They do not go as far as his Front-Bench colleagues would like them to go, in terms of cost to business. We believe we have struck the right balance.
Our opinion about notifications differs from that of the various providers that have made submissions. We think notifications are important because we want users to understand the contracts they are in and the methods of exiting them. The basic principle is that it should be as easy to exit a contract as it is to enter one. Some providers still want to require the customer to ring a call centre. We are having discussions, but we think we have struck a reasonable balance.
There are certainly issues relating to cooling-off periods, which the hon. Gentleman and I have discussed previously. We want to ensure that consumers cannot game the system by entering a contract, benefiting from it by downloading lots of information or content, watching it, and then cancelling without paying. We are dealing with that through secondary legislation.
The hon. Gentleman talks about the cost to business. Yes, there is a cost to business: the expectation is that the annual business impact will be about £170 million a year, but there are establishment costs too. It is not exactly a zero-sum game, because we want competition to develop through the provisions in the Bill. That will be good for consumers and businesses, so we believe there will be a net gain from this legislation. We want to ensure that consumers are treated fairly. Businesses should do well, but not at the expense of unfairly treated consumers. We seek to strike that balance.
Neil Coyle
If this is about balance and fairness, businesses are right to say that there is an annual reminder system for other regulated services, such as broadband and telephones. The Bill proposes a six-monthly reminder system for new services, so is the Minister saying that other services should be better regulated and that the reminder system should be more frequent to help consumers get fairness, or is he saying that businesses are being treated better in some circumstances than the Bill will allow? I am confused about which bit of Government policy he does not support in that domain.
Kevin Hollinrake
I think there are differences in different sectors, and the hon. Gentleman referred to things such as mobile phone contracts. Lots of people subscribe to things they do not know about, as set out in the impact assessments and the various different evidence we have had from different parties. There are differences, and we believe it is right to have slightly more frequent requirements, such as six-monthly notifications, but we are continuing to discuss these issues. Yesterday we met a representative of the media industry, who raised similar concerns, and we are listening to them. We certainly hope to strike the balance that the hon. Gentleman seeks, but we think it is wrong to put a commencement date on the face of the Bill, given that there is quite a lot of work to do to get it to pass through both Houses.
Again, the balance we need to strike must not delay the commencement of the Bill, because it will benefit consumers, and we are also making sure that stakeholders, including businesses, have time to understand and implement the new rules. We will continue to engage to make sure that both we and they fully understand the operationalised impact of the new rules. I hope the hon. Member will withdraw his amendment on the basis that we will keep those conversations ongoing.
Neil Coyle
I think the point has been made that businesses need space to make sure that they can implement what the Government are asking them to do without undue cost, while also trying to retain the benefits of the greater consumer provisions. I hope that the Minister’s meetings and further consultation garner better business confidence in the Government’s plans, which the other place will see later. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Kevin Hollinrake
Clause 316 makes provision regarding commencement of the Bill. Part 6 and powers to make regulations will commence at Royal Assent, and all other parts will commence by way of regulations made by the Secretary of State. Clause 317 establishes the short title.
Alex Davies-Jones
We have no further comments, Chair.
Question put and agreed to.
Clause 316 accordingly ordered to stand part of the Bill.
Clause 317 ordered to stand part of the Bill.
New Clause 1
Decision not to make final offer order
“(1) The CMA may decide not to make a final offer order in relation to the transaction where it has reasonable grounds to believe that there has been a material change of circumstances since the final offer initiation notice was given.
(2) For the purposes of this section and section 42(3) a material change of circumstances includes an agreement between the designated undertaking and the third party with respect to terms as to payment in relation to the transaction.
(3) Where the CMA decides not to make a final offer order, it must give a notice to that effect to the designated undertaking and the third party.
(4) The notice must include the reasonable grounds referred to in subsection (1).
(5) As soon as reasonably practicable after giving a notice under subsection (3), the CMA must publish a statement summarising the contents of the notice.”—(Kevin Hollinrake.)
This new clause, together with Amendment 10, ensures that the CMA can end the final offer mechanism without making a final offer order at any time after giving a final offer initiation notice. It would appear after clause 41.
Brought up, read the First and Second time, and added to the Bill.
New Clause 8
Limit on secondary ticketing
“(1) The Consumer Rights Act 2015 is amended as follows.
(2) After section 91 (prohibition on cancellation or blacklisting) insert—
‘91A Limit on secondary ticketing
(1) This section applies where a person (‘the seller’) re-sells a ticket for a recreational, sporting or cultural event in the United Kingdom through a secondary ticketing facility.
(2) The operator of the facility must—
(a) identify the maximum number of tickets available for a consumer to buy from the primary market for any event for which tickets are being re-sold through their facility; and
(b) check that the seller has not bought more tickets than they are permitted to buy as set out in subsection (2)(a) with the intention to re-sell, unless the seller provides proof that they have bought more tickets than they are permitted to buy from the primary market with the consent of the event organiser.
(3) The operator of the facility must not allow the seller or any associate of the seller to list more tickets for an event than can be bought by a consumer through the primary market.
(4) If the operator breaches its duties in subsections (2) and (3), they are jointly liable with the seller for enforcement action against them as set out in section 93’”.—(Seema Malhotra.)
This new clause would amend the Consumer Rights Act 2015 to introduce provisions banning sellers on secondary ticketing sites from selling more tickets than can be bought by consumers on the primary market.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss the following:
New clause 9—Secondary Ticketing: duty to verify seller’s details—
“The Consumer Rights Act 2015 is amended as follows—
‘After section 90 insert—
‘90A 90A Duty to verify seller’s details
(1) The operator must—
(a) obtain from any seller using their facility the information set out in subsection (2), and
(b) verify that information.
(2) That information is—
(a) proof that the seller owns the ticket they are intending to sell through the facility,
(b) proof that the information specified in section 90(3) is accurate; and,
(c) the seller’s address.
(3) If the operator breaches the duty under subsection (2), the operator is jointly liable with the seller for enforcement action against them as set out in section 93.’’”
This new clause amends the Consumer Rights Act 2015 to impose a duty on secondary ticketing platforms to verify further details from sellers using their platform.
New clause 10—Secondary ticketing regulation: reporting requirement—
“(1) The Secretary of State must—
(a) prepare a report on the merits of introducing a new regulatory function for regulating the secondary ticketing sector; and,
(b) lay a copy of this report before parliament.
(2) The report must include consideration of the recommendation to introduce a new regulatory function to the secondary ticketing sector as set out in the CMA’s ‘Secondary Ticketing’ report published in August 2021.
(3) The report must be laid within the period of 12 months beginning with the day on which this Act is passed.”
This new clause would introduce a reporting requirement on the Secretary of State to produce a report on the merits of introducing a new regulatory function in the secondary ticketing sector, as recommended by the CMA in their August 2021 ‘Secondary Ticketing’ report.
Seema Malhotra
These new clauses all relate to the secondary ticketing market. In particular, they aim to further regulate the market in order to protect consumers in a sector where they are all too often left to fend for themselves. I do not plan to press these new clauses to a vote today, but I do want to speak to them. The Minister’s response will determine how we choose to move forward on Report or in further stages, because this is an important issue.
New clause 8 would amend the Consumer Rights Act 2015 to introduce provisions banning sellers on secondary ticketing sites from selling from more tickets than can be bought by consumers on the primary market. That is a direct recommendation from the CMA’s August 2021 “Secondary ticketing” report. The intent is simple: it would filter out sellers who have obtained tickets through the use of illegal bots with the intention to sell them on at a significantly inflated price. It would also reduce the risk of consumers being sold fake tickets.
New clause 9 would amend the Consumer Rights Act 2015 to impose a duty on secondary ticketing platforms to verify details from the sellers who use them. That would make it harder for bad actors who intend to scam or rip off consumers to use secondary ticketing platforms, as it would be far easier to track their details. That is also a direct recommendation from the CMA’s 2021 report. New clause 10 would introduce a requirement on the Secretary of State to produce a report on the merits of introducing a new regulatory function in the secondary ticketing sector, as recommended by the CMA in its report.
I will take a step back from the specifics of the new clauses to briefly address the broader picture of the secondary ticketing market, where consumers are continually ripped off or put at risk of falling victim to a scam. I am sure that many Committee members, and those who may be watching our proceedings, will have either had their own experiences or heard of constituents being ripped off or scammed for tickets to musical or sporting events. That is not to say that every person who resells on the secondary ticketing market is attempting to scam or rip off consumers—far from it. However, the Minister will know that when those scams and rip-offs occur, there is little in the way of enforcement against either the seller or the platforms that host and legitimise them.
The CMA’s 2021 report helpfully outlined the major areas of concern in the current secondary ticketing market. It said:
“We are concerned that some approaches used by professional resellers to buy up tickets may be illegal – involving committing fraud and/or breaching legislation introduced to prevent the bulk purchase of tickets using computer bots...Such illegal activity will reduce the number of tickets available at face value on the primary market – and increase the number of tickets advertised through secondary ticket platforms at significantly higher prices. The CMA often receives complaints about these practices but does not have the powers to tackle them.”
It went on to say:
“We are concerned that professional resellers may be i) speculatively advertising tickets that they do not own and ii) advertising tickets with inaccurate information about the ticket or the seller’s identity, which sellers are required to provide, by law, when listing tickets for sale. The CMA’s recent enforcement cases required viagogo and StubHub to put in place certain safeguards to ensure key information was gathered and displayed to consumers and that where such information was being displayed inaccurately this could be addressed. However, even if platforms comply in full with these obligations, speculative listings and inaccurate information may still appear if the resellers do not provide correct information to the platforms about themselves and/or the tickets they are listing.”
In each of those cases, there is a clear risk of consumer detriment, through being scammed or ripped off. As a result, the CMA in the same report made a series of recommendations to Government that would enable more robust enforcement in the sector. But shortly before the Bill was introduced, the Minister wrote to the CMA, stating that the Government would not adopt its recommendations. Specifically, and as part of what seems to be the quite weak rationale by the Government for not adopting those proposals, there was the suggestion that the conviction of just two ticket touts three years ago acts as a robust enough deterrent to bad actors. That seems more like the Government kicking the can down the road and failing to act in the interests of consumers, which was so powerfully highlighted by my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) on Second Reading.
I urge the Government to consider seriously these new clauses. This need not be party political; in fact, it is far from that. They are direct recommendations from the CMA, given the work that it has done and that it does. It is a regulator whose judgment we all clearly and rightly value, considering the increased powers—and expectations for its work—granted in the Bill. The new clauses are cost free and would significantly increase the protections available to consumers using the secondary ticketing market in the UK—they would dramatically increase protections for all consumers. I look forward to the Minister’s response.
Kevin Hollinrake
Two of these new clauses seek to add further regulation on secondary ticketing and platforms. The third would provide for a report on the introduction of a new regulatory function for the secondary ticketing market, to be prepared within 12 months of the Bill receiving Royal Assent. I thank the hon. Member for these new clauses. I am also grateful for the work of her colleague, the hon. Member for Washington and Sunderland West, who has worked so hard in this space.
The new clauses reflect the recommendations made by the CMA in its secondary ticketing report from 2021, as the hon. Member for Feltham and Heston said. She also referred to our position, which we set out on 10 May 2023. At this point, it is too early, we believe, to bring forward further regulation on secondary ticketing.
One overarching point that I think it is fair to make here is that we should all encourage the primary market to do more to inhibit touting and report breaches of existing law. If anybody went to Glastonbury recently, they would have found great difficulty in—in fact, the impossibility of—selling on tickets, because they are limited to the person who bought the tickets in the first place, so it is clear that primary markets can do more to clamp down on secondary ticketing malpractice where it exists.
The Bill, under part 3, will itself give more powers to the CMA and other public enforcers to enforce existing consumer protection law, which includes legislation applicable to the secondary tickets sector. The shadow Minister referred to good work that is going on in this area, including existing laws. As she said, the National Trading Standards eCrime Team successfully prosecuted two ticket touts for fraud and consumer law breaches. They received prison sentences of four years and two and a half years and were subject to a £6.2 million confiscation order. Despite the imposition of additional regulation by the Breaching of Limits on Ticket Sales Regulations 2018, it is those general consumer protection law powers that the regulators have tended to use most effectively.
New clause 8 would make the platform liable where the number of tickets resold on a platform by an individual seller exceeded the maximum set by the event organiser in the primary market. It is already an offence to use automated software to buy more tickets for events than permitted, with a view to financial gain. If the rules are applied, there should be no need for further action on the secondary market, such as that proposed. However, we will work with the CMA to monitor the market and technological developments to assess whether the measure is both practical and necessary.
New clause 9 seeks to put a strict obligation on a secondary ticketing facility to verify certain information provided to it by a seller. The CMA acknowledges that placing a strict liability on platforms in this way would be an unprecedented step. Moreover, thanks to previous enforcement work of the CMA and others in the secondary ticketing market, choices and associated costs are more transparent than they were five years ago. Therefore, it is not clear to me that the proposal would amount to proportionate regulation.
Seema Malhotra
I thank the Minister for his response. I think his overall message is that the existing legislation is enough and is proportionate. I take on board that he will keep it under review. He will know that there are different views on whether the regulations are enough, and it will be important to do further work with stakeholders on this. If there are ways that existing regulations can be used further to deal with at least some of the challenges, we would obviously all want to see that.
The principle of not having regulation that we do not need if it can be dealt with by existing regulation is an important one that we all share. I think the question is whether it is enough, because currently the story suggests that it is not. However, I will not press the new clause to a vote today. We reserve the right to bring it back on Report, by which time we will have had further discussions with stakeholders on this. I hope it will be an issue on which we can move forward with the Government if we can demonstrate that there is a need to do more. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
The Chair
I gently remind the Committee that we have a hard stop at 11.25 am.
New Clause 11
Annual Report on Operation of CMA Functions Under Parts 2 and 3
“(1) The CMA must, within 12 months of this Act being passed and every 12 months thereafter, prepare a report on—
(a) the effectiveness of the operation of the CMA’s functions under Parts 2 and 3,
(b) the impact of the operation of those functions on maintaining competition in digital markets, and
(c) the impact of the operation of those functions on the enforcement of consumer protection law.
(2) The CMA must arrange for a copy of the report prepared under subsection (1) to be laid before each House of Parliament
(3) This new clause would introduce an annual reporting requirement on the CMA to report to Parliament on the operation of their functions under Parts 2 and 3 of the Act.”—(Seema Malhotra.)
This new clause would introduce an annual reporting requirement on the CMA to report to Parliament on the operation of their functions under Parts 2 and 3 of the Act.
Brought up, and read the First time.
Seema Malhotra
I beg to move, That the clause be read a Second time.
New clause 11 would introduce an annual reporting requirement on the CMA to report to Parliament on the operation of their functions under parts 2 and 3 of the Act, complementing the new clause debated earlier in Committee that would have introduced such a report in relation to part 1 of the Bill. Specifically, the report under new clause 11 would need to include the effectiveness of the operation of the CMA’s functions under parts 2 and 3 and the impact of the operation of those functions on maintaining competition in digital markets and on the enforcement of consumer protection law.
The report would have to be laid before both Houses of Parliament and be produced annually. The core principles behind the new clause—principles I would hope the Minister agrees with—are transparency and scrutiny. The legislation rightly confers significant powers on various regulatory bodies in the UK, not least the CMA. However, to ensure those powers are used as effectively and as fairly as possible, Parliament must be able to fully scrutinise their use and effectiveness in achieving their aims.
There is also the question of where the report goes and who scrutinises it on behalf of Parliament and the public. While I appreciate and recognise that the CMA will have frequent communication and contact with various Departments and Secretaries of State, opportunities for scrutiny are more disparate. With the former Regulatory Reform Committee being subsumed by the Business and Trade Committee, much of the opportunity for scrutiny is supposed to lie there. However, House of Commons Library research highlights that in the past five years, the CMA has appeared before the Committee just five times, and three times since 2021. The CMA does an incredibly significant job in our economy. While an average of one Select Committee appearance a year is appreciated, with the new functions granted by the Bill, one cannot help but feel that the oversight and scrutiny need to become more frequent and detailed to ensure parliamentarians and the public are as informed of the CMA’s work as possible.
I note the Regulatory Reform Group, made up of MPs from the Minister’s own party, has recently called for a cross-party Committee to oversee the performance of regulators and to offer a systematic appraisal of the UK’s regulators that cover key economic sectors. Its members are not the only ones concerned by the overall lack of transparency and scrutiny of the performance of regulators and competition authorities. There is a need for better mechanisms to allow issues to be identified earlier and reforms to be made.
Clearly, there is appetite in Parliament for further scrutiny of our regulators, not least the CMA. That is not to criticise the regulators in any way, but it is a reflection of their increased importance, our increased responsibility and the growing impact of their work in a digital economy, subject to that greater scrutiny. As a result, I hope the Minister agrees that parliamentary scrutiny of the kind that the new clause would provide is important for the effective operation of this new regulatory regime. I urge him to consider supporting the new clause—I know he has been sympathetic to similar clauses in earlier parts of the Bill—so that we see reports and discussion on the scrutiny measures of this House.
Kevin Hollinrake
I wholeheartedly agree that the CMA should be firmly accountable to Parliament across its digital competition and consumer functions. However, that is already the case. The CMA is already required to present an annual report to Parliament. That includes a survey of developments relating to its functions, assessments of its performance against its objectives and enforcement activity, and a summary of key decisions and financial expenditure. The CEO and chair of the CMA regularly appear before the relevant Select Committee—five times as the hon. Member said. Most recently, they appeared before the House of Lords Communications and Digital Committee. Indeed, they meet me on a regular basis, and we also provide an annual strategy steer.
In relation to the CMA’s new consumer direct enforcement functions under part 3 of the Bill, clause 193 gives the Secretary of State the power to request a report from the CMA from time to time on the effectiveness of interventions. Such a report must also be published by the CMA, so that it is available to parliamentarians and the public. I noted her points on the Regulatory Reform Group. I met Lord Tyrie and my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami). They made some interesting points, which I am sure the wider House will have heard. These matters should be kept under review, but for these reasons, I hope the hon. Lady will withdraw the new clause.
Seema Malhotra
I thank the Minister for his remarks. New clause 11 was inspired by new clauses with a similar purpose in the United Kingdom Internal Market Act 2020, so there is an important precedent. I will not press the new clause to a vote, but we will keep the matter under review. I take this opportunity to thank all the Clerks who have been involved in the Committee. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Kevin Hollinrake
On a point of order, Dame Maria. I put on the record my thanks to all the Clerks and the many people who worked on the Bill, including all the officials and my private office, for doing a tremendous job. I thank Opposition Members for their constructive dialogue.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Further to that point of order, Dame Maria. The Under-Secretary of State for Science, Innovation and Technology, the hon. Member for Sutton and Cheam agreed in our proceedings to send a letter and told the Committee that a letter had been sent. No letter has been received and no letter is in the Library. Will the Minister please send the letter as promised?
The Chair
I will leave the Minister to deal with that outside the sitting. The Committee has finished its work.
Bill, as amended, to be reported.
Digital Markets, Competition and Consumers Bill
Monday 20th November 2023
(8 months, 1 week ago)
Commons ChamberRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 20 November 2023 - (20 Nov 2023)
18:35 - The House divided: - Ayes: 196 / Noes: 275 - Question accordingly negatived.
18:49 - The House divided: - Ayes: 197 / Noes: 278 - Question accordingly negatived.
20:56 - The House divided: - Ayes: 210 / Noes: 280 - Question accordingly negatived.
21:11 - The House divided: - Ayes: 209 / Noes: 281 - Question accordingly negatived.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Saqib Bhatti)
I beg to move, That the clause be read a Second time.
Madam Deputy Speaker (Dame Rosie Winterton)
With this it will be convenient to discuss:
Government new clause 6.
New clause 23—Digital Markets Unit and CMA: annual statement to House of Commons—
“(1) The Secretary of State must, once a year, make a written statement to the House of Commons giving the Secretary of State’s assessment of the conduct and operation of—
(a) the Digital Markets Unit, and
(b) the CMA as a whole.
(2) The first statement must be made by 1 February 2024.
(3) A further statement must be made by 1 February each subsequent year.”
This new clause would require the Secretary of State to make a written statement about the conduct and operation of the DMU and CMA.
New clause 27—Appointment of senior director of the DMU—
“The senior director of the Digital Markets Unit must be appointed by the Secretary of State.”
This new clause provides that the senior director of the DMU must be appointed by the Secretary of State.
New clause 28—Duty of the CMA: Citizens interest provisions—
“(1) The Enterprise and Regulatory Reform Act 2013 is amended as follows.
(2) After section 25(3) insert—
“(3A) When carrying out its functions in relation to the regulation of competition in digital markets under Part 1 of the Digital Markets, Competition and Consumers Act 2024, the CMA must seek to promote competition, both within and outside the United Kingdom, for the benefit of consumers and citizens.””
This new clause would give the CMA a duty to further the interests of citizens – as well as consumers – when carrying out its digital markets functions under Part 1 of the Bill.
Amendment 176, in clause 2, page 2, leave out lines 20 and 21 and insert—
“(b) distinctive digital characteristics giving rise to competition law concerns such that the undertaking has a position of strategic significance (see section 6).”
This amendment is linked to Amendment 182.
Amendment 206, page 2, line 25, after “Chapter” insert “, taking account of analysis undertaken by the CMA on similar issues that have been the subject of public consultation.”
This amendment aims to ensure that the CMA are able to draw on previous analysis on issues relevant to the regulatory regime.
Amendment 177, page 2, line 25, at end insert—
“(5) The CMA must publish terms of reference setting out a summary of the evidence base for making a finding of substantial and entrenched market power or of a position of strategic significance.
(6) The terms of reference must include a detailed statement of the competition law concerns arising from these characteristics and the relationship between the designated digital activity and other activities.
(7) Activities with no reasonable prospect of adverse competitive effects linked to digital activity must be referred to as unrelated activities and the terms of reference must expressly state that unrelated activities are not covered by the designation.”
This amendment would require the CMA to publish terms of reference summarising the evidence base for a finding of substantial and entrenched market power or a finding of strategic significance.
Amendment 178, in clause 3, page 2, line 28, after “service” insert “predominantly”
This amendment clarifies that the provision of a service predominantly by means of the internet would be a digital activity.
Amendment 179, page 2, line 34, leave out subsection (2)
This amendment is linked to Amendment 178.
Amendment 180, in clause 5, page 3, line 28, at end insert—
“(c) are not assuaged by evidence of competition arising beyond the activities of the undertaking, and
(d) demonstrate that the perceived market power will be improved compared with the scenario in which the designation does not occur.”
This amendment makes additions to the definition of substantial and entrenched market power.
Amendment 181, in clause 6, page 3, line 31, leave out “one or more of” and insert “both”
This amendment is linked to Amendment 182.
Amendment 182, page 3, line 33, leave out paragraphs (a) to (d) and insert—
“(a) significant network effects are present;
(b) the undertaking’s position in respect of the digital activity would allow it to extend its market power.”
This amendment changes the definition of the term “position of strategic significance”.
Amendment 183, in clause 7, page 4, line 17 at end insert “arising from the designated activities”
This amendment limits the turnover condition in relation to UK turnover to turnover arising from designated activities.
Amendment 184, page 4, line 19, at end insert “to account for inflation on the CPI measure”
This amendment ensures that the sums used to determine whether the turnover condition has been met can only be amended to account for inflation on the CPI measure.
Amendment 194, in clause 11, page 6, line 36, at end insert—
“(c) give a copy of the statement to those undertakings that have not been designated as having SMS that are most directly affected.”
This amendment ensures that challenger firms are able to access information about the regulatory framework on an equal basis to designated firms.
Amendment 195, in clause 12, page 7, line 9, at end insert—
“(5) As soon as reasonably practicable after giving a notice under subsection (2), the CMA must give a copy of the notice to those undertakings that have not been designated as having SMS that are most directly affected.”
See the explanatory statement to Amendment 194.
Amendment 196, in clause 14, page 7, line 36, at end insert—
“(5A) As soon as reasonably practicable after giving an SMS decision notice, the CMA must give a copy of the notice to those undertakings that have not been designated as having SMS that are most directly affected.”
See the explanatory statement to Amendment 194.
Government amendments 2 and 3.
Amendment 197, in clause 15, page 8, line 41, at end insert—
“(6) As soon as reasonably practicable after giving a revised SMS decision notice, the CMA must give a copy of the revised notice to those undertakings that have not been designated as having SMS that are most directly affected.”
See the explanatory statement to Amendment 194.
Government amendments 4 to 7.
Amendment 193, in clause 19, page 11, line 15, at end insert—
“(9A) A conduct requirement must be imposed within 3 months of an undertaking being designated as having SMS under section 2.”
This amendment ensures that a time frame of three months is imposed for the CMA to enforce conduct requirements on designated SMS firms.
Government amendment 8.
Amendment 190, in clause 20, page 12, line 9, after “to”, insert “harm competition in the relevant digital activity or the other activity,”
This amendment would ensure that the CMA can tackle anti-competitive conduct in a non-designated activity, provided that the anti-competitive conduct is related to a designated activity.
Amendment 191, page 12, line 11, after “activity”, insert “, provided that the conduct is related to the relevant digital activity”
See the explanatory statement to Amendment 190.
Government amendments 9 and 10.
Amendment 192, in clause 25, page 14, line 7, at end insert—
“(e) whether to take action in accordance with Chapter 4 (Pro-competitive interventions) in respect of the extent to which it is complying with each conduct requirement to which it is subject and the effectiveness of each conduct requirement to which it is subject.”
This amendment would ensure that the CMA considers the efficacy of existing Conduct Requirements when considering whether to make Pro-Competitive Interventions.
Government amendments 11 and 12.
Amendment 198, in clause 26, page 15, line 3, at end insert—
“(7) As soon as reasonably practicable after giving a conduct investigation notice, the CMA must give a copy of the conduct investigation notice to those undertakings that have not been designated as having SMS that are most directly affected.”
See the explanatory statement to Amendment 194.
Amendment 187, in clause 27, page 15, line 8, at end insert—
“(2) The CMA may have regard to any significant benefits to users or potential users that the CMA considers have resulted, or may be expected to result, from a factor or combination of factors resulting from a breach of a conduct requirement.”
This amendment would ensure that the CMA considers any significant benefits to users resulting from the breach of a Conduct Requirement when it is considering representations from designated undertakings as part of a Conduct Investigation.
Amendment 199, in clause 28, page 15, line 20, at end insert—
“(5) As soon as reasonably practicable after giving a notice under subsection (2), the CMA must give a copy of the notice to those undertakings that have not been designated as having SMS that are most directly affected.”
See the explanatory statement to Amendment 194.
Amendment 188, page 15, line 21, leave out Clause 29.
This Amendment is consequential to Amendment 187.
Government amendment 13.
Amendment 186, in clause 29, page 15, line 31, leave out subsection (c) and insert—
“(c) the conduct is necessary for the realisation of those benefits based on the best available evidence reasonably obtainable, and”
This amendment would change the circumstances in which the countervailing benefits exemption would apply.
Government amendment 14.
Amendment 209, page 15, line 37, at end insert—
“(4) The CMA may only consider that the countervailing benefits exemption applies if it has reached such a consideration within six months of the day on which the conduct investigation notice is given to the undertaking.
(5) In subsection (2), a “benefit” means any benefit of a type set out in regulations made by the Secretary of State in accordance with the procedure under subsections (6) to (9).
(6) The Secretary of State must, within six months of this section coming into force, lay before Parliament draft regulations setting out the types of benefit that apply for purposes of subsection (2).
(7) A Minister of the Crown must make a motion in each House of Parliament to approve the draft regulations within 14 days of the date on which they were laid.
(8) Subject to subsection (9), if the draft regulations are approved by both Houses of Parliament, the Secretary of State must make them in the form of the draft which has been approved.
(9) If any amendments to the draft regulations are agreed to by both Houses of Parliament, the Secretary of State must make the regulations in the form of the draft as so amended.”
This amendment would introduce a 6 month time limit on the duration of investigations into countervailing benefits claims, and specifies that the Secretary of State shall introduce further legislation for Parliamentary debate providing an exhaustive list of the types of countervailing benefits SMS firms are able to claim.
Amendment 200, in clause 30, page 16, line 13, at end insert—
“(4A) As soon as reasonably practicable after giving the notice, the CMA must give a copy of the notice to those undertakings that have not been designated as having SMS that are most directly affected.”
See the explanatory statement to Amendment 194.
Government amendments 15 and 16.
Amendment 201, in clause 31, page 17, line 3, at end insert—
“(7A) As soon as reasonably practicable after making an enforcement order (including a revised version of an order), the CMA must give a copy of the order to those undertakings that have not been designated as having SMS that are most directly affected.”
See the explanatory statement to Amendment 194.
Amendment 202, in clause 32, page 17, line 35, at end insert—
“(6A) As soon as reasonably practicable after giving a notice under subsection (5), the CMA must give a copy of the notice to those undertakings that have not been designated as having SMS that are most directly affected.”
See the explanatory statement to Amendment 194.
Amendment 203, in clause 34, page 18, line 36, at end insert—
“(4A) As soon as reasonably practicable after revoking an enforcement order, the CMA must give a copy of the notice to those undertakings that have not been designated as having SMS that are most directly affected.”
See the explanatory statement to Amendment 194.
Government amendments 17 and 18.
Amendment 189, in clause 38, page 21, line 7, leave out “breached an enforcement order, other than an interim enforcement order” and insert “breached a conduct requirement”
This amendment would allow the CMA to initiate the Final Offer Mechanism after a Conduct Requirement of the type permitted by clause 20(2)(a) has first been breached, provided that the other conditions in clause 38 are met.
Government amendments 19 to 30.
Amendment 204, in clause 47, page 26, line 8, at end insert—
“(4A) As soon as reasonably practicable after giving a PCI investigation notice or a revised version of the PCI investigation notice, the CMA must give a copy of the notice to those undertakings that have not been designated as having SMS that are most directly affected.”
See the explanatory statement to Amendment 194.
Amendment 205, in clause 50, page 27, line 28, at end insert—
“(6A) As soon as reasonably practicable after making a pro-competition order, the CMA must give a copy of the order to those undertakings that have not been designated as having SMS that are most directly affected.”
See the explanatory statement to Amendment 194.
Government amendments 31 to 56.
Amendment 185, in clause 102, page 61, line 10, leave out subsections (6) and (7) and insert—
“(6) In determining an application under this section—
(a) for any application made within a period of three years beginning on the day on which this Act is passed, the Tribunal must determine the application on the merits by reference to the grounds set out in the application;
(b) for any application made thereafter, the Tribunal must apply the same principles as would be applied—
(i) in the case of proceedings in England and Wales and Northern Ireland, by the High Court in determining proceedings on judicial review; and
(ii) in the case of proceedings in Scotland, by the Court of Session on an application to the supervisory jurisdiction of the court.
(7) The Tribunal may—
(a) for any application made within a period of three years beginning on the day on which this Act is passed, confirm or set aside the decision which is the subject of the application, or any part of it, and may—
(i) remit the matter to the CMA,
(ii) take other such steps as the CMA could itself have given or taken, or
(iii) make any other decision which the CMA could itself have made;
(b) for any application made thereafter—
(i) dismiss the application or quash the whole or part of the decision to which it relates. and
(ii) where it quashes the whole or part of that decision, refer the matter back to the CMA with a direction to reconsider and make a new decision in accordance with a ruling of the Tribunal.”
This amendment changes for a three-year period the mechanism by which the Tribunal would determine applications for review.
Government amendments 57 to 67, 83 and 84, 106, 108, 111, 148 and 149.
Saqib Bhatti
I am honoured to have been appointed as the Minister with responsibility for tech and the digital economy, and as one of the Ministers with responsibility for the Digital Markets, Competition and Consumers Bill. When I was appointed last Tuesday, many helpful colleagues came up to me to say, “You have been thrown in at the deep end,” but it is a blessing to have responsibility for taking this legislation through the House.
In that vein, I thank my hon. Friend the Member for Sutton and Cheam (Paul Scully) for his tireless work to get the Bill to this stage.
I am aware of the importance of this legislation and the sentiment across the House to deliver the Bill quickly. The benefits of the digital market measures in part 1 of the Bill are clear to see. They will bring about a more dynamic digital economy, which prioritises innovation, growth and the delivery of better outcomes for consumers and small businesses. The rise of digital technologies has been transformative, delivering huge value to consumers and businesses. However, a small number of firms exert immense control across strategically critical services online because the unique characteristics of digital markets, such as network effects and data consolidation, make them prone to tip in favour of a few firms. The new digital markets regime will remove obstacles to competition and drive growth in digital markets, by proactively driving more dynamic markets and by preventing harmful practices such as making it difficult to switch between operating systems.
I turn now to the Government amendments. When the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) first stood in the House, he stated that the legislation would unleash the full opportunities of digital markets for the UK. That intention has not changed, and our amendments fully support that. The Government’s amendments to part 1 will provide greater clarity to parties interacting with the regime, enhance the accountability of the regulator and make sure that the legislation is drafted effectively and meets its aims. I will address each of those themes in order.
This new regime is novel. To maximise certainty, it is critical that its parameters—the scopes of the regulator’s functions and the rights and obligations set out in the legislation—are clear. Therefore, the Government have tabled a series of amendments to further clarify how the digital markets regime will work in practice. The amendments relate to how legally binding commitments provided by firms within the scope of the regime will work in practice, the Digital Market Unit’s ability to amend certain decision notices, and how in certain circumstances the DMU may use its investigatory and enforcement powers after a firm is no longer designated.
Two important sets of clarifying amendments are worth covering in more detail. The first relates to conduct requirements. Consumer benefit is a central focus of the digital markets regime. The DMU must consider consumer benefit when shaping the design of its interventions. To reinforce that central focus, we are clarifying how the DMU will consider consumer benefits when imposing and enforcing conduct requirements. Amendment 7 requires the DMU to explain the consumer benefits that it expects to result from a conduct requirement, ensuring transparent, well-evidenced decisions. Amendments 13 and 14 simplify the wording of the countervailing benefits exemption, while critically maintaining the same high threshold.
Sir Jeremy Wright (Kenilworth and Southam) (Con)
I draw the House’s attention to my entry in the Register of Members’ Financial Interests. Let me take the opportunity to congratulate my hon. Friend the Member for Meriden (Saqib Bhatti) on his appointment. Does he recognise that it is important to be clear—and for the CMA and the DMU to be clear—that there could be a conflict between the interests of current consumers and those of future consumers? Therefore, it is important that the interests of both are balanced in what the CMA and the DMU eventually decide to do.
Saqib Bhatti
My right hon. Friend makes an important point. As I make progress, I hope he will be reassured that the regime will take both those things into account.
Together, amendments 13 and 14 will make sure that consumers get the best outcomes. Amendment 14 makes an important clarification on the role of third parties in the final offer mechanism process. New clause 5 and related amendments will clarify when and how third parties may make collective submissions in relation to the final offer mechanism. That is vital, as collective bargaining can help to address power imbalances during negotiations. We expect that third parties, especially smaller organisations, may seek to work together when negotiating payment terms and conditions.
My second theme is the accountability of the regulator. The discretion afforded to the CMA and its accountability to Government and Parliament have formed a large part of the debate—quite rightly—during the passage of the Bill. I will take time to address that.
The digital markets regime is flexible in its design, with the CMA requiring a level of discretion to deliver effective outcomes. While that is common for ex ante regulation, that does not negate the importance of taking steps to maximise the predictability and proportionality of the regulator’s actions. For that reason, the Government are introducing an explicit requirement for the CMA to impose conduct requirements and pro-competition interventions only where it considers that it is proportionate to do so.
That will make it clear to firms in scope of the regime that they will not be subject to undue regulatory burdens. Firms will be able to challenge disproportionate obligations, and the Competition Appeal Tribunal will, in its consideration of any appeals, apply the principle of proportionality in a reasonable way, as it always does. To complement that, and to ensure consistent senior oversight and accountability of the regime, amendments 57 to 60 require enforcement decisions, including the imposition of penalties, to be reserved to the CMA board or its committee.
Damian Collins (Folkestone and Hythe) (Con)
I welcome my hon. Friend to his position, and congratulate him on his role. The Government amendments relate to the proportionality test for conduct requirements. Why did the Government feel that there was a need for those additional tests? Was there a concern that the CMA would use the power disproportionately, and if so, what might such a use have been?
Saqib Bhatti
I thank my hon. Friend for his contribution to the House on these matters, and for that question. The aim of the amendments is to provide clarity and give certainty—clarity that we will always ensure that the consumer is at the heart of what we do, and certainty because that is what business always needs. I will happily give further clarity in my closing remarks. To ensure robust oversight of the DMU’s implementation of the regime, we are also requiring that the Secretary of State approve the publication of guidance relating to part 1 of the Bill.
Rebecca Long Bailey (Salford and Eccles) (Lab)
On the issue of clarity, the Minister knows that the final offer mechanism should be an issue of last resort, and before that there should be a mechanism by which negotiations can take place. Can he assure the House that there will be a mechanism to ensure that big tech firms do not drag out negotiations unnecessarily, because it is not clear so far?
Saqib Bhatti
The whole mechanism is designed to ensure that smaller firms have a say in this. That is why the final offer mechanism is there. I hope that that that gives the hon. Member some reassurance.
Finally, the regime has the potential for significant financial penalties to be imposed, so we have tabled amendments to allow any party subject to a penalty to appeal decisions about the penalty on the merits, rather than on judicial review principles. An appeal on the merits allows the Competition Appeal Tribunal to consider whether it was right to impose the penalty, and to consider the penalty amount. Where appropriate, it also allows the Competition Appeal Tribunal to decide a different penalty amount.
John Penrose (Weston-super-Mare) (Con)
I join the queue of people congratulating the Minister on his new role, which is well deserved. I think that I am right in saying that any appeal against a fine from another economic regulator, such as Ofwat or Ofgem, is made to the CMA on the basis of the JR standard, yet we seem to be creating a different, and arguably more complicated, special deal for large tech platforms. Can he explain the Government’s thinking behind that?
Saqib Bhatti
I do not think that there is, as my hon. Friend puts it, a special deal; it is about taking a balanced approach to ensure that firms with penalty decisions that have less direct impact on third parties have the opportunity to challenge them, and take a view on them according to the regime.
John Penrose
The Minister is being very generous. I just want to understand why the approach differs from that taken in identical appeals by other companies against other economic regulators.
Saqib Bhatti
Given the huge size of the fines, it is only right that that approach is put in place to ensure the penalties are applied appropriately, but it does not apply to decisions that are not made by the CMA.
The regime has the potential for significant financial penalties to be imposed, so we are introducing amendments to allow any party subject to a penalty to appeal decisions about that penalty “on the merits”. An appeal “on the merits” allows the Competition Appeal Tribunal to consider whether it was right to impose the penalty and to consider the penalty amount. Where appropriate, it allows the Competition Appeal Tribunal to decide a different penalty amount. The DMU’s other decisions, including the decision as to whether a breach of the regime occurred, would remain subject to an appeal on judicial review principles.
Sir Jacob Rees-Mogg (North East Somerset) (Con)
I join in congratulating my hon. Friend on his appointment and on this very wise amendment. It is fundamental to the rule of law that people who are fined large amounts of money have some proper form of appeal; we must not put too much trust in unaccountable and unelected regulators.
Saqib Bhatti
My right hon. Friend is always a thoughtful contributor to debates in this House. We believe that the amendments ensure consumer benefit is at the heart of what we are doing and any appeals will be carried out appropriately. Adopting these amendments would bring the digital markets regime into closer alignment with existing CMA mergers and markets regimes, where penalty decisions can be appealed on the merits. As in those regimes, all other decisions are appealable on judicial review principles.
Sir Jeremy Wright
I thank my hon. Friend for giving way again. He will appreciate that we are all trying to get clarity, so we understand what the proposals really mean. In relation to the appeal standard that he describes, for cases that are not specifically related to fines, he mentioned the proportionality addition earlier in his remarks. When it comes to an appeal, are we right to understand that the question of proportionality applies when the CMA originally makes its decision to require an intervention and does not apply to the JR standard that is used to determine an appeal?
It is important to be specific about that, because there are those who would argue that proportionality should be a part of the appeal process. I think the Government amendments say that proportionality applies at an earlier stage and that when it comes to considering whether the CMA has behaved in a proportionate way in making its decisions, the assessment will be made by the Competition Appeal Tribunal on JR principles. Am I right about that?
Saqib Bhatti
I agree that that is exactly what we are saying. I am happy to provide further clarity in my closing remarks.
Critical to accountability is, of course, transparency. The Government are committed to transparency and bringing forward amendments that will require the CMA to set out its reasons for imposing or varying a conduct requirement. That will improve transparency around CMA decision making and increase consistency with other powers in the Bill where similar justification is required. It also reinforces the CMA’s existing responsibility to consider likely impacts on consumers when deciding whether and how to intervene.
The third theme is to ensure the legislation is drafted effectively. Therefore, we have tabled further technical amendments to ensure that the Bill’s text meets the Government’s original intended aim. They relate to the scope of conduct requirements, specifically the application of the materiality threshold contained in clause 20(3)(c), the maximum penalty limits imposed on individuals, the mergers reporting duty and the service of notices on undertakings overseas in certain circumstances.
It is worth noting that there are a small number of cross-cutting amendments contained in parts 5 and 6 of the Bill that will also impact the digital markets regime. I want to ensure that there is plenty of time for hon. Members to debate the Bill at this important stage in its passage. I appreciate a collaborative approach from across the House. I am sure that there will be many different views on some of the amendments, but I look forward to a constructive and collaborative discussion.
Alex Davies-Jones (Pontypridd) (Lab)
It is a true privilege to be back in the Chamber once again, on behalf of the Opposition, to open the third debate in recent months on Report stage of this incredibly important Bill. I welcome the Minister to his place: he is joining this brief at a very exciting time, and I look forward to working with him in the months ahead to get the Bill finally over the line. I pay tribute to his predecessor, the hon. Member for Sutton and Cheam (Paul Scully). We may not always have agreed on the detail, but I was always grateful for his collegiate and open-minded approach to getting the Bill to a good place, where it needed to be.
Margaret Greenwood (Wirral West) (Lab)
People often find it difficult to get out of internet provider contracts. They may spend hours on the phone, or communicating via a bot, and when they do get through to someone, that person tries to talk them out of what they are trying to do. It seems to me that it would be very straightforward to require providers to have on their websites a simple and prominent “cancel my contract” button, easily visible to anyone who is logged in. That, surely, would save people acres of time and a huge amount of frustration.
Alex Davies-Jones
My hon. Friend has made an important point about an issue faced by all our constituents who are struggling to get out of contracts that do not give value for money, and subscription traps, which we will discuss later this evening. These are issues that should have been dealt with in the Bill, and could have been had it been afforded parliamentary priority. Sadly, many opportunities have been missed and will need to be returned to, and we will be urging the Government to do that in due course.
The Conservatives have needlessly delayed the introduction of the Bill. Their focus on infighting and general chaos has prevented them from presenting suitable legislation. The Bill was first promised in Parliament more than a year ago, and since then, owing to Tory delay, we have fallen behind our European neighbours in this vital policy area. Failure to act against gatekeepers to access points in the digital economy—from web browsers to search engines, and from mobile operating systems to app stores and broadband contracts—is having a huge impact on business growth and consumer prices. Let us be clear: a failure to regulate and level the playing field is having a huge impact on consumers, who ultimately pay the price.
This is a complicated Bill, which has rightly received substantial coverage in the media since it was first published. It is only appropriate for me to begin my consideration of the first group of amendments by raising particular concerns about the Government amendments relating to the countervailing benefits exemption—notably, amendments 13 and 14. As we all know, the countervailing benefits exemption allows the Competition and Markets Authority to close an investigation of a breach of a conduct requirement if a big tech firm can demonstrate that its anti-competitive conduct produces benefits that outweigh the harm. These amendments change the test for the exemption from indispensability—a recognised competition law standard that ensures that a big tech firm cannot proceed with anti-competitive conduct without good reason—to an untested, potentially ambiguous standard. There is a danger that this new, untested standard could allow big tech firms to evade compliance and continue with conduct that harms UK businesses and consumers. They might also inundate the CMA with an excessive number of claims of consumer benefit, diverting its limited resources away from other essential tasks.
The Minister must be realistic. It is highly unlikely that anti-competitive conduct on the part of regulated firms will ever have a consumer benefit. The amendment creates an unnecessary loophole that Labour colleagues and I find very concerning. I would also be grateful if the Minister could clarify whether these amendments create a new legal standard that could allow regulated companies to evade compliance. There is also the question of how the amendments will protect the CMA from being inundated with claims of countervailing benefits from regulated companies. Labour is concerned by these amendments, and I therefore urge Members across the House to support amendments 187 and 188, tabled in my name, which seek to undo the Government’s mismanagement.
I will turn now to the changes in the appeals mechanism. The Minister knows about, and will have heard, the concerns of colleagues on the Conservative side—on all sides, actually—about the changes in the appeals process, as outlined in Government amendment 51 to 56. We have all heard the passionate calls from businesses that have risked their reputations and market share by sticking their heads above the parapet to warn of the risks of watering down the appeals process. It is testament to their hard work that we are at this point today.
As colleagues will be aware, the Government amendments would change the appeals process and standard for penalty decisions to full merits only. As we know, penalties such as fines are the most significant deterrent to prevent short message service firms from breaking the conduct requirements established by the CMA. Although timing—a key concern when considering the impact of full merits on other parts of the Bill—is not of paramount importance when it comes to fines, it is foreseeable that full merits appeals could allow SMS firms to reduce significantly the size of penalties, thus reducing their incentive to comply.
The Minister will come to learn that collegiate, sensible agreement has been a common theme as the Bill has progressed, particularly in line-by-line scrutiny in Committee. Indeed, we broadly welcome the Government’s decision to maintain the judicial review standard for appeals on regulatory decisions. Labour feels that will ensure that the Competition and Markets Authority has the tools to act and is not bogged down in complex, lengthy and costly legal wrangling, which would render the new regime completely ineffective.
However, the Minister must clarify how the amendments will not impede the CMA’s ability to keep pace with rapidly moving digital markets. The regulator must retain the flexibility to construct remedies that target the harms to UK businesses and consumers stemming from big tech’s dominant position in digital markets. Looking back on the contributions of the Minister’s predecessor in Committee, we were all assured with a level of certainty that there would be no changes to weaken the appeals process, so it is a frustrating reality to see yet another U-turn from this Government—sadly, we have all become more than used to their slapdash way of governing and making law.
As we know, introducing full merits appeals for all regulatory decisions would have allowed complex, lengthy and costly legal wrangling, which would render the new regime ineffective. It must therefore be clarified that the Government’s amendment allows full merits appeals only for the level of the fine and for the decision to issue a fine. It must not permit a review of the CMA’s decision to create a conduct requirement or implement pro-competitive intervention, or of the CMA’s decision on whether a conduct requirement has been breached and how to remedy that breach. I would therefore be grateful if the Minister clarified exactly whether that will be the case.
I am conscious of time so I will push the Minister to clarify a number of important points. Government amendment 64 gives the Secretary of State the power to approve CMA guidance, which will be critical to regulated firms, particularly on how they should comply with the conduct requirements placed upon them. What is unclear is when and how, and in what timeframe, guidance must be submitted to the Secretary of State. I know that many of us would be grateful for some straightforward clarity from the Minister on that issue.
Lastly, I am keen to highlight Labour amendments 194 to 196, tabled in my name, which aim to improve the consultation rights of challenger firms. Under the current drafting, firms with strategic market status will have far greater consultation rights than those that are detrimentally affected by their anti-competitive behaviour. The amendments would give third parties the ability to provide critical information for the CMA’s consideration, and feedback on its work. That is vital, particularly for challenger companies whose growth may see them captured by the regime at a future point. I hope that the Minister will consider the merits of introducing similar amendments in the other place. He would have widespread support from colleagues across the House if he were to go ahead and do so.
We have heard the concerns of Members across the House about how the changes have been implemented, so I urge the Minister to listen carefully to the debate as it progresses and to do the right thing by working collegiately for the benefit of good legislation.
Sir Robert Buckland (South Swindon) (Con)
In rising to address the House, I draw Members’ attention to my entry in the Register of Members’ Financial Interests: I am an independent adviser in a collective action being brought in the Competition Appeal Tribunal for alleged anti-competitive behaviour relating to cryptocurrency. Although I will not address my remarks to any part of the Bill that might be perceived as relevant to the funding of litigation relating to such actions, I thought it right to be comprehensive in my declaration.
I wish to couch my remarks in this way: I am a firm supporter of the need to provide effective regulation in a market that is vulnerable—and, some would say, prone—to monopolistic abuse of market power. It is clear that regulation is not only desirable but essential when it comes to representing the interests of the consumer, and that is the place from which we all need to start.
In the sturm und drang that has accompanied some of the coverage of the Bill, it is perhaps inevitable that focus has been placed on the interests of one sector, as opposed to those of another—the large-scale enterprise against the small start-up. In all that, we risk forgetting the essential truth of why we are legislating in this way, which is first and foremost to ensure that any regulator is working in the interests of the consumer. My amendment deals precisely with that issue, by imposing an overarching and paramount duty on the regulator, and indeed the courts, to serve the interests of the consumer. Accompanied with a duty of expedition, that underlines the thrust of why I have decided to speak in this debate and to table amendments. Much needs to be done in the process of dealing with competition issues, which of course means the operation of the CMA and the Competition Appeal Tribunal. This debate—indeed, this whole process—can be a moment for us to reflect, and to take action and ensure that the way such disputes are dealt with in future will be more efficient, more speedy and in the interests of the consumer.
Ex-ante regulation is very difficult; it is all about predicting the future. Indeed, I am glad to see my hon. Friend the Member for Folkestone and Hythe (Damian Collins) in the Chamber. He followed that market very carefully and knows its ever-changing nature. It is difficult to predict what the world will look like in six months, let alone in five years. It is right to remember that the basis of the Bill, and of today’s debate, goes back four years to the Furman review, which rightly set out the parameters that have led to the development of this much-needed legislation.
In one respect, the review has been somewhat prayed in aid in a way that is potentially misleading. Recommended action 12 of the Furman review speaks about the ability of an affected company to appeal a decision—this is relevant to amendment 185 to clause 102. The review states:
“To facilitate greater and quicker use of interim measures to protect rivals against significant harm, the CMA’s processes should be streamlined.
The ability for an affected company to appeal a decision or an interim measure is a vital safeguard of their rights, and a check on the quality of CMA decision-making. Appeals processes need to strike a balance between protecting those affected by any unjustified decision and ensuring that CMA powers can be exercised effectively to protect those who would be left exposed by underenforcement or undue delay.”
It goes on:
“The competition framework would be improved for digital markets by focusing appeals on testing the reasonableness of CMA judgement, that procedure has been appropriately followed, and that decisions are not based on material errors of fact or law—a standard more closely relating to that of judicial review.”
As I read it, that is an invitation to ensure that there is not a completely unbridled merits-based approach. It is a world away from suggesting that somehow, in this world of ex-ante regulation, we should be immediately narrowing down the options of any court or applicant relating to potential claims on merit.
Ex-ante review work is not easy, but it is not unprecedented in United Kingdom regulation. We have had telecoms regulations for a long time, with the work of Ofcom in policing that. In that area, for a long time the decision making and the appeals process were allowed to be based on merit, before a reversion or a narrowing down to judicial review principles. Indeed, that was laid out for a long time—much longer than the period I envisage in my amendment—in order to reflect the importance of achieving maximum clarity as early as possible. I do not want to see anything that creates uncertainty in this market, because that will lead to a lack of investment, and perhaps a reduction of the sorts of investments that we want to see domestically and internationally in this important and vital market for the future of our British digital services industry.
Sir Robert Neill (Bromley and Chislehurst) (Con)
My right hon. and learned Friend is making an important and eloquent speech. Can I emphasise the point that he makes about certainty, and return to the intervention by my right hon. and learned Friend the Member for Kenilworth and Southam (Sir Jeremy Wright) about the importance of having clarity on what the test will be and at what stage it applies? We all understand proportionality tests, and we certainly all understand classic judicial review tests, but it is important in this emerging market that people know at which stage which test applies. I appreciate the Minister saying that he will clarify that later in his speech, but I am not sure that the wording proposed by the Government gives us that clarity. Will my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland) consider what more needs to be done around that?
Sir Robert Buckland
What my hon. Friend outlines is precisely what we are seeking. In making these arguments, we are not in some way the friends of big tech; we are not here to represent a particular sectoral interest. My amendment was drafted by me and by senior counsel from Monckton Chambers, including Philip Moser KC, who regularly appears both for and against big tech in these matters. I thought it right to seek some independent pro bono advice on the operation of competition law to make sure that, in developing the law in this way, we do not create entirely untested mechanisms that would—guess what?—require litigation to clarify.
The point is that we should be seeking to minimise more interpretive language that will require to be tested in the courts. That is why I take slight issue with what was said by the hon. Member for Pontypridd (Alex Davies-Jones), whom I respect very much. In amendment 186, I seek to replace the word “indispensable” with “necessary”, because I think that is a much clearer term that everyone would understand and that would, in itself, be a high threshold for the affected company in demonstrating consumer benefit in the countervailing consumer benefit test.
I think that, rather than trying to use and develop new language, we should look back and learn from the experience of telecoms regulation. One of the problems in, in effect, handing considerable power to the new digital markets unit is that the legal landscape relating to this activity is unformed. Unlike the landscape that underpinned the Competition Act 1998, we do not have the advantage of years of EU and UK court interpretation that was then applied by guidelines issued by the CMA.
Grahame Morris (Easington) (Lab)
The right hon. and learned Gentleman is articulate in presenting the case and knowledgeable about the issue, but may I distil it down to an issue of fairness that everyone can understand? Before our very eyes, the landscape is changing. Long-established titles, newspapers and publications are disappearing and retrenching. Thousands of journalists are losing their jobs. Is it not a matter of basic fairness that people who create the content should be properly compensated?
Sir Robert Buckland
The hon. Gentleman is right to make that point. That is why in other jurisdictions we have seen agreement reached between big tech and newspaper titles to ensure that there is that element of fairness. I agree with him; I want to see similar fairness and equity applied across the market. What I and others who agree with me are trying to do is to ensure that, in creating this brave new world of energetic and efficient regulation, we do not as a Parliament upset the balance by giving too much power to a particular regulator. A lot of us in this place have watched with concern the failure of other types of regulation—in our water industry or our energy industry, for example. I do not think anybody would deny that, at times, we have got regulation wrong. That is why it is important that we have this debate.
There are people outside this place who have put pressure on us by saying, “The Bill is in perfect order. There is no need for you to look at it any more; great minds have thought about it.” I say to them that it is for this place to make those decisions. I do not look kindly on comments made by the chief executive of the CMA about the merits of what this place is considering while the Bill is in Parliament. I absolutely accept the independence of the CMA and the important role that it plays, but we should not confuse independence with lack of accountability. That is a point that I will warm to in a little while, when I address the relationship between regulators—in this case, the CMA—and Parliament. At the moment, that relationship is wholly inadequate.
I was making the point that, unlike the Competition Act 1998, there is a relative lack of worked-out court interpretation of this Bill’s subject matter. That has led to distinguished commentators—no less than Sir Jonathan Jones, former Treasury counsel—making the point in evidence to the Committee that, in effect, the DMU would be able to decide who was going to regulate, set the rules that apply and then enforce those rules. The phrase “legislator, investigator and executioner” was used. While that is colourful language—perhaps too colourful for a dry debate about competition law—it is important that we reflect on the view of that former Treasury solicitor and be very careful that in going down this road, we are not making false comparisons.
A lot has been said about Ofcom and its decisions, and comparisons have been made, but we must not forget that those Ofcom decisions were heavily governed by EU framework directive 2002/21. Article 4 of that directive says that on ex-ante telecom appeals,
“Member States shall ensure that the merits of the case are duly taken into account and that there is an effective appeal mechanism.”
That is a bit different from the provisions in the Bill. A simple JR-type review is precisely that, and no more.
I listened with interest to the intervention made by my right hon. and learned Friend the Member for Kenilworth and Southam (Sir Jeremy Wright), who made a really good point that needs answering. We need to understand where proportionality comes into this. If the principle of proportionality is being used in the first instance, that is all well and good, but we need to understand how that fits with the provisions of the Bill: whether it implies that the courts deem every decision made by the DMU to be proportionate, or whether there is a way to challenge a particular decision by saying that it was not made according to the DMU’s own principles, acting in a proportionate way.
Sir Jeremy Wright
It seems to me—I would be interested in my right hon. and learned Friend’s view—that on the basis of the Government’s proposed wording, it is more likely that a firm will be able to challenge whether the CMA has applied its proportionality test appropriately, but the means by which it will do so will be under JR principles on appeal, rather than on a merits basis. It is not that proportionality is not subject to challenge, but that that challenge is limited by JR principles at the appeal stage. Does my right hon. and learned Friend agree?
Sir Robert Buckland
That is what we need to bottom out. The primary worry that a lot of us have about the JR principle is that it means that any challenge will probably be vanishingly small, which is not good for ensuring that the regulator is working in the best way. None of us wants to encourage incontinent litigation—or incontinent legislation, bearing in mind the importance that we place on it—but sometimes, challenge is essential to create greater certainty. There will be ambiguities; there will be occasions where there needs to be a test. We should not be frightened of that.
Damian Collins
I am following what my right hon. and learned Friend says carefully. Does he agree that we have to consider the nature of this business landscape? For these firms—some of the biggest companies in the world—litigation is a cost of doing business. Their track record shows that they use almost all grounds there are to challenge any decision made by any regulator. Not even a regulator is resourced sufficiently to be able to contest those challenges, and the people who seek to bring them know that they will take years and cost a huge amount of money, and that the business may even be closed by the time a resolution has been found.
Sir Robert Buckland
I fully take on board my hon. Friend’s concern. He is right to say that, which is why this should not just be about what might happen in terms of raw dispute; it has to be the culture of the new regulator to work with any potential subject—any company that might be a subject of an investigation—in a co-operative way. That raises the issue of how open the parties are with each other about the basis of their assertions and of how data is shared—that goes right into the Competition Appeal Tribunal itself. A lot of people would be surprised that the disclosure rules in the CAT are not as open as one would expect them to be if one is challenging a decision. We have to work our way through that, in order to change that attitude and reduce the amount of potential litigation by making sure that there is agreement.
I accept that the Government have moved on the JR test with regard to penalty, but a potential problem could result from the Government’s amendment on that: there will not be a change of culture, there will be a readiness by big tech to admit breach and then all resources will be thrown into contesting the penalty. There we will get the litigation, the real argument and the high-stakes money. To paraphrase my hon. Friend, we will get the actuarial calculation that it would be worth throwing a lot of money at litigation to reduce a penalty that could be a big percentage of turnover. We are potentially talking about huge penalties for these companies.
That issue does worry me and I hope that it demonstrates to the House why I am properly sensitive about the need to make sure that we do not just open the door to abuse by another means. I am a huge follower of Theodore Roosevelt and a great believer that his approach to fighting the J.P. Morgans and the Standard Oils of his day is exactly how we should operate in the monopolistic markets of today and tomorrow. My hon. Friend is right to say that this market is fast developing. When the Furman report was produced, we were looking at a different world in big tech. With the rise of artificial intelligence, we are seeing it evolve further.
Damian Collins
I am grateful to my right hon. and learned Friend for giving way, particularly as we are on the subject of Theodore Roosevelt. Does he agree that we have to be careful when considering consumer detriment in this case? The argument was not successfully made in the United States that J.P. Morgan could say that he may have a railway monopoly but the ticket prices were relatively low and so there was no consumer detriment. That was not considered to be a binding argument, so because the cost of an app in an app store might be low, that does not mean to say that the company can get away with overcharging.
Sir Robert Buckland
Again, I am grateful to my hon. Friend. He is right: there is a danger that in regulation we focus on the cost of the good or service, rather than on the overall environment and quality of the market. Some would say that that has been a particular issue in the way that regulation has operated in the water sector. That is why this is a good moment for all of us, as a House, to pause and reflect on where we have gone wrong with regulation in the past and how we can get it right from here on in.
There are some options the Government can look at when dealing with the JR standard. I have mentioned the importance of making sure that there is accountability, but we should not just be looking at the sunset option that I have set out in my amendment; we should look again at whether the clarification of the proportionality test could help everybody to understand precisely how the JR principles will work. If we miss the opportunity on this occasion to get this right, I am not sure we will be doing anybody any favours, least of all the consumer and especially not the DMU itself, which needs to develop in a way that is truly accountable.
The thrust of some of my amendments relates to the regulator’s accountability to this place, which is why they include a requirement to report regularly to Parliament and to Ministers. New clause 12 relates to the appointment of the senior director of the DMU, which I think should be done directly by the Secretary of State. That is not a challenge to the independence of the body; Ministers regularly appoint independent directors and inspectors, for example, and it does not undermine the integrity and quality of their role. However, through those amendments I am seeking to make the case that we should not confuse independence for lack of accountability. I do not use that word as a way of avoiding a greater accountability to this place.
The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)
Order. I have to get five more speakers in, plus the Minister. As the right hon. and learned Gentleman will shortly have been on his feet for nearly 25 minutes, this is just a quick reminder that he needs to give others time to speak.
Sir Robert Buckland
Of course. I have just cleared my throat, Madam Deputy Speaker, and by my standards this is a very short speech.
I will deal in summary with the other amendments. What I am seeking with those amendments is to ensure that, in using definitions, we do not end up creating mission creep for the DMU. I want the DMU to focus on the emerging digital economy; I do not want it to end up dealing with, for example, supermarkets such as Tesco, which will increasingly use online services to allow customers to shop. I do not think that is the intention of those proposing the Bill, but we need to make it clear in the Bill that that sort of mission creep will not be part of how the regulator develops.
I also want to make the point that, when looking at entrenched market power, focusing purely on size can sometimes be deceptive. Rather small enterprises can often have a disproportionate effect on a market. They do not necessarily need to be big. While we rightly understand that generally the bigger the entity or organisation, the bigger the impact it has, it is not always the elephant that makes a difference; it is sometimes the mouse. That is why focusing on market power rather than size is a better way of dealing with effective regulation.
In summary, I want to hear from my hon. Friends on the Front Bench a response to the challenges that I have laid out. I do not seek to press the amendments to a vote this evening, but I am sure that they will be returned to in the other place. Surely it is in the interests not only of the people we serve, but of the wider British economy that in passing such pioneering legislation, which in many ways puts Britain in a different place from other jurisdictions, we do not end up disincentivising the sort of investment that I know is part of the Prime Minister’s aspiration to make this country a world leader in artificial intelligence and machine learning safety and a place where digital businesses will want to invest. It is as simple as that. That is why it is vital that in this Bill we strike as perfect a balance as we can, because in this complex, ever-changing market it is very difficult to predict what the future will be.
Richard Thomson (Gordon) (SNP)
My party broadly welcomed the Bill at its introduction and through Committee, and broadly speaking we still do. However, for our liking there remain too many gaps in consumer protection. The Bill does not include an equivalent to the EU’s consumer rights to redress when consumers are misled, and it does not baseline the protections that we had previously, which we think is a serious omission. Many consumers found that to their cost when their travel arrangements went haywire through chaos at the channel ports over the summer.
The Bill does not do enough to tackle greenwashing. As we have heard, there is a systemic failure to tackle drip pricing and subscription traps. We are also still unclear about how the Government intend to tackle the scourge of fake reviews; although secondary legislation could be introduced, the scope of the sanctions that could be brought to bear against the perpetrators would inevitably be restricted.
Rather to my surprise, we have 175 Government amendments to the Bill. That seems rather a lot to be bringing in. It can be gently elided over that this is a Government who have been listening carefully to all the arguments put, but, to be perfectly honest, I think it shows that this has become something of a Christmas tree Bill. It would have been better to have had much more parliamentary scrutiny in Committee of some of the things we now find coming in, no matter how well-intentioned they are.
A number of amendments to the Bill do cause me concern, including the series of amendments that changes the mechanism for appealing the Competition and Markets Authority’s decisions. In our view, Government amendments 6, 7, 10 and 30 will water down the Bill’s effectiveness, allowing tech companies described under the Bill as the most powerful firms and dynamic digital markets to be able to challenge the CMA’s decisions if they do not believe that they are proportionate.
Government amendments 51 to 53, 55 and 56 also have that effect, since they will prevent certain appeals by big-tech firms of decisions made by the CMA from being held to the judicial review standard. I am unpersuaded by the arguments that we have heard so far about that. We fear that, in practice, when a decision is taken that is not, for whatever reason, to the liking of big-tech companies with rather large budgets—to take one entirely at random, we have Apple, which makes profits and turnover yields that are bigger than most countries’ GDPs—they will inevitably be able to tie those decisions up in the courts for quite some time, all the while being able to secure whatever advantage they had which the CMA had judged they got unfairly. The CMA has warned that changing the appeal mechanism could lead to such a set of drawn-out legal battles and quite an adversarial relationship with the firms that it seeks to regulate, which I would venture is far removed from the Bill’s original intention.
It is unusual that I should ever pray in aid the other place in a political argument, but last month the House of Lords Communications and Digital Committee called on the Government to maintain the JR standard for all appeals. It is therefore worrying, if not entirely surprising, that the extensive lobbying that some of the bigger tech companies have subjected us to seems to have found the ear of the Government.
If the UK Government’s amendments 6, 7, 10 and 30, which seek to allow firms with strategic market status to appeal against CMA decisions, are accepted, that will essentially undermine the CMA’s job and ability to protect consumers. Those amendments would allow big tech firms to appeal against decisions taken by the regulators on significant issues such as blocking mergers and issuing fines simply on the basis of their feeling that they may not be proportionate. As I say, they can certainly afford to spend huge amounts of money on legal representations to quibble with these decisions, particularly if the fines or deprivation of the opportunity to make lots of money mean that they feel it is worth spending that money whatever the eventual chances of success are.
This is in addition to the letter that Baroness Stowell wrote to the PM last month warning that the UK Government must not “undermine” the Competition and Markets Authority, noting that these amendments would
“favour those with an interest in delaying regulatory intervention”
and give greater power to avoid scrutiny to the tech firms
“with the greatest resources”.
The UK Government should not be ignoring these warnings, and we believe that this is a detrimental addition to the Bill. This position was also backed up by Which? in April last year. In our view, these amendments show that the Government have done the exact opposite of sticking to their guns on this.
I am mindful of the time—as are you, Madam Deputy Speaker—so I shall come to the amendments that I believe we will be voting on later. Labour amendments 187 and 188 would enable the Competition and Markets Authority to consider any significant benefits, due to a combination of factors, that might result from a breach of the conduct requirement. We think that strikes a reasonable and fair balance on where we would like the outcomes to be, and should the amendments be pressed to a vote, the SNP will be supporting them.
Damian Collins (Folkestone and Hythe) (Con)
Listening to this debate, I was reminded of remark attributed to a major United States tech investor who said that it had always amused him that people thought competition and capitalism were the same thing. While competition can be a great driver of economic growth, the acquisition of capital and the creation of new markets, there are equally plenty of capitalistic enterprises that have grown wealthy on the back of a lack of competition, through market domination. That is why this legislation is so important.
Superficially, it is tempting to look at the landscape of the digital economy and say that the fact that there are a number of very big companies is evidence of effective competition between those companies. Those companies, including Amazon, Apple, Google and Meta, may compete for the provision of some services, but they largely dominate markets where they are the central player. We have heard throughout the passage of the Bill that even major businesses seeking to sell their goods through, say, Amazon as an online retail platform cannot afford to have a public dispute with that platform, because their relationship with that company is fundamental to the success of their business. Major publishing companies have talked about the fact that contract renegotiation with companies such as Amazon can come with big costs attached, but that ultimately they have to do business through them.
Cloud storage, which is currently an area of investigation for the CMA, is going to be a vital piece of business infrastructure for anyone who operates in the digital economy, but again, it is dominated by one or two companies, principally Google and Amazon. There are only two operating systems for our mobile phone devices. One is Android, which is owned by Google; the other is Apple’s iOS system. They both have app stores, and there is a lack of interoperability between them. We therefore have app store markets that are actual monopolies. This has been investigated by the CMA and it has billions of pounds of consumer detriment in overpricing and variable pricing attached to it.
We know that these anti-competitive forces exist. In its recent ruling on the proposed Microsoft-Activision merger, the CMA was right to highlight that if a company that creates video games that people like to play is allied to a cloud system owned by a dominant company, people might only be able to access the service if they pay that cloud provider—the storage gatekeeper or guardian of that service—which could have consumer detriment down the line.
We are already seeing examples such as market domination and self-preferencing. Google has been investigated by the European Commission over self-preferencing. This is where companies are not just creating an easy-to-use service across multiple products for people, but doing so in a way that excludes others from that market. In the long run we must be concerned about the consumer detriment of market power being consolidated into the hands of a relatively small number of companies. An example that Members will probably all be familiar with is the mobile mapping app market. It used to be quite a vibrant market with a number of players in it, but it is now largely dominated by two, Google and Apple. That is not to say that the interest of companies is always against the consumer interest, but we should be mindful of the fact that in many of these markets, monopolistic conditions can easily be created, so we should be concerned about abusive market power. There is already some evidence of that.
Grahame Morris
I, too, welcome the new Minister to his place and congratulate him on his appointment. We all recognise that this is important, long-overdue legislation, so I wish him well in piloting it through the House. I also declare an interest: I am co-chair of the all-party parliamentary group for the National Union of Journalists. I receive no pecuniary advantage, directly or indirectly, and the NUJ is not affiliated to the Labour party or any other party, but it none the less makes some valid points, which I wish to raise today.
We face immense challenges and significant technological changes in the UK, and indeed globally, given the development of social media and the increasing use of artificial intelligence. In an era of fake news, there are few sources of news trusted more than our national, regional and much-loved local titles, which have stood the test of time and have deep roots in our communities. I have participated in a number of debates on the subject in Westminster Hall, and debates on the decline of our local newspapers and the need to support them are always over-subscribed.
It is important to be aware that professional journalism in the UK is in crisis. Reach PLC, the publisher of titles including The Mirror, the Daily Star and the Manchester Evening News, has announced a third round of redundancies, putting at risk as many as 800 journalist jobs. If we do not find means of fairly compensating established publishers and trusted sources of journalism, we will suffer from a less diverse media landscape, job losses, and the promotion of voices delivering fake news guided by hidden agendas.
Big tech continues to exploit its market dominance in digital advertising; it uses news content from professional journalists without giving any payment or compensation to the publishers who produce the content. This Bill is a positive step, which I welcome. It is welcomed by the NUJ, journalists and publishers. A functioning media market requires regulators to address the power imbalances that have emerged between major tech companies and the journalism industry in recent years.
Our established news titles and publishers are essential to democracy; they scrutinise Government and contribute to an informed society. Their content is being used to generate revenues for tech giants. They—the creators—must be guaranteed a fair share of revenues. Without quality news content on online platforms, the overall standard of information that we all consume will decline. It is in the collective interest of our Government, of all citizens of the country, and even of major tech companies to ensure the continued presence of quality journalism. That is relevant to the part of the Bill that allows the Competition and Markets Authority to initiate a final offer mechanism, which was referred to by my hon. Friend the Member for Pontypridd (Alex Davies-Jones)—I support Opposition amendments 187 and 188 for the reasons she gave. The final offer mechanism must be used only as a last resort, and not by big tech companies to bypass meaningful negotiations.
I also wish to reinforce the point made by my hon. Friend the Member for Salford and Eccles (Rebecca Long Bailey): meaningful and fair negotiations are vital if big tech companies are not to continue to exploit the current power dynamic, and place undue influence on smaller publishers in a way that does not recognise the true value of the original content that they produce. British journalism is valuable, and its value is quantifiable. News content used by tech giants is estimated to be worth around £1 billion a year in the UK. That revenue is essential to the health and wellbeing of professional journalism in the UK.
I welcome the stance of the House of Lords Communications and Digital Committee on the timely implementation of the Bill, and its recommendation that the Government
“resist pressure to weaken some of the Bill’s measures”.
I also echo what the NUJ and the News Media Association say about maintaining the option of judicial review for appeals against regulatory decisions.
Government amendments must be clarified—a number of Members, including my hon. Friend the Member for Pontypridd, have asked for this—to ensure that the Competition and Markets Authority can retain the flexibility to construct remedies for problems that arise, and to keep up with rapidly changing digital markets, especially when big tech has such a monopolistic position.
I urge the Minister to uphold a high threshold for exemption from penalties when tech firms breach the rules, so as to prevent misuse of exemption provisions by well-funded companies that employ expensive legal teams. The example of Everton Football Club comes to mind. It seems to me—not that I am an expert in these matters—that it is being heavily penalised. Other football clubs in the premier league that seem, on the face of it, to be guilty of far greater abuses have managed to avoid the penalties. It is crucial that we eliminate loopholes that could be exploited by big tech.
Whether we like it or not, people consume a lot of their news from the big tech giants. Research conducted by Ofcom found that Facebook is the third most popular place to consume news; a higher proportion of people go there than to the BBC or Sky News channels. Meta recently discontinued Facebook News in Europe, and that has a potential impact on news consumption. With almost half of news consumers relying on social media, it is imperative to ensure fair compensation for quality content on social media platforms.
Looking ahead, the NUJ seeks extensive engagement with the Government—I hope that the Minister will respond to this—on safeguarding the future of journalism, and on recognising the multi-faceted threats that it faces, including from emerging technologies such as artificial intelligence. It is imperative that this legislation quickly progress through Parliament, so that we can safeguard the integrity of UK news titles and publishers, and protect them from undue influence from big tech lobbyists who wish to water down much-needed reforms.
Sir Jacob Rees-Mogg
I am delighted to support the amendments in the name of my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland). It is important to get the balance right, and not to worry too much about phantasms and fears that will not arise. It is worth recalling that, in the 1970s, the Federal Trade Commission was on the cusp of opening an investigation into IBM for its monopoly in typewriters. Technology is changing so rapidly, and an over-zealous regulatory mechanism is more likely to damage and hold back innovation than advance it.
Think of the names that have come and gone over the past few years. Who now has a BlackBerry? We once again think of blackberries as a fruit, rather than a mechanism for communicating. Or a Nokia telephone? In the 1980s, Nokia made Wellington boots. It is probably now back to making them, as its telephone has come and gone and been overtaken. That is the thing about the sector that we are looking to regulate: there is competition in it. It is not necessarily a competition for market share at any one time; it is a competition of technology that is evolving faster than people are able to deal with it.
There is in the Bill a touching faith in the competence of regulators, which I do not share. The CMA, to which we are about to give significant powers, has made a fool of itself this year—and not just a little. It has been made a global laughing stock by its Microsoft Activision Blizzard ruling, in which it blundered. It got it wrong; all the other regulators in the world did something else, and the CMA had to back down. The story was—this is quite important—that the CMA was doing the work of the FTC, but the FTC had to meet a higher legal standard and therefore encouraged the CMA to make the bid more difficult, because it thought that the UK law would be easier to work around than US law. That is why the amendments on the judicial review standard are so important. I would be in favour of a full merit standard. I think it is very peculiar that the Opposition, who are always happy to go to court to obstruct the Government at any opportunity—to obstruct the Government in carrying out the will of the British people, or to obstruct the Government when decisions are made by accountable Ministers—want unaccountable, unelected bureaucrats to have arbitrary power, which I do not want them to have. I want them to be able to operate according to merits.
Sarah Olney (Richmond Park) (LD)
The Liberal Democrats welcome many aspects of this Bill. We are pleased that the Government are finally acting on the Competition and Markets Authority’s recommendations in bringing forward measures to prevent the tech giants from putting our digital sector in a stranglehold. We want to see a thriving British tech sector in which start-ups can innovate, create good jobs and launch innovative products that will benefit consumers. A strong competition framework that pushes back on the tech giants’ dominance is essential for that.
For too long a small number of big tech firms have been allowed to dominate the market, while smaller, dynamic start-up companies are too often driven out of the market or swallowed up by the tech giants. New rules designed by the CMA will ensure that these large companies will have to refrain from some of their unfair practices, and they give the regulator a power to ensure that the market is open to smaller challenger companies. The Liberal Democrats are pleased to see changes to the competition framework, which will allow the CMA to investigate the takeover of small but promising start-ups that do not meet the usual merger control thresholds. This change is particularly important for sectors such as artificial intelligence and virtual reality while they are in their infancy. The benefits of these changes will filter down to the end users, the consumers, in the form of more choice over products and services, better prices and more innovative start-ups coming to the fore.
While we are glad that most of the CMA’s recommendations are in this Bill, we have concerns about certain aspects, such as the forward-looking designation of SMS firms and the definition of countervailing benefits that SMS firms are able to claim. The countervailing benefits exemption allows the CMA to close an investigation into a conduct breach if an SMS firm can demonstrate that its anti-competitive practices produce benefits for users that outweigh the harms. There is some concern that big tech may seek to exploit this exemption to evade compliance with conduct requirements and continue with unfair, anti-competitive practices. It could also create scope for tech firms to inundate the CMA with an excessive number of claims of countervailing benefits, diverting the CMA’s limited resources away from essential tasks. Amendment 209, tabled in my name, seeks to strengthen the Bill and to curtail the power of large tech firms to evade compliance by tightening the definition in the Bill of what kind of benefits are valid.
The Liberal Democrats also have concerns about several of the Government amendments, particularly those relating to the appeals standard, as they risk watering down some of the CMA’s most powerful tools. There is now a real danger that powerful incumbents will use their vast resources to bog down and delay the process, leaving smaller competitors at a disadvantage. These amendments show that the Government are taking the side of these established firms at the expense of smaller, growing firms, and at the expense of economic growth and innovation as a whole.
The Liberal Democrats are keen to ensure that big tech is prevented from putting the British tech sector in a stranglehold. We hope that the Government will be robust on the defensive measures in the Bill. It is important that they reject any attempt to water down or weaken this Bill with loopholes, and that they ensure there is no ambiguity that could be exploited. Although competition is crucial for Britain’s tech sector, we hope the Government also move to tackle some of the fundamental issues holding it back, such as the skills gap, the shortage of skilled workers and weak investment.
Saqib Bhatti
With the leave of the House, I would like to address some of the points that have been made today.
I am grateful to Members across the House for their contributions to this debate and, of course, throughout the development of this legislation. I am similarly grateful for the cross-party support commanded by the digital markets measures. Members will find that I agree with points raised on both sides of the House, and I am confident that this Bill addresses those points.
I thank the hon. Member for Pontypridd (Alex Davies-Jones) for kindly welcoming me to the Treasury Bench, for her amendments and for her commitment to getting this legislation right. She asked about the countervailing benefits exemption, and I reassure her that the wording change maintains the same high threshold. SMS firms must still prove that there is no other reasonable, practical way to achieve the same benefits for consumers with less anti-competitive effect. This makes sure consumers get the best outcomes, whether through the benefits provided or through more competitive markets.
The hon. Lady also asked about appeals, and it is important that decisions made by the CMA can be properly and appropriately reviewed to ensure that they are fair, rigorous and evidence-based. We have considered strong and differing views about appeals from a range of stakeholders, and judicial review principles are the appropriate standard for the majority of decisions under the regime, as we have maintained with the additional clarification on the DMU’s requirement to act proportionately. We have, however, aligned the appeal of penalty decisions with appeals under the Enterprise Act 2002, so that parties can challenge these decisions on their merits to ensure that the value of a penalty is suitable. Penalty decisions have less direct impact on third parties, and the amendment will provide additional reassurance without affecting the regime’s effectiveness.
The significant changes we are making will provide more clarity and assurance to firms on the need for the DMU to act proportionately. They also bring the regime in line with the relevant CMA precedent. Parties will have greater scope to challenge whether the interventions imposed on them are proportionate or could have been achieved in a less burdensome way. When financial penalties are imposed, parties will have access to a full merits review to provide reassurance that the value of the fine is appropriate.
The hon. Lady also asked about the implementation of guidance, and I can assure her that we are working at pace to ensure the regime is operational as soon as possible after Royal Assent. Guidance must be in place for the regime to go live, and the Government will be working with the CMA to ensure timely implementation. The Secretary of State will, of course, review all guidance for all future iterations.
The hon. Lady also talked about amendments 187 and 188, which seek to replace the countervailing benefits exemption with a power for the CMA to consider benefits to users before finding a breach of a conduct requirement. The exemption will ensure that there is a rigorous process to secure the best outcomes for consumers, and removing it would jeopardise clear regulatory expectations and predictable outcomes. In turn, this would make it more likely that consumers lose out on the innovations developed by SMS firms, such as privacy or security benefits. Government amendments 13 and 14 clarify the exemption while, crucially, maintaining the same high threshold and clear process.
The hon. Lady also mentioned amendments 194 and 196, and the Government agree that it is important that the DMU’s regulatory decisions are transparent and that the right information is available to the public. We understand that these amendments would require the DMU to send decision notices to third parties that it assesses to be most affected by those decisions. However, under the current drafting, the DMU is already required to publish the summaries of key decisions. Requiring the DMU to identify appropriate third parties and send them notices would introduce a significant burden on the DMU, to limited benefit, and I argue that it would undermine the flexibility and quick pace that we expect from the DMU. We believe the current drafting strikes the right balance, providing transparency and public accountability on DMU decisions.
Sir Robert Buckland
I warmly welcome my hon. Friend to his place, as this is my first chance to do so. Are we now to understand that, with regard to the judicial review standard, proportionality will, in effect, be built in, and that we are going beyond the principles of plain, vanilla JR into the more widely understood term? Am I right?
Saqib Bhatti
I suggest that I write to my right hon. and learned Friend, and to all right hon. and hon. Members who have raised the important question of proportionality, to clarify the position. We want this legislation to have clarity for consumers and certainty for businesses because, as my right hon. Friend the Member for North East Somerset (Sir Jacob Rees-Mogg) said, this is an ever-changing market, so it is essential that we have clarity and certainty.
Sir Robert Buckland
The point about proportionality extends into clause 29, where the Government have now removed the indispensability test, leaving bare proportionality. My amendment asks for a necessity test. What assessment has my hon. Friend made of the removal of “indispensability”? Does he still think that the threshold for countervailing benefit will be sufficiently high to ensure that the CMA does not disapply or discontinue investigations inappropriately?
Saqib Bhatti
That is an important point, and I appreciate my right hon. and learned Friend giving me the opportunity to clarify it. I want to be unequivocal that, from my perspective, the threshold is still high and we have provided clarify. If he requires even further clarity, I am happy to write to him to be completely clear.
Damian Collins
I am grateful for what my hon. Friend has said so far about the application of the proportionality test, but if he is to follow up with Members in writing with some clarity, can he set out what he believes the grounds for challenge would be on the basis of proportionality? The interventions that the CMA may make and the rulings it may give are at the end of quite a lengthy process of market analysis, demonstration of abuse of market power and breach of conduct requirements. If those are challenged routinely and at a late stage, on the basis that there are grounds to say that it is disproportionate, it could have the unintended consequence of delaying systems in a way that they should not be delayed.
Saqib Bhatti
If I heard my hon. Friend correctly, he wanted a letter on that. This legislation is designed to make sure that it is not for big companies to litigate heavily to stifle the smaller challengers from coming out and becoming the big companies and employers of tomorrow. Let me write to him to clarify the point further.
My right hon. and learned Friend the Member for South Swindon has spoken about accountability in my numerous conversations with him over the past few days, and again today. I take his point. He will know that I want independent, versatile, flexible and adaptable regulators. That is only right for an ever-changing digital market that is always innovating and changing the way it operates. We do not know the unicorns of tomorrow or the benefits that we can get from consumers. The Competition and Markets Authority and the DMU have a responsibility to be accountable, to maintain that flexibility and to have adaptability to new technology and new entrants in the market. As I am sure he knows and respects, that is why independent regulators are a central part of our internationally recognised business environment. We should not forget that point.
I take the points about overreach by regulators, but they are a core part of what international partners and investors look at when it comes to the competition regime, because they know that will be innovative and will encourage further innovation in technology. The CMA is operationally independent from Government, and Government will not intervene in its regulatory decisions. The DMU will have discretion in how it designs its interventions under the regime. That discretion is matched with robust accountability, from initial decision making to appeals.
There is a range of checks and balances throughout the regime that provide assurance. I hope that reassures my right hon. Friend. There are opportunities for Government, Parliament and stakeholders to hold the CMA to account, but I welcome his challenges and interventions on this point, because it is important. I am sure that this will be looked at again in the other place. Government should always be sensitive to those challenges. The digital markets regime will be overseen by CMA’s board, which is accountable to Parliament for all key decisions. Key decisions will be taken by a committee, of which at least half its members will offer an independent perspective. I am sure that he will welcome that because, as new technologies and innovations emerge in the market, we will need new expertise.
Damian Collins
My right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland) made the important point that the growth and expansion of regulation in digital markets is necessary but substantial. The ability of this place to keep track of how the regulators use their powers is increasingly important. That may be beyond the work of any departmental Select Committee, but instead requires something like the Public Accounts Committee, as he suggested—a separate committee whose job is to focus on and scrutinise such work. That was recommended by the House of Lords Communications and Digital Committee, and also by the Joint Committee on the Online Safety Bill. I do not expect the Minister to give us an answer right now, but if he could reflect on that need and give some guidance to the House, that would be welcome.
Saqib Bhatti
My hon. Friend makes an important point that is a matter for wider discussions on accountability. I am happy to have that discussion with him in future. As things currently stand, there are sufficient balances and checks in place, but I am always open to having further discussions with him.
Grahame Morris
Could the Minister give some clarification on my point about fair reimbursement to the journalists and publishing houses that produce original content? As the new Minister, is he prepared to meet the National Union of Journalists to hear its concerns directly?
Saqib Bhatti
If the hon. Member will be ever so patient, I will address that point, because it is important.
My right hon. and learned Friend the Member for South Swindon talked about the DMU’s ex-ante powers, which I want to address because it is an important measure. We proposed to give the DMU ex-ante powers to impose obligations on designated firms because of the characteristics of digital markets, which make them particularly fast-moving and likely to tip in favour of new, powerful winners. We do not think that approach is appropriate for firms in other markets that do not exhibit the same qualities. Even if a firm meets the turnover conditions and carries out a digital activity, the DMU will still need to find evidence that the firm has substantial and entrenched market power, as well as a position of strategic significance in the activity, to designate the firm. The DMU will prioritise the areas where there will be greatest benefits for markets and consumers, and will reflect the CMA’s strategic steer provided by the Government, which is designed to reflect the policy as intended.
Sir Jacob Rees-Mogg
I think that everyone wishes to achieve the same objective, so I do not quite understand why His Majesty’s Government do not accept the amendment of my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland), which will make that clear beyond doubt, will safeguard it and will tidy up the legislation.
Saqib Bhatti
I will address my right hon. Friend’s point. We have listened to the concerns and discussed them in great detail, but I believe the Government’s amendments strike the right balance between prioritising the benefit to the consumer while helping the digital market to remain flexible and innovative, allowing for the future tech of tomorrow to be a big challenger.
One of the great strengths of the Bill lies in the speed and flexibility of the toolkit to better equip the regulator to tackle fast-moving and dynamic digital markets. The amendments will maintain an effective, agile and robust process, and will not undermine the Digital Markets Unit’s ability to intervene in a timely and impactful way. They will ensure that the DMU’s approach is proportionate and beneficial to consumers. I hope that we have reached a good position with the Members I have spoken about, but I want to turn to the points raised by my hon. Friend the Member for Folkestone and Hythe (Damian Collins), who was ever so eloquent about the challenge that the legislation is looking to overcome and the balance that it seeks. I was greatly appreciative of his support and the challenge he has put down.
In respect of the hon. Member for Easington (Grahame Morris), the final offer mechanism, which strengthens the hand of smaller businesses when they challenge those bigger businesses, is designed with the challenges he has put forward in mind. I hope that he appreciates that we recognise the traditional business model of news media, particularly print media, which has been substantially disrupted by the growth of digital. The regime is designed to help rebalance the relationship between major platforms and those who rely on them, including news publishers. That could include creating an obligation to offer fair and reasonable payment terms for the use or acquisition of digital, including news, content. I will absolutely take up the offer to meet the NUJ and hear its concerns. I hope that this measure goes a long way towards appeasing those concerns by rebalancing the market and ensuring that firms that have strategic market significance know that they must present a much fairer deal for regional print media.
Sir Robert Buckland
Perhaps the Minister will forgive me for juxtaposing his reluctance to make things clear in primary legislation when discussing this clause and what the Government seek to do in part 4 on subscriptions. It seems to me very odd to conduct a subscription regulation mechanism by using primary legislation. There is a conflict in the logic being applied here, and I am sorry that I have to point that out to him.
Saqib Bhatti
I am sure that the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) will appreciate the pass that I am just about to give him; I am sure that he will address that issue in his speech.
I reiterate my gratitude to the Opposition for their co-operative behaviour, which I have been informed about by my predecessor, and to right hon. and hon. Members across the House for the challenge that they have put forward today. I am grateful to Members across the House for their contributions, and I hope that they continue to work with the Government. We will continue to work with Members as the Bill progresses through Parliament to ensure that it drives innovation, grows the economy and delivers better outcomes for consumers. That is what the Government care about. We want a highly competitive market that innovates and nurtures the technology companies of tomorrow to ensure that the digital online world serves consumers. For that reason, I respectfully ask Members not to press their amendments.
Question put and agreed to.
New clause 5 accordingly read a Second time, and added to the Bill.
New Clause 6
Protected disclosures
“In the Public Interest Disclosure (Prescribed Persons) Order 2014 (S.I. 2014/2418), in the table in the Schedule, in the entry for the Competition and Markets Authority, in the right hand column, after ‘Kingdom’ insert ‘, including matters relating to Part 1 of the Digital Markets, Competition and Consumers Act 2024 (digital markets)’.”—(Saqib Bhatti.)
This new clause (which would be inserted into Chapter 8 of Part 1 of the Bill) confirms that matters relating to Part 1 of the Bill (digital markets) are covered by the entry for the Competition and Markets Authority in the Public Interest Disclosure (Prescribed Persons) Order 2014.
Brought up, read the First and Second time, and added to the Bill.
Clause 15
Notice requirements: decisions to designate
Amendments made: 2, in clause 15, page 8, line 34, leave out from “that” to the end of line 35 and insert
“the undertaking or digital activity, as the case may be, remain substantially the same”.
This amendment clarifies how the CMA may revise its view of an undertaking or digital activity by issuing a revised SMS decision notice.
Amendment 3, in clause 15, page 8, line 37, leave out from “not” to the end of line 38 and insert
“affect—
‘(a) the day on which the designation period in relation to that designation begins, or
(b) anything done under this Part in relation to that undertaking.”—(Saqib Bhatti.)
This amendment confirms that giving a revised SMS decision notice does not affect anything done under this Part in relation to a designated undertaking.
Clause 17
Existing obligations
Amendments made: 4, in clause 17, page 9, line 23, at end insert—
“(2A) In Chapters 6 (investigatory powers and compliance reports) and 7 (enforcement and appeals), references to a ‘designated undertaking’ are to be read as including an undertaking to which an existing obligation applies by virtue of provision made in reliance on subsection (1).”
This amendment provides that references in Chapters 6 and 7 to a designated undertaking include an undertaking to which an obligation applies by virtue of provision made in reliance on clause 17(1).
Amendment 5, in clause 17, page 9, line 37, at end insert—
“(ba) commitment (see sections 36 and 55);”.—(Saqib Bhatti.)
This amendment provides for the CMA to be able to apply an existing commitment, with or without modifications, in respect of certain new designations or to make transitional, transitory or saving provision in respect of a commitment when it would otherwise cease to have effect.
Clause 19
Power to impose conduct requirements
Amendments made: 6, in clause 19, page 10, line 30, leave out from “requirement” to the end of line 35 and insert
“or a combination of conduct requirements on a designated undertaking if it considers that it would be proportionate to do so for the purposes of one or more of the following objectives—
(a) the fair dealing objective,
(b) the open choices objective, and
(c) the trust and transparency objective,
having regard to what the conduct requirement or combination of conduct requirements is intended to achieve.”
This amendment provides that the CMA may only impose a conduct requirement or combination of requirements if it considers that it would be proportionate to do so, having regard to what the requirement or combination is intended to achieve.
Amendment 7, in clause 19, page 11, line 15, at end insert—
“(9A) Before imposing a conduct requirement or a combination of conduct requirements on a designated undertaking, the CMA must have regard in particular to the benefits for consumers that the CMA considers would likely result (directly or indirectly) from the conduct requirement or combination of conduct requirements.”—(Saqib Bhatti.)
This amendment provides that the CMA must consider the likely benefits for consumers when imposing a conduct requirement or combination of conduct requirements.
Clause 20
Permitted types of conduct requirement
Amendment made: 8, in clause 20, page 12, line 9, leave out from “to” to “in” on line 10 and insert
“materially increase the undertaking’s market power, or materially strengthen its position of strategic significance,”.—(Saqib Bhatti.)
This amendment clarifies that a conduct requirement is permitted if it is for the purpose of preventing an undertaking from carrying on activities other than the relevant digital activity in a way that is likely to materially strengthen its position of strategic significance in relation to the relevant digital activity.
Clause 21
Content of notice imposing a conduct requirement
Amendments made: 9, in clause 21, page 12, line 28, after “requirement” insert
“or, as the case may be, each conduct requirement as varied,”.
This amendment clarifies how the notice requirements in clause 21 apply in relation to the variation of a conduct requirement.
Amendment 10, in clause 21, page 12, line 31, leave out paragraphs (b) and (c) and insert—
“(b) the CMA’s reasons for imposing the conduct requirement, including—
(i) the objective for the purposes of which the CMA considers it is proportionate to impose the conduct requirement (see section 19),
(ii) the benefits that the CMA considers would likely result from the conduct requirement (see section 19(9A)), and
(iii) the permitted type of requirement to which the CMA considers the conduct requirement belongs (see section 20);”.—(Saqib Bhatti.)
This amendment requires the CMA to give reasons for imposing conduct requirements on a designated undertaking. Sub-paragraph (ii) is consequential on Amendment 7.
Clause 26
Power to begin a conduct investigation
Amendments made: 11, in clause 26, page 14, line 11, leave out “a designated” and insert “an”.
This amendment, together with Amendments 12, 16, 29, 37, 38, 40, 42, 43 and 65, ensures that enforcement action can be taken in respect of an undertaking that has ceased to be a designated undertaking in relation to its conduct while it was a designated undertaking.
Amendment 12, in clause 26, page 14, line 18, leave out “designated”.—(Saqib Bhatti.)
See the explanatory statement for Amendment 11.
Clause 27
Consideration of representations
Amendment proposed: 187, in clause 27, page 15, line 8, at end insert—
“(2) The CMA may have regard to any significant benefits to users or potential users that the CMA considers have resulted, or may be expected to result, from a factor or combination of factors resulting from a breach of a conduct requirement.”—(Alex Davies-Jones.)
This amendment would ensure that the CMA considers any significant benefits to users resulting from the breach of a Conduct Requirement when it is considering representations from designated undertakings as part of a Conduct Investigation.
Question put, That the amendment be made.
The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
I beg to move, That the clause be read a Second time.
Mr Deputy Speaker (Sir Roger Gale)
With this it will be convenient to discuss the following:
Government new clause 8—Use of damages-based agreements in opt-out collective proceedings.
Government new clause 9—Mergers of energy network enterprises.
Government new clause 10—Power to make a reference after previously deciding not to do so.
Government new clause 11—Taking action in relation to regulated markets.
Government new clause 12—Meaning of “working day” in Parts 3 and 4 of EA 2002.
Government new clause 13—ADR fees regulations.
Government new clause 14—Power to require information about competition in connection with motor fuel.
Government new clause 15—Penalties for failure to comply with notices under section (Power to require information about competition in connection with motor fuel.
Government new clause 16—Procedure and appeals.
Government new clause 17—Statement of policy on penalties.
Government new clause 18—Offences etc.
Government new clause 19—Penalties under section (Penalties for failure to comply with notices under section (Power to require information about competition in connection with motor fuel)) and offences under section (Offences etc).
Government new clause 20—Information sharing.
Government new clause 21—Expiry of this Chapter.
Government new clause 22—Removal of limit on the tenure of a chair of the Competition Appeal Tribunal.
New clause 1—Meaning of “payment account” and related terms—
“(1) ‘Payment account’ means an account held in the name of one or more consumers through which consumers are able to—
(a) place funds;
(b) withdraw cash; and
(c) execute and receive payment transactions to and from third parties, including over any designated payment system.
(2) ‘Payment account’ also includes the following types of account—
(a) savings accounts;
(b) credit card accounts;
(c) current account mortgages; and
(d) e-money accounts.
(3) ‘Designated payment system’ has the same meaning as within the Financial Services (Banking Reform) Act 2013.
(4) ‘Relevant institution’ means—
(a) any bank which has permission under Part 4A of the Financial Services and Markets Act 2000 to carry out the regulated activity of accepting deposits (within the meaning of section 22 of that Act, taken with Schedule 2 and any order under section 22);
(b) any building society within the meaning of section 119 of the Building Societies Act 1986;
(c) any credit institution within the meaning of the Payment Services Regulations 2017;
(d) any authorised payment institution within the meaning of the Payment Service Regulations 2017; and
(e) any small payment institution within the meaning of the Payment Services Regulations 2017.
(5) ‘Discriminate’ means that a relevant institution acts in a way which, were that relevant institution a public authority, would constitute a breach of its obligations under section 6(1) of the Human Rights Act 1998, in so far as those obligations relate to—
(a) Article 8 of the European Convention on Human Rights;
(b) Article 9 of the European Convention on Human Rights;
(c) Article 10 of the European Convention on Human Rights;
(d) Article 11 of the European Convention of Human Rights; and
(e) any of the Articles listed in paragraphs (a) to (d) when read with Article 14 of the European Convention on Human Rights.”
This new clause defines relevant terms for the purposes of NC2.
New clause 2—Rights of consumers in relation to payment accounts—
“(1) A relevant institution must not discriminate against a consumer when deciding—
(a) whether to offer a consumer a payment account;
(b) whether to alter, or vary in any way, the terms of an existing payment account in use by a consumer; or
(c) whether to terminate or otherwise restrict a consumer’s access to their payment account.
(2) A relevant institution, within 30 days of deciding to alter, vary, terminate, or otherwise restrict a consumer’s access to their payment account, or deciding not to offer a consumer a payment account, must provide the consumer with a written statement of reasons explaining their decision.
(3) A written statement of reasons under subsection (2) must clearly specify—
(a) the basis upon which such a decision was taken, including reference to any terms and conditions within the consumer’s contract upon which the relevant institution relies, or reference to any legal obligations placed upon the relevant institution;
(b) all evidence taken into account by the relevant institution in reaching its decision; and
(c) any other matters that had bearing on the relevant institution’s decision.”
This new clause would place a duty on banks, building societies and similar institutions not to discriminate against consumers when offering retail banking services.
New clause 3—Rights of redress—
“Where a relevant institution has acted in breach of its obligations under section [Rights of consumers in relation to payment accounts] (1), the consumer shall have a right to damages in respect of any—
(a) financial loss;
(b) emotional distress; and
(c) physical inconvenience and discomfort.”
This new clause would give consumers a right to redress if discriminated against under NC2.
New clause 4—Enforcement of rights of redress—
“(1) A consumer with a right to damages by virtue of section [Rights of redress](1) may bring a claim in civil proceedings to enforce that right.
(2) The Limitation Act 1980 applies to a claim under this section in England and Wales as if it were an action founded on simple contract.
(3) The Limitation (Northern Ireland) Order 1989 (S.I. 1989/1339 (N.I. 11)) applies to a claim under this section in Northern Ireland as if it were an action founded on simple contract.”
This new clause makes provision for the enforcement of redress under NC3.
New clause 24—Review of Competition Appeal Tribunal—
“(1) The Secretary of State must, as soon the Secretary of State considers reasonable practicable after this Act has been passed, commission a review of all processes involving the Competition Appeal Tribunal.
(2) The Secretary of State must ensure that the review is conducted independently of the Digital Markets Unit and the CMA.
(3) The Secretary of State must lay a report of the review before Parliament.”
This new clause would require the Secretary of State to commission an independent review of the Competition Appeals Tribunal processes.
New clause 25—Duty to treat consumer interests as paramount—
“(1) In applying the provisions of this Act, the CMA and the Courts have an overriding duty to treat consumer interests as paramount.
(2) The duty set out in subsection (1) includes a duty to—
(a) address consumer detriment, including the protection of vulnerable consumers;
(b) expedite investigations that give rise to consumer detriment; and
(c) narrow points of challenge in appeals to CMA decisions that engage consumer detriment.”
This new clause would impose a duty on the CMA and the Courts to treat consumer issues as paramount.
New clause 26—Proceedings before the Tribunal: claim for damages—
“(1) The Competition Act 1998 is amended as follows.
(2) In section 47A, after subsection (2)(b) insert—
“(c) Part 4 of the Digital Markets Act 2023””
This new clause would allow claims for damages in respect of infringements of the provisions of Part 4 of this Bill.
New clause 29—Contract renewal: option to opt in—
“(1) Before a trader enters into a subscription contract with a consumer where section 247(2) applies, the trader must ask the consumer whether they wish to opt-in to an arrangement under which the contract renews automatically at one or more of the following times—
(a) after a period of six months and every six months thereafter, or
(b) if the period between the consumer being charged for the first and second time is longer than six months, each time payment is due.
(2) If the consumer does not opt-in to such an arrangement, the trader must provide a date by which the consumer must notify the trader of the consumer’s intention to renew the contract, which must be no earlier than 28 days before the renewal date.
(3) If the consumer has not—
(a) opted into an arrangement under subsection (1), or
(b) given notification of the consumer’s intention to renew by the date specified under subsection (2),
the contract will lapse on the renewal date.”
This new clause would allow the consumer to opt-out of their subscription auto-renewing every six months, or if the period between payments is longer than six months, before every payment. If the consumer does not opt-in to auto-renewal, they would be required to notify the trader manually about renewing.
New clause 30—Contract renewal: variable rate contracts—
“(1) Before a trader enters into a subscription contract with a consumer where section 247(3) applies, the trader must ask the consumer whether they wish to opt into an arrangement under which the contract renews automatically on the date the consumer becomes liable for the first charge or the first higher charge.
(2) If the consumer does not opt into an arrangement under subsection (1), the trader must provide a date by which the consumer must notify the trader of the consumer’s intention to renew the contract, which must be no earlier than five days before the renewal date.
(3) The trader must also ask the consumer whether they wish to opt into an arrangement under which the contract renews automatically—
(a) after a period of either six months from the first charge or higher charge and every six months thereafter, or
(b) if the period between the consumer being charged for the first and second time is longer than six months, each time payment is due.
(4) If the consumer does not opt into an arrangement under subsection (3), the trader must provide a date by which the consumer must notify the trader of the consumer’s intention to renew the contract, which must be no earlier than 28 days before the renewal date.
(5) If the consumer has not—
(a) opted into an arrangement under subsection (1) or subsection (3), or
(b) given notification of the consumer’s intention to renew by the date specified under (as the case may be) subsection (2) or subsection (4),
the contract will lapse on the next renewal date.”
This new clause would introduce an option for the consumer to opt-out of their subscription auto-renewing after their free or discounted trial. Otherwise, they would have to notify the trader manually about the subscription continuing. It also introduces an option for the consumer to opt-out of their subscription auto-renewing.
New clause 31—Regulatory burdens arising from competition and consumer regulation—
“(1) The CMA must, at least once a year, publish a report setting out its assessment of the economic cost of regulatory burdens that have been created and removed over the previous year through the exercise by public bodies of—
(a) competition and consumer powers; and
(b) the following activities, as far as they relate to competition and consumer matters—
(i) the imposition of conduct requirements;
(ii) dispute resolution and public enforcement activities;
(iii) the monitoring of undertakings, and
(iv) the issuing of regulatory orders.
(2) The Secretary of State must ensure that public bodies provide the CMA with information the CMA considers is necessary for completion of the report.
(3) The Secretary of State must ensure that the net economic cost of regulatory burdens set out in the report is zero or less in every year.
(4) In this section a “regulatory burden” means a burden as defined in section 1(3) of the Legislative and Regulatory Reform Act 2006.”
This new clause places on Ministers a permanent duty to ensure that the net economic cost of burdens from competition and consumer regulation is zero or less each year.
Government amendment 69.
Amendment 207, in clause 141, page 89, line 13, at end insert—
“(c) the collective interests of consumers include avoiding any detriment that might be incurred by consumers if the United Kingdom does not reach a level of net zero carbon emissions by 2030.”
This amendment would mean that part of the test of whether a commercial practice had committed an infringement would be whether the commercial practice had failed to protect consumers from any detrimental effects arising from a failure to achieve net zero by 2030.
Government amendments 70 to 79, 81, 82 and 85.
Amendment 226, in clause 224, page 150, line 27, at end insert—
“(4A) Where a commercial practice has been found to be unfair under paragraph 32 of Schedule 18 of this Act, any body listed as a public designated enforcer in section 144(1) of this Act may require the removal of the relevant online marketing from the internet.”
This amendment allows enforcement bodies to remove the marketing of fake or counterfeit products from the internet.
Amendment 208, page 150, line 29, at end insert—
“(6) An established means used to encourage control of unfair commercial practices must include the following measures—
(a) investigation and determination on a timely basis—
(i) in accordance with a pre-determined process which has been published on the internet,
(ii) by people who are independent of any organisation undertaking commercial practices, and
(iii) with the outcome of any decision published.
(b) the appointment of a board to oversee the investigation and determination process, with the majority of the members of the board independent of any organisation undertaking commercial practices;
(c) provision for the suspension of a commercial practice during an investigation and prior to a determination being made;
(d) provision for guidance to be issued, by the CMA, the relevant weights and measures authority or, if the established means is an organisation, the established means itself, about the lawfulness of a commercial practice;
(e) publication of statistical and other information about the operation of, and compliance with, the established means to enable the CMA or weights and measures authority in question to assess on an annual basis the continuing appropriateness of using the established means.”
This amendment sets out conditions, including in relation to independence and transparency, for the means by which the control of unfair commercial practices will be encouraged.
Government amendments 86 to 93.
Amendment 210, in clause 251, page 166, line 24, leave out “six” and insert “twelve”.
This amendment would provide for traders to have to issue reminder notices to consumers about ongoing subscription contracts only every twelve months, rather than every six.
Amendment 211, page 166, line 36, leave out subsection (5) and insert—
“(5) The Secretary of State may, by regulations, make reasonable provision for the content and timing of reminder notices.”
This amendment, together with Amendments 212 and 213, would remove the detailed provision about the content and timing of reminder notices from the face of the Bill and instead give the Secretary of State the power to make such provision by regulation.
Government amendment 94.
Amendment 212, page 167, line 1, leave out Clause 252.
See explanatory statement to Amendment 211.
Government amendments 95 to 98.
Amendment 214, in clause 253, page 168, line 7, leave out “in a single communication” and insert
“in a manner that is straightforward, timely and does not impose unreasonable cost on a consumer”.
This amendment, together with Amendments 215 to 218, would remove from the Bill the existing detailed provisions for ending a subscription contract, intending that they should be covered by provision made in secondary legislation under the provisions of clause 270(1)(c), and instead set principles for how a contract may be ended.
Amendment 215, page 168, line 10, leave out subsection (2).
See explanatory statement to Amendment 214.
Amendment 216, page 168, line 15, leave out subsection (4).
See explanatory statement to Amendment 214.
Amendment 217, page 168, line 23, leave out subsection (6).
See explanatory statement to Amendment 214.
Amendment 218, in clause 254, page 168, line 37, leave out subsections (3) to (5).
See explanatory statement to Amendment 214.
Government amendments 99 and 100.
Amendment 219, page 170, line 25, leave out clause 257.
This amendment, together with Amendments 220 to 222, would remove the provision for a mandatory cooling-off period for a subscription contract.
Amendment 220, page 171, line 19, leave out clause 258.
See explanatory statement to Amendment 219.
Amendment 221, page 172, line 18, leave out clause 259.
See explanatory statement to Amendment 219.
Government amendments 101 to 103.
Amendment 222, in clause 272, page 180, line 25, leave out subsection (5).
See explanatory statement to Amendment 219.
Government amendments 104, 105, 107, 109, 110, 112 to 147 and 150 to 152.
Amendment 223, in clause 317, page 221, line 35 leave out “subsection (2)” and insert “subsections (2) and (2B)”.
This amendment and Amendment 224 would provide for an implementation period of two years before the provision in the Bill relating to subscription contracts comes into force.
Government amendments 153 and 154.
Amendment 224, page 222, line 6, at end insert—
“(2B) Chapter 2 of Part 4 comes into force two years after the day on which this Act is passed.”
See explanatory statement to Amendment 223.
Government new schedule 1—Mergers of energy network enterprises.
Government amendments 155 to 163.
Amendment 225, in schedule 18, page 343, line 42, at end insert—
“32 At any stage of a purchase process, presenting a price for a product which omits obligatory charges or fees (or an estimate thereof) which are payable by the majority of consumers, which are not revealed to the consumer until later in the purchase process.”
This amendment adds the practice of “drip-pricing”, a pricing technique in which traders advertise only part of a product’s price and reveal other obligatory charges later as the customer goes through the buying process, to the list of unfair commercial practices.
Amendment 227, page 343, line 42, at end insert—
“32 Marketing online products that are either—
(a) counterfeit; or
(b) dangerous.”
This amendment would add marketing counterfeit and dangerous online products to the list of banned practices.
Government amendments 164 to 170.
Amendment 228, in schedule 19, page 350, line 30, at end insert—
“Non-commercial society lotteries
13 (1) A contract under which a lottery ticket or tickets are purchased for one or more non-commercial society lotteries.
(2) In sub-paragraph (1), “non-commercial society” has the meaning given by section 19 of the Gambling Act 2005, and “lottery ticket” has the meaning given by section 253 of that Act.”
This amendment seeks to exclude lottery tickets purchased for non-commercial society lotteries from the scope of the provisions on subscription contracts.
Government amendment 171.
Amendment 213, in schedule 20, page 354, line 19, leave out paragraphs 28 to 38.
See explanatory statement to Amendment 211.
Government amendments 172 to 175.
Kevin Hollinrake
May I first echo the remarks about the excellent address by the Under-Secretary of State for Science, Innovation and Technology, my hon. Friend the Member for Meriden (Saqib Bhatti)? I welcome him to his place—he did a fine job on his first outing in such a complex debate.
I, too, am delighted to bring the Digital Markets, Competition and Consumers Bill to the House on Report. May I express my gratitude to colleagues across the House for their contributions to Second Reading and Committee stages, and for their continued engagement throughout its passage? I thank in particular the hon. Members for Pontypridd (Alex Davies-Jones) and for Feltham and Heston (Seema Malhotra) for their constructive engagement and commitment to seeing the Bill delivered quickly so that its benefits can be realised. I also thank my hon. Friend the Member for Weston-super-Mare (John Penrose) for his excellent engagement—over the weekend in particular—and my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland) for his many important and relevant amendments.
The reforms to the competition and consumer regimes contained in parts 2 to 5 of the Bill will grow the economy and deliver better outcomes for consumers and bona fide businesses. Consumers will have more choice and protection, and pay lower prices. Businesses will operate on a fairer and more level playing field. The reforms will do that by enhancing the wider competition regime, strengthening the enforcement of consumer protection law, and putting in place new consumer rights and more transparency.
It is a simple fact that the way in which we buy products and services today very often involves a digital process. The opportunities that follow are vast—more accessibility, flexibility and choice for consumers—but there is also a greater risk of consumer harm, including, for example, consumers being trapped in a subscription contract that they no longer want or purchasing goods that may not be up to scratch because they unknowingly relied on a fake review. We must ensure that consumers and their cash are protected.
Swifter interventions to tackle bad business practices against consumers are expected to deliver a consumer benefit of £9.7 billion over 10 years, as UK consumers benefit from new rights, stronger law enforcement and more competition through merger control. Importantly, the reforms will also grow the economy by boosting competition, better placing the UK to succeed in export markets. It will allow the Competition and Markets Authority to more effectively deter, prevent, and, where necessary, enforce against monopolistic behaviours. That will ensure that the free market can operate effectively.
The Government amendments to parts 2 to 5 of the Bill will provide greater clarity, ensure coherence with related legislation, and make sure the Bill’s measures meet their intended aims. Almost all the amendments are technical in nature. I will address them across four categories: competition, consumer enforcement, consumer rights and cross-cutting provisions.
First, the competition measures in the Bill will give the CMA new powers to enable it to tackle anti-competitive activity swiftly and effectively, meaning that it can focus its work on the areas of greatest potential harm. The competition environment is complex and ever evolving. We must respond carefully but decisively to changes in the judicial and legislative landscape to provide certainty and to avoid any unintended detrimental consequences of wider developments.
New clause 8 amends the Competition Act 1998 so that the absolute bar on damages-based agreements being relied on in opt-out collective actions will not apply to third-party litigation funding agreements, which are the main source of funding for that type of action. That responds to a recent Supreme Court judgment, and effectively restores the previously held understanding of the status of litigation funding agreements under the 1998 Act. Accordingly, it will have retrospective effect.
In response to a recent Competition Appeal Tribunal judgment, we are specifying the circumstances in which a market investigation reference may be made in relation to an area that has already been the subject of a market study but was not referred for further investigation at that time. We are also bringing forward a series of amendments to ensure alignment between this Bill and the Energy Act 2023, which introduced the energy network merger regime, and to make minor corrections to provisions relating to that regime. Separately, we are repealing paragraph 8 of schedule 3 to the 1998 Act to remove a redundant reference to the treaty establishing the European Coal and Steel Community. To ensure that the implementation trials for market remedies introduced by the Bill are as effective as possible, we are introducing new powers for the Secretary of State to extend the scope of implementation trials in the markets regime to include regulatory conditions.
I will now address the new direct consumer enforcement model. That model will enable the CMA to act faster and take on more consumer cases on behalf of the public, resulting in a further estimated direct benefit to consumers of tens, or potentially hundreds, of millions of pounds. The Government have tabled a series of technical amendments to increase certainty in respect of the CMA’s operational duties. They include aligning the definition of “business” in part 3 of the Bill with that in part 4 of chapter 1 to ensure that any breaches of unfair trading prohibitions can be enforced through the regime; and making provision about information-sharing between public authorities so that enforcers can obtain the information that they need to take enforcement action under part 3 of the Bill.
On appeals, we are adding a requirement for the CMA to include information about applicable appeal rights in a final breach-of-directions enforcement notice, as well as empowering the appeal court to send issues back to the CMA for decision on certain notices. We are also empowering the Secretary of State to update through regulations the specified maximum amounts for fixed and daily penalties imposable by a court or the CMA when a business breaches a formal information request.
Moving on to consumer rights—I am sure this will interest many Members across the House—the purpose of the Bill is simple: to empower consumers to get the deal that is right for them, and to increase their confidence in the products they buy and the services they use. The new rights on subscription traps will give consumers more control over their spending. Such traps have been the subject of some debate during the passage of the Bill, and the Government are introducing amendments to remove unintended consequences.
Edward Timpson (Eddisbury) (Con)
I welcome the introduction of consumer rights on subscriptions, which have become a real minefield for many people of all ages. Why do the Government feel it necessary to have this provision in the Bill and in primary legislation, when if it was in secondary legislation it could have more flexibility with changing circumstances?
Kevin Hollinrake
We think it is a sufficiently important issue and something we consulted on previously. We have a good idea of the kind of measures we would like to put in place, and we are adding more flexibility—my hon. Friend will have seen some of the Government amendments that have been tabled in response to concerns raised by Members of the House, including my right hon. and learned Friend the Member for South Swindon. We want that flexibility, yet we want to move on quickly with this important reform. There is about £1.6 billion of potential benefit to consumers through this Bill.
Jim Shannon (Strangford) (DUP)
I commend the Minister who is putting forward ideas that I, and perhaps my party, feel we can subscribe to and support. I always ask this question, because I think it is important that the general public have an access point if they have a question on something to do with consumer rights. Do the Government intend to ensure that there is some methodology—a phone call, an email address or contact person—who the public can contact if they have a question?
Kevin Hollinrake
Our position is that we do not intervene in the practices of businesses unless there is a necessity to do so. We leave those channels open for decisions by businesses in the services that they offer to consumers, rather than dictating to them how they should communicate with their consumers. It is absolutely right that those channels are open and freely available. One important thing we are doing in the Bill is making it much easier to terminate a contract. A person should be able to end a contract as easily as they enter into it, and that is an important part of the Bill.
The Government are bringing forward a series of amendments that remove the requirement for businesses that offer subscription contracts to send a reminder notice ahead of the first renewal notice in instances where there is no free trial. For businesses that offer those contract types, the amendments will see their regulatory burden decrease as they will be required to send only two reminder notices per year instead of three. That also ensures that consumers do not receive too many notices at the start of their contract. The requirement to send a reminder notice before a free or low-cost trial rolls over to a full contract will remain in place.
In addition, we are creating a new power for the Secretary of State to disapply or modify reminder notice requirements in respect of particular entities or contracts, and amend the timeframes in which a business must send a reminder notice to a consumer. The amendments provide greater flexibility and clarity on when reminder notices should be sent, allowing for adaptability post implementation. A further amendment clarifies that, in the event of a dispute about the cancellation of a contract, the onus is on the consumer to prove that the method in which they sent a notification to cancel their subscription contract was sufficiently clear. That intends to rectify the concern that businesses will be subject to enforcement action if a consumer attempts to cancel their subscription contract through unconventional means, for example through a tweet.
I thank my right hon. Friend the Member for Calder Valley (Craig Whittaker) and the hon. Member for Gordon (Richard Thomson) for their continued engagement on Second Reading and in Committee on the issue of whether society lotteries are captured under the subscription measures. As I said in Committee, it is certainly not our intention to capture those contracts. We are therefore introducing an amendment to clarify that gambling contracts, which are already regulated under gambling laws, are excluded from the scope of the subscription contract measures. I trust that that amendment will offer them, and those in the industry, clarity on the matter.
Let me turn to a series of technical Government amendments in relation to protections for consumer savings schemes. Such schemes involve making deposits to save towards a specified event such as Christmas or back-to-school shopping, and they are a vital means for British families to budget for those big occasions. The Bill is not designed to capture routine advance payments for services. In order to avoid possible uncertainty, we are introducing amendments that will exclude contracts regulated by Ofcom, such as prepaid pay-as-you-go mobile phone contracts, as well as contracts for prepaid passenger transport services, such as prepaid Transport for London Oyster cards, from the list of what constitutes a consumer savings scheme. Finally, we are introducing two amendments to maintain the effect of the Consumer Protection: Unfair Trading Regulations 2008, which the Bill repeals and largely restates. The first relates to the application of disclosure of information provisions in part 9 of the Enterprise Act 2002, and the second relates to the information requirement placed on a trader in certain circumstances. Two technical amendments are also being introduced.
Alex Davies-Jones
First, let me say how pleased I am to see the Minister remain in post, and I thank him for his collaboration during the passage of the Bill; it has been appreciated by those on the Labour Front Bench.
I am keen to highlight a number of amendments tabled in my name that, sadly, have been significant Government omissions. New clauses 29 and 30 relate to subscription traps, which frustratingly still remain in the Bill. I have heard from the Minister and I am grateful for his approach, but Labour has pledged to end subscription traps, which see consumers get stuck in auto-renewing contracts that they did not explicitly ask for following free trials, by making companies end automatic renewal as a default option. The plans would change the current system of “opt out” to ensure that customers actively “opt in”, saving people money during this Tory Government’s cost of living crisis.
In the last year alone, people in the UK spent half a billion pounds on subscriptions that auto-renewed without them realising, and unused subscriptions are costing people more than £306 million per year. That is impacting marginalised groups and those on low incomes considerably more than others. It could mean that those least able to absorb the cost of being in a subscription trap are more likely to be in one, and the impact on those people will be more acute. Although the Government have recently made changes so that companies will be mandated to provide a reminder to consumers before renewing their subscription, sadly that change does not go far enough. I urge colleagues to support these new clauses, because this issue is impacting people in each of our constituencies the length and breadth of our islands.
In addition, amendment 225 would address the common issue of drip pricing, which impacts people across the UK. As colleagues will be aware, drip pricing is the practice of businesses advertising only part of the product’s price, and then later revealing other obligatory charges as the customer goes through the buying process. The Government promised to tackle that issue in the King’s Speech, but they have not tabled their own amendments on it. Indeed, the King’s Speech was the fourth time that this Government have promised to act since 2016, and enough is enough. Can the Minister clarify exactly why the Government have chosen to ignore the opportunity to right this wrong in the legislation?
Broadly, the Bill is welcomed by the Opposition, but it is well overdue. It is a positive step forward in creating new competition in digital markets that will enable the competition authorities to work closely and fairly with businesses to ensure fair competition and to promote growth and innovation. Labour in particular welcomes competition and consumer choice and protection as signs of a healthy, functioning market economy. It is vital, if we are to make the UK the best place in the world to start and grow a business, that digital opportunities are open for all. We are committed to ensuring that a pro-business, pro-worker, pro-society agenda is built for Britain, and we see consumer protections and competition law as playing an integral part in that. I look forward to the Minister’s response, and I look forward to seeing this Bill finally progress to becoming an Act.
John Penrose
May I start where I left off when the Bill hit Second Reading by saying that it is extremely welcome and creates an enormous amount of important and much-needed change? I continue to support it in principle.
My purpose in rising today is to speak to new clause 31, which I have tabled and 29 parliamentary colleagues have supported. Those who are familiar with the Kremlinology of the Conservative parliamentary party will understand that the new clause does something wondrous to behold, which is that it unites the breadth and every single part of the party behind one central idea: better regulation. I should pause briefly just to say that better regulation is distinct from deregulation. Better regulation is not saying that we want to trash standards; it is saying that standards of everything from environmental standards to workers’ rights all matter, but it does also matter that Governments of any type and stripe make sure they try to deliver those standards in the cheapest and most efficient and economically logical way possible. That is the difference between deregulation and better regulation. It is about delivering high standards, but in the most economically sensible way. That is what new clause 31 attempts to do.
It is worth pointing out that we had a regime that worked pretty well for about five or six years between 2010 and 2016, and it did something along those lines. It was called “one in, one out,” and then it was upgraded to “one in, two out.” It basically said that any new piece of legislation or regulation had to be costed for the extra cost it was adding on to the British economy, and before it could be introduced the Minister concerned had to find an equally large amount of cost to remove from other regulations elsewhere to begin with. Later, it was twice as much cost to remove from other regulations elsewhere. That worked reasonably well, except that it had some loopholes deliberately left, partly because it could not affect anything created in Brussels when we were members of the EU, and also because it did not cover things such as the economic regulators, Ofgem and Ofwat and so on.
That system changed to what everyone hoped would be a better one in 2016, but it turned out to be an absolute disaster. Instead of gently but steadily bearing down on the costs of regulation, we saw a huge ballooning in costs in the first year of the new system, and there was a target of reducing the costs of regulation across the economy by £8 billion or £9 billion. Instead of that, they increased by that amount. One would have thought that would have meant that the sky fell in, everyone would have been horrified by that notion and this place would have been up in arms, but not a bit of it. There was zero reaction from any party across the House, because the system was lacking some crucial points. The crucial thing it was missing was a proper accountability mechanism for when Governments of any kind fail to deliver on better regulation principles and on reducing the cost to wealth creation in this country, and inherently therefore reducing the rate of growth in the country and the improvements in productivity that we all want to see. It meant nothing happened within Parliament.
Clearly, we cannot leave things as they stand, and new clause 31 is an attempt to try to put that right. It would do something very simple, and it comes back to what I have called net zero red tape, which is effectively one in, one out, with the cost of any new pieces of legislation or regulation needing to be matched by finding countervailing savings elsewhere, but it would also do something else. The new clause says, “We need to make sure that there is not just a commitment from Ministers, but a legal duty on Governments—not just this Government, but all future Governments—to make sure that everyone who is a Minister, when they get out of bed on a Monday morning, knows they have a legal duty to deliver on this.” That would mean that if Ministers did not deliver on it, they will have broken the law. Breaking the law means they are in breach of the ministerial code, which this Parliament and all Parliaments take seriously. It would be a far more effective trigger mechanism for ensuring proper accountability and that this measure is delivered.
I would be the first to admit that this new clause is not perfect. That is because the parliamentary Clerks have rightly said, “Hang on a second; this Bill has a scope, and you cannot exceed it.” Therefore the new clause cannot, even though I devoutly wish that it could, apply the basic principles that I have just been explaining to the House across the entire economy—would that it could. As it is, it can only apply those principles to the economic regulators and anything to do with competition and consumer law. That is a huge step forward, because, as I mentioned, the previous regimes all excluded the activities of economic regulators, and we will now enfranchise them, if we agree this new clause. That is worth doing, but the new clause is far from perfect, because it cannot cover the rest of the economy.
Incidentally, the relevant bits of accountancy—the reporting on whether costs have been added or subtracted —has to devolve to the Competition and Markets Authority under the scope of the Bill, when in fact a perfectly respectable initial grouping, the Regulatory Policy Committee, already does it. It is full of clever and well-intentioned people, and I think the CMA would rather it did not have to do this work if it could avoid it; it would rather that others did it.
It is not a perfect amendment, but it none the less would take us a big step in a much-needed direction and establish an important principle. I am grateful to the Minister, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who mentioned that we have been having extensive discussions over the weekend in an attempt to lock in these fundamental underlying principles and to find ways to perhaps broaden them beyond just the scope of this Bill. I hope that in his closing remarks he will be able to come up with some comments that may allow me not to press this amendment to a vote.
Fundamentally, the crucial things we have to ensure are: proper independent measurement, reporting and accountability on the costs of new regulations, rather than anything that can be lent on by Government; proper consequences for Ministers in any Government who fail to deliver on trying to reduce those costs; and that no Government feel like they have a blank cheque on spending other people’s money. It is stark to examine the differences in how we approach taxpayer-funded spending versus regulation cost-funded spending. At the moment, a Minister or official who wants to spend taxpayers’ money has a squillion different hoops that they have to jump through, and rightly so. There are lots of controls on that spending undertaken by the Treasury and followed up by the Public Accounts Committee, and I can see one of the senior members of that Committee here today, my hon. Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown). It is highly regulated and controlled, and great attention is paid to it in this Chamber.
However, if one wants to spend five, 10 or 100 times that amount of money by increasing the cost to business through regulation, there is not a peep. Much less attention is paid to those ways of spending cash, and that cannot be right. As everybody here will understand, a pound taken in tax has the same underlying economic impact on the country’s rate of growth as a pound taken in extra cost to business. We should treat both things with equal seriousness, rather than paying huge attention to one and largely blithely ignoring the other, while writing blank cheques. Any regime has to fix that problem as well.
Sir Geoffrey Clifton-Brown (The Cotswolds) (Con)
My hon. Friend engaged in some self-deprecation at the beginning of his speech about the scope of the new clause, which I co-signed, but I think he is underselling it. The consumer protection and economic regulation in the new clause go a long way towards reducing the burden of red tape. The second thing that is really important is that this is not about the number of regulations, but their economic value. That is what really places a burden on business in this country. Will he explain how he is going to establish a baseline through the new clause? If this thing is to be measured properly, we have to have a proper baseline.
John Penrose
My hon. Friend is right: I may have been guilty of being too glass half empty, rather than glass half full. The new clause goes a very long way and enfranchises large chunks of the economy that perhaps have not been dealt with properly up until now; I just wanted to go even further and cover the entire economy. He is right to point out that the new clause does quite a lot, but it is half a loaf rather than the whole loaf, if I can put it that way.
My hon. Friend is also right to say that the accountancy —the measurement of the costs—is crucial. If we are trying to do one in, one out, we have to know the cost of the things coming in so that we can know what savings we have to find elsewhere. As I mentioned, the crucial thing is that we need to have an independent accounting body—an independent measurement body. That will require the Regulatory Policy Committee to be made a little more independent and to be given more arm’s length ability to set those accounting and measurement standards in a way that cannot be leant on by senior Ministers, senior mandarins or senior regulators. The committee needs to be able to look those people in the eye and say, “No, this is the way it’s got to be.” Like any good external auditor, it needs to be sufficiently at arm’s length to deal with that. If it does so properly, it will mean that any set of measurements can be relied on, both by my hon. Friend’s Committee and the rest of this Chamber. That is essential.
To bring my remarks to a close, if we do not adopt the system proposed in the new clause, we need a system that provides proper accountability for anybody who fails to hit these targets; proper measurement and independent accounting standards to make sure that Government and regulators cannot mark their own homework; and proper targets of some kind to make sure there is a standard to which Ministers must be held. I hope that my hon. Friend the Minister will be able to reassure me, and I look forward to his remarks.
Richard Thomson
It is a pleasure to follow the hon. Member for Weston-super-Mare (John Penrose), who made some very interesting arguments. In some of them, I heard echoes of the arguments that have been made by the Opposition during my few years in this place about trying to measure the effect that legislation has when it is passed. Amendments that seek to measure that effect routinely get knocked down, but there is a fundamentally useful point in what he says about the need to make sure that we are not suffering from unintended consequences and that the goals we are seeking are the ones that result, so that corrective measures can be taken if they are not.
Hansard records that on Second Reading, I was wished “Good luck!” by the hon. Member for Pontypridd (Alex Davies-Jones) when—perhaps intoxicated by an overly friendly and useful exchange across the Floor about the scourge of fake reviews—I thought we might get to a consensus that would allow something to appear in the Bill. Sadly, the hon. Member’s cynicism appears to have been well founded: there is certainly nothing about fake reviews in the Bill that I can see. I accept that the Government might amend that in future through secondary legislation—they are certainly able to do so—but as I said earlier this afternoon, that inevitably restricts the scope of the sanctions that can be levied for that behaviour.
I appear to have had a little more success in another area. In his opening remarks, the Minister said that when it came to additional gold-plating of the rules and regulations affecting charity lotteries and gambling for that purpose, there was a risk of charitable organisations being caught up as an unintended consequence of the legislation. I am absolutely delighted that the Government appear to have listened, and have tabled Government amendment 170, which
“excludes contracts for gambling (that are regulated by other legislation) from the new regime for subscription contracts”.
I very much welcome that amendment. On that basis, I will not seek to move amendment 228, which stands in my name and which I pressed to a Division in Committee.
A rather gruesome spectre was raised in the debate earlier—phantasms and fears that will not arise, apparently. That brings me neatly to new clauses 1, 2 and 3, which were tabled by the right hon. Member for North East Somerset (Sir Jacob Rees-Mogg)—a series of amendments that appear to be aimed squarely at a somewhat contested narrative surrounding the personal financial arrangements of somebody currently residing in a very small part of a jungle somewhere in Australia. Their appearance there is set to land them a fee that—if the scale of that bounty is as reported—would surely have every private banking manager the length and breadth of London fighting for their custom. When most of us speak in this Chamber about financial exclusion, usually we are talking about a lack of access to cash or about the ability to access one’s cash without a service charge at an ATM. We are talking about a lack of access to credit or to any kind of bank account, and very much not about those suffering the privations and indignity of having to deal with a bog-standard current account rather than being courted by Coutts.
Sir Jacob Rees-Mogg
The hon. Gentleman is absolutely right that this issue has come to people’s attention because of Nigel Farage. I will talk about that case in a moment, but what has emerged is that actually, quite a lot of people—and sometimes charities—who have views that banks do not like find that they are not able to get access to a bank account, which nowadays is a fundamentally important thing for people’s carrying on an ordinary daily life.
Richard Thomson
I thank the right hon. Gentleman for his intervention. There is already a multiplicity of legislation and entitlements—indeed, he appears to reference them in new clause 1—that can be used to tackle such circumstances when they arise, if indeed they do. I find it very encouraging that in drafting new clause 1, the right hon. Gentleman has alighted on the relevant provisions of the European convention on human rights, which provides a very useful earthing point for many of the fundamental rights that we hold dear and, indeed, are a bulwark of a civilised society. Perhaps we will see a similarly stout defence of them in future debates in this Chamber.
I very much welcome new clause 14, which will require companies to comply with requests for information from the Competition and Markets Authority when it comes to the pricing of motor fuel. On 9 November, the CMA published its first monitoring report on the road fuel market, and while 12 of the largest retailers responded to that request, I am given to understand that two did not. From my perspective and, I am sure, the perspective of many others wherever in this Chamber they sit, that is simply not acceptable. I am sure we can all point to large variations in the cost of petrol, diesel and other forms of motor fuel across our constituencies, sometimes in filling stations that are only a few miles apart or even within relatively close proximity. That is certainly a great source of contention for people right across my constituency, so the Government requiring retailers to provide the CMA with that information is an important strengthening of its powers, and one that we welcome.
New clauses 29 and 30, which stand in the name of the hon. Member for Pontypridd, seek to tackle subscription traps. I appreciate that the Government have tabled amendment 93, which seeks to tackle these traps by issuing reminders, and that is a welcome step forward. Nevertheless, I am bound to observe that SNP Members, at least, believe that a better balance could be struck by asking consumers whether they wish to opt in to automatic renewals or to variable rate contracts, rather than simply getting reminders about them, which will inevitably end up in the recycling bin or junk mail folder, even for the most attentive of consumers. Having to opt in would be far better and it would protect the consumer’s interest to a far greater extent than simply having the opt-out option emailed or mailed, or conveyed in some other way, in due course. If those new clauses are put to a vote, the SNP will support them in the Lobby.
Sir Robert Buckland
I hope to speak briefly, as the hors d’oeuvres for the pièce de résistance, which will be the speech by my right hon. Friend the Member for North East Somerset (Sir Jacob Rees-Mogg), who has tabled excellent amendments. Although I did not sign them, for which I apologise, I very much endorse and support his efforts in these areas. These are important matters that need to be dealt with, and this is the right forum in which to do so. I wish to speak briefly in summary about provisions that I spoke to in the first group and simply reiterate that the thrust of the new clauses I have tabled, and am supported in by a number of right hon. and hon. Members, is all about accountability.
New clause 24 seeks a review of the work of the Competition Appeal Tribunal and is all about making sure that that body is functioning as effectively and expeditiously as possible to deal with these important matters. The work of the tribunal has become progressively more scrutinised. I do not wish to cast aspersions on its chairs or members, who work extremely hard. It is an impressive body, which is looked upon internationally for its work. However, there is no doubt in my mind and in the minds of many others that there is more work to be done to streamline and improve the CAT’s processes if it is increasingly to be looked upon and relied upon as an important arbiter of issues relating to digital markets, among other things.
The consumer interests duty set out in new clause 25 is at the heart of what we are trying to do here. Coupled with that, new clause 26 seeks to allow claims for damages under part 4 of the Bill and is an attempt to reframe the way in which the Government are approaching the provisions on subscriptions, to which I have tabled a number of amendments. I am grateful to my hon. Friend the Minister and the Government for having listened and moved on that issue. However, it seems to put the cart before the horse a little to not allow claims for damages, but to put through exemptions that would mean that if I were to seek to terminate my subscription via Twitter, the company concerned would not be liable. It would be far better to have a general liability in damages and not to have such prescriptive clauses in the first place that would be liable to misinterpretation. I am offering the Minister another way of looking at it that would be less prescriptive.
I have to come back to the Minister on the point that I made to the Under-Secretary of State for Science, Innovation and Technology, my hon. Friend the Member for Meriden (Saqib Bhatti): there is an odd juxtaposition between different parts of the Bill, where we are told in one breath that primary legislation is not the appropriate vehicle for prescribing procedures, yet here we are prescribing in minute detail procedures relating to subscriptions in the Bill. My hon. and learned Friend the Member for Eddisbury (Edward Timpson) has made the point for me, and it is one we well know: secondary legislation allows for greater flexibility, so that if a new potential problem or abuse is identified in this fast-growing market, the Government would be able to plug the hole and deal with the subscription issue.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
I rise to speak to amendments 226 and 227 in my name, which would introduce a take-down power to ensure that unsafe or counterfeit goods are removed from sale online. We covered this issue in some detail in the Bill Committee, where the problem of dangerous online sales was likened to the wild west, due to the risks to individual consumers and the lack of governance. I am disappointed that we still do not have clarity on how the Government want to tackle this growing concern, because this is fundamentally about safety and the Government failing in their core duty to keep people safe.
The Minister knows that unsafe products bought online have caused deaths in the UK. We have seen fires and other catastrophic damage caused by dodgy goods bought online, and since the Committee completed its considerations, a coroner has specifically cited faulty e-bike chargers in a report on a death. The coroner’s report in September suggested that at least 12 people have died and a further 190 have been injured in faulty e-bike and e-scooter blazes in the UK since 2020 alone, and that is only one area of problematic online sales. The coroner’s report goes on to call for greater action, and says:
“It is clear that there is an existing, ongoing and future risk of further deaths whilst it continues to be the case that there are no controls or standards governing the sale in the UK of lithium-ion batteries and chargers (and conversion kits) for electric-powered personal vehicles.”
There is a call for the Government to act in the face of further problematic items and dangerous goods being sold online.
My amendment helps to address the situation, where such items are identified. Not everything we discuss in this place is a life-and-death issue, but this can be. The Minister has had many representations from organisations about the growth of unsafe and dodgy goods sold online as legit: the British Toy & Hobby Association and Electrical Safety First issued briefings that supported my amendments in Committee. Trading standards also supports greater means of taking action, and briefed in support of the amendment in Committee.
At this time of year, it is even more important to act and raise awareness, because many people are buying their Christmas gifts online. Being super organised, I have my seven-year-old’s Christmas presents all safely stashed away at home. I am pretty confident she is not watching tonight and will not be looking for them, although who knows? I genuinely would not buy her gifts online because I am fearful about what happens to those who do trust some online sites.
Research by the British Toy & Hobby Association in 2021 showed that some 60% of children’s toys bought online were unsafe for a child to play with, and 86% were illegal to sell in the UK. That is very disturbing. Some of the problems it discovered were counterfeit goods, fire safety and chemical restriction failures, and packaging or parts that presented choking hazards. They were all products that online marketplaces had been told about but had not removed from sale.
In Committee, we had more time for detailed examples. We have less time here, so I will give just one, the toy crocodile story, and I will make it snappy. In July 2018, Amazon was told about a dangerous crocodile toy that was putting children’s lives at risk and was being sold widely online. Trading standards intervened several times, and in January 2020 the Office for Product Safety and Standards also intervened, but that toy range is still on sale online today, five years later. That is unacceptable, and sadly it is not a one-off. The OPSS has issued recall notices due to what it called
“serious risks of fire and electric shock”
for 90 products that are still on sale on Amazon, and 20 that are still on sale on eBay. There is a fundamental problem with the current regime and system. My amendment seeks to restore confidence.
The consumer organisation Which? has also alerted MPs to, among other issues that it has discovered, the problem of energy-saving devices that do not save energy but do present significant risks, including plugs with no fuses. There is unity in the call for greater action. The chief executive of the Government’s own Office for Product Safety and Standards said last November that
“there is too much evidence of non compliant products being sold by third party sellers”
online. The National Audit Office and the Public Accounts Committee have also called for action.
My amendments are not about new regulations or new pressures on business, which the right hon. Member for North East Somerset (Sir Jacob Rees-Mogg) talked about. They are about enforcing standards and rules for all, both online and on our high streets. The Minister, when he opened this section of the debate, said that he wanted fairness and a level playing field for all. I want that for British consumers and businesses as well. People have a misplaced faith that there is a level playing field, and that what they see in Argos and what they can buy on Amazon are regulated in the same way, but sadly they are not, and without my amendments they will not be.
Since Committee, I have tidied up the amendments slightly to ensure that they include a power to require the removal of items that are unsafe or counterfeit. That power links to the Government’s list of organisations in clause 144, to ensure that the same bodies as are listed in the Bill are involved. I am trying to help the Government and trying to help more generally, because there are wider benefits to getting this right.
UK high streets are struggling. Removing unsafe goods from online sale will mean that British high street shops that meet regulations will get a boost, as will British manufacturers who play by the rules but are undercut by imports from other countries that do not meet our safety and other standards. My amendments are designed to address all those issues and help to ensure that our standards are met. There is unity in the calls for greater regulation, and for a new sheriff or a new marshal for the wild west—not a rhinestone cowboy, singing the same old song and trying to stick up for a system that is failing British customers.
I will end on consumer rights. I do not believe in the enfeebled state, which seems to be accepted by some Ministers. We were told that the whole “take back control” narrative was supposed to lead to better rights for Brits, but we already lack rights that our European cousins have. French, Dutch, Irish and Polish customers now all have better protection, through the Digital Services Act, which has been passed by the EU since we left it—crucially, with the support of Amazon. It is beyond shocking that Amazon seemed to understand and support the need for change before most of the UK Government did.
However, there is a glimmer of hope. There is one Minister who has called for action, and has said that we should make the UK the “safest” place in the world to shop and do business online. That same Minister told this House that
“we should go further than that and require marketplaces to ensure that such products are not on their sites at all, ever”.—[Official Report, 20 January 2023; Vol. 726, c. 715.]
I agree with that Minister. These amendments help to deliver his aim, and we are lucky that that Minister is before us in this debate. I hope that when he gets back to his feet, he will reward my optimism and say that the Government will act now. I will not push the two amendments to a vote today, in the hope that my take-down power will be taken up by the Government before or during Lords consideration. I look forward to the Minister’s response.
Sir Jacob Rees-Mogg
It is a pleasure to follow the hon. Member for Bermondsey and Old Southwark (Neil Coyle). I am also grateful to the Minister for his thorough engagement on these matters. He has been extremely diligent, helpful and, as always, courteous. Let me begin by declaring a sort of semi-interest. I do not think it is technically one that the Standards Commissioner would worry about, but Mr Farage and I both appear on a television programme under the auspices of GB News at about the same time of day—I follow him. I have no financial relationship with Mr Farage; we merely appear on GB News at a similar time of day.
It was Mr Farage who brought to the attention of the public the issue of de-banking. It is a great problem; if someone’s bank suddenly says to them, “We are not providing you with any facilities”, where do they go? It is very hard to go to a new bank. New banks do not want people who have been de-banked. Nigel Farage became in a way the poster boy for this issue, highlighting something that was affecting people up and down the country, affecting charities, and affecting businesses that have been to see me as a constituency MP in the past—people running certain types of business, who found that their banking facilities were withdrawn without any proper answer or explanation. A pawnbroker who came to see me had had his banking facilities taken away. His is a perfectly honest and reputable business, but inevitably it deals with a lot of cash, which makes banks nervous and, when they are nervous, they need to give that customer a proper explanation as to why they are no longer getting that service.
The hon. Member for Gordon (Richard Thomson), in an elegant speech, teased me for standing up for Nigel Farage as if debanking was not a common problem. He mentioned that Mr Farage is off in the jungle eating offal and all sorts of other tasty morsels. Yes, that has had the benefit of bringing people’s attention to something that was affecting our constituents across the country. Therefore, I do indeed draw on definitions, but only definitions, from the European convention on human rights—this is not a sudden Damascene conversion to such a document; it is simply that those definitions are in our law and it is useful to base any amendment to a Bill before the House on existing law. That leads me, as always, to thank the Clerks for their mastery of ensuring that amendments are within scope, because getting the new clause into scope, as my hon. Friend the Member for Weston-super-Mare (John Penrose) found with his excellent new clause, which I will come to, was not particularly easy. That is why, in affecting consumers but not businesses, it does not go as far as I would have liked.
This matter is of such fundamental importance. You may think, Mr Deputy Speaker, that I am not all that much in favour of the modern world and that I think it would be nicer if we could go round with the odd groat or perhaps a sovereign to pay our way, but sadly that age of specie has gone—you might even say that the age of specie had become specious, but it is in the past. Everybody now needs modern banking facilities. Cash is not used anything like as much as it was, and every transaction that people carry out needs a piece of plastic, a bank that it comes from and a telephone or some type of technology. When somebody is debanked, it is like the Outlawries Bill on which we only ever have a First Reading: they are effectively made an outlaw in their own land. They are without the normal law of the land and the ability to do ordinary things. That is why new clauses 1 to 4 are really important, and a protection for people.
To return again to Nigel Farage, the idea that someone should be debanked because of legal political opinions is outrageous. The hon. Member for Gordon teases me for mentioning Nigel Farage, but actually a separatist who wants to break up the nation has a political opinion that in other countries would be considered treason. Those in China who say, “Free Tibet—have an independent Tibet,” do not get a lot of quarter. So once we start saying that someone can be debanked for holding Nigel Farage’s views, what about being in favour of Scottish independence? Would that be a view that one bank might not like and might say that members of the SNP—a perfectly legal party—should not be banking with it? It affects every political opinion, and a political opinion may be fashionable today, but tomorrow it may not be. We always have to consider in legislation the protection of free speech against the interests of passing fashion, because we and Opposition Members may be affected by it in a slightly different or changed environment.
Richard Thomson
Are we not talking about slightly different things? There was a highly contested narrative around the circumstances the right hon. Gentleman describes, but my understanding is that the gentleman in question was not so much debanked as offered a lesser account and has subsequently found somewhere he can bank satisfactorily.
Sir Jacob Rees-Mogg
The hon. Gentleman is misinformed. Mr Farage was only offered any new bank account with NatWest rather than Coutts when the story became public. Prior to that, he had not been offered any banking facilities, nor had he been able to find another bank that would take him on. So the facts of the matter are that Coutts/NatWest debanked him because of the extraordinary internal set of communications, which have become public and led to the resignation—effectively the firing—of the chief executive of NatWest, partly for gossiping about his banking circumstances, but also for the behaviour that had led to his banking facilities being taken away for his political opinions. That is quite clear from the information that has emerged.
Richard Fuller (North East Bedfordshire) (Con)
My right hon. Friend’s new clauses relate to debanking, prompted by a particular incident. Would he not accept that there is the broader issue that the pursuit of environmental, social and governance goals by corporations and the pursuit of values in association with diversity, equity and inclusion objectives raise the same issue on a much broader front than banking facilities? What would he recommend the Government should do on that?
Sir Jacob Rees-Mogg
I agree with my hon. Friend that it does go much further. Some time ago, the Bank of England issued a document suggesting that loans should not be given to companies investing in oil and gas when we need oil and gas for the foreseeable future. I think that this politicisation of banking is quite wrong, and ESG is not fulfilling the fiduciary duty of investors to provide the best return to their clients. We should look at that.
Neil Coyle
Can I clarify that when the right hon. Member talks about banks, outlaws and dodgy cash, he talking about high street banks and not Arron Banks?
Sir Jacob Rees-Mogg
I am talking about the banking system generally, and I am saying that it is important that people should have banking facilities regardless of their political views. It is important that Russian oligarchs may be sanctioned—that is a legitimate thing for Governments to do—but that requires the rule of law.
I want to touch briefly on some of the other amendments to which I have attached my name. I once again agree with my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland) on new clauses 24 and—particularly—25. Putting the consumer first must be the essence of what we are trying to do. To my absolute horror, I have discovered that I agree with him on turning some of these measures into secondary legislation.
Skeleton Bills are a dreadful thing. We get awful legislation coming into the House on which there is no detail at all because it will all be decided by Ministers later. Such Bills should be deprecated. The House of Lords is good at pushing back on them; this House less so. Skeleton Bills are bad idea—except, there is a place for secondary legislation, and that is it. For some utterly random reason, a Government who have brought forward extraordinary skeleton Bills, some of which I could mention and have mentioned in the Chamber on occasions, have brought forward every last detail on something that, in its essence, will need revision and updating and to meet different standards as time goes by. It is a modest eccentricity to have put that in the Bill. I suggest that, in the other place, the Government look at whether that detail could be easily turned into secondary instruments, with such instruments ready to come into force at the same time as the Bill, so there would be no delay. That structurally would make for a better Bill. I am embarrassed to be speaking in favour of secondary legislation, because normally I want to see things in the Bill. If we could have a promise of fewer skeleton Bills in future, I would be delighted.
Against that, I could not disagree more with new clauses 29 and 30. Those make a real mistake—dare I say it, they are typical socialist amendments—because they do not trust people. It seems to me that people are sensible: they know what they are doing, they volunteer to do it, and they are free to undo it. Yes, of course, it is important that they should be free to undo it, but there is a cost to over-regulation. If we make companies write all the time to say, “Are you sure you want to do this?” that puts up the price. The profit margin for the business will not change, but the price that they charge consumers will. If they are constantly saying, “Do you want to leave us?” that will put the price up, because there will be an administrative and bureaucratic cost to that, and a loss of business that will put up the overall cost for everybody. It is legislating for inefficiency based on the idea that consumers are stupid. Well, in North East Somerset, consumers are very clever, highly intelligent, and know what they have agreed to and what they have not agreed to.
I congratulate my hon. Friend the Member for Weston-super-Mare. His new clause 31 is genius because it gets to the heart of an incredibly complicated and difficult matter that no other piece of legislation that we have tried has really worked with. Even the one in, one out that we had from 2010 to 2015 did not really work. I seem to remember reading that the Crown’s ownership of sturgeon was cancelled during this period because it counted as a “one out”, allowing some regulation to come in, no doubt costing millions, as we got rid of something trivial. One in, one out was not really there, but this new clause does it on a proper cost audit and looks ultimately to cover everything. That is absolutely the right way to go. My hon. Friend made the superb point that whenever any type of Government expenditure is involved, it is looked at, reviewed and referred to a Committee, yet when regulations worth billions are involved, they pass through without so much as by your leave. This is a really important new clause and I encourage the Government to do whatever they can to implement it.
A final thought before I conclude is on petrol stations. This is very good news. Why is it that the Tesco’s in Paulton is more expensive than the local service station in Ubley? I use the local service station in Ubley because it is better value for money, but Tesco’s in Paulton is more expensive than the Tesco’s on the outskirts of Bristol. That is very unfair on my constituents and I want it to bring its price down.
Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)
Thank you, Mr Deputy Speaker. We all have that image in our head now, of which particular supermarket you are talking about.
As other hon. Members have said, this Bill is much needed and will help in so many ways. Hon. Members have sought to address a number of vexed issues in this legislation. This includes an attempt, through our Opposition amendment 225, to address drip pricing, which I know as chair of the all-party parliamentary group on ticket abuse is especially prevalent in the primary and secondary ticketing markets. In these markets, customers often have to wait until the payment screen to see a complete price breakdown. In the secondary market, customers are often drawn in by Google-paid ads to professional looking sites such as Viagogo, which are selling tickets for many times their face value and engaging in illicit business practices. Initial prices, while eye-watering, are present, but there is no breakdown of the exact amounts for service charges or VAT.
The consumer is left in the dark about what they are actually paying for until it is time to pay, usually after having navigated many more time-wasting pages on the website and almost losing the will to live and the power of rational thought. Even then, the prices are often still estimates when the customer eventually hits “Buy now”, after feeling that they will lose the tickets if they do not make the decision quickly. Lots of customers still get a nasty surprise when the payment confirmation email comes in and they see the actual amount that has been taken from their bank account or credit card.
Moving on more broadly to the Competition and Markets Authority, I am aware that the CMA made its recommendations on tackling abuses in the ticketing market to the Government in August 2021, which the Department for Culture, Media and Sport then sat on for over 18 months before making an outright rejection of them. Principally, these recommendations called for stronger laws to tackle illegal ticket resale, and this Bill could and should have been—and could still be—the perfect place to introduce those powers. I am therefore very disappointed that the Government are still resisting these modest calls from the body set up to regulate our markets.
I support efforts in the Bill to ensure healthy competition online, but why not extend it to tackle online ticket touts? Sites such as Viagogo have been allowed to grow and gain a monopoly over ticket resales while being accused of benefiting from the illegal bulk buying of tickets and the wholesale speculative selling of tickets that they simply do not have. This includes Viagogo sellers attempting to sell thousands of festival tickets that they had not purchased and did not have the title to, as well as something known as the golden circle, an online rent-a-bot group illegally buying masses of tickets for the upcoming tours of Beyoncé and Taylor Swift, even when artists such as Swift actively speak out against touting and take measures to protect their tickets from ending up in the hands of touts instead of fans.
John Penrose
I do not know whether the hon. Lady heard my earlier remarks, but let me reassure her that new clause 31 would not reduce the CMA just to that; it would still have all its other powers. In fact, the total number of staff employed by the RPC to do this at the moment is relatively small. I also mentioned that if the Minister were able to come up with alternative ways of delivering a fully independent and therefore much more objective way of doing the RPC’s job—perhaps by strengthening the RPC—I would be delighted to accept that instead.
Mrs Hodgson
I agree. I am sure that would be a much better way. I definitely do not think that the CMA should have to do what the new clause is seeking to do.
I have it on good authority that professional touts now number anywhere from 3,000 and 3,500. In all the time I have been campaigning and speaking on this issue, which is getting on for 15 years, those numbers were in the tens, the fifties and the hundreds. It shocks me to know that we are now trying to deal with this level of professional touts. They are attacking everywhere, from stadium gigs to local venues and, increasingly, football games. They should not be able to tout tickets for football games, but they do. Yet according to Home Office figures, the yearly arrests of football ticket touts have been decreasing, dropping from 107 in 2011-12 to only 28 in the 2019-20 season.
In my opinion, the lone conviction of just two touts nearly four years ago, which we discussed with the Minister in the last debate on this Bill, is not a strong enough deterrent, especially as it relied on outdated legislation such as the Companies Act 2006 and the Fraud Act 2006, rather than the purpose-built Consumer Rights Act 2015, which I was substantially involved in, or the Digital Economy Act 2017.
I appreciate the efforts in the Bill to protect consumers online, and I can see that there are measures in the Bill to be welcomed, but for me, ticket touting and the widespread fraud that comes with it must be properly addressed and regulatory bodies must be fully empowered to tackle these sites. I will leave my remarks there.
Caroline Lucas (Brighton, Pavilion) (Green)
When first announcing this Bill, the Prime Minister promised that it would clamp down on greenwashing and bring misleading environmental claims under the umbrella of consumer protection laws, but the reality seems to fall far short of that—something to which we should perhaps have become accustomed when contemplating the gap between this Government’s environmental rhetoric and their lack of concrete action. While the Bill allows for consumer redress if commercial practices result in their being misled, confused or misinformed, the measures it contains certainly do not amount to the robust action on greenwashing that the Prime Minister led us to believe would be forthcoming. I have therefore tabled two amendments that would go some way towards delivering on the promises that he made.
As a multibillion pound persuasion industry, advertising has an enormous influence on which companies we trust, on our lifestyle choices and on the purchases we all make.
We are all exposed to thousands of advertisements on a more or less daily basis. To protect consumers from misinformation and harm, advertising must be properly and fairly regulated. However, we currently have an advertising regulation system that is slow, opaque and, in short, failing. The UK’s Advertising Standards Authority is not an independent regulator; it is self-funded by the advertising industry. Any complaints that the ASA handles about misleading or harmful advertising is essentially therefore marking its own homework. The ASA’s motivation to fairly regulate is wholly undermined by its close proximity to the industry it should be holding accountable.
My amendment 208 seeks to address the regulatory gap as a matter of urgency. It would create a regulator that is independent, transparent and one that can take timely action, thus better protecting consumers from misleading messaging by polluters and other harmful commercial actors. I think consumers want action. They are increasingly concerned about the role of companies in producing waste, pollution and environmental harms, and ignoring human rights. Yet in response these same companies turn to advertising to try to clean up their image and shore up their social licence to operate. New evidence reported in the Financial Times shows that Shell, one of the world’s top polluters, is estimated to have spent £220 million on advertising in 2023. Much of that advertising is aimed at younger generations, who are perhaps more vulnerable to misleading claims.
Misleading green advertising and greenwashing is on the rise. The ASA’s response has been to update its minimal environmental guidance to advertisers and to rule against just a tiny number of adverts for Shell, HSBC and other high-carbon advertisers for making misleading green claims. Those rulings are often slow and are often made well after the damage has been done. Time-consuming complaints have largely been brought by civil society organisations concerned with the impact of advertising and greenwashing on consumer wellbeing and their rights, but it should not be left to those organisations to have to try to enforce misleading adverts and to ensure that those adverts do not go unchecked. We need a robust regulatory framework and it is disappointing that the Government did not use the opportunity afforded by the Bill to deliver one.
The ASA celebrates its slim count of investigations into polluter advertising while a whole sea of greenwash escapes its notice and seeps into consumer consciousness. Only 2.4% of adverts reported to the ASA over environmental concerns saw any formal action in 2022, while thousands go unreported and therefore see no action at all. This is a drop in the ocean. We simply cannot afford this lack of effective advertising regulation to continue. My amendment 208 is a small but essential step if we are to stop the most polluting adverts from promoting our own environmental demise.
My other amendment is 207. It is another small but essential step, this time towards tackling the way in which the adverts to which we are exposed to every day are themselves fuelling the climate crisis. The UK advertising industry was responsible for 208 million tonnes of carbon dioxide-equivalent emissions in 2022. To put that another way, advertising is responsible for the equivalent of just under a third of the carbon footprint of every single person in the UK. No wonder that, from the World Health Organisation and the House of Lords Environment and Climate Change Committee, to the UN’s environment programme and the Committee on Climate Change, there is universal agreement about the need to regulate the advertising of high-carbon products.
High carbon clearly means fossil fuels, flights and SUVs. I would argue that it also probably means fast fashion, most meat and dairy, and the banks funding the likes of BP and Shell. I therefore back the many campaigns for a ban on high-carbon advertising and for interim measures, such as car advertisements with mandatory content about the benefits of active travel and public travel, as has been done in France. In the meantime, and in the absence of a Government prepared to act in line with the climate science and other evidenced demands, my amendment 207 would bring consideration of net zero emissions by 2030 into the consumer protection regime envisaged by the Government. Let me say a few words about why that is 2030, rather than 2050.
The Intergovernmental Panel on Climate Change is clear that limiting global temperatures to 1.5° requires that the whole world reaches net zero by 2050, a deadline that has been directly translated into domestic targets. But the UN Secretary-General, for example, is among many who have called for developed countries to commit to net zero much sooner, by 2040. When we look at the UK’s own historic responsibility, and indeed our financial means, that puts us into the category of richer countries that, in the interests of fairness, should be going faster and further.
Given the rate at which we are eating through our remaining carbon budget for 1.5°—according to some scientists, 1% a month—further and faster in terms of the UK translates to us achieving zero emissions by much closer to 2030 or 2035, thereby giving countries in the global south longer to cut their emissions. This idea is actually enshrined in climate law around the idea of common but differentiated responsibility, but sadly it is more respected in the avoidance rather than in the implementation.
Of course, that timeframe is undoubtedly hugely challenging. It will require a scale of social and economic transformation far surpassing what we have seen to date—hence the need for action across the board, including in relation to the advertising industry and consumer laws. Specifically, amendment 207 would signal that achieving net zero by 2030 is in the collective interests of consumers and it would help protect consumers from any detrimental effects arising from commercial practices that do not fully reflect the need to stay within that limit.
Misleading advertising is unfairly influencing consumers who want to do the right thing to protect the environment. It is delaying climate action just when we need to shift consumption patterns towards lower carbon alternatives. It is further flooding consumers with adverts that normalise and glamourise high-carbon products and ways of living, something the regulator, with its limited remit, cannot currently act upon, and which the current limited understanding of consumer collective interest does not encompass.
The scale and urgency of the climate and nature crises are such that they should be factored into every single piece of legislation. My two amendments are designed to do exactly that by delivering on the promises the Prime Minister made about greenwashing, and by delivering on what every shred of evidence tells us about the impact of that advertising on our precious environment, and therefore on consumers’ long-term collective interests.
Jim Shannon
It is a pleasure to follow the hon. Member for Brighton, Pavilion (Caroline Lucas). She is, if I may say so, the conscience of the Chamber in relation to net zero and environmental issues. She always gives us a helpful reminder of the importance of those issues for all of us across this United Kingdom of Great Britain and Northern Ireland.
It has been incredibly encouraging to hear the comments made thus far by all Members on all sides of the House. It is also great to see the intention of the Bill, which lies solely around the consumer, and consumer rights and protections. The Minister very helpfully set the scene in a way we can all adhere to and agree with. If the hon. Member for Weston-super-Mare (John Penrose) puts forward some of his amendments, maybe the Government will also support them. If they do, we will have no need to divide the House.
The new consumer protection measures in the Bill are intended to apply to the whole of the UK. Consumer protection policy is devolved to Northern Ireland, and reserved for Scotland and Wales. It is my understanding that, as a result, consent will be required for Northern Ireland. It would be helpful if the Minister could confirm what discussions he will have, or has had, with Northern Ireland Departments to ensure that they can be implemented as soon as possible. Reading through the Bill and the amendments and new clauses that have been tabled, I am ever mindful that the Government do have powers. In new clause 69, for instance, sectoral enactments are in place for the Water and Sewerage Services (Northern Ireland) Order 2006, the Gas (Northern Ireland) Order 1996 and the Electricity (Northern Ireland) Order 1992. There seems to be a methodology whereby decisions for Northern Ireland can be made. Again, as an Northern Ireland MP, I think it is important that we understand what the implications are and how the process will work for us.
I wish to refer to new clause 4 and also to new clause 29, which was tabled by the shadow Minister and which seems to be a perfectly amenable suggestion. I very much welcome the Minister’s commitment in his opening speech to address the issue of fuel prices. A number of right hon. and hon. Members have referred to that matter. Clearly, there is something wrong if the fuel price on one side of Newtownards in my constituency is different from that on the other side, but it is even more wrong if one of the major stores has a price at a certain level, yet further up the road that same store has a different price. It really is quite hard to comprehend how that can happen.
I wish to highlight the subscriptions issue, which many Members have referred to today. I have been made aware of two examples that I wish to put on the record in Hansard. I believe that these issues are being addressed. The Minister referred to that in his opening speech. The fact is that we are now living in an online world. I am afraid that I am not one of those who can do that—I make that admission here in this Chamber—but most people are involved in that world. It is a world where there is almost always an opportunity for subscription payments. Even newspapers now offer an online subscription service to get premium access to certain articles. These services are good if they are used correctly.
I heard a story from one of my members of staff. One of her subscriptions was with an online clothing company, which charged £50 a month for her to get access to clothes at a significantly cheaper rate. At the start of the month, for four days only, there is an opportunity to skip the month and not pay the £50 payment. The issue, quite simply, is that if people forget to skip the month, they are charged that £50. There is something wrong with that. No reminder is sent by the company, so this is a smart way for companies to make more money, as being forgetful is a human error. Again, I am keen to get the Minister’s ideas on whether this legislation address that issue.
Kevin Hollinrake
I thank right hon. and hon. Members for their contributions to the debate and for their ongoing engagement. ‘Working day Section 129(1)’.
First, let me speak to the amendments tabled by the hon. Member for Pontypridd (Alex Davies-Jones), who has thoroughly enjoyed our engagements over the weeks that we have been studying the Bill. New clause 29 would impose a requirement on traders to ask their customers whether they want their subscription to renew automatically every six months when they sign up to a subscription contract. If they do not choose this auto-renewal option, the contract would end after six months, unless the customer expressly asked for it to continue. New clause 30 would apply equivalent requirements to contracts that renew automatically after a free or low-cost trial.
The Government agree that consumers must be protected from getting trapped in unwanted subscriptions. However, we do not think the new clauses would deliver this in the right way, and such an approach could end up inconveniencing many consumers. For example, if a consumer had not initially opted into an auto-renewing contract, but later decided that they wanted to keep the subscription, they would have to repeatedly communicate that they wanted to continue their subscription or risk its unintentionally lapsing. That risk could be multiplied across each subscription they held.
The new clauses would also impose undue additional costs on businesses. As my right hon. Friend the Member for North East Somerset (Sir Jacob Rees-Mogg) rightly stated, all regulatory costs end up being borne by consumers, so we must approach regulation with extreme care. The Government’s approach strikes the balance of protecting consumers without compromising the benefits of rolling subscriptions and the convenience they provide.
On amendment 225, the Government recently consulted on tackling the practice of drip pricing, and we will shortly set out the next steps, following an assessment of the responses. It would be premature to amend the Bill in advance of that.
Turning to my hon. Friend the Member for Weston-super-Mare (John Penrose), I agree with the instincts behind his ideas to control the costs of red tape and regulatory burdens in new clause 31, and with many of the points made about this issue in his Government-commissioned report on competition policy and the subsequent 18-month update that he published. I suggest that together, we can do better than what is set out in the new clause. He too knows that, as my right hon. Friend the Member for North East Somerset said, all regulations are ultimately paid for by consumers. It is absolutely right that we look to minimise regulation and that we also recognise that the best form of regulation is competition, which is what we are here to promote.
In his “Power To The People” report, my hon. Friend the Member for Weston-super-Mare recommends a one in, two out solution. It will be interesting to see where we can go with that. Everybody, certainly on the Government Benches, is concerned about regulation and the increasing burden on businesses. However, if we look at some of the regulations that we imposed on business in 2021-22—this is from “Better Regulation: Government’s Annual Report”—significant regulations were put in place covering things such as making our telecommunications more secure against foreign actors, climate-related financial disclosures and making homes more efficient, which I think most people would acknowledge we should do, as well as sanctions against Russian oligarchs and the rest. Those regulations are not necessarily the burdens that many Members might consider them to be.
When we look at regulation, we have to decide what is the right thing to do—the right things to leave, the right things to take out and the right things to amend. We have made a start by updating the better regulation framework, with earlier scrutiny of regulatory proposals by the Regulatory Policy Committee so that its advice can be applied before a legislative solution has been settled on. The updated framework focuses on designing the least burdensome policies, avoiding regulation completely where possible, and minimising costs and administrative burdens where regulation is required. In parallel to our call for evidence and forthcoming consultations, we are seeking to change the culture of regulation in the UK to be more pro-growth and business friendly.
New clause 31 proposes some important further measures. It would create much stronger accountability for any future Government who failed to control red tape costs properly. It would plug an important historical loophole by including economic regulators in the better regulation framework, and it would provide extra independence for the accountancy sector in reporting on changes in regulatory burdens, so that Governments cannot be accused of marking their own homework, as my hon. Friend puts it. However, the new clause is constrained by the scope of the Bill, so it cannot plug all the historical gaps in the better regulation framework, and it makes the CMA a successor to the RPC, when there may be better ways to ensure enhanced independence.
As a result, I would suggest a better alternative approach. Any regime should recognise the economic benefits as well as costs of any changes to regulation. Accounting for them is complex: some are indirect, some are externalities and some take years to manifest or come to fruition. Individual regulators should take responsibility for reporting on their activities, including what they have done to support the growth of the businesses they regulate, as well as what additional burdens they have created or removed, and why. In each case, I agree that we will need to establish targets and metrics to monitor the success of our regulators and of Government Departments in promoting growth.
There are a few legitimate exceptions from the RPC’s scrutiny process, such as urgent or civil emergency measures, but that should not mean whole areas of the economy are exempt from its scrutiny, otherwise we would leave loopholes that mean costs are still not scrutinised and potential benefits are ignored.
Although the RPC is already an independent scrutiny body, I agree that we should find ways to ensure even stronger and more independent measurement and reporting of changes in regulatory benefits and burdens, without assuming that the best or only answer is for the CMA to take over this function, as the new clause proposes. Finally, there must be stronger accountability than at present for any Government who fail to control regulatory burdens properly.
Although we do not think it is right to accept the new clause as it stands, I accept and agree with many of the things it tries to achieve. I therefore invite my hon. Friend to work with officials and me to develop a better, stronger way of achieving his four aims through a mixture of potential Government amendments to the Bill and other measures or statements of Government policy to be released publicly before Royal Assent, where the changes fall outside the Bill’s scope. I hope these proposals are acceptable and that he will not press the new clause.
Amendment 228, which was tabled by the hon. Member for Gordon (Richard Thomson), seeks to exclude lottery tickets purchased from non-commercial society lotteries from the scope of the provisions on subscription contracts. We agree with him on this, which is why we tabled a Government amendment to that effect. I thank him for his contribution.
New clause 24, which was tabled by my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland), would require the Secretary of State to commission a review of the Competition Appeal Tribunal’s processes, independent of the CMA and the DMU. I am grateful for his focus on this important matter and for the legal knowledge he brings to bear.
The Competition Appeal Tribunal Rules 2015, which set out the tribunal’s procedures, require the Secretary of State to carry out a regular review of the rules and to publish their conclusions, which last happened in April 2022. New clause 24 would unnecessarily duplicate this work.
Turning to new clause 25, the CMA’s overarching objective is to promote competition for the benefit of consumers, and this must shape the design of its interventions and how it prioritises its work. A consumer duty would overlap with that objective and is, in our view, unnecessary.
New clause 26 would extend the right to seek damages at the Competition Appeal Tribunal to all infringements of part 4. The Bill already provides for consumer redress in respect of some provisions of part 4. Additionally, the private redress provisions in part 3 include the power for public enforcers to seek enhanced consumer measures, including financial redress for consumers.
Amendment 210 would reduce the frequency with which a trader must send reminder notices. We share the intention of my right hon. and learned Friend the Member for South Swindon to ensure that businesses and consumers are not overburdened by reminder notices. However, we believe that this amendment would negatively impact consumers by increasing the risk that they end up paying longer for unwanted subscriptions. We think that requiring traders to send reminders every six months strikes the right balance.
Amendment 211 would create a new power for the Secretary of State to make reasonable provision relating to the content and timing of reminder notices. Amendments 212 and 213 would then remove existing provisions relating to such matters from clause 252 and schedule 20. As my right hon. and learned Friend recognises, we have tabled an amendment that provides a power to amend these details through regulations, enabling the Government to respond should evidence of consumer behaviour or operational practice indicate that adjustments are necessary.
Amendments 214 to 217 would remove requirements that are designed to ensure traders provide easy and accessible means for consumers to end their subscription contracts. Instead, principles would be set out to guide the arrangements put in place by traders, and relevant provisions would be made in secondary legislation. The Government are committed to ensuring that consumers are not hindered when trying to leave a subscription contract or when trying to stop a subscription renewing—the hon. Member for Strangford (Jim Shannon) also raised that point. That is the objective behind these provisions, and it is vital that they remain in the Bill. It is also critical that consumers have flexibility when ending their contract, rather than businesses dictating the communication channel, such as a phone cancellation only. We appreciate that any communication to end a contract must be sufficiently clear to a business, as is underlined by Government amendment 102. That amendment makes it clear that the onus is on the consumer to prove that their communication was sufficiently clear.
Amendments 219 to 222 would remove the mandatory cooling-off period for subscription contracts. It is important to retain those provisions as they provide essential protections for consumers. The renewal cooling-off period protects consumers who have signed up to trials or longer term contracts. That is particularly important since our consultation showed that many people forget to cancel those subscriptions before they automatically renew. We understand, however, that some businesses are concerned about how the cooling-off period will work in practice, particularly for digital streaming services. This is an important issue to get right, so the Government will publicly consult on the return and refund rules to ensure that they are fair and practical for businesses and consumers. That will include consulting on a waiver of cooling-off rights for some products.
Amendments 223 and 224 would apply a two-year implementation period to the subscription contract provisions in the Bill. The Government fully understand that clarity is important so that businesses know when the new rules will come into effect and can make the appropriate preparations. That is why we will continue to engage with stakeholders to understand the impact of implementing these new rules.
Let me move on to the hon. Member for Bermondsey and Old Southwark (Neil Coyle)—he and I have been walking these streets for so long. Amendment 227 would ban in all circumstances the marketing of counterfeit and dangerous products online, which are already offences under current consumer protection and product safety law. The Government are committed to strengthening enforcement of these laws through the reforms in part 3 of the Bill, and recently consulted on a number of proposals in the product safety review.
Amendment 226 would confer on public enforcers the power to require removal of such material from the internet. The Government have consulted on this issue, with proposals to extend the power to apply for online interface orders to all public enforcers. The Government will publish their response shortly. Finally, the public safety review includes proposals specifically aimed at tackling the sale of unsafe goods online. We will publish a response in due course.
The amendment tabled by my right hon. Friend the Member for North East Somerset (Sir Jacob Rees-Mogg) seeks to add further anti-discrimination laws related to payment account provisions. The Government have been clear about the importance of protecting lawful free speech. It is unacceptable for banks and payment service providers to discriminate on the basis of lawfully held political views, and others such as pawnbrokers, as he mentioned. Consequently, the Government support the spirit of the amendment, but do not believe that it is necessary, principally because the Government have taken significant action to build on existing protections to resolve this issue since the amendment was tabled.
On 2 October, the Chancellor committed to amend the threshold conditions that financial services firms must meet in order to be authorised and to consult on how to deliver that. It will ensure that banks uphold their current legal duties, including requirements not to discriminate on the basis of political opinion, therefore ensuring freedom of speech. Safeguards will also be put in place to protect consumers. Banks will be required to put in place safeguards to protect consumer rights, including free speech, and regulators will be required to act when they are not complied with. In addition, the Government announced that the legal notice period for payment service contract terminations will increase to 90 days, and payment service providers will be legally required to give consumers clear, tailored explanations detailing why they closed their accounts.
I thank the hon. Member for Washington and Sunderland West (Mrs Hodgson) for all her work on the all-party parliamentary group on ticket abuse. She raised the point about the secondary ticket market. We have taken action in this area; I know she is not content with where we are today, but the CMA has new powers in the Bill to fine businesses up to 10% of turnover, which will include ticket touts. Indeed, it has already taken action against two touts, with confiscation orders of £6.1 million in 2022.
On amendment 207, tabled by the hon. Member for Brighton, Pavilion (Caroline Lucas), enforcers can already take action under the Bill to protect consumers during the transition to net zero. For example, they have powers to tackle misleading green claims. We are already making strong progress towards net zero by 2050. The UK has reduced its emissions further and faster than any other major economy.
On amendment 208, established means have long played an important, cost-effective and proportionate role in tackling and stopping unfair commercial practices. Particularly in the field of misleading advertising, bodies such as the ASA have played a key role in expanding the reach of consumer protection law compliance.
In closing—[Hon. Members: “Hurray!”] I have gone on longer than I would have liked to, but an awful lot of amendments were tabled. In closing, I hope that right hon. and hon. Members will see from the Government’s amendments that we have listened to the concerns raised during the passage of the Bill, and that we are determined that it will deliver better outcomes for consumers and small businesses.
Question put and agreed to.
New clause 7 accordingly read a Second time, and added to the Bill.
New Clause 8
Use of damages-based agreements in opt-out collective proceedings
“(1) In section 47C(9) of CA 1998 (collective proceedings: damages and costs), for paragraph (c) substitute—
‘(c) “damages-based agreement” has the same meaning as in section 58AA of the Courts of Legal Services Act 1990 but as if in subsection (3)(a) of that section, in the words before sub-paragraph (i), for “, litigation services or claims management services” there were substituted “or litigation services”.’
(2) The amendment made by subsection (1) is treated as always having had effect.”—(Kevin Hollinrake.)
This new clause (which would be inserted into Chapter 1 of Part 2 of the Bill) responds to the Supreme Court judgment in R (PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28. It provides that a damages-based agreement is only unenforceable in opt-out collective proceedings before the Competition Appeal Tribunal if the agreement is with a provider of advocacy or litigation services.
Brought up, read the First and Second time, and added to the Bill.
New Clause 9
Mergers of energy network enterprises
“Schedule (Mergers of energy network enterprises) makes provision amending Part 3 of EA 2002 and Schedule 16 to the Energy Act 2023 in relation to mergers involving energy network enterprises.”—(Kevin Hollinrake.)
This new clause (which would be inserted into Chapter 2 of Part 2 of the Bill) introduces the Schedule inserted by NS1 which amends Part 3 of the Enterprise Act 2002 to facilitate the investigation of mergers involving energy networks enterprises under sections 68B or 68C of that Act and under section 22 or 33 of that Act by the same CMA Group, and to make other minor amendments to provisions relating to mergers involving energy network enterprises.
Brought up, read the First and Second time, and added to the Bill.
New Clause 10
Power to make a reference after previously deciding not to do so
“(1) Section 131B of EA 2002 (market studies and the making of decisions to refer: time limits) is amended as follows.
(2) In the heading, after ‘time-limits’ insert ‘etc’.
(3) In subsection (7), for ‘This section is’ substitute ‘Subsections (4) to (6) are’.
(4) After subsection (7) insert—
‘(8) Where the CMA—
(a) has published a market study notice, and
(b) has decided not to make a reference under section 131 in relation to the matter specified in the notice,
the CMA may subsequently make a reference under section 131 in relation to the matter (without first publishing a market study notice in relation to the matter) only where subsection (9) applies.
(9) This subsection applies where—
(a) the reference under section 131 is made two years or more after the publication of the market study report in relation to the market study notice, or
(b) there has been a material change in circumstances since the preparation of the report.’”—(Kevin Hollinrake.)
This new clause (which would be inserted into Chapter 3 of Part 2 of the Bill) responds to the decision of the Competition Appeal Tribunal in Apple v CMA [2023] CAT 2. It allows the CMA to make a reference under section 131 of the Enterprise Act 2002, if it has previously made a decision not to do so, in the two cases mentioned in what will be new subsection (9) of section 131B of that Act.
Brought up, read the First and Second time, and added to the Bill.
New Clause 11
Taking action in relation to regulated markets
“(1) In Chapter 4 of Part 4 of EA 2002 (market studies and market investigations: supplementary), section 168 (regulated markets) is amended as follows.
(2) In subsection (3) omit paragraph (j).
(3) In subsection (4)—
(a) in paragraph (g), for ‘the duty of the Director General of Electricity Supply for Northern Ireland under article 6 of that Order’ substitute ‘the objective and duties of the Northern Ireland Authority for Utility Regulation under Article 12 of the Energy (Northern Ireland) Order 2003 (S.I. 2003/419 (N.I. 6))’;
(b) omit paragraph (l);
(c) in paragraph (m), for ‘the duties of the Director General of Gas for Northern Ireland under article 5 of that Order’ substitute ‘the objective and duties of the Northern Ireland Authority for Utility Regulation under Article 14 of the Energy (Northern Ireland) Order 2003’;
(d) in paragraph (r), for ‘Monitor’ substitute ‘NHS England’.
(4) In subsection (5), in paragraph (ia), for ‘Monitor’ substitute ‘NHS England’.”—(Kevin Hollinrake.)
This new clause (which would be inserted into Chapter 3 of Part 2 of the Bill) tidies up section 168 of the Enterprise Act 2002 to remove spent references and to correct references that have become out of date.
Brought up, read the First and Second time, and added to the Bill.
New Clause 12
Meaning of “working day” in Parts 3 and 4 of EA 2002
“(1) Part 3 of EA 2002 (mergers) is amended as follows.
(2) In Chapter 1 (duty to make references)—
(a) in section 25 (extension of time limits)—
(i) in subsection (1), after ‘20’ insert ‘working’;
(ii) in subsection (5), in paragraph (b), after ‘10’ insert ‘working’;
(b) omit section 32 (supplementary provision for the purposes of section 25);
(c) in section 34ZA(3) (time limits for decisions about references) omit the definition of ‘working day’;
(d) in section 34ZB (extension of time limits) omit subsection (9);
(e) in section 34ZC (sections 34ZA and 34ZB: supplementary) omit subsection (9).
(3) In Chapter 2 (public interest cases)—
(a) in section 54 (decision of Secretary of State in public interest cases)—
(i) in subsection (5), after ‘30’ insert ‘working’;
(ii) omit subsection (8);
(b) in section 56 (competition cases where intervention on public interest grounds ceases)—
(i) in subsection (4), in paragraph (b), after ‘20’ insert ‘working’;
(ii) omit subsection (5).
(4) In Chapter 4 (enforcement), in section 73A (time limits for consideration of undertakings) omit subsection (12).
(5) In Chapter 5 (supplementary)—
(a) in section 129(1) (other interpretative provisions), at the appropriate place insert—
‘“working day” means any day other than—
(a) a Saturday or Sunday, or
(b) a day that is a bank holiday in any part of the United Kingdom under the Banking and Financial Dealings Act 1971.’;
(b) in section 130 (index of defined expressions), at the appropriate place insert—
(6) In Part 4 of EA 2002 (market studies and market investigations), in section 151 (public interest intervention cases: interaction with general procedure)—
(a) in subsection (3), after ‘20’ insert ‘working’;
(b) in subsection (5), after ‘20’ insert ‘working’;
(c) omit subsection (6);
(d) at the end insert—
‘(7) In this section, “working day” means any day other than—
(a) a Saturday or Sunday, or
(b) a day that is a bank holiday in any part of the United Kingdom under the Banking and Financial Dealings Act 1971.’
(7) In regulation 2(1) of the Enterprise Act 2002 (Merger Prenotification) Regulations 2003 (S.I. 2003/1369), for the definition of ‘working day’ substitute—
‘“working day” means any day other than—
(a) a Saturday or Sunday, or
(b) a day that is a bank holiday in any part of the United Kingdom under the Banking and Financial Dealings Act 1971.’”—(Kevin Hollinrake.)
This new clause (which would be inserted into Chapter 5 of Part 2 of the Bill) amends Parts 3 and 4 of the Enterprise Act 2002, and the Enterprise Act 2002 (Merger Prenotification) Regulations 2003, so that they are consistent in providing that a bank holiday in any part of the United Kingdom is not a working day.
Brought up, read the First and Second time, and added to the Bill.
New Clause 13
ADR fees regulations
“(1) The Secretary of State may by regulations make provision about the following descriptions of fees, namely—
(a) fees to be paid by applicants for accreditation under section 289(1);
(b) fees to be paid by applicants for the variation of their accreditation under section 289(3B);
(c) fees to be paid by accredited ADR providers under section 292(1).
(2) The power to make provision about a description of fees includes power to provide—
(a) for fees of different specified amounts to be payable in different cases or circumstances;
(b) for cases or circumstances in which no fees are to be payable;
(c) in the case of fees to be paid under section 292, the times at which the fees are to be paid.
(3) In making regulations under this section the Secretary of State must have regard to the need to secure that, taking one year with another—
(a) the total amount of fees paid does not exceed the costs to the Secretary of State of carrying out functions under this Chapter;
(b) the total amount of fees paid under section 289(1) does not exceed the costs to the Secretary of State of processing and determining applications for accreditation;
(c) the total amount of fees paid under section 289(3B) does not exceed the costs to the Secretary of State of processing and determining applications for the variation of an accreditation.
(4) Regulations under this section are subject to the negative procedure.”—(Kevin Hollinrake.)
This new clause (which would be inserted into Chapter 4 of Part 4 of the Bill) confers power to make regulations about the fees payable under clauses 289 and 292. The power includes power to prescribe cases or circumstances in which no fee is required to be paid.
Brought up, read the First and Second time, and added to the Bill.
New Clause 14
Power to require information about competition in connection with motor fuel
“(1) The CMA may require an undertaking involved in, or connected with, the distribution, supply or retail of motor fuel (‘U’) to give specified information to it where it considers that the information would assist the CMA in—
(a) assessing competition in the United Kingdom in connection with the retail of motor fuel;
(b) publishing information about competition in the United Kingdom in connection with the retail of motor fuel;
(c) making proposals, or giving information or advice, to the Secretary of State about the need for, or the potential for, action to be taken (whether by the Secretary of State or another person) and what that action should be for the purposes of—
(i) increasing competition in the United Kingdom in connection with the retail of motor fuel;
(ii) benefiting consumers of motor fuel;
(d) assessing the effectiveness of any action taken as a result of proposals made, or information or advice given, under paragraph (c).
(2) The power conferred by subsection (1) is to be exercised by giving U a notice (an ‘information notice’).
(3) The CMA must include in an information notice—
(a) the time at which, or the frequency with which, the information must be given to the CMA;
(b) the manner and form in which the information must be given to the CMA;
(c) information about the possible consequences of not complying with the notice.
(4) The power under this section to require U to give information to the CMA includes the power to—
(a) require U to take copies of or extracts from information;
(b) require U to obtain or generate information;
(c) require U to collect or retain information that they would not otherwise collect or retain;
(d) if any specified information is not given to the CMA, require U to state, to the best of their knowledge and belief, both where that information is and why it has not been given to the CMA.
(5) An undertaking may not be required under this section to give the CMA a privileged communication.
(6) A ‘privileged communication’ is a communication—
(a) between a professional legal adviser and their client, or
(b) made in connection with, or in contemplation of, legal proceedings,
which in proceedings in the High Court would be protected from disclosure on grounds of legal professional privilege.
(7) In the application of this section to Scotland—
(a) the reference to the High Court is to be read as a reference to the Court of Session, and
(b) the reference to legal professional privilege is to be read as a reference to the confidentiality of communications.
(8) In this section—
‘consumer’ has the same meaning as in Part 4 of EA 2002 (see section 183(1) of that Act);
‘motor fuel’ has the same meaning as in the Motor Fuel (Composition and Content) Regulations 1999 (see regulation 2 of those Regulations), but as if paragraphs (c) and (d) of the definition of that term were omitted;
‘specified’ means—
(a) specified, or described, in the information notice, or
(b) falling within a category which is specified, or described, in the information notice;
‘United Kingdom’ includes a part of the United Kingdom.
(9) The Secretary of State may by regulations amend the definition of ‘motor fuel’ in subsection (8).
(10) Regulations under subsection (9) are subject to the negative procedure.
(11) In this Chapter, ‘undertaking’ has the same meaning it has for the purposes of Part 1 of CA 1998 (competition: agreements, abuse of dominant position etc).”—(Kevin Hollinrake.)
This new clause (which, along with the new clauses inserted by NC15 to NC21, would form a new first Chapter in Part 5 of the Bill) allows the CMA to give an information notice to undertakings involved in the distribution, supply or retail of petrol or diesel requiring them to provide the CMA with information for the purposes mentioned in subsection (1) of the clause.
Brought up, read the First and Second time, and added to the Bill.
New Clause 15
Penalties for failure to comply with notices under section (Power to require information about competition in connection with motor fuel)
“(1) The CMA may impose a penalty on an undertaking where it considers that the undertaking has, without reasonable excuse—
(a) failed to comply with an information notice under section (Power to require information about competition in connection with motor fuel);
(b) destroyed, otherwise disposed of, falsified or concealed, or caused or permitted the destruction, disposal, falsification or concealment of, any document which the undertaking has been required to produce by an information notice under that section;
(c) given the CMA information which is false or misleading in a material particular in connection with an information notice under that section;
(d) given information which is false or misleading in a material particular to another undertaking knowing that the information was to be used for the purpose of giving information to the CMA in connection with an information notice under that section.
(2) The amount of a penalty imposed on an undertaking under this section may be such amount as the CMA considers appropriate, provided it does not exceed the amounts set out in subsection (4).
(3) The amount of a penalty under this section must be—
(a) a fixed amount,
(b) an amount calculated by reference to a daily rate, or
(c) a combination of a fixed amount and an amount calculated by reference to a daily rate.
(4) The maximum amounts of a penalty that may be imposed on an undertaking are—
(a) in the case of a fixed amount, an amount equal to 1% of the total value of the undertaking’s turnover (both inside and outside the United Kingdom);
(b) in the case of an amount calculated by reference to a daily rate, for each day an amount equal to 5% of the total value of the undertaking’s daily turnover (both inside and outside the United Kingdom);
(c) in the case of a combination of a fixed amount and an amount calculated by reference to a daily rate, the amounts mentioned in paragraph (a), in relation to the fixed amount, and paragraph (b), in relation to the amount calculated by reference to a daily rate.
(5) In imposing a penalty under this section by reference to a daily rate—
(a) no account is to be taken of any days before the service on the undertaking concerned of the provisional penalty notice under section 112(A1) of EA 2002 (as applied by section (Procedure and appeals)), and
(b) unless the CMA determines an earlier day (whether before or after the penalty is imposed), the amount payable ceases to accumulate at the beginning of the day on which the undertaking first complies with the requirement in question.
(6) The Secretary of State may by regulations make provision for determining the turnover (both inside and outside the United Kingdom) of an undertaking for the purposes of this section.
(7) The regulations may, among other things—
(a) make provision about amounts which are, or are not, to be included in an undertaking’s turnover;
(b) make provision about the date or dates by reference to which an undertaking’s turnover is to be determined;
(c) confer on the CMA the power to determine and make provision about matters specified in the regulations (including the matters mentioned in paragraphs (a) and (b)).
(8) Regulations under subsection (6) are subject to the negative procedure.”—(Kevin Hollinrake.)
This new clause would allow the CMA to impose financial penalties on undertakings who fail to comply with an information notice given under the new clause inserted by NC14.
Brought up, read the First and Second time, and added to the Bill.
New Clause 16
Procedure and appeals
“(1) Sections 112 (penalties: main procedural requirements), 113 (payments and interest by instalments), section 114 (appeals) and 115 (recovery of penalties) of EA 2002 apply in relation to a penalty imposed under section (Penalties for failure to comply with notices under section (Power to require information about competition in connection with motor fuel)) as they apply in relation to a penalty imposed under section 110(1) of that Act.
(2) For the purposes of this section—
(a) sections 112 to 115 of EA 2002 are to be read as if references to ‘the appropriate authority’ were references to the CMA only;
(b) section 114(5A) of EA 2002 is to be read as if the words ‘In the case of a penalty imposed on a by the CMA or OFCOM,’ were omitted;
(c) section 114(12) of EA 2002 is to be read as if, for paragraph (b), there were substituted—
‘(b) “the relevant guidance” means the statement of policy which was most recently published under section (Statement of policy on penalties) of the Digital Markets, Competition and Consumers Act 2024 at the time of the act or omission giving rise to the penalty.’”—(Kevin Hollinrake.)
This new clause applies provision in sections 112 to 115 of the Enterprise Act 2002, with modifications, for the purposes of the new clause inserted by NC15.
Brought up, read the First and Second time, and added to the Bill.
New Clause 17
Statement of policy on penalties
“(1) The CMA must prepare and publish a statement of policy in relation to the exercise of powers to impose a penalty under section (Penalties for failure to comply with notices under section (Power to require information about competition in connection with motor fuel)).
(2) The statement must include a statement about the considerations relevant to the determination of—
(a) whether to impose a penalty under section (Penalties for failure to comply with notices under section (Power to require information about competition in connection with motor fuel)), and
(b) the nature and amount of any such penalty.
(3) The CMA may revise its statement of policy and, where it does so, must publish the revised statement.
(4) In preparing or revising its statement of policy the CMA must consult—
(a) the Secretary of State, and
(b) such other persons as the CMA considers appropriate.
(5) A statement of policy, or revised statement, may not be published under this section without the approval of the Secretary of State.
(6) Subsection (7) applies where the CMA proposes to impose a penalty under section (Penalties for failure to comply with notices under section (Power to require information about competition in connection with motor fuel)) on an undertaking.
(7) The CMA must have regard to the statement of policy most recently published under this section at the time of the act or omission giving rise to the penalty when deciding—
(a) whether to impose the penalty, and
(b) if so, the amount of the penalty.”—(Kevin Hollinrake.)
This new clause requires the CMA to publish a statement of policy about the imposition of penalties under the new clause inserted by NC15.
Brought up, read the First and Second time, and added to the Bill.
New Clause 18
Offences etc
“Destroying or falsifying information
(1) A person (“P”) commits an offence if, having been required to give information to the CMA under section (Power to require information about competition in connection with motor fuel), P—
(a) intentionally or recklessly destroys or otherwise disposes of it, falsifies or conceals it, or
(b) causes or permits its destruction, disposal, falsification or concealment.
False or misleading information
(2) A person (“P”) commits an offence if—
(a) P gives information to the CMA in connection with an information notice under section (Power to require information about competition in connection with motor fuel),
(b) the information is false or misleading in a material particular, and
(c) P knows that it is or is reckless as to whether it is.
(3) A person (“P”) commits an offence if P gives information to another person which is false or misleading in a material particular and P—
(a) either—
(i) knows the information to be false or misleading in a material particular, or
(ii) is reckless as to whether the information is false or misleading in a material particular, and
(b) knows that the information will be given to the CMA in connection with an information notice under that section.
Sentences
(4) A person guilty of an offence under this section is liable—
(a) on summary conviction in England and Wales, to a fine;
(b) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum;
(c) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both.
Offences by officers of a body corporate etc
(5) If an offence under this section committed by a body corporate is proved—
(a) to have been committed with the consent or connivance of an officer of the body corporate, or
(b) to be attributable to neglect on the part of an officer of the body corporate,
the officer as well as the body corporate is guilty of the offence and liable to be proceeded against and punished accordingly.
(6) If the affairs of a body corporate are managed by its members, subsection (5) applies in relation to the acts and defaults of a member in connection with the member’s functions of management as if the member were an officer of the body corporate.
(7) If an offence under this section committed by a partnership in Scotland is proved—
(a) to have been committed with the consent or connivance of a partner, or
(b) to be attributable to neglect on the partner’s part,
the partner as well as the partnership is guilty of the offence and liable to be proceeded against and punished accordingly.
(8) In subsection (7), “partner” includes a person purporting to act as a partner.”—(Kevin Hollinrake.)
This new clause makes it an offence for a person to destroy or falsify information the person is required to give to the CMA by virtue of an information notice given to the person under the new clause inserted by NC14 or to provide the CMA with false or misleading information in connection with such an information notice.
Brought up, read the First and Second time, and added to the Bill.
New Clause 19
Penalties under section (Penalties for failure to comply with notices under section (Power to require information about competition in connection with motor fuel)) and offences under section (Offences etc)
“(1) The CMA may not impose a penalty on a person under section (Penalties for failure to comply with notices under section (Power to require information about competition in connection with motor fuel)) in relation to an act or omission which constitutes an offence under section (Offences etc) if the person has, in relation to that act or omission, been found guilty of that offence.
(2) A person may not be found guilty of an offence under section (Offences etc) by virtue of an act or omission if the person has paid a penalty imposed under section (Penalties for failure to comply with notices under section (Power to require information about competition in connection with motor fuel)) in relation to that act or omission.”—(Kevin Hollinrake.)
This new clause prevents a person from being charged a penalty under the new clause inserted by NC15, and being found guilty of an offence under the new clause inserted by NC18, in respect of the same acts or omissions.
Brought up, read the First and Second time, and added to the Bill.
New Clause 20
Information sharing
“In Schedule 14 to EA 2002 (provisions about disclosure of information) at the appropriate place insert—
“Chapter A1 of Part 5 of the Digital Markets, Competition and Consumer Act 2024.””—(Kevin Hollinrake.)
This new clause provides that the restrictions on the disclosure of information contained in Part 9 of the Enterprise Act 2002 apply to information that comes to the CMA in connection with the exercise of its functions under the new first Chapter of Part 5 of the Bill to be formed by the new clauses inserted by NC14 to NC21.
Brought up, read the First and Second time, and added to the Bill.
New Clause 21
Expiry of this Chapter
“(1) This Chapter, apart from subsection (5) of this section and section (Information sharing), expires at the end of the relevant period.
(2) The “relevant period” means the period of five years beginning with the day on which this Act is passed.
(3) The Secretary of State may by regulations amend this section to change the definition of the “relevant period”.
(4) Regulations under subsection (3) are subject to the affirmative procedure.
(5) The expiry of this Chapter does not affect its continued operation in relation to any information notice given under section (Power to require information about competition in connection with motor fuel) before its expiry.”—(Kevin Hollinrake.)
This new clause provides that the new first Chapter of Part 5 of the Bill to be formed by the new clauses inserted by this Amendment, and NC14 to NC19, expires five years after it comes into force, unless the Secretary of State makes regulations extending the period for which the Chapter has effect
Brought up, read the First and Second time, and added to the Bill.
New Clause 22
Removal of limit on the tenure of a chair of the Competition Appeal Tribunal
“In Schedule 2 to EA 2002 (the Competition Appeal Tribunal), in paragraph 2 (tenure etc) omit sub-paragraph (2).”—(Kevin Hollinrake.)
This new clause (which would be inserted into Part 5 of the Bill) removes the prohibition on a person being a chair of the Competition Appeal Tribunal for more than 8 years.
Brought up, read the First and Second time, and added to the Bill.
New Clause 29
Contract renewal: option to opt in
“(1) Before a trader enters into a subscription contract with a consumer where section 247(2) applies, the trader must ask the consumer whether they wish to opt-in to an arrangement under which the contract renews automatically at one or more of the following times—
(a) after a period of six months and every six months thereafter, or
(b) if the period between the consumer being charged for the first and second time is longer than six months, each time payment is due.
(2) If the consumer does not opt-in to such an arrangement, the trader must provide a date by which the consumer must notify the trader of the consumer’s intention to renew the contract, which must be no earlier than 28 days before the renewal date.
(3) If the consumer has not—
(a) opted into an arrangement under subsection (1), or
(b) given notification of the consumer’s intention to renew by the date specified under subsection (2),
the contract will lapse on the renewal date.”—(Alex Davies-Jones.)
This new clause would allow the consumer to opt-out of their subscription auto-renewing every six months, or if the period between payments is longer than six months, before every payment. If the consumer does not opt-in to auto-renewal, they would be required to notify the trader manually about renewing.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Kevin Hollinrake
I beg to move, That the Bill be now read the Third time.
The UK’s continued tech success depends on markets that are fiercely competitive, and where the best companies can flourish and create the innovations that spur growth. With this Bill, we will establish new, more effective tools to address the unique barriers to competition in digital markets, allowing the CMA to proactively drive more dynamic markets and prevent harmful practices, such as making it difficult to switch between operating systems. With this Bill, we will help the UK technology industry to grow, creating room for small businesses with great ideas to flourish. This Bill will deliver tangible benefits to British consumers and British businesses alike.
The Bill was welcomed on both sides of the House on Second Reading. The Select Committee Chairs from this House and the other place, as well as hon. Members from a number of parties, including the hon. Member for Pontypridd (Alex Davies-Jones) and my hon. Friend the Member for Weston-super-Mare (John Penrose), have repeatedly spoken of the Bill’s importance. I thank them for their work and for working with us so constructively. On Report, the Government made a number of amendments to the Bill, reflecting the important discussions between stakeholders and Members of this House. I thank Members from across the House for their contributions during the passage of the Bill.
I will conclude by thanking all my predecessors who have taken the Bill from consultation to this House, my officials, the Clerks, and the Chairs and members of the Public Bill Committee for their line-by-line scrutiny, and for their collaborative and constructive approach.
Alex Davies-Jones
May I briefly join the Minister in thanking all the members of the Public Bill Committee and the Clerks of the House? I give personal thanks to my hon. Friend the Member for Feltham and Heston (Seema Malhotra) for working with me so collaboratively on getting the Bill to a good place. Let me also place on the record my thanks to Freddie Cook, in my team, for all her work on the Bill.
Labour welcomes this Bill, having led the way in calling for large tech companies to be properly regulated to ensure competition in digital markets. We are pleased to see the Bill in a good place as it goes to the other place for further consideration. We have long called for measures to protect consumers, enhance innovation and promote competition in digital markets to unlock growth and level the playing field for smaller businesses. That could not be more important in the midst of a cost of living crisis. We have supported the passage of this Bill and it is now important that these new powers that are given to the CMA to ensure competition in digital markets are not watered down as the Bill progresses. We will be following closely, as will colleagues from across the House, and we look forward to the Bill finally coming into action.
Richard Thomson
May I, too, add my thanks to the Bill Committee members and to all the Members who have contributed throughout the passage of the Bill? I also thank the Clerks for their wise guidance and assistance, and Sarah Callaghan, in the SNP’s research office, for the diligent work she has done on this.
I have said throughout that the amendments we sought to put forward were merely to fill the potholes that we saw in the Bill. It did not need a special fund from the Prime Minister to fill them; all it needed was for some action to be taken on greenwashing and drip pricing, and I am sure the Minister can understand the rest from what I have said. We think those issues still need addressing, but my concern is now about the impact that the Bill will or will not have on big tech and the freedom of the markets our consumers operate in. The success of the Bill will be measured not in the size of the majority that the Government could have had tonight, but in the impact it has on consumers and small businesses in the weeks, months and years ahead.
Question put and agreed to.
Bill accordingly read the Third time and passed.
Digital Markets, Competition and Consumers Bill
Wednesday 22nd November 2023
(8 months, 1 week ago)
Lords ChamberRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: Consideration of Bill Amendments as at 20 November 2023 - (20 Nov 2023)
Digital Markets, Competition and Consumers Bill
Tuesday 5th December 2023
(7 months, 3 weeks ago)
Lords ChamberRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 20 November 2023 - (20 Nov 2023)
Lord Offord of Garvel
That the Bill be now read a second time.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
My Lords, I start my opening speech with a reference to the importance of digital. In recent decades, digital technologies have brought untold benefits to people around the world. From connecting us with loved ones in faraway places to streaming our favourite album or TV series in an instant, our lives are enriched by the services that these technologies enable. In the UK, digital technologies were fundamental to our collective response to the Covid-19 pandemic, helping businesses to continue operating and helping friends and family to stay in touch in challenging times for us all.
The digital revolution has also had transformative and hugely beneficial effects on our economy. The UK has the largest tech ecosystem in Europe. Last year, our start-ups and scale-ups raised more investment than France and Germany combined. We have more tech unicorns than any other country in Europe with eight cities having at least two unicorns, including Edinburgh, Nottingham and Leeds.
The strengths of our vibrant digital sector are numerous and closely interlinked. From our world-class universities and breadth of tech talent to our support for start-ups and our innovative financing sector, the UK is a global tech powerhouse. Furthermore, the UK leads the world in our approach and response to developments in digital technology. Just last month at Bletchley Park, the UK hosted the first AI Safety Summit, bringing together Governments, leading technology organisations, academia and civil society to inform action at the frontier of AI development.
I turn to the rationale for the Bill and the detail of its parts. Part 1 is on digital markets. The continued success of our tech sector relies on highly competitive digital markets. Firms with alternative market offerings and innovative ideas should have the freedom to grow and challenge powerful incumbents on a level playing field. This benefits consumers by giving them access to the best products at the lowest prices.
However, the UK’s competition framework is not set up to keep pace with developments in fast-moving digital markets. A handful of powerful tech firms now dominate strategically critical services, such as online search, app stores and digital advertising, and in effect set the rules of the game for other businesses and consumers. Jurisdictions around the world are now considering how best to address the unique competition challenges presented by digital markets, and the UK is playing a major part in these efforts.
The Digital Competition Expert Panel and the Digital Markets Taskforce—expert groups set up to examine competition issues in digital markets—both independently concluded that digital markets have specific features which may lead them to tip in favour of one particular firm. This restricts choice for consumers, growth for emerging digital companies, and the potential of small businesses that rely on large firms to reach their customer base. As such, both groups recommended the establishment of a new pro-competition regime for digital markets, which the Bill delivers.
Noble Lords from across the House have also investigated these competition challenges and called for action. My noble friend Lady Stowell of Beeston and the Communications and Digital Committee conducted a review of the Bill earlier this year, for which I am very grateful. They consulted a broad range of stakeholders, including tech firms of all sizes. The committee recommended some further actions for the Government’s consideration, and I have no doubt that we will discuss these in detail during the passage of the Bill. I was, however, very pleased to hear its conclusions that the Bill’s objectives are “sound” and its measures “broadly proportionate”.
The noble Baroness, Lady Jones of Whitchurch, and the noble Lord, Lord Clement-Jones, also expressed their strong support for the Bill and provided suggestions for improvement, which I also look forward to discussing further. The advice of the noble Lord, Lord Tyrie, on legislative and institutional reforms to safeguard the interests of consumers and public confidence in markets, is also at the heart of the Bill’s measures.
The Bill is divided into six parts. Part 1 establishes a new pro-competition regime for digital markets, which will be overseen by the Digital Markets Unit. The Digital Markets Unit is an administrative unit within the Competition and Markets Authority. The Bill gives the CMA tough new powers to force the most powerful tech firms to treat businesses in the UK fairly, including through targeted action to address the root causes of competition issues, and to create opportunities for innovative start-ups in the UK to compete with these powerful firms. Greater competition in digital markets will lower the prices of everyday online goods and services, giving consumers more choice and control over the fundamental services they use online. This came across clearly during the Communications and Digital Committee’s evidence sessions. For example, the consumer advocacy organisation Which? noted that the Bill will benefit consumers through “more competition” and “more innovation” in digital markets.
Part 2 concerns competition. Competitive markets deliver a variety of good-value, high-quality products for their customers, because firms which fail to deliver will be overtaken by their competitors. They also enable innovative, dynamic companies to enter markets more easily, compete on level terms, and grow and gain market share. Measures in Part 2 of the Bill will refine the CMA’s competition tools, making investigations better targeted and its enforcement action faster and more effective. These changes will allow the free market to operate more efficiently. Market inquiries will become more efficient, flexible and proportionate, while the merger regime will be updated to focus on transactions with the greatest potential to weaken competition. The measures will also grant stronger powers to investigate illegal anti-competitive conduct.
Parts 3 and 4 deal with consumer enforcement and protection. Alongside effective competition, well-functioning markets require strong consumer protections. Such protections give people confidence to spend their money, safe in the knowledge that they have the right information to make sound purchasing decisions and have ways to seek redress if something goes wrong. Noble Lords on all sides will likely have had first-hand experience of the difficulties surrounding subscription contracts, including unexpected charges and unduly complex cancellation processes. Such subscription traps cost consumers £1.6 billion a year. A host of other unfair trading practices and consumer rip-offs also remain far too common, particularly online. Research commissioned by the Government has found that, for example, on the nine most frequently used platforms by UK consumers, up to 15% of reviews are fake, with consumers more likely to unknowingly rely on well-written fake reviews when purchasing products. Moreover, many Christmas and similar savings schemes are not protected in the event of business insolvency, so if a business enters insolvency, consumers face losing the money they had deposited.
At present, public consumer law enforcement lacks teeth: the UK is currently the only G7 country not to have any civil penalties for common consumer protection breaches such as mis-selling. Enforcers can apply for court orders to stop or prevent breaches and to obtain compensation for consumers. However, businesses may still profit more than they lose from breaches of consumer law, because no financial penalties can currently be imposed for such wrongdoing.
The measures in Parts 3 and 4 beef up enforcement of consumer protections and address these consumer rip-offs. Part 3 creates a model that will allow the CMA to act faster against breaches of consumer protection, tackle more cases and protect consumers’ interests, while creating a level playing field for businesses. Part 4 includes a raft of measures to help consumers keep more of their hard-earned cash. New rights to subscription reminders and easier cancellations will help consumers exit the contracts they no longer want. This part of the Bill includes a power to add to the list of banned unfair commercial practices. This will ensure that the legislation keeps pace with changes in online consumer harms, which will give consumers greater confidence when spending and reward businesses which treat their customers fairly. Moreover, there are new protections for consumer payments to consumer saving schemes. These will ensure that financial failures such as the collapse of the Farepak Christmas savings club, which leave vulnerable consumers out of pocket, can never happen again.
Parts 5 and 6 contain cross-cutting and general provisions, including new information-gathering powers for the CMA to help boost competition in the road fuel market and protect consumers from unfair fuel prices. In addition, the Government recognise the importance of international co-operation for effective cross-border enforcement in a globalised economy. Measures in Part 5 will enhance the ability of UK regulators to co-operate internationally on competition and consumer matters, including introducing new powers to provide investigative assistance.
I come now to the Commons Report stage amendments. The Government engaged closely with parliamentarians and stakeholders throughout the Bill’s passage in the other place. Based on this engagement, a number of amendments were brought forward on Report in the House of Commons to strengthen the Bill. These amendments had two overarching aims. First, the amendments sought to strike the right balance between accountability over the CMA’s regulatory decisions and the flexibility needed for targeted and proportionate action to tackle the unique competition challenges in digital markets. Secondly, the amendments aimed to ensure that the Bill is strongly focused on consumers with the new and improved rights to deal with bad business practices, such as subscription traps, in ways that will not disproportionately burden businesses and potentially reduce consumer choice.
At a briefing I chaired last week with my noble friend Lord Camrose, I promised my noble friend Lady Stowell of Beeston that I would provide some assurances regarding the digital markets regime. First, I turn to consumer benefits. Amendments brought forward by Ministers in the other place reinforce the regime’s focus on consumers, by clarifying how the DMU will consider consumer benefits when imposing conduct requirements or taking enforcement action. Requiring the CMA to explain the consumer benefits that it expects to result at these points ensures that its decisions to impose conduct requirements are transparent and carefully considered. Clarifying the wording of the countervailing benefits exemption will improve legal clarity, and I reassure my noble friend that it maintains the same high threshold. These changes make sure that consumers get the best outcomes possible.
Secondly, I turn to the appeals of penalty decisions. Appealing penalty decisions on the merits will allow firms to challenge the value of potentially significant fines, but will not allow firms to frustrate the regime or delay regulatory intervention. This brings the regime in line with the Enterprise Act 2002, and will provide reassurance to firms that the value of a fine imposed on them is appropriate. To be clear, all other decisions, including whether or not a breach of the regime occurred, remain appealable on judicial review principles. I hope this helps address my noble friend’s concerns.
The amendments agreed in the other place bring further clarity about the DMU’s approach to regulation. Together, they ensure that the DMU’s interventions are proportionate and drive the best possible outcomes for consumers.
In closing, this Bill will drive innovation, grow the economy, and deliver better outcomes for consumers throughout the UK. It is a hugely important piece of legislation and I thank noble Lords for their involvement in and support for the Bill so far. I look forward to hearing their views today and throughout the rest of the Bill’s passage. I beg to move.
Lord Bassam of Brighton (Lab)
My Lords, it is a great pleasure to follow the Minister, who has very ably set out the purposes behind this much-needed and long-awaited Bill. I hope he has not given it a fake review or indulged in any drip pricing in his opening salvo.
Our Labour colleagues in the Commons made it clear during the passage of the Bill in another place that we are fully behind the intents of the Bill. Indeed, if anything, we wish to strengthen it—a comment that will no doubt be echoed many times during today’s debate. We are at one with its direction of travel, even if we have a slightly different destination. There are, for us, issues of continuing concern, and we will focus on these when we go through its detail in Committee and on Report.
I know the Government argue that the Bill delivers on a manifesto commitment, but the truth is that it has been much longer in the making. It was as far back as 2018 when the Government set up their Digital Competition Expert Panel, and it is nearly three years since the CMA set up the Digital Markets Unit. Even with a speedy passage through your Lordships’ House in 2024, this Bill will have little impact much before 2025—a full six years after the Furman report concluded that digital markets required a new approach. Of course, we were promised the Bill in 2022, the year of extreme chaos in government and a time when Ministers were not sure if they favoured any regulation at all. All the while, we have been falling further and further behind our European neighbours and other jurisdictions and playing catch-up.
Thankfully, wiser heads have now prevailed and we have a workable, if not fully formed, piece of legislation. We should be grateful to the CMA, UKHospitality, the Chartered Trading Standards Institute, the CAB, Which? and others in the tech sector who have through their persistence helped make this happen. The sector and market are, as we know, dominated by a small number of large companies and the truth is that the lack of competition and regulation is acting as a barrier to market entry and expansion. This in turn impacts on consumers, their interests and the health of the market and our digital economy. Five years ago, the OECD reported that digital markets were exhibiting
“certain characteristics, such as low variable costs, high fixed costs and strong network effects, that result in high market shares for a small number of firms”,
so that:
“Firms in these concentrated markets may possess market power, the ability to unilaterally and profitably raise prices or reduce quality beyond a level that would prevail under competition”.
The ONS has reported that between 2008 and 2020 the percentage of adults reporting shopping online had risen from 53% to 87%. Those figures would have been given an extra twist since the impact of Covid. This trend will undoubtedly have led to greater exposure to the downsides of the digital economy, in particular the misuse of consumer data, misleading information and unrestrained marketing. We need, as our Labour colleague Seema Malhotra argued in the Commons, to deliver
“a pro-competition, pro-consumer, pro-growth Bill”.—[Official Report, Commons, 17/5/23; col. 886.]
For that reason, we need to recognise the harm that can come from the creation of monopolies in a digital economy and ensure that innovation is fostered. This will enable us all to share in the benefits of new and emerging technologies and use them to grow the economy and promote economic and social progress.
The challenge is to get the balance right in the framing of the legislation. On these Benches, we seek assurances that the Government will not resile from the current drafting of the Bill and the commitments made in another place. So, first, in terms of our asks today, I say no watering down of the Bill’s original intent. We will be seeking reassurance on that point and would like to hear that commitment on the record today. Secondly, while it is clear that the CMA and the DMU have the capability to deliver the Bill’s aims, we wonder whether they have the capacity. Can they, for example, communicate their policies, programmes and priorities effectively to stakeholders and legislators? Will they be sufficiently independent of the sponsoring department to be able to get on with the job? Furthermore, will they have the tools to undertake the necessary enforcement work to make the regulatory function effective?
On these Benches, we worry that, as with other regulators, they are hobbled from the start by a lack of the forensic investigatory skills necessary and trained personnel required. Can the Minister assure us that the CMA will have staff in place fully trained for the job and resourced to make it work? Perhaps he can outline the growth plan for staffing and put on record some details today demonstrating a workforce strategy. It is of little value to have a regulator with all the necessary powers if it cannot effectively exercise them—a quick look at the water industry makes that plain.
Earlier, I referenced our concerns about the potential dilution of the Bill. Two examples readily come to mind and I have no doubt other noble Lords will pick up on them. First, the changes to the appeals test on the penalties regime will surely undermine the DMU’s primary purpose, which is to protect competition in the UK. Secondly, we are concerned that the addition of explicit proportionality obligations will create uncertainty in terms of the impact on the enforcement regime. Why have these changes been introduced so late in the legislative process and who asked for them?
Moving on from concerns about the weakening of the Bill’s measures, we want to make it clear that we have a long list of areas where we and, no doubt, other noble Lords want to see the Bill strengthened, so we give notice today that we will be tabling amendments to tackle the Bill’s most egregious omissions.
I am sure it will come as no surprise that we will be seeking amendments to the subscription contracts arrangement—moving from the opt-out principle to opt in—and seeking to tighten up the approach to fake reviews, drip-pricing and greenwashing. We cannot understand why the Government are reluctant to do more on product safety to ensure that fake products and counterfeits are fully covered. We also wonder why Ministers are so reluctant to use the Bill as a way of tackling the forever issue of ticket touts, digital fraud and the theft of creative content.
Tech platforms benefit enormously from the work of creatives, so why is it that platforms in particular are able to avoid properly and fairly paying them? Few of the rewards to the platforms themselves get passed on. That cannot be right or fair. It begs the question: should we be looking again at the law surrounding copyright in this context?
We will also want to revisit the countervailing benefit exemption issue. Currently, the exemption surely benefits the big tech companies with monopoly power more than it does consumers, even where some short-term benefit is claimed. By claiming an exemption, the platforms can easily evade conduct requirements and obligations. Perhaps the Minister can provide instances of anti-competitive behaviour where there are more benefits than harms; we have yet to find any of great significance. It might be the case that there is a need to develop a more rigorous test of the countervailing benefit claims made, and a measure of consultation with the public to ensure their validity. In this light, we will want to discuss the need for an interests of citizens duty to be inserted into the Bill to strengthen the hand of consumers.
Finally, there are issues that relate to how the CMA operates. Is there not a case for more to be made of the CMA’s co-ordinating role as an enforcer? It is not the only body that will exercise the powers contained in the Bill, but it is the lead regulatory agency. Could more be done to recognise that, so that best use is made of the enforcement regime and regulatory leadership is entrenched?
This is a large Bill, almost too big to summarise and with many issues hidden and tucked away within it. We will listen carefully to the debate today, particularly on subjects such as final-offer arbitration, the alternative disputes resolution scheme, the potential vulnerabilities of the “strategic market status” designation, and the need for a takedown power for trading standards officers to enable them to provide for swifter remedies where there is self-evident harm to consumers and a need to act.
This Bill is much needed and has been for much of the lifetime of this Government. As I said at the outset, we support its direction of travel, but that does not mean that it is not capable of improvement through challenge, or that we will give it an easy passage.
Lord Fox (LD)
My Lords, it is a great pleasure to be working on this Bill—a Bill that we on these Benches broadly welcome. I hope we will be able to work constructively to improve it as it moves through your Lordships’ House. It is about time, as the noble Lord, Lord Bassam, noted. The Furman report was set up five or six years ago; we have been impatient for competition law in the digital space to be reformed and for the Digital Markets Unit to be empowered—so, at last.
As the noble Lord, Lord Bassam, also noted, this is a big Bill, and it acts in a number of different ways. I fear that many of the things I say will be similar to what was said by the noble Lord; in order to maintain novelty, I will probably say them in a different order.
I will start with consumer issues. Clearly, these issues have excited correspondence from a lot of people in the outside world. We should note and thank them for the work that they have done in sending through a load of briefings. There are some important issues here, and areas that should be tightened up and improved. These include: tackling online scams, dealing with product safety issues and strengthening trading standards; taking action on primary and secondary ticketing; impeding price drip and mid-contract price rises; addressing the pernicious nature of fake reviews, as we heard from the Minister; devising a sensible way of redesigning automatic subscription rollover—there is a danger of us taking a number of other areas down with the law we have, so we must be careful of unintended consequences of that move—and delivering a range of other consumer rights, such as the possibility of collective action for consumer claims. I am sure there will be plenty of grist to this mill as we work through that part of the Bill.
Moving on from consumers, the second big challenge is the need to tip the balance of power toward content providers—and here I should declare that I have several creators in my family. As a basic principle, all content creators should be properly paid for the work they do. UK law requires payment for the commercial use of another’s copyrighted work, yet commercial use is currently being made of content by global platforms without any permission being obtained or payment being made. The dominant platforms profit from the efforts of content creators, from songwriters and artists to publishers and broadcasters, and they do not get rewarded.
The News Media Association estimates that over 50% of searches are news-related, but Google keeps the value of repeated visits and the value of online footfall that is generated. As such, copyright law looks foolish, as the system is being gamed. Smaller players must try to sue their distributors to enforce their rights, but they cannot risk such a move or indeed afford to take them on. Indeed, the evidence suggests that it is difficult even for Governments to challenge these platforms. After almighty tussles, the Australian and Canadian Governments have won concessions. It remains to be fully appreciated how those will pan out but, as well as highlighting the global dominance of the big two, those fights highlighted an essential difference between Meta and Google when it comes to news content, which is of great interest.
The Bill must make it clear that platforms need to pay properly and fairly, on benchmarked terms and with reference to value for end users. Additional clarification is needed on how a final offer mechanism would work in practice, and we will be seeking that, but really a bigger change is needed. That change should require those using and distributing content to obtain the owners’ permission before they use it, and we will be pushing for that.
I remind noble Lords that that we are discussing the Digital Markets, Competition and Consumer Bill—so competition is a central part of it and we have already heard elements of that. But, in the market that we are looking at, competition is weak—if not frail, to perhaps overstate it. In our view, the pro-competition interventions are one of the Bill’s most powerful features and a big step forward. We must use the Bill process to ensure that the powers are sufficient and Ministers must articulate government support for the ambition that the CMA and its DMU will need in order to start to take on the competition challenge, because that will require a big shift in emphasis from the CMA.
At present the CMA deals with a lot of mergers— 50 to 70 detailed investigations a year—while enforcement typically attracts fewer than 10 cases per annum and there are hundreds of complaints for it to deal with. When looking at competition matters, including acquisitions and mergers, the world’s competition authorities have focused on efficiency and short-term consumer benefit, but, as we have been reminded recently by the Court of Appeal when it found against Apple, the overriding objective of the CMA, as set out in the 2013 Act, is to promote competition in the interests of consumers.
“Promoting competition” does not mean just assessing the efficiency of a monopolist; in digital markets, this approach has delivered global oligopoly. So, while Web 1.0 was an open access—albeit read-only—platform, Web 2.0 has been captured, intermediated and monetised by a very small number of profitable concerns. That has been achieved largely through acquisitions that have been waved through by the authorities. Looking at the publicly disclosed acquisitions between 2008 and 2018, we see that Google has acquired 168 companies, Facebook 71 and Amazon 60. Now, thanks to this and other things, they control the core software in web browsers and device operating systems, and through that control they determine what we see, what we find, what we search on the web and how we pay for stuff.
The Bill is, in many respects, seeking to close the gaping doors of empty stables that this approach has delivered and, to do so, short-term consumer welfare cannot be the sole—or sometimes even the primary—consideration. Promoting competition means taking into account market structure and the ability of players to innovate. When looking at mergers, regard has to be taken of the effect of allowing large companies to buy innovative ones so that they can assimilate or retire their ideas and technology. In that context, we very much welcome the CMA’s approach to the Microsoft acquisition of Activision Blizzard and Ofcom’s decision to refer the hyperscalers in cloud services for an investigation by the CMA. This demonstrates that the CMA is up for a global challenge in this strategic way and that it can play a leadership role.
Looking forward, as well as mitigating the competitive and consumer issues thrown up by the centralised Web 2.0, the Bill should empower the CMA to help usher in a genuinely decentralised Web 3.0. As Professor Furman reminded us in evidence in Committee in the Commons, intervention interoperability is a vital remedy—and we say that interfering with interoperability in all its forms should be policed by the DMU. That means embarking on investigations and actions with the aim of distributing the power and control over Web 3.0, creating a network that spans a large base of independent actors. This speaks to the technology on which the network is based and the standards that are set to deliver that network.
It seems clear that the DMU should be proactive with respect to promoting international standards and aiming to create that interoperability: for a start, by focusing on open access and operational transparency, working for standards that allow unrestricted participation and favouring the technologies and protocols that prevent a single person or group amending or reversing transactions executed and recorded. It would be good to hear from the Minister, when he sums up, on the role that the Government feel the DMU and the CMA should be playing on the standards authorities—the IETF and the W3C. How do we see engaging further and more thoroughly with those standards bodies, because that is where the first fight starts in these technology issues?
So there is a lot resting on this Bill. The architecture of the web is currently threatened by those who would create and preserve their own walled gardens of content that is provided by others, privatise a public resource for their own ends and monopolise all content offered to the public via the internet for their own profit. This is not an abstract need; additional danger is already with us. Big tech is busy wrapping its tentacles around AI, including by co-opting start-ups for investments and partnerships. It is critical that the CMA uses these new powers to keep that technology open before it, too, is intermediated.
To deliver on this, however, there are many issues to be addressed. Your Lordships will no doubt come up with many others; we have already heard a list from the noble Lord, Lord Bassam, who will be pleased to know that there are many coincident issues. I will give a short list before I end of the issues that we will be keeping an eye on: ensuring that the Bill no longer gifts to strategic market status players the opportunity to challenge DMU decisions on the basis of lack of evidence, which means looking at the five-year view that is required; securing the role of judicial review and making sure it is not eroded; strengthening the leveraging principle that denies third-party developers revenue; understanding the Government’s position on data and information-sharing; clarifying how the final-offer mechanism would work in practice; probing the proportionality tests brought in via the latest amendments; challenging the changes to the definition of “counter- vailing benefit”, which also came through the amendments; enabling those with content to be paid properly; and allowing smaller businesses a voice and an ability to bring claims and, where possible, be awarded exemplary damages.
This Bill is a weighty tome, but it has a vital role in shaping the architecture and landscape in which the future digital economy will be built. It will help establish how the value of this economy is created and distributed. It will influence how easy or hard it is for challengers and disrupters to enter the market. Our job, therefore, will be to ensure that the CMA and DMU have the powers they need, but, more than that, our job is to articulate the cross-party ambition we have for this direction of travel and to launch the DMU with our overwhelming support to maximise its success.
Baroness Hayman (CB)
My Lords, I declare my interests as chair of Peers for the Planet and a director of the associated company.
The content of this Bill is not my area of expertise— I intend to contribute on a very narrow issue—and I was therefore particularly grateful for the clarity with which the Minister described the content of the Bill and for the parsing of its contents by the two Front-Bench speakers. I thought I would be making a speech perhaps at the end of a long list of speakers, when everything had been dealt with and raised, as a little coda, but I find myself speaking first from the Back Benches.
However, I can at least assure the noble Lord, Lord Fox, that I have something to add to the list of things we might need to deal with in this Bill. It is a narrow issue, to which I will speak in a moment, but I would like to raise one other thing. In the briefings that I have received since putting my name down on the list, important points were raised by a number of charities on the measures proposed around the auto-renewal of subscription contracts and the impacts they may have on the claiming of gift aid. That is an issue I hope the Minister responding to the debate might speak about.
I will focus my contribution on Part 4 of the Bill, which relates to the protection of consumer rights, and what I believe is a missed opportunity in relation to right-to-repair provisions. I am grateful for the work of organisations which have briefed on this issue, particularly the Design Council, which has a long-standing interest in this area. Strengthening our existing right-to-repair provisions and extending them in line with international norms would have multiple benefits. It would help us to shift to a more circular economy, reduce the waste from our throwaway culture and drive down emissions.
I am sure that there is no one in the Chamber who has not had some experience of planned obsolescence—where manufacturers have deliberately designed a product to limit its lifespan. For example, they have had to throw away a perfectly good kettle and buy a new one because the on/off switch has stopped working and it is not possible to replace that part, or they have had no choice but to buy a new mobile phone because the producer has stopped providing software updates even though the handset continues to work perfectly.
The apparent growth in terms of increased demand that comes with planned obsolescence is not sustainable growth. It does not add to people’s quality of life. In fact, it impoverishes consumers and wastes resources, depleting us of the critical minerals we will rely on and need more of in the future. It also creates huge problems of waste disposal.
Globally and nationally, we need to do more to protect both consumers and natural resources by extending product lifecycles. The most recent research from the UN-sponsored but industry-compiled Global E-waste Monitor showed that the UK produces 1.6 million tonnes of electronic and electrical waste each year. This is the second highest per capita amount of waste globally. The UK really needs to do better in terms of expanding our right to repair.
The measures that we have introduced to date have been very limited, focusing on manufacturers of certain larger electrical appliances being required to take very limited steps to make repairing the items easier for consumers. While the UK languishes at the bottom end of the league tables in respect of the quantities of electronic waste that we generate, other countries are racing ahead. The European Parliament just last month voted overwhelmingly in support of the consumer’s right to repair, which proposes banning built-in obsolescence. Three US states are now passing similar legislation.
The Government are aware of the problem. They said in their cross-departmental plan, Maximising Resources, Minimising Waste, that they are considering broadening the existing right to repair requirements under the 2010 ecodesign regulations and Schedule 7 to the Environment Act, to include a wider range of electrical products. Given that the Bill provides the ideal opportunity to do this and, at the same time, strengthen the existing provision to make them work better for consumers, why are there no provisions in the Bill on this area? There is widespread public support for what is proposed. A recent poll, carried out by YouGov, found that 85% of the public support expanding the UK’s right to repair regulations to cover all consumer groups.
I hope very much that the Minister might be able to meet and discuss before Committee how a right to repair could be best integrated into the legislation before us. It is an opportunity for the Government to follow through on their commitment to protect consumers and match or exceed the ambition shown elsewhere in the world. By doing so, they would kickstart a shift to a more circular economy, reduce waste and protect consumers from costly and unnecessary expenditure.
Lord Vaizey of Didcot (Con)
My Lords, I am grateful for the opportunity to speak so early in this debate, ahead of many noble Lords who actually know what they are talking about and have specific expertise in this area. I begin by declaring my interests in the register, specifically my role as a trustee of Tate, adviser to Pixel United and broadcaster on Times Radio, which is owned by News UK.
I should say from the outset that I am a huge supporter of this Bill. As the Minister set out at the Dispatch Box, updating our competition regime—for the first time comprehensively, I think, for some 25 years —is long overdue, to take account of how the digital tech giants have changed the landscape. It is one of a number of pieces of legislation that this Government are putting through, including the Online Safety Act, the forthcoming media Bill and the data protection Bill, providing a much-needed framework for regulation of digital companies.
I shall concentrate on two issues in the Bill, but I have to say that I was extremely grateful to all the Front Benches for highlighting some of the other issues, which I was blissfully unaware of, particularly aspects such as copyright—so I may well get stuck into some other issues in Committee. But we all know what we are talking about, when we talk about giving the competition authority power: we are talking about the power to take on big tech and big platforms such as Apple and Google, which have effectively established a duopoly. They set the terms and conditions and the rents, and there is very little comeback.
It is an unusual position to be in, because as consumers we all benefit from this technology. During my speech, as it becomes duller and duller, noble Lords will whip out their iPhones and androids and have a range of apps to choose from. But this is really a Bill which puts small businesses in the place of the consumer, because small businesses are being shut out from these opportunities —and who knows what other apps noble Lords could have taken advantage of if this Bill was already law.
One key issue for me is the appeals standard, because it is vital that the regulator has the opportunity to take on big tech, reach judgments and levy fines. I know from my time as the Telecoms Minister, working closely with Ofcom, that an appeal on the merits was a gift to the big companies and a burden on the regulator. It wildly extended the time in which a proper conclusion could be reached, it cost huge amounts of money and the firepower that could be deployed against the regulator, in terms of the quantity of lever-arch files, was something to behold. So, it is quite right that we have judicial review as the appeals standard in the Bill—which I think only adds to everybody’s confusion as to why the Government appear to have muddied the waters.
The great opportunity, obviously, of a Second Reading debate is to raise these issues, to explore them in Committee and to give the Government ample time to explain why these changes have been made and why they think they are the right ones, because I obviously approach it with an open mind. For example, if there is going to be a merits appeal on fines resulting from an adjudication, that may work provided it is clearly limited, effectively, to the quantum of the fine and no more. Nevertheless, I would still like to know why this slightly confusing change has been made from a simple JR standard throughout the process. Then—and it has already been raised by both opposition Front Benches—there is the idea of proportionality in the JR appeal standard and imposing conduct requirements. Some people say that this, in effect, creates a new appeals standard of JR-plus: again, this is very confusing. It would be much better to keep it simple and straightforward, because, goodness knows, those big companies have enough resources to tie the regulator up in knots without the Government, perhaps unintentionally, giving them a helping hand.
There are numerous other, smaller points within this framework of how the investigative process works which are important to highlight. They have been highlighted, as I am sure noble Lords are aware, by a number of organisations and campaign groups that wish to bring them to our attention. These include the consultation rights for challenger tech firms to be involved from the very beginning of a CMA process to avoid the circumvention of any solutions by strengthening the leveraging principle, so that, in effect, big tech cannot extract rents by using a different method. We have already heard, as well, about the countervailing benefits exemption—the ability for companies to argue that they are benefiting the consumer; and the removal of the word “indispensable”, which I understand is a clear legal term and therefore has a slew of case law on which the regulator could rely, again causes more confusion. My overwhelming message to the Government is that they have got it absolutely right in applying the JR principle; why are they therefore setting these slightly confusing mini changes throughout the process, because they do not really add up?
I also want to talk about a separate issue. I am sure, looking around the Chamber at some of those who are due to speak, that subscriptions will come up. I hugely support the idea that it should be as easy as possible, in a digital age, to cancel a subscription. I remember well once taking out a subscription to an online publication because I wanted to read a particular article and then, when I wanted to cancel the subscription, there was literally no way of doing it—it was a US magazine. Luckily, I knew the chief executive, so I found myself ringing him and begging him to allow me to cancel it: that cannot be the right way.
We all know, with our iPhones, that it is only recently that they have changed the way we can cancel subscriptions on an iPhone. It is, I am afraid, a truism that many companies that offer subscription products have an incredible imagination when it comes to making it as difficult as possible to navigate your way out. Most people should be confident enough about their product to know that they will keep their consumers if they continue to provide a fantastic product, and they will lose them if they do not.
Let me, however, completely contradict myself by asking the Minister—he knows what is coming—to exempt charities from the rules that are coming in the Bill. The Bill treats charitable membership, as I am sure he is aware, as a commercial transaction rather than a donation. That means that memberships or subscriptions would have to be refundable, and it means that charities cannot claim gift aid on the subscription, because gift aid applies only to donations which cannot be refunded.
Numerous charities have contacted me and, I am sure, other noble Lords, including very well-known ones such as the National Trust, the Zoological Society of London and the Royal Horticultural Society—you cannot say no to the Royal Horticultural Society—and Tate finds itself in the same basket. The changes would put pressure on Tate’s budget—I will not read out the cost it has estimated—and therefore could force the Government to look at their grant in aid for not just Tate but many other museums. It would have deep implications for Tate’s ability to fulfil its public service. As well as the financial costs, there would be huge additional bureaucratic burdens.
As I am sure we are all aware, charities are calling for charitable membership organisations to be included in the list of exemptions. For example, Tate is already regulated by DCMS and there are exemptions in the Bill for suppliers of services regulated by Ofcom. In the other place, the Minister introduced an amendment excluding the lottery as having charitable ends and already being regulated elsewhere. Surely, something similar should apply to other charities too. Have the impacts on charitable memberships been considered, in particular the pressures on national museums and their grant in aid allocations? If an exemption is applicable to the lottery as being already regulated and having charitable good, why does it not apply to museums and other charitable membership organisations?
Viscount Colville of Culross (CB)
My Lords, I declare an interest as a television producer. I too welcome this Bill, which has been a long time coming.
Five and a half years ago, I had the honour to be a member of the Communications and Digital Committee inquiry into digital advertising in the UK. We heard how the two big tech companies, Facebook and Google, used the combination of their massive databases and near-total control of the supply, intermediary and purchase sides of the digital advertising market to take a more than 80% share. Our inquiry recommended that the CMA conduct a market study as quickly as possible into the digital ad market. Two years later, that market study confirmed the tech companies’ near-complete domination of the market. It concluded that the lack of competition harmed consumers by excessive exploitation of their data and lower quality of service to them and to advertisers.
However, the tech companies’ dominant position in the market has also had a deleterious effect on media advertisers. Publishers of news in particular have suffered from the massive reduction in advertising revenue. In the first half of 2020, while tech platforms’ ad revenue grew, digital advertising fell by 8% for national news brands, by 10.5% for online magazines and by 10% for online regional titles. It is expensive to create original news and, especially, to launch investigative journalism, which is essential to holding those in power to account.
It was therefore not surprising that the Communications and Digital Committee launched an inquiry into the future of journalism in the digital age. Journalism deserves special consideration in this Bill. I say this not just because I am a career journalist but because it plays a role of public value and importance to our society and democracy. It helps people stay informed about the world beyond their personal experience—surely a prerequisite for an active citizen in a democratic society—but it is under threat, especially the provision of local news.
In the digital age, people’s consumption of news has moved dramatically online. Ofcom’s 2021 report showed that 45% of UK adults got their news through social media sites. The number must be much greater now. Much of this is posted by users and viewed on platforms without reference or redirection to the publishers’ websites. The tech companies have their own curated news sites, such as Google’s news showcase and Facebook news, which aggregate news from a wide variety of sites. An article from an extreme magazine can sit alongside FT journalism and the reader be none the wiser. All this is damaging for the brands of the legacy media. Most news publishers have moved online, but the combination of falling advertising revenue and the tech companies’ free use of their news—at best giving minimal remuneration for their provision of it—has led to considerable cost-cutting and redundancy.
There are a few glowing exceptions in America. When Mark Thompson was CEO of the New York Times he invested massively in journalism, and the company is managing to make a profit from digital subscriptions. But to compound the exploitation of media companies, artificial intelligence is also using journalistic content as a free database for training its large language models. An academic paper published recently found that the greatest source of data for OpenAI’s LLMs came from the New York Times. The BBC ranked second, with its content providing 1.6% of the total database, and the Guardian closely followed with 1.5%. This content is so valuable for AI training because the data is of high value and original. Most importantly, it is taken from the publishers by the AI firms for free.
It is not surprising that the exploitation of the media publishers by the tech companies is having a devastating effect. In the last 17 years, more than 271 print titles have gone out of business, and goodness knows how many have become freesheets, sacked their journalists, withdrawn from covering local councils and courts, and mainly publish press releases. Reach plc, one of the biggest publishers of local news, recently announced 450 redundancies, including 320 editorial roles. That was its third round of cuts in 2023 alone, bringing the total number of jobs at risk to more than 1,000. The trend is accelerating.
The power imbalance between tech companies and publishers means that the former are not prepared to move much to reduce their dominance of the digital ad market, provide proportionate remuneration for the use of journalistic content or give publishers more control over how their content is used and provenanced. So I greatly welcome the final offer mechanism and the conduct requirement process set up in the Bill. The threat of the final arbitration by the regulator of two offers of remuneration is obviously a backstop, and I know that His Majesty’s Government hope that the CMA will never have to be in a position where it can make this decision.
However, my concern, and that of many people in the media, is that this beautifully thought out and carefully crafted CR process, which gives plenty of opportunity for the designated SMS companies to abide by a code of conduct, could take a year and a half to complete, if not longer, whereas in Australia it takes six months to come to arbitration. Meanwhile, many small publishers, which are already on the edge financially, will not be able to wait that long.
My fear is that the tech companies have so much to gain from the present situation that they will act in bad faith. In Canada, the Government estimated that the value of news content to Google was 300 million Canadian dollars. However, after exhaustive negotiations it ended up paying just 76 million Canadian dollars. I too ask the Minister to consider whether Clause 38(3), when the SMS company has breached an enforcement order, could be a more effective point in the process at which to pressurise the two sides to agree fair terms.
Like the noble Lords on the Front Bench, I am worried about the introduction of the Clause 29 countervailing benefits, which were inserted at the last minute before the Bill went to the other place. I imagine it was done at the instigation of tech company lobbyists, who will use it to delay the CR process yet further. In the other place, the well-established definition of “indispensable benefit”, set out in the Competition Act 1998 and tested through the courts, has been thrown out. The Bill now has a new definition of benefit. Thresholds are set out in the clause, but the courts will still have to decide what “benefit” now means. Can the Minister explain how that will clarify and speed up the effectiveness of this Bill? The Bill is supposed to be dealing with anti-competitive practices set up by the SMS company, but surely Clause 29 creates an opportunity to give extra lobbying power to companies that already have the most effective and well-paid lobbyists in the world.
I am also worried by Clause 114, on the control that the Secretary of State has over guidance to the CMA in setting up the machinery of the CR process, and then also having power over guidance on setting up an individual SMS process. The noble Baroness, Lady Stowell, fought hard, and with some success, during the passage of the Online Safety Act to try to limit Ministers’ control over Ofcom’s work. Political independence must be the mainstay of a successful regulator. However, this clause as drafted gives the Government endless time and power to send guidance back to the regulator for revision. I am convinced that this will cause unnecessary delays and politicisation of the CR process. At the least, I would like to see a time limit introduced for the Minister to accept CMA guidance proposals.
I am also concerned about powers given to tech companies further down in the Bill, in Part 4. Clause 259 sets out the duties of a trader on the cancellation of a contract, and they focus on providing various types of notices and dealing with potential overpayments by the consumer. Although the retrieval of personal data is covered under the GDPR, there is no provision for the retrieval of non-personal data, which might have been provided to the trader during the subscription period. This could be data about household fuel consumption, cloud-based Word documents, comments on social media or videos uploaded to video-sharing platforms.
The consumer might want the legal right to retrieve their data from the service before the subscription ends. More importantly, the trader might want to keep non-personal data and make it available to other users without the consent of the consumer. In my view, this is an omission that many people would be pleased to have rectified by an amendment to the Bill.
I too share the frustration of the noble Lord, Lord Vaizey, about the difficulty of ending subscriptions. An even more popular option to the Bill would be the introduction of an end-of-contract button labelled “terminate now” on the front page of digital services websites. Often it is hard to find the unsubscribe button on a website. On occasions it has taken me some time to burrow down through the layers of a site to find the unsubscribe button hidden away in a digital corner. German law provides for a compulsory button, which allows the consumer to enter all the essential information needed to end the contract—that would be a benefit to the customer.
This is a huge and complex Bill, and it has been a long time in its gestation. I am very pleased to see our country finally confronting the anti-competitive behaviour of the big digital players and protecting consumers for the long term.
Lord Tyrie (Non-Afl)
I declare my interest as an adviser to DLA Piper. I too strongly support the Bill. Rather than dwell in any detail on how to improve it further—there will be plenty of time to do that in Committee—I thought it might be helpful first to attempt briefly to explain what I think is the Bill’s place in a wider policy perspective, and why I support it. Secondly, I will explain why the legislation on its own probably will not deliver the benefits that we are hoping for it. The CMA needs to do better, and so will Parliament, in scrutinising it.
On the first point, it is now widely accepted in many western democracies that competition policy has simply not been delivering the goods. I will not dwell on this for long, but concentration ratios are rising everywhere, and consumer detriment with them. The result is an erosion of public confidence in competition and consumer protection and in many regulatory bodies, including the CMA. That is only part of a much bigger picture of vulnerability to obsolescence of the tools and machinery that western Governments have been using over the past 30 years to manage capitalism and secure consent for it.
One of the problems the Bill seeks to address is that the West’s technological inventiveness, while improving economic performance, has also had the effect of challenging the legitimacy of global free enterprise. The platforms were created by global capitalism and they have improved consumer welfare dramatically. But they have also brought corrosive by-products: risks to privacy, fake news, online harm, greater cyber risk. These corrosive effects have been greatly amplified by the tendency of big platforms to monopoly. Western Governments are now struggling to adapt the machinery of regulation—in some cases radically—to cope with this. Consumer protection has also been badly neglected. Millions of people now feel vulnerable to rip-offs and no longer think that free enterprise works for them. As the noble Lord, Lord Vaizey, pointed out, small businesses —which are also consumers—have been at the wrong end of platform power a great deal recently.
Unless we face up to it, the free enterprise, pro-competition settlement, which has brought so many welfare benefits in recent decades, will be put at risk. Like us, all the democracies are groping their way towards addressing these challenges, to which the noble Lord, Lord Fox, also alluded. The Bill is at least a start but, none the less, the improvements to competition and consumer protection policy proposed will make only a small contribution to the much broader intellectual challenge I am trying to set out.
The Bill is at least intended as a reboot of the CMA’s legislative base. It largely provides it, and it has the potential to improve Britain’s economic performance a great deal.
Of course, it is scarcely surprising that I support the Bill. Much of it draws on the detailed proposals that I put to the Secretary of State nearly five years ago in response to his instructions that, as incoming chairman of the CMA—and I am more or less quoting—I try to shake the CMA up, raise its profile, and advise him on what, if any, improvements to the statutory base might be needed. I was told to get on with it and come back to him in six months, which I duly did.
What did I find? In a nutshell, I found highly motivated and high-quality staff—among the very best in public service. I found good, sometimes outstanding, work being done in two of the CMA’s five major areas of statutory responsibility—mergers and anti-trust—but, in varying degrees, a neglect of the other three: markets, advocacy and consumer protection. Internally, they had become the CMA’s poor relations. I also found a lack of boldness at the top and some substandard governance. Frankly, this is no more than we have seen in recent years in many other regulators.
I reported this to the then Secretary of State, but I told him that we needed to get on with the legislative improvements anyway, particularly on consumer protection and digital. I also said that we would need other improvements for it to be effective: a change in mindset at the top, and a much higher profile taken on behalf of the consumer by the CMA, with much better communication to a wider public. I also said that work was needed to develop a deeper understanding of the state of competition in the UK economy as a whole, and that this needed to be used to target the CMA’s workstreams. Virtually none of this work was being undertaken when I arrived at the CMA.
As far as I can tell, the three problems that I outlined still persist to varying degrees, so it is not just the legislation but, to some degree, the CMA’s approach to implementing its statutory remit that needs a reboot. If we do not secure that, the CMA will not deliver what we expect of it and hope for it. Even more concerningly, the growing sentiment of many of the public that they are victims of a rip-off economy, run for the benefit of the few and certainly not for them, will develop further. That is why the later parts of the Bill, particularly those improving consumer protection, are at least as important, although perhaps less glamorous to talk about, as the digital measures in Part 1.
My impression is that the new chairman and the new CEO are on the case. They both recognise the need for an organisational reboot. They will need our support in that. In any case, these problems are not entirely a matter for them. The CMA has only been responding to the signals that Parliament and others have put before it. Faced with those signals, many of us would have done the same. Parliament needs to send much better signals. In particular, we need to develop scrutiny tools that can get deep into what really goes on in the CMA. It needs to be rewarded with praise and support for improvements in its strategic approach when they come. There have been quite a few recently; I will not list them, for the sake of brevity. Of course Parliament should also flag up the CMA’s shortcomings, but it should always do so on the basis of detailed evidence.
To do that, Parliament will need to develop much more technical expertise than is currently available to it. It needs a specialist group—probably answerable to a dedicated Select Committee and with some of the characteristics of the NAO, but much smaller—that can get into the detail of the CMA’s working methods. By doing so, Parliament can help to shape the CMA’s decision-making framework and its wider public engagement, to which I alluded, just as the Treasury Committee has shaped that of the Bank of England and the FCA over the past decade.
One of the reasons that the Bank of England engages in public discourse and explanation of its role is that Parliament makes sure that it does, but that is currently not the case with the CMA. I asked to appear before the BEIS Select Committee when I was chairman and discovered that, when I appeared, it was the first time that any CMA chairman had ever appeared before it. They had simply evaded, avoided or had somehow been the subject of neglect by the BEIS Committee for many years. Of course the committee is extremely busy and has far too much to do, hence my suggestion for a specialist body. I said earlier that not only Parliament but the Government should act as an enabler of better scrutiny, and I have quite a number of suggestions for the Government but, rather than raise them now, I will try to press them in Committee.
I end with just one further remark. I have tried to put the legislation in a wider policy perspective, and I have lingered on the need for an institutional reboot of the CMA and the responsibility that we carry in Parliament and the Government to secure that reboot. But the CMA is becoming a repository for a good number of the Government’s smelly rats. It has been asked to monitor the internal market and has acquired responsibility for the highly politically sensitive topic of state aid, now travelling under the new name of the Subsidy Advice Unit. That is all before this huge Bill and the new big-ticket mergers that are coming its way post Brexit, which have recently been so controversial. With this Bill, we are going to empower the CMA with huge new responsibilities even as it struggles to do a full job with its existing powers. Government offload is risking CMA overload.
Twenty-five years ago, we overloaded a new body, the Financial Services Authority, with new responsibilities. Offload from the Bank of England and from other institutions became overload at the FSA. It failed spectacularly a decade later. When it failed, it was carved up. We need to put in place the support and scrutiny here for the CMA to accompany this Bill that can give the CMA better protection against such an outcome in the years ahead.
Baroness Stowell of Beeston (Con)
My Lords, it is a pleasure to follow the noble Lord, Lord Tyrie, and I will come to his theme of accountability later in my remarks, but I am very grateful to my noble friend the Minister for setting out in his introductory speech just how successful the UK’s tech sector is to date, because it really is a huge success. I was delighted to learn that Nottingham, my home city, is one of only a small number with two unicorns—billion-dollar tech start-ups. I did not know that, so that was good to hear.
Although we have been successful so far in the tech sector in this country, we have the talent and the potential to do so much more. But we have a problem, as we have already heard, which is that our digital markets are not working properly. The financial clout and sheer computing power of the US tech giants are creating significant, often insurmountable barriers to entry for alternative providers. I want to be clear that the Bill should not be about bashing big tech. We should not penalise these businesses because of their size. Their success and innovation also create other business opportunities, providing products and services that millions of people use and love. But that does not mean they should control the way markets develop and who else gets the chance to succeed. Like most, if not all, of my noble friends on the Conservative Benches and my erstwhile noble friend Lord Tyrie, I believe that free markets drive growth when they allow for effective competition. When markets are not creating that competitive landscape on their own, Governments should step in—hence the Bill before us.
Noble Lords have already heard that the Communications and Digital Select Committee, which I am privileged to chair, has started to call for legislation to empower the CMA with a new ex ante regime under the chairmanship of my predecessor and noble friend Lord Gilbert of Panteg. Through several committee inquiries, we have heard evidence of many things— we have heard about some of them today—including: unfair dominance and control of the immensely powerful and increasingly important digital advertising market; non-negotiable fees and terms applied by Apple and Google on thousands of businesses that rely on app stores, even though the terms of trade prevent some of those businesses providing a more streamlined experience and cheaper prices for their customers; and big players using their dominance in one part of the digital market, such as search, to damage the prospects of a potential competitor in another, such as online shopping or travel bookings. In our committee, we also continue to learn more about the failing of our digital markets as more firms, previously reluctant, are now willing to speak publicly about their experiences. So, as much as I would rather that the Bill was not necessary, the case for it is clear.
Once the Bill had been published and introduced to the Commons in the summer, my committee held hearings on Parts 1 and 2. I shall speak on only those parts today, but I have been interested to hear noble Lords cover other issues, to which we will no doubt return in Committee. I am grateful for all the briefings that I have received on all parts of the Bill.
I come back to the focus of my remarks. Overall, we as a committee found the Bill’s objectives and principles to be sound and a good basis for regulation. In our subsequent formal letter to the Secretary of State, we highlighted three important measures that we considered proportionate. My noble friend the Minister acknowledged that that is what we said, but he has not acknowledged something else we said: that these measures should not be diluted during the passage of the Bill. The three measures that we highlighted were the appeals process, the countervailing benefits exemption and the leveraging principle.
We knew from our evidence sessions that the big tech firms would lobby hard for changes in these areas. When all is said and done, they are successful businesses that will understandably fight hard to retain their positions. So, in the face of considerable pressure from them over the past few months, there was some relief when the government amendments tabled on Report in the Commons were less extensive than many had feared—but they are changes none the less.
Not only would any further dilution to these measures be unacceptable; the government amendments that have been made deserve proper scrutiny and debate to resolve the uncertainty that they have created. What I mean by that is that, in two or three years’ time, when the Competition Appeal Tribunal is considering an appeal, we need to be sure that judges will be in no doubt as to what the Government and Parliament intended by this legislation. We must avoid delays and outcomes that undermine the purpose of this Bill.
In his opening remarks, my noble friend the Minister anticipated some of my remarks. As he said today, and as the Government have shown in other ways, the Government have been at pains to stress that none of these changes affect the substance of the legislation. I am grateful for the reassurances that my noble friend has been able to offer. However, the fear is that these changes create loopholes for those with the deepest pockets to protract and extend a legal claim. We may require the publication of some new Explanatory Notes to provide that clarity and certainty. From noble Lords’ comments in today’s debate, I feel that we may need to table some amendments to at least probe and get firmly on the record the clarity that we need.
I will explain what I am talking about, which has already been highlighted by others. It is good that judicial review remains the procedure for any appeals against CMA decisions. But can we be sure that the new merits procedure for large firms to appeal against financial penalties will not lead to the CMA’s findings on conduct being reopened? My noble friend Lord Vaizey raised that question.
Indeed, why has the requirement for the CMA to ensure that its decisions are “proportionate” been spelled out in the Bill, when it is already a fundamental requirement of it as a regulator? Why has the decision been made to swap the word “indispensable” for a new form of words in the context of countervailing benefits? As we have heard, “indispensable” has precedent in case law and is well understood by the courts.
The Government have also added a new requirement that any guidance produced by the CMA in relation to Part 1 of the Bill should be subject to Secretary of State approval. I understand why the Government want to ensure sufficient oversight of the CMA, given the very substantial additional powers provided by this legislation, but my main concern with this change is that it will give the big tech firms another chance to lobby and delay. If this new requirement is to stay, we should at the very least include a short deadline in the Bill for the Secretary of State to grant her approval.
There are two other important principles for us to keep in mind here. First, the UK’s new digital competition regime is considered better than Europe’s because it is more flexible, but it will work only if the most dominant players participate in the process from the start to help the CMA decide best how strategic markets should work so that, in the end, all players get fair terms. The word “participatory” has been coined to describe this approach; “co-operative” would have done just as well. The point is that we must avoid deterring the kind of behaviour from big tech that is critical to the regime’s success.
The second principle—this is where I come to some of the comments that were made by my erstwhile noble friend Lord Tyrie—is accountability to Parliament. When it comes to the strategic oversight of the CMA and the work of its Digital Markets Unit, parliamentarians have an important role. Some noble Lords may recall that I raised the importance of accountability and parliamentary oversight during the passage of the Online Safety Bill. My committee, and the Online Safety Bill’s pre-legislative committee, both recommended a Joint Committee of both Houses be established to oversee digital regulation, because of the increasing power and remit we are giving to regulators. The Government, though, did not respond with any enthusiasm. We must return to this, and I thought that other speakers today might raise similar points.
This House passed a Motion only yesterday to establish a new committee of your Lordships’ House to oversee financial regulators. This was news to me yesterday, but I understand that it came about because of a government amendment to the Financial Services and Markets Bill. My noble friend Lord Tyrie suggested something different from what I have in mind, but the creation of this new committee sets a precedent, which is worth further consideration and study.
I support the Bill. It allows the big firms to continue to operate and innovate while ensuring that they do not use unfair tactics to suppress competition and stifle new challengers before they have had a chance to get going. In other words, it creates the level playing field that is critical to effective and fair competition. Ultimately, that is good for the UK economy, businesses of all kinds and sizes, and British consumers. I hope the Bill will pass swiftly because, as others have said, it is long overdue.
Lord Knight of Weymouth (Lab)
My Lords, it is a great pleasure, as ever and once more, to follow the noble Baroness, Lady Stowell. I particularly endorse the comment she made about having a Joint Committee, which I also made repeatedly during the course of the Online Safety Act. I am pleased to note the precedent she noticed, which I did not, and I support what she had to say. I remind your Lordships of my interests in the register, particularly as the chair of tech company CENTURY Tech and a co-owner of Suklaa Limited, which has a number of tech clients.
Like all other speakers so far, I very much welcome the Bill but, like everybody else, I think except for the Minister, I question whether it goes far enough in creating a sufficiently robust regime to hold the large tech companies to account. I do not necessarily want to bash them, but it is notable that they are particularly wealthy and particularly litigious. If we want to have a meaningful regime, we need a robust set of regulators to take them on. In September, the European Commission listed six of them—Alphabet, Amazon, Apple, Meta, Microsoft and ByteDance—as the gatekeepers under its new Digital Markets Act. That feels like roughly a good list of companies for us to keep in mind.
I was amused to look back, just over 20 years ago, to the anti-trust case taken against Microsoft. At that time, Microsoft was the gatekeeper as everyone was using personal computers to access the internet, and the likes of Apple were pushing for the competition authority in the US, the Federal Trade Commission, to take action, so that it could free up browsers and operating systems to allow consumers to access the internet through other sources. Happily, that pressure won out, and Microsoft had to yield and lost the anti-trust case. It is now time for us to take action, in particular on the issue of app stores. I am delighted that the noble Baroness, Lady Harding, is in her place, because she and I collaborated a little, and she led, on trying to get app stores included within the competence of the Online Safety Act. There is no doubt that we are now all accessing the internet predominantly on phones and iPads. The latest data that I have seen from Statista for this country says that, in the UK, 60% of us use smartphones as the most important device to access the internet, and another 12% use tablets such as iPads. That is 72% of us going through either the Apple App Store or the Android store to access the applications that we need to access content.
How do those app stores work? If you want to collect money through them, they take a percentage of that money—roughly 30%. That is on top of VAT at 20%, assuming you are liable to pay VAT, so you have lost 50% of your revenue before you have even started. That is a massive constraint on small businesses being able to get set up. We see that Spotify—one of the companies which have tried to come to talk to me—has, as I read in the newspaper, cut 1,500 jobs today. Perhaps if it was able to keep some more of its revenue and not have it taken by one or the other of those two platforms, some of those jobs would not be lost.
But it is about more than the money: it is also about the data that those two companies can collect through their app stores and analyse to see what applications, and what features within those, are doing well. Then, if they choose to, they can create competitor applications or block applications that they are concerned about. They will not block them overtly: they will just delay the process of approval through their systems—lo and behold, another release of iOS or other operating system is published, and the apps go to the back of the queue in the test pilot system before they can get approval to get on to the app store. All that is a massive constraint on small businesses being able to access and enter the market. I was struck by the speech by the noble Baroness, Lady Hayman, on planned obsolescence—that use of the release of the operating systems to make our devices obsolete is something that a powerful regulator could really help with, in ensuring that our devices remain current.
We need to act urgently in this country, and we need to be able to act internationally as well. Does the Minister honestly believe we have enough powers in the Bill for us to take on the really tricksy issue of these app stores? Will we be able to force them to offer alternative payment systems, so they do not cream off all the money, or systems so that, if I wanted to download an application on my iPhone, I would not have to go through the app store if I did not want to, so that we could then open up to more competition?
I move on to the issue of data a little more. In this House, I have previously raised my concern that an individual such as Elon Musk has all that data on transport movements through Tesla, on communications through his satellite company and on sentiment through his ownership of the company that used to be known as Twitter. That is just one example of a consolidation through horizontal integration, if you like, of data ownership. He, or others in similarly powerful positions, can point the same artificial intelligence machine at each of those individual data lakes, even if they are kept discrete, and get the benefit of being able to train the AI on the different sources of data and create power that nobody else has access to. That would give him a massive competitive advantage.
But it is bigger than just Musk: if you look at the amount of data that Google is collecting about us all at any given time, with all the integration that it has —or any one of the six tech giants that I listed earlier —it is a massive issue. Again, the CMA needs to have some ability to go after this data ownership issue, which is not about verticals but horizontals. I am not sure that it is within the regime or the thinking at the moment, and I would love to hear the Minister’s reassurance on it.
Like the noble Viscount, Lord Colville, I have concern around the competitive landscape for digital advertising. In the second quarter of 2022, Meta and Google made up 87.3% of total ad spend in the UK. It has fallen slightly since, with a greater share being invested in mobile-first platforms such as Snapchat and TikTok. This is in the context of online advertising spending making up 25% of total ad spend in this country. The DCMS has reviewed it and said that there is a lack of transparency and a need for action. However, at the end of its report, the DCMS says:
“In order to be ready to bring forward legislation to implement these reforms when Parliamentary time allows, we will be issuing a further consultation seeking views on these proposals”.
We have a vehicle here in the Bill. Why are we not taking action now to open up competition in digital advertising? Why are we waiting for parliamentary time when we have time now? Where is the sense of urgency from the Government around this important issue that the noble Viscount referred to?
Like others, I have looked at the correspondence on gift aid and would support action to be taken on it.
I know that the noble Baroness, Lady Kidron, who will be speaking later, has also raised the important issue of researcher access, which we came to in the Online Safety Act. Again, if we could use this vehicle to open up researcher access via the regulator to these large companies, then we could have some oversight over what is going on, so that we could inform better parliamentary scrutiny and regulation of these large, powerful and litigious organisations.
In the end, this is about the power of the internet for good and for ill. As we have heard, we have a suite of legislation before us, of which this is just one Bill, in order to create, hopefully, powerful, agile regulators who can collaborate and give confidence and safety for consumers to realise the transformational potential of technology and not the harms that we are all concerned about.
Lord Lansley (Con)
My Lords, I am very glad to follow the noble Lord, who made another of the many very valuable contributions we have listened to already in this debate. I will try not to repeat some of the important points that have already been made, which we will have an opportunity to consider in Committee in detail.
From my point of view, it is an illustration of the nature of how competition has changed in our markets. I was on the Standing Committee in another place of the Competition Act 1998, on the Standing Committee of the Enterprise Act 2002, and the Standing Committee of the Communications Act 2003, many of which are aspects of the legislation that we will be amending in this. If we had understood then the extent to which digitisation and digital markets had led to concentration of market power in relatively few hands, we would have thought that the competition regime we were establishing would have intervened to stop it.
Of course, it has not. I will come back to this in a moment, but we look at the Furman review, reporting in I think 2018 that there had previously been 400 acquisitions of nascent tech companies without any effective intervention by competition authorities anywhere. Even today, we are looking back very recently at the Competition and Markets Authority’s intervention in Microsoft’s acquisition of Activision Blizzard, which the noble Lord, Lord Fox, rightly referenced and, I think, praised its actions. But, of course, it affects only a small part of Activision Blizzard’s market penetration. It may be important in the long run—cloud computing may grow significantly—but it is not that significant yet.
It is important for us to recall that we are dealing with very large tech companies that are essentially American. The FTC tried to stop it and failed. My noble friend Lord Tyrie—he is not in his place at the moment, but will no doubt read this—was absolutely right; it is not simply the legal framework we create for our competition authorities but the manner in which the competition authorities deploy those powers that is absolutely vital. Of course, there is the consequential question of whether those competition authorities are properly accountable, and not simply whether they are doing their job well but whether we support them to do their job well—that they feel confident that the political class, as it were, will back them up.
At the time, we would have thought that the ex post interventions would have been sufficient. In the last few years, we have now realised that it will require a combination of ex ante rules and ex post interventions, and the Bill reflects that. With others, I was quite hopeful that we would make faster progress on the introduction of legislation following the Furman review. We are now over four and a half years on from the publication of that, but credit goes to our present Prime Minister for pushing things forward since he came to office. In this respect, he is a contrast to his immediate predecessor, who one might have imagined was pro competition, but who did not actually proceed apace with pro-competition legislation. Be that as it may, the Prime Minister is doing what is right to be done.
From my point of view, there are clearly many benefits that will be derived if this legislation is effective in diminishing the opportunity for self-preferencing by large digital players. I did think—this was a very good point made by, not least, the noble Lord, Lord Fox, and my noble friend Lord Vaizey—that we must ensure fair return to intellectual property. That is linked to making sure there is transparency and choice for consumers; the relationship between those two is really important.
I will be interested to see, as we proceed, the relationship between this legislation and the European Union’s. It is not a direct relationship, but we might do a bit of “compare and contrast”, not least in relation to definitions. The noble Lord, Lord Knight of Weymouth, was talking about that. The approaches are a little different, but some of the definitions, and how they are reached, will be really important. When we look at turnover, the number of consumers and users of digital technologies, the extent to which individual players or undertakings exercise power and control over those users’ access to digital markets, and indeed the extent to which they have control over business users of those markets, the definitions are already out there in the implementing regulations of the Digital Markets Act from the European Commission. So we ourselves should look very carefully at that.
I share, and will not repeat, the points that have been made very well, not least by my noble friend Lady Stowell of Beeston, about ensuring that we maintain the clarity of the appeals standard. As far as I understand it, a JR standard includes a test of proportionality. For it to be further added in the legislation in the way that is currently proposed—I think it is in Clause 46—runs the risk that the courts will say: “Well, it must have been added for a further reason, for an additional and distinct test other than we would have understood to be normal in JR”.
The same applies to the point made about indispensability. I suggest that my noble friend looks very hard at whether the countervailing benefits exemption serves any valuable purpose or opens a very dangerous door to long litigation. We know that some big companies such as Apple have $1 billion available for their legal costs in a year; we know that it is a cost of doing business; we know they have succeeded on several occasions in delaying interventions by other competition authorities for years through legal challenges. We have to be very aware that we do not create exactly that opportunity.
I will finish with a final point on killer acquisitions. The Bill includes a requirement for notification of mergers by undertakings with significant market status. However, the Furman review went on to give a recommendation that there needed to be a specific test of
“whether a merger is expected to be on balance beneficial or harmful, taking into account the scale of impacts as well as their likelihood”.
That test is not included in the merger regime in relation to these markets in the way that the Furman review recommended. I hope that, in the course of our scrutiny of the Bill, we might look at whether we should indeed come to look at that forward-looking review of mergers, taking into account that balance; giving, as a consequence of changing the legislative framework for merger control, an opportunity for competition authorities to intervene more regularly and effectively; and ensuring that there is more opportunity for entry into these competitive markets, because these markets cannot be expected to become as competitive as we wish and need them to be without real opportunities for market entry by new entrants.
Notwithstanding that, I very much support the Bill. I look forward to what I think will be a very non-partisan approach across the House to try to ensure that the Bill achieves the purposes which the Government clearly intend and Parliament intends that it should.
Lord Kamall (Con)
My Lords, it is a great pleasure to follow my noble friend Lord Lansley. I do not say this because he is next to me and might heckle me, but because of some of the distinctions he made between rules, implementation of those rules and enforcement. I also thank my noble friends the Ministers and their officials, not only for the opening comments but for meeting with noble Lords last week, as well as the House of Lords Library and the various other organisations that have contacted us for their briefings, which have been very informative.
I refer noble Lords to my interests as laid out in the register, especially my roles on the advisory board of the Startup Coalition and as a non-executive director of the Department for Business and Trade, my work with a couple of think tanks that have published on competition issues, and others.
In some ways, I am not one of these people who is into instant gratification, but I remember being a member of the European Parliament in about the mid-2000s, when the EU Commission was considering the case of Microsoft. I remember being visited by lobbyists, including from Google, who were lobbying against Microsoft because they wanted to see a more competitive market. I remember telling them, “Just be careful what you wish for, because one day you might find other companies lobbying against you”. It has taken a long time, but it just shows how markets move. The other observation is how quickly these markets move—even definitions change. I am old enough to know when SMS actually meant text messaging; now it has a new meaning of “significant market status”.
At this stage I have only a series of questions, but before I raise them I would like to think about the matter at the heart of this debate, which is: how do markets really work? There are lots of debates about it. How do we react to markets where there are one or a few dominant firms? What do we do about dominant firms that compete not by seeking to offer the best product or service at the best price possible but by using their significant market power to block competitors?
I have to admit that, when learning economics in the past, I was fairly dissatisfied with some of the models that we were presented with. We were presented with a fairy tale of a perfect markets with perfect information—“If everyone had all this information, this is the way markets should work”. Then we were given a few variations—the oligopolistic market, the monopolistic market, the monosoponistic market, but they are not real markets—and then we were told by our economics tutor that actually markets do not work like that at all. There are market failures, and we need government intervention.
When I look at this from first principles, one of the views that I find attractive is the one that made me consider the hundreds, thousands, millions or billions of transactions that occur every day between willing buyers and willing sellers. It is the aggregate of these transactions that creates the spontaneous order of markets. Markets are not perfect, and there is imperfect and asymmetric information. Not everyone has the same information. Entrepreneurs are the key to these markets because they spot opportunities that others may not have spotted and they are prepared to take risks to take advantage of those opportunities and asymmetries, which the economist Israel Kirzner referred to as entrepreneurial alertness.
What happens is that, soon after, other firms enter the market and try to compete on quality of product, service or price. Governments from first principles can either get in the way or get out of the way. While I would prefer Governments to get out of the way as much as possible to allow thriving markets, there will be occasions where some of these new companies will become so large that they dominate the market. In these cases, we need to consider if and how regulations can provide a framework for competition and prevent abuse by dominant players.
I was very much taken by the comments of the noble Lord, Lord Knight, who eloquently gave examples of how companies that were once seen as entrepreneurial, exciting, new and whizzy are now abusing their significant market status. However, in considering the Bill we also have to consider how digital markets may be different from other markets, such as those for physical products, even though many physical products are sold online today. While a firm may be dominant in one part of the market—for example, on search or devices—it may not be dominant in another.
I have weighed up the advantages of judicial review versus merits-based decisions, and especially of getting the balance right between not punishing the big firms for being successful and innovative and their significant market status allowing them to become gatekeepers promoting their own products over rivals’ products or, as has been alleged, search engines and app stores imposing unreasonable charges. Like many noble Lords, I have come down on the side of judicial review, mainly to speed things up but also to avoid larger firms with their armies of lawyers delaying the process, which may lead to smaller competitors going out of business before the end of the case. However, we now see that firms can appeal this penalty of the judicial review process so, like other noble Lords, I ask the Minister to say how long the Government expect the appeal process to take. If a firm lodges an appeal, is there a danger that it may delay the main decision further? If a large firm wins a penalty, will it then have grounds to challenge the original decision delaying the remedy further? The Minister may well say that will not happen, and it would be reassuring to hear that from him at the Dispatch Box so we understand it.
Like other noble Lords, I am interested in the counter- vailing benefit exemption. What is the thinking behind the use of “countervailing” rather than “indispensable”? As many other noble Lords have said, it is legally defined. What extra does “countervailing duties” or “countervailing exemption” give to the Bill and what is the justification? Can the Minister assure noble Lords that “countervailing” will not act as a loophole for dominant firms to escape their responsibilities?
One of my other concerns more generally—I know it is shared by noble Lords from other parties across the House—is that over time Governments delegate responsibilities to agencies or regulators, as well as to international organisations. I teach politics, and one of the things we teach is principal agent theory, where a Government delegates authority to an agency or a regulator, but that regulator may pursue an agenda different from the one expected of it. There is real concern about accountability, but also about who regulates the regulator. That is why I welcome the comments by the noble Lord, Lord Tyrie, and my noble friend Lady Stowell about accountability to Parliament. Perhaps across the House noble Lords should pursue the solution of a committee.
I suspect that the proposed power in Part 1 for the Secretary of State to review CMA guidance may be a way to tackle this issue. I would like to hear the Minister’s justification for granting this power to the Secretary of State and whether this may slow down decisions, especially in a fast-moving market. Does the Secretary of State really need these powers? Will noble Lords have to propose a timeframe for these decisions to be made if there is no timeframe for quick decisions? I should add that I have met people who work for the CMA and have been impressed by their knowledge and their understanding of some of these deeper philosophical questions of markets and some of the trade-offs they have to consider. It is not an easy job to balance innovation, markets and concentration.
There are a couple of other things. I welcome the action on subscription traps. There is probably consensus across the House. It recently took me more than two hours and disconnected calls to leave the broadband company that I was with. When I went online to read customer forums, thinking I had been hard done by, I realised I was lucky. It was like the Monty Python sketch: “Two hours! That's absolutely nothing! You don't know hardship!” I saw one comment where someone said they tried so often that they gave up for one year and tried again the year later because it just was not worth it; they just were not getting through. We also read of dirty tricks by companies disconnecting calls or leaving customers to hang on for ages.
I understand that companies are desperate to hold on to their customers. I understand why customers looking to leave companies or end their subscription are redirected to customer retention teams. When I was a consultant to telecom firms, the figure we used was that the estimated cost of new customer acquisition was seven times that of customer retention—but you keep customers by offering a service that they are happy with and they are happy to pay the price for. You do not keep them by engaging in these dirty tricks. In 2021, the Government promised to make it easier to switch broadband provider—as easy as it is to switch mobile operator—with a so-called one-touch switching system, but broadband companies failed to meet the target April 2023 deadline. Will the Minister say when one-touch switching will come into effect? Perhaps noble Lords have to ask what more pressure we can put on the industry and the CMA to look into this delayed implementation. As my noble friend Lord Lansley said, we have the rules but how do we make sure they are enforced? Why are companies dragging their feet on one-touch switching?
A number of noble Lords have talked about the last issue I will talk about, which is the fact that we have all been contacted by charities. I will not go into details because they have already been laid out by others, but I think we would like a response from the Minister on charity subscriptions. I add one word of caution. Charities may also behave in a way to try to keep their subscribers or donors. Let us not give them a blanket exemption, but let us understand the issue that they are lobbying on.
Overall, like other noble Lords, I welcome the Bill. I look forward to hearing the Minister’s comments and answers to my questions. I look forward to working with my noble friends the Ministers and other noble Lords in creating the appropriate framework so that the UK continues to be a leading digital market for local and international firms.
Lord Etherton (CB)
My Lords, I wish to address three short but important points. The first two concern redress or means of redress by consumers and small businesses. The third concerns the point which has been raised by a number of Members of the House about charities and subscription contracts.
The first issue concerns the absence of provision for collective proceedings by consumers and small businesses. Chapter 7 of Part 1 deals with enforcement and appeals. Provision is made for individual claims in the Competition Appeal Tribunal or to a court for breaches of requirements, such as conduct requirements and pro-competition orders following pro-competition interventions.
There is no provision in the Bill or elsewhere enabling consumers and businesses to make a collective redress claim where multiple parties have been harmed by the same breach. In many cases, individual consumers and small businesses will be unable to finance proceedings. Furthermore, the knowledge of the likelihood of such difficulty will be a disincentive for those who are subject to conduct requirements and pro-competition interventions to comply with their obligations.
Provision for collective proceedings—which, colloquially, are generally called class actions—is made in the Competition Act 1998, as amended by the Consumer Rights Act 2015. That provision, however, applies only to breaches of competition law. For these reasons, I would urge the Government to make provision in the Bill for a collective actions regime, borrowing, where appropriate, from that which applies already in the case of breaches of competition law.
The second issue I wish to raise concerns alternative dispute resolution schemes for consumer disputes under the Bill. Part 4 of the Bill deals with “Consumer Rights and Disputes”. Chapter 4 of Part 4 addresses the issue of ADR and supplementary provisions are to be found in Schedules 23 to 25. Aside from the imposition of a duty on traders to notify consumers of ADR arrangements, the provisions in this part are concerned essentially with the terms of accreditation of ADR providers.
What is lacking is any provision for making ADR schemes more accessible for the resolution of disputes, or even any provision for a review of potential ADR arrangements for the inexpensive, speedy and efficient disposal of consumer disputes. Resort to court proceedings will always be expensive and time-consuming. It is well known that current delays in the delivery of civil justice are considerable.
For these reasons, I suggest that the Bill should provide for a government review of ADR for consumer disputes so as to make it accessible, inclusive and appropriate for the needs of all consumers, regardless of age, income, education level or vulnerabilities.
Finally, I turn to a question that has been addressed by a number of your Lordships: the impact of the Bill on subscription contracts and its application to charities that provide membership benefits and also rely on Gift Aid when donations are made. Chapter 2 of Part 4 the Bill addresses the topic of subscription contracts. The important point is that it makes provision for those contracts to be subject to a right on the part of the consumer to terminate the contract and secure a refund. The effect, in the case of charities, is that the Gift Aid programme cannot apply to those donations.
This is a matter of great financial significance to charities large and small. In its briefing, the Royal British Legion points out that it has 194,000 members, 38% of whom have Gift Aid subscriptions. That Gift Aid represents approximately 10% of total RBL membership fee revenue. This could have an obviously very detrimental effect.
The description of a subscription contract in the Bill is
“a contract between a trader and a consumer … for the supply of goods, services or digital content by the trader to the consumer in exchange for payment by the consumer”,
and a trader is defined as acting for the purposes of a business. It is difficult to understand that the Government intended, without much clearer words, to embrace the concept of subscription contracts membership donations paid to a charity, because of the type of benefits conferred on donors by charities such as RBL.
So I ask the Minister to tell us, in his reply to this debate: is it the Government’s intention to include charities in these provisions? If it is their intention, were they aware and conscious in making that decision of the impact on Gift Aid? If it was not the Government’s intention to include charities in these provisions, they should be expressly excluded, in Clause 253 and in Schedule 20 to the Bill.
Lord Black of Brentwood (Con)
My Lords, it is a pleasure to follow the noble and learned Lord, and, indeed, so many speakers who have made such powerful points, with which I am overwhelmingly in agreement. There is a danger that I might sound like Little Sir Echo. I declare my interest as deputy chairman of Telegraph Media Group and director of the Advertising Standards Board of Finance, and I note my other interests in the register.
Like other noble Lords, I wholeheartedly support this legislation. As we have heard, it has been the subject of countless studies and consultations over many years, dating back to Dame Frances Cairncross’s admirable review—even before Furman—of the sustainability of the press, which concluded that
“the unbalanced relationship between publishers and online platforms”
threatened the future of journalism, and recommended that
“these platforms should be required to set out codes of conduct to govern their commercial relationships with news publishers”.
That review reported in early 2019—nearly five years ago—since when the commercial position of the press, and in particular the local and regional press, has deteriorated significantly. So, as we have heard many times, this has been a long time coming—but it will have been worth the wait, as long as we now get on with it without delay.
This legislation is hugely important because it delivers on so many different policy fronts. It is a policy for economic growth because, with the creative economy at its heart, it will open up digital markets, allowing UK businesses to innovate and grow. It is a policy for fairness, ensuring that the giant, unaccountable tech platforms deal with publishers on a level playing field. It corrects a dreadful imbalance in market power, which springs from the fact that, essentially, two foreign companies now take 80% of UK digital advertising but do not agree fair and reasonable terms for the content that powers their operations.
It will be good for consumers, as each UK household now pays over £200 more each year than it should for its online purchases as a result of the stranglehold on the ad market exercised by Google and Meta. It is also an investment in the future of trusted, authoritative journalism at a national and local level, which will be in deep jeopardy if there is no correction to a deeply distorted market, which means that publishers do not receive anything like a fair share of digital advertising revenues.
Finally, it delivers on perhaps one of the most important areas with which we, as parliamentarians, will have to grapple in the future: artificial intelligence. It is not quite “oven ready” but it is certainly “AI ready”, because it could also provide a route for publishers to negotiate the fair use of their content by AI systems. Without adequate compensation in this way, the commercial sustainability of content providers will progressively erode and, in the long term, fail.
Before coming on to some of the detail of the Bill, I want to explain why I think it is so essential. First, it is now crystal clear that the anti-competitive practices of the global monopolies are harming the UK economy. The CMA estimated back in 2018—the position will be much worse now—that Google and Facebook made excess UK profits of £2.4 billion in digital advertising. Those excess profits did not come from a free market but from the unashamed leveraging of market power. It is a closed market.
Secondly, it is equally clear that the big tech platforms benefit hugely from the content produced by publishers, both with advertising shown around the news, and the data obtained by platforms that interact with that content without paying for it. Again, the CMA has found that adtech intermediaries, in a market dominated by Google, capture over a third of the value of the ad space on publishers’ websites. The fact that people can find trusted news there makes them return more frequently, further expanding the market of the duopoly—a point made by the noble Lord, Lord Fox. It is a virtuous cycle generating cash for the platforms, but a vicious cycle for those investing in regulated news and investigative journalism.
Thirdly, the Google and Meta duopoly have become “must have” services for publishers because that is where people go for news. Google’s search engine is second only to the BBC as the most used online news website for people seeking news. This has produced a profound fault line in the operation of the market: publishers are at the mercy of big tech and have no choice but to accept their terms, leading to a position of clear market abuse.
The establishment of the Digital Markets Unit will correct these and many other faults. Publishers will be able to negotiate fair terms for the value that news content brings to platforms, and, as we have heard, if they refuse to comply then a final offer mechanism will be deployed, with each party submitting bids and the fairest offer selected. The DMU will ensure that publishers receive a fair share of revenues for advertising shown around their content and receive user data when consumers interact with their content. Unfair app-store terms will be prevented, allowing publishers to build sustainable subscription businesses.
As with all Bills that come here, we need to scrutinise it properly to ensure that it delivers what it says on the tin. There are a number of issues that we need to look at very closely. One area that we must guard against is importing anything into the DMU’s procedures that would allow the platforms, as we have heard, to deploy delaying tactics. They have the money and the legal clout to slow dispute resolution down to such an extent that the terms of the Bill could, if allowed to do so, become worthless.
A good example is the countervailing benefits exemption in Clause 29, as many noble Lords have mentioned, which would allow the DMU to close an investigation into a breach of conduct requirement if a big tech firm could demonstrate that its anti-competitive conduct produced benefits that outweighed the harms. The Government’s original policy intention was to ensure that this should be used only in the most rare and exceptional of circumstances, but, as the noble Lord, Lord Bassam of Brighton, said, amendments in the Commons have watered that down by introducing an untested and uncertain standard. It is not at all clear why that change—moving away from the recognised competition law standard of “indispensability”—was necessary. We need to return Clause 29 to its original wording, or indeed get rid of it altogether, otherwise the big tech firms will simply be presented with a “get out of jail free” card.
Also concerning are the powers given to the Secretary of State to approve CMA guidance, a point made by the noble Viscount, Lord Colville of Culross. That guidance will be crucial in setting out how specific digital services should comply with the Bill’s conduct requirements, allowing the pro-competition regime to be proportionate and targeted. In a system designed to regulate rapidly moving digital markets, any delay could seriously undermine the CMA’s ability to target consumer harm. As several noble Lords have said, there must be a time limit for the Secretary of State’s decision.
We have heard a lot about the maintenance of the judicial review standards, but again those have been watered down for appeals on penalty decisions. There needs to be absolute clarity in the Bill on the very limited area covered by the so-called full-merits appeals, so that it does not bleed into other parts of the system.
We should also consider in Committee the way in which the final offer mechanism will work. At the moment it is a last resort, quite rightly, but it is one that could become such a distant prospect that publishers were forced to accept sub-optimal terms simply because of the pressing commercial imperative to do so quickly.
The part of the Bill that concerns me most is Part 4, relating to subscriptions. Like everyone else, I applaud the aim of tackling the nuisance of subscription traps, but we need to make sure that the day-to-day operations of reputable traders are not adversely impacted by the measures designed to achieve this—particularly publishers, such as the one I work for, which are building sustainable business models through subscriptions. Subscriptions provide many different types of businesses with a degree of certainty in order to invest in their operations, but I fear that we risk undermining some of that certainty with the measures in the Bill at a challenging economic time for many traders.
The severity of the measures in the Bill treats all subscriptions as though they were an endemic problem and unwanted by consumers, when that is not the case. By the Government’s own analysis, four in five adults in the UK have at least one subscription—and often many more—yet only 5% of subscriptions are unwanted. There is a danger that we are creating a sledgehammer here to crack a nut. As an example, under the terms of Clause 258, traders will be required to establish procedures that enable consumers to terminate subscription contracts in a “single communication”. That could have many unintended consequences which, ironically, disadvantage the customer, not least because many are often happy to take advantage of discounts and price offers that arise during their exit journey.
There are also potential problems with the cooling-off period. Clause 262 largely retains the 14-day cooling-off period under EU law, which starts the day after the day on which a contract is entered into. However, the Bill introduces a so-called renewal cooling-off period which, for instance, occurs when an annual subscription renews. That is an unnecessary expansion of the existing regulation without any evidence that it is needed, and it is hardly a Brexit dividend to impose even harsher regulations on British business than the EU does.
In a Bill intended in part to ensure the sustainability of journalism, with business models often based on subscription income, some of the measures introduced in the Bill, ironically and dangerously, point in the opposite direction. We must correct that. These are issues that we will scrutinise in Committee with our usual vigour. None of them is insuperable and I hope that, as with the Online Safety Bill, my noble friend the Minister will engage in constructive debate. As I said at the start, I wholeheartedly support the Bill. It has been a long time in gestation, it is supported by all the parties in Parliament and it has been endlessly consulted on. Let us now get on with it without delay and in that spirit of consensus on these issues that binds us together.
Baroness Bennett of Manor Castle (GP)
My Lords, in that spirit of consensus, I declare my former position as editor of the Guardian Weekly. Noble Lords will find an unusual degree of confluence between what you might describe as the two ends of the media spectrum, in that I very much agree with the noble Lord, Lord Black, on the issues of artificial intelligence use and the digital giants’ use of material coming from mainstream and private publishers without declaring or making fair payment for that.
There are so many Bills coming through alongside this one that I am not sure where this next issue belongs, but much of what is described as generative artificial intelligence is actually plagiarism on a giant scale. I declare a meeting last week with UK Music, which is very much pushing for the idea that the source material of anything that is generated through these kinds of technologies needs to be declared, as well as the way in which it has been generated. These are issues that need to be raised.
A number of noble Lords declaring their creative endeavours made me think that I should declare that I have a book forthcoming in April, Change Everything: How We Can Rethink, Repair and Rebuild Society, published by Unbound.
Baroness Bennett of Manor Castle (GP)
Thank you. I have an interest in seeing that that is not open to being rehashed, reused or recycled without my consent, yet as far as I am aware we have no capacity to do that. That is something we need to think about in this Bill and more broadly.
It is a pleasure to take part in a debate in which we are seeing an unusual degree of consensus. Noble Lords have had plenty of time to prepare for the passage of the Bill through your Lordships’ House. It is widely acknowledged to be necessary and it is broadly headed in the right direction, so the department needs to be warned that that will probably produce a strong desire to improve it in Committee and on Report. I am reminded of the most recent similar Bill that I can think of, which is what is now the Domestic Abuse Act, which left this House a lot stronger than it arrived after a lot of consensual and constructive cross-party contributions.
As many have said, the Front-Bench contributions have been very informative. I will pick up one point from the Minister: I do not share the enthusiasm for unicorns. Unicorns have often turned out really to be phoenixes that crash and burn but then are not capable of rebirth, at great cost in human and financial suffering. As many noble Lords have said, we have an ecology that has seen many exciting, new and creative independent businesses swallowed up—minnows swallowed up by sharks—and we need to think about how we can create a different kind of ecosystem. It is worth focusing on the fact that the digital world was born into an oligarchic system, where a big four—or perhaps a big five or six —dominate all sectors of our economy, so it is perhaps not surprising that we have arrived at a system with very little diversity in it and a few large players.
My aim is not to repeat what has already been said, so I am going to tick off some points that have been well covered. On the issue of subscriptions to charities, mentioned by the noble and learned Lord, Lord Etherton, among many others, I would note that one of my favourite charities, English Heritage, is among those that were very concerned about this issue. It is clearly something that your Lordships’ House will need to address.
Picking up from the points made by the noble Lord, Lord Black, on the issue of small, independent news providers I think that many noble Lords will have received a briefing from the Public Interest News Foundation—some have referred to it. We desperately need local news, supporting local democracy and local communities, and these are areas where we desperately need action.
I associate myself also with the speech of the noble Baroness, Lady Hayman, not currently in her place. Right to repair is something that I have long been working on and I look forward to seeing what we can do in that area, so I will not repeat any of that.
We could hear the passion of personal experiences in how many noble Lords focused on the difficulty of ending subscriptions. My suggestion to the noble Lord, Lord Vaizey, is that if you do not know the CEO, you need a strong social media following. A grumble on social media is often very effective. I would like to think that, if we did that enough, it might have some impact on encouraging companies to do a better job of allowing people to escape from subscriptions that they no longer wish to have.
However, I shall focus the main part of my speech on an area that I believe no noble Lord has yet covered, by looking at the issue of advertising. We are all of us, both online and through screens in train stations, on roads and in many other places, exposed to thousands of digital advertisements more or less daily. It is really crucial that, to protect consumers from misinformation and harm, advertising needs to be properly and thoroughly regulated. However, we currently have a system that is slow and opaque and is definitively failing. The UK’s Advertising Standards Authority is not an independent regulator; it is self-funded by the advertising industry. Any complaints which the ASA handles are essentially therefore marking its own homework, so we need to look at this regulatory gap as a matter of urgency. We should have a regulator that is independent and transparent and one that can take timely action.
I will focus on the role of the companies that are advertising products in terms of producing waste, pollution and environmental harms, and ignoring human rights. Recent research published by the Financial Times shows that Shell, one of the world’s top polluters, is estimated to have spent £220 million on advertising in 2023, much of that explicitly aimed at younger people. I have to share a case study of one of my favourite examples of this because its sheer uselessness and inaccuracy has to be noted. A couple of years back, going through the Eurostar terminal, I peered around a corner into an entirely unused area of the terminal where there was an advert from Exxon about plans for green energy from algae—something that Exxon has subsequently got out of entirely. At the time, the company was defending itself about this and its spokesperson said that the company had spent more than $350 million trying to develop biofuels from algae, which was more than double what it spent on advertising—greenwashing, anybody?
It is worth noting that, if noble Lords go back to when the Government first announced the Bill, we were promised protection from greenwashing. That was going to be a central part of the Bill, but in the Minister’s introduction we heard no similar focus on the protection from greenwashing that we are looking for. I would suggest that we can go further than protection for actively misleading issues, and I will look to table amendments on this.
In this climate emergency, as we speak in the middle of the COP 28 talks, we need to acknowledge that advertising is a push factor for the generation of a massive amount of unnecessary carbon emissions. The Green Party is calling for a ban on high-carbon advertising—fossil fuels, flights and SUVs are major examples, but it might also include fast fashion, meat and dairy and the banks that are funding the likes of BP and Shell. I can feel your Lordships wincing at this point, but I would point out that there is no right to advertise. We have a choice to decide what our society looks like and what people are bombarded with. We do not have to say, “It’s open slather and you can do whatever you like”. An obvious area for this is cigarette advertising, on which we have long had tight controls, but I also note that Transport for London now restricts advertising on a range of products including junk food and is close to banning gambling promotion. France and Amsterdam are also looking at working on banning high-carbon adverts. We can choose what the future looks like.
There is so much to do, but I finish on the point of how so many of the Bills that your Lordships’ House is dealing with are interrelated. I do not think anyone has yet referred to the fact that we are speaking in the “fraud capital of the world”—I am quoting UK Finance here—and we really need to cross-reference this with what is happening in financial advertising. It is a huge problem that consumers need so much protection from.
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to take part in this Second Reading. In doing so, I declare my interests as set out in the register, as an adviser to Ecospend Ltd and Boston Ltd respectively, and as a member of the board at Channel Four Television Corporation. I would like to talk briefly about the opportunity, then the Bill at large and then make some points on specific elements within it as currently constructed.
There exists a huge opportunity for the UK with the new technologies that we have available to us. If we conceive of them as tools in our human hands—yes, incredibly powerful tools but in our human hands, led by our human heads and hearts—that will give us the greatest chance of success for small, medium and potentially successful unicorn businesses, right across the United Kingdom. Some of the greatest elements of these technologies are that you do not necessarily have to be in the capital, or indeed in a city at all; you can have an international business with a laptop and a decent broadband connection from your bedroom. When we look at how we can combine those new technologies with the great good fortune of the United Kingdom’s financial services sector, and perhaps the most prized and often underrated good fortune that we have, which is English common law, the potential that we have individually and collectively as a nation—one that is looking out to connect internationally—is as good as infinite.
What we really need to see as a golden thread running through the Bill is that everything we do in this space is inclusive by design. Everything is predicated on the fundamental truth that it is our data—our decisions, our intellectual property and our copyrighted content. None of these platforms or huge businesses has very much at all without our data, our ID and our copyrighted content. We need to address, legislate and regulate for this fundamental truth.
The Bill itself is not small and it is getting bigger. Perhaps more concerning from a parliamentary perspective is that, when it entered Second Reading in the House of Commons, it had 35 Henry VIII clauses. As we start Second Reading here, that number has risen to 43. I calculate that to be a Tudorian rate of inflation of around 23%. I ask my noble friend the Minister: is this the way the Government wish to legislate? Does it make sense to have an increasing number of such clauses in our primary legislation? As we already have 43 of them, will the Minister confirm that they will all be subject to the affirmative resolution procedure?
It is a big Bill, and noble Lords have covered many of the issues eloquently and effectively at this stage. I will go relatively rapidly over a few areas I think are worthy of consideration. First, on the Competition and Markets Authority, our regulators are nothing if not independent. We have some of the most respected regulators around the world, but, if their independence is even perceived to be called into question, they and we have a problem. As we saw in our discussions during the passage of the Financial Services and Markets Bill, independence should never be confused with accountability and parliamentary scrutiny. It is absolutely essential that the regulators must be accountable to Parliament. There must be the right scrutiny mechanisms in place. As we heard earlier in the debate, we need that level of expert input so that a parliamentary Select Committee can effectively hold these regulators to account.
So that is accountability and scrutiny: good. But, on encroaching on independence, perhaps less so. Is it wise, as currently constructed in the Bill, for the Secretary of State to have sign-off powers over the guidance that will come from the regulator? That seems to go well beyond any sort of normal arrangement between government and an independent regulator. Similarly, when talking about the CMA, the Bill is peppered with references to proportionality and being proportionate, but the CMA already has to operate in a proportionate manner. So what do these additional references to proportionality add? Do they not potentially lead to confusion and less clarity for both the regulator and those who will find themselves regulated?
As many noble Lords have commented on, I am similarly concerned by the introduction of the full merits test when it comes to fines issued by the regulator. It is fairly clear, as the Bill is currently constructed, where the difference is between full merits and JR. But why are we taking a full merits approach when no other economic regulator has such an approach put upon it? We do not even need to reach back 25 years, or five years indeed, into history. Why do we not go for one of the most recent pieces of legislation, which many noble Lords present were involved with—the Online Safety Act? When it comes to fines issued by Ofcom, there is no full merits procedure there. Why are we looking at a different approach in this piece of legislation, as it is currently drafted?
Moving on to pricing and payments, the Government have spoken often, and rightly, around the present problem of drip pricing. Yet there is currently nothing in the Bill to address it. I ask my noble friend the Minister why this is. Would this Bill not offer the ideal opportunity to address the practice of drip pricing, which so many people find themselves on the wrong end of? Similarly, when looking at leveraging principles, would we not wish to strengthen the Bill in that respect? Otherwise, the potential danger is that—to take the app example so eloquently pointed out by my friend the noble Lord, Lord Knight of Weymouth—those prices, that 30%, simply gets moved and applied to a different part of the ecosystem. It could be moved, applied again, and thus nothing would be achieved from this legislation as currently constructed.
As other noble Lords have commented, I agree that we have to address the issue around charities and gift aid. I would probably be more in the camp of my noble friend Lord Kamall, in that we should consider this carefully, rather than simply saying “There’s an issue around Gift Aid” and drafting a blanket exemption. We want to consider this carefully and come up with some more elegant drafting around this point.
As I already stated, none of this is anything if it is not predicated on being inclusive by design. A key strand within that is obviously accessibility. There is a real problem with the Bill as currently constructed if we want all these markets and platforms to be accessible for all. Although Clause 20(2)(C) talks about the information describing the activity needing to be accessible, the Bill does not require the activities—the platforms themselves—to be accessible. Buildings were designed 500 years ago with no thought of accessibility or disabled people, yet, in the main, they have now been made pretty accessible. For example, take the Palace of Westminster—a grade 1 listed building. It is not perfect by any means, but it is pretty accessible, and a great job of work has been done. Why would we seek to rebuild steps and inaccessibility in cyberspace when all these markets are constructed, if you will, on completely greenfield sites?
Inaccessibility and exclusion will happen if the concept of “inclusive by design” is not written right through every element of the development and deployment of these platforms, and thus into the digital markets we describe. So would it not make sense to look at, for example, the Public Sector Bodies (Websites and Mobile Applications) Accessibility Regulations 2018, and seek to draft some amendments to that effect so that we truly have not just accessibility around the information but accessibility around the activity, service, platform and market? Those regulations are more effectively drafted and are practically implementable. They look to the international web of accessibility guidelines. Would the Government not wish all the platforms and everything in this digital markets Bill to be rooted in such firm grounding?
In some final collected thoughts, I will also comment on the right to repair. In your Lordships’ House and the other place, rightly we often talk about resource and resource matters. But we should also talk much more about resourcefulness, and how we make optimum use of the resource we have. It seems perfectly logical and timely, if not urgent, to have something in this legislation around a right to repair. Similarly, can I ask my noble friend the Minister what the budget will be for the DMU? It is being given quite a task. Although we have a full range of regulators across many sectors of our economy and society, one significant issue, which cannot be denied, is that if we do not fund them to the right level, we cannot then criticise or be disappointed if they are unable to do their job as Parliament intended. Similarly, when will the Government look to quantify many of the measures set out in the Bill—currently largely white space?
Finally, we are talking about ex ante regulation, or EAR. We need to ensure that everybody is listening when we reach Committee, and we can then approach the Bill collectively, in a participatory manner and with those golden threads of inclusive by design and those fundamental truths again—that it is our data, our decisions, our legislation, our regulation and our digital futures.
Baroness Ritchie of Downpatrick (Lab)
My Lords, it is a pleasure to follow the noble Lord, Lord Holmes of Richmond. I welcome the Bill, but there are some improvements that the Government could bring forward to provide better protection against the big tech giants. I feel that many of today’s arguments have coalesced around several points. The Bill deals with various aspects, and there are concerns that it does not contain any explicit environmental content. Reference has already been made to that. It makes no progress in plugging the gap in environmental reporting of food and drink products, it does nothing to extend repair as a consumer right, as the noble Baroness, Lady Bennett, indicated, and there are issues around gift aid. All that needs to be addressed.
However, I want to concentrate this evening on the need for the Government to strengthen the legislation through government-based amendments introduced at Committee or Report to enable better and more effective regulation for big technology companies. Undoubtedly the Bill can launch a ground-breaking framework to regulate a remarkably unbalanced digital marketplace in the UK. It is a market in which tech giants such as Alphabet and Meta hold near-complete control over every aspect of nearly every online transaction. While digital technology has given journalists new opportunities to engage with the communities that they cover, the dominant tech firms have positioned themselves as central intermediaries, through which most news content must pass to reach citizens. This allows them to capture data about the use of the content by consumers, sell advertising based on that use, and capture value created by news and information firms. They hoard a lion’s share of advertising revenue, nearly 80% of the digital advertising market, as well as valuable user data generated for them by news providers, while the providers struggle to keep their lights on. I have seen examples of that in Northern Ireland.
With that system in place, the news publishers that have to interact with the giants lose out, especially those that are locally owned and operated. When they suffer, their audiences—citizens right across the UK—lose out as well. The independent news sector online is made up of several hundred publishers. Millions of residents in hard-to-reach local communities, such as those in distinct rural communities in Northern Ireland, rely on them for fact-checked and trustworthy information about all facets of their lives. It is a sector that has been given many reasons to feel as if it was abandoned by the UK’s policymakers. With appropriate policy measures, it also stands to gain the most out of our action. Using proper interventions, we can allow it to continue enriching the lives and democratic participation of the UK’s communities at every level.
In 2022, the Public Interest News Foundation estimated the UK independent news sector’s total revenue at £20 million to £40 million. In the same year, take note that Google and Meta generated an estimated £16.1 billion in UK advertising revenue. We should contemplate that contrast in resources. According to Press Gazette, the overall digital advertising market in the UK grew this year, but none of the fresh spoils will go to the publishers working diligently to inform the public. Undoubtedly, this system must be remedied; with certain amendments and considerations, this Bill can sit among a much-needed set of holistic interventions. It can help to introduce sustainability to the news industry, and in particular help the independent online news sector to survive and flourish. In many instances, it is providing local news content to local communities.
The Bill should allow the CMA to use the final offer mechanism more flexibly and earlier in the regulatory process; reduce the potential to politicise regulation by limiting the vast oversight powers given to the Secretary of State over the Digital Markets Unit; allow for countervailing benefits to users to be considered at the many consultation and investigation stages of regulation instead of being used as a “get out of jail free” card by tech giants; promote a competitive and pluralistic UK press by instructing the CMA to consider citizens’ rights as it regulates the digital marketplace; ensure that as many actors as possible can trade with SMS firms on fair and reasonable terms by mandating transparency with the regulator and, when appropriate, the market; and ensure that the expanded merits-based appeal to penalties imposed on SMS firms does not undermine appropriate regulatory decisions made after due process at earlier stages in the new framework.
I hope that the Minister will reflect on those suggested proposals for amendments in this sector and consider bringing them forward in Committee or, failing that, on Report. Such amendments would enable and bring about an improvement to the Bill, put certain checks in place in respect of the big tech companies and provide for their better regulation, which is urgently required. I urge the Minister today to reflect on those proposals and provide answers and some direction about the next steps from the Government.
Baroness Kidron (CB)
My Lords, it is a pleasure to follow the noble Baroness, Lady Ritchie of Downpatrick. I declare my interest as set out in the register as adviser to the Institute for Ethics in AI at Oxford and the Digital Futures Commission at LSE, and chair of 5Rights Foundation.
Like other noble Lords, I welcome the Bill. I can claim to be an enthusiastic advocate for democratic oversight of the power of tech, corporations, their products and services and the externalities on society. While my primary focus is on the detail of the regulatory regime brought forward by the Online Safety Act and the opportunities and problems of the upcoming Data Protection and Digital Information Bill, this Bill represents an enormously important piece of the puzzle of digital regulation. I hope that the Minister has recognised the warm glow of agreement across the House, which we put to such good effect during the passage of the then Online Safety Bill, and that we will have a similar outcome during the passage of this Bill.
One aspect of working on digital regulation is that however fundamental it is to the lives and outcomes of UK citizens, its importance is often obscured by language and concepts that very few people engage with—holdover computer power, large or specialist datasets, automated decisions, synthetic information and so on. It means that debates like the one we are having today and the public discourse outside your Lordships’ House are confined to small interest groups. Yet I am often struck by the number of times somebody raises with me the feeling of being forced into using certain products; the fierce hold over small business by the app stores and search; the powerlessness of creators; or the ubiquity and damage that fake reviews do to both legitimate businesses and unsuspecting consumers. Or they simply express the idea that the deal they thought they had made is not the deal they got.
Any concentration of power is disfiguring of democratic societies and ultimately consumers come to feel that asymmetry of power, even if they cannot speak to it. The concentration of market power in the digital marketplace is no different. Here, I want to make it utterly clear that the tech lobby move to make consumer benefit the paramount criterion for exercising DMU judgment must be looked at in detail in Committee. Consumers often have long-term interests that are vastly different to the shiny, superficial, short-term consumer gains so often trumpeted by the sector.
Before the Government published their amendments on Report in the other place, I was asked what I thought of the Bill by someone rather senior. I replied, somewhat jokingly, that it depended almost entirely on how successful the tech sector lobbying over the summer had been. That is about the size of it. What the Government put forward was a thoughtful and robust legislative proposal which sought to deploy greater nuance than similar proposals in other jurisdictions. Happily, while the worst of the lobbying has not materialised in the Bill, I am afraid that it remains the case that, were the Government to hold firm and to set the final bar closer to where it was before Report, it would be rather better for it. I will quote the noble Baroness, Lady Stowell, who wrote in an article in the Times—rather brilliantly:
“This is a bill the government got right the first time, it must not now second-guess itself”.
Today, I want to briefly raise a number of points that I am sure we will look at in great detail in Committee. Many of them have been raised by others, so I will try to do so quickly. Over the last decade, I have repeatedly seen regulators going toe to toe with companies with seemingly unlimited resources and falling back on “advising”, “working with” and “taking on only the winnable action”. The Bill as it stands enforces many duties on the CMA to consult and consider representations during its work. In the context of litigious companies with limitless cash, this encourages regulators fearing judicial review to consult on what the rules should be, rather than publishing their regime and inviting the sector to raise reasonable concerns. It is the perfect route for regulatory capture, and I am afraid I have seen it elsewhere. We are making the law, and the regulator, not the industry, should interpret Parliament’s intent. I wholly support, and I practise, high engagement with the sector, but a regulator must not be strung up by requirements such as those in Clauses 6, 20, 114 and others.
For the same set of reasons, I trust that the counter- vailing benefits clause, Clause 29, will get the full power of scrutiny from your Lordships’ House. It must not become a corridor by which strategic market status firms can avoid requirements set out in the Bill. It is the statutory duty of the CMA and DMU to promote competition: surely, in the digital context it is those firms that hold the most power that we most want to regulate to allow a rich environment for challenger and growing businesses, as well as consumer benefit.
I strongly support the push from publishers, including small and independent publishers and groups such as the Public Interest News Foundation, for the Bill to be amended to include citizens’ interests to be considered for a competitive, pluralistic press in this country. Such an amendment would align with the advice from the Digital Markets Taskforce, which advised the Government on the regime as the Bill was being developed. I think it would also send a strong and unequivocal signal that your Lordships’ House backs strong, independent journalism.
Like the noble Lord, Lord Fox, I have concerns about the unmet need for collective action, which is a problem across all our digital regulation. Digital is a complex area of law, it is technical to prove wrongdoing and hard for a non-expert to know which law is being broken: data, consumer, harms, IP, privacy and so on. We did not get an adequate redress system in the Online Safety Act and we will undoubtedly discuss it again during the passage of the DPDI Bill, so I ask the Minister whether he is open to discussing this in the round so that we can consider the need for the consumer to be supported across all the regimes. I am glad not to disappoint the noble Baroness, Lady Stowell, because at the same time I would like to revisit the idea of a standing Joint Committee on digital regulation to provide the parliamentary oversight of independent regulation which the pre-legislative committee suggested during the passage of the Online Safety Act.
Finally, I was going to mention the full merits appeal, but I thought the noble Lord, Lord Vaizey, spoke so beautifully on that, as did the noble Lord, Lord Lansley, and the noble Baroness, Lady Stowell, that I shall just associate myself with their words and say that I very much look forward to working with noble Lords across the House on the Bill and that I have learned a great deal during this debate.
Lord Mendoza (Con)
My Lords, it is a great joy to follow the outstanding words of the noble Baroness, Lady Kidron. I should declare that I am the chairman of Historic England and a member of the board of the Ashmolean Museum. Like everybody else, I support much of the intention of the Bill, but I shall confine myself narrowly to the topic that has been raised multiple times on the charities point by my noble friend Lord Vaizey.
I take my noble friend Lord Kamall’s point that perhaps not all charities operate their processes with the most benign of intentions, but I think we have to be careful about placing additional regulation on charities, which are already regulated by the Charity Commission. I want to talk about this in special relation to the heritage sector, because so many organisations in that sector use the annual subscription method to fund memberships—it is incredibly important. Looking at Clause 252, the noble and learned Lord, Lord Etherton, read out some of the definitions of what a subscription contract is, but it is clear that when charities sell such subscriptions and memberships they are providing goods and services. Sometimes it is free entry to places, sometimes it is parking, sometimes it is digital content or magazines, but they are supplying stuff.
They also look not unlike things that could be defined as subscription traps: they involve auto-renewal and people having to make a conscious effort to cancel, but they are an important part of the operating models of charities. For example—if I can add some colour— the noble Baroness, Lady Bennett of Manor Castle, mentioned her favourite charity, English Heritage. The English Heritage Trust was established just in 2016 under its new name and in its new incarnation as a subsidiary of Historic England. It is a charity, and it holds the licence to care for and look after the national heritage collection—our stuff, if you like: 400 sites, dozens of museums, 1 million objects, from Dover Castle up to Hadrian’s Wall and including Stonehenge. I looked at the accounts, and its revenue is £130 million a year. Of that, £48 million—almost 40%—is membership income. If you fiddle with that, it could be very significant. If it makes a surplus, it all goes back into the restoration, maintenance and improvement of the national heritage collection.
Many noble Lords have raised the issue of gift aid, and there is a threat to that. As we have heard, HMRC treats these kinds of subscriptions as donations. However, if there is a repayment option in a donation, it no longer qualifies for gift aid. Again, that is a really big number. For example, the National Trust’s revenue last year was £682 million, which is very significant. Of that, £276 million—again, about 40%—was memberships and, of that, £47 million related to gift aid, so it is a non- trivial part of the operating models of a lot of these heritage organisations. As my noble friend Lord Vaizey said, that applies to all sorts of others, such as Kew Gardens or my own museum, the Ashmolean.
I hope that we can find a way in Committee, subject to my noble friend Lord Kamall’s point, of either working on the definition of a subscription contract or, as the noble and learned Lord, Lord Etherton, said, adding charities to the “Excluded contracts” provisions in Clause 253 and Schedule 20. I hope my noble friend the Minister finds a way of coming back to us with an answer on this question, because it is so important to the operating model of so many heritage organisations, museums and theatres up and down the country. It is a non-trivial point.
Baroness Uddin (Non-Afl)
My Lords, it is an honour and a privilege to follow such distinguished speakers.
This digital era is regarded as a miracle century of advancement. The Covid lockdown fastened us all to Zoom, which connected us with not just our loved ones but the worlds of work and business. The large monopolies arrived at our e-doors expanding every conceivable service, including health and well-being, education and internet shopping, on a scale beyond any predicted forecast. In zillions of homes around the globe, a device became the best childminder for five minutes of peace. In turn, four and five year-olds became the best tutors for countless reluctant grandparents, who are now just as hooked on sharing every aspect of their thoughts and live events—including my 84 year-old mother. These online interactions raise many aspects of our consumer rights and protections: how do we regulate a global phenomenon that is in every environment that we occupy?
I do not possess the technical prowess or expertise of many other noble Lords, but I welcome the determination of this Bill to ensure scrutiny of the digital economy. My intervention is based on a desire to play my part in safeguarding consumer rights and protections. I suggest that the Government need to be ready for frequent reviews of this fast-evolving spectrum of platforms and businesses.
I acknowledge the immense contribution of the digital market revolution to our economy and simultaneously worry about its capacity to develop advanced weaponry, the power of which is playing out on our screens to devastating impact on human beings on the battlefield. It is imperative to set benchmarks and standards as well as codes of ethics in managing new digital products and services.
I have been enthralled by the potential of digital advancement for the public good, for example in advancing communication. There is no one better than the noble Lord, Lord Holmes, to explain some of its aspects, but the advent of technology-assisted learning has empowered so many people with disabilities—including my son—especially children and the elder generation. Such examples are minutiae among the millions of applications constantly being developed.
Lately, I have immersed myself in a number of workstreams arising from my role as co-chair of the All-Party Parliamentary Group on the Metaverse and Web 3.0. I have actively engaged with stakeholders, including developers leading various aspects of technology development such as cybersecurity, digital currency, AI and workforce development. I will therefore use this Second Reading in particular to raise matters of consumer protection and to highlight the need for widening access and diversity among those leading digital market innovation, as we must take action to remedy the deficit in the education and skills of our workforce.
I express my gratitude to former Minister Paul Scully, who worked tirelessly with a number of us in this arena to reach out to businesses and organisations that are not often on the radar of this Government or any other. He is much respected for his championing of a diverse workforce. I also thank Mr Charley Coleman from the Library for meeting me very late last night.
The Government propose that the Digital Markets, Competition and Consumers Bill will compel dominant digital platforms to trade fairly with the wider industry and consumers. The proposed new regime is to be overseen and enforced by the Competition and Markets Authority’s Digital Markets Unit, which the legislation gives the ability to ensure that people and businesses, regardless of their size, are treated fairly by tech firms. I assume that the result will be lower prices for online services and goods, giving more informed choices and control to consumers, but as it is—the Committee stage will no doubt improve some of the Bill’s shortcomings and strengthen it—this is difficult to comprehend, given that Google, Apple, Meta, Amazon and Microsoft continue to dominate the profit ledgers and dwarf any control over advertisements and content.
It is self-evident that what consumers view and experience is determined by often unknown practitioners, who design the contents and messaging that we are allowed and forced to view. Given these confined parameters of product development and services, how will the regulator determine fairness, prices, quality or equity—never mind social justice and safeguarding consumers? What assessment have the Government made of the number of small, independent entrepreneurs and how they can be assisted to compete with the likes of controlled monopolies such as Google, Meta and Amazon, to maintain fair competition and choice for consumers?
Regardless, we know that the appetite and demand for online services and goods has soared. Reportedly, the numbers of adults shopping online have increased from 53% to 87% within a year. This has inevitably resulted in an increased level of concern from individuals and SMEs, many of which have experienced unsafe online interactions and digital trading. This suggests that consumer rights and protection are adversely ineffective.
Equally significant is the content of advertising and news materials on big platforms such as Google and Meta, which are impossible for SMEs to contest. Hence the question of balance is difficult to evaluate unless there is an adequate level of financial resources, capacity of expertise and strong representation of consumer advocates within the regulatory structures. Concerns have been raised by some organisations, including bilingual organisations. The Public Interest News Foundation said:
“shrouding all commercial agreements struck under the shadow of the new regulatory framework in secrecy will leave small, resource-strapped independent publishers at a disadvantage compared with their large, corporate counterparts. This would create yet another competitive imbalance in the legislation that is designed to remedy an anti-competitive market”.
How do the Government intend to ensure that the authority given to the CMA will guarantee consumer protection and transparency in its pursuit of unfair and anti-competitive advantages held by leading monopolised companies, as stated?
Not all the news is terrible; it is good that the UK remains a destination of choice for investors and, as the Minister himself said, we can boast holding Europe’s largest number of unicorns. In addition, more music to my ears is the exponential growth of start-up investing, which demonstrates confidence in the UK economy, with the expectation that it will drive economic growth with an additional £41 billion by 2025.
There has been huge excitement about the potential of AI technology, robotics, the metaverse and Web 3.0, all of which cannot function in a silo and require clarity from the Government and overall strategic planning that incorporates new components of digital markets and technological evolution. As the noble Lord, Lord Fox, reminded us, big techs have already encircled the AI envelopes. I agree with noble Lords that, if we get this right, the UK can indeed lead a holistic approach to a digital platform and economy, no matter who is in Government.
I take this opportunity to say something about the potential economic impact of the metaverse—and I am not referring to the one-man band of Meta and its proposed construction of an online world, including depicting history as it sees fit. Here lies the problem in regulating the market of new products and content; for example, who decides what content is appropriate for public consumption, such as on colonisation, slavery, the Elgin marbles, or within the wide range of services being developed in the metaverse space? If we abide by the current status quo, how will any regulator position itself vis-à-vis the many contentions—history is littered with biased information—when it is clear that alternative smaller platforms do not have the massive resources to create or challenge the current trajectory of opinions and content, which seems to be supported by a handful of individuals who control media outlets and governing institutions? As a collective, they set out a specific narrative on any given subject, even if that account is deemed inaccurate and false from others’ points of view—held by vast numbers of consumers, for instance. Thus, big techs with large pockets and capacity will continue to mark out profits of billions while ignoring the need for more conscious and inclusive content and services. My point is that I fear that few changes may happen as a result of this legislation to address the issue on perceived bias.
The hope on the horizon is the new transition to Web 3.0 and the metaverse, with promises of personal data ownership and control; PWC, Goldman Sachs and others suggest that the economic benefits will yield multiple billions to many economies around the world. In fact, our APPG, which I have co-chaired for the past 18 months, has undertaken some work, led by Professor Fernandes of Durham University, who has examined the economic impact of metaverse-related technology by regions, in line with the Government’s levelling-up agenda, particularly cites the east of England as the powerhouse positioned to support the development and research of the metaverse and Web 3.0 technology.
Here too we need to guard against anticompetitive structures and, while encouraging innovation, there is an urgent need to empower all parts of our regions with emerging prospects of jobs and training in this sector. The APPG on Metaverse and Web 3.0 programmes included several evidence sessions with women leaders in this sector, academics and young people. Many highlighted the disparities in access to high-quality equipment and internet connectivity, which were stark. There are many parts of our country where families and young people simply cannot afford the benefit and advantages which new technology enables.
Data ownership is therefore a promise from emerging Web 3.0 technology; it is my view that it is likely to remain a panacea and a purview of the elite organisations and institutions. The case in point is access to NHS health data. I am not sure what percentage of the public actually access their own personal data, but we know that huge amounts of data are already in circulation, bought and sold between companies and corporate organisations, owned and transferred many times over. What difference will this legislation make to that data ownership?
Choices and informed decision-making, whether about goods, services or sharing data online, must be in the forefront of any legislation which intends to promote innovation while protecting consumers, and there are significant gaps in achieving proper safeguards for our citizens in relation to protecting data within the NHS and the welfare system. Informed consent must be an absolute priority, and in the event of any breaches of consumer trust, every user must have a clear pathway for seeking information, appealing decisions and, in the event of any negligence, reparation should be embedded.
Embedding consumer protection, structured penalties and redress within the digital economic landscape would instil community confidence that consumer rights are indeed the Government’s uppermost priority. The Bill must shift the power balance in favour of our citizens as consumers. Only then can this new frontier of the digital market provide absolute certainty of consumer protection.
Lord Sandhurst (Con)
My Lords, I welcome the aspiration of this Bill, in particular its stated intent to
“make provision relating to the protection of consumer rights and to confer further such rights; and for connected purposes”.
The focus of my speech today is narrow. It is addressed at only one topic and one clause, namely Clause 126. After Second Reading, it is my intention to move an amendment which goes further than the provisions of that clause, and I have given notice of that to the Government. This is about achieving effective access to the courts, which is of real importance to consumers and businesses, who have to fight large entities to recover just compensation. Let me explain.
As the Explanatory Notes tell us, Clause 126 was introduced by the Secretary of State to overturn with retrospective effect a decision of the Supreme Court handed down on 26 July of this year in cartel litigation known colloquially as PACCAR. The effect of the Supreme Court’s decision is to render unenforceable third-party litigation funding agreements, which I shall refer to hereafter as LFAs. Clause 126 makes a start at putting this right, but it should and could go further, which is what my amendment will be aimed at. The Supreme Court rendered unenforceable these third-party litigation funding agreements, which are entered into by claimants with third-party funders who finance litigation in return for the right to recover payment, often set as a percentage of the damages recovered. Such third-party funders have no say in the litigation and are ring-fenced from tainting its management. The lawyers are paid, win or lose, by the funder, and so can take a detached view when advising their clients.
Contrary to the views of most who practise in this area, and indeed the view of the Competition Appeal Tribunal—CAT—and later the Divisional Court, the Supreme Court in PACCAR held that if an LFA is to be enforceable by the funder, it must comply with the Damages-Based Agreements Regulations 2013. These regulations were introduced to regulate contingent fee agreements between claimants and their lawyers providing litigation services, not funding arrangements with third-party funders.
Unfortunately, it is quite clear now that almost all, if not all, current LFAs do not comply with the regulations. So, they are, and will be, unenforceable unless something is done about it. That is because the funders, and indeed most lawyers, considered that simply to provide funding was not to provide claims management services and did not bring them within the regulations. The Supreme Court, however, determined otherwise—for reasons I need not explain but would not challenge. That has serious ramifications for existing and future claims. The 2013 regulations were not drafted with LFAs in mind; lawyers were the target, not funders. So, it is hard, if not impossible, I am told, to structure compliant LFAs for use between a funder and client. This Bill offers an excellent opportunity to put things right, but so far it does not go anything like far enough.
Correction is necessary because an essential element, as we all know, of encouraging competition and a free market is to ensure that consumers, SMEs and other businesses have effective means to challenge and obtain redress from cartels and others that abuse dominant positions. That requires effective access to justice, particularly, but not always, in the CAT. Indeed, on 3 November 2014, the then Parliamentary Under-Secretary of State, my noble friend Lady Neville-Rolfe, said in this House in Committee on the Consumer Rights Bill something that demonstrates that the Government favoured LFAs over damages-based agreements. She said that
“there is a need for claimants to have the option of accessing third-party funding so as to allow those who do not have a large reserve of funds or those who cannot persuade a law firm to act pro bono to be able to bring a collective action case in order to ensure redress for consumers. Blocking access to such funding would result in a collective actions regime that is less effective”.
She added:
“Restricting finance could also create a regime which was only accessible to large businesses. This would weaken private enforcement in competition law, which is of course not the Government’s wish or intention”.—[Official Report, 3/11/14; col. GC583.]
That was what was said in 2014, and that is what is clearly stated in the Long Title to this Bill. The Government supported the use of such litigation funding agreements in the sort of litigation that we are concerned with in this Bill.
Competition law cases such as Mastercard or the claims against Google are obvious examples. The group actions in such cases are plainly necessary if consumers are to have effective access to justice and giant organisations are to be made to behave themselves. But group actions also have to be brought in the High Court, not just in the CAT. They have to be brought in respect of matters in the High Court which do not meet the criteria for an action in the CAT. These are necessary for individuals to obtain redress where a powerful entity has caused damage to those who, again, cannot individually contemplate litigation. A claim against a car company cheating on diesel emissions is a classic example, but it need not be the only example. Claimants’ rights as consumers are plainly involved. Group litigation is their only practical means and they have to be funded by third-party funders.
Bringing this speech to a conclusion: the key issue is that the Supreme Court’s PACCAR ruling affects LFAs in all courts, not just in the CAT, and not just, as this Clause 126 is designed to address, in so-called opt-out cases. You need it for opt-in cases as well.
In fact, such funded cases throughout the court system, particularly in the High Court, make up the majority of cases that litigation funding supports. I am told that CAT cases are just the tip of the iceberg. While the current Clause 126 goes a little way, it will put matters right for so-called opt-out cases, but will not help in opt-in cases, nor in conventional bi-party litigation—one large against one small. The small company fighting Apple will, effectively, not be able to go to a funder. Worse still, in the High Court—outside the CAT—in, for example, drug damages litigation, or the diesel exhaust emissions litigation to which I referred, the current Clause 126 will achieve nothing. Claimants will have no effective access to litigation funding agreements and many cases already in the pipeline face considerable problems.
It is necessary, therefore, to restore what I would say was the Government’s original 2013-14 intention, which was for litigation funding agreements not to be subject to the damages-based agreement regulations.
Clause 126 needs to be redrafted and expanded or it will not meet these important issues. This is critical to provide certainty and effective access to justice, and to protect and expand consumer rights: the Bill’s stated aim. I have provided a draft to the Minister and will be happy to engage with him and his team.
Lord Vaux of Harrowden (CB)
My Lords, it is always good to be able to start a speech with the words, “This is a good Bill”. I am not the only person to have used those words. They have been used all around the Chamber; it is an unusual situation and very welcome. It is also getting to the point of the evening where it is quite difficult to say anything that has not been said several times before. I am going to try to avoid repeating what has been said. I may not manage that, partly because, as the Minister will have spotted, there is a high-level of consistency of theme emerging on all sides of the Chamber.
The various ways in which the large tech platforms can stifle competition have been well described by many noble Lords, including the Minister at the outset. Part 1 of the Bill empowers the Digital Markets Unit of the CMA to tackle the monopolistic behaviour of companies with strategic market status with a quicker, more flexible, tailored approach and a more efficient regime. It should make it easier for new, innovative companies to enter the market on a fair basis—so far, so excellent. It is a shame, then, that the Government have chosen to amend their own Bill in ways that may water down the effectiveness of Part 1. This has been alluded to by noble Lords all around the Chamber and I am sure that we will have a lot of discussions on those matters as the Bill progresses through its stages—but I will very quickly touch on the matters that worry me most.
First, it seems entirely wrong, and to conflict badly with the CMA’s independence, that any guidance issued by the CMA regarding the exercise of its functions relating to digital markets must first be approved by the Secretary of State. Worse, there is no timeframe or process for obtaining such approval; I think that is inappropriate. I can see a case for a defined period of consultation, but approval goes too far. Why did the Government decide that was required?
Secondly, again as we have heard several times, the Government have potentially weakened the ability of the DMU and CMA to implement and enforce rulings quickly by introducing a countervailing benefits exemption, proportionality restrictions and watering down the judicial review appeal process. The danger here is that these, individually or together, may provide an anti-competitive SMS entity with more ways to bog down the process in appeals and so delay implementation of any enforcement. In such a fast-moving market, speed and agility are critical; anything that delays the enforcement of a ruling could be the difference between a new entrant’s success or failure. We are talking about some of the world’s biggest companies here, with extremely deep legal pockets.
Part 4 of the Bill, which covers consumer protections, introduces some really welcome additions to consumer protection law, especially around subscription contracts. But they do not go far enough and there are some important omissions in what the Government have proposed. Others have pointed out the omission from the Bill of fake reviews. This is an important area and I look forward to hearing from the Minister what the Government are planning—I know they are consulting, but I would like to understand what they are planning on doing in respect of fake reviews.
The other area that the Bill does not tackle is the more difficult question of drip pricing. This is perhaps a more nuanced area. There are genuine benefits to consumers from disaggregating pricing of core and non-essential elements of a service, such as an airline ticket: those who are prepared to travel without an assigned seat, with no luggage and so on, clearly benefit, but that is different for a parent and child, for example, for whom sitting together is essential. Having said that, I can think of a number of occasions when I would have paid good money to sit at the other end of the aeroplane from my children. I hope Ryanair is not listening; that might give it ideas.
There are those companies that push drip pricing too far by hiding unavoidable charges, fees for essential elements, commissions and so on until the very end of the process. That is clearly unacceptable. A well-known train booking company does this, as do event ticket sellers: you get to the end of the process, you are bought into going to see that particular concert, it is too late to turn around, and suddenly they hit you with all the fees and whatever at the end. It is time that real action is taken to ensure fairness and transparency, and this Bill seems the ideal opportunity for that.
On subscription traps, the Bill introduces some welcome changes that will help consumers, but I do not think they go far enough. That said, I have some issues with the cooling-off period; I am not sure that is necessarily the best way of doing it. As a point of principle, it cannot be right for businesses to make their money by deliberately designing subscription arrangements that rely on forgetfulness or making it difficult to cancel. For subscriptions that involve a free or reduced period up front, the contract should end by default unless it is actively renewed at the end of that initial period. It is too easy at the moment to join a free trial and then find yourself locked in because you forget to cancel on the due date. That will probably remain true even with the reminders the Bill will introduce.
It is often too difficult to find the end date of a subscription. For example, I have been looking at my home broadband contract recently. I ended up having to ring the company because I could not find the end date anywhere in any of the account details. The Bill will require a reminder as the end date nears, which is welcome, but it is often helpful to be able to find the date well in advance—for example, as in the case of my broadband, when a new and better service becomes available and you want to know when you will be able to transfer. Why not insist that the end date is included clearly on every invoice or other piece of correspondence? That would not add any great burden—companies seem to be able to do it easily enough if they are pushing you to upgrade—but it would make it a lot easier for the consumer to find out, at any time, when the contract will terminate.
Another pernicious trend seems to be emerging, especially among telecom providers, for longer, two-year contracts. That may be fine, but there is often a very small print price kicker, where periodically, often on a fixed date such as 31 March, the price rises by significantly more than inflation. That can happen within a short period of entering the contract—for example, if you sign up in March you can be hit by that price kicker within a couple of weeks of signing the contract. These price hikes are often hidden with an asterisk and a footnote in small print. I looked at my provider this morning. Down at the very bottom of the page it says, “Legal stuff”. In there, there is a sentence that says it will go up by 3.9% over inflation on 31 March. That is not acceptable.
Finally on subscriptions, it cannot be right that companies should be able to continue to take subscriptions for services that are clearly not being used after the initial period has come to an end. I suggest that, if a service has not been used for three months after the initial contract period has ended, it should be terminated automatically, unless the subscriber actively confirms that it should continue. It is not acceptable to rely on the fact that the subscriber has forgotten and said nothing if there is no use of the service.
At the risk of being predictable, I will put in a word on fraud, which I do not suppose will surprise anybody. One of the biggest risks that consumers face at the moment is online and digital scams. The majority of these arise from the telecoms industry or the online services industry, particularly where scammers use these organisations’ services to make contact and create the scam. This is a missed opportunity in the Bill, and I hope it is one we will come back to.
Overall, this is a good Bill, but there are areas where we can improve it. I look forward to working with everyone to do so.
Baroness Harding of Winscombe (Con)
My Lords, it is a privilege to follow the noble Lord, Lord Vaux, and his really detailed and insightful analysis of my old industry—telecoms—among other things. I am sure my noble friend the Minister will be pleased that I rise, as the last Back-Bench speaker, to support the Bill.
I should declare my interest. I am never quite sure when I should and should not declare my relationship with my husband in the other place, but as he was so fully quoted in the Lords briefing, I feel I should reference that my husband tends to lead on competition issues in our family and I lead on digital things, so this Bill brings us together.
I strongly support the Bill. As many noble Lords have said, it has the potential to really drive innovation and investment, and to bring immediate consumer benefits. We should all warmly support it. I am also pleased to see it finally here.
I will speak primarily and very briefly on Part 1 and the competition elements. Large companies the world over try to persuade us that investment and competition are a trade-off. Time and again we have seen that that is not the case. I come to this with experience of running a challenger telco in an ex ante competition regime. Large incumbents rarely create real innovation. They spend a huge amount of money on it, and they are very proud of telling us how much they spend, but big leaps of innovation rarely come from the incumbents. That is the first thing that is true of nearly all these markets.
The second is that they spend even more money protecting their oligopoly or monopoly. I think it was Niklas Zennström, one of the founders of Skype, who originally said something like, “The thing about monopolies is that they’re like children. If you don’t have any you don’t really understand what the fuss is all about, but once you have one you will do everything in your power to protect them”. We should have no illusions: that is what big tech is doing during the passage of this Bill. It is not wicked and evil; it is entirely rational. If you have an oligopoly or a monopoly, you will protect it to the end.
Digital is no different from every other market where these forces are at play. We have exactly these two forces. Innovation is not coming from the incumbents. OpenAI is not an incumbent. Many noble Lords referenced Google, the original innovator, against the incumbent, Microsoft. We should not allow ourselves to be deceived by the big sums of money that incumbents spend on innovation to believe that the digital innovation will come from them. Equally, we should recognise how much power they will bring to bear to try to protect their existing monopolies. The noble Lords, Lord Fox and Lord Knight, gave such erudite descriptions of the theory and practice of what is happening that I will not repeat them, except to say that it is a pleasure to be back working with them together, as we all did on the Online Safety Act.
Digital is different, though, in a couple of ways. First, it tends to network monopolies in an extraordinary way, partly because the companies in it that succeed make so much money. The leveraging principle is alive and well as they acquire every little start-up around them to leverage the monopoly they already have. The second thing that is very different from other markets with network monopolies is the speed at which these things happen. The third is how interconnected and complex the digital architecture is.
All this means that it is really important that we understand how the package of measures in this Bill will work. We will have to descend into the fine, technical detail if we are to ensure we really do balance these forces that are against real innovation and real competition. As my noble friend Lady Stowell said, I feel that the Government got the balance right in the original Bill—that was the Goldilocks spot. I am sad that virtually every speaker has said the same thing: that we have moved slightly off the Goldilocks spot, and that every one of the changes brought in on Report in the other place moved the Bill towards the power of big tech and made it just a little harder for the regulator to do its job.
I fear I will list the same concerns as many other noble Lords: the full merits appeal, the move for fines, the Secretary of State’s approval of all guidance, the removal of “indispensable” from Clause 29(2)(c), the leveraging principles, the benefits for consumers, the wording in Clause 19, and the lack of third-party consultation rights, which means that the little guy does not get a fair shout in a JR process. We will have to look at all those in considerable detail as we go through Committee.
I shall briefly speak on the first one, the full merits appeal for fines. I have run a little business in a full judicial review world, in a judicial review-plus world, and in a full merits world. In fact, I had a great row with my regulatory director at TalkTalk when Ofcom was consulting on moving away from full merits to the JR standard. The regulatory team at TalkTalk thought that it might win a full merits appeal, because it had in the past won one in five years, so it did not like the idea of giving that up. My chairman at the time and I had to overrule them and say, “We might be able to fight one of those battles in the next five years, but BT will fight every single one—maybe 20 a year. Our pockets aren’t deep enough; we just don’t have the money”.
It is hugely tempting to believe that you will get to a better answer by full merits, but I fear my experience is that you do not. You tie everything up, so whoever benefits from things going slowly wins, whoever has the deepest pockets wins, and whoever is willing to take the risk to keep appealing again and again wins. That shifts the regulator’s risk appetite, because it does not have unlimited pockets, it does not have unlimited time and it cannot afford to keep losing. That means that the decisions it takes and the actions it chooses even to begin are reduced, simply because of the scale of the appeals risk. I really do not understand why tech companies, alone among network monopoly owners, are at risk of having their fines calculated incorrectly, in comparison with telcos, water companies and electricity businesses, all of which live in an ex ante regulatory regime with a JR standard for fines. I would be really keen to understand why we think tech exceptionalism needs to be added back into the Bill.
I am conscious of the time and will not take much longer. I pull us right back to look at the competition elements of the Bill in the round, because they are really important. There is a temptation this evening, for the small number of us who appear for all these debates on digital: as the noble Baroness, Lady Kidron, again said so eloquently, the danger is that people do not realise how important this is. This Bill could be every bit as important as the original anti-trust legislation in the US as the 19th century turned into the 20th. It is that important that we get this right.
I think we are quite well suited to going through the detail. Rather than ask my noble friend to respond on specifics today, I just ask him to reassure us that he will enter Committee in the same spirit in which many of us worked together on the Online Safety Act: recognising that we are trying to find that Goldilocks spot, and that this will require us to understand not just each individual issue but how the issues interrelate. The danger is that the pressures on large tech companies to influence and weaken the regime will enable them to play the game against us rather too well. They just chip away on one or two issues and, before you know it, you do not have a landmark piece of competition regulation; you have something that none of us can remember from the 19th century, when monopolists were doing rather well, before anti-trust legislation came in.
That is why I think this really matters, and very briefly I just add my words to the concerns about the subscription clauses. As the noble Lord, Lord Vaux, said, it is important that we protect consumers in this space. It looks like we have got something wrong on gift aid, judging by the number of people who have been emailing all of us. I think we have also got something wrong in the way that app developers work with the app stores. The app stores control subscriptions, and there is a real risk that once again we are putting the responsibility on the app developers, not recognising that the consumer needs to be able to cancel the actual subscription that Apple controls. We will need to look at those in considerable detail, otherwise we will have all these brilliant intentions but the legislation will not deliver what people need.
Lord Clement-Jones (LD)
My Lords, it is a great pleasure, as it always seemed to be on the then Online Safety Bill, to follow the noble Baroness, Lady Harding, especially with her great advocacy of the power of competition. That passionate belief in competition is something that unites us all around the House today. First, I declare an interest as a consultant to DLA Piper and as chair of the Trust Alliance Group, which runs the Energy Ombudsman service.
I thank the Minister—the noble Lord, Lord Offord—for what I thought was a comprehensive introduction that really set the scene for the Bill. As my noble friend said, we very much welcome the Bill, broadly. It is an overdue offspring of the Furman review and, along with so many noble Lords around the House, he gave very cogent reasons, given the dominance that big tech has and the inadequate powers that our competition regulators have had to tackle them. It is absolutely clear around the House that there is great appetite for improving the Bill. I have knocked around this House for a few years, and I have never heard such a measure of agreement at Second Reading.
We seem to have repeated ourselves, but I say to the noble Lord, Lord Vaux, that repetition is good. I am sure that in the Minister’s notebook he just has a list saying “agree, agree, agree” as we have gone through the Bill. I very much hope that he will follow the example that both he and the noble Lord, Lord Parkinson, demonstrated on the then Online Safety Bill—as the noble Baronesses, Lady Kidron and Lady Harding, said—and will engage across and around the Chamber with all those intervening today, so that we really can improve the Bill.
It was very important that the noble Baroness, Lady Stowell, reminded us that it is not just size that matters: we must consider behaviour, dominance, market failure and market power. We need to hold on to that. We need new, flexible pro-competition powers and the ability to act ex ante and on an interim basis—those are crucial powers for the CMA. As we have heard from all round the House, the digital landscape, whether it is app stores, cloud services or more, is dominated by the power of certain big tech companies, particularly in AI, with massive expenditure on compute power, advanced semiconductors, large datasets and the scarce technology skills forming a major barrier to entry where the development of generative AI is concerned. As the noble Lord, Lord Knight, indicated, we can already see the future coming towards us.
In that context, I very much welcome Ofcom’s decision to refer the hyperscalers in cloud services for an investigation by the CMA. The CMA and the DMU have the capability to deliver the Bill’s aims. We were reminded by the noble Lords, Lord Tyrie and Lord Lansley, about the importance of the ability to implement the new legislative powers. Unlike some other commentators, we believe, as my noble friend said, that the CMA played a positively useful role in the Activision Blizzard-Microsoft merger. As a number of noble Lords, including the noble Lords, Lord Holmes, Lord Kamall and Lord Tyrie, and the noble Baroness, Lady Stowell, emphasised, it is crucial that the CMA needs to be independent of government. All around the House, there was comment about the new powers of the Secretary of State in terms of guidance. The accountability to Parliament will also be crucial, and that was again a theme that came forward. We heard about the Joint Committee proposals made by both the committee of the noble Baroness, Lady Stowell, and the Joint Committee on the Online Safety Bill.
We need to ensure that that scrutiny is there and, as the Communications and Digital Committee also said, that the CMA’s DMU is well resourced and communicates its priorities, work programmes and decisions regularly to external stakeholders and Parliament.
The common theme across this debate—to mention individual noble Lords, I would have to mention almost every speaker—has been that the Bill must not be watered down. In many ways, that means going back to the original form of the Bill before it hit Report in the Commons. We certainly very much support that approach, whether it is to do with the merits approach to penalties, the explicit introduction of proportionality or the question of deleting the indispensability test in the countervailing benefits provisions. We believe that, quite apart from coming back on the amendments from Report, the Bill could be further strengthened in a number of respects.
In the light of the recent Open Markets Institute report, we should be asking whether we are going far enough in limiting the power of big tech. In particular, as regards the countervailing benefits exemption, as my noble friend said, using the argument of countervailing benefits—even if we went back to the definition from Report—must not be used by big tech as a major loophole to avoid regulatory action. It is clear that many noble Lords believe, especially in the light of those amendments, that the current countervailing benefits exemption provides SMS firms with too much room to evade conduct requirements.
The key thing that unites us is the fact that, even though we must act in consumers’ interests, this is not about short-term consumer welfare but longer-term consumers’ interests; a number of noble Lords from across the House have made that really important distinction.
We believe that there should be pre-notification if a platform intends to rely on this exemption. The scope of the exemption should also be significantly curtailed to prevent its abuse, in particular by providing an exhaustive list of the types of countervailing benefits that SMS firms are able to claim. We would go further in limiting the way in which the exemption operates.
On strategic market status, one of the main strengths of the Bill is its flexible approach. However, the current five-year period does not account for dynamic digital markets that will not have evidence of the position in the market in five years’ time. We believe that the Bill should be amended so that substantial and entrenched market power is mainly based on past data rather than a forward-looking assessment, and that the latter is restricted to a two-year assessment period. The consultation aspect of this was also raised; there should be much greater rights on the consultation of businesses that are not of strategic market status under the Bill.
A number of noble Lords recognised the need for speed. It is not just a question of making sure that the CMA has the necessary powers; it must be able to move quickly. We believe that the CMA should be given the legal power to secure injunctions under the High Court timetable, enabling it to stop anti-competitive activities in days. This would be in addition to the CMA’s current powers.
We have heard from across the House, including from the noble Viscount, Lord Colville, about the final offer mechanism affecting the news media. We believe that a straightforward levy on big tech platforms, redistributed to smaller journalism enterprises, would be a far more equitable approach. However, as a number of noble Lords have mentioned, we need to consider in the context of the Bill the adoption by the CMA of the equivalent to Ofcom’s duty in the Communications Act 2003
“to further the interests of citizens”,
so that it must consider the importance of an informed democracy and a plural media when considering its remedies.
As my noble friend and many other noble Lords said—including the noble Baroness, Lady Bennett, the noble Viscount, Lord Colville, and the noble Lords, Lord Lansley and Lord Black—the Bill needs to make it clear that platforms need to pay properly and fairly for content, on benchmarked terms and with reference to value for end-users. Indeed, we believe that they must seek permission for the content that they use. As we heard from a number of noble Lords, that is becoming particularly important as regards the large language models currently being developed.
We also believe it is crucial that smaller publishers are not frozen out or left with small change while the highly profitable large publishers scoop the pool. I hope that we will deal with the Daily Telegraph ownership question and the mergers regime in the Enterprise Act as we go forward into Committee, to make sure that the accumulation of social media platforms is assessed beyond the purely economic perspective. The Enterprise Act powers should be updated to allow the Secretary of State to issue a public interest notice seeking Ofcom’s advice on digital media mergers, as well as newspapers, and at the lower thresholds proposed by this Bill.
There were a number of questions related to leveraging. We want to make sure that we have the right approach to that. The Bill does not seem to be drafted properly in allowing the CMA to prevent SMS firms using their dominance in designated activities to increase their power in non-designated activities. We want to kick the tyres on that.
Of course, there are a great many consumer protection issues here, which a number of noble Lords raised. They include fake reviews and the need for collective action, as was mentioned by the noble and learned Lord, Lord Etherton, and the noble Lord, Lord Sandhurst. It is important that we allow collective action not just on competition rights but further, through consumer claims, data abuse claims and so on. We should cap the costs for claimants in the Competition Appeal Tribunal. I heard what the noble Lord, Lord Sandhurst, had to say on LFAs, which is highly relevant as well. These issues also include misleading packaging.
Nearly every speaker mentioned subscriptions. I do not think that I need to point out to the Minister the sheer unanimity on this issue. We need to get this right because there is clearly support across the House for making sure that we get the provisions right while protecting the income of charities.
There is a whole host of other issues that we will no doubt discuss in Committee: mid-contract price rises, drip pricing, ticket touting, online scams and reforming ADR. We want to see this Bill and the new competition and consumer powers make a real difference. However, we believe that we can do this only with some key changes being made to the Bill, which are clearly common ground between us all, as we have debated the Bill today. We look forward to the Committee proceedings next year—I can say that now—which will, I hope, be very productive, if both Ministers will it so.
Baroness Jones of Whitchurch (Lab)
My Lords, we have had an excellent debate, with enormous expertise and some powerful themes emerging from around the Chamber. I look forward to exploring them in more detail when we roll up our sleeves and focus on the specifics in Committee. However, it is already clear that we start from a common belief that the essence of the Bill is important and necessary.
I will not repeat the points well made by my noble friend Lord Bassam about the history of delays and distraction. We could have had this Bill on the statute book much sooner, but we have to deal with the reality of where we are now. As noble Lords have said, the digital world is developing and expanding at an incredible pace and the dominance of the major players continues to rise. As a result, consumers and businesses feel increasingly powerless in the online market. The Bill has an important role to play in resetting the balance, so that we can concentrate on the undoubted benefits that can accrue from greater innovation, access and competition in the sector.
Of course, we still have an important role to play in scrutinising the Bill, but our job has been made so much more difficult by the last-minute amendments tabled by the Government. I share the concerns that many noble Lords have raised during the debate; the warm glow of agreement identified by the noble Baroness, Lady Kidron, has united us, but not in quite the way that the ministerial team hoped. There are considerable concerns about the latest amendments tabled.
Evidence was given during Committee in the Commons from a wide range of stakeholders. They seemed broadly happy with the basic architecture of the procedures, conduct requirements and appeals systems set out in the original Bill. The main concern raised, if there was one, was the length of time it would take to complete the designation of strategic market status, including appeals. I listened carefully to the attempt of the noble Lord, Lord Offord, to provide reassurance on the changes but, like many noble Lords, I was not convinced as to why the Government felt they were really necessary.
For example, we share the concern of a number of noble Lords about the late amendment to switch appeals against CMA penalty decisions from a judicial review to a merits-based system. This is widely perceived as an attempt to water down the Bill, which opens the door to lengthy wrangling and long delays in finally resolving issues. This goes against the overriding desire for these cases to be heard and resolved in a timely manner.
When asked about this issue in the Commons Committee hearing back in June, the CEO of the CMA made it clear that the authority wanted the JR standard to be applied to its decisions at appeal. She said:
“It is critical that the CMA faces effective judicial scrutiny for our work. That should go on the record. We think that the JR standard achieves that”.
She went on to say that her experience of merits appeals was that they result “in very protracted litigation”, making it
“a lot harder to reach constructive, collaborative outcomes”
because
“all eyes are on that litigation process”.—[Official Report, Commons, Digital Markets, Competition and Consumers Bill Committee, 13/06/23; cols. 7-8.]
We agree with this analysis and, like many noble Lords, I will want to explore further in Committee why the Government felt that this change was necessary.
We also share noble Lords’ concerns about the watering down of the powers of the CMA through the countervailing benefits exemption, which would allow SMS-designated firms to argue that the benefits of their market domination outweigh the damage. This has been further weakened by the deliberate fudging of the definitions of consumer benefit. Similarly, the Government’s late amendment requiring the CMA to apply a proportionality test on conduct requirements gives a whole new raft of legal loopholes, which will no doubt, as we have heard in the debate, be exploited mercilessly by the vast legal companies employed to protect the big tech firms.
We do not believe that these new amendments are necessary. They will drag down the work of the CMA, undermine its independence and tie it up in endless court battles. We want to return to all these issues in Committee.
In the Commons, our Front Bench also tabled an important amendment to improve the consultation rights of challenger firms when the CMA is investigating the strategic market status of big tech firms. As we know, challenger firms are those that are being squeezed out of the market by the anti-competitive actions of those that currently dominate the market. We have heard numerous examples of these behaviours, such as restrictions on booksellers’ access to Amazon listings, the prohibitively high charges for apps developers to appear on Apple products and the domination of Google searches by those prepared to pay for the space. The challenger firms deserve the right to be formally consulted when a CMA investigation is taking place and to give evidence in any subsequent hearings. I hope we can work with the Government to be assured that these protections will be in place.
A great many noble Lords have eloquently expressed the need for greater protection for intellectual property and content creators, which needs to be at the heart of the Bill. It is crucial that we use the Bill to defend our news media, whose content is routinely absorbed by digital platforms without compensation.
Noble Lords made a powerful case for tackling platforms that take advertising revenue without investing in the original content. Similarly, artists, publishers and broadcasters need to be paid properly and fairly. We believe that an interest of citizens duty could widen the remedies available in the arbitration process and open the door to collective actions on cases such as this. We also want to ensure that the total value of repeat visits to online sites is properly captured. This is hugely important for the health of our creative economy and our access to informed journalism. We want to work with the Government and colleagues to get this regime right, and we want to explore my noble friend Lord Knight’s point about who owns our personal data and whether we can get it back once it has been published. We very much support the argument of the noble Lord, Lord Holmes, and the noble Baroness, Lady Uddin, that it is essential that accessibility is designed into all online platforms.
I am pleased that the noble and learned Lord, Lord Etherton, raised the need to reform alternative dispute resolution and the right of redress. We welcome the strengthening of ADR provisions, but we believe that it could have gone further. ADR has the capacity to be a simple, low-cost way of consumers raising complaints, and having an independent ruling by an ombudsman and a speedy form of redress. Unfortunately, the ADR landscape continues to be muddled and confused, with multiple providers, lack of clear signposting and refusenik companies that will not participate in the schemes. We believe that there is a strong case for single, mandatory ADR providers to operate in each sector, and we want to explore how this can be achieved in Committee.
The noble Baroness, Lady Hayman, will be pleased to hear that we also wish to explore whether the right to redress should include the right to repair for electronic equipment, with spare parts easily available, as happens in many other jurisdictions.
A number of specific consumer rights issues were tabled in the Commons to which we will want to return. First, subscription traps have been raised by many noble Lords and we do not feel that the current wording in the Bill goes far enough. This is a widespread problem, with Citizens Advice estimating that some £300 million a year is spent on unwanted subscriptions, often by those who can least afford them and with limited digital skills. While we were all tempted by the suggestion of the noble Viscount, Lord Colville, of a “terminate now” button, having listened to the debate, I have realised how much more complicated this is. Until now, we have argued for the provision to opt into, rather than opt out of, renewals. There is still a lot to be said for that principle, but we also need to recognise, as we heard today, that this cannot be a one-size-fits-all regime. Charity subscriptions and Gift Aid are some examples and noble Lords have made powerful cases for others.
Secondly, one of the most pernicious anti-competitive activities in the digital marketplace is fake reviews. They are damaging to huge numbers of legitimate businesses in the UK, big and small. The Government have made the commitment to deal with hosting fake reviews at a later date, via Schedule 18. We do not believe that it is necessary to wait for action on this issue and we will be tabling amendments to go into the Bill.
Thirdly and similarly, the Government have recognised that drip pricing is an issue but have not explicitly included it as a banned practice in the Bill. Drip pricing is where consumers are tempted into an online purchase by low advertised prices, only to find that the final price they have to pay is hugely inflated. We have all fallen victim to this, with some notable sinners such as the airline industry, which daily seems to find new and novel ways to increase total ticket prices. The CMA reported that enforcement against drip pricing is restricted by a lack of an explicit ban, so we want to address this in the Bill.
Fourthly, I pay tribute to the work of my Commons colleague, Sharon Hodgson, on ticket touting in the primary and secondary online markets. It is proving more and more difficult to pay the standard advertised price for sport, concert and festival tickets. The current legislation on this is not proving fit for purpose. We need stronger laws to tackle illegal ticket resale. The CMA gave evidence that, when it tried to take Viagogo to court, it came up with inherent weaknesses in the existing consumer protection toolkit. We will want to address this in Committee.
Finally, the noble Baroness, Lady Bennett, and my noble friend Lady Ritchie will be pleased to hear that we want to address the increasing propensity of firms to make extravagant claims about their environmental credentials through greenwashing. We will want to explore a specific prohibition in Schedule 19 on claims about environmental benefits or sustainable products which are not based on evidence. We will also want to explore whether consumers misled on this basis could have the right of redress for goods and services which knowingly do not meet the suppliers’ claims.
I am aware that I have not been able to cover all the issues, and I do not want to test the patience of the House any further. As we have heard, many of these issues have cross-party support, and we hope the Government might favour our proposals, as we believe they will improve the Bill. We want to get the Bill on to the statute book as soon as practical, as it is long overdue. With this in mind, I underscore to the Government that any further attempts to water down the Bill will be met with huge resistance, so I hope the Minister can confirm that the Government have no further plans to do this. I look forward to his response.
The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
My Lords, I thank all today’s speakers for their eloquent, clear and powerful contributions to what has been a fascinating debate of the very highest quality. In particular, a number of speakers referred back to the Online Safety Act debates and variants of the warm glow. I am delighted to participate in any such approach to the Bill, as is my noble friend Lord Offord. I welcome very much the support shown across the House for this legislation, with the caveats gone into by many speakers. As my noble friend said in his opening speech, this is an important Bill which will drive innovation, grow the economy and deliver better outcomes for consumers. The debate we have engaged in is demonstrative of noble Lords’ desire to ensure that digital markets are competitive and work well, and that consumers are protected from the potential harms posed by anti-competitive and unscrupulous practices.
I will respond to the questions raised, cutting across a number of issues and speakers as I go. First, my noble friend Lady Stowell and the noble Lords, Lord Bassam and Lord Clement-Jones, asked, quite rightly, whether we are watering down the Bill. Let me categorically say that that is absolutely not the intention. The amendments at Commons Report brought further clarity, and they will ensure that the DMU’s interventions are proportionate and drive the best possible outcome for consumers. I look forward to discussing this further during the Bill’s passage.
I turn to the appeals standard in the digital markets regime, which was raised by noble Lords across the House, including my noble friends Lord Vaizey, Lord Kamall, Lady Stowell, Lady Harding, Lord Black and Lord Lansley, the noble Lords, Lord Bassam and Lord Clement-Jones, and the noble Baronesses, Lady Kidron, Lady Ritchie and Lady Jones. We have considered strong and differing views about appeals from a range of stakeholders. Judicial review remains the appropriate standard for the majority of decisions in the regime, and we have maintained that for appeals of regulatory decisions, with additional clarification on the need for the Digital Markets Unit to act proportionately. Firms would already have been able to challenge decisions to impose interventions on the basis that there were disproportionate interferences with their rights under the European Convention on Human Rights. This amendment allows that challenge to happen under usual JR principles. Moving appeals on penalties to full merits brings the regime into line with the Enterprise Act 2002. It will mean that, once a breach has been found, a firm could argue that the imposition of a penalty was not appropriate, the level of it was not suitable, or the date by which it should be paid needs to be changed.
I turn to the countervailing benefits exemption, which was raised by a number of noble Lords, including my noble friends Lady Harding, Lord Vaizey, Lord Lansley, Lord Kamall, Lord Black, Lady Stowell, the noble Lords, Lord Bassam, Lord Clement-Jones and Lord Fox, the noble Viscount, Lord Colville, and the noble Baronesses, Lady Ritchie and Lady Kidron—I see the point about themes. I reassure all noble Lords that this is a further safeguard in the legislation to ensure that consumer benefits which might have been unknown when conduct requirements were first introduced can be recognised. The noble Lord, Lord Bassam, asked for an example of how this could work in practice. If an SMS firm bans an application on its platform, it might breach a conduct requirement not to apply discriminatory terms. The firm could claim that the ban was to protect user security and privacy. Thanks to the exemption’s high bar, the DMU would close its investigation only if the SMS firm provided sufficient evidence, such as an independent report from security experts. Firms will not be able to use the exemption to delay enforcement. Assessment of whether the exemption applies will take place during the enforcement investigation, which has a deadline of six months.
The noble Lords, Lord Fox and Lord Bassam, and my noble friends Lord Vaizey, Lady Harding and Lord Kamall asked about the change to the indispensability wording. The change of the language is to clarify the exemption; it maintains the same high threshold and makes sure that consumers get the best outcomes possible, whether through the benefits provided or through more competitive markets.
I thank the noble Lord, Lord Tyrie, for his detailed analysis of the work of the CMA and his continued support for the legislation. He raised the matter of proper scrutiny of the CMA. I very much agree with him on the importance of this and look forward to continuing that conversation.
The noble Viscount, Lord Colville, the noble Lord, Lord Clement-Jones, and my noble friends Lady Stowell and Lord Kamall sought reassurance that requiring the Secretary of State to approve guidance would not cause delays. The Government are committed to ensuring that approval is given in good time, in order for the regime to be in place as soon as possible. Introducing a statutory timeline for this process would limit the Government’s ability to work collaboratively with the CMA.
My noble friend Lord Holmes and the noble Lord, Lord Vaux, raised the importance of the independence of the regulator, and the noble Baroness, Lady Kidron, spoke about the risk of regulatory capture. I agree that this is an absolutely vital issue. The noble Lord, Lord Bassam, and my noble friend Lord Holmes asked about the resourcing and tools of the DMU. I reassure them that the Government have full confidence in the DMU’s resourcing. There are currently around 70 people working in DMU roles, and we expect the DMU to be around 200 people in steady state.
A number of noble Lords, including my noble friend Lord Black, the noble Viscount, Lord Colville, the noble Lord, Lord Clement-Jones, and the noble Baronesses, Lady Kidron, Lady Bennett, Lady Jones and Lady Ritchie, raised the importance of support for the press sector, with which I agree. The digital markets regime aims to address the far-reaching power of the biggest tech firms and help rebalance the relationship between those platforms and other businesses, including publishers. This will make an important contribution to the sustainability of the press, which is so important in all aspects of our lives.
The noble Viscount, Lord Colville, the noble Lord, Lord Fox, my noble friend Lord Black and the noble Baroness, Lady Ritchie, asked about the final offer mechanism and how this will work. The final offer mechanism is a backstop measure to help resolve sustained breaches of conduct requirements relating exclusively to fair and reasonable payment terms, where other DMU tools are unlikely to resolve the breach in a reasonable timeframe. Unlike the Australian and Canadian models, the final offer mechanism is not a standalone tool to force negotiations. It forms just one part of the DMU’s holistic toolkit for promoting competition in digital markets. The DMU will be able to impose conduct requirements on the firm from day one of its designation, including requirements to ensure fair and reasonable terms. However, we recognise that some stakeholders may be concerned about SMS firms frustrating the process. Here, the CMA can seek to accelerate the stages before the final offer mechanism, making use of urgent deadlines on enforcement orders and significant financial penalties, where appropriate.
The noble Lord, Lord Knight, and the noble Baronesses, Lady Bennett, Lady Jones and Lady Uddin, asked if the regulator will have sufficient power to deal with imbalances in access to data. The answer is yes. These are exactly the kinds of issues that the DMU will be able to address.
The noble Viscount, Lord Colville, and the noble Baroness, Lady Uddin, asked how the digital markets regime will address the rise of artificial intelligence. The regime has been designed to be tech-neutral, future-proof and flexible enough to adapt to changing digital markets.
I now turn to questions raised today on the competition part of the Bill. I note the interest from my noble friend Lord Sandhurst in the recent Supreme Court judgment on the status of litigation funding agreements—LFAs—and its potential impact on the ability to bring collective actions on behalf of consumers across the legal system. The Government have urgently addressed the potential implications of the judgment on claims under competition law, and we feel this has provided some much-needed certainty to funders and claimants. I also note the interest from my noble friend and others across the House in extending this to all parts of the civil legal system. While I am advised that this Bill is not the appropriate vehicle to deliver this aim, I can assure noble Lords that the Ministry of Justice is actively considering options for a wider response.
I now turn to the consumer part of the Bill. Several noble Lords, including my noble friend Lord Black, the noble Lords, Lord Vaux, Lord Clement-Jones and Lord Bassam, and the noble Baroness, Lady Jones, posed questions about the approach taken in the Bill on subscription traps. The measures being taken forward are the ones which are necessary and proportionate to ensure that consumers are treated fairly and understand what they are signing up to, while balancing further costs and regulatory burdens on businesses.
A number of noble Lords—I hope noble Lords will forgive me if I do not read out the full list, because there are far too many of them and it might test everyone’s patience—raised concerns about potential unintended consequences for charities in relation to the new subscription rules, in particular their ability to claim gift aid. Donations to charities where nothing is received in return are not subject to the subscription rules. Generally, charities will only be in scope if they provide auto-renewing contracts to consumers for products and services in return for payment. This is consistent with other consumer protection laws. I reassure the House that it is not the Bill’s intention to undermine access to gift aid; we are examining this issue closely and will provide a further update in Committee.
Many noble Lords, including the noble Lords, Lord Bassam and Lord Fox, raised other consumer harms such as drip pricing and fake reviews. The Government have recently consulted on proposals to address these and other practices, and our upcoming consultation response will set out next steps. The noble Baroness, Lady Bennett, also mentioned misleading green claims. This is indeed an important issue, which we hope is already covered by existing regulations.
I agree with the noble Baroness, Lady Hayman, and my noble friend Lord Holmes that the right to repair is important. The right-to-repair regulations which came into force on 1 July 2021 address some of the issues she raised. My noble friend Lord Offord, as the responsible Minister, would be happy to meet her to discuss this further.
My noble friend Lord Holmes raised concerns about Henry VIII powers. Where the powers to amend primary legislation would permit major changes to the legislation concerned, they are subject to the draft affirmative procedure.
I hope that in wrapping up I have responded to at least most of the points raised by noble Lords today. I note that there were other issues raised which I have not addressed, such as alternative dispute resolution and secondary ticketing. I look forward to discussing those items and others during the Bill’s passage. Let me once again thank all noble Lords for their contributions and engagement, not just today but in the lead-up to it. My noble friend Lord Offord and I look forward to further and more detailed debates on these matters and many more besides in Committee.
Lord Fox (LD)
Before the Minister sits down, I should say that I mentioned the central role that standards and the setting of future standards have. The Minister need not answer the question now, but could he write to me about the strategy, in a sense, and the involvement that the DMU might have, or should have, in future standards-setting for the technology?
Viscount Camrose (Con)
I apologise to the noble Lord for not addressing that. Absolutely I will write.
Lord Offord of Garvel
That the bill be committed to a Grand Committee, and that it be an instruction to the Grand Committee that they consider the bill in the following order:
Clauses 1 to 36, Schedule 1, Clauses 37 to 57, Schedule 2, Clauses 58 to 124, Schedule 3, Clauses 125 to 127, Schedule 4, Clause 128, Schedule 5, Clause 129, Schedule 6, Clauses 130 to 136, Schedule 7, Clause 137, Schedule 8, Clauses 138 to 142, Schedules 9 to 11, Clause 143, Schedule 12, Clause 144, Schedule 13, Clauses 145 to 149, Schedules 14 to 15, Clauses 150 to 207, Schedule 16, Clauses 208 to 213, Schedule 17, Clause 214, Schedule 18, Clauses 215 to 223, Schedule 19, Clauses 224 to 253, Schedule 20, Clause 254, Schedule 21, Clauses 255 to 282, Schedule 22, Clauses 283 to 293, Schedule 23, Clauses 294 to 299, Schedule 24, Clauses 300 to 307, Schedule 25, Clauses 308 to 323, Schedule 26, Clauses 324 to 325, Schedule 27, Clauses 326 to 355, Title.
Digital Markets, Competition and Consumers Bill
Monday 22nd January 2024
(6 months, 1 week ago)
Grand CommitteeRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 12-II Second marshalled list for Grand Committee - (22 Jan 2024)
Member’s explanatory statement
This amendment aims to ensure that the CMA are able to draw on previous analysis on issues relevant to the regulatory regime.
Baroness Jones of Whitchurch (Lab)
My Lords, we have also added our names to Amendment 7. At the outset, I should say that we are in broad agreement with all the amendments in this group.
Before I explain the detail of our amendment, and without wishing to rerun the Second Reading debate, I would just like to say that we believe that the essence of the Bill is important and necessary. Our concerns, where we have them, are about some of the details in the Bill and we will give them proper challenge and scrutiny. However, it is not in the interests of consumers or businesses for the Bill to be unduly delayed and we hope to get it on the statute book in an improved form and in a timely manner.
Part 1 of necessity gives the CMA considerable new powers. We support the model that is being proposed, with priority being given to identifying the big tech players that have strategic market status. However, it is important that those new powers are carried out with clarity and with transparency and a number of our amendments in this and other groups address this issue. Our Amendment 1 is a simple but important amendment. It would enable the CMA to draw on its analysis and consultations that have taken place before the passing of the Bill.
Those of us who attended the briefings with the CMA last week will have heard the amount of detailed preparation that it has carried out in anticipation of the Bill being passed. We believe that it is important that it can draw on this wealth of knowledge without starting from scratch and having to do it all again. This will strengthen its effectiveness going forward, as it can reflect on the lessons learned and the outcomes of the various consultations that have already been undertaken.
When this issue came up in the Commons, the Minister, Paul Scully, said:
“I strongly support the point that the CMA should not have to repeat work that it has already done. It is for the DMU to decide what is and is not relevant analysis to its investigations, and it should be able to draw on insight from previous analysis or consultations when carrying out an SMS investigation where it is appropriate and lawful to do so. I am happy to confirm that the Bill does not prevent the DMU from doing that”.—[Official Report, Commons, Digital Markets, Competition and Consumers Bill Committee, 20/6/23; col. 116.]
However, this is our concern. The Bill as it currently stands is silent on the issue. It does not make it clear either way and, specifically, it does not make it clear that this retrospection is within the powers of the CMA. We want to put this clarity in the Bill to avoid the potential for any legal challenges about the way the CMA is going about its investigation. Noble Lords will be familiar with this argument, as it will be a running theme during our scrutiny of the Bill. We want the rules to be watertight and we want to close any legal loopholes from those who stand to lose if the CMA rules against them. Therefore, we believe that this amendment is important in shoring up the CMA’s powers to act and I beg to move.
Lord Clement-Jones (LD)
My Lords, at the opening of this Committee stage, I want to repeat, rather in the same way as the noble Baroness, Lady, Jones, what I said on Second Reading: we broadly welcome this Bill. In fact, since the Furman report was set up five years ago, we have been rather impatient for competition law in the digital space to be reformed and for the DMU to be created.
At the outset, I also want to thank a number of organisations—largely because I cannot reference them every time I quote them—for their help in preparing for the digital markets aspects of the Bill: the Coalition for App Fairness, the Public Interest News Foundation, Which?, Preiskel & Co, Foxglove, the Open Markets Institute and the News Media Association. They have all inputted helpfully into the consideration of the Bill.
The ability to impose conduct requirements and pro-competition interventions on undertakings designated as having strategic market status is just about the most powerful feature of the Bill. One of the Bill’s main strengths is its flexible approach, whereby once a platform is designated as having SMS, the CMA is able to tailor regulatory measures to its individual business model in the form of conduct requirements and pro-competition interventions, including through remedies not exhaustively defined in the Bill.
However, a forward-looking assessment of strategic market status makes the process vulnerable to being gamed by dominant platforms. The current five-year period does not account for dynamic digital markets that will not have evidence of the position in the market in five years’ time. It enables challengers to rebut the enforcer’s claim that they enjoy substantial and entrenched market power, even where their dominance has yet to be meaningfully threatened. Clause 5 of the Bill needs to be amended so that substantial and entrenched market power is based on past data rather than a forward-looking assessment. There should also be greater rights to consultation of businesses that are not of SMS under the Bill. As the noble Baroness, Lady Jones, said, this will be discussed later, under another group of amendments.
The provisions of Clause 5, as it is currently worded, risk causing problems for the CMA in practice. Part of the problem is the need for evidence to support a decision by the CMA of a market position over the entire five-year period. The five-year period requires current evidence of the position in the market in five years’ time. In dynamic digital markets such as these, no such evidence is likely to exist today. The CMA needs evidence to underpin its administrative findings. Where no such evidence exists, it cannot designate an SMS firm.
The CMA will have evidence that exists up to the date of the decision—evidence of the current entrenched position, market shares, barriers to entry, intellectual property rights and so on. In that respect, we support the noble Baroness, Lady Jones, with her Amendment 1, because it should of course include earlier investigations by the CMA. All that evidence exists today in 2024, but what the position will be in 2028 will need to be found and it has to be credible evidence to support a CMA decision under Clause 5. Particularly in fast-moving technology markets, the prediction of future trends is not a simple matter, so lack of sufficient evidence of the entrenched nature of a player at year 5 or over the entire period would prevent a rational decision-maker from being able to make a decision that the player will have SMS over the five-year period, as demanded by the Bill. Every designation and subsequent requirement or investigation imposed on the designated undertaking risks being subject to challenge on the basis of insufficient evidence.
As the Open Markets Institute says,
“the inevitably speculative nature of a forward-looking assessment makes the process vulnerable to being gamed by dominant platforms. For example, such firms may use the emergence—and even hypothetical emergence—of potential challengers to rebut the enforcer’s claim that they enjoy substantial and entrenched market power, even where their dominance has yet to be meaningfully threatened by those challengers”.
It gives the example of the rise of TikTok, which Meta has used in arguments to push back against anti-trust scrutiny:
“Yet while experiencing rapid growth in terms of user numbers, TikTok has so far failed to seriously challenge the economic dominance of Meta in online advertising (the basis of Meta’s market power), generating less”
than
“a tenth of the latter’s global revenues. Dominant platforms will also use emerging technologies—such as generative AI—to claim that their dominance is transitory, claims that will be difficult for the CMA to rebut given future uncertainty”.
Our Amendments 3, 4, 5 and 6—here I thank the noble Lord, Lord Vaux, for his support for them, and sympathise with him because I gather that his presence here today has been delayed by Storm Isha—suggest that the number of years should be removed and the provision clarified so that the assessment is made based on current evidence and facts. If the market position changes, the CMA has the power to revoke such designation in any event, on application from the SMS business, as provided for by Clause 16.
That is the argument for Amendments 3, 4, 5 and 6 in Clause 5. I look forward to hearing what the noble Viscount, Lord Colville, has to say on Amendment 7, which we very much support as well.
Viscount Colville of Culross (CB)
My Lords, I have put down Amendment 7 to Clause 6 and, in later groups, amendments relating to Clauses 20 and 114. I will come to them later in Committee, but all of them have the aim of limiting the wide powers given to the Secretary of State in the Bill to intervene in the setting up of the processes for dealing with anti-competitive behaviour by the big tech companies. Amendment 7 would prevent the Secretary of State having broad powers in revising the criteria for establishing the designation of the SMS investigative process. My particular concern is about the power that the Minister might have to alter the criteria for the process in order to de-designate a company following heavy lobbying.
As this is my first intervention at this stage of the Bill, I join other noble Lords in saying that I too very much welcome it and the Government’s approach to dealing with anti-competitive behaviour by the big tech companies. In fact, I welcome it so much that I want to ensure that it is implemented as quickly and effectively as possible, to safeguard our digital start-ups and smaller digital companies.
The independence of the CMA is central to the effectiveness of the processes set out in Part 1. However, the huge powers given to the Minister in these chapters should worry noble Lords. They are proposing great powers of oversight and direction for the Secretary of State. I fear that these will undermine the independence of the CMA and dilute its ability to take on the monopolistic behaviour of the big tech companies. I hope that these amendments will go some way to safeguard the independence of the regulator.
I support the collaborative approach set out in the SMS and conduct requirement processes; it seems to be preferable to the EU’s Digital Markets Act, which is so much more broad-brush, with a much wider investigation into designated companies’ business activities. The Bill sets out a greater focus on a company’s particular activity and ensures that the CMA and the DMU work closely with stakeholders, including the tech companies which are going to be under investigation. However, despite this collaboration, it can only be expected that the companies involved in the process will want to give themselves the best possible chance of maintaining their monopolistic position. Clause 6 is central to the start of the process—after all, it sets out when a company can be considered to be under DMU oversight.
Designation as an SMS player means only that the company is subject to the jurisdiction or potential oversight of the DMU; it does not mean that it has done anything wrong. The deliberate aim of the Bill is to ensure that only large players are to be included in the SMS status. These criteria will not dictate how the investigation will go, so the criteria for designation as an SMS player does not need to be changed if the market changes. However, Clause 6(2) and (3) will give Ministers power to take criteria away from this section. This will mean that powerful tech players could fall outside the jurisdiction of the DMU and will not be open to SMS designation as a result. If the clause allowed only new criteria to be added, so that a wider scope of companies could be included, that would not be so bad. However, the ability to reduce the scope of the DMU’s potential designation should alarm noble Lords. These subsections give the tech companies huge powers to lobby the Secretary of State to ensure that there is not the possibility to designate them. Effectively, this would be a de-designation of these companies, which would defeat the purpose of the CR process before it has even got off the ground.
I am also concerned that the Secretary of State’s powers in this clause go against the law’s need to be normative: as a basic principle, it must apply to all the companies, without discrimination. The DMCC Bill is a law that applies only to those who qualify, but it is, in principle, generally applicable. Chapter 2 of Part 1 sets out a set of criteria that apply to all companies, but only a few will satisfy the criteria. The criteria for being an SMS requires enduring market power and a collection of other criteria. It is likely, as a result, that these will cover Microsoft, Amazon, Apple, Google and Facebook; each has enduring market power and qualifies for designation under the criteria in Clause 6. However, if that law can be varied by a Secretary of State to take away criteria, as it currently can, then the law can be made to apply to only a few companies. At the extreme, it could be altered to apply to only one or two. I am advised by lawyers that this is likely to be discriminatory.
Imagine if the law were varied so it applied only to a business that provides both a digital platform and home deliveries. This would mean it would apply only to Amazon, and the company would go to town lobbying against the change in criteria as discriminatory. Noble Lords must continually remind themselves that the Bill is taking aim at the biggest, most powerful companies in the world. I ask them to consider just how far these companies would go to put pressure on politicians and Ministers to safeguard their position, and how effective that pressure can be in changing their minds.
Baroness Harding of Winscombe (Con)
My Lords, as we start this phase of the Bill, I declare my interests, in particular my husband’s close involvement with the Bill in the other place as the Member of Parliament for Weston-super-Mare. We rarely get involved in the same issues at the same time, but in this case we are.
Like other noble Lords, I am keen to see this Bill reach the statute book, but also keen to ensure that we minimise the degree of legal ambiguity. I thank the many companies that have given us briefings in advance of Committee, but note how many of them have felt incredibly uncomfortable in doing so and have sworn us all to secrecy about having even been talking to us in private, for fear that their commercial relationships will be prejudiced. We must recognise the enormous commercial power that the companies that this Bill aims to regulate already exert. Making sure that the Bill is clear, and that we are not inadvertently creating legal loopholes, is probably the most important thing that we will do in this House as we give it the degree of scrutiny that we like to give here.
Loopholes do not need to be permanent. If you have already got large market power, loopholes just need to slow the process down. When I ran a challenger business competing against a very large incumbent in telecoms, BT, we used to say all the time that BT’s regulatory strategy was to walk backwards slowly—I think that was even said in public, about 20 years ago. That was its strategy.
This is exactly what the big technology companies are doing worldwide. They know that regulation is coming to this sector but are walking backwards as slowly as they can. We see this very clearly with the EU’s Digital Markets Act where, so far, every potential SMS-equivalent firm has challenged its designation through every stage of the courts that it can. We should go into this Committee with our eyes wide open that that is exactly what will happen with this legislation as well. Giving clarity wherever possible will therefore be essential.
With that in mind, I support Amendments 1, 3, 4, 5 and 6 in their endeavour to give clarity on two important issues: first, whether the CMA can use work that it has already done; and, secondly, that it is impossible to have clarity about what will happen in technology markets over the next five years. Does my noble friend the Minister agree that it is important that the Bill gives clarity on those two issues? If the amendments as currently drafted do not achieve that, what can we do to ensure that we do not look with horror in a few years’ time when each SMS designation is in a JR, with technology companies challenging the CMA’s ability to use historic work or its lack of crystal ball-gazing, which will inevitably have come about?
I also have considerable sympathy with Amendment 7 from the noble Viscount, Lord Colville. We will come to the question of the Secretary of State’s powers in a number of parts of this Bill. In this case, I can see why we should be worried about the ability of individual companies—this is only from the media—with regulatory lobbying budgets of at least $1 billion to influence a single person because, however moral and upstanding they are, it is likely to be quite great. I have some sympathy with the amendment, but the requirement for a Secretary of State decision via the affirmative process is the strongest parliamentary scrutiny available to us. Does my noble friend acknowledge that this is a potential risk? If it is, what additional safeguards would he suggest if he does not like the removal of this power? I recognise that it is possible that we have not captured all the reasons why you might not want to designate a firm as having strategic market status.
We will come back to these issues again and again in our many days together in this Room, because this is really about giving clarity of intent. Will my noble friend confirm that he shares the intent of these amendments?
The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
My Lords, I am pleased to speak on this first day of Committee and thank all noble Lords for their continued and valued engagement on the DMCC Bill, which, as many noble Lords have observed, will drive innovation, grow the economy and deliver better outcomes for consumers. I am grateful for noble Lords’ continued scrutiny and am confident that we will enjoy a productive debate.
I start by briefly speaking to government Amendments 11 and 12, which I hope noble Lords will support. They make the strategic market status notice provisions consistent by obliging the Competition and Markets Authority to provide reasons for its decision not to designate a firm following an initial SMS investigation.
I turn to Amendment 1, tabled by the noble Baroness, Lady Jones of Whitchurch. The amendment seeks to ensure that the CMA will be able to use, in its SMS investigations, previous analysis undertaken in related contexts. I agree entirely that the CMA should not have to repeat work that it has already done and should be able to draw on insights from previous analysis when carrying out an SMS investigation, when it is appropriate and lawful to do so.
I offer some reassurance to the noble Baroness that the Bill as drafted permits the CMA to rely on evidence that it has gathered in the past, so long as it is appropriate and lawful to do so. As she highlighted, a strength of the regime is the flexibility for the CMA to consider different harms in digital markets. I suspect that this is a theme that we will return to often in our deliberations, but being prescriptive about what information the CMA can rely on risks constraining the broad discretion that we have built into the legislation.
Amendments 3, 4, 5 and 6, tabled by the noble Lord, Lord Clement-Jones, would make it explicit that the CMA must consider currently available evidence of expected or foreseeable developments when assessing whether a firm holds substantial and entrenched market power in a digital activity. Amendment 3 would remove the duty for the CMA to consider such developments over a five-year period. The regime will apply regulation to firms for a five-year period; it is therefore appropriate that the CMA takes a forward look over that period to assess whether a firm’s market power is substantial and entrenched, taking account of expected or foreseeable developments that might naturally reduce the firm’s market power, if it were not designated.
Without an appropriate forward look, there is a risk that designation results in firms facing disproportionate or unnecessary regulation that harms innovation and consumers. However, the CMA will not be required to prove that a firm will definitely have substantial and entrenched market powers for the next five years—indeed, that would be impossible. The CMA will have to give reasons for its decisions to designate firms and support any determination with evidence. As a public body, it will also be subject to public law principles, which require it to act reasonably and take into account relevant considerations. Therefore, in our view, these amendments are not necessary.
Amendment 7, tabled by the noble Viscount, Lord Colville of Culross, seeks to remove the power for the Secretary of State to amend by regulations subject to the affirmative procedure the conditions to be met for the CMA to establish a position of strategic significance. I recognise, first, that Henry VIII powers should be used in legislation only when necessary. To the point raised by my noble friend Lady Harding, I also recognise the importance of limiting the scope for too much disputation around this and for too many appeals. In this case, however, the power helps to ensure that the regime can adapt to digital markets that evolve quickly and unpredictably.
Changes in digital markets can result from developments in technology, business models, or a combination of both. The rapid pace of evolution in digital markets, to which many have referred, means that the CMA’s current understanding of power in these markets has changed over the past decade. The concept of strategic significance may therefore also need to evolve in future, and the conditions to be updated quickly, so that the regime remains effective in addressing harms to competition and consumers effectively. The affirmative resolution procedure will give Parliament the opportunity to scrutinise potential changes. It will provide a parliamentary safeguard to ensure that the criteria are not watered down, and should address the noble Lord’s concerns regarding lobbying. For these reasons, I believe that it is important to retain this power.
Lord Knight of Weymouth (Lab)
To look at Clause 6 and the four conditions laid down there, they appear pretty generic, in terms of size; the number of undertakings; the position in respect of digital activity, which would allow an extension of market power; and the ability to influence the ways in which other undertakings conduct themselves. They are generic conditions, so can the Minister give us a bit more of a taste of the kind of thing that just might crop up? I know that he does not have a crystal ball, but could he tell us what might crop up that would require these Henry VIII powers to be used?
Viscount Camrose (Con)
I would struggle to name a particular one, but if we were to look back over the last five to 10 years we might reflect that there have been a number of developments in markets that have been largely unpredictable and that technology changes might drive further developments. The point is to create a balance between predictable and durable legislation and the ability to adapt to changes in business practice and technology as they emerge. As a thought experiment, if we were to flip it round and say, “No, we have to stick with only these four things for the duration of the eventual Act”, many of us would be concerned about an ongoing inability to adapt to change in what is a fast-moving marketplace that is likely to see an accelerating pace of change, rather than anything else.
That said, I hope my words provide the noble Baroness and noble Lords with sufficient assurance not to press their amendments.
Lord Clement-Jones (LD)
My Lords, the Minister rather glossed over the importance of Clause 5. In Clause 2(2), the SMS conditions are that
“the undertaking has—
(a) substantial and entrenched market power (see section 5), and
(b) a position of strategic significance”.
The conditions in Clause 6 are rather formulaic, in the way that the noble Lord, Lord Knight, talked about, but the determination, examination and assessment in Clause 5 as to whether an undertaking has substantial and entrenched market power is really important. The Minister glossed over this and said that it is not necessary to have a determination based on current evidence and that this forward-looking element must be in there.
Can the Minister confirm that he has taken advice within the department from competition lawyers who deal with this kind of potential challenge on a daily basis? He seems extraordinarily complacent about the fact that big tech will look at that assessment and say, “The evidence is not there. It’s all speculation for the next five years. You haven’t based it on the actual conduct in our market currently, or indeed an adjacent market”. No doubt we will come to that later in another group. This is absolutely at the core of the Bill, and all the advice that I get, whether from the Open Markets Institute or others, is that this is a real failing in the Bill that could open up a litigation problem for the CMA in due course.
Viscount Camrose (Con)
I certainly do not intend to gloss over any of these issues. I can confirm that the department receives extensive advice on these matters, as have those working on the Bill, not only from competition lawyers but from other stakeholders in the market of all different sizes and types, and indeed from the CMA itself. To turn around the noble Lord’s position, if we make a designation that is designed to last for five years, it is crucial that we take into account existing evidence and what is foreseeable today when determining whether to make that designation. Nobody is being asked to be overly speculative, but it is possible to identify existing trends and available information that can form part of the analysis, and use that to make the determination, particularly as the CMA will then have a duty to explain in detail the rationale behind its decision to designate a firm with SMS, or indeed not to do so.
Lord Lansley (Con)
Apologies; I had not intended to intervene on this group, but I am confused and I wonder if my noble friend might be able to help me. We have the word “entrenched”. Obviously, we are talking about “substantial and entrenched”, but “substantial” is not really in debate since, if it has strategic significance, it is likely to be substantial; the issue is with “entrenched”.
A theme that I might develop later on other aspects is to look at our legislation in the context of what has been done by the European Union in its Digital Markets Act. We are doing things differently—and better, I hope—but my point is that the European Union looks at the question of what it describes as an “entrenched and durable position”. That seems to have two aspects to it: the first, “entrenched”, is that it exists and has existed for some time; and the second, “durable”, relates to it being foreseeable that it will continue to exist in future. We have lost the word “durable” and retained “entrenched”, but we are applying it in relation only to what is foreseeable—forward-looking assessment. I am confused about why it is only a forward-looking assessment. The relevant regulation from the European Commission looks back three years to establish whether it is entrenched, and looks forward to see whether it is durable or whether there are foreseeable developments that would give rise to such an entrenched, significant market status. I am looking for both and, at the moment, I cannot see both; I see only the forward-looking part.
Viscount Camrose (Con)
Indeed. I am afraid that the use of the word “durable” in this context is new to me. I will very happily take that forward and consider whether it might be a valuable addition to the guidance here. To focus on the outcomes that we want here, we want a reasonably derivable position that the existing entrenched power of the potentially SMS-designated firm is likely to last for the five-year period. We want to ensure that any evidence or analysis supporting that position is presented as part of the report that details why the decision is taken. I will take forward the use of the word “durable”.
Lord Lansley (Con)
Would it be fair to say that the contention in this legislation is that the determination that there is a position of strategic significance also satisfies the argument of whether such substantial market power exists? This further assessment is really about whether it is likely to be entrenched and durable over the five-year period, since the designation extends for five years. This is looking forward over those five years. I think it is perhaps not absolutely clear how these two clauses are intended to be considered together for this purpose.
Viscount Camrose (Con)
I take note of my noble friend’s point. There may be many areas on which all of us in this Committee end up disagreeing, but one that I doubt we will disagree on is the need for absolute clarity in all these measures. I am very happy to commit to taking that away and seeing whether there is an appropriate form of words that can deliver the clarity that noble Lords are seeking.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken. I very much echo the thanks expressed by the noble Baroness, Lady Harding, to all the companies and business that have given evidence and come forward to speak to us. It is true that, for a number of them, they have taken risks to do that. It is a sad fact of life now that their very survival could be at stake if some of their concerns become public. That is why we are here today, I suppose. That is where the market has left us and there is a need to address that.
To pick up on the points made by the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Harding, about the CMA’s assessment, I think that we have had a useful discussion with the Minister around all that. I certainly want to look at Hansard and at the reassurances that the Minister has tried to give on this. I very much take the point, incidentally—as mentioned by the noble Viscount, Lord Colville, in moving his amendment—that SMS status does not mean that they have done anything wrong, so I do not want to get too hung up about giving that status in the first instance. What is important is how we follow that up and look at their behaviour going forward. As the noble Lord, Lord Clement-Jones, spelled out, there is a danger that, if we are not careful, those who are given that category will game the system. That is what we are all anxious about.
I am not sure that the wording achieves what the Minister wants. I think that we are all genuinely clear on the outcomes that we want, as the Minister said, but the current wording does not achieve that. The five-year forward plan is playing into the hands of the wrong people, and we will not come out with the outcomes that we want if we stick with the current wording, so I very much welcome the chance to have further discussion about that.
Lord Tyrie (Non-Afl)
Before the noble Baroness leaves that point, I strongly endorse what she says. I make the point that we are here debating a set of powers that we would, in most contexts, otherwise consider extremely draconian, because there has already been abuse and market power has already been exercised in ways that we all consider unacceptable. That is why we need clarity on this point. We do not need to look into the crystal ball—we can read the book.
Baroness Jones of Whitchurch (Lab)
I thank the noble Lord very much for that insight. He is absolutely right, of course. We all understand his wealth of experience; it is very helpful to have his support on that issue.
I pick up on the amendment tabled by the noble Viscount, Lord Colville, to which the noble Lord, Lord Clement-Jones, and I have added our names. He rightly raised that the significant powers given to the Secretary of State to vary the conditions would lead to tech companies being considered to have strategic market status. As my noble friend Lord Knight said, the list in Clause 6 is quite generic. In a sense, that should be enough for us. None of the things in Clause 6 is time limited, so it should be enough for the CMA and the DMU to do their work.
There is concern, therefore, about how the Bill is currently worded, as it does not give any constraints to the Secretary of State to change the conditions, apart from the affirmative SI—and we can all rehearse the arguments about what that means for parliamentary accountability. The Minister might say that it is necessary to add new conditions if new anti-competitive practices come to light, but I feel that the current wording—and I think that the noble Viscount feels this, too—allows not just for new anti-competitive practices but for the current conditions to be watered down. That is our real concern. The noble Viscount gave an example about specifying particular forms of market practice, such as online sales and delivery, which would then apply to only one or two companies and not the ones that, as I think we all understand, should be in the frame. I was not absolutely convinced by what the Minister said on this issue. It is a bit of a running theme and, as several noble Lords said, we will come back to the issue of parliamentary scrutiny. Perhaps we can look at that in the round at a future point.
The Minister will be pleased to know that I support the government amendments. They make good sense and give clarification in the Bill, which we always like.
We continue to believe that Amendment 1 is necessary to enable the CMA to proceed with speed once the Bill is on the statute book. Nothing the Minister has said so far has persuaded me that the silence in the Bill on this issue is sufficiently reassuring. I hope that we can find a form of words—if not ours then a different form of words—that will allow the CMA to look backwards, giving it absolute reassurance that it can do so and that it will not have to repeat any of its activities. This is all about tightening up the wording. We will reflect on what the Minister said, and I hope that we can talk about this some more. In the meantime, I beg leave to withdraw the amendment.
Lord Clement-Jones
“(d) the digital activity or the way in which the undertaking carries on the digital activity is likely to have a substantial impact on the creation, displacement, quality or conditions of work or work environments in the United Kingdom.”Member's explanatory statement
This amendment would ensure key definitions such as ‘digital activity’ take into account impacts on UK work and workers in determining whether there is a sufficient link to the UK.
Lord Clement-Jones (LD)
My Lords, I was looking forward to hearing the noble Lord, Lord Knight, introduce these amendments but, owing to a glitch in timing when tabling the amendments, I am unfortunately in the hot seat this afternoon. As well as moving Amendment 2, I will speak to Amendments 18, 23, 56 and 61.
These amendments, developed by the Institute for the Future of Work, are aimed in particular at highlighting the direct and indirect impacts on job creation, displacement and conditions and on the work environment in the UK, which are important considerations that are relevant to competition and should be kept closely under review. I look forward to hearing what the noble Lord, Lord Knight, says, as co-chair of the All-Party Parliamentary Group on the Future of Work, which helped the Institute for the Future of Work to develop the amendments.
Digital markets and competition are shaping models for work, the distribution of work, access to work and the conditions and quality of work for several different reasons. Digital connected worker and labour platforms are used across the economy, not just for online or gig work. There is concentration in digital markets, with the emergence of a few dominant actors such as Amazon and Uber, which impacts the number and nature of local jobs created or lost. There are specific anti-competitive practices, such as wage and price fixing, which is currently subject to litigation in the US, and there are secondary and spillover impacts from all the above, including the driving of new models of business that may constrain wages, terms and work quality, directly or indirectly.
A good example is cloud-based connected worker platforms, which use behavioural and predictive algorithms to nudge and predict performance, match and allocate work and set standards. There is also increased market dominance in cloud computing, on which a growing number of UK businesses depend. For example, Amazon Web Services leads four companies in control of 67% of world cloud infrastructure and over 30% of the market.
Other examples are algorithmic hiring, job matching and task-allocation systems, which are trained on data that represents past practices and, as a result, can exclude or restrict groups from labour market opportunities. Social, environmental and well-being risks and impacts, including on work conditions and environments, are under increasing scrutiny from both the consumer and the corporate sustainability perspective—seen, for instance, in the World Economic Forum’s Global Risks Report 2024, and the EU’s new corporate sustainability due diligence directive, due to be formally approved this year, which obliges firms to integrate their human rights and environmental impact into their management systems.
This suggests that consumer interests can extend to local and supply-chain impacts, and informed decision-making will need better information on work impacts. For a start, key definitions such as “digital activity” in Clause 4 need to take into account impacts on UK work and workers in determining whether there is a sufficient link to the UK. Amendment 2 is designed to do this. Secondly, the CMA’s power to impose conduct requirements in Chapter 3 of the Bill should make sure that a designated undertaking can be asked to carry out and share an assessment on work impacts. Similarly, the power in Chapter 4, Clause 46, to make pro-competition interventions, which hinges on having an adverse effect, should be amended to include certain adverse impacts on work. Amendments 18, 23 and 56 are designed to do this.
Thirdly, information and understanding about work impacts should be improved and monitored on an ongoing basis. For example, the CMA should also be able to require an organisation to undertake an assessment to ascertain impacts on work and workers as part of a new power to seek information in Clause 69. This would help investigations carried out to ascertain relevant impacts and decide whether to exercise powers and functions in the Bill.
Evidence is emerging of vertical price fixing at a platform level, which might directly impact the pay of UK workers, including payment of the minimum wage and, therefore, compliance with labour law, as well as customer costs. Such anti-competitive practices via digital platforms are not limited to wages, or gig, remote or office work. Ongoing research on the gigification of work includes connected worker platforms, which tend to be based on the cloud. This is indicative of tight and increasing control, and the retention of scale advantages as these platforms capture information from the workplace to set standards, penalise or incentivise certain types of behaviour, and even advise on business models, such as moving to more flexible and less secure contracts. At the more extreme end, wages are driven so low that workers have no choice but to engage in game-like compensation packages that offer premiums for completion of a high number of tasks in short or unsociable periods of time, engage in risk behaviours or limit mobility.
The Institute for the Future of Work has developed a model which could serve as a basis for this assessment: the good work algorithmic impact assessment. The UK Information Commissioner’s Office grants programme supports it and it is published on the DSIT website. The assessment covers the 10 dimensions of the Good Work Charter, which serves as a checklist of workplace impacts in the context of the digitisation of work: work that promotes dignity, autonomy and equality; work that has fair pay and conditions; work where people are properly supported to develop their talents and have a sense of community. The proposed good work AIA is designed to help employers and engineers to involve workers and their representatives in the design, development and deployment of algorithmic systems, with a procedure for ongoing monitoring.
In summary, these amendments would give the CMA an overarching duty to monitor and consider all these impacts as part of monitoring adverse effects on competition and/or a relevant public interest. We should incorporate this important aspect of digital competition into the Bill. I beg to move.
Lord Knight of Weymouth (Lab)
My Lords, I congratulate the noble Lord, Lord Clement-Jones, on the way he occupied the hot seat and introduced his amendments. I had hoped to add my name to them but other things prevented me doing so. As he said, I co-chair the All-Party Group on the Future of Work with Matt Warman in the other place. I am grateful to the Institute for the Future of Work, and to Anna Thomas in particular for her help in putting these amendments together.
I start with a reflection on industrialisation, which in its own way created a massive explosion in economic activity and wealth, and the availability of goods and opportunities. There was innovation and it was good for consumers, but it also created considerable harms to the environment and to workers. The trade union movement grew up as a result of that.
In many ways, the technological revolution that we are going through, which this legislation seeks to address and, in part, regulate, is no different. As the Minister said a few moments ago, we see new opportunities with the digital tools and products that are being produced as part of this revolution, more jobs, more small and medium-sized enterprises able to grow, more innovation and more opportunities for consumers. These are all positive benefits that we should celebrate when we think about and support the Bill, as we do on all sides of the Committee.
However, the risks for workers, and the other social and environmental risks, are too often ignored. The risks to workers were totally ignored in the AI summit that was held by the Government last year. That is a mistake. During the Industrial Revolution, it took Parliament quite a while to get to the Factory Acts, and to the legislation needed to provide the protection for society and the environment. We might be making the same mistake again, at a time when people are being hired by algorithm and, as the noble Lord, Lord Clement-Jones, pointed out, managed by algorithm, particularly at the lower end of the labour market and in more insecure employment.
The Institute for the Future of Work’s report, The Amazonian Era, focused on the logistics sector. If you were ever wondering why your Amazon delivery arrives with a knock on the door but there is nobody there when you open it to say hello and check that the parcel has been delivered, it is because the worker does not have time to stop and check that someone is alive on the other side of the door—they have to get on. They are being managed by machine to achieve a certain level of productivity. They are wearing personalised devices that monitor how long their loo breaks are if they are working in the big warehouses. There is a huge amount of technological, algorithmic management of workers that is dehumanising and something which we should all be concerned about.
In turn, having been hired and managed by algorithms, people may well be being fired by algorithm as well. We have seen examples—for example, Amazon resisting trade union recognition in a dispute with the GMB, as the trade union movement also tries to catch up with this and do something about it. Recently, we saw strikes in the creative sector, with writers and artists concerned about the impact on their work of algorithms being used to create and that deskilling them rapidly. I have been contacted by people in the education world who are exam markers—again, they are being managed algorithmically on the throughput of the exams that they have to mark, despite this being an intensive, knowledge-based, reflective activity of looking at people’s scripts.
In this legislation we have a “user”, “consumer”, “worker” problem, in that all of them might be the same person. We are concerned here about users and consumers, but fail to recognise that the same person may also be a worker, now being sold, as part of an integrated service, with the technology, and at the wrong end of an information asymmetry. We have lots of data that is consumer-centric, and lots of understanding about the impacts on consumers, but very little data on the impact of their function as a worker.
In the United States, we have seen the Algorithmic Accountability Act. Last month, the Council of Europe published its recommendations on AI. Both are shifting the responsibility towards the companies, giving them a burden of proof to ensure that they are meeting reasonable standards around worker rights and conditions, environmental protection and so on. These amendments seek to do something similar. They want impacts on work, and on workers in particular, to be taken into account in SMS designation, competition decisions, position of conduct requirements and compliance reports. It may be that, if the Government had delivered on their promise of many years now to deliver an employment Bill, we could have dealt with some of these things in that way. But we do not have that opportunity and will not have it for some time.
As I have said, the collective bargaining option for workers is extremely limited; the digital economy has had very limited penetration of trade union membership. It is incumbent on your Lordships’ House to use the opportunities of digital legislation to see whether we can do something to put in place a floor of minimum standards for the way in which vulnerable workers across the economy, not just in specific digital companies, are subject to algorithmic decision-making that is to their disadvantage. We need to do something about it.
Baroness Kidron (CB)
My Lords, I too faced a glitch, having wanted to add my name to these amendments. Since we are at a new stage of the Bill, I declare my interests as set out in the register, particularly as an adviser to the Institute for Ethics in AI at Oxford and to the Digital Futures centre at the LSE and as chair of the 5Rights Foundation. I support the noble Lord, Lord Clement-Jones, who has, with this group of amendments, highlighted that job creation or displacement and the quality of work are all relevant considerations for the CMA. I think it is worth saying that, when we talk about the existential threat of AI, we always have three areas of concern. The first is the veracity and provenance of information; the second is losing control of automated weapons; and the third, importantly in this case, is the many millions of jobs that will be lost, leaving human beings without ways to earn money or, perhaps, a reason for being.
There are two prevailing views on this. One is that of Elon Musk, who, without telling us how we might put food on the table, pronounced to the Prime Minister
“There will come a point where no job is needed – you can have a job if you want one for personal satisfaction but AI will do everything”.
The other, more optimistic view is that boring or repetitive work will go, which is, in part, beautifully illustrated by David Runciman’s recent book, The Handover, where he details the fate of sports officials. In 2021, Australian and US line judges were replaced by computers, while Wimbledon chose to keep them—largely for aesthetic reasons, because of the lovely Ralph Lauren white against the green grass. Meanwhile, Carl Frey and Michael Osborne, in their much-publicised 2017 study assessing the susceptibility of 702 different jobs to computerisation, suggested that sports officials had a 98% probability of being computerised.
In fact, since 2017, automation has come to all kinds of sports but, as Runciman says,
“Cricket matches, which traditionally featured just two umpires, currently have three to manage the complex demands of the technology, plus a referee to monitor the players’ behaviour”.
Soccer has five, plus large teams of screen watchers needed to interpret—very often badly—replays provided by VAR. The NBA Replay Center in Secaucus employs 25 people in a NASA-like control room, along with a rota of regular match officials.
It would be a fool who would bet that Elon Musk is entirely wrong, but nor should we rely on the fact that all sectors will employ humans to watch over the machines, or even that human beings will find that being the supervisor of a machine, or simply making an aesthetic contribution rather than being a decision-maker, is a good result. It is more likely that the noble Lord, Lord Knight, is correct that the algorithm will indeed be supervising the human beings.
I believe that the noble Lord, Lord Clement-Jones, and his co-author, the noble Lord, Lord Knight, may well prove to be very prescient in introducing this group of amendments that thoughtfully suggest at every stage of the Bill that the CMA should take the future of work and the impact of work into account in coming to a decision. As the noble Lord made clear in setting out each amendment, digital work is no longer simply gig work and the concentration in digital markets of behemoth companies has had and will continue to have huge consequences for jobs across supply lines, as well as wages within markets and, most particularly, on terms of employment and access to work.
AI is, without question, the next disruptor. Those companies that own the technology will be dominant across multiple markets, if not every market, and for the CMA to have a mandate to consider the impact on the workforce is more than sensible, more than foresightful; it is in fact a new reality. I note that the Minister, in responding to the last group, mentioned the importance of foreseeable and existing trends: here we have one.
Lord Bassam of Brighton (Lab)
My Lords, I am sure the noble Viscount has more important things to say than I have, but it falls to me to make a few comments from the Opposition Benches on this. While listening to my noble friend Lord Knight, I was reflecting that we might be the last profession ever to be dismissed or appointed by algorithm and wondering whether that is a good or a bad thing. I leave that for the Minister to ponder while I make my observations.
The noble Lord, Lord Clement-Jones, introduced these amendments with his customary skill and guile. No doubt, like the rest of us, he has been extremely well briefed by the Institute for the Future of Work; I pay tribute to my noble friend Lord Knight for his work in that regard. This group of amendments is extremely important. We know that, with algorithms, new digital technology and thinking, just as the history lesson from my noble friend showed, it is really important when technological revolutions happen that we grasp the moment to think about their wider social and economic impact—with this, in particular, the impact on the world of work.
On the face of it, these amendments would provide a valuable extension of the CMA’s remit and role and could lead to protection of consumers and workers from the adverse impacts brought about by the activities of digital companies that operate in a dominant position in the marketplace. As the noble Lord, Lord Clement-Jones, said, the near-monopoly position of some companies means that wage and price fixing are a real concern. The ability of the CMA to monitor, comment and have an impact on conduct could have a wider and beneficial impact on ensuring that the market works not only well but fairly and with equity. It is the case that social, environmental and well-being risks and impacts, including work conditions and the environment are under increasing scrutiny from consumer and corporate sustainability perspectives.
The noble Lord, Lord Clement-Jones, referenced the World Economic Forum’s Global Risks Report and the EU’s new corporate sustainability due diligence directive 2023, to be introduced later this year. They exemplify the importance and salience of the issue. As he said, this all suggests that consumer interests can extend to local supply chains, so, as a consequence, informed decision-making will need to have better information on work impacts in the future. Consumers are, as has been said, both consumers and workers, and they are bound to take much greater interest in digital workplaces. From these Benches, we therefore support, in general terms, better monitoring, intervention and information sharing by the CMA; if these amendments achieve that objective, they are certainly worthy of our support. The Minister will have to persuade us otherwise, or explain that the CMA will have the scope to use its powers to satisfy the objectives behind the amendments in the name of the noble Lord, Lord Clement-Jones.
I was intrigued by the reference by the noble Baroness, Lady Kidron, to sports officials being put out of a job. I am a big football fan, as many colleagues will know. It just seems to me that VAR is a great example of how you can generate even more activity and interest by the digitisation of assessments and the use of algorithms to judge whether something is or is not offside. We are happy to support these amendments; we think they potentially touch on a vital aspect of the CMA’s work and we look forward to what the Minister has to say about them.
Viscount Camrose (Con)
My Lords, I apologise to the noble Lord, Lord Bassam, for jumping the gun before his interesting words. I reflect that the algorithm that puts exactly this combination of people in this Room would be fairly complex—but a good one.
I thank the noble Lord, Lord Clement-Jones, for using several amendments to raise the important issue of the impact of technologies, such as artificial intelligence, on workers and the nature of work. I also thank the noble Lords, Lord Knight and Lord Bassam, and the noble Baroness, Lady Kidron, for their contributions to what is an important part of our deliberations.
The Government of course recognise that new technologies can create challenges and risks, as well as opportunities and benefits. I agree with noble Lords that the impact of technology on work and workers deserves attention, and I will respond to each amendment in turn. However, I also hope that noble Lords agree that it is of paramount importance that this regime is effective and focused on promoting competition for the benefit of consumers, which is the CMA’s area of expertise. I know that future amendments propose that the CMA’s focus should go beyond that, so perhaps the bulk of that can be left for that debate.
The CMA has been considering future issues in the space of competition, and indeed recently published its first horizon-scanning report on 10 trends in digital markets and how they may develop over the next five years and beyond. However, the Government feel that wider issues around the impact of digital technologies on work and workers—those that do not impinge directly on competition for the benefit of consumers—are better dealt with elsewhere.
Amendment 2 would allow the CMA to establish that there is a link to the UK for the purposes of designating a firm with SMS when a digital activity is likely to have a substantial impact on work or work environments in the United Kingdom. The CMA’s objective is, as I say, to promote competition for the benefit of consumers, and it is important that the digital markets regime is focused on competition.
The current criteria to establish a link to the UK ensure that the regime is targeted and proportionate, and draw on similar approaches in other legislation, including Chapter 1 of the Competition Act 1998. However, this amendment would allow the CMA to link a digital activity to the UK on the basis of impacts that are explicitly unrelated to competition. It would therefore detract from the aims of the regime, which are competition focused. It would also be inappropriate for the CMA to assess impacts unrelated to competition, which is its area of expertise and jurisdiction.
Amendments 18 and 23 would ensure that the CMA can require the SMS firm, through conduct requirements, to carry out and share an assessment on wider social impacts. I agree with noble Lords that it is of crucial importance that users are given the information necessary to make informed decisions about the services they use. The current objectives and list of permitted types of conduct requirements have been carefully drafted to ensure that the regime can protect consumers and businesses that rely on SMS firms via targeted and tailored rules. Conduct requirements can be imposed for the purposes of the trust and transparency objective, to ensure that those who use or seek to use the relevant digital activity have the information they need to understand the terms on which the activity is provided. This amendment would go beyond the scope and competition remit of the CMA, potentially creating new burdens and additional complexities, which could slow down effective enforcement.
Amendment 56 would expand the concept of an adverse effect on competition to include the displacement or alteration of work conditions or environments within the United Kingdom. Pro-competition interventions are designed specifically to address the root causes of the substantial and entrenched market power which gives rise to strategic market status. Where adverse working conditions intersect with or create a substantial negative impact on the competition within a particular market or industry, it may be relevant for the CMA to consider these. However, explicitly amending the definition of adverse effects on competition to include workplace conditions would skew the focus of the regulator away from competition and shift PCIs away from the established precedent of the markets’ regime. During a PCI investigation, the CMA may identify actions that other regulators or public bodies would be better placed to act upon. This may include the DMU referring issues such as workplace conditions to a relevant regulator, better placed to deal with these key issues.
Lord Knight of Weymouth (Lab)
Which regulators is the Minister thinking of? I am interested in Clauses 107 and 108, which are about regulatory co-ordination and information sharing, and whether there is something we should do there with those regulators. If he could give us a hint as to which regulators he is thinking of, that would be really helpful.
Viscount Camrose (Con)
I refer to the digital regulators themselves—the ICO or the FCA and Ofcom—or indeed regulators with oversight of employment law.
Amendment 61 would enable the CMA to require algorithmic impact assessments, to assess the impact of algorithms on society and the environment, including working conditions, if it considered such information relevant to its digital markets functions. I agree wholeheartedly with the noble Lord about the importance of understanding the impact of algorithmic systems on society, the environment and working conditions in the UK.
Lord Bassam of Brighton (Lab)
Is the Minister saying that it is up to the CMA to decide whether it is a relevant consideration?
Viscount Camrose (Con)
Yes, I think that I am saying that. The CMA, over the course of its investigations, can come across information beyond its own competitive remit but relevant for other regulators, and then could and should choose to advise those other regulators of a possible path for action.
Lord Knight of Weymouth (Lab)
In that sense, could the CMA ask for an impact assessment on the algorithmic harm that might be carried out? Would that be in the power and remit of the CMA?
Viscount Camrose (Con)
The CMA does have power and remit to request an algorithmic impact assessment. I will take advice on this, because I believe that the algorithmic assessment that it undertakes must be in the direction of understanding anti-competitive behaviours, rather than a broader purpose. I will happily take advice on that.
As the Bill stands, the CMA will already have sufficient investigatory powers to understand the impact of complex algorithms on competition and consumers. The suggested expansion of this power would fall outside the role and remit of the CMA. Moreover, the CMA would not have appropriate tools to address such issues, if it did identify them. The Government will continue to actively look at whether new regulatory approaches are needed in response to developments in AI, and will provide an update on their approach through the forthcoming AI regulation White Paper response.
I thank the noble Lord once again for raising these important issues and hope that he feels able to withdraw the amendment.
Lord Clement-Jones (LD)
I thank the Minister for his considered reply, and thank all those who have taken part in this extremely important and interesting debate, particularly the amplification by a number of noble Lords of some of the issues.
I was very much taken by what the noble Lord, Lord Knight, had to say about the risks for workers—hired, managed, fired. He used the word “dehumanising”, which was very powerful. The noble Baroness, Lady Kidron, referred back to some of the really interesting papers about automation from Osborne and Frey and others over the years, telling us that it is not just Elon Musk but, perhaps I might say, other more serious people who are warning us about the dangers of automation.
At the end of the day, I think the question is how relevant this is to competition. Those of us putting forward and supporting these amendments believe that monopoly, concentration and the power of big tech have the ability to determine working conditions. The Minister talks about this detracting from the CMA’s duties, saying that it is beyond its competition remit and so on. We think it is mainstream; we do not think that it is just an add-on to the CMA’s duties. There is a very strong argument for a wider focus by the CMA.
It feels rather like the Minister is passing the parcel to another regulator. It was instructive that we had to scrabble around at the back end of Clause 107 to see what other regulator might be available to deal with this, but there is nobody to pass this parcel to: this is a direct consequence of concentration and monopoly power. We should include these considerations in what the CMA does. It should have the power to insist on an algorithmic impact assessment.
I think the noble Baroness, Lady Kidron, used the word prescient. We need to be prescient and think forward to the future and the power of the algorithm, artificial intelligence and big tech. Our working population are extremely vulnerable in these circumstances. I do not get the feeling that the Government are really taking their duties to protect them seriously. I am sure that we will have further debates on this. In the meantime, I beg leave to withdraw Amendment 2.
(c) give a copy of the statement to those undertakings that have not been designated as having SMS that are most directly affected.”Member’s explanatory statement
This amendment is one of a series that would ensure that challenger firms are able to access information about the regulatory framework on an equal basis to designated firms.
Baroness Jones of Whitchurch (Lab)
My Lords, in moving Amendment 8, I will also speak to my Amendments 9, 10, 13, 35, 37, 42, 45, 46, 57 and 58. I thank my noble friend Lady Ritchie, the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Harding, for adding their names. The noble Lords, Lord Clement-Jones and Lord Tyrie, have some other amendments in this group to which I will respond at the end of this debate. However, I can confirm that we support the thrust of the noble Lords’ amendments and look forward to hearing their more detailed arguments in due course.
As I made clear at the outset, our concerns with this Bill are mainly about the detail, in particular the changes made by the Government at the very last minute on Report in the Commons. We support the model that is being proposed, although we share some of the concerns that will come up in this debate and in later ones about the extent of the widespread powers that have been given to the CMA and the DMU in respect of the big tech players, in particular their application to those being given strategic market status. The corollary to the decision to introduce this new approach is that the new power should be set out clearly in statute, which is the point that we have made, and that when it is used the DMU will need to be open and transparent to all those who have a legitimate interest.
There must be no question that the smaller challenger firms which—for various understandable reasons—may not be fully informed about discussions and negotiations between the DMU and potential SMS firms need to be able to access information about the regulatory framework and potential changes to it on an equal basis as the firms being considered for SMS status. How else will we achieve the balance that we are all aiming for in this Bill? Our amendments in this and other groups address this issue.
When this came up in the Commons, Minister Saqib Bhatti said:
“the Government agree that it is important that the DMU’s regulatory decisions are transparent and that the right information is available to the public”. —[Official Report, Commons, 20/11/23; col. 74.]
We agree with that. With respect, however, the DMU publishing summaries of decisions reached completely misses the point we are trying to make. The DMU must ensure that it has all the information it needs, including all the information held by challenger firms, before it makes decisions about SMS status and related matters. Challenger firms may have a different view of what SMS means to their businesses and consumers and it is unlikely that they will have perfect information about the DMU’s thinking. They will, however, certainly want to be engaged in the issues if they are made aware of them at the right time.
Many of us attended a helpful meeting with the CMA last week, where this issue was raised. It became clear that it already has good relations with a number of the bigger challenger firms. However, given that it is investigating anti-competitive behaviour, it is also clear that there will be many smaller start-up companies that will never be given a chance to get established because of the behaviour of the big players. We have a real concern about how we can make their voices heard too. We run the danger that the DMU will contact only the people it already knows about and will not hear from those who are perhaps most squeezed out of the process being investigated.
Our suggestion is that the DMU should have a statutory duty to send decision notices to third parties that it assesses are likely to be most affected by such a decision. To us, this does not seem to be unduly burdensome to the DMU. One could argue that a failure to know which challenger firms are likely to be affected could be very injurious to consumers and the economy at large. In the Commons, the Minister said he thought there would be “limited benefits” to introducing this requirement. I do not think the Government have made the case on this point and I hope they will think again. I also hope that they and the Minister will listen carefully to the points made in this debate.
In the last few weeks, we have met and received submissions from many challenger firms concerned about the Government’s position on the issue. They support the Bill but worry about the imbalance, as they fear it will have a deleterious effect on the regime. They have all made it clear that they support our amendments. I hope the Minister will be able to agree with our arguments. We think there is a strong case for involving the challenger firms at an earlier stage and giving them far more information. I would like to hear how and when the Government intend to do that. I beg to move.
Lord Tyrie (Non-Afl)
I declare a number of general interests with respect to this Bill. I am on the advisory board of BSV, a consumer class action being taken against crypto exchanges; I act as a consultant to DLA Piper; I have also had contact with many companies, several platforms and their advisors and many consumer groups about the Bill. As a former chairman of the CMA, I had a significant hand in constructing large parts of it. It is important that others bear in mind that anything I say on this is from the perspective of having been there for enough time to have taken too many of its ideas to heart. In fact, I have been lobbied in all directions on this Bill and for so long that I am losing count of which direction the lobbies all come from.
Baroness Harding of Winscombe (Con)
My Lords, I support Amendments 8, 9, 10, 13, 35, 37, 42, 44, 45, 46, 57 and 58 in the name of the noble Baroness, Lady Jones of Whitchurch, to which I have added my name. I list them all because the very fact that there are so many amendments to make what is actually quite a simple point shows the scale of the inequality of arms between the potential strategic market status firms and the firms that are detrimentally affected by them.
From looking at the detail it is clear that there are opportunities in the Bill for an SMS firm to comment at the outset and throughout an SMS designation investigation, at the drafting of a conduct requirement, in a conduct investigation and in a PCI investigation. Those affected can comment only at the latter public consultation stage. There is a real risk that the CMA will take decisions without the involvement, insight and information of non-SMS firms.
Like other noble Lords, I attended the very helpful briefing with the Minister and the CMA last week. When challenged on this, the CMA representatives told us that they agreed that there was an inequality of arms, that it was really important to do everything possible to balance it, and that they, with the best intent, intended to do that. They also acknowledged some commercial issues, where there may well be information that the SMS firms share that they should not share with commercial counterparties. Essentially, the CMA leadership—I say this without any judgment on them—told us to rely on the “good chap” theory of government and to trust their best intentions. That is really quite dangerous, given the sheer gulf in that inequality of arms.
So we might not have got the right wording in this long list of amendments, but this is a really important principle. I have deep respect for all the officials in the CMA, as my noble friend Lord Tyrie has just said, but this is a very hard balancing act that we will be asking them to undertake. Having played this game on the other side, I say that we should have no illusions: all companies spend a lot of time trying to influence the regulator that regulates them. If we do not ensure that there is an equality of arms in that process, we will be setting the CMA up to fail.
Lord Vaizey of Didcot (Con)
My Lords, I support these amendments as well. This is a terrifying prospect; I hate taking part in Bill Committees, because it is so hard to navigate where the amendments are, but I feel more courage following my noble friend Lord Tyrie, with his practical suggestions, and my noble friend Lady Harding, with her overview and common-sense approach to these amendments. In effect, she said exactly what I want to say. Trying to amend different clauses to get the effect we want is a slightly artificial process. As we know, these amendments in Committee are, in effect, devices to get across the fundamental point.
Some kind words were used about potential SMS companies and the platforms, but we all know that what we are debating is an attempt to bring about equality in the arms race when it comes to levelling the playing field as far as competition is concerned. When my noble friend Lady Harding spoke to earlier amendments, she talked about companies being afraid to put their names to concerns. That really shone a spotlight on the situation that currently prevails, which is, in effect, a duopoly of two platforms that can decide whether start-ups and apps live or die—or, indeed, how much profit they potentially make.
I support the principle of these amendments. How one gets from A to B is potentially a very difficult route, but I hope that the Minister will say in his reply that he understands the mood of the Committee. Can we find a way to extricate ourselves from the current process whereby, understandably, the SMS company is presented with the case against it and goes off to answer it? To a certain extent, it is kept within a relatively closed circle, in a very legalistic way, when the accused is in the dock. Can one broaden that out to allow the challenger companies that may have prompted the investigation to know exactly what the CMA thinks are substantial points that it wants to take forward, which could potentially be points that they wish to take action on? That might also encourage other challenger companies that may not be aware of the investigation or, indeed, the details of the investigation to come through with their own material evidence.
Baroness Kidron (CB)
My Lords, I do not actually have much to add to the excellent case that has already been made, but I, too, was at the meeting that the noble Baroness, Lady Jones of Whitchurch, mentioned, and noticed the CMA’s existing relationships.
Quite a lot has been said already, on the first group and just now, about lobbying—not lobbying only in a nasty sense but perhaps about the development of relationships that are simply human. I want to make it very clear that those words do not apply to the CMA specifically—but I have worked with many regulators, both here and abroad, and it starts with a feeling that the regulated, not the regulator, holds the information. It goes on to a feeling that the regulated, not the regulator, has the profound understanding of the limits of what is possible. It then progresses to a working relationship in which the regulator, with its limited resources, starts to weigh up what it can win, rather than what it should demand. That results in communities that have actually won legal protections remaining unprotected. It is a sort of triangulation of purpose, in which the regulator’s primary relationship ends up being geared towards government and industry, rather than towards the community that it is constituted to serve.
In that picture, I feel that the amendments in the name of the noble Baroness, Lady Jones of Whitchurch, make it clear, individually and collectively, that at every stage maximum transparency must be observed, and that the incumbents should be prevented from holding all the cards—including by hiding information from the regulator or from other stakeholders who might benefit from it.
I suggest that the amendments do not solve the problem of lobbying or obfuscation, but they incentivise providing information and they give challengers a little bit more of a chance. I am sure we are going to say again and again in Committee that information is power. It is innovation power, political power and market power. I feel passionately that these are technical, housekeeping amendments rather than ones that require any change of government policy.
Lord Clement-Jones (LD)
My Lords, it is a pleasure to follow the noble Baroness, Lady Kidron, whose speech segues straight into my Amendments 14 and 63. This is all about the asymmetry of information. On the one hand, the amendments from the noble Baroness, Lady Jones, which I strongly support and have signed, are about giving information to challengers, whereas my amendments are about extracting information from SMS undertakings.
Failure to respond to a request for information allows SMS players to benefit from the information asymmetry that exists in all technology markets. Frankly, incumbents know much more about how things work than the regulators. They can delay, obfuscate, claim compliance while not fully complying and so on. By contrast, if they cannot proceed unless they have supplied full information, their incentives are changed. They have an incentive to fully inform, if they get a benefit from doing so. That is why merger control works so well and quickly, as the merger is suspended pending provision of full information and competition authority oversight. We saw that with the Activision Blizzard case, where I was extremely supportive of what the CMA did—in many ways, it played a blinder, as was subsequently shown.
We on these Benches consider that a duty to fully inform is needed in the Bill, which is the reason for our Amendments 14 and 63. They insert a new clause in Chapter 2, which provides for a duty to disclose to the CMA
“a relevant digital activity that may give rise to actual or likely detrimental impact on competition in advance of such digital activity’s implementation or effect”
and a related duty in Chapter 6 ensuring that that undertaking
“has an overriding duty to ensure that all information provided to the CMA is full, accurate and complete”.
Under Amendment 14, any SMS undertaking wishing to rely on it must be required to both fully inform and pre-notify the CMA of any conduct that risks breaching one of the Bill’s objectives in Clause 19. This is similar to the tried-and-tested pre-notification process for mergers and avoids the reality that the SMS player may otherwise simply implement changes and ignore the CMA’s requests. A narrow pre-notification system such as this avoids the risks.
We fully support and have signed the amendments tabled by the noble Baroness, Lady Jones. As techUK says, one of the benefits that wider market participants see from the UK’s pro-competition regime is that the CMA will initiate and design remedies based on the evidence it gathers from SMS firms in the wider market. This is one of the main advantages of the UK’s pro-competition regime over the EU DMA. To achieve this, we need to make consultation rights equal for all parties. Under the Bill currently, firms with SMS status, as the noble Baroness, Lady Harding, said, will have far greater consultation rights than those that are detrimentally affected by their anti-competitive behaviour. As she and the noble Lord, Lord Vaizey, said, there are opportunities for SMS firms to comment at the outset but none for challenger firms, which can comment only at a later public consultation stage.
It is very important that there are clear consultation and evidence-gathering requirements for the CMA, which must ensure that it works fairly with SMS firms, challengers, smaller firms and consumers throughout the process, ensuring that the design of conduct requirements applies to SMS firms and pro-competition interventions consider evidence from all sides, allowing interventions to be targeted and capable of delivering effective outcomes. This kind of engagement will be vital to ensuring that the regime can meet its objectives.
We do not believe that addressing this risk requires removing the flexibility given by the Bill. Instead, we believe that it is essential that third parties are given a high degree of transparency and input on deliberation between the CMA and SMS firms. The CMA must also—and I think this touches on something referred to by the noble Baroness, Lady Jones—allow evidence to be submitted in confidence, as well as engage in wider public consultations where appropriate. We very strongly support the amendments.
On the amendments from the noble Lord, Lord Tyrie, it is a bit of a curate’s egg. I support Amendments 12A and 12B because I can see the sense in them. I do not see that we need to have another way of marking the CMA’s homework, however. I am a great believer that we need greater oversight, and we have amendments later in the Bill for proposals to increase parliamentary oversight of what the CMA is doing. However, marking the CMA’s homework at that stage is only going to be an impediment. It will be for the benefit of the SMS undertakings and not necessarily for those who wish to challenge the power of those undertakings. I am only 50% with the noble Lord, rather than the whole hog.
Viscount Camrose (Con)
I thank both noble Lords for speaking and for their thoughtful contributions. I will start by considering the amendments tabled by the noble Baroness, Lady Jones of Whitchurch, relating to information and transparency.
It is important to state from the outset that the Government agree it is vital that the Digital Markets Unit’s decisions are transparent and that the right information is available publicly. Currently, the DMU would be required to publish the key information related to its investigations in the summaries of its decisions. The amendments in this group, beginning with Amendment 8 and ending with Amendment 58, tabled by the noble Baroness, would create a new requirement for the DMU to send decision notices to firms that it assesses to be the most affected by decisions.
We agree it is vital that the DMU's decisions are transparent, and the appropriate information is accessible publicly. That is why the DMU is required to consult publicly before it imposes obligations such as conduct requirements or pro-competition orders. This gives third parties the opportunity to make representations on the design of interventions. While the precise nature of the consultation process is at the DMU’s discretion, we are aware of the imbalances in resources between different firms, as noble Lords have raised.
In its recently published overview, the CMA highlighted that engaging with a wide range of stakeholders will be a core principle of their approach. We therefore expect the DMU to put appropriate mechanisms in place for third parties to feed in. The consultation requirements are minimum requirements. As the CMA set out earlier this month, the DMU will undertake fair, inclusive and transparent engagement with third parties when designing its interventions. The participative approach will ensure that obligations are effective and appropriate, while minimising undue burdens and avoiding unintended consequences for both SMS firms and third parties.
However, requiring the DMU to identify appropriate third parties and send notices for each decision would introduce a significant burden on the DMU for minimal benefit. I think this will be a theme as we go through Committee: the burdens created by some of the proposed amendments are greater than they initially seem. For example, it could mean sending notices to potentially thousands of interested third parties in the case of app developers in the activity of app stores. Given this and the fact that the CMA will publish key information related to its decisions, we feel the burden would outweigh the benefit.
Amendment 14, tabled by the noble Lord, Lord Clement-Jones, would require SMS firms to inform the CMA before launching a digital activity that may give rise to competition issues. The Government agree that it is important that the CMA has access to information on potential competition issues in digital markets as they emerge. However, the CMA already has robust information-gathering powers under Part 1, supported by appropriate penalties for non-compliance. This amendment would create new burdens on the CMA, which could potentially be inundated with information. As a result, rather than focusing on priorities, the regulator would have to expend resources sifting the information provided. Further, it could introduce undue burdens on SMS firms looking to introduce innovative new products and services in areas that have healthy competition. It is important that obligations within the regime do not dissuade firms from developing innovations that are beneficial to consumers. I hope that sets out the position to the noble Lord.
Lord Vaizey of Didcot (Con)
I am interested in my noble friend’s point about the idea that allowing challenger firms to put in evidence to the CMA would overwhelm it with too much information that it could not cope with. Two points spring to mind. First, when you bring a case against an SMS the workload is unbelievable anyway—it is enormous—and these cases go on for years, so it strikes me that additional information from challenger firms would not unduly add to the CMA’s burden. Secondly, if my noble friend will forgive me, it seems a relatively casual phrase. I do not know whether there has been any analysis of the kind of information the CMA would expect to receive, but surely information that it received from challenger firms would simply allow it to present a much more robust case, rather than it being overwhelmed by paperwork.
Lord Clement-Jones (LD)
My Lords, so that the Minister does not have to stand up a second time, I will just add the other side of the coin to the question from the noble Lord, Lord Vaizey. The Minister seems very concerned about the workload within an SMS, but they are an SMS for a reason.
Viscount Camrose (Con)
I thank noble Lords for raising those points. My response to them both is that the key is that we are trying to set a balance between the workloads—the work that has to be performed by the regulator—and the benefit of that work for competition. We can certainly come up with examples. I shared the example of how many app developers there are and how many of them would have to exchange information with the regulator, but perhaps it would be more helpful to the Committee if I committed to giving a slightly deeper analysis of what the CMA estimates would be the time consumed on such activities and why we are concerned that it would have the potential to detract from the core basis of its mission.
Baroness Harding of Winscombe (Con)
The challenger app developers are, in essence, the customers here, so I am quite worried that I think I am hearing that the regulator cannot cope with customer feedback, whereas that is probably the most important feedback in its process. We are looking for a way of enshrining that in the legislation that does not create some overwhelming burden. To say that customers will overwhelm the regulator with feedback is back to front: they are the people that the competition regulator should most want to hear from.
Viscount Camrose (Con)
In that example, I would cast the app developers as participants in the ecosystem and the customers as the users of the app, but that is perhaps an ontological problem. Perhaps the most straightforward thing, to satisfy the Committee’s concerns that we are not idly throwing out the possibility of an overworked regulator, would be to provide the Committee with a greater analysis of why we believe we have to be careful with what information we ask them to exchange with interested parties to avoid the situation in which the paperwork exceeds the value work.
Lord Clement-Jones (LD)
My Lords, would the Minister also agree to add the whole question about the overworked SMS in his response?
Viscount Camrose (Con)
Yes. The point is that we are very happy for these firms to keep delivering innovative new products in competitive markets; we are less happy about them spending their time frustrating the will of the regulator. It is more difficult for me to comment on SMS workloads but I am very happy to comment on the regulators’ workloads.
Lord Clement-Jones (LD)
My Lords, the foundation of the Minister’s argument is SMS workload. The issue is exactly the point that the noble Baroness, Lady Kidron, made about information being power. The SMS companies will know what they are developing. They have huge teams of developers and marketeers, and they have huge amounts of information. This is a question of the CMA trying to keep abreast of what is happening in markets which are dominated by SMS companies, so it is important that there is a proactive duty on the SMS undertaking to give information to the CMA. Maybe the Minister could, as part of this letter, explain how many people there are whose job it is to gather information from the SMS companies—maybe that is the right way around—so we can judge whether it is right to require an SMS proactively to deliver information to the CMA.
Viscount Camrose (Con)
Indeed. I am happy to include such analysis in my letter. However, I observe that were I to put myself in the SMS’s shoes and I had a desire to frustrate the will of the regulator, my approach would be to provide far more information than was necessary and create a significant burden on the regulator to sift that information. Any such request or any such standing order about the information coming from the SMS to the regulator must itself be quite carefully balanced.
Lord Clement-Jones (LD)
My Lords, all the SMS has to do is put it through one of its large language models, and hey presto.
Baroness Kidron (CB)
I am losing track of the conversation because I thought we were asking for more information for the challenger companies. rather than this debate between the SMS and the regulator. Both of them are, I hope, well resourced, but the challenger companies have somehow been left out of this equation and I feel that we are trying to get them into the equation in an appropriate way.
Lord Clement-Jones (LD)
That is not incompatible. These are two sides of the same coin, which is why they are in this group. I suppose we could have degrouped it.
Viscount Camrose (Con)
Indeed, and I apologise for getting slightly sidetracked on the issue. I think the outcomes we want are that challenger tech firms should be duly informed about the information they need, whether to rebut claims set out by an SMS or to understand the implications and contribute to the process of determining what interventions the regulator should need to make. In the Bill, we are trying to develop the machinery that balances both sides of that equation most effectively, and I remain concerned that we need to manage the workload requirements of the regulator so that it is optimally focused on delivering the right outcomes based on the right information.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken. We have had an excellent debate. I very much respect the experience of the noble Lord, Lord Tyrie, on this issue. I agree that there is a challenge for us in building trust in the new regime. It is a leap in the dark and, undoubtedly, we are giving the CMA/DMU considerable new powers, so it must prove its worth and prove that our faith in it is justified. I agree that there is a danger of getting that balance wrong. During the passage of the Bill, we will look at other ways of getting parliamentary and other oversight of its activities, to ensure that we get the balance in check.
I also agree that it is important that we maintain commercial confidentiality. This is an issue about sharing information, which we were just talking about. However much information is shared, we must ensure that those who are sharing it—sometimes it is very much core to their business model—respect it and do not put it in the public domain. All that must underpin our debate.
I agreed with the noble Lord, Lord Clement-Jones, that the proposals from the noble Lord, Lord Tyrie, were a curate’s egg; I was not sure either about the independent case reviewer. I worry that it would be another loophole, or hurdle, that would allow the lawyers a field day. The noble Lord, Lord Tyrie, put it there with the very best intentions, and I am happy that we talk about it, but I am not sure about it. It worries me that we are being too prescriptive by setting it out in so much detail in the Bill, but let us get that right because there will, I hope, be other opportunities to debate this.
I thank the noble Baronesses, Lady Harding and Lady Kidron, and the noble Lord, Lord Vaizey, for their support on my amendments. The noble Baroness, Lady Harding, said it very well: the amendments illustrate the inequality of arms between the SMS and the challenger firm. There will be a wealth of evidence that the CMA needs to consider. That will be a whole lot of major anti-competitive practices, a lot of which it already knows about, but there will also be some of the more minor inconveniences that are put upon some of the challenger firms. We have met with a lot of the stakeholders; sometimes what is so annoying is the irritating, almost vindictive little actions, because you have the temerity to put your hand up and say that you do not agree with the major companies. We must ensure that we capture all of that in the round, and that it is not just the major known knowns that the CMA considers.
The noble Baroness, Lady Kidron, made the point very well: there is a danger that, based on what it knows, the CMA will make assumptions about what it can win, rather than getting under the skin of what is really going on and what is right for the consumer in all this. To get under the skin, the CMA will need a lot of information, so we must ensure that it gets the right information, at the right time, from the right people. The noble Baroness and the noble Lord, Lord Clement-Jones, made the point that, as it is set out at the moment, the incumbents have all the cards. We need transparency of information to rebalance the scales in all this.
I have listened carefully to the Minister’s response. He said that the DMU is required to consult publicly before decisions are implemented, but that is probably too late to influence the outcome. By the time that it is consulting publicly, it has already made its mind up. I am not sure that that is the right point at which that major flow of new information needs to take place. The Minister argued that the burden of sending notices to thousands of parties, et cetera, would outweigh the benefit. That is exactly the information that it needs, and the noble Baroness, Lady Harding, made that point. If we have to bite that bullet, let us bite that bullet. If that is what it takes to rebalance the scales then we need to do that.
I fully admit that we might not have got the wording right to achieve that, but I think the principle is right and I am prepared to dig in on that principle. I hope we can have a further discussion on it. I think we know what we want to do. Nobody wants the SMS companies to flood the CMA with so much information that everybody drowns. We have to get it right so that it gets the right information. I do not think we have the balance right at this time, but let us talk about it some more. In the meantime, I beg leave to withdraw my amendment.
Lord Offord of Garvel
“(A1) Where the CMA decides as a result of an initial SMS investigation not to designate the undertaking to which the investigation relates as having SMS in respect of a digital activity to which the investigation relates, the SMS decision notice must include the CMA’s reasons for its decision.”Member’s explanatory statement
This amendment provides that the CMA must give reasons when it decides not to designate an undertaking following an initial SMS investigation.
Member’s explanatory statement
This amendment is consequential on my first amendment to Clause 15.
The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)
Before I call Amendment 15, I should tell your Lordships that if Amendment 15 is agreed to, I cannot call Amendments 16 to 18 for reasons of pre-emption.
Clause 19: Power to impose conduct requirements
Amendment 15
Lord Holmes of Richmond
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to take part in this first day of Committee on the Bill. As it is my first time speaking in Committee, I declare my technology interests as set out in the register, not least as an adviser to Boston Limited. In moving Amendment 15, I will also speak to Amendment 24, and I am very interested in the other amendments in this group.
Much of the discussions so far rest on the most important point of all when it comes to legislating. It reminds me of many of the discussions that we had in this very Room last year on the Financial Services and Markets Bill, as it was then, about accountability, the role of the Secretary of State and the role of the regulators. Much of this Bill as drafted, if not a pendulum, simultaneously swings significant powers to the regulator, and indeed to the Secretary of State. But the question that needs continually to come up in our deliberations in Committee and beyond is where Parliament is in this process. We hear every day how the physical building itself is crumbling, in need of desperate repair and in need of a decant, but, when it comes to this Bill, Parliament has already disappeared.
There is a massive need for accountability in many of the Bill’s clauses. Clause 19 is just one example, which is why my Amendment 15 seeks to take out a chunk of it to help in this process. Later in Committee, we will hear other amendments on parliamentary accountability. It is not only essential but, as has already been mentioned, goes to the heart of a trend that is happening across legislation, in different spheres, where huge powers are being given to our economic regulators without the right level of accountability.
What we saw as one of the major outputs of FSMA 2023, as it now is, was a new parliamentary committee: the financial services and markets committee. In many ways, you can see this as a process that may happen repetitively, but positively so, across a number of areas if this approach to legislation is perpetuated across those areas when it comes to competition. I look forward to my noble friend the Minister’s response to my Amendment 15 on that issue.
I move on to Amendment 24, which concerns a very different but critical area. It seeks to amend Clause 20, which makes brief mention of the accessibility of the information pertaining to these digital activities but is silent on the accessibility of the digital activities themselves. Does my noble friend the Minister agree that we need more on the face of the Bill when it comes to accessibility? With more services—critical parts of our lives—moving on to these digital platforms, it is essential that they are accessible to all users.
I use the term “user” deliberately because, as we have heard in previous debates, there is a great need for clarity around this legislation. “User” is used—indeed, peppered—throughout the legislation. This is right in that “user” is a term of art that would be understood across the country; however, it does not appear in the title of the Bill, which is at least interesting. We must ensure that all users or consumers are able to access all these digital platforms and services fully. Let us take banking as an example. It is far more difficult to get face-to-face banking services and access to cash, so much more is moved online. However, if those services are not accessible, what use are they to people who have been physically excluded and are now being financially and digitally excluded in the digital space?
When it comes to sporting events, mention has been made of sport in our debates on earlier amendments. I think everyone in the Committee would agree that VAR has not demonstrated technology at its brightest and best in the sporting context. I wonder whether, if we completely turned referees into bots, there would be questions about the visual acuity of the bot on the decisions that it similarly made when it went against our team. If we are to have so many ticketing services for sporting, musical and cultural events available largely, if not exclusively, online—and if, at the front end of that process, there is the all-too-familiar CAPTCHA, which we must go through to prove that we are not yet a bot—what will happen if that is not accessible? We will not get tickets.
I put it to my noble friend the Minister that there needs to be more in Clause 20 and other parts of the Bill around the accessibility of those digital services, activities and platforms. If we could fully embrace the concept of “inclusive by design”, this would evaporate as an issue. I beg to move.
Lord Clement-Jones (LD)
My Lords, this is quite a group of amendments. Clearly, it will take a bit of time to work our way through all of them. It is a pleasure to follow the noble Lord, Lord Holmes, who is so knowledgeable about digital aspects—I thought that he would slip stuff about the digital aspects of sport into his introduction.
I am in curate’s egg country, as far as the two amendments in the name of the noble Lord are concerned. I am not quite sure about Amendment 15, but I look forward to the Minister’s response. I think Amendment 24 is absolutely spot on and really important. I hope that the noble Lord succeeds in putting it into the Bill, eventually.
I will start by speaking to Amendments 21, 28 and 55 on interoperability, Amendment 30 on copyright and Amendment 20 in the name of the noble Lord, Lord Lansley. I will refer to Amendment 32 in the name of the noble Viscount, Lord Colville, but I will not speak on it for too long, because I do not want to steal his thunder. If possible, I will also speak to the amendments in the names of the noble Baroness, Lady Jones, and the noble Lord, Lord Vaizey, on leveraging. They are crucial if the Bill is to be truly effective.
Interoperability is the means by which websites interoperate, as part of the fundamental web architecture. Current problems arise when SMS players make browser changers and interfere with open web data, such as header bidding, which is used for interoperability among websites. Quality of service and experience can be misused for the benefit of the platforms; they can degrade the interoperability of different systems or make video or audio quality either higher or lower for the benefit of their own apps and products.
At Second Reading, my noble friend Lord Fox reminded us that Professor Furman, in evidence in Committee in the Commons, said that intervention on interoperability is a vital remedy. My noble friend went on to say that interfering with interoperability in all its forms should be policed by the CMA, which should be
“proactive with respect to promoting international standards and aiming to create that interoperability: for a start, by focusing on open access and operational transparency, working for standards that allow unrestricted participation and favouring the technologies and protocols that prevent a single person or group amending or reversing transactions executed and recorded”.—[Official Report, 5/12/23; col. 1396.]
At my noble friend’s request, the Minister, the noble Viscount, Lord Camrose, followed up with a letter on the subject on 7 December. He said:
“Standards are crucial to building the UK’s economic prosperity, safeguarding the UK’s national security, and protecting the UK’s norms and values. The Government strongly supports a multi-stakeholder approach to the development of technical standards, and it will be important that the CMA engages with this process where appropriate. The UK’s Plan for Digital Regulation, published in 2021, confirms the importance of considering standards as a complement or alternative to traditional regulation”.
It is good to see the Minister’s approach, but it is clear that there should be a stronger and more explicit reference to the promotion of interoperability in digital markets. The Bill introduces an interoperability requirement under Clause 20(3)(e) but, as it stands, this is very vague. Interoperability should be defined and the purpose of the requirement should be outlined; namely, to promote competition and innovation, so that content creators can provide their services across the world without interference and avoid platform dependency.
I move to Amendment 30. Breach of copyright online is a widespread problem. The noble Baroness, Lady Kidron, referred to the whole IP issue, which is increasing in the digital world, but the current conduct requirements are not wide enough. There should be a simple obligation on those using others’ copyright to request the use of that material. As the NMA says, the opacity of large language models is a major stumbling block when it comes to enforcing rights and ensuring consumer safety. AI developers should be compelled to make information about systems more readily available and accessible. Generative outputs should include clear and prominent attributions, which flag the original sources of the output. This is notable in the EU’s proposed AI Act.
This would allow citizens to understand whether the outputs are based on reliable information, apart from anything else.
If publishers are not fairly compensated for the use of the content by generative AI systems in particular—I look towards the noble Lord, Lord Black, at this point—and lose audiences to them, it will harm publisher sustainability and see less money invested in quality journalism. In turn, less trusted content will be available to train and update AI systems, harming innovation and increasing the chance that these systems produce unreliable results.
Lord Lansley (Con)
My Lords, this is a substantial group of amendments. I have two amendments in the group to which I wish to speak: Amendments 20 and 29. I am grateful to the noble Lord, Lord Clement-Jones, for signing them. I will also discuss a number of other amendments later.
We are dealing with the structure of Clauses 19 and 20. Clause 19 has a set of objectives that conduct requirements are intended to achieve. My noble friend Lord Holmes of Richmond’s Amendment 15 effectively asks us to examine what the purpose of the objectives are. It is quite an interesting question. The objectives are not translated directly into the conduct requirements; the conduct requirements are intended to achieve the objectives. Setting out the broad range of objectives might be regarded as a way of enabling the Competition and Markets Authority to have a broader scope when setting its conduct requirements. Equally, there is a risk that if the scope of the conduct requirements is not specified in Clause 20 and they rely on Clause 19 and the broad-ranging objectives, they will be opened up to challenge as to the meaning of them. We need to be careful.
I come at this from the standpoint that the Digital Markets Act in the European Union does not set objectives in quite that way. It sets not broad objectives but a large number of detailed obligations on what it calls gatekeepers—effectively the same as our designated undertakings for these purposes. We are going down the different route of setting broad objectives and a broader description of conduct requirements. The Competition and Markets Authority will then go on to specify in detail what those conduct requirements look like in relation to any particular designated undertaking to achieve the objectives. That is a better way of doing things.
My two amendments—I will comment on one or two other amendments to the same effect—are asking whether Clause 20 gives the Competition and Markets Authority the necessary scope of powers to achieve what it wants to achieve by setting conduct requirements. Clause 20 is divided into two parts: the things that are positively required to be done by designated undertakings and the things that designated undertakings should be prevented doing. It is important to have those two bits in mind.
I have to confess that I have used the mechanism of looking at our own legislation through the scope of other legislation before, and Amendment 20 to Clause 20 is no different. I looked at the Digital Markets Act and it sets out a lot of detailed obligations. I then asked myself: to what extent do I feel comfortable that what is in Clause 20 gives the CMA the power to do this thing if it wishes to do it?
People are not likely to argue about the fact that data itself is central to this process. When it sets obligations for gatekeepers, Article 5 of the Digital Markets Act starts with a set of obligations related to the ways in which the personal data of users of services can be taken and used. Article 6 talks about the circumstances in which data may be portable and the portability of data between and among gatekeepers and users. Article 6(11) sets out the circumstances under which gatekeepers may or may not access third-party data provided to them as a consequence of users of their undertakings. Article 7 consists entirely of obligations on gatekeepers in relation to the interoperability of number-independent interpersonal communication services.
These are all detailed obligations relating to data access. Whose data can they access and how can they use it? How can they port data between different users and themselves? They are also about the interoperability between and among the users of their services.
I have looked at Clause 20, and the noble Lord, Lord Clement-Jones, was right: there is a provision which restricts interoperability. It is in that bit which prevents undertakings doing things that they should not do. It says that they should not restrict interoperability, but there is no corresponding positive conduct requirement which says that they should be promoting interoperability. This is where the noble Lord and I are coming from, in relation to our Amendments 20 and 21, if I remember correctly.
The point is to secure data access, interoperability and data portability. My amendment is designed to put into that first, positive set of conduct requirements that those should all be things where the CMA has the ability to make what are, effectively, positive conduct requirements upon undertakings to ensure that they enable the market to function more competitively and more efficiently. That is Amendment 20.
Why do I not rely in Amendment 20 or Amendment 21 on the other reference to data, which is in Clause 20(3)(g)? That provision means that requirements may be
“for the purpose of preventing a designated undertaking from … using data unfairly”.
This is very dangerous. We have reached the point where data is a central issue, yet Clause 20 hardly specifies the various ways in which data should be at the core of these conduct requirements. The only reference that we are really relying on for many of these issues is that it should not be used “unfairly”. That is not enough. I am not taking that out, but let us leave in “using data unfairly” and add to it.
Where we add to it is not least in Amendment 29, which, after saying that they should not use data unfairly, would insert
“or using data that is not publicly available which is generated or provided by users of the relevant digital activity in the context of their use of the relevant digital activity”.
I use that language because it is a shorter version of what is in Article 6.2 of the EU regulations, which says that a gatekeeper should not use
“in competition with business users, any data that is not publicly available that is generated or provided by those business users in the context of their use of the relevant core platform services”.
It seemed to me that there was a particular extension of this question of the unfair use of data, which is where they take data from their platform users and use it for themselves. That is what we are trying to restrict and, broadly speaking, what the Digital Markets Act tries to restrict. These two amendments, from my point of view, are about putting data firmly into the conduct requirements, specifying how data is important and where positive requirements may be put, and being specific about the unfair use of data, when data that other users put on the platform is taken for their own use.
On other amendments, briefly, Amendments 22 and 32 would give the CMA the power to vary the scope of conduct requirements in future, rather than relying on the Secretary of State to do so—but of course with parliamentary approval. There is an argument which says, “At least we have an opportunity to examine any change in the scope of conduct requirements if we leave that in”, so I am afraid I do not support that.
The noble Lord, Lord Clement-Jones, made an interesting set of points about copyright. That is very important and it is quite hard to see where it lies in here, unless it were under trade on fair and reasonable terms. However, it will require the CMA to look and ask, “Do fair and reasonable terms lead us to set conduct requirements for designated undertakings relating to, for example, copyright terms?”. It might perhaps be worth us exploring whether it should.
There are one or two other things. I support Amendment 34, which raises a valuable question about taking account of the impact of conduct requirements before making pro-competitive interventions. Otherwise, I just make the general point that I hope, through Amendments 20 and 29, we might put the importance of data firmly into the structure of conduct requirements for designated undertakings.
Viscount Colville of Culross (CB)
My Lords, I tabled Amendment 32 in my name, and I thank the noble Baroness, Lady Jones, and the noble Lord, Lord Clement-Jones, for adding their names. I also thank the organisations that helped me work on these amendments. Amendment 32 to Clause 20 would stop the Secretary of State from revising the criteria for the conduct requirement process. These criteria are already very broad, but subsections (4) and (5) give the Minister huge scope to alter the types of behaviour expected from the SMS as part of the CR process.
Amendment 22, in my name and that of the noble Lord, Lord Clement-Jones, aims to respond to government concerns about removing Clause 20(4) and (5), which are that it will prevent the Minister future-proofing the CR criteria by allowing the CMA leeway to alter criteria in Clause 19, which will open the way for the imposition of conduct requirements.
I also support attempts to encourage interoperability between user and digital activity in any way possible, so I support Amendment 20, in the name of the noble Lord, Lord Lansley, and Amendment 21, in the name of the noble Lord, Lord Clement-Jones.
On my Amendment 32 in Clause 20, the conduct requirements for the process will be hard-fought by the tech companies. The collaborative nature of the Bill will mean that the SMS will be very involved in setting up the regime, but it will also be following every possible avenue to ensure that the requirements are not burdensome to its businesses. However, subsection (4) gives the Secretary of State broad and unlimited time to be subject to lobbying and to change the nature of the contact requirements.
I have already given an example in my speech on Amendment 7 to show the lengths to which tech companies will go to affect the decisions of politicians in establishing an SMS designation. This amendment will have a similar effect of thwarting their attempts to interfere in the CR process. Over the last decade, a number of cases have been brought against the big tech companies by the EU anti-competitive regimes. As part of that process to rectify the anti-competitive behaviour, the regulators have laid out behaviour for the companies under investigation. These are sets of rules aimed to force the companies to change their conduct and reduce their dominance in the market.
The process is very complicated, and small tweaks can make the difference between success and failure of the rules and their ability to control anti-competitive behaviour. Implementation takes time. Consultation on the rules between the DMU, the SMS and other stakeholders can mean it takes up to six months to put into action, then it takes another several months before the market study on how the new conduct regime criteria are working can be assessed. In the meantime, the SMS continues to make huge profits, while the smaller competitors continue to suffer the loss of market activity.
My concern about the clause is that, even if the CMA comes across a new type of harm and can see clearly what remedy would apply, it cannot create its own remedy under the clause. This is most unusual for a regulatory body. Usually, the breach of law is investigated, and the remedy tailored by that body to proportionately fit the harm identified. The regulator is usually granted the power to craft the remedy itself.
The Government are keen to build a system which is speedy and effective, and so there is the list of tools that can be used as remedies in Clause 20, which is useful, but, instead of a speedy, sensible mechanism which would be in the hands of the expert regulator of digital markets, an additional step has been put in place. That additional step—going back to the Secretary of State to create regulations—is a slower and more complicated way to craft this remedy. The DMU must be left to use its professional expertise to set these rules.
At a later stage, we will be talking about the suggestion of the noble Baroness, Lady Stowell, to have some parliamentary committee involvement. I wonder why on earth we cannot have parliamentary committee involvement when looking at these particular Secretary of State powers and the way that the DMU would use them.
To deal with the concerns that the Minister might have about the lack of future-proofing, I also tabled Amendment 22. Its aim is to respond to claims by the Government that the removal of Secretary of State powers in Clause 20 will stop the future-proofing. Noble Lords know that, in the fast-changing digital world, even the most comprehensive list of criteria might not include all possible eventualities; my amendment deals with those concerns. It stems from the powers of the CMA to look at the objectives of the conduct requirements in Clause 19(5), which are comprehensive: they cover “fair dealing”, “open choices” and “trust and transparency”. Only conduct requirements of the permitted type in Clause 19(5) can be imposed under Clause 20 on the CR regime.
Clause 20 is currently a permitted list for the regime; in future, the CMA may want to change the criteria needed to achieve the objectives of Clause 19(5) as markets inevitably change. I suggest to noble Lords that Amendment 22 will achieve that. I have argued that the fear of the Secretary of State succumbing to the lobbying powers of the big tech companies is something to worry about. This small amendment will solve that problem and give flexibility to the CR process, without the danger of political interference.
Baroness Stowell of Beeston (Con)
My Lords, as this is the first time I have spoken in Committee, I declare that I chair the Communications and Digital Select Committee—but I am speaking in a personal capacity. This is quite an eclectic group of topics; it makes me wonder what will be in the group labelled “miscellaneous”.
I will talk about the leveraging principle, but before doing so, I acknowledge what has already been said about parliamentary accountability and the fact that I have an amendment in a later group. To pick up a point that the noble Viscount, Lord Colville, just made about his amendment to Clause 20, if we were to have a new Select Committee, there is no reason why, in the course of its business, it would not look at regulations being brought forward. I would expect there to be that sort of role for a Select Committee, but it would not replace the role of the Secretary of State in this context. We will come back to that when we get to the specific amendment.
The amendment on copyright is very interesting to me, not least because the Communications and Digital Committee is currently carrying out an inquiry on large language models. We are in the final stages of that inquiry and will publish our report very soon. We will have, I hope, some interesting things to say about copyright at that time.
I turn to my point on the leveraging principle; in particular, I will pick up on Amendments 26 and 27 in the name of the noble Baroness, Lady Jones. When the Communications and Digital Committee carried out our scrutiny of the Bill and held hearings in the summer, we looked at the leveraging principle and concluded that what was in the Bill was adequate; we did not propose any further changes being necessary. Noble Lords may remember that, at Second Reading, I raised concerns about how the Government had diluted various bits of the Bill that we, as a committee, had said, “Do not do that”. As I understand it, they have not diluted the leveraging principle. However, I am a great believer in judging people by their actions rather than by what they say. Over the last few weeks, I have been very interested in the various representations that have been made to me and others from the different challenger firms and industry bodies in this area. I see and am sympathetic to their concerns on this topic.
Only today, I was interested to read the Bloomberg daily newsletter on tech matters, which refers to the recent case in the US in which Apple has been forced to make some changes to its 30% fee policy. It has already started introducing things that make that almost meaningless to those who might benefit from it. The newsletter explains what people have to do to use a different payment system from Apple’s and avoid the 30% fee. It says:
“In order for developers to include a website link in their apps to an outside payment system, they’ll first need to submit a request form to Apple. If approved, the link can only be displayed once within the app. It must look like a text URL—meaning it can’t be a candy-colored button that says ‘Use PayPal’—and the text itself must match one of seven templates”.
It continues:
“When clicked, the link will surface a warning from Apple about the risks of transacting with third-party websites, with ‘continue’ or ‘cancel’ buttons. The website has to open in the device browser, rather than from a pop-up within the app, where, depending on the type of service, a user can sign in or register for a new account”;
in other words, you will not bother by the time you have got through all that.
That was a long-winded way to say that I am minded to support what the noble Baroness, Lady Jones, is seeking to do with the leveraging principle here. A safeguard is necessary, but, as I said at the beginning, I am speaking in my own personal capacity.
Lord Vaizey of Didcot (Con)
My Lords, I will slip in here quickly, since I have Amendment 25 in this group. I follow my noble friend Lady Stowell in supporting tightening up the leveraging principle as much as possible. We would have a lot more fun in this Committee if we stopped referring to the leveraging principle and started referring to the whack-a-mole principle, which is the same thing. From now on, that is what I will do.
As my noble friend said, it is absolutely critical to the success of the pro-competition regime. We all know how it works and may have used it in our own commercial lives. After years of litigation, you concede a point to the competition authority and reduce the headline prices you are charging for the app to appear on your platform, and then you slip in a new way of charging, as was so ably set out by my noble friend Lady Stowell. You find a different way to charge in order to generate exactly the same revenue.
I tabled Amendment 25 simply to strengthen the anti-whack-a-mole conduct requirement so that designated undertakings cannot shift their anti-competitive behaviour to non-designated activities, even if their ability to do so is directly linked to their strategic market status in a designated activity. Without this change, there is a danger in the current drafting of the CMA having to constantly designate new activities and play catch-up with the SMSs—or it may not be able to combat anti-competitive behaviour in any way at all.
The key point here is that Clause 20 allows the CMA to intervene only when an SMS firm’s conduct
“is likely to materially increase the undertaking’s market power”.
It is too narrow, and it gives these SMS firms broad opportunities to avoid compliance. For example, if Apple News was not designated, as things currently stand, Apple could impose unfair terms on news publishers via contracts, circumventing the terms where it holds the market power, where the action has been taken which would be in the App Store. To appear in Apple News, you would go one step behind, in terms of the contracts with the news publishers, and therefore avoid any remedy.
My amendment seeks simply to close potential loopholes. As I said, my noble friend Lady Stowell has ably set out what the whack-a-mole principle is all about: generating exactly the same revenues but being very creative in how you do so as you play this game with the competition regulator.
Lord Black of Brentwood (Con)
My Lords, I support Amendment 25; but for the glitch that others have experienced, I would have put my name to it. I shall also speak to Amendments 26 and 27. As this is the first time I have spoken in Committee, I must declare my interest as deputy chairman of the Telegraph Media Group and note my other interests.
In short order, the noble Lord, Lord Clement-Jones, got it right: in many ways, these anti-leveraging provisions, the whack-a-mole provisions, go to the heart of the Bill, because if we do not get this right then it will fail. As my noble friend Lord Vaizey said, at the moment Clause 20 is far too narrow and will give the SMS firms remarkable opportunities to avoid any form of compliance. In fact, it runs a coach and horses through the Bill, which is why we need to rectify it. The example of Apple that he gave could be replicated across all sorts of SMS platforms, which is why we absolutely need to close the loophole. My noble friend’s amendment is probably the cleanest and easiest way to do that, but I would also support Amendments 26 and 27, tabled by the noble Baroness, Lady Jones, which would effectively address the same concerns. I look forward to hearing from the Minister on these points, which are crucial to the future of the Bill.
Lord Vaizey of Didcot (Con)
On a point of order, I am incredibly embarrassed that I fail to declare my interests each time I speak because I am so nervous in this Committee. I declare my interests, particularly as a presenter of Times Radio, which links me to News UK, and as an adviser to a mobile games company, Pixel United.
Baroness Harding of Winscombe (Con)
My Lords, I shall also discuss the leveraging or whack-a-mole provisions. Perhaps Conservative Peers today are London buses: this is the fourth London bus to make the same point. I too would have added my name to my noble friend Lord Vaizey’s amendment had I been organised enough.
I shall make a couple of points. The noble Lord, Lord Tyrie, said earlier that we are all here on the Bill because harm has already been done. If noble Lords will forgive me, I will tell a little story. In 2012, I went on a customer trip to Mountain View, Google’s headquarters in California, as the chief executive of TalkTalk. We were in the early days of digital advertising and TalkTalk was one of its biggest customers. A whole group of customers went on what people now call a digital safari to visit California and see these tech companies in action.
I will never forget that the sales director left us for a bit for a demo from some engineers from head office in Mountain View, from Google, who demoed a new functionality they were working on to enable you to easily access price comparisons for flights. It was an interesting demo because some of the other big customers of Google search at the time were independent flight search websites, whose chief executives had been flown out by Google to see all the new innovation. The blood drained from their faces as this very well-meaning engineer described and demoed the new functionality and explained how, because Google controlled the page, it would be able to promote its flight search functionality to the top of the page and demote the companies represented in the room. When the sales director returned, it was, shall we say, quite interesting,
I tell that tale because there are many examples of these platforms leveraging the power of their platform to enter adjacent markets. As my noble friend has said, that gets to the core of the Bill and how important it is that the CMA is able to impose conduct requirements without needing to go through the whole SMS designation process all over again.
I know that the tech firms’ counterargument to this is that it is important that they have the freedom to innovate, and that for a number of them this would somehow create “a regulatory requirement to seek permission to innovate”. I want to counter that: we want all companies in this space to have the freedom to innovate, but they should not have the freedom to prioritise their innovation on their monopoly platform over other people’s innovation. That is why we have to get a definition of the leveraging principle, or the whack-a-mole principle, right. As with almost all the amendments we have discussed today, I am not particularly wedded to the specific wording, but I do not think that the Bill as it is currently drafted captures this clearly enough, and Amendments 25, 26, and 27 get us much closer to where we need to be.
I, too, add my voice in support my noble friend Lord Lansley’s amendments. I must apologise for not having studied them properly in advance of today, but my noble friend introduced them so eloquently that it is very clear that we need to put data clearly in the Bill.
Finally, as a member of my noble friend’s Communications and Digital Committee, I, too, listened very carefully to the comments made by the noble Lord, Lord Clement-Jones, about copyright. I feel this is a very big issue. Whether this is the right place to address it, I do not know, but I am sure he is right that we need to address it somehow.
Baroness Kidron (CB)
My Lords, I am sorry to break the Conservative bus pattern but I, too, will speak to Amendments 26 and 27, to which I have added my name, and to Amendment 30. Before I do, I was very taken by the amendments spoken to by the noble Lord, Lord Lansley, and I support them. I feel somewhat sheepish that I had not seen the relationship between data and the Bill, having spent most of the past few months with my head in the data Bill. That connection is hugely important, and I am very grateful to the noble Lord for making such a clear case. In supporting Amendments 26 and 27, I recognise the value of Amendment 25, tabled by the noble Lord, Lord Vaizey, and put on record my support for the noble Lord, Lord Holmes, on Amendment 24. So much has been said that we have managed to change the name of the leveraging principle to the whack-a-mole principle and everything that has been said has been said very well.
The only point I want to make on these two amendments, apart from to echo the profound importance that other noble Lords have already spoken of, is that the ingenuity of the sector has always struck me as being equally divided between its incredible creativity in creating new products and things for us to do and services that it can provide, and an equal ingenuity in avoiding regulation of all kinds in all parts of the world. Without having not only the designated activity but the activities the sector controls that are adjacent to the activity, we do not have the core purpose of the Bill. At one point I thought it might help the Minister to see that the argument he made in relation to Clause 6(2) and (3), which was in defence of some flexibility for the Secretary of State, might equally be made on behalf of the regulator in this case.
Turning briefly to Amendment 30 in the name of the noble Lord, Lord Clement-Jones, I first have to make a slightly unusual declaration in that my husband was one of the Hollywood writers who went on strike and won a historic settlement to be a human being in charge of their AI rather than at the behest of the AI. Not only in the creative industries but in academia, I have seen first-hand the impact of scraping information. Not only is the life’s work of an academic taken without permission, but then regurgitating it as an inaccurate mere guess undermines the very purpose of academic distinctions. There is clearly a copyright issue that requires an ability both to opt out and correct, and to share in the upside, as the noble Lord pointed out.
I suggest that the LLMs and general AI firms have taken the axiom “it’s better to ask forgiveness than permission” to unbelievable new heights. Our role during the passage of this Bill may be to turn that around and say that it is better to ask permission than forgiveness.
Baroness Jones of Whitchurch (Lab)
My Lords, we have had a wonderfully eclectic debate. I am sorry if we gave some of the amendments more attention than others, because we have a number of very important issues here. Even in my response I may not be giving some colleagues due deference for their hard work and the good arguments they have put forward.
As noble Lords have commented, Amendments 26, 27 and 34 are in my name. As we have discussed, Amendments 26 and 27 would ensure that the CMA can tackle anti-competitive conduct in non-designated activity, provided that this conduct is related to designated activity. This would ensure, for example, that a designated company facing conduct requirements could not simply shift the resources of its business into another similar business venture, which would have a similar outcome of anti-competitive behaviour.
I am very grateful to the noble Baroness, Lady Stowell, for her support. The example she gave of Apple resonates with all of us and has obviously been in the news. It was one of the behaviours I described as rather vindictive in the last debate. I am not sure how much extra money Apple is going to make from it, but it is a question of rubbing someone’s nose in it because you do not like the decision that has been made. I feel that we need to address this issue.
The noble Lord, Lord Vaizey, in his Amendment 25, made a very similar point about the leveraging principle. We have all signed up to “the whack-a-mole principle”; I think we will call it that from now on. As the noble Baroness, Lady Harding, made clear, this is about addressing the leveraging of SMS markets to enter adjoining markets. She gave the example of travel price comparison. I feel that is a lazy innovation; if you get so big, you stop innovating—you copy the competing firms and taking their best ideas without innovating any more. It is in all our interests to get a grip on this, so that these companies that have great resources and great capacity for innovation innovate in a creative way rather than just copying other people’s ideas.
Amendment 34, which is also in our names, would enable the CMA to keep conduct requirements under review and take account of whether those requirements are having their intended effects or if further steps of pro-competition intervention is necessary. It would provide a clearer link between the measures available to the CMA. As the noble Lord, Lord Clement-Jones, and others have said, it underpins the importance of interoperability in CMA decisions. We believe that the amendments help to clarify and reinforce the powers available to the CMA.
I listened carefully to the noble Lord, Lord Holmes, who, as ever, provided enormous insight into the tech world and the consequences of the legislation. We share his objective of getting the powers of the CMA in the right balance. His amendment challenges the Government to explain why the CMA can only impose a conduct requirement to achieve the fair dealing, open choice or trust and transparency objectives—which seems to be overly restrictive and open to legal challenge. We look forward to hearing the Minister’s explanation of why those restrictions were felt necessary. The noble Lord, Lord Holmes, also raised an important point in his Amendment 24, which we have not given sufficient weight to, about the need for those conduct requirements to deliver proper accessibility in line with previous legislation. We absolutely support him in that quest.
The amendments from the noble Lords, Lord Clement-Jones and Lord Lansley, raise important points about transparency and improved data. They stress the importance of portability and interoperability and put data firmly into the conduct requirements. We support those arguments and look forward to the Minister’s response to what we feel are common-sense proposals.
Viscount Camrose (Con)
I start by thanking all noble Lords who spoke so compellingly. It was a great pleasure to listen. I must say my head is slightly spinning, it is such an eclectic group of amendments, but I will do my best to respond properly to all the points raised.
I start with the discussion on the imposition and use of conduct requirements by the regulator. I thank my noble friend Lord Holmes of Richmond for tabling Amendment 15, which would remove the conduct requirement objectives—fair dealing, open choices and trust and transparency—and instead allow the CMA to impose conduct requirements for any purpose, so long as they fall within the list of permitted types. I intend to cover only the impacts of this amendment on the conduct requirement objectives, not its impacts on the proportionality requirement, as we shall be turning to that in detail later. Both the objectives and the permitted types of conduct requirement reflect extensive and expert evidence and analysis on types of harms in digital markets. These have been set out in legislation to provide clarity up front about the types of rules that designated firms could be subject to. It is right that the powers given to the CMA have clear and defined limits, and the objectives provide an appropriate framework for them to operate within. The Government feel that this clarity of objective is essential to the success of the regime, ensuring that it remains targeted and proportionate.
Amendment 19, tabled by the noble Lord, Lord Clement-Jones, would allow the CMA to gather and publish information relating to commercial deals. I sympathise with the sentiment behind his amendment and believe this regime will provide a crucial means to address the imbalance that exists between the most powerful tech firms and other parties. The CMA will already, as part of investigatory requirements, conduct requirements and the final offer mechanism process, be able to gather relevant information about payment terms and deals, and require SMS firms to share information with third parties. The CMA will also, where appropriate, be able to publish aggregated and anonymised information. As such, we do not believe that this amendment provides the CMA with any necessary additional powers.
Amendment 30 proposes that conduct requirements on unfair use of data be amended to allow the CMA to also prevent SMS firms using copyright material without permission. I absolutely agree, needless to say, with the sentiment that properly functioning, competitive markets that respect intellectual property rights have a vital role to play in stimulating growth and encouraging innovation.
I assure the noble Lord, Lord Clement-Jones, that the CMA is well equipped to address competition issues in a range of contexts, including where these issues intersect with intellectual property rights. When making interventions, the CMA will consider a range of factors, which can include the fairness of terms in issues related to copyright, where they are relevant, on a case-by-case basis. Existing permitted types of conduct requirements already allow the CMA to set requirements for unfair and unreasonable terms, which can include payment terms.
Lord Clement-Jones (LD)
I am sorry to interrupt the Minister but that is very general. We have heard around the Room that people are really concerned. As we go forward, so many areas of intellectual property—the ingestion of copyright material, the issues with synthesisation of performances—are being affected by artificial intelligence. The kind of language the Minister is using sounds far too generic. It needs to be much more focused if we are to be convinced that the CMA really has a role in all of this. He is the Minister for both AI and IP, so he is right at the apex of this issue; maybe he is right on the point of the whole thing. He has the ability in his ministerial role to start trying to resolve some of these issues. We have the IPO coming up with a code of conduct—
Lord Clement-Jones (LD)
This is a long intervention, I agree. I would just ask the Minister to focus on the fact that this is not just any old fairness of terms but something that should be explicitly stated in the Bill.
Viscount Camrose (Con)
There is a much broader set of work looking at issues of copyright, intellectual property and artificial intelligence together—a hugely complex piece of work with many stakeholders pulling in a range of different directions. The goal of this Bill is to address that in so far as it affects competitive markets. We may debate this, but the design of the Bill is such that, in so far as competition is affected by the misuse of intellectual property or intellectual property infringements, the CMA is empowered to intervene to drive greater competition or address issues that limit competition. It is targeted only at addressing competitive issues but, in so far as they affect competitive issues, it is empowered to address IP infringement issues, as set out here.
Existing permitted types of conduct requirements already allow the CMA to set requirements for unfair and unreasonable terms, which can include payment terms. The Government are committed to our world-leading IP regime. Copyright legislation already provides a robust framework for rights holders to enforce against copyright infringement. We will take a balanced approach to the use of AI across the press sector and departments across government are working together closely to consider the impact of AI, ensuring that AI innovators and our world-leading creators can continue to flourish.
I turn to Amendments 26, 27 and 25. I thank noble Lords for their thoughtful and considered contributions on these amendments. Amendments 26 and 27 are intended to expand the ability of the CMA to intervene outside the designated digital activity. Amendment 25 also seeks to expand this power specifically in relation to self-preferencing behaviour that takes place outside the designated activity. We agree with noble Lords that it is crucial that the CMA can deal with anti-competitive behaviour outside the designated activity where appropriate. My noble friend Lord Offord and I have had a number of representations giving further examples of this kind of behaviour and we are committed to finding the right means of addressing it.
Our current drafting has sought to balance the need for proportionate intervention with clear regulatory perimeters. The regime is designed to address the issues that result from strategic market status and is therefore designed to address competition issues specifically in activities where competition concerns have already been identified. This recognises that SMS firms are likely to be active in a wide range of activities and will face healthy competition from other firms in many of them.
I assure noble Lords that the power to prevent self-preferencing is already sufficiently broad. It can apply where an SMS firm is using its power in the designated activity inappropriately to treat its own products more favourably, but without a need for those products to be linked to the designated activity. In addition, the existing power outlined in Clause 20(3)(c) to intervene in non-designated activities, which noble Lords are referring to as the whack-a-mole principle, has been carefully calibrated. It is available only where the conduct has a material impact on the strategic market status in respect of the designated activity.
The same conduct in respect of a different activity may not have the same impact on the market. It will not always be anti-competitive and may instead form a part of normal business practice in a more contestable market. The DMU will therefore take a targeted, evidence-based approach when considering intervention. The DMU can intervene via conduct requirements outside the designated activity to prevent leveraging into the designated activity or via PCIs to address an adverse effect on competition in a designated activity. Therefore, the Government’s view is that broadening the CMA’s powers would risk over-intervention, creating uncertainty for businesses and risks to innovation and investment.
Baroness Jones of Whitchurch (Lab)
Before the Minister moves on, do I understand from the beginning of that contribution that he is still looking at the wording—in other words, that he not wedded to the wording and is there some scope for either the amendment from the noble Lord, Lord Vaizey, or our amendment, or to work with him to see if we can achieve what we are trying to achieve through this or other means?
Viscount Camrose (Con)
Throughout this group, I am convinced that we are trying to achieve the same thing. I remain concerned that we have to design safeguards against regulatory overreach to enter into markets that are currently healthy, but beyond that I am very happy to explore the right form of wording or design that achieves the end that all sides are keen to establish.
Amendment 24 is intended to clarify the meaning of information being accessible. I thank my noble friend Lord Holmes for the amendment, and for the rigour and passion he demonstrated when making his points. I agree that the question of online accessibility is of great importance. All kinds of technology should be for everyone. I can provide assurance that the CMA can already consider the concept of accessibility in the broadest sense, and in a way that includes—but is not limited to—compatibility with assistive technology. I agree that it is crucial that all members of our society have the right to accessible information. The Bill as drafted provides for this and can encompass, for example, a requirement to have terms and conditions that are easily accessible on a website, in easy-to-understand language, and compatible with assistive technology.
Amendments 32 and 22 would remove the power that enables the Secretary of State to update the list of permitted types of conduct requirement and replace it with an additional open-ended type of conduct requirement. I thank noble Lords for their amendments and agree that digital markets are fast-moving and unpredictable. Future innovations are hard to foresee and will likely give rise to a range of new behaviours and ensuing harms. Although the Government have endeavoured to make the list of permitted types of conduct requirements fully comprehensive, it could become out of date in the future. The noble Viscount’s proposal to add an open-ended type of conduct requirement would, we feel, grant too wide a power to the CMA and undermine the safeguards we have set by creating a clear framework for the CMA to operate within.
It is right that both government and Parliament have appropriate oversight and scrutiny over the significant powers being granted to the CMA. Therefore, the delegated power to allow the Secretary of State, subject to parliamentary scrutiny, to update the legislation provides the most appropriate way to future-proof the regime, ensuring that it can intervene effectively and promptly on the right issues. In addition, I note that the Delegated Powers and Regulatory Reform Committee has not queried the need for this power.
Lord Clement-Jones (LD)
My Lords, we are getting on in the Committee, but I was really interested in the Minister’s interpretation point, because quite a lot hangs on that. The noble Lord, Lord Lansley, illustrated extremely well the difference between promoting and not restricting, so to speak—that is a crucial distinction. The Minister prayed in aid Clause 20(2) versus (3), but could he write on that in due course?
Viscount Camrose (Con)
I am very happy to do so. As I say, anything that ensures the clarity of the Bill is valuable and important.
On the reference to international technical standards, these can be an important tool in supporting good regulatory outcomes, and we expect the CMA to pay due regard to these, along with other relevant considerations.
Finally, Amendment 34 would place a duty on the DMU to consider opening a PCI investigation when reviewing the effectiveness of, and an SMS firm’s compliance with, conduct requirements. Conduct requirements are tailored rules to manage the effects of an SMS firm’s market power and prevent harms before they occur. PCIs will tackle the sources of SMS firms’ market power, which can arise from both structural features of a market and SMS firms’ conduct. These are different but complementary tools, and the CMA will need to carefully decide when it is appropriate to use each tool, depending on the specific competition issue at hand. This amendment risks narrowing and reframing PCIs as a tool of last resort for non-compliance with conduct requirements.
I hope noble Lords feel assured that the issues they have raised have been carefully considered and reflected throughout the Bill, and I hope that the noble Lord will be able to withdraw his amendment.
Lord Holmes of Richmond (Con)
I thought I would wait, just in case the noble Lord, Lord Clement-Jones, wanted to come in before the Minister sat down.
It has been an excellent debate, covering a wide range of connected issues, and I thank all noble Lords who have spoken and the Minister for his response. All the issues are connected by so many of the fundamentals that underpin not just this Bill, but the entirety of this digital project that we are all on: accessibility, interoperability, inclusion and intellectual property. I do not think we should ever stop mentioning copyright and intellectual property in these discussions; it is absolutely critical and is being decimated in so many ways right this very day.
Data, as was so eloquently set out by my noble friend Lord Lansley, is part of the critical underpinning. What is any of this without data? I certainly think that what we do not want to do with the Bill, as the Minister set out, is to come up with a definition of interoperability that is not interoperable—that would be an unfortunate slip of the pen. All these issues need to be at the forefront of all our deliberations; it unites all the amendments in this group and should unite all of our thoughts. They are the key threads that will not only make a success of this Bill but make a success of everything that we are trying to achieve with this digital project.
I know we are going to return to a number of these issues as we progress through Committee and into Report, but at this point—beating the Division Bell, still—I beg to withdraw my amendment.
Digital Markets, Competition and Consumers Bill
Wednesday 24th January 2024
(6 months ago)
Grand CommitteeRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 12-II(b) Amendment for Grand Committee (Supplementary to the Second Marshalled List) - (24 Jan 2024)
Lord Faulks
Member’s explanatory statement
This amendment would restore the Bill’s original wording in relation to Clause 19.
Lord Faulks (Non-Afl)
My Lords, I begin by apologising for not taking part at Second Reading. I have read the excellent debate, including the helpful introduction by the Minister. I also had the privilege of sitting through the first day in Committee, during which I learned a great deal. I refer to my interests in the register. I am not a competition lawyer, but I have experience of judicial review and of the operation of the Human Rights Act. I was chair of the Independent Review of Administrative Law, which reported a couple of years ago and resulted in the Judicial Review and Courts Act.
My amendment, which has the support of the noble Baroness, Lady Stowell, and the noble Lord, Lord Black of Brentwood, concerns the use of the word “proportionate” in Clause 19. I also have a similar amendment in this group, Amendment 53, which concerns Clause 46.
Despite some heavy lobbying of the Government by big tech, the right to appeal against an intervention by the CMA will engage the judicial review test, rather than a merits test, except as to penalty. Later amendments will carefully probe this latter aspect and I look forward to hearing the debate.
The original adjective in Clause 19 was “appropriate”. The word “proportionate” replaced it at a relatively late stage in the Bill’s progress through the Commons. Why? In one view, it is an innocuous change. Indeed, one would expect an intervention by the Digital Markets Unit to be proportionate. The word also has a respectable legal pedigree. For example, you can defend yourself against attack, provided that your response is proportionate to the attack. Whether that response is proportionate will be a question of fact, often for a jury to decide.
But judicial review is primarily concerned not with the facts of a decision but with the process by which the decision is made. Classically, the courts got involved only if a decision was so unreasonable that no reasonable public body could have reached it. The scope of judicial review has expanded somewhat to include challenges based on, for example, irrationality or the failure to take into account relevant considerations. There are other grounds, but all are effectively concerned with the process rather than with factual findings, although I readily concede that there are occasions when these distinctions can be somewhat opaque.
Since the enactment of the Human Rights Act, the concept of proportionality has entered the law in relation to judicial review, but only in limited circumstances. The most recent edition of De Smith’s Judicial Review, generally regarded as the leading textbook in this area, says at 6-090:
“Domestic courts are required to review the proportionality of decisions and enactments in two main categories of case: cases involving prima facie infringements of Convention rights and cases involving EU law”.
Some think that proportionality should be the test in all cases of judicial review, but that is not currently the law.
I cannot see why an appeal in the context of this Bill would obviously involve a convention right, although those rights have a habit of getting in everywhere. If convention rights are engaged, proportionality comes into the analysis anyway. Choosing to put “proportionate” into the legislation might lead a court to conclude that Parliament had deliberately used the word to widen the scope of a judicial review challenge, even when no convention right is engaged. For my part, that is a risk that I do not think should be taken. Your Lordships’ House is well aware of the risk of expensive, time-consuming litigation that may result from these interventions, which it may be perfectly sensible to bring about.
A proportionality test is far closer to an appeal on the facts than one based on conventional judicial review principles. Whether an intervention is proportionate or not gives the court greater scope for looking at those facts. I would therefore much prefer to revert to the original word, “appropriate”, which does not carry the same heavy legal charge and does not risk expanding the grounds of appeal. I look forward to hearing the Minister’s response and explanation behind the change in wording. I beg to move.
The Deputy Chairman of Committees (Baroness Fookes) (Con)
I add at this point that, if Amendment 16 were to be agreed, I could not call Amendment 17 by reason of pre-emption.
Baroness Stowell of Beeston (Con)
My Lords, I am hugely grateful to my noble friend Lord Faulks, if I can still call him that—in real life, he is my friend, even if he now sits on another Bench—both for tabling his amendments and for the incredibly comprehensive and thoughtful way in which he has introduced this group. To have the noble Lord’s expertise on this topic is incredibly valuable. I have signed his Amendments 16 and 53 but have also tabled my own in this group: Amendments 17 and 54. I am grateful to the noble Lords who have signed mine.
By way of some background to add to what the noble Lord has said, as I mentioned on the first day in Committee, and indeed at Second Reading, the Communications and Digital Select Committee held hearings on the Digital Markets, Competition and Consumers Bill during the summer of last year. We took evidence from the large tech firms as well as a range of challenger firms. We focused on Parts 1 and 2 of the Bill, which is what we are discussing at this time.
As my noble friend the Minister acknowledged when he spoke at Second Reading, we as a committee found that the Bill as it stood at that time—as introduced to Parliament—struck a careful balance. We felt that, overall, it was proportionate and would deliver on the outcomes that we were seeking to achieve and all felt were necessary for this legislation—namely, a level playing field for the various different businesses that now seek to operate in digital markets. We were careful to acknowledge that striking that balance was hard to achieve; it was not an easy thing. We commended the Government for that. We were also clear, however, that any further changes, particularly to some contentious areas, such as the appeals process, could cause significant problems.
As the noble Lord, Lord Faulks, said, we will come on to the question of appeals in a later group. The insertion of the word “proportionate” in the Bill, in the context of the conduct requirements that the CMA may impose, or the specific pro-competition interventions, has the potential to create a question and introduce a loophole that could be exploited during the appeals process. This is making people nervous—it is certainly making me nervous.
The noble Lord’s amendment would change the Bill back to its original wording. I have signed the amendment based on the way he, as a legal expert, has explained it, which seems to me to be the best way forward. However, my Amendments 17 and 54 try to make it clear to any tribunal hearing down the line that, by including the word “proportionate”, Parliament has not intended to create any new, novel or different opportunity for anybody to interpret what the CMA should always be doing, which is being proportionate in the way in which it goes about its duties. My amendments are, if you like, a safeguard, but I think what the noble Lord, Lord Faulks, has proposed is clearer and neater. Like him, I look forward to the Minister’s reply. This is an area which is causing quite a lot of concern and on which we need a clear response from the Government.
Baroness Harding of Winscombe (Con)
My Lords, it is an honour to follow such an esteemed legal brain and parliamentary brain. I am neither, but I have put my name to my noble friend Lady Stowell’s two amendments and I want to make two points in support of her arguments.
The common-law concept of proportionality is important in this legislation. I am not supporting these amendments in any spirit other than wanting to make sure that we are proportionate in the way we regulate the technology sector. After our first day in Committee, I was reflecting a little that perhaps all of us got a bit carried away—certainly I did—with some of our oratory about the importance of mitigating the downsides of the technology sector. I want to put it on the record that I recognise the upsides, too. Therefore, a proportionate path is important. I sit on the Communications and Digital Select Committee that my noble friend so ably chairs and, as she said, we felt that the Bill as introduced into the Commons got that proportional balance right.
We have been in this place before, having a very similar argument. A number of us here today are part of the Online Safety Act gang. I had a look at Hansard and on 19 July, during the last group on Report on the Online Safety Bill, I proposed a group of amendments in the name of the noble Baroness, Lady Kidron, which sought to clarify how non-content-related harms would be captured in the Bill. The argument made by the Minister, my noble friend Lord Parkinson of Whitley Bay, was that, by trying to define it in the Bill, we would create legal uncertainty because that concept was already defined. Now we find ourselves on the opposite sides of the same argument, where I think I am hearing the Government say that there is no intention to bring in any different definition of proportionality than that which already exists—that the CMA is already mandated to give significant consideration to proportionality—yet they want to put the word back in the Bill in the way that they resisted firmly in the Online Safety Bill, when a number of us were seeking a different form of clarification. I do not think that you can have it both ways quite so quickly in related legislation. Either the Government mean something different from the existing requirements of proportionality that the CMA is under, or we should simply take out this additional complexity and reduce the risk of further legal disputes once the Bill is enacted.
Baroness Kidron (CB)
My Lords, I have had a number of arguments about “proportionate” in the decade that I have been in this House. In fact, I remember that the very first time I walked into the Chamber the noble Lord, Lord Pannick, was having a serious argument with another noble Lord over a particular word. It went on for about 40 minutes and I remember thinking, “There is no place for me in this House”. Ten years later, I stand to talk about “proportionate”, which has played such a big part in my time here in the Lords.
During the passage of the DPA 2018, many of us tried to get “proportionate” into the Bill on the basis that we were trying to give comfort to people who thought data protection was in fact government surveillance of individuals. The Government said—quite rightly, as it turned out—that all regulators have to be
“proportionate, accountable, consistent, transparent, and targeted”
in the way in which they discharge their responsibilities and they pushed us back. The same thing happened on the age-appropriate design code with the ICO, and the same point was made again. As the noble Baroness, Lady Harding, just set out, we tried once more during the passage of the Online Safety Bill. Yet this morning I read this sentence in some draft consultation documents coming out of the Online Safety Act:
“Provisionally, we consider that a measure recommending that users that share CSAM”—
that is, for the uninitiated, child sexual abuse material—
“have their accounts blocked may be proportionate, given the severity of the harm. We need to do more work to develop the detail of any such measure and therefore aim to consult on it”.
This is a way in which “proportionate” has been weaponised in favour of the tech companies in one environment and it is what I am concerned about here.
As the noble Lord said, using “proportionate” introduces a gap in which uncertainty can be created, because some things are beyond question and must be considered, rather than considered on a proportionate basis. I finish by saying that associating the word specifically in relation to conduct requirements or making pro-competitive interventions must create a legal uncertainty if a regulator can pick up that word and put it against something so absolute and illegal and then have to discuss its proportionality.
Lord Vaizey of Didcot (Con)
I wonder if I can just slip in before Members on the Front Bench speak, particularly those who have signed the amendment. I refer again to my register of interests.
I support the principle that lies behind these amendments and want to reinforce the point that I made at Second Reading and that I sort of made on the first day in Committee. Any stray word in the Bill when enacted will be used by those with the deepest pockets—that is, the platforms—to hold up action against them by the regulator. I read this morning that the CMA has resumed its inquiry into the UK cloud market after an eight-month hiatus based on a legal argument put by Apple about the nature of the investigation.
It seems to me that Clause 19(5) is there to show the parameters on which the CMA can impose an obligation to do with fair dealing and open choices, and so on. It therefore seems that “proportionate”—or indeed perhaps even “appropriate”—is unnecessary because the CMA will be subject to judicial review on common-law principles if it makes an irrational or excessive decision and it may be subject to a legal appeal if people can argue that it has not applied the remedy within the parameters set by paragraphs (a), (b) and (c) of Clause 19(5). I am particularly concerned about whether there is anything in the Bill once enacted that allows either some uncertainty, which can be latched on to, or appeals—people refer to “judicial review plus” or appeals on the full merits, which are far more time-consuming and expensive and which will tie the regulator up in knots.
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to take part in day two of Committee on the DMCC Bill. Again, I declare my interest as an adviser to Boston Limited.
It is a pleasure to follow the introduction from my noble friend Lord Faulks. I think is highly appropriate that we discuss proportionality. I have a number of amendments in my name in this group: Amendments 33, 52 and 220, and then the rather beautifully double Nelsonian, Amendment 222. Essentially, a considerable amount of work needs to be done before we can have proportionality going through the Bill in its current form. My amendments suggest not only addressing that but looking at counter- vailing benefits exemptions and financial penalties.
Agreeing with pretty much everything that has been said, and with the tone and spirit of all the amendments that have been introduced thus far, I will limit my remarks to Amendment 222. It suggests that regulations bringing into force Clauses 19, 21, 46 and 86
“may not be made until the Secretary of State has published guidance”
going into the detail of how all this will operate in reality.
Proportionality is obviously a key element, as has already been discussed, this is just as important, as we will come on to in the next group. My Amendment 222 straddles the groups a bit, under the vagaries of grouping amendments, but it is nevertheless all the better for it.
I look forward to hearing my noble friend the Minister’s response on proportionality, countervailing benefits exemptions and financial penalties, and on the need for clear, detailed guidance to come from the Secretary of State before any moves are made in any and all of these areas.
Lord Black of Brentwood (Con)
My Lords, I am afraid I am going to play the role of Little Sir Echo here. I hope that the unanimity expressed so far will send a strong message to my noble friend the Minister. I support Amendment 16 in the name of the noble Lord, Lord Faulks, to which I have added my name, and Amendments 17, 53 and 54. I note my interests as declared at the start of Committee.
As I made clear in my remarks on Second Reading, we must, throughout the consideration of the Bill, steadfastly avoid importing anything into the CMA and DMU procedures that would allow the platforms to deploy delaying tactics and tie up the regulators in endless legal knots. Long legal wrangling will destroy the very essence of the Bill, and it is not mere speculation to suggest that this might happen. As we have seen elsewhere in the world, and indeed in publishers’ own existing dealings with the platforms, we do not need to gaze into a crystal ball; we can, as the noble Lord, Lord Tyrie, put it the other day, read the book.
In that light, as we have heard consistently this afternoon, I fear that the government amendments made in the other place, requiring the conduct requirements and PCIs to be proportionate rather than appropriate, do just that. They impose significant restrictions on the work of the CMA and, as an extremely helpful briefing—which I think all Members have had—from Which? put it, produce “a legal quagmire” that would allow the unaccountable platforms
“with their vast legal budgets … to push back against each and every decision the regulator takes”.
It is simply counterintuitive to the design of the flexible and participatory framework the legislation portends. As my noble friend Lady Stowell said, it certainly makes me very nervous.
The key point is that introducing the concept of proportionality is, frankly, totally otiose, as the noble Lord, Lord Faulks, put it so well, as proportionality is already tested by judicial review—something the CMA itself has already reiterated. The courts, in this novel area of legislation, will rely on Parliament clearly to state its intentions. Introducing the concept of proportionality not only is unnecessary but in fact muddies the waters and creates confusion that will be mercilessly used by the platforms. It certainly does not produce clarity. The Government really must think again.
Lord Tyrie (Non-Afl)
My Lords, I do not know whether I am the sole dissenting voice—I do not think I am—but I want to make one preliminary point. I never thought I would make a point in defence of lawyers, but not all legal challenge or scrutiny will necessarily be wrong as this Bill proceeds or as the CMA takes its decisions. It is extremely important that we bear in mind, as we will come on to later on in the Bill, that we need to have a sense of balance about all this, so that we do not allow quite reasonable discontent with some of the shocking practices we have seen from platforms to lead us to a place that we might subsequently regret and which could lead to injustices or damage to British interests through loss of innovation or inward investment.
I listened very carefully to what the noble Lord, Lord Faulks, said. It seemed to boil down to very few things. Are convention rights engaged? They probably are, or if they are not then they will be. Even if they are not, the courts will find a way of getting them in eventually. If they are, what have the Government added? That is why I think I might be with the amenders here. I think very little, if anything at all, has been added. Was this a piece of window dressing, supplied by the Government to satisfy the intense lobbying that has taken place, particularly of No. 10? It had a whiff of that about it for me when I first saw it—I see one or two nods of assent. If it is, I am particularly wary of this change, which is what leads me to think that the amenders might be right. If it is more than this—if something very substantive has been added—then I think we would all like to hear from the Minister what exactly it is that, as a result of the adding of “proportionality”, will be considered for legal scrutiny when this Bill is on the statute book.
Lord Lansley (Con)
My Lords, I will briefly intervene. I have not signed the amendments but I am rather supportive of what the noble Lord, Lord Faulks, said in support of his amendment.
In thinking about this, among other thing I had the benefit of seeing a letter that the Parliamentary Under-Secretary at the department sent to my friends in another place, Robert Buckland and Damian Collins, after Report in the Commons; other noble Lords may have seen it. In that letter, he set out why he was building proportionality into Clause 19. He said:
“Our intention for this amendment is to allow a firm to appeal a decision by arguing that the DMU made public law errors in its consideration of proportionality under normal JR principles—without establishing that their rights under the European Convention on Human Rights are engaged”,
for example, the right to peaceful enjoyment of possessions. So that would not bring convention rights on board. The letter continues: “For example”— it is always helpful to have an example—
“the firm could argue that the DMU failed to take a relevant consideration into account, made a material error of fact or otherwise acted unreasonably”—
so JR principles—
“when deciding against an intervention that would have been less burdensome on the firm while still achieving the same outcome”.
So the outcome has to be achieved, but is it proportionate to impose this particular conduct requirement or pro-competitive intervention?
Lord Kamall (Con)
My Lords, I have not put my name to these amendments but I want to speak in favour of Amendments 16, 17 and others in this group. After the first day of Committee, which I sat through without speaking, one noble Baroness came up to me and said I was unusually quiet—“unusually” being the key word there. When another noble Lord asked me why I sat through proceedings without saying a word, I said I had once been told about the principle that I should speak only if it improves the silence. Given the concern for my welfare shown by those two noble Members, I am about to violate that principle by making a few remarks and asking a couple of questions.
As this is the first time for me to speak in Committee, I refer noble Lords to my interests as set out in the register. These include being an unpaid member of the advisory board of Startup Coalition and a non-executive director for the Department for Business and Trade. I have also worked with a couple of think tanks and have written on regulation and competition policy, and I am a professor of politics and international relations at St Mary’s University. I mention that last role because in future interventions I will refer to some political science theories, but I assure noble Lords that I will try not to bore them. I am also a member of the Communications and Digital Committee.
I want to make only a short intervention on the amendments. Previous noble Lords made the point that we want to understand the Government’s intention behind deciding to change the word from “appropriate” to “proportionate”. I am grateful to my noble friend Lord Lansley for seeking to answer that question. I am not a lawyer, so I am very grateful to the noble Lord, Lord Faulks, for his intervention, which explained the legal context for “proportionate”. It has to be said, however, that at Second Reading I and a number of other noble Lords repeatedly asked the Minister to clarify and justify the change in wording. A satisfactory answer was not given, hence we see these amendments in Committee.
We could argue that this is an entirely appropriate response to what my noble friend said in Committee. Maybe the Government could argue that it was a proportionate response. It is a very simple question: can the Minister explain the reasons? Is it, as my noble friend Lord Lansley says, that there is something wider in “proportionate” than “appropriate”? Will the Government consider bringing forward an amendment that explains this—sort of “appropriate-plus”—to make sure that it is legally well understood? Can the Government assure us that it is not a loophole to allow more movement towards a merits appeal, as opposed to judicial review, which many of us have come to support?
I have some support for Amendment 222, in the name of my noble friend Lord Holmes, which seeks clarity on the appeal standards for financial penalties and countervailing benefits, but I know we will discuss these in a later group.
Lord Clement-Jones (LD)
My Lords, this has been a really interesting and helpful debate, with a number of noble Lords answering other noble Lords’ questions, which is always pretty useful when you are summing up at the end. One thing absolutely ties every speaker together: agreement with the letter to the Prime Minister from the noble Baroness, Lady Stowell, on behalf of her committee, about the need to retain the JR principle throughout the Bill. That is what we are striving to do.
It was extremely interesting to hear what the noble Lord, Lord Lansley, had to say. He answered the second half of the speech by the noble Lord, Lord Tyrie. I did not agree with the first half but the second was pretty good. The “whiff” that the noble Lord, Lord Tyrie, talked about was answered extremely well by the noble Lord, Lord Lansley. It was a direct hit.
The interesting aspect of all this is that the new better regulation framework that I heard the noble Lord, Lord Johnson, extolling from the heights in the Cholmondeley Room this afternoon includes a number of regulatory principles, including proportionality, but why not throw the whole kitchen sink at the Bill? Why is there proportionality in this respect? It was also really interesting to hear from the noble Lord, Lord Faulks, who unpacked very effectively the use of the proportionality principle. It looks as though there is an attempt to expand the way the principle is prayed in aid during a JR case. That seems fairly fundamental.
I hope that the Minister can give us assurance. We have a pincer movement here: there are a number of different ways of dealing with this, in amendments from the noble Lords, Lord Holmes and Lord Faulks, and the noble Baroness, Lady Stowell, but we are all aiming for the same end result. However we get there, we are all pretty determined to make sure that the word “proportionate” does not appear in the wrong place. In all the outside briefings we have had, from the Open Markets Institute, Foxglove and Which?, the language is all about unintended consequences and widening the scope of big tech firms to challenge. What the noble Lord, Lord Vaizey, had to say about stray words was pretty instructive. We do not want language in here which opens up these doors to further litigation. The debate on penalties is coming, but let us hold fast on this part of the Bill as much as we possibly can.
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?
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.
Lord Vaizey of Didcot (Con)
I want to get all the heckles out of the way; they have to be recorded in Hansard. I listened to the Minister’s explanation very carefully. He said that there is no single accepted definition of “proportionate”—that there are different definitions depending on case law and the common law. Is that not exactly what the problem is? The minute you put that word in the clause, you have, effectively, said that there are eight, seven or six definitions of proportionate. Guess what the platforms will do with that.
Lord Holmes of Richmond (Con)
May I build on that before my noble friend the Minister responds? What precisely was inappropriate about “appropriate”?
Lord Black of Brentwood (Con)
My Lords, this is not just to prevent the Minister getting up again; it is relevant to both points that have just been made. A number of noble Lords asked whether this huge volte-face by the Government between the publication of the Bill and the amendments made very late in the other place came about as a result of pressure from the platforms. Could he tell us whether the platforms lobbied for this change and whether he discussed it with them?
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.
Lord Faulks (Non-Afl)
I am very grateful to the Minister and all noble Lords who took part in this debate. I think it has raised a pretty fundamental point which runs through a number of different parts of this Bill. I do not know whether to take it personally, but I have not received any of this lobbying that so many other noble Lords received about this particular adjective and its use. My approach is simply to look at it as a lawyer with some experience of the way litigation actually works, and it seemed to me egregious in what it is doing, or at least at risk of doing.
The Minister did well to stick with his instructions that this was to provide clarity. I am afraid it does not do that. As I indicated when I was talking about self-defence, the whole problem with proportionality is that it is very much a question of fact. I might regard something as proportionate; someone else might regard it as disproportionate. It is far more difficult than the tests of rationality or Wednesbury unreasonableness, the tests that are normally used for judicial review, so it is a much lower bar.
On the question of A1P1, it is not usually the most common of the convention rights relied upon. To the man and woman in the street, the idea that Google or Apple have human rights is perhaps a little counter- intuitive. However, I accept that there are ingenious arguments to the effect that A1P1 may have a role to play, which I acknowledged in my opening remarks. However, the Minister accepted that there would be cases when the European convention is not engaged in the analysis, in which case why have proportionality at all? I am afraid I did not find his answer convincing.
I am most grateful to the noble Lord, Lord Lansley, for referring to the communications he had with the Parliamentary Under-Secretary, who, in the course of the communications, seemed to me to be guilty of a most spectacular own goal and reinforced all the fears which have been expressed around the Committee.
This is not paranoia on our part. We have not received sufficient reassurance for the reason for this change. Of course I concede that we expect regulators to act proportionately, but that is not the same as inserting the particular word “proportionate”, which carries such a heavy charge. If it does not mean anything, do not put it in. If it is put it, it is going to be absolute catnip for the courts and judges. It will give them a chance to examine these decisions in a wholly broader perspective.
Grateful though I am to the Minister, I feel it is almost inevitable that we will return to this on Report. I beg leave to withdraw.
Lord Clement-Jones
“(ba) provide a means of payment within the platform in a way that offers consumer protection from goods and services disputes.” Member's explanatory statement
This amendment would allow the CMA to require online marketplaces to provide consumers with a more secure way of paying for goods or services, with a means of recourse in the case that something goes wrong.
Lord Clement-Jones (LD)
My Lords, let us go back to the calmer waters of Clause 20. In moving Amendment 18A, I look forward to hearing what the noble Lord, Lord Lansley, has to say about his Amendment 31, which I have signed as well.
It seems that 75% of purchase scams originate from social media platforms. They often occur when consumers go to digital marketplaces, such as Facebook Marketplace, and try to buy goods from their peers which never arrive. Such scams cost consumers over £40 million in the first half of 2023 alone, and they seem to be on the rise. Currently, many consumers purchasing on peer-to-peer marketplaces have no access to secure payment providers that offer protections in the event that their purchase never arrives. Some marketplaces, such as Vinted and eBay, have integrated with secure providers, but despite many experts stating that these integrations will protect consumers and keep money out of the hands of criminals, adoption is still patchy across major marketplaces.
Building on voluntary commitments made in the recent Online Fraud Charter, this amendment would empower the CMA to require these marketplaces to provide consumers with a way to pay on these platforms that offers protection when things go wrong, such as when goods and services do not arrive as described, provided that these marketplaces are identified by the CMA as designated undertakings which have strategic market status. This would also be a good step in protecting consumers transacting online. Some payment services, such as PayPal or Stripe, do offer consumers protection when things go awry.
Such an amendment would also have a secondary impact: marketplaces would be better incentivised to vet sellers to ensure that they are able to meet the risk-management expectations of the commercial partners that offer secure payment services. For the avoidance of doubt, this amendment does not propose that designated marketplaces use any specific provider of secure payment services. Clause 20 sets out an exhaustive list of permitted types of conduct requirements that may be applied to designated undertakings. This amendment would confer power on the CMA to impose conduct requirements that protect consumers buying goods on peer-to-peer marketplaces identified as designated undertakings with strategic market status. I hope very much that the Minister will give this suggestion serious consideration.
Lord Lansley (Con)
My Lords, I am grateful to the noble Lord, Lord Clement-Jones, for introducing Amendment 18A. On Monday, in the previous day of Committee, we looked at the list of conduct requirements—both the obligations placed on designated undertakings and the capacity to set conduct requirements preventing designated undertakings doing certain things. The noble Lord is asking whether we have covered the ground sufficiently, and so am I.
In Amendment 31, I come at it from the position that I took in earlier amendments, but I wanted to separate this out because it is in a different case. The train of thought is the same: to look at the detailed obligations included in the EU’s Digital Markets Act and to say that we are approaching it in what I hope is a better way that sets broader, more flexible definitions and looks to see how they will be implemented in detail by the Digital Markets Unit. That is fine; I am okay with that, but we need to be sure that the powers are there. For example, Amendment 18A is about whether the requirement to trade on fair and reasonable terms in Clause 20 comprises this power. It is a simple question: would it be possible for such conduct requirements to be included by the DMU under that heading?
Mine is a different one. In paragraph (6) of Article 5 of the Digital Markets Act, the European Union sets an obligation for gatekeepers—that is, its comparable reference to designated undertaking; in this sense it is dealing with platforms—that:
“The gatekeeper shall not directly or indirectly prevent or restrict business users or end users from raising any issue of non-compliance with the relevant Union or national law by the gatekeeper with any relevant public authority, including national courts, related to any practice of the gatekeeper”.
For our purposes, I have rendered that in the amendment as something slightly simpler in our language—that is to say, that an obligation may be placed on designated undertakings that they shall not seek
“directly or indirectly to prevent or restrict users or potential users of the relevant digital activity from raising issues of non-compliance with any conduct requirements with any relevant public authority”.
It is not just the CMA, of course; there may be others involved, such as the Information Commissioner and other public authorities.
For this purpose, I looked at the conduct requirements laid out in Clause 20 to find where this might be covered. I do not think it is covered by the material about complaints handling processes. This is not about whether you can make a complaint to the designated undertaking; this is about whether one is subject to the provision, as a user or potential user, such as an app seeking to complain about the non-compliance of a designated undertaking to the Digital Markets Unit. That is not the same as having a complaints process in place.
Do we think this could happen? Noble Lords will make their own judgments about that. All I am assuming is based on the fact that, for example, in April 2021, in the Judiciary Committee hearings on competition in app stores in the US Senate, Senator Klobuchar said, to paraphrase, that a lot of providers of apps were afraid to testify. They felt that it was going to hurt their business and they were going to get intimidated. So I am not having to invent the proposition that there may be a degree of intimidation between the providers of apps, for example, and the platforms that they wish to use.
In a sense, we do not actually need to know that it is happening to know that we should give the power to the Competition and Markets Authority to set conduct requirements as and when necessary to prevent such a thing happening. I do not think that it is comprised within the existing text of Clause 20.
I hope that my noble friend will take this one away, with a view to thinking positively about whether it is required to be added to the conduct requirements in Clause 20 at Report.
Lord Stevenson of Balmacara (Lab)
I am grateful to the noble Lords, Lord Clement-Jones and Lord Lansley, for raising this point. Clause 20 is very important, as has been mentioned, as it puts flesh on the bones of what we have been talking about for most of the first and half of the second day in Committee—which is whether we have in place the ability to deal with the important firms likely to be designated as SMS and the challenger firms. We have said before, and I am sure that we will repeat it, that this is a very innovative approach to regulating. We are very much trusting those who are appointed to take this forward with a great deal of power and not a lot of overarching scrutiny —or, if it is, it will be retrospective and not prospective.
Therefore, we have to understand that the CMA must have the ability to do all this and have the range of functions that are important. The noble Lord, Lord Clement- Jones, raised one in particular—a very important one to consumers—around seeing on the internet the goods of your dreams and then finding a payment system that siphons your money away but does not deliver the goods; that is not a palliative one for any Government to propose. I hope that the Minister has some reassuring words about the points raised by the noble Lord.
I had to read the amendment proposed by the noble Lord, Lord Lansley, three or four times to understand what he was getting at, so I am very grateful to him for his brief introduction. It was only on this occasion; normally, he is as a lucid as we would wish—and sometimes as pellucid. He raises a very subtle question about whether the measures that are not sufficiently exposed here will cover the question of those who have innovative lawyers thinking about ways in which they can avoid some of the very broad measures in Clause 20.
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 Clement-Jones (LD)
My Lords, I think there is quite a lot of meat in what the Minister said just now, both in respect of the amendment in the name of the noble Lord, Lord Lansley, and my amendment.
I appreciate that we have a set of moving parts here, including the response to the consultation on smarter regulation, improving consumer price transparency and product information for consumers, which came out this morning.
The answer to the noble Lord, Lord Stevenson, was quite interesting. However, if what the Minister said about the conduct requirements in Clause 20 is to be put into effect, I suggest that he has to bring forward amendments on Report which reflect the response to the consultation. I do not think this can be done just as a sort of consumer protection at the back end of the Bill; it has to be about corporate conduct, and at the Clause 20 end of the Bill.
Obviously, we will all read the words of the Minister very carefully in Hansard. It is interesting. I have written down: “Why are we kicking the tyres on Clause 20?” As the noble Lord, Lord Stevenson, said, this is absolutely central to the Bill. Basically, it could not be more important; getting this clause right from the outset will be so important. This is why not only we but the CMA will be poring over this, to make sure that this wording absolutely gives it the powers that it needs.
I take the point of the noble Lord, Lord Stevenson. These are very important powers, and we have to make sure that they are used properly, but also, as the noble Lord, Lord Lansley, said, that the powers are there. Otherwise, what are we spending our time here in Committee doing, if we are going to put forward a Bill that is not fit for purpose? We have to make sure that we have those powers. I like what the Minister had to say in reference to the Clause 20(3)(a) provision. Again, when people look at Pepper v Hart and so on, that will be an important statement at the end of the day.
We have certainly managed to elicit quite a useful response from the Minister, but we want more. We want amendments coming down the track on Report which reflect some of the undertakings in the response to the consultation on consumer price transparency and product information for consumers.
The only other thing to say—exactly as the noble Lord, Lord Stevenson, has said—is that comments about the consultation are that it was half a loaf. There is a whole lot more to be said on drip pricing. We have a discussion coming down the track on that, and we will reserve our fire until then.
Lord Lansley (Con)
As I understood it, Clause 20(3)(a) is about discrimination between users; it is not about trying to stop any user of a platform going to the CMA to complain about non-compliance or other conduct requirements—or indeed that conduct requirement. I will happily look at what my noble friend said and hope that it meets the test of the kicking of the tyres. If it does not, we may have to return to this.
Lord Clement-Jones (LD)
My Lords, that is a useful warning that we need to read Hansard extremely carefully to see what the Minister thinks the scope of that really is and whether it covers the point that the noble Lord, Lord Lansley, has made.
This is a continuing discussion and, in the meantime, I beg leave to withdraw my amendment.
“(2) The CMA may have regard to any significant benefits to users or potential users that the CMA considers have resulted, or may be expected to result, from a factor or combination of factors resulting from a breach of a conduct requirement.”Member's explanatory statement
This amendment would ensure that the CMA considers any significant benefits to users resulting from the breach of a Conduct Requirement when it is considering representations from designated undertakings as part of a Conduct Investigation.
Baroness Jones of Whitchurch (Lab)
My Lords, in moving this amendment I will also speak to Amendments 39, 40 and 48 and the Clause 29 stand part notice, all in my name. I thank all noble Lords who have added their names.
These amendments follow on from our earlier debate about the proportionality of the CMA’s judgments and our desire across the Room not to create unforeseen legal loopholes. They address the new wording in Clause 29, which the Government introduced at a late stage in the Commons. They also address the countervailing benefit exemption, in which companies can argue that their conduct gives rise to benefits to consumers that outweigh the detrimental impact of competition that their conduct would otherwise breach. This clause then goes further and makes it clear that the CMA “must” close a conduct investigation in these circumstances.
Viscount Colville of Culross (CB)
My Lords, I have put my name to Amendment 48 in the name of the noble Baroness, Lady Jones of Whitchurch, and I support dropping Clause 29 from the Bill.
These amendments are also about speeding up the process of stopping anti-competitive behaviour by the tech companies. It is essential that no hostages to fortune are given for tech company lawyers to drag out the process, as many noble Lords said, particularly in the first group.
I want noble Lords to bear in mind that, for every big tech company, every week they succeed in delaying a decision against their anti-competitive practices is one in which they earn millions of pounds, while their competitors are left struggling in so many areas. Speed is of the essence.
As a former newspaper journalist, my most immediate field of concern is local and regional media, which are suffering from the anti-competitive behaviour of the tech companies. There has been a collapse in local newspapers over the past decade and in the next three years this will turn in to a major exodus, with huge areas of the country becoming local news deserts with nobody reporting on local councils, courts and other important civic activities.
The Digital Markets Taskforce study on digital advertising found that the tech companies had used network effects and economies of scale to dominate the market. It concluded that the “more vibrant competition” in the market would improve
“the bargaining power of online news publishers”,
which would
“improve the health and sustainability of journalism in the UK”.
In turn, this would
“contribute positively to the effectiveness and integrity of our democracy”.
On top of this, much of the news content generated by these media companies is used by tech platforms either for free or for little remuneration.
I have long campaigned for the final offer mechanism to be available to the CMA as a powerful deterrent against anti-competitive behaviour by the tech companies, but surely all deterrents are more effective if there is a realistic chance that they will be deployed, and in a short time. Once the CR requirements on an SMS have been imposed, breached and reported, the CMA should be in a good position to know whether the designated SMS company will take the long or short road to a solution. Amendment 48 would allow the CMA to issue an enforcement order, decide whether that has been breached and investigate the breach, if it feels that it will lead to a satisfactory resolution to the company’s behaviour. However, if, earlier in the process, the solution is not going to be possible, the regulator needs the power to bring forward its ultimate deterrent. No SMS will want to have the final offer mechanism imposed on it, and I understand that the CMA is equally reluctant to deploy it, but the more pressing the threat the more likely it is that the DMU investigation will be brought to a quick and effective resolution.
I know that these companies will fight tooth and nail to preserve their massive profits resulting from the anti-competitive behaviours. It might be useful for the Committee if I give just one really shocking example of how effective these delaying actions can be. The salutary lesson is the story of a nascent shopping comparison site, Foundem, based in London and founded in 2005, which was doing very well until 2008, when it was massively deprioritised on Google Search, at about the same time that Google Shopping, the search engine’s own shopping comparison site, was set up. Foundem issued a complaint to the EU Commission in 2009 about anti-competitive behaviour by Google. The Commission set up an investigation and, three years later, after many legal arguments, Google was given a preliminary assessment—similar, I imagine, to an SMS designation. Rules were then laid down for the company to follow, but within six months market tests revealed that it was not tackling the anti-competitive behaviour. The response was dragged out by Google until 2016, when it was given a supplementary statement of objectives, which were also heavily fought by the search engine.
Finally, on 27 June 2017, the EU imposed a record €2.4 billion fine on Google for violating EU competition law. However, the company appealed, first to the EU General Court and then to the Court of Justice of the European Union. Final judgment on the case has yet to be issued. Meanwhile, Foundem exists in order to fight the case, but it suspended all its services eight years ago. This is a 15-year David-versus-Goliath battle with a company, some of whose activities CMA might have to designate. This legislation must be drafted to ensure that the process brings results, and fast, if small digital competitors are to have a chance of surviving.
Already the CMA estimates that the designation process will not become operational until June 2025. I know that the hope is to set up a designation process at the same time as negotiating the conduct requirements, but that could still take up to nine months to implement on the SMSs. Meanwhile, many of the smaller media outlets I talked about earlier will have gone under.
The same arguments for legal delay by tech companies must apply to Clause 29, which introduces the concept of countervailing benefits. I do not understand the need for Clause 29. Clearly, the balance between consumer benefit and anti-competitive behaviour will have been looked at as part of the SMS designation process, which is clearly set out in the Bill. Does the Minister think that our world-class regulator will ignore these considerations in the initial process? If they will be considered then, why introduce this clause for consideration all over again? I have already explained the need for speed in the CMA’s process. This exemption can only play into the hands of the tech companies to draw out the processes and hold up the prospect of many more companies like the start-up shopping search website Foundem being littered by the digital wayside. I ask the Government to seriously consider taking Clause 29 out of the Bill.
However, I support the fallback in Amendment 40, to have the word “indispensable” inserted into the clause. Your Lordships’ Committee has heard that “indispensable” was taken out on Report in the other place. The Minister has said that the simple threshold of “benefit” is already established in Section 9 of the Competition Act 1998 and Section 134(7) of the Enterprise Act. However, the former talks of an “indispensable benefit” and the latter just of a “benefit”. The Minister says that the two thresholds are the same; clearly, they are not.
The new definition of the grounds on which anti-competitive conduct can be permitted states that
“those benefits could not be realised without the conduct”.
It requires only that anti-competitive conduct be necessary, rather than indispensable, which means that anti-competitive behaviour is the only way to achieve the benefit. Surely, if that is the case, it would be better for the consumer, in whose name the Bill is being enacted, to have the highest possible threshold of benefit.
The Explanatory Notes open up avenues for further legal wrangling by lawyers, as they say the definition of benefit will be similar to that in the Competition Act and the Enterprise Act. As the two Acts use “benefit” in different ways, that will surely lead to confusion. Is the use of the word “similar” because it is not possible to say “same”, in the light of the divergent terms that appear in these two Acts? Without it, there seems to be room for legal ambiguity. At the very least, there should be an explanation in the Bill that establishes “benefits” as having the same definition as in the Competition Act.
I know that all noble Lords want the Bill to be implemented and effective with all possible speed, to make this country a world leader in digital start-ups. However, it needs to be amended to avoid legal confusion and unnecessary delay by world players that have everything to gain from protecting their dominant position in markets.
Lord Fox (LD)
My Lords, on the pretext that he would not be here, my noble friend passed responsibility for this group on to me. As noble Lords can see, he is “not” here. This is a long group and my noble friend managed to attach his name to every amendment in it, with the exception of the two proposed by the Minister, so I apologise if I give a slightly long speech on his behalf.
I spoke at Second Reading, but I was not here for the first day in Committee, as I was in the Chamber speaking to the main business there. My noble friend has tabled Amendments 38 and 41, on countervailing benefits; Amendment 43, on goods and services; Amendments 49, 50 and 51, on final offers; and Amendment 107, on injunctions. He also supports Amendments 36, 39 and 40 from the noble Baroness, Lady Jones, which seek to restore the status quo of Clause 29.
In Clause 29, as we know, there is an overarching provision that enables SMS designated firms to push back on regulatory decisions through a countervailing benefits exemption. This is, in our opinion, a potential legal loophole for big tech to challenge conduct requirements through lengthy, tactical legal challenges. We just heard an example of how similar measures can be employed. This is a significant loophole, not a small one, and it would require the CMA to close a conduct investigation into a breach of conduct requirement when an SMS firm is able to prove that the anti-competitive conduct in question produces benefits which supposedly outweigh the harms, and that the conduct is “proportionate”—that word again—to the realisation of those benefits. It has the potential to tie up CMA resources and frustrate the intent of the legislation. It is critical that these provisions do not inadvertently give designated firms immunity from CMA decisions. We heard from other speakers that the scale of resources at the command of these companies far outweighs the resources that the CMA would be capable of summoning. That inevitably leads to the ability to clog things up.
As the noble Baroness, Lady Jones, explained, the Government added amendments to the Bill on Report in the Commons that could further weaken the ability of the DMU to push back against spurious claims of consumer benefit. The removal of the term “indispensable” may weaken the regulator’s ability to rebuff these claims as, by analogy with competition law, the use of the term “indispensable” is likely to require a high standard for firms to meet; therefore, the standard is now lower.
Lord Black of Brentwood (Con)
We are all delighted that he is in fact here. I support Amendment 48 in the name of the noble Baroness, Lady Jones of Whitchurch, to which I have added my name.
The final offer mechanism is a crucial part of the Bill; it is the engine that makes it all work. In an ideal world, of course, it ought never to be deployed because the platforms would see the light of day and enter into sensible agreements with publishers. It should be a last resort only where common sense has failed. But this last resort is—like a deterrent—credible as an incentive to negotiate only if it can be deployed throughout the process of negotiation, not at some far distant point in the future. If it is something so far off that the platforms and publishers believe it will never in reality be reached, publishers will be compelled, out of commercial necessity, to accept suboptimal deals from SMS firms, in some cases—I think in particular of the local and regional press—simply to survive. As the Bill is currently drafted, that is exactly what might happen. The noble Viscount, Lord Colville, talked passionately about that aspect.
SMS firms that have time and money on their side—in the way that hard-pressed publishers do not—could very easily hold out until the very last minute of negotiations before the final offer mechanism is deployed. That ability continually to delay things simply reinforces the market power of the SMS firms and does nothing to redress the balance, which is what the Bill is supposed to be all about.
Such an extended nature of the enforcement process means that it could take years for the FOM to be reached if SMS firms are not acting in good faith—and, let us face it, that will happen. We need a system much closer to the Australian news media bargaining code, whereby strict timelines mean that every step combined—bargaining, mediation and final offer arbitration—would take just over six months. Of course, neither publisher nor platform wishes to end up in FOM unnecessarily. This amendment from the noble Baroness would make the FOM available at an earlier stage only if the CMA judged that its standard enforcement mechanisms would not be effective; for example, if an SMS firm had simply refused to enter negotiations. However, if the CMA judges that its standard enforcement mechanisms under Part 1 would be sufficient to ensure that deals are made swiftly, it could proceed with other remedies. This ensures that the FOM is a last resort but also a credible alternative.
Many publishers, particularly local and regional ones, as I have mentioned, are under the most severe commercial pressure. They simply cannot afford to wait to see the fruits of this Bill. Many more titles will have closed and some publishers may have gone under. In the interests of media plurality and local democracy, we need to get this right. As it stands, the Bill wills the ends but not the means.
Lord Holmes of Richmond (Con)
My Lords, I shall speak briefly to this group of amendments and particularly commend those in the name of the noble Baroness, Lady Jones.
There are key themes that inevitably run through deliberations across groups in Committee, and it seems that, this afternoon, a recurrent theme has understandably been that the Bill is certainly better as was than currently as is. A number of amendments make that point very firmly.
If the Bill does not address at every point necessary the whole question of asymmetry in the nature of the relationship between the parties in all these complex arrangements, there is precious little point in proceeding beyond this point. The whole nature of the relationship and the negotiations therein is framed by the asymmetry of power, of resources and of what can be brought to bear by each party to proceedings. Hence, in this set of amendments, while different approaches are taken, similar ends are sought.
I look forward to hearing the Minister’s response and, as the noble Lord, Lord Clement-Jones, is “not” here, I also look forward very much to him “not” intervening on the Minister.
Baroness Stowell of Beeston (Con)
My Lords, I support Amendments 39 and 40 in the name of the noble Baroness, Lady Jones, which are about countervailing benefits. I have added my name to them. Before I make my remarks about those amendments, it is worth noting that my noble friend Lord Black gave quite a compelling argument in support of Amendment 48, describing how it would not drive a coach and horses through what the Bill is trying to introduce by virtue of the final offer mechanism but would strengthen it further. I will be interested to hear what my noble friend the Minister has to say in reply to that.
In response to the debate on a previous group of amendments, my noble friend the Minister said that, by virtue of the process of parliamentary scrutiny, or just making laws, we should improve Bills, in the sense that the way in which they are first introduced to Parliament does not mean that they cannot be changed. He is absolutely right: doing our jobs should lead to stronger, better and more effective legislation.
In the few amendments I have tabled I have tried not to unpick what has already been changed in the Commons but to add clarification where I felt that the changes were going in the wrong direction. On the topic of countervailing benefits, I added my name to Amendments 39 and 40, which revert Clause 29 back to its original wording at the point of the Bill’s introduction to Parliament, because I could not think of another way to secure the important purpose of Clause 29.
If I may, I again return to the way in which the Communications and Digital Committee scrutinised the Bill when it was first introduced. Countervailing benefits was one of the topics that we identified as an area of contention. In the course of our hearings, we heard a range of views on this clause. As other noble Lords have voiced in this debate, some wanted to see Clause 29 removed and others wanted it strengthened. The committee found that it should remain as it was; that it did not need to be changed and should remain in the Bill. We noted that the countervailing benefits exemption is
“designed as a backstop rather than an initial enforcement measure: the CMA is expected to take consumer benefit into account throughout its work”.
In conclusion, we said that the exemption
“provides a proportionate backstop as long as the threshold for using it remains high. The Government should resist any changes that would lower the threshold”.
Contrary to those who argued either to take out Clause 29 or to raise its threshold even further, my view is that, as it stood, it was fair and proportionate. Some of the big tech firms did not like it at all, but we thought none the less that it was an appropriate measure. Therefore, it would be fair to all parties for us to revert to the original text.
Baroness Harding of Winscombe (Con)
My Lords, I, too, wish to speak to Amendments 39 and 40, to which I have added my name. First, it is worth dwelling briefly on what the countervailing benefits exemption is: quite a “get out of jail free” card. To be clear: the company in question will have been found to have SMS, conduct requirements will have been imposed and the company will have been found to be breaching them and be on its way to jail. The countervailing benefits exemption is a “get out of jail free” card because the benefits that the new product or functionality brings are so good that it is worth breaching this set of fundamental competition principles.
That exemption is a really powerful tool that gets you completely out of jail. It can also enable you to simply slow down the process by arguing that it should be used, even if you will not succeed in getting out of jail. The process of slowing down being sent to jail is also very powerful for the big tech firms. This is a big weapon in the Bill.
However, I can also make the case, as many of the tech companies did at our Select Committee—as my noble friend Lady Stowell just said—that the exemption is an important tool to have in the Bill because we do not want to live in a world where large monopolists are not encouraged to innovate at all. There is an argument that we need to find the Goldilocks spot, if noble Lords will forgive me mixing my metaphors. I sit on my noble friend’s committee and, as she said, we have heard from the companies that would like this removed and from the companies that would like it strengthened. I share her view that the Bill as introduced to the House of Commons got that spot just about right.
Does my noble friend the Minister think that the new wording, introduced at a late stage in the Commons, of
“could not be realised without the conduct”
is the same as “indispensable”, or does it set a higher or a lower threshold to be able to use the “get out of jail free” card? I do not think he is going to argue that it sets a higher threshold; I think it is either the same as or a lower threshold. If it is a lower threshold, why do we really think that we need to make it easier for people who are on their way to jail to get out? If it is the same then we are right back to where we were two hours ago. Why do we need to define something differently that is already well enshrined in law as “indispensable”?
Lord Lansley (Con)
My Lords, in my short contribution I will look at what Clause 29 adds and whether it is necessary. I suppose I am saying that I want to speak to whether Clause 29 should stand part. We might have to come back to that.
My starting point was Clause 19(10):
“Before imposing a conduct requirement … on a designated undertaking, the CMA must have regard in particular to the benefits for consumers”.
Unless I am missing something, that will include disbenefits, so the countervailing benefits form part of that consideration. I do not understand why it would not be the best drafting, or the best Explanatory Note, to say, “Under Clause 19, when the CMA is considering imposing a conduct requirement, it must have regard to any countervailing benefits of not imposing such a conduct requirement”.
That is the starting point but let us say, for the purpose of the argument, that Clause 29 is not really about the imposition of a conduct requirement in the first place but about what should happen when there is a conduct investigation. But there are more stages for the designated undertaking. When the CMA wants to impose a conduct requirement, it has to give a notice under Clause 21 and say what the benefits are. The undertaking can come along and say, “Well, we have countervailing benefits if you don’t do this”, so it is entirely open at that stage to raise the countervailing benefits clause. I do not know why it is called an exemption. It is not an exemption. There should not be an exemption from the regime; there should just be a balance: how is the consumer benefit to be maximised? Once that notice has been served, it is subject to a public consultation under Clause 24, and the undertaking can come along under Clause 24.
Let us say that all that has happened, and there is a potential breach of the conduct requirement, and the CMA initiates an investigation under Clause 26. When the CMA does that, it has to give the opportunity to make representations within a defined period. Even if the countervailing benefits have not been taken into account in the original activity, when a breach is considered the notice is issued and the undertaking can come along and say, “Well, actually, the consumer benefits are being delivered by this means, and it is necessary and indispensable”, or whatever word you use. We could include it, if necessary, in the guidance.
I do not think that we are quite finished, even then. Clause 27 requires that in the
“undertaking to which a conduct investigation relates … the CMA must consider any representations that the undertaking makes”.
We could have put it in there, because it has a right to make representations at that point.
After all these things, which get us to the point where it has been considered in the first place, considered in whether a notice of a breach should be issued, and considered in the notice for the conduct investigation, and been given the opportunity to make representations, why do we need another clause that says that there is this thing that is called a countervailing benefits exemption as distinct from, at each previous stage—and there are many of them—the benefits or disbenefits and potential consumer benefits from different requirements that are to be considered? Frankly, I do not see it—unless it is, as my noble friend said, that there is a “get out of jail free” card that can be played. If it can be played, it will be played, so I do not think that we should allow it to be played.
Lord Kamall (Con)
My Lords, I will speak to Amendments 36, 38, 39, 40 and 41. I have been trying to understand the reason for the current government position. One issue that I have thought about, and which I have written about in the past, is the notion of unintended consequences. Often a well-intended government intervention can make things worse. Many of you will remember the example of the Government of the 1990s introducing the dash to diesel, as it was supposed to be better for the environment—and, in response, we found that actually it made things worse. That is not to criticise the Government of the day, as it was well-intentioned, and many people supported the reduction of greenhouse gases.
One thing that I have thought about with regard to better law-making is how we ensure that there are safeguards in place for when there are negative unintended consequences. For that reason, I have some sympathy for considering whether the unintended consequence of a CMA decision could make things worse for consumers. However, like many noble Lords I am concerned that this is a massive loophole for large tech companies to continue to engage in anti-competitive behaviour or, as other noble Lords have said, slow down the process.
Having looked at the amendments and the Government’s position, I want to ask my noble friend the Minister a direct question. Could he explain what the Government mean by countervailing benefits and give some real examples, or hypothetical examples, of where consumers may be harmed by a pro-competitive intervention by the CMA? If that response convinces noble Lords, perhaps the Government could consider bringing forward an amendment based on Amendment 41 from the noble Lord, Lord Clement-Jones. I look forward to my noble friend the Minister’s response.
The Lord Bishop of Manchester
My Lords, I shall be extremely brief. When we debate in Grand Committee, it always strikes me that we do so in the Moses Room —Moses, the great giver of the law. However, the biblical characters that I am more thinking of today would be David fighting Goliath, because it seems to be that a lot of the conversation around this group of amendments is about how we create a proper balance between the large platforms and small entrepreneurial providers. My mother was a small businesswoman; she ran two record shops in the Greater Manchester area. We could have been put out of business very easily if somebody had been able to delay some anti-competitive business action against us. We also have the judgment of Solomon here; he was quick in his judgment—there were no lengthy processes that took for ever and a day. I tend to the view that the Bill, as it entered the House of Commons, was probably at about the sweet spot, but let us get this right so that Davids have a chance amid the Goliaths. And yes, I apologise for not declaring that interest—I am called David.
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.
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.
Viscount Colville of Culross (CB)
If “indispensable” and purely “benefit” are the same, why was the change made on Report in the Commons?
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.
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.
Lord Fox (LD)
I appreciate the Minister giving way again and his answers. I am slightly confused; I either misheard or misunderstood, but did the Minister say that Clause 19(5) is, in essence, unenforceable by the CMA and is merely an advisory action?
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.
Lord Offord of Garvel
Member’s explanatory statement
This amendment ensures that transactions in which an undertaking uses goods or services of a third party have the potential to be subject to the final offer mechanism.
Lord Vaux of Harrowden
“(c) an undertaking which has received an SMS investigation notice in accordance with section 11(1), unless the initial SMS investigation has been closed in accordance with section 12 or an SMS decision notice has been given in accordance with section 14; and where such an undertaking is part of a group, any member of that group.”Member’s explanatory statement
This amendment would apply the merger reporting requirements to undertakings that are being investigated by the CMA as to whether they have strategic market status.
Lord Vaux of Harrowden (CB)
I hope that this group of amendments will not be as much of a marathon as the previous group—or indeed that performance from the Deputy Chairman. I start by apologising that I could not attend the first day in Committee, due to a combination of Avanti West Coast and Storm Isha. I would have liked to have spoken in support of amendments in the first group that day, and I entirely agree with what has been said about ensuring that we do not create opportunities for large tech firms to use their immense legal firepower to slow down the process of designating them as having strategic market status, and ensuring that the information and work already done by the CMA can be taken into account. It is fair to say that the same themes have continued today, and Amendment 59 is a continuation of them in a slightly different way.
As a number of noble Lords have already pointed out, we already know who the main strategic players are and that they are already abusing their strategic market positions, as the noble Lord, Lord Tyrie, said so clearly on day one. The noble Baroness, Lady Harding, described how the big tech players know that the regulation is coming, but they are walking backwards as slowly as they can. As she pointed out, we see that very clearly with the EU’s Digital Markets Act, in which so far every potential SMS-equivalent firm has challenged its designation through every stage of the courts that it can. So at best we are unlikely to see any SMS designations until well into 2025, and possibly much later, if they are able to spin out the process.
If I read the Bill correctly, there is actually only one immediate additional obligation that designation imposes on a company: a requirement to report possible mergers on a more enhanced basis than currently applies. But this obligation does not come into force until the SMS designation has been made.
As I said, we already know who the main players are. That is not just speculation—the CMA has already confirmed some of them in its previous work. As an example, in its Mobile Ecosystems market study report of June 2022, just a year and a bit ago, the CMA confirmed that both Apple and Google would meet the test of having strategic market status in the supply of mobile operating systems and the devices on which they are installed, in native app distribution, and in mobile browsers and browser engines. It is not speculation; we know who these people are. Why, then, would we want to wait for another year or more, allowing them to game the system during that period, before applying the enhanced merger reporting requirements on them?
Amendment 59 would apply the enhanced merger reporting requirement to companies that have been given notice that they are under SMS investigation, rather than having been designated. We do not have to wait until the designation has been made. We have heard already the fears that the large tech players will seek to spin the designation process out. Without Amendment 59, the large tech companies would have an additional incentive to game the system by deliberately prolonging the designation process so that they could complete a merger that would be reportable once designated but which is not reportable before the designation is made. I do not think that it is a good idea to give them further incentive to do that.
This is important. For much too long, the large tech companies have been able to entrench their market power through acquisitions with relative impunity. Very few have been passed to the CMA for investigation. In the 10 years to June 2023, according to Wikipedia—admittedly not the best source, but the only one I could find easily—Alphabet, the owner of Google, has completed at least 129 acquisitions, Apple 81 and Microsoft 110. In each case, that has happened across an extraordinarily wide area of activities. These big companies can afford to gamble on acquisitions, even if all they do is succeed in taking out a competitor, or potential competitor.
The enhanced merger reporting regime that this Bill will introduce is a really important step, and I very much welcome it, but we should ensure that it cannot be side-stepped by making it applicable as soon as a company has been informed that it is under SMS investigation. This does not prejudge the merits of any merger; it would simply allow the CMA to take a look while the SMS investigation is under way, rather than it going through under the radar.
I am sure that the Minister will argue that it would be unfair to apply the more stringent merger reporting rules to companies that have not yet been designated, but I do not believe that that is right. First, under Clause 9, the CMA is able to investigate an SMS firm only when it has reasonable grounds to consider that it may be able to designate an undertaking as having SMS. As previously pointed out, we know who those companies are, and we know that there are reasonable grounds for a lot of them that exist at the moment, as the CMA has already pointed out. More importantly, would not it be extraordinary if a merger that would meet the new threshold, and that therefore might impact the strategic status investigation itself, was not reported to the CMA during the investigation? That cannot make sense.
This is very simple: we know who the strategic players are, we know that they abuse their market power, including through mergers and acquisitions, and we know that they are likely to seek to challenge and prolong designation to avoid regulation—we have seen them do it. So let us at least put them under the enhanced merger reporting rules at the earliest opportunity, rather than leaving it for another couple of years.
Lord Lansley (Con)
My Lords, I am very glad to follow the noble Lord, Lord Vaux of Harrowden, who presented very well the context to both of these amendments and made a very good point about the desirability of extending the scope of Clause 57 in the way proposed in Amendment 59.
Amendment 60 stands in my name and that of the noble Lord, Lord Clement-Jones—who may be able to say something in his absence through the medium of the noble Lord, Lord Fox.
From my point of view, Amendment 60 goes back to the Furman review of 2019, which noble Lords will recall, which reflected a similar point to one that was made by the noble Lord, Lord Vaux of Harrowden. Paragraph 3.44 of the review referred to the preceding decade and said that in that preceding decade
“Amazon, Apple, Facebook, Google, and Microsoft … have made over 400 acquisitions globally”.
Under the Competition and Markets Authority in this country, in that decade none was blocked, none was notified voluntarily and none was called in for phase 1 or phase 2 investigation. There were European Commission investigations—and that might be regarded as the more appropriate umbrella as a competition authority—but it cleared Google and DoubleClick, Apple and Shazam, and Microsoft and LinkedIn. They were not blocked.
The world has moved on since Furman, and you might say that we have learned more and know more about some of the benefits that are obtained by some of those acquisitions. But the Furman review looked very carefully at whether we should regard mergers involving digital companies differently. That is, I suppose, my point.
I refer to paragraph 3.81 and subsequent paragraphs of the Furman review, which said:
“In mergers involving digital companies, the harms”—
the balance of benefits and disbenefits in relation to future competition—
“will often centre around the loss of potential competition”.
It goes on to say:
“Although potentially harmful to consumers, these outcomes are likely to be relatively uncertain at the time of the merger. This may make it hard to demonstrate that a substantial lessening of competition is more likely than not”.
I will come back to “substantial lessening of competition”, which will be a term familiar to many noble Lords. It gave the example, at this point, of the 2012 Facebook acquisition of Instagram, which at the time was a small photo-sharing platform. It said that even if the OFT had gone on from its phase 1 to a more thorough phase 2 investigation—which of course is more than a decade prior to the period it was looking at—it may have been limited in its ability to block the merger by the balance of probabilities standard: looking at a substantial lessening of competition, would it be more likely than not that there would be a substantial lessening of competition? We do not need to debate Facebook and Instagram and how it all turned out.
The Furman review said:
“The CMA should take more frequent and firmer action to challenge mergers that could be detrimental to consumer welfare through reducing future levels of innovation and competition, supported by changes to legislation where necessary”.
That was its strategic recommendation B. It went on to say, in a recommended action:
“Digital companies that have been designated with a strategic market status should be required to make the CMA aware of all intended acquisitions”.
That is indeed exactly what Clause 57 achieves. To that extent, the recommendations of the Furman review were carried through.
Interestingly, the Furman review went on to discuss the question of whether the balance of probabilities standard could be replaced by a balance of harms standard. I am not going to pursue that, because I can see that it was very difficult to vary a standard which is, in effect, not in the statute but is in the substance of the practice. What I have done instead, in Amendment 60, is to ask what it is that is lacking, or may be lacking, and should we, through the mechanism of the Bill, examine very carefully whether we can do more to strengthen the powers of the Competition and Markets Authority in relation to digital competition in particular.
Once there is a notification in relation to a potential merger, Clause 57(9) refers to the steps that the CMA may take in relation to a merger. It refers to Section 33 of the Enterprise Act 2002. It does not change it; it just refers to those steps. I have the benefit—I may not be the only one here, I am not quite sure—of having been on the Standing Committee in the other place on the Competition Act 1998 and the Enterprise Act 2002. I see that my noble friend was on the Standing Committee on the Enterprise Act—and maybe both.
We will come back to the issue, but I say to my noble friend the Minister, in parenthesis, referring to the previous debate, that trying to compare a block exemption under the Competition Act, which is ex post regulation, with an exemption applied in relation to an ex ante imposition of a conduct requirement by the regulator is, I am afraid, a false analogy. I will not go back to that, but I think it does not really apply.
What I have done in Amendment 60 is to seek to vary Section 33 of the Enterprise Act 2002—quite a big thing to do—but only in relation to designated undertakings. The amendment says that if one is a designated undertaking, not only does one have to notify but there is a difference in the structure of Section 33, so that where it says that a reference can be made in relation to
“(a) arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and (b) the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services”,
I am seeking adding an “or”. So (a) would apply in all cases; (b) might apply; or (c ) would apply, which the amendment makes clear would say
“or, (c) if the relevant merger situation involves a designated undertaking under section 2 of the Digital Markets, Competition and Consumers Act 2024 the creation of that situation may be expected to result in the loss of future benefit to consumers in the provision of digital activities as a consequence of the forestalling of prospective competition”.
The drafting may be deficient, but I make the point that we need to put in the drafting what we are trying to do. That is to give the CMA explicit statutory cover to look forward—as it does in its five-year forward designation—identify a merger situation and ask, in the context of its forward-looking assessment, which it must do for designation purposes, whether there is an expectation that that merger situation would result in the loss of future benefit to consumers if it were brought into effect. That is a reasonable alignment between the nature of the designation process and its forward-looking character and the desirability of the assessment of any potential merger situation having the same characteristic.
Lord Fox (LD)
My Lords, clearly the noble Lord’s days on the standing committee were not wasted; we thank him for his incredibly cogent set of arguments. He has said some of what I was going to say, which is good, so I will not repeat it.
It is worth remembering that there is a point of scale here, and it is scale that creates the issue. Alphabet, Amazon, Microsoft, Meta and Apple, in 2022, together had revenues of nearly £400 billion. How did they get there? Of course, they had their initial offering and their services and were able to attract customers, but then there is the law of networks and then predatory acquisition. The two feed off each other; one boosts the other and gives the finances and so on. Predatory acquisitions add to the network scale, and the network scale then makes the offer.
As we have heard, there has been a huge number of such acquisitions—not mergers—across those platforms, and they have very much been part of the strategy for those businesses. Few, if any, were questioned in time because, in classic competition terms, the scale of one outweighed the significance of the other in the short term.
The noble Lord pulled out the question of the acquisition of Activision. That was a departure—it did not go to court, but it did lead to a different way of looking at an acquisition by Microsoft. It was interesting that the authorities in the EU and the US did not take the same view. It was notable that the CMA stood apart and made that decision. It is a small step, and one that will clearly need much more support in order for the aims of this Bill to be properly supported.
The Bill introduces a requirement for SMS firms to report mergers, which is a start. They have to meet criteria relating to share ownership, voting rights, relevance to the UK and transaction value. This will help ensure that problematic acquisitions by dominant tech firms do not fly under the radar, but the Bill does not give the regulator additional powers, as such, to intervene in those deals.
Existing merger control practice in the UK and elsewhere has struggled to grapple with tech acquisitions, which can appear relatively harmless in the present, as we have said, while resulting in serious competition, as was elegantly illustrated by the noble Lord, Lord Lansley. In the UK, the CMA can intervene in a merger only if it proves that the deal is “more likely than not” to result in a “substantial lessening of competition”. Of course, that was not tested with the Microsoft acquisition. To address this, the Bill should be amended to give the CMA greater scope to block or impose remedies on SMS acquisitions. The Bill should introduce a tougher merger control regime for acquisitions by SMS firms, in the sectors where they have been designated as SMS firms.
On that basis, we support both Amendment 59, in the name of the noble Lord, Lord Vaux, relating to where an investigation is ongoing, and Amendment 60, in the name of the noble Lord, Lord Lansley, to Clause 57. As we have heard, it would amend the merger regime in the Enterprise Act. We think that may be a way of reaching in and giving the powers that the CMA will obviously need.
Lord Tyrie (Non-Afl)
My Lords, I will be brief. I strongly support the intentions of this part of the Bill. What the Government are attempting to do must be right. Relative inaction on mergers by leading regulators around the world has contributed to the problems that we are now trying to address with the creation of the DMU. Killer acquisitions are a serious and enduring problem in this market.
My view is that the CMA, among other regulators, probably could and should have acted earlier. It is worth pausing for a moment to consider why it did not. One reason is a lack of boldness; a reluctance to take risks by taking action with its existing powers; a fear of losing. Although we are empowering it a good deal through the DMU, it is important to bear in mind that, unless we secure a change of mindset in the CMA, I am not sure that we will get the benefits that we are hoping for from this Bill—certainly not all of them.
A second reason why a good number of the big regulators did not intervene earlier derives from the intellectual history of the current legislation, which is similar all around the world. Over the last 30 years, in the post-Cold War world, almost all the major jurisdictions, and a lot of minor ones, put on the statute book very similar legislation. About 150 jurisdictions have done so, based on a set of ideas often summarised as the Chicago school, although it is rather a caricature, which believed that there would be no need for such an interventionist approach because it would be difficult for any platform to sustain for long a dominant position, and another technological change would supplant them. That may yet turn out to be the case, with AI and new generations of technology.
However, we now know that it has not been successful with the existing range of platforms; they have been around for a long time, and we have ample evidence of abuse of market position by some of them. That is why we need to qualify the Chicago school approach in our minds. We need the people who run our competition regulators to shed what may be a lifetime of acceptance of some of their reflexes in respect of these big deals. They should start to challenge far more, and be far less accepting of, the tenets of the Chicago school.
Perhaps I could summarise my position overall by saying that I am sympathetic to all the clauses that have been tabled, but Ministers will need to reassure us that their intentions for these clauses really will be delivered by what is in the Bill at the moment. I myself am not sure that it is enough. There may be merit in some or all of the amendments in achieving what the Government themselves say they want to do.
Baroness Harding of Winscombe (Con)
My Lords, I associate myself with the remarks just made by the noble Lord, Lord Tyrie, about recognising how important it is that we embolden the CMA to tackle these merger issues. I do not have anything like the expertise in detailed drafting that my noble friend Lord Lansley has just demonstrated, but I encourage the Government to listen carefully to his advice and review the drafting. We should see if we cannot come together with a solution on Report that achieves what I think we are all trying to achieve here.
I would also like to briefly correct the record. On Monday, as the noble Lord, Lord Vaux, said, I said that all the companies had appealed their designation of the DMA. Much to my amusement, Google was very swift to email me on Tuesday morning to tell me no, it was very keen to collaborate, so I would hate that to become a considered fact of this Committee—I owe Google that.
I support the amendment by the noble Lord, Lord Vaux, but I point out to the Committee that it is actually a very small amendment. The CMA told us in one of its briefings last week that it could undertake only two SMS investigations at any one time. We should recognise that it is a very minor amendment meaning that, while the CMA is investigating two entities, those two entities will be required to report. We should accept that that is a very small improvement that we should encourage the Government to accept.
Lord Bassam of Brighton (Lab)
My Lords, I am sure the Committee will be relieved to know that we do not have a great deal to say on this, except that we see merit in the amendments from both the noble Lords, Lord Vaux and Lord Lansley.
I thought the noble Lord, Lord Vaux, made a very good point: this is very simple. It is about providing and encouraging greater transparency in the merger process. It is straightforward in ensuring that all parties are aware of the status of the undertaking involved, and it brings clarity where the SMS is concerned.
It has to be regretted that companies might want to use mergers and acquisitions as a way of delaying SMS designation. As the noble Baroness, Lady Harding, has just said, there are delays enough in the process as it is. If the CMA is going to be able to do only two of these a year, there is hardly much reason to encourage more, greater and longer delays in the process.
The noble Lord, Lord Vaux, argued that designations could take until 2025 and delays will occur. With the sheer volume of acquisitions taking place, if companies are going to use that as a means of gaming the system then that cannot be right. It cannot be in consumers’ interests either.
I turn to the elegant amendment by the noble Lord, Lord Lansley. It seeks to ensure, where a designated undertaking is involved, that there is an assessment of the impact on consumers. The Minister has argued from the Dispatch Box that the legislation is designed by the Government to place the interests of consumers at the very front of this piece of working legislation. So, if a merger is likely to lead to a loss of benefit to consumers, it must therefore be right that market intelligence is shared, and we assume from our perspective on the Labour Benches that that must be a public good to be supported.
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.
Viscount Camrose
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.
Lord Etherton (CB)
My Lords, I thank the Minister for his comments on Amendment 70 in my name. As he indicated, it would enable consumers to bring collective proceedings where there has been breach of requirements specified in Clause 101. The amendment would also require the Secretary of State to conduct a review to ascertain whether there are any other types of claim appropriate for collective proceedings.
Under current procedural rules of the court in England and Wales, there are very limited circumstances in which more than one person can bring proceedings, even though they may have suffered harm or loss from the same defective product or conduct. A single set of proceedings with multiple claimants could not be brought, for example, where the harm or loss was suffered on different occasions and in different circumstances. Representative proceedings—or class actions, as they are usually called—would overcome these limitations.
Chapter 7 of Part 1 of the Bill, dealing with enforcement and appeals, makes provision for individual claims in the Competition Appeal Tribunal or to a court for breaches of requirements, such as conduct requirements and pro-competition orders following pro-competition interventions. There is no provision in the Bill or elsewhere enabling consumers and businesses to make collective redress where multiple parties have been harmed by the same breach. In many cases, individual consumers and small businesses will be unable to finance proceedings. Furthermore, the knowledge of the likelihood of such a difficulty will be a disincentive to those who are subject to conduct requirements and pro-competition interventions to comply with their obligations.
Provision for collective proceedings, or class actions, is made in the Competition Act 1998, as amended by the Consumer Rights Act 2015. However, that provision applies only to breaches of competition law. The Bill provides an excellent opportunity to extend the availability of such proceedings to cases where numerous consumers have suffered from the same defective goods or conduct. The Competition Appeal Tribunal is now well used to representative proceedings in competition cases and is well aware of how best to handle them. This is an important opportunity for the Government to increase accessibility to justice to those who would otherwise not have the financial ability to bring proceedings, especially against large and well-funded entities. The Government should grasp it.
Lord Wolfson of Tredegar (Con)
My Lords, it is a pleasure to support the noble and learned Lord, Lord Etherton, in this amendment, which he has proposed extremely clearly; I can therefore be relatively brief. However, I probably have the most difficult feat of advocacy ahead of me. Normally in these circumstances one is trying to persuade the Minister to depart from the written brief in front of him, but now I have to persuade him to depart from the written brief which he has already read out, so I feel as though we know the answer to the question I am about to pose. None the less, I will proceed. I refer to my interests in the register as a practising barrister, including, as I will mention in a moment, practising in the Competition Appeal Tribunal, popularly known as the CAT.
It is a fundamental principle of the rule of law that there ought to be an effective means for legal rights to be vindicated. Having a legal right without the ability to vindicate it is not of much use. There are areas of law where a breach of legal duty may affect many consumers, but it is likely to affect each of them minimally. Although such affected consumers can in theory bring a claim for damages, it is rarely worth their while because of the small amount of each individual claim. The irrecoverable legal costs—I again declare my interest—will swamp any damages recovered, even if the claim is successful. There is also the risk of an adverse costs order if the claim fails. The real-world effect is that these claims are brought only by large claimants who have suffered large losses. That means that legal rights are not in practice vindicated. That is, in effect, a gap in our justice system.
In order to make access to justice possible for consumers in these cases, and to create a means of effectively enforcing competition law, a class action regime was introduced into the Competition Act 1998, in Section 47B. That section does not create any new rights; it creates a new process for the more effective enforcement of existing rights. It does this by enabling individual claimants to pool their claims and have them brought by a class representative. The class representative does the running in terms of preparing, funding, and bringing the action. The individual class members tend to have very little to do, other than to receive their damages when they are awarded. Importantly, there is no exposure to adverse costs orders.
This regime has been very successful. There is a high degree of expertise, both procedural and economic, in bringing such claims, and for that reason, the Competition Appeal Tribunal is the only forum in which such claims can be brought. I am instructed in such cases in the CAT, both for potential claimants, through the class representative, and also for defendants. While there are a few rough points which need to be smoothed out, as in any new jurisdiction, there is no doubt that the jurisdiction is bedding down extremely well. There are specialist judges sitting in the CAT, and there is now a range of specialist practitioners, in London and elsewhere, who appear in it.
Clause 101 creates a new data right, which is unlikely to see much use, I suggest, unless it is collectivised—in other words, brought subject to the same regime so that right can be vindicated in the same way. The main thrust of the amendment to which I have added my name is that the class action regime in Section 47B be expanded to include such claims, which would benefit from better access to justice, and, really importantly, would avoid leaving claimants with a right but with no effective remedy.
Baroness Stowell of Beeston (Con)
I wanted to intervene briefly. I do not have an amendment in the group, I have not signed my name to any, but I wanted to piggyback on the introduction of the issue of private litigation to ask a question that has been put to me by one of the big tech firms. I thought it was a reasonable question, even though it was not one I felt moved to table an amendment on. I suggest to my noble friend the Minister that he might find it easier to reply by means of a letter to me that he can put in the Library of the House, rather than taking up time.
The question is why, in this Bill, if somebody wants to bring a private litigation, there is no provision for the CMA to be required to give consent before an action can be taken by way of private litigation. In contrast, in the Communications Act 2003, Ofcom’s consent is required before private litigation is taken on a matter that refers to conditions imposed on the various companies that come under its auspices. The relevant part of the Communications Act is Section 104, where claimants must obtain permission from Ofcom to bring private enforcement claims alleging a breach of the conditions that have been set by Ofcom: they cannot simply file a claim whenever they wish. The Act says:
“The consent of OFCOM is required for the bringing of proceedings by virtue of subsection (1)(a)”.
The purpose of this is to give Ofcom a sort of gatekeeping role and prevent overlapping, or private litigation happening while something is being carried out by the regulator.
I thought it was a worthwhile question and I am happy to ask it. The other issue that has been raised with me is that in these private litigations, the contentious countervailing exemption that we discussed in an earlier group is not available to the big tech firms in the same way that it is available to them in the procedure that is set out in the Bill.
I have given the Bill team notice of these questions. I know that they have some very good answers, and I suggest to my noble friend that he asks his officials to convert that into a letter that he can put into the public domain.
Lord Fox (LD)
My Lords, the hyperactive pen of my noble friend signed up to this amendment as well. It is a great pleasure to support the noble Lords, and particularly to get cover from the noble Lord, Lord Wolfson—it is not usually like that. I am very happy to support this amendment, or the principle of this amendment: if not these words, some others.
Just to emphasise, when I was speaking to the last group of amendments, I set out a group of the major tech companies and said that in 2022, they had a revenue of nearly £400 billion, which is twice the size of the Ukrainian economy. That is the scale of the opponent that we are asking citizens to take on. To deny them the opportunity to band together, which in itself would still be a formidable challenge, is really to deny them justice. It is unrealistic to expect any individuals bar a few—and they are probably the ones who own the companies in the first place—to have sufficient resources to take on businesses of this scale. I would like the Minister at least to acknowledge that point. Perhaps we can go away and work out the best way to enable the reality of individuals being able to bring cases, because at the moment it is merely an idea; it cannot possibly happen.
Baroness Harding of Winscombe (Con)
I will just add a couple of questions to the ones that my noble friend Lady Stowell just posed, and I am sorry that I have not been organised enough to share these with the Bill team in advance. Both relate to the importance of the collaborative nature of this legislation and how important it is that the tech companies are actually incentivised to work with the CMA as they go through this process. I too have had a couple of questions posed to me, in addition to what I would describe as the Ofcom-model question that my noble friend raised.
First, should the legislation require courts to avoid judgments that conflict with the DMU’s existing decisions? Otherwise, I think there is potentially a risk that you get two jurisdictions coming to contradictory conclusions. Secondly, how can we avoid litigation undermining existing DMU resolutions and therefore just extending and delaying any implementation? In both cases, there is a risk—although I defer to the huge expertise in the Committee on the need for the civil proceedings. We have to make sure that we do not undermine the very principle of trying to incentivise the SMS firms to engage in constructive dialogue through the process.
Lord Tyrie (Non-Afl)
The CAT’s class action powers have been a success, although probably not an unqualified success—but that is for another day. I just want to pick up on one point.
Nowhere is the asymmetry of power greater than between an ordinary consumer and a platform. We must try to find ways of enabling consumers to have greater self-reliance, to have mechanisms to achieve some redress of that asymmetry. When I was in the CMA, I did quite a lot of work on this subject, not only with respect to platforms but generally with respect to big firms, and that work largely got lost.
I suggest to the Minister that he asks for some work in this field to be done by the CMA, not only with respect to platforms but across the piece, to see whether a much more comprehensive programme—taking into greater consideration the reality of the asymmetries of power that we see have now developed in the marketplace —can be put together and give consumers greater confidence that they are not being ripped off, as so many of them are at the moment, frankly.
Lord Leong (Lab)
My Lords, I apologise for not being at Second Reading; I was only recently co-opted to support my noble friends Lady Jones, Lord Bassam and Lord Stevenson in the Bill’s passage through its various stages.
I thank the Minister for introducing this group of government amendments, which we are not opposing. I also thank the noble and learned Lord, Lord Etherton, for speaking to his important Amendment 70 on collective proceedings, and all other noble Lords for their contributions. We have signed the noble and learned Lord’s amendment and support what he has argued.
I will be brief. I am not a lawyer, and I hesitate to stray into this issue to the depth that it clearly requires. After listening to the noble and learned Lord, however, and having read some background material, I am bound to say that this is an area that needs more attention. If there are not to be changes made in this Bill, for which there seems to be a case, at the very least there needs to be a review, as suggested in the amendment.
We are very grateful to the noble and learned Lord for introducing this amendment and we will listen very carefully to the Minister’s response. If he is not able to give a positive response today, I am sure that this is an issue that we will need to return to on Report.
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.
Digital Markets, Competition and Consumers Bill
Monday 29th January 2024
(6 months ago)
Grand CommitteeRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 12-IV Fourth marshalled list for Grand Committee - (29 Jan 2024)
Member's explanatory statement
This amendment, alongside others in my name to Clauses 89 and 103, would revert the relevant Clauses back to the ones first introduced in the House of Commons. This would reinstate judicial review principles as the means by which appeals against penalty decisions are heard, rather than such decisions being determined on the merits.
Baroness Jones of Whitchurch (Lab)
My Lords, in rising to move Amendment 64, I will also speak to Amendments 65, 67, 71 and 72. I thank the noble Lord, Lord Clement-Jones, and the noble Baronesses, Lady Harding and Lady Kidron, for their support. The noble Baroness, Lady Kidron, cannot be here and sends her apologies, but she asked me to stress her absolute support for this amendment. I have added my name to Amendment 66, in the name of the noble Baroness, Lady Stowell, and I look forward to hearing from the noble Lords, Lord Holmes and Lord Tyrie, who, I am sure, will make important contributions shortly in support of their amendments. All our amendments would revert the appeals process back to judicial review principles for resolving appeals against penalty decisions, unlike the late government amendments, which substituted merit reviews.
This debate follows on from last week’s excellent debate on the impact of making CMA decisions proportionate and strengthening the right of SMS firms to argue for countervailing benefits to be taken into account. The issue of judicial review versus merit appeals goes to the heart of the argument about achieving the right balance between the rights of SMS and challenger firms. Of all the many submissions we have received on the Bill, this has received the most attention—from those on both sides of the argument—and we have taken note of all those views.
The Government’s amendments matter, because penalties such as fines are the most significant deterrent in preventing strategic market status companies breaking the conduct requirements established by the CMA. There is real concern that, under the new wording, SMS firms will use the appeals process to delay implementation of the fines and thereby reduce their incentives to comply with the order. Also, as the fines do not have to be paid until any legal challenges are finally resolved, there is an incentive to drag out the final decision through the courts. The fact that they have lobbied for these changes raises real questions about their motivation in pursuing this.
When we met with one of the potential SMS firms recently, it argued that the new regime gave the CMA too much power and that a merit appeal process was the only way to provide a check against misguided or ill-informed decisions. It has also been argued that the Furman review recommended that any loss of the right to merit reviews should be coupled with an enhanced role for independent decision-making to protect against executive overreach. We accept that this new regime does give the CMA significant new powers, and this has already been a theme of our debates, but we would argue that the scrutiny of whether it is carrying out its duties effectively should be through Parliament, not through individual costly legal cases going to merit review.
We are supporting several amendments to the Bill that would enhance Parliament’s oversight of the CMA’s activities. In addition, it is important that the CMA explain its decisions in detailed written reports and disclose its underlying data to interested parties in order to allow them to identify errors. All this would help to shore up scrutiny of its decisions.
As the CMA itself argued in giving evidence to the Commons committee, judicial review is the established system for much of its work, including merger control and market investigations. It also applies to a number of other regulators. The advantage is that it avoids protracted litigation and encourages engagement early on, with constructive and collaborative outcomes. We agree with this approach, which is why we believe that appeals through judicial review will deliver swifter and more effective outcomes.
In his response at Second Reading, the Minister made the point that appeals on full merit bring the regime into line with the Enterprise Act 2002. So far, this seems to be the only justification the Government have made but, as we have made clear, it is not the only comparator. Many other regulators, including Ofcom’s role under the Online Safety Act, do not use merits reviews on appeal. We do not believe that the case has been made for this change; we believe that both sides benefit from a prompt resolution of the issues which a JR process will deliver.
In the meantime, noble Lords have submitted other amendments in this group that seek to limit the application for any merits review. We would argue that the cleanest way to achieve our objective is to revert to the original wording, but I very much look forward to hearing their views and having this debate. I therefore beg to move Amendment 64.
Baroness Stowell of Beeston (Con)
My Lords, I will speak in particular to my amendment in this group, Amendment 66, which does what it says quite clearly in its explanatory statement. This amendment would make it clear on the face of the Bill that
“the only CMA decisions subject to full merits review in Part 1 of the Bill are the decision to impose a penalty, the level of the penalty, and the timing of the penalty”.
Before I go on, may I please also thank all noble Lords who have added their names to my amendment? They are the noble Baroness, Lady Jones, the noble Lord, Lord Clement-Jones, and my noble friend Lord Black of Brentford—no, Brentwood; sorry, they are quite different, I think. I will say something shortly about the other amendments in this group.
Noble Lords will know that I was very public and vocal in airing not just my own concerns but those of the Communications and Digital Committee that the essential judicial review process for appeals against CMA rulings that is in the Bill might be overturned by the Government in the face of lobbying by big tech. As I said at Second Reading, there was much relief that the Government did not go as far as we feared they might, but the introduction of a merits appeal on penalty still causes alarm, because it is hard to see how such an appeal will not reopen the substantive finding.
My amendment seeks to prevent that happening, but we need to look at the practicalities of this, which is where I would also include the other amendments in this group that seek effectively to reverse the Bill back to its original wording. If a firm appeals the penalty, how will a complete rerun of the basis for the CMA intervention be avoided? I have had a conversation with my friend, the noble Lord, Lord Faulks, because he is the legal expert—I am not at all. He made a couple of points to me that are relevant for me to air in my remarks.
I would like my noble friend the Minister to tell us what would be relevant for a firm to appeal on its merits, because once we start to look at the practical differences between an appeal on the penalty and one via the merits process, as opposed to a JR test, what worries me is that it will not simply be an argument that the penalty was excessive, as in when people say, “The prisoner should have got five years when he got seven”. How will the Government, by virtue of the changes they have made to the Bill, avoid a complete rerun of the basis for the CMA’s original intervention? I fear it will be argued, when it brings an appeal on the merits of the penalty, that this is also all relevant to an appeal on the merits of the substantive finding. Basically, we will find that the whole decision starts to get reopened.
As I said to my noble friend the Minister last week, with the amendments I have tabled in Committee, I have tried to avoid repeatedly unpicking what the Government brought forward at Third Reading in the Commons. At the very least, there must be further clarification in the Bill if the merits appeal on fines is to stay. However, to satisfy this Committee—and, ultimately, your Lordships’ House—against reverting the Bill to its original wording, my noble friend the Minister must convince us of the practicalities of how the merits appeal on fines system will work in practice, and that it will not undermine the JR process for substantive CMA rulings.
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to follow my noble friend Lady Stowell in speaking to my Amendment 69. As has already been mentioned, a common theme runs through all the amendments in this group: limiting full merits appeals and ensuring that in practice they apply only to the imposition of financial penalties and the quantum of those penalties, as set out in Clauses 85 to 92.
As has already been stated, when he sums up, my noble friend the Minister needs to explain how this will operate in practice and why this situation is so special that a different approach is needed from that of any other regulatory environment, such as Ofcom.
There is nothing more to be said. Following on from the noble Baroness, Lady Jones, I am tempted to ask whether the amendments were government late amendments or late government amendments, but I will leave that hanging with the Committee. Ultimately, we need to ensure that we have clarity on how this approach will work when the Bill becomes law and that there is a watertight limit on the deployment, and potential misuse, of full merits appeals.
Lord Tyrie (Non-Afl)
I have put a couple of amendments down which I suspect will not fully accord with the mood of the majority of the Committee on JR. I also support the removal of full merits appeals on fines, and I would like to explain why I have taken that position.
The Government took a number of important decisions on appeals in the other place. One was an amendment conceding that the scale of fines will be subject to a full merits review. Another stuck with the narrow definition of JR, or pure JR. Those two decisions are directly linked—politically, economically and legally—and there is a trade-off between them. They are best considered together.
My view on the fines issue is straightforward. There are two main reasons why the Government have got this decision wrong. First, a key point that we must bear in mind is that fines in the UK for all forms of breach of competition, anti-trust and consumer protection law are, on average, far lower than those in any comparable jurisdiction. As a result, both in the competition field and with many financial regulatory issues, fines are treated as a business cost by large firms. This has been a major weakness of our regulatory framework for decades and is still there now. If fines are to serve as a deterrent to platforms, they need to be large—perhaps very large, even unprecedentedly so for the UK. I fear that a full merits review will drag fines in only one direction, and we have the history of fines review by the CAT in other areas in support of that view.
Incidentally, I am amazed that the Treasury has not taken a closer interest in all this, because fines score against the consolidated fund, but it seems quite sleepy on this issue. It should be very wary of a full merits review of fines.
Lord Black of Brentwood (Con)
My Lords, it is a great pleasure to follow the noble Lord, Lord Tyrie, who has made an important speech. I shall speak to Amendment 66 in the name of my noble friend Lady Stowell, to which I have added my name. I also support the amendments tabled by the noble Baroness, Lady Jones, which cover similar ground. I remind noble Lords of my registered interests set out on the first day in Committee.
Two key themes seem to have emerged consistently during the scrutiny of this Bill in Committee: first, the need for there to be as much clarity as possible with no room for protracted legal wrangling as a result of legal loopholes; and, secondly, the emphasis on the speedy resolution of disputes. My noble friend’s amendment goes to the heart of both those themes and seeks to enshrine in the Bill the Government’s stated commitment, which is strongly shared by the Grand Committee, as I have seen to date, to clarity and speed.
As the Minister made clear at Second Reading, the Government intend that merits-based appeals are available once a breach has been found only if
“the imposition of a penalty was not appropriate, the level of it was not suitable, or the date by which it should be paid needs to be changed”.—[Official Report, 5/12/23; col. 1450.]
Merits appeals are not intended to apply to the decision that a breach has occurred or to the decision to set a conduct requirement in the first place or to introduce a remedy such as an enforcement order following a breach.
Lord Faulks (Non-Afl)
My Lords, may I crave the indulgence of the Committee? Unfortunately, I missed the first minute of the speech made by the noble Baroness, Lady Jones, as I was trying to comply with etiquette and remain in the Chamber until the conclusion of the opening speeches on the Rwanda Bill. If the Committee permits, the points I was going to make have largely been made by others, so I can be particularly brief.
At the heart of this legislation is the decision: do we want the regulation to be done by the DMU or, de facto, by the courts? This is, effectively, a twin attack. First, there is the proportionality provision inserted into the statute, and now we have the change in the test of appeals on sentences. The combination of those two seems inevitably to lead to further court involvement, and it is not the intention that courts should be the regulator. The courts are there, as the noble Lord said, to stop executive overreach or some illegality in the approach based on usual JR principles. They are not there to second-guess what the DMU has done.
If the amendments, or something like them, are not accepted, I fear that an appeal of the merits will involve going into everything, as other noble Lords have said. We would have the war of the lever arch files, so eloquently described by the noble Lord, Lord Vaizey, at Second Reading. Lawyers will act, and continue to act, and it will frustrate what we are trying to achieve.
Lord Vaizey of Didcot (Con)
My Lords, as I have been cited by the noble Lord, Lord Faulks, it is incumbent on me to speak on the same principles as him. Everything that I want to say has already been said, but that will not stop me putting in my two pennies’ worth. This is the stuck-record part of the debate, where I repeat what I said at Second Reading and simply put on record my support for all these amendments.
I will pick up on what some noble Lords said in their comments. I wholeheartedly endorse what my noble friend Lady Stowell said. In the real world, if you have an appeal on the merits of a fine, it seems almost impossible to see how you stop leakage into an appeal on the merits of the case. So you are, in effect, back to square one and, as the noble Lord, Lord Faulks, put it, the war of the lever arch file.
The speech by the noble Lord, Lord Tyrie, was fascinating and a master class on the different aspects of judicial review: an appeal on the merits, an appeal on JR-plus, or an appeal on JR. When I was a Minister, I dealt with this debate with Ofcom, when it started the process of wanting to move from appeals on the merits to appeals on JR. To the layman, an appeal on the merits is in effect a full rehearing of the case: you go back to square one and simply have the trial all over again. An appeal on JR means that you at least have to identify a flaw in the reasoning of the regulator when it comes to a judgment. If, in effect—here, I bow to the expertise of the noble Lord, Lord Tyrie—settled law informed by European directives means that some element of the merits of the case are taken into account in a JR appeal of a regulator, so be it. It may be the difference between a passive and an active decision, as it were.
In this Committee, we understand how you can judicially review a decision by a government department. When a regulator is making an active decision to bring a prosecution, and it then finds guilty the company that it is prosecuting, some element of the merits may well be taken into account. It seems to me that how it is drafted may well be important, but the clear intent should be that any appeal, whether on the actual decision or the level of the fine, should be an appeal based on JR, when it comes to how a judicial review is understood when appealing a decision by a regulator.
I finish with the simple point—this is the stuck-record part—that it clearly is the settled will of this Committee, and I suspect it will be the will of the House when this comes to Report, to constantly guard against giving the SMS companies too much opportunity to wriggle out of decisions made by the regulator.
I should add that a lot of the tone of my remarks at Second Reading and in Committee might make it seem that I am in the pocket of the regulator. I am certainly not. I have lots of concerns that, at other times, would make me say that I think the regulator often strays too far and interferes in far too many cases. I am not resiling from the fact that there clearly should be an opportunity to appeal its decisions. Often, it backs away before it gets to a decision, but its interference in mergers and takeovers sometimes leaves me slightly baffled, particularly when it involves companies that have very little presence in the UK market. I am not saying, by any stretch of the imagination, that the regulator is perfect, but I know that any procedure it undertakes, as it will do when this law is passed, will be long and expensive, so we must guard against making it even longer and even more expensive.
Baroness Harding of Winscombe (Con)
My Lords, I seem to have found my space in this Committee following my noble friend Lord Vaizey again. I have put my name to Amendments 65, 67, 71 and 72 in the name of the noble Baroness, Lady Jones.
I would like to add a possible new element to the discussion, as I am conscious that otherwise we are all just literally repeating each other’s words. My noble friend Lady Stowell talked about the practicalities of a full merits appeal for fines and her concerns. We should also think about the incentives on the designated firms and on the CMA.
Much of what we are debating in this Committee is about how we balance the inequality of arms between companies with enormous resources, and the concern that independent regulators, given a large amount of power, can occasionally make mistakes. That is the essence of this debate. The noble Lord, Lord Tyrie, spoke eloquently about the risk of regulators making mistakes. I wish to add to the discussion some facts about the sheer scale of the inequality of arms.
According to a number of different sources, the best public assessment we can get of Apple’s legal budget is that it is north of $100 billion a year. Bruce Sewell, who stepped down in 2017 after eight years as Apple’s general counsel, gave an interview to a student at Columbia Law School in 2019 in which he set out how he thinks about the legal department and the legal budget in a technology company. He said that, rather than take clearly safe actions, the job of the general counsel is to
“steer the ship as close to that line as you can, because that’s where the competitive advantage lies … you want to get to the point where you can use risk as a competitive advantage”.
So, when you have a $1 billion legal budget, you can afford to play the risk card on every review. You can afford to fully resource every full merits review, whereas when you are the regulator, with a substantially smaller legal budget, you cannot risk every single one of your decisions going to a full merits review.
The incentives are equally divergent. The incentive on the regulator is to be really risk-averse; to not risk being challenged. That means that you will not bring the case in the first place. As the noble Lord, Lord Tyrie, said last week, we know that we need to embolden our competition regulator. One of the big opportunities on leaving the EU is to have a much stronger competition regime because we know that that will drive stronger economic growth. But a full merits regime, in any part of the process, will make the regulator more risk-averse and will drive the incentive to sail closer to the wind, as Bruce Sewell said. Sailing closer to the wind means less collaboration with the regulator, because you are much better off playing your legal cards in the courts. In both those cases, that is not the regime that we are trying to design. We need to recognise that it is not just about practicalities; incentives are really hard to avoid if you have a full merits appeal process at any stage.
I am therefore left asking why the Government are proposing to do this for fines. The argument we have heard up to now is that the reason for doing so is to align with the Enterprise Act. However, as the noble Lord, Lord Tyrie, beautifully set out, they are not really aligning with anything in this regime, so that argument does not wash. It is not the same as the regulatory regime for appeals in the sector I come from, telecoms. As I said at Second Reading—I apologise for repeating it—I do not really understand why small telecoms companies, tiny in comparison with these tech giants, are fine to cope with a JR on fines decisions, but the large tech giants need the extra protection of a full merits review, in case they are fined too much money. It sounds like the worst form of tech exceptionalism. Looking at digital regulation in this House in the last couple of years, we have learned that the era of tech exceptionalism should be over and that technology companies are just the same as other companies. They are not wicked and evil but driven by incentives to do a good job for their stakeholders, and if we define the rules of the game to encourage them to use their legal budgets to challenge the regulator, that is what they will do.
Therefore, I am left to believe, as the noble Lord, Lord Tyrie, said, that the only reason for the change made on Report in the House of Commons was that it was part of some form of explicit or implicit deal to open a back door that will weaken the Bill, which will therefore not achieve what we want. I strongly support the amendments in the name of the noble Baroness, Lady Jones. Later we will come to how, if we accept them, we will ensure strong parliamentary scrutiny. I hope very much that we do not think we trade one for the other.
Lord Kamall (Con)
My Lords, I wish to speak to this group of amendments. Other noble Lords have clearly made the case for the amendments in their names so I will try not to repeat what they have said.
Given that, I have three simple questions for my noble friend the Minister. First, having decided that appeals by firms should be decided not on merits in a court but by JR appeal, why have the Government now decided to allow this merits-based appeal on the size of the fine? I know that noble Lords have their own views on this, but I would like an answer and some clarity from the Government. Secondly, what evidence has come to light to persuade the Government to lay their amendments on this matter in the other place? Thirdly, how confident are the Government that, if a firm wins its merits-based appeal on the size of a financial penalty, this definitely will not give the firm a legal basis for challenging the reasons for the penalty and the conduct required by the CMA in the first place? I look forward to my noble friend the Minister’s responses to these three questions.
Lord Clement-Jones (LD)
My Lords, following this superb debate, I am worried about being able to add much to what has been said.
First, I want to pick up what the noble Lord, Lord Tyrie, said. As ever, I agree entirely with half of what he said, but the other half is rather more controversial. This seems to be a growing habit. Exactly as the noble Baroness, Lady Harding, said, if there is a solution to overreach, it must be through greater parliamentary scrutiny. The noble Baroness, Lady Stowell, also referred to this and we have amendments coming down the track on it. Going back to JR-plus for the majority of decisions to be made under the Bill would be a retrograde step.
Lord Tyrie (Non-Afl)
The noble Lord said that we should not go back to JR-plus, which would bring in a limited form of merits review. However, many decisions in merits appeals have been found to be clearly wrong, once in the appeal, and would have harmed consumers’ interests had they been allowed to stand, under full judicial review. Does the noble Lord agree with that remark? Before he decides whether or not he does, I remind him that I am quoting him in his opposition to the move made in 2017.
Lord Clement-Jones (LD)
My Lords, it is lovely to be reminded of previous remarks but, of course, that was then and this is now. We were talking about the standard for Ofcom then; today, we are talking about the CMA standard. The noble Lord would need to produce evidence that that standard did not in fact have a really poor outcome as a result of the power of big tech not being as limited as it could have been. He talked about us needing to recognise the power of big tech, but that is exactly what adopting the JR standard—the Wednesbury “unreasonable” standard that the noble Lord, Lord Faulks, talked about last week, and which all of us are content to stick with—would do.
Of course, what we are trying to do, if possible—if the amendments in the name of the noble Baroness, Lady Jones, are accepted—is to revert back to a JR standard for penalties. I believe that consistency across the board is rather more important than trying to revert to a form of appeals standard that obtains in a different part of the regulatory forest. However, as the noble Lord said, the danger of executive overreach is much more easily cured by increased parliamentary scrutiny than by trying to, in a sense, muddy the waters of the test for appeals.
What the noble Baroness, Lady Harding, said about incentives was entirely right. Litigation has clearly been used and is being used by big tech for strategic business purposes. We are trying to make sure that this does not drag on for ever and that appealing against the penalties does not open up the whole caboodle as a result. The noble Lord, Lord Black, and others who talked about the change of standard for penalties infecting other aspects of a CMA decision, made very strong points.
Ultimately, the Minister has a large number of questions from noble Lords. The noble Baroness, Lady Stowell, asked what would be relevant for an appeal on penalties. What is the motivation for the Government in putting forward this new standard for penalties? What is so special about it and what evidence did they use to come to that view? Is not the danger of using a merits appeal basis that the decisions on which the penalty was based will be unpicked? The practicalities were also raised by a number of noble Lords.
Lord Vaizey of Didcot (Con)
I intervene on the point that the noble Lord, Lord Tyrie, made to the noble Lord, Lord Clement-Jones. There is a difference. The noble Lord was absolutely right to raise his concerns about Ofcom moving from a merits-based to JR-based appeal, in 2017. As the noble Baroness, Lady Harding, knows very well, Ofcom often makes decisions on extremely complicated pricing mechanisms. The telecoms companies had a point in saying that a merits-based appeal for Ofcom decisions is worth while, because going through the calculations again could sometimes be worth £50 million, £100 million or £200 million.
Ofcom was right in finally moving to JR for those cases when it took quite important strategic decisions about the marketplace—for example, forcing Sky Sports to offer its content wholesale to competitors. The noble Lord, Lord Clement-Jones, had a point then and he has one today.
Lord Clement-Jones (LD)
It is very nice and helpful to be reminded of things that I had forgotten entirely. We need to make sure that we are consistent across the board. A full merits-based standard is not, for example, used to appeal against fines issued by Ofcom under the Online Safety Act. These Benches have serious concerns regarding the insertion of two different appeal standards in the Bill, as it may decrease the deterrent effect and risk lengthier appeals, as we have heard.
If we are not successful in persuading the Government to change back to JR for penalty appeals, and a merits appeal is to be included, a number of amendments—the amendment in the name of the noble Baroness, Lady Stowell, that in the name of the noble Lord, Lord Holmes, and my amendment—are of great relevance to make sure that we do not see that drift that the noble Lord, Lord Black, talked about. A failure to do so could run the same risks as an entirely novel appeals standard. On that basis, we very much support the amendments in the names of the noble Lord, Lord Holmes, and the noble Baroness, Lady Stowell, and my own Amendment 68, which would ensure that there is no further extension of the merits appeal standards into any other part of the Bill. It is intended to have the same impact and draw a clear line in the sand beyond which no court can go.
I am sorry that we do not have the noble Lord, Lord Lansley, here to reveal perhaps another letter from a Minister. We had an interesting discussion last Wednesday, when the noble Lord, Lord Lansley, quoted the letter, sent to Damian Collins and Sir Robert Buckland, about the nature of the intention behind including “proportionate”. It said:
“In practice this means that firms will be able to challenge whether the DMU could have achieved its purpose for intervention through less onerous requirements”.
In a sense, that is a massive invitation to litigation, compared to ordinary JR. If that move is an invitation to litigation, think how much further along the road we are travelling if we go for a merits test for the fine and the penalties. I hope the Minister will therefore reverse course back to the pre-Report situation in the Commons; that would give a great deal of satisfaction around this Committee.
The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
I thank the noble Baroness, Lady Jones, for raising the important subject of digital markets appeals through Amendments 64, 65, 67, 71 and 72. I thank noble Lords for their powerful and compelling contributions. I am glad of the opportunity to set out the Government’s position.
These amendments seek to revert the changes made in the other place to the appeal standard of digital markets penalties. This would mean that penalties would be subject to judicial review principles, instead of being heard on their merits. It is important that decisions made by the CMA can be properly reviewed to ensure they are fair, rigorous and based on evidence. As the Bill stands, the key decisions—particularly the regulatory decisions that will drive the benefits from this regime—will be appealable on judicial review principles. Only penalty decisions will be appealable on the merits. This will provide SMS firms subject to penalties with additional reassurance, without compromising the regime’s effectiveness.
Penalty decisions will come at the very end of the regulatory process, if at all. They do not have the same impact on third parties as other decisions in the regime. Conduct requirements and pro-competition interventions will already have been in place to address their intended harm before penalty decisions are considered. Decisions on penalties are different from those about imposing requirements: they are more about making assessments of facts. They will assess what the SMS firm has or has not done. Other decisions that the CMA will take in the regime are forward-looking expert judgment calls. It is appropriate that the latter be given a wider margin of appreciation through a judicial review standard than decisions to impose penalties.
To address the point made by many noble Lords, I make it clear that challenging penalties does not open up the question of whether a breach occurred, or whether a conduct requirement or PCI was right in the first place. I will set this out in more detail in response to the next set of amendments—but perhaps I should say, as I did on the first day of this Committee, that I am happy to listen to and take forward any form of words that strengthens the clarity or intent of the Bill. As I said, the intent of the Bill is that the decision about whether a breach has occurred is made on JR principles.
The digital markets measures, as with other CMA regimes, have always treated penalties differently in the regime. For example, they are automatically suspended upon appeal, unlike other decisions. This would also have been the case under JR. We have aligned penalty appeals with those under the Enterprise Act 2002, as was said, so that parties can challenge these decisions on the merits to ensure that the value of penalties is suitable. The regimes in the Enterprise Act apply to firms from all sectors, rather than just tech firms. In addition, to give two examples, penalties are appealed on the merits in the financial services and markets regime, administered by the Financial Conduct Authority, and, under the Water Industry Act, overseen by Ofwat. In the EU’s Digital Markets Act, penalty appeals are similar to merits reviews in the UK.
Lord Vaizey of Didcot (Con)
I found my noble friend’s remarks very helpful, because they shone a brief light on the Government’s position. Is he saying that, by introducing an on-the-merits appeal for fines, the Government are effectively allowing the CAT to substitute its decision for that of the regulators, whereas if it were a judicial review it would simply have to send back the decision on the quantum or the timing of the fine back to regulator; in which case, he may have a point?
Viscount Camrose (Con)
I hope very much that I have a point. I think it would be best for me to write to my noble friend and the members of the Committee to clarify that.
Lord Faulks (Non-Afl)
I am listening very carefully to what the Minister says. It would be helpful if he would give an idea of the sort of arguments that would be open to somebody who is challenging a decision as to the fine and the merits. Will they be circumscribed simply by saying, “Well, it was too much”, or will they be able to look in some detail at the whole process and the interventions that ultimately resulted in the fine? How will those two things be kept separate from each other?
Viscount Camrose (Con)
As the noble Lord says, the intent is to keep those two separate. During and on the merits appeal for the penalty, the penalised firm could argue that the value of the penalty exceeded the crime, or that the breach took place inadvertently or by accident. It could not argue, however, that no breach took place; the fact that a breach took place is the premise against which the rest of the penalty appeal takes place. If the firm then wants to appeal that no breach took place, that would be done under JR, not on the merits.
The boundaries of the merits appeal process are explained in the Explanatory Notes for Clause 89. If those can be made any clearer, I am happy to engage on that. We will continue to listen to any concerns that noble Lords have on this important point.
I turn now to Amendments 72A and 72B from the noble Lord, Lord Tyrie. I thank him for his amendments, which raise an important question about the appeal standard across the wider digital markets regime. These amendments would align the appeal standard of all regulatory decisions in the regime with appeals carried out against Ofcom’s decisions taken under the Communications Act 2003. I am sure that many noble Lords are aware that the appeal standard in the Communications Act regime is often referred to as judicial review-plus. Although Parliament amended the Act in 2017 so that these appeals are to be decided on judicial review principles, the CAT has ruled that, due to retained EU law, it must also
“ensure that the merits of the case are duly taken into account”.
To turn back to this Bill, the Government heard the strong views expressed by your Lordships on the Select Committee, among others, on the importance of retaining judicial review. The changes made by the Government in the other place sought to uphold the use of the well-known judicial review principles for appeals in the new regime, except for those about penalties, as I have already discussed. Judicial review principles balance robust scrutiny of the CMA’s decisions with the need for the CMA to use its expertise to act quickly and iteratively to resolve issues.
As we discussed on the second day in Committee, the Government have made an explicit requirement for the CMA to consider proportionality when imposing conduct requirements and PCIs. As I set out during that discussion, it is right that interventions should be proportionate, but we are clear that any appeals of these matters should be heard under standard judicial review principles.
Lord Tyrie (Non-Afl)
In which case, it is clearly not the Ofcom standard, is it? The Ofcom standard imports a measure of appeal on the merits. Why are the Government continuing to assert that this is the Ofcom standard? It is nothing of the sort.
Viscount Camrose (Con)
I suggest that I set out a comparison in writing and perform the analysis as to the differences, should there be any, between the two.
Noble Lords expressed a concern on the second day in Committee that there should not be ambiguity in how appeals will be conducted. Introducing a requirement in a new domestic regime that requires an analysis of unrelated retained EU law to be able to understand how an appeal should be decided risks creating that kind of ambiguity. Complicating the appeals standard with EU case law would slow down appeals while the boundaries of what is captured by JR-plus are agreed.
Regarding decision-making, the noble Lord, Lord Tyrie, mentioned the CMA independent panel. Our approach to internal decision-making balances accountability and independence. Launching major market-shaping investigations under the regime will be reserved for the board. A board committee will oversee the regime’s regulatory interventions. At least half the members of the committee will be non-executive directors and members of the CMA’s independent panel. This make-up will ensure an independent perspective and the ability to develop deep expertise over time.
I hope that the reasoning I have put forward provides the necessary reassurances to noble Lords and that they will feel able not to press their amendments.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken. Again, in the vast majority of the contributions, we seem to have reached a wide degree of consensus, although not totally, in the light of that from the noble Lord, Lord Tyrie.
Noble Lords have made a number of important points. The noble Baroness, Lady Stowell, was quite right to take us back to the practicality of appeals on a merits basis; I will come back to the Minister’s response on all that because things are still not clear. How can we be sure that such an appeal will not open the whole case up again? That is at the heart of what we are debating here.
The noble Lord, Lord Holmes, said that we do not really understand why this must be different. Why is it such a special case? It has not been explained to us why this exception has been made.
I very much appreciate the point made by noble Lord, Lord Faulks: at the heart of this issue is whether we want regulation by the DMU or by the courts. There is a real danger of us drifting towards the latter with the Government’s amendments.
The noble Baroness, Lady Harding, rightly reminded us that regulators cannot afford to take too many risks. There is a fundamental imbalance, with regulators perhaps being forced to be risk-averse because they do not have the budgets of the big tech companies. We understand the danger of the David and Goliath situation that we are in here. It is all too easy to create a system where big tech companies’ lawyers can rule the roost.
The Minister said that decisions on penalties will address what an SMS firm has or has not done. He said that a decision will address not whether a breach has occurred but what led to the breach. Our concern is that we are going to go back over all the evidence of what led to a breach, whereas the fine at the end of it represents the end of the decision-making and is meant to be the deterrent. Again, I will look at Hansard and the Minister’s subsequent letter, but it seems to me from his explanation that he risks opening the whole case up again.
I listened carefully to the noble Lord, Lord Tyrie. I understand his experience in all this. Importantly, he said that there is not just one model here—that is, we have a number of regulators that do things differently. As he pointed out, the Government have previously supported the JR model; we must be reminded of that. The noble Lord also raised his concern about what happens if mistakes are made. If mistakes are made, they would be made in the process leading up to the decision, not the subsequent fines. A merits appeal on the fine would not really help if the decisions had happened further up the decision-making process.
I agree with the noble Lord, Lord Vaizey, that the regulators are not perfect. However, as we have discussed and will discuss again, we need stronger regulatory oversight. That will come—indeed, it needs to come—from stronger parliamentary oversight, which we will continue to debate in our discussions on this Bill.
I come back to the fundamental point made by the Minister. I listened to him carefully but I am still not clear how he will keep the stages separate. How will he keep the decision-making separate from the decision on the penalty? If SMS firms argue that the penalty is too high, they will have to revisit the evidence leading to the decision.
Lord Faulks (Non-Afl)
Can the noble Baroness confirm that, in her understanding, there is nothing in the Bill itself that makes that separation clear?
Baroness Jones of Whitchurch (Lab)
I thank the noble Lord, Lord Faulks; he is absolutely right. Again, we look forward to the Minister’s letter that will try to explain how these are two separate processes and that there is a clear cut-off point between one and the other, because I am not sure that that was really what he said in his reply. To be honest, I do not see how they can be separate, as that is not how the systems work. The appeal will be, as I think the Minister said, on what the SMS firm did to lead up to that penalty; therefore, the whole case would have to be revisited.
I do not know that the Minister persuaded many people on this matter. I am sure that we will continue to debate this, and we look forward to reading his letter, which I am sure will explain things in a little more detail. In the meantime, I beg leave to withdraw my amendment.
Lord Offord of Garvel
Member's explanatory statement
This amendment would omit the definition of “data protection legislation” in Clause 107, as my amendment to Clause 328 would define that term for the purposes of the whole Bill.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
My Lords, I am delighted to speak on the third day in Committee. I reiterate the sentiment articulated in the first session by my noble friend Lord Camrose that the Bill, importantly, will drive growth, innovation and productivity and ensure that businesses and consumers in the UK reap the benefits of competitive markets. I thank noble Lords for their contributions throughout the passage of the Bill and for their continued scrutiny and debate.
I turn to a number of miscellaneous amendments put forward by the Government that affect different parts of the Bill. Amendments 214 and 219 introduce a new clause and schedule into the Bill that make amendments to other pieces of primary legislation, consequential to provisions in Parts 2, 3, 4 and 5 of the Bill. The consequential amendments fall into three groups. The first amends sectoral legislation that applies, with modifications, the information-gathering power given to the CMA for its merger control functions in Section 109 of the Enterprise Act 2002. Where that power is applied for non-merger related purposes, the changes made by Part 2 of the Bill—which make express provision about the extraterritorial reach of the power and strengthen the civil sanctions regime that supports its enforcement—are not to apply. The schedule makes provision accordingly.
The second group of amendments is in consequence of Part 3, and the repeal of Part 8 of the Enterprise Act 2002 and its replacement with Part 3 of this Bill. The third group is in consequence of provision in Chapter 1 of Part 4 and Chapter 2 of Part 5, to amend legislation which otherwise restricts disclosure by regulators and others of information relating to individuals and businesses. This will permit them to disclose information for the purposes of the enforcement of consumer protection law, unfair trading and the provision of investigative assistance to overseas regulators.
Amendment 223 amends the commencement provision in Clause 334, so that the new clause and schedule can be commenced alongside the substantive provisions to which they relate.
Amendment 213 will ensure that information that comes to a UK public authority in connection with its power to provide investigative assistance to an overseas authority in Chapter 2 of Part 5 of the Bill will be covered by the information disclosure restrictions and gateways in Part 9 of the Enterprise Act 2002. This ensures that a public authority can share the information that it has collected on behalf of an overseas authority with that overseas authority. This will be in line with relevant safeguards, including personal data protection and safeguards for commercially sensitive information. To help ensure that the investigative assistance regime operates efficiently, the amendment will also enable UK authorities that hold information to which Part 9 applies to disclose that information to another UK authority to facilitate the provision of investigative assistance by that UK authority.
I turn to data protection override. Amendments 73, 206, 207, 208, 216 and 217 are minor and technical amendments which will make provision in relation to data protection across the Bill. Amendment 217 adds a new clause that clarifies that no provision in the Bill would require or authorise the processing of data that would contravene data protection legislation. Amendments 73, 206, 207, 208 and 216 remove provisions that previously applied only to some specific powers and insert a definition of data protection legislation that applies across the whole Bill.
On pre-commencement consultation, Amendment 218 adds a new clause to clarify that:
“A duty to consult under or by virtue of this Act may be satisfied by consultation that took place wholly or partly before the passing of this Act”.
The provision clarifies that the CMA has the flexibility to begin consulting before Royal Assent to ensure that the full set of reforms in the Bill can be implemented as soon as possible.
I hope that noble Lords will accept these amendments. I look forward to addressing any questions or points that they may have about them. I beg to move.
Lord Clement-Jones (LD)
My Lords, this is quite a set of amendments and the Minister rather rattled through his speech, but I have only one question: why are they now being included in the Bill here in Committee? Why were they not in the original version of the Bill? What is the motivation behind these new amendments? I am always a little suspicious. With the data protection Bill coming down the track, we will have hours of endless excitement. The words “data protection” and “government” are sometimes a bit of a red rag, so one always has to kick the tyres quite hard on any provision that appears to be opening a door to disclosure of data and so on. Obviously, in a competition context, it is most likely to be commercial confidential information, but the Minister needs to explain what kind of information we are talking about and why we need to have these provisions included at this stage.
Lord Leong (Lab)
My Lords, I thank the Minister for his overview and explanation of the various government amendments. I look forward to his response to the question from the noble Lord, Lord Clement-Jones: why now? These are mainly technical and tidying-up amendments and we are in broad agreement with most of them in this group.
Amendment 217 makes it clear that any imposed or conferred duties to process information do not contravene data protection legislation. That is welcome. Amendment 213 ensures the disclosure of information under Chapter 2 of Part 5 of the Bill, which allows UK regulators to provide investigative assistance to overseas regulators. This is in line with the restrictions on the disclosure of certain kinds of information found in the Enterprise Act 2002, which is fine. I ask the Minister what assessments are in place to safeguard the sharing of such details with autocratic regimes, which may not have robust governance and accountability systems in place and whose values we do not share? On Amendment 218, I ask the Minister whether the intent is similar to that of Amendment 1, as set out so eloquently by my noble friend Lady Jones of Whitchurch on the first day of Committee?
Finally, I refer to Amendment 216, which replaces the definition of data protection legislation for the whole of the Bill, so the definition in Amendments 73 and 208 are removed. Can the Minister confirm that such a definition is consistent with Article 8 of the European Convention on Human Rights and the Enterprise Act 2002? I look forward to the Minister’s response and comments.
Lord Offord of Garvel (Con)
I thank the noble Lords for their questions. I will first address the question from the noble Lord, Lord Clement-Jones. I do not see the shadows that he sees within the amendments. Unlike in the first part of the Bill, which introduces new bodies, units and legislation, we are here looking back consequentially at the Enterprise Act and Consumer Protection Act and building on them. The amendments simply improve the Bill while maintaining the overall policy intent and approach and the procedure, which is technical in nature. For example, we will go through the whole list of consequential Bills to which data protection applies to make sure that we have got a single concept of data protection across all the various Bills that consequentially apply.
The data protection amendment does not change but merely clarifies the application of existing data protection legislation across the Bill, as mentioned by the noble Lord, Lord Leong. Information of relevance will mostly be commercially sensitive information, as the noble Lord suggested. In answer to the second question of the noble Lord, Lord Leong, about international information disclosure, it will be governed by Part 9 of the Enterprise Act, which ensures appropriate safeguards.
I look forward to discussing more of these substantive measures later today and in future sessions. However, having answered the questions, I hope that the amendments can now be accepted. I beg to move.
Lord Knight of Weymouth
“CMA cooperation with work and labour market institutions(1) The CMA must take reasonable steps to consult with—(a) the Office of Labour Market Enforcement,(b) the Health and Safety Executive,(c) the Employment Agency Standards Directorate, and(d) HMRC where the CMA considers that the institution holds or has a right to request information, knowledge or documentation that may be relevant to the exercise of its regulatory functions.(2) The CMA must, following consultation under subsection (1), undertake a regulatory function analysis and make recommendations regarding the following additional questions—(a) whether action should be taken by the institution or others to materially affect competition in line with the CMA’s objectives, and(b) if so, what action should be taken.(3) The institutions named in subsection (1) may make a recommendation or other requests to the CMA where they consider that the CMA may exercise a regulatory function.(4) A recommendation or other request under subsection (3) must be accompanied by a statement of reasons which sets out the rationale and any substantial legal or evidential questions identified by the institution for consideration by the CMA.(5) In this section, a material effect on competition is deemed to include a significant impact on the creation, displacement or alteration in the conditions or quality of work and environment for work in the United Kingdom.”Member’s explanatory statement
This amendment enables cooperation between the CMA and work and labour market regulators.
Lord Knight of Weymouth (Lab)
My Lords, this group contains a range of amendments on competition reforms. They are fairly wide-ranging and I will leave it to the proposers of the other amendments to summarise them.
Amendment 73A, in my name and the names of the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Kidron, returns us to an issue that we debated last Monday and on which the noble Lord, Lord Clement-Jones, moved an amendment. It is the issue of good work and the CMA. I apologise for returning to the issue, but that was stimulated by the Minister, the noble Viscount, Lord Camrose, saying that
“the CMA may identify actions that other regulators or public bodies would be better placed to act upon. This may include the DMU referring issues such as workplace conditions to a relevant regulator”.—[Official Report, 22/1/24; col. GC 132.]
I reflected on it and thought that there may be some merit in seeing whether or not we can empower it in the Bill. Subsequent reading and events have reinforced that view. The purpose of these amendments is to promote cross regulator co-operation and information sharing.
Our current approach to regulation rests on domain or sector-specific action, which demands a high level of co-operation and co-ordination. This means sharing information and knowledge, as well as technical and non-technical skills and resources, exactly as was publicly requested by the director of labour market enforcement, Margaret Beels, in her letter of April 2023, to the BEIS Committee in the other place, on AI and the labour market. I remind the Committee that the director of labour market enforcement is effectively an arm’s-length body of the Minister’s department. Her letter said:
“There is a need for cross-cutting collaboration with regulation in this space … There is no vehicle or champion for doing this”
at present.
Baroness Kidron (CB)
The noble Lord, Lord Knight, has said so much of my speech that I will be very rapid. There are two points to make here. One is that regulatory co-operation is a theme in every digital Bill. We spent a long time on it during the passage of the Online Safety Act, we will do it again in the Data Protection and Digital Information Bill, and here it is again. As the noble Lord, Lord Knight, said, if the wording or the approach is not right, that does not matter, but any move to bring regulators together is a good thing.
The second point, which may come up again in amendments in a later group that looks at citizens, is that it is increasingly hard to understand what a user, a worker or a citizen is in this complicated digital system. As digital companies have both responsibilities and powers across these different themes, it is important, as I argued last week, to ensure that workers are not forgotten in this picture.
Baroness Harding of Winscombe (Con)
My Lords, it is with great trepidation that I rise to speak to these amendments because, I think for the first time in my brief parliamentary career, I am not complete ad idem with the noble Lord, Lord Knight, and the noble Baroness, Lady Kidron, on digital issues where normally we work together. I hope they will forgive me for not having shared some of my concerns with them in advance.
I kicked myself for not saying this last week, so I am extremely grateful that they have brought the issue back this week for a second run round. My slight concern is that history is littered with countries trying to stop innovation, whether we go back to the Elizabethans trying to stop looms for hand knitters or to German boatmen sinking the first steamboat as it went down the Rhine. We must be very careful that in the Bill we do not encourage the CMA to act in such a way that it stops the rude competition that will drive the innovation that will lead to growth and technology. I do not for a moment think that the noble Lord or the noble Baroness think that, but we have to be very cautious about it.
We also learn from history that innovation does not affect or benefit everybody equally. As we go through this enormous technology transformation, it is important that as a society we support people who do not necessarily immediately benefit or who might be considerably worse off, but I do not think that responsibility should lie with the CMA. Last week, the noble Lord, Lord Knight, challenged with, “If not in this Bill, where?” and I feel similarly about this amendment. It is right that we want regulators to co-operate more, but it is important that our regulators have very clear accountabilities. Having been a member of the Court of the Bank of England for eight years in my past life, I hate the fact that there are so many that the Bank of England must take note of in its responsibilities. We have to be very careful that we do not create a regime for the CMA whereby it has to take note of a whole set of issues that are really the broad responsibility of government. Where I come back into alignment with the noble Lord, Lord Knight, is that I think it is important that the Government address those issues, just probably not in this Bill.
Lord Ranger of Northwood (Con)
My Lords, I rise with an equal amount of trepidation to the noble Baroness, Lady Harding. I am a new Peer in the House with a background in the technology industry and the delivery of digital services. Although we are talking about market competition, we are straying into a complex conversation around labour markets and digital skills—the fundamental, No. 1 topic that drives a lot of thinking in digital organisations. I refer noble Lords to my register of interests.
The complex nature of a global digital skills market is the one thing that is challenging all digital businesses at this point in their ability to deliver and drive innovation. It is so competitive; in fact, the hyper-competitiveness is driving the inability to deliver. People are cannibalising other organisations. The agility and speed at which the market is moving, the hyperinflation in pricing, the investments that people are trying to make—indeed, that international businesses are trying to make globally—and the length and longevity of those investments’ value are becoming increasingly challenging. Therefore, the CMA intervening and having some influence will be challenging. We will have to think hard about how to enable understanding; about the speed at which the market is moving; about where this kind of activity would take place; and about how it would operate, understanding the global size and scale of this challenge.
I view this market with some concern but also with some excitement because of its ongoing development. One thing that I have seen is the move from triage, where outsourcing and moving to international markets for labour skills in digital was a trend, to the emerging nearshore and onshore trend of looking at bringing more skills into local geographies. Why do I say that? I say it because of the speed of the change in the market. If we try to regulate and legislate for that speed, it will be extremely challenging.
Humbly, that is the point I wanted to make at this stage of the debate.
Lord Tyrie (Non-Afl)
I have tabled a couple of amendments in this group. One concerns cost recovery for mergers while the other is about the need to review whistleblowing. This group is a proper mixed bag; it has all sorts of things in it.
Let me just say that I agree with what the noble Baroness, Lady Harding, said. We are at risk of “take note” and “have regard” confetti with respect to a number of our regulators. The problem is that they deflect attention away from their central function and make it much more difficult to hold regulators to account adequately; in fact, they make it virtually impossible for Select Committees to do their already difficult job. We will come on to discuss this later, but those two issues are more closely related than they might initially appear.
On cost recovery for mergers, it is important that we all know what is going on at the moment. When the CMA examines a merger, for example the Microsoft-Activision deal or the Sainsbury’s-Asda merger, the taxpayer subsidises a considerable part of the costs incurred by the regulator for that investigation. I cannot think of a good reason why the scrutiny and approval of big-ticket mergers should be subsidised. However, there is—it is important for me to say this—a wide divergence of view and practice on this, both domestically and internationally. I discussed this issue over many years with a number of my counterparts when I was the chairman of the CMA, as well as internally within the CMA and with what I suppose one might call the competition community of lawyers, which is pretty large.
Some jurisdictions argue that merger control is an imposition on firms by government and that, therefore, the public sector should pay for all of it—at least, that is their starting position. Germany takes this position; it has something to do with its long history in the treatment of cartels and the creation of the Bundeskartellamt, but we do not need to go into that. The fact is that it is in its bloodstream to pay for this from general taxation. Others argue, like me—it varies from regime to regime—that this public service is a perfectly reasonable, chargeable event. After all, anti-competitive practices, which many mergers might facilitate, are a cost to the economy and welfare.
In 2011, the Government looked at all this in the White Paper that led to the creation of the CMA, when they put together the Competition Commission and OFT. As a result of that White Paper, the Government compromised between the wide variety of views and increased cost recovery for mergers as a whole—that is, the whole task of scrutinising mergers—from 50% to 60%. It is important to bear in mind that, in deciding what to do on merger fees, firms seeking approval for their mergers pay consultants huge sums and that the cost of the CMA scrutinising it is a residual in their calculations. Indeed, it would be a residual of a residual, because these numbers are so very large.
Lord Clement-Jones (LD)
My Lords, I support Amendment 73A in the name of the noble Lord, Lord Knight, and will speak to a number of the other amendments in the group.
The noble Lord, Lord Tyrie, made a very interesting and attractive case for both his amendments. On Amendment 93A, the whistleblower review amendment, I was particularly struck by him saying that the budget for compensation for whistleblowers comes from within the CMA’s budget. That seems to be an extraordinary set of circumstances. In the case of both amendments, he clearly spoke from a huge amount of experience, and he has obviously been thinking about these areas for improvement for some considerable time. I very much look forward to hearing what the Minister has to say in response, because the noble Lord, Lord Tyrie, made an extremely good case from the point of view of someone who has been inside the system and is well informed about the issues.
On the full cost recovery for mergers, one of the perennial issues that we come across when talking about regulators is the question of resources. Anything that assists them in not having to cheese-pare in the way they regulate is extremely welcome, particularly when this kind of solution can be so easily put into effect.
On the amendment tabled by the noble Lord, Lord Knight—and on what the noble Baroness, Lady Harding, and the noble Lord, Lord Ranger, said—I do not think we are very far part. A lot of this is making sure that, where something does not fall within the remit of a particular regular, that regulator can co-operate with other regulators and exchange information to make sure that the other regulators, in whose province a particular issue is located, can then take appropriate account.
What the noble Lord, Lord Ranger, said amounted to almost a generic speech about how you regulate the digital sector or digital services. I do not disagree with him, but I would perhaps be slightly more robust in thinking that regulation is not the enemy of innovation. Sometimes, regulation can be the friend of innovation, because it creates a certainty in the context in which people are developing new technology.
Lord Leong (Lab)
My Lords, I thank all noble Lords who have contributed to this debate. I will refer first to Amendment 73A, which my noble friend Lord Knight of Weymouth set out so succinctly. Let us remind ourselves that the digital regulation co-operation forum, the DRCF, was founded by the CMA, the Information Commissioner’s Office and the Office of Communications—Ofcom. The FCA subsequently joined as a full member the following year. As mentioned by the noble Lord, Lord Clement-Jones, the purpose of the DRCF is to ensure coherent, informed and responsive regulation of the UK digital economy. When this is achieved, we can serve citizens and consumers better, reduce regulatory burdens for industry where appropriate and enhance the global impact and position of the UK.
The noble Baroness, Lady Kidron, and my noble friend Lord Knight have said that workers are really important in the competition space. The noble Baroness reminded us that workers are also users and citizens; they should be involved in any regulation. Having conversations with them would make a better competitive environment.
The noble Baroness, Lady Harding, and the noble Lord, Lord Ranger of Northwood, cautioned us that we should not allow regulators to stifle innovation. We really need to let innovators do their thing and the old saying “Do not kill the goose that laid the golden egg” is so true in this respect. We need to ensure that the right framework is in place so that the regulators are not overburdened with too much regulation that would stifle innovation, so we really support Amendment 73A. It would empower the CMA to co-operate with other government bodies which may have the power to obtain information relevant to its regulatory functions.
I refer now to Amendment 93A, tabled by the former chair of the CMA, the noble Lord, Lord Tyrie, who has a deep understanding of the relevant issues in this area. Whistleblowers with insider knowledge who provide assistance to the CMA can be a powerful tool in helping to uncover cartels and other anticompetitive practices more swiftly than might otherwise be possible. Since cartels often operate in secrecy, individuals or companies with insider or market knowledge can play a crucial role. They can bring issues to the CMA’s attention or gather information that will allow it to start an investigation.
The primary legal protection for whistleblowers in such situations comes from the Public Interest Disclosure Act—PIDA—which won praise when it was first introduced in 1999. More recently, it has been criticised for not protecting the majority of whistleblowers from suffering retaliation with little or no legal recourse. In January 2023, the Minister for Security said that
“what the country needs is an office for whistleblowers, and what we need to do is ensure that we have the updates to the legislation”.—[Official Report, Commons, 25/1/23; col. 1094.]
Can the Minister update your Lordships’ House on whether any primary legislation to that effect is forthcoming?
Lord Offord of Garvel (Con)
Amendment 73A, tabled by the noble Lord, Lord Knight of Weymouth, would require the CMA to co-operate with regulators and bodies with responsibility for matters relating to employment and working conditions. I thank the noble Lord for his amendment, for raising the importance of regulatory co-ordination, and for once again highlighting the direct and indirect impacts of digital activities and competition policy on workers.
On the first day of Committee, a number of noble Lords argued that the CMA should take a wider view in considering impacts on work and work environments in its regulatory functions. The CMA can already consider these issues where they relate to competition. Indeed, although competition authorities in the past focused primarily on competition in product markets, we are seeing them take an increased and welcome interest in labour markets. The CMA’s annual plan sets out how it will prioritise investigating businesses engaging in anti-competitive labour market practices. It is already using its powers to take enforcement action against firms that break the law by fixing wages.
However, the amendment would go beyond the scope of the competition remit of the CMA, potentially creating new burdens and additional complexities. It would therefore detract from the aims of the UK competition regime, and it would be inappropriate for the CMA to assess impacts unrelated to competition, which is its area of expertise and jurisdiction.
The noble Lord, Lord Knight, mentioned the director of labour market enforcement, who is an independent public appointee with a statutory responsibility to prepare an annual strategy for Home Office and DBT Ministers, setting out their assessment of the scale and nature of non-compliance in the labour market. In this way, there is already an independent assessment of the labour market and enforcement, so this amendment could infringe or duplicate the director of labour market enforcement’s remit.
The noble Lord, Lord Clement-Jones, mentioned the report by the Competition and Market Authority’s microeconomics unit. This takes a deep dive into the trends in the UK labour market, focusing on the impact of competition and employer market power. Where labour market issues are relevant to competition, the CMA already looks at this.
On co-operation between regulators, I agree with the noble Lords, Lord Knight and Lord Leong, and the noble Baroness, Lady Kidron, that this is essential. Part 9 of the Enterprise Act facilitates exactly that. The CMA works closely with bodies, regulatory and otherwise, both when delivering its own regulatory functions and when supporting others in theirs.
I agree with my noble friend Lady Harding that we should not provide the CMA with additional roles and duties that risk undermining the careful balance between effective enforcement and preventing overenforcement and overregulation, which risk stifling innovation. It would further confuse the regulatory landscape to require the CMA to consider labour market issues in this way, beyond its remit and expertise. Nothing in legislation prevents the CMA and other regulators from co-operating on these important issues, subject to necessary information-sharing safeguards. We do not need to legislate to achieve this.
The DMU specifically will be required to consult the regulators whose remits have the most interaction with the digital markets regime. It can, and will, engage with other authorities, including labour market regulators, where appropriate.
I will touch briefly on regulatory functions analysis. While the CMA works closely with other regulators and authorities, it would not be appropriate for it to conduct an analysis of other regulators’ functions as a regulator itself. For these reasons, I hope the noble Lord will withdraw his amendment.
Lord Tyrie (Non-Afl)
On this point, can the Minister say whether he supports the cross-subsidy that currently exists? Given the fact that a lot of mergers of a very large size will be coming through, as he has pointed out, does he think that a logical way of dealing with the problem to which he has alluded—that of the small dynamic mergers that do not want to be discouraged by excusive scrutiny costs—would be to extend that cross-subsidy?
Lord Offord of Garvel (Con)
The noble Lord will know that, on the current pie chart of activity undertaken by the CMA, 80% is for mergers with companies with a turnover north of £100 million, while 20% of it is for companies with turnovers below that. The 80:20 rule always works in life, so there is obviously scope to charge the larger companies more if that is the decision taken. I refer to the reassurance given that this can be amended in secondary legislation if that is deemed appropriate.
Let me move on to media merger public interest interventions. Amendment 93 in the name of the noble Lord, Lord Clement-Jones, would expand the list of public interest grounds for the Secretary of State to intervene in a merger case to include the need for free expression of opinion and plurality of ownership of media enterprises in user-to-user and search services. I am grateful to the noble Lord for raising this issue. Media mergers are particularly sensitive, as they could have an impact on how the UK public access and consume information.
The Government are currently reviewing the recommendations on changes to the media public interest test in Ofcom’s 2021 statement on media plurality. Ofcom did not recommend that online intermediaries or video and audio on-demand services should fall within the scope of the media mergers regime, which this amendment would provide for. We are considering Ofcom’s recommendations carefully and, as we do that, we will look closely at the wider implications on the industry. The Government have not proposed pursuing substantive changes to the grounds for public interest interventions in mergers in this Bill. The changes recommended in Ofcom’s review can be addressed directly via secondary legislation under the made affirmative procedure, if appropriate.
For these reasons, I hope that the noble Lord opposite will not press this amendment.
Lord Clement-Jones (LD)
What is the timescale within which all this will be decided?
Lord Offord of Garvel (Con)
I do not have a detailed timetable. I understand this is being looked at currently. I am happy to confirm in writing when we have a detailed timetable.
I move now to Amendment 93A and protection for whistleblowers. I again thank the noble Lord, Lord Tyrie, for his informed contribution to the scrutiny of this Bill. I also thank the noble Lords, Lord Clement-Jones and Lord Leong, for their contributions on this topic. Amendment 93A would introduce a new requirement for the CMA to carry out a review of protections and support available for whistleblowers under the UK’s competition and consumer law.
The noble Lord will know that the Government consulted on the important issue of incentives and protections for whistleblowers in the competition regime. However, no clear evidence or support was put forward by respondents that would support making changes to the existing framework. Therefore, the Government do not propose to introduce reforms to whistleblowing protections. In taking this decision, we also considered that the courts can already give due weight to the importance of anonymous whistleblowing in competition law enforcement. This could, for example, justify a court restricting how the identity of a whistleblower is disclosed depending on the circumstances of the case.
As the noble Lord mentioned, in 2023 the CMA increased the compensation cap for informants in cartel cases from £100,000 to £250,000. This will support the CMA to investigate effectively and, where appropriate, enforce against criminal cartels, which can cause serious harm to consumers and businesses within the UK.
Any whistleblower worker who faces victimisation in the UK can also seek additional compensation from their employer in an employment rights tribunal. This compensation can be awarded uncapped and can reflect the costs of some whistleblowers being unable to work in their chosen profession again.
The Government, therefore, have not proposed reforms to the compensation for whistleblowers in the Bill. However, I stress that we recognise the importance of whistleblowing in uncovering wrongdoing and will continue to ensure whistleblowers are not discouraged from coming forward under the current framework.
At this time, we do not think that a review in the form that the noble Lord’s amendment calls for would be merited, nor that it would be appropriate to place a new and binding obligation on the CMA requiring it to conduct such a review within a specific timeframe. For these reasons, I hope that the noble Lord does not push this amendment.
Lord Leong (Lab)
Can the Minister share whether there is any update on the office for whistleblowers, as mentioned by the Secretary of State?
Lord Offord of Garvel (Con)
I need to write to the noble Lord on that.
I now speak briefly to the government amendments in this group, all of which are minor and technical in nature. First, Amendments 90, 91 and 92 ensure that extensions to the statutory deadlines for phase 2 merger investigations under the new fast track procedure for mergers operate correctly within the existing legal framework for deadline extensions under the Enterprise Act 2002.
Secondly, government Amendments 94, 95, 97, 98, 99, 100 and 102, will clarify that, in the civil penalty provisions introduced and amended by Schedules 9 and 10 to the Bill, references to maximum amounts of daily penalties are maximums per day and not in total.
Thirdly, Amendments 96 and 101 update cross-references in Section 120 of the Enterprise Act 2002, so that decisions made under the civil penalty provisions in Part 3 of that Act, as amended by the Bill, are carved out from that provision. Section 120 allows persons to seek a review of a CMA decision in the CAT on judicial review principles. Such a review is not required because penalty decisions are appealable on a merits basis.
Fourthly, Amendment 103 makes the equivalent amendment to Section 179 in relation to civil penalty decisions made under Part 4 of the Enterprise Act.
Finally, Amendments 104 and 105 have been introduced to take account of an amendment made by the Energy Act 2023 to Section 124(5) of the Enterprise Act 2002, which is also amended by the Bill.
I hope noble Lords will support these government amendments.
Lord Knight of Weymouth (Lab)
My Lords, we have had a useful debate. I was very much persuaded by the noble Lord, Lord Tyrie—far more so than the Minister was—and I thought that the noble Lord, Lord Clement-Jones, made some useful points around asymmetry in respect of search and media.
I am very grateful to all noble Lords who responded to my amendments. I kind of feel that my friend, the noble Baroness, Lady Harding, and the noble Lord, Lord Ranger, were in many ways responding to last week’s debate—I think as the noble Baroness admitted. It is perfectly possible to argue that it is an encumbrance to extend the remit as we were arguing last week; that is a perfectly reasonable position. Indeed, just yesterday in the Observer, I read Torsten Bell from the Resolution Foundation responding to the CMA chief executive’s speech around the labour market and competition, saying that this is not a case for minimum labour standards nor a case for extending regulatory reach. They have friends in all sorts of places.
The EU announced a fine of £27 million against Amazon for oversurveillance of workers. These are real problems, and there is a regulatory gap that would be best addressed, I am sure, by having a single powerful labour market regulator. At the moment, we have a multiplicity of relatively weak regulators. That might solve some of the regulatory gap problem.
The debate this week was much more about collaboration between regulators. I feel that the Minister failed to really address and respond to the point. He might want to follow up by having a meeting just to sort out whether, in essence, Margaret Beels, the director of labour market enforcement, is wrong. In her letter to the BEIS Select Committee on 6 April 2023, under the bullet point on regulation, she said that:
“There is a need for cross-cutting collaboration with regulation in this space to bring different aspects together both within the UK and across the international playing field. There is also a need to learn from each other. There is no vehicle or champion for doing this”.
If the Minister had been listening, I said that earlier. He performs his notes brilliantly, but one of these regulators is saying that there is “no vehicle or champion” for regulatory co-operation in respect of AI. We need to fill that regulatory gap, and this Bill is an opportunity for us to do so. It is urgent because of the exploitation of some workers. We need to get on with it and I hope that, as this Bill proceeds, we find an opportunity to do so. I would be delighted to do so in collaboration and co-operation with the Government Front Bench.
On that basis, I beg leave to withdraw my amendment.
Lord Offord of Garvel
Member's explanatory statement
This amendment clarifies that the levy rules must include provision about how the levy is to be paid.
“(4A) The levy rules may make provision for interest to be charged, at the rate specified for the time being in section 17 of the Judgments Act 1838, on any amount of levy not paid by the date on which it is due.(4B) References in subsection (4) to an amount payable by an undertaking do not include interest charged in accordance with provision made under subsection (4A).(4C) The CMA must pay any amount that it receives in accordance with provision made under subsection (4A) into the Consolidated Fund.”Member's explanatory statement
This amendment makes provision about the charging of interest on amounts of levy that are not paid by the due date.
Member's explanatory statement
This amendment removes the requirement for the CMA to obtain approval from the Secretary of State before publishing its guidance outlining how it will exercise its functions.
Viscount Colville of Culross (CB)
My Lords, I have asked for my Amendment 76 to Clause 114 to be decoupled, because I think it goes to the centre of the operation of Part 1 and I want noble Lords to focus on debating the issues raised by this clause as it stands. I also thank the noble Baroness, Lady Jones of Whitchurch, and the noble Lords, Lord Black and Lord Holmes, for putting their names to this amendment. I am glad that Amendment 77 in the name of the noble Baroness, Lady Stowell, is also in this group; I support its aims. Clause 114 seems to be a small section hidden away on page 70 of the Bill, yet the guidance process that it outlines is fundamental to the operation of the regime set out in Part 1 of the Bill.
This is a high-level Bill, which leaves a lot of fine-tuning and detail to the CMA. It will be the first part of the process to become operational after Royal Assent has been granted. Without these guidelines, the CMA will not be able to start its urgently needed investigations into the activities of large tech companies and their domination of many digital markets.
Baroness Stowell of Beeston (Con)
My Lords, I speak to my Amendment 77 in this group. I thank the noble Lords, Lord Tyrie and Lord Clement-Jones, and the noble Baroness, Lady Jones of Whitchurch, for adding their names to it.
I do not support what the Government did in the Commons, which the noble Viscount, Lord Colville, described and which his amendment seeks to overturn. However, I think that I understand why they did it, and I have some sympathy with their reasoning, if it is, as I assume, about increasing oversight of the CMA. Where I differ is that I do not believe that this is a job for the Secretary of State. In saying that, it is important to add that this is not just about a turf battle, for want of a better expression, between the Executive and Parliament. It is quite dangerous for the Secretary of State to position herself in this way, because she will become the subject of intense lobbying if she has the power to approve the CMA guidance on how Part 1 of the Bill will operate. That lobbying will be done in private—it could go on for weeks, as the noble Viscount said—and any change made as a result of that activity would be subject to massive rows, if not legal challenge. For me, nothing makes sense about the solution to the problem with which I have some sympathy.
As I have said on several occasions, the need for regulators to be independent can sometimes be over-argued. I very much believe that their regulatory decisions should be made independently without fear or favour or any kind of political interference. What I am most concerned about is that they must be accountable, even though they are independent. We are giving the CMA substantial new powers, so we must also ensure that we—Parliament—oversee its use of them properly.
I will come to parliamentary accountability and how we might improve on that in another amendment in my name, which relates to this group but is in another, for the reasons that the noble Viscount set out. But here, my Amendment 77 proposes that, instead of the Secretary of State approving the CMA guidance, the CMA must
“consult the relevant Parliamentary committees … and publish its response to any recommendations”
made by the committee at the same time that it publishes the final version of its guidance. That approach would ensure oversight of the guidance before it is implemented. It would also make sure that there is scrutiny of the CMA, that the CMA is properly accountable to Parliament and that any debate about the guidance happens in the open and not behind closed doors.
I am pleased to say that I have received widespread support for my proposal from many stakeholders and trade bodies, from all angles. I am not exaggerating when I say that what is proposed by way of Amendment 77 serves everyone’s needs and shared objectives, whether that is big tech, challenger tech, Parliament or the Government. I am grateful to my noble friends—both the Ministers—for our meeting to discuss this matter, which we had a couple of weeks ago. When my noble friend comes to respond—having already, I hope, discussed my amendment with colleagues in Whitehall—I hope he is able to express some support for what is proposed here. This is an important amendment to the Bill and I hope very much that he, speaking for the Government, feels able to accept it and make it their own.
Lord Black of Brentwood (Con)
My Lords, I want to support Amendment 76, to which I have added my name, with some brief remarks because the noble Viscount, Lord Colville, has put the case with great power and eloquence. I also support Amendment 77 in the name of my noble friend Lady Stowell, which is a clever solution to the issue of accountability.
I support Amendment 76 in particular, both because I do not believe the requirement is necessary and because—this is a consistent theme in our Committee debates—it builds into the legislation a completely avoidable delay and poses a very real threat to the rapid enforcement of it. Quite apart from the issues of principle, which are significant, this is also intensely practical. The CMA’s guidance on the Bill, published earlier this month, set out the expected timetable for the consultation phase on the Bill’s implementation, running through to October 2024, which could be a very busy month. It is almost certainly when we will have a general election or be in the midst of one.
It seems highly unlikely that the Secretary of State will be able to approve guidance during the purdah of an election campaign and if, after the election—whoever wins it—we have a new Secretary of State, there will inevitably be a further delay while he or she considers the guidance before approving it. The Bill therefore ought to be amended to remove the requirement for the Secretary of State’s approval, or, at the very least, set a strict timetable for it, such as the draft guidance being automatically approved after 30 days unless it is specifically rejected. That would ensure that there is not unnecessary delay, which could run into many months, before the new regime takes effect—especially if there is, as a number of noble Lords have made clear, intense lobbying of the Secretary of State behind the scenes.
Baroness Kidron (CB)
My Lords, I support both amendments in this group. This seems to be fundamentally a question of what happens in private and what happens in public. I was struck by the number of exchanges in the second day in Committee last week in which noble Lords raised the asymmetry of power between the regulator and the companies that may be designated SMS. The right reverend Prelate the Bishop of Manchester said,
“let us get this right so that Davids have a chance amid the Goliaths”.—[Official Report, 24/1/24; col. GC 230.]
Baroness Stowell of Beeston (Con)
I urge the noble Baroness to stay for the debate on the next group of amendments, in which we will talk about parliamentary accountability. I think she will find that the committee I am proposing is perhaps not quite as modest as she has just described it.
Baroness Harding of Winscombe (Con)
My Lords, I promise I will speak briefly to associate myself with the remarks of my noble friend Lady Stowell and support her Amendment 77 and Amendment 76 in the name of the noble Viscount, Lord Colville.
Despite the fact that there are fewer of us here than there have been in the debates on some of the other quite contentious issues, this is an extremely important amendment and a really important principle that we need to change in the Bill. To be honest, I thought that the power granted to the Secretary of State here was so egregious that it had to have been inserted as part of a cunning concession strategy to distract us from some of the other more subtle increases in powers that were included in the other place. It is extremely dangerous, both politically and technocratically, to put an individual Secretary of State in this position. I challenge any serious parliamentarian or politician to want to put themselves in that place, as my noble friend Lady Stowell said.
On its own, granting the Secretary of State this power will expose them to an enormous amount of lobbying; it is absolutely a lobbyist’s charter. This is about transparency, as the noble Baroness, Lady Kidron, said, and parliamentary scrutiny, which we will come to properly in our debate on the next group of amendments. However, it is also about reducing the risk of lobbying from the world’s most powerful institutions that are not Governments.
For those reasons, I have a slight concern. In supporting Amendment 77, I do not want the Government or my noble friend the Minister to think that establishing parliamentary scrutiny while maintaining the Secretary of State’s powers would be a happy compromise. It would be absolutely the wrong place for us to be. We need to remove the Secretary of State’s powers over guidance and establish better parliamentary scrutiny.
Lord Clement-Jones (LD)
My Lords, it has been very interesting to listen to noble Lords on this amendment. I am getting a strong sense of déjà vu from our debates on the then Online Safety Bill.
The noble Viscount, Lord Colville, made a devastating case for the deletion of the Secretary of State’s power, and the noble Baroness, Lady Stowell, made a superb case for the inclusion of parliamentary oversight over the guidance. The fact is that, just as we argued in our debates on the then Online Safety Bill, there is far too much power for the Secretary of State in this Bill. This example is the most egregious, but there are so many other aspects that one could argue with, and have argued with—the noble Viscount reminded us of his earlier amendments—such as the conditions for an undertaking to have an SMS designation; the turnover condition; the permitted types of conduct requirements; the period during which the DMU must decide which terms to include in the final transaction under the final offer mechanism; the amount of penalties imposed by the DMU on individual undertakings; and the DMU’s statement of policy on penalties. That is a heck of a lot of different powers for the Secretary of State and, as I say, power over guidance is the most egregious of them.
The way in which the noble Baroness, Lady Stowell, expressed this was exactly right. We will come on to parliamentary scrutiny in our debate on the next group, but the word “accountability” is crucial. Of course the regulator should be independent but, at the same time, it should be accountable. This is not just a licence to roam beyond the bounds; it is the right and duty of Parliament to have oversight of the regulator, which is exactly what this amendment would provide for. You have only to look at the draft that was put together of the Overview of the CMA’s Provisional Approach to Implement the New Digital Markets Competition Regime to see just how broad the Secretary of State’s powers over the way in which the CMA carries out its functions will be. That is why this is such an important amendment.
I very much hope that the Minister will hear our voices. This is a really important area of the Bill. As the Minister can see, it is something about which, having had the experience of the then Online Safety Bill, we feel very exercised.
Lord Bassam of Brighton (Lab)
My Lords, this is the beginning of an important couple of debates about accountability. The breadth and the import of what noble Lords have said so far underlines how much we value that. We on the Labour Benches are co-signatories to both amendments in this group—the first, Amendment 76 in the name of the noble Viscount, Lord Colville, and the second, led by the noble Baroness, Lady Stowell.
Put simply, if the CMA is to be a regulator genuinely independent of government and accountable to Parliament, these amendments should stand. As it is, the legislation seems to suggest that, before the CMA can take any initiative on guidance, it first has to receive the approval of the Secretary of State. This is surely not only a time-consuming process but a wholly inefficient way of conducting business. I can well understand and appreciate why the Government desire to understand how the CMA intends to implement its regulatory policy, but do they really require such a firm and strong hand in the process? As it is, the CMA will be in constant consultation, discussion and interaction with government Ministers, and I do not see why, in the final analysis, approval has to come from the Secretary of State.
Can the Minister tell us how the regulatory regime compares with others? Do regulators like the Charity Commission, Ofcom, Ofwat, the Electoral Commission et cetera all require approval from the Secretary of State before issuing guidance? How does this process contrast with these other regulators? Is there a standard practice, or does it vary across regulatory frameworks? We need something that will work for this particular part of our economy, and it has to be built on trust and understanding and not reliant on the heavy hand of the centre of government coming in and ruling things in or out of guidance which the experts, in the form of the CMA and the DMU, have reflected and consulted on.
We obviously support the amendment of the noble Baroness, Lady Stowell, which, as I said, we co-signed. Consulting the relevant parliamentary committees seems a wholly sensible solution and step. These committees are powerful entities, as we know, full of expertise and insight, and they provide a layer of accountability that Parliament rightly expects. After all, the CMA is a creature of Parliament and of legislation that we will put through this House.
I am sure there are plenty of examples of where legislation, particularly secondary legislation, has benefited from the input and oversight of Select Committees and other committees of both Houses. The points made about lobbying the Secretary of State were important and powerful. We need maximum transparency, and we need openness in this process; otherwise, suspicion will abound, and we will always have cynics who say that Secretaries of State are very much in the pockets of business and commercial interests. We do not want that in this legislation; we want something that works for the market, for the competitive interests in the digital world, and particularly for consumers.
Ministers would do well to listen carefully to what the noble Baroness, Lady Stowell, said. She is an experienced parliamentarian, but, more than that, she was the chair of a regulator, so she understands exactly the import of the pressure that can come from central government and how it can best be managed.
These amendments are important for us in order to secure accountability in this market and in the way in which the various institutions work and operate together. I happily lend my support to both of them.
Viscount Camrose (Con)
I start by thanking my noble friends Lord Black, Lady Harding and Lady Stowell, the noble Viscount, Lord Colville, the noble Baroness, Lady Kidron, and the noble Lords, Lord Clement-Jones and Lord Bassam, for their thoughtful and valuable contributions. I absolutely recognise the seriousness of this part of the debate and look forward to setting out the Government’s position on it. I will address each amendment in turn.
I thank the noble Viscount, Lord Colville, and my noble friend Lady Stowell of Beeston for highlighting the subject of accountability to government and Parliament. As I said, I am aware of the importance of the topic, and I welcome the chance to speak to it now. Amendment 76, from the noble Viscount, Lord Colville, would remove the requirement that the Secretary of State must approve guidance produced by the CMA in relation to the digital markets regime. Amendment 77, from my noble friend Lady Stowell of Beeston, would also have this effect. Additionally, Amendment 77 would add a requirement for the CMA to consult certain parliamentary committees about proposed guidance and publish responses to any committee recommendations.
Lord Clement-Jones (LD)
I am sorry to interrupt the Minister, but, if the logic were being followed for what he said, there would be—at the very least—some form of affirmative resolution for the guidance, as with all the other powers in the Bill.
Viscount Camrose (Con)
I am happy to look into that as a mechanism, but, as currently set out in the Bill, the logic is that the Secretary of State can approve the guidance.
The Government will continue to work closely with the CMA, as they have throughout the drafting of the Bill, to ensure that the timely publication of guidance is not disrupted by this measure. Published guidance is required for the regime to be active, and the Government are committed to ensuring that this happens as soon as possible. Guidance will be published in good time before the regime goes live, to allow affected stakeholders to prepare. The Government hope that, subject to parliamentary time and receipt of Royal Assent, the regime will be in force for the common commencement date in October this year.
In response to my noble friend Lord Black’s question about guidance and purdah, the essential business of government can continue during purdah. The CMA’s guidance relates to the CMA’s intentions towards the operation of the regime, rather than to a highly political matter. However, the position would need to be confirmed with the propriety and ethics team in the Cabinet Office at the appropriate time, should the situation arise that we were in a pre-election period.
I thank the noble Viscount, Lord Colville, and my noble friend Lady Stowell for their amendments, and I hope that this will go some way towards reassuring them that the Government’s role in the production of guidance is proportionate and appropriate. As I said, I recognise the grave seriousness of the powerful arguments being raised, and I look forward to continuing to speak with them.
Viscount Colville of Culross (CB)
I thank noble Lords for their contributions and ask the Minister to listen to the concerns Members have expressed today. The clause gives extraordinary power to the Secretary of State, and I ask the Minister to listen to his noble friends, the noble Baronesses, Lady Stowell and Lady Harding, who called the power dangerous. In particular, the noble Baroness, Lady Harding, said that it was so dangerous and such a big power that it must be a distraction.
The noble Lord, Lord Black, said that the concern about having this power is that it would create a delay, and that that would especially be a concern over the period of the election, both before and after. He called for draft guidance to be approved within 31 days, which is certainly something that could be considered; after all, no one wants ping-pong to go back and forth do they? They want the CMA’s guidance to be put into action and this process to start as soon as possible.
The noble Baroness, Lady Kidron, said that the asymmetric power between the regulators and the tech companies means that there will be a drum beat of what she called “participative arrangements”. That is quite a complex thought, but the idea behind it—that the CMA must not be stopped from using its power to deal with some of the most powerful companies in the world—is very important.
The noble Baroness, Lady Stowell, is a former regulator and called for Parliament to have a role in overseeing this. We were reminded by both the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Kidron, that we had a discussion on Secretary of State powers in the debate on the Online Safety Act, much of which was about whether a joint digital committee could oversee digital regulation. I suspect that that will be discussed in the next group. We have given enormous powers to Ofcom with the Online Safety Act, we are giving big powers to the CMA and I imagine that we are giving big powers to the ICO in the Data Protection Act, so Parliament should have a powerful standing role in dealing with that.
The Minister called for robust oversight of the CMA and said that it must be accountable before Parliament. Already, Parliament looks at its review and annual reporting. I come back to the concern that the Secretary of State still has powers that are far too great over the implementation of this guidance, and that the CMA’s independence will be impinged on. I repeat what I and other noble Lords said on the concern about Clause 114: it stands to reduce the CMA’s independence. I ask the Minister to consider very seriously what we have been saying.
The Minister’s suggestion that he will look at the affirmative resolution for Secretary of State approval of guidance is something that we should certainly push further—at least that is some step towards reducing Secretary of State powers. With that, I beg leave to withdraw my amendment.
Lord Offord of Garvel
“Restriction on disclosure orders(1) This section applies for the purposes of—(a) digital markets proceedings, or(b) competition proceedings.(2) A court or the Tribunal must not make a disclosure order requiring the CMA to disclose or produce information where the court or the Tribunal is satisfied that another person would be reasonably able to provide the information.(3) A court or the Tribunal must not make a disclosure order requiring the CMA to disclose or produce digital markets investigation information before the CMA gives notice of the closure or outcome of each investigation to which the information relates.(4) In this section—“competition proceedings” has the meaning given by paragraph 2(4) of Schedule 8A to the Competition Act 1998 (further provision about claims in respect of loss or damage before a court or the Tribunal);“digital markets investigation information” means information—(a) prepared by a person other than the CMA for the purpose of a digital markets investigation;(b) sent by the CMA in connection with such an investigation to a person that is the subject of the investigation;“digital markets proceedings” means proceedings under section 101 (rights to enforce requirements of Part 1 of that Act) or proceedings on appeal from such proceedings.(5) Paragraphs 7 and 27 of Schedule 8A to the Competition Act 1998 (other definitions; disclosure orders) apply for the purposes of this section as they apply for the purposes of Part 6 of that Schedule.(6) In Schedule 8A to the Competition Act 1998—(a) in paragraph 7 (other definitions), after sub-paragraph (2) insert—“(2A) “Digital markets proceedings” means proceedings under section 101 of the Digital Markets, Competition and Consumer Act 2024 (rights to enforce requirements of this Part).”;(b) in paragraph 28, after “competition proceedings” insert “or digital markets proceedings”;(c) in paragraph 29, after “competition proceedings” insert “or digital markets proceedings”;(d) in paragraph 30(1), after “competition proceedings” insert “or digital markets proceedings”.”Member’s explanatory statement
This amendment would prevent a court or the Tribunal from making a disclosure order in respect of certain material held by the CMA.
Lord Bassam of Brighton
“Digital Markets Unit and CMA: annual statement to Parliament (1) The Secretary of State must, at least once each year, lay before Parliament a statement containing the Secretary of State’s assessment of the conduct and operation of—(a) the Digital Markets Unit, and(b) the CMA as a whole.(2) The first statement must be laid before 31 October 2024.(3) Each further statement must be laid before 1 February of each subsequent year.”Member's explanatory statement
This new Clause would require the Secretary of State to lay before Parliament each year a written statement about the conduct and operation of the DMU and CMA.
Lord Bassam of Brighton (Lab)
My Lords, we now move on to the second debate about accountability. We have two amendments in this group—in moving this amendment, I will speak also to the other—relating to the accountability in various forms of the CMA, the Secretary of State and Parliament. With these amendments, we seek to strengthen parliamentary oversight over the CMA by obliging the Secretary of State to bring before Parliament an annual report on the work of the DMU and the CMA. We are grateful to the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Bennett, for their support for this amendment.
This is a common device exercised by parliamentarians to try to improve the quality of accountability to Parliament. I have almost lost count of the number of times I have seen similar amendments moved by Members on either side of the House—from a Labour Government and from a Conservative Government—but they are nevertheless important because they remind us all of the value of Parliament and why we are here. They also oblige the Secretary of State to make it clear in their annual reporting how the work of a particular regulator is progressing and the content of that work.
Additionally, we want Parliament to have an opportunity to debate and discuss the workings of the DMU. We also want to ensure that the DMU has sufficient financial support and staff to do that work—that is, the work that Parliament has ultimately asked it to do in protecting the public interest and promoting competition that is beneficial to consumers. There are already some concerns that both the CMA and the DMU might lack the resource and clout to undertake their work in tackling the giants that dominate the digital marketplace. That is why we have tabled Amendment 83: to focus attention on this concern.
The question of resources is important because, unlike many other regulators, the CMA is funded not by a levy on the firms it regulates but by a grant. We are not seeking to change this with our amendment, but does the Minister have any concerns that the CMA and the DMU may lack the certainty enjoyed by other bodies such as Ofcom? Does he have any worries that the CMA’s funding arrangements could have an impact on its ability to scale up certain operations and ensure that investigations take place as quickly and efficiently as possible?
We argue that this must be a primary concern from the outset. The history of regulators is littered with examples of underpowered institutions lacking the ability to tackle the big issues of the day. The water industry is a critical example of what can go badly wrong when an infrastructure regulator cannot cope. Digital infrastructure is key to the nation’s future economic success and prosperity, so this is every bit as important. For those reasons, I beg to move Amendment 79.
While I am on my feet, I would like to address Amendment 81 in the name of the noble Baroness, Lady Stowell. It goes to the heart of the issue in requiring the regulator or regulators to report to the relevant parliamentary committees; this is consistent with the noble Baroness’s Amendment 77 in the previous group. For the reasons argued in our debate on that group, we support Amendment 81.
Amendment 82 in the name of the noble Lord, Lord Fox, seeks to inquire whether the CMA will be able
“to play a proactive role in promoting international standards of digital market regulation”.
It would be most odd if it were prevented doing so. Although this amendment is of interest for good trade reasons, I would also be interested to hear from the Minister how the Government view the international regulatory field and the CMA’s role, part and place in it.
I look forward to the Minister answering some of those questions and points.
Baroness Stowell of Beeston (Con)
My Lords, I speak to my Amendment 81 in this group. I am very grateful to the noble Lords, Lord Tyrie and Lord Clement-Jones, and the noble Baroness, Lady Jones of Whitchurch, for adding their names. My amendment reflects the increasing power of some of our most important regulators in the context of digital markets and online activity; and the need for greater parliamentary oversight as a result.
Lord Fox (LD)
My Lords, I speak to Amendment 82 in my name. Through the medium of parliamentary reports, it seeks to probe the Government’s position on standards—as was previewed by the noble Lord, Lord Bassam. Why am I interested in standards? My experience of other sectors is that the UK’s approach to engagement in international standards is often—in my case, always—a technical approach. Technical people are sent to the relevant bodies to do the work. This flies in the face of what I have witnessed when other countries, on their own account and that of their national champions, used the process of negotiating new standards to further the strategic aims of their country and its national standards. I want to have this discussion so that I can hear how the Government view this and where the responsibility lies. Without a real handle on standards, competitivity and competition will be playing catch-up.
During the first day in Committee, when I was in the Chamber, your Lordships discussed the importance of interoperability. By my definition, interoperability has to enable both vertical interconnection between systems and horizontal interconnection with the web. The internet is a web of interconnected sites, so interoperability has to be both one to one, for example between servers and systems, and among servers and systems.
During that debate, the Minister, the noble Viscount, Lord Camrose, said that there was no need to define interoperability and that doing so might unhelpfully narrow the definition. That would be true if, when he was speaking, he had covered all types of interoperability, including web interoperability. Separately, he referred to interoperability and data access. This might be helpful if he meant interoperability generically, covering different subsets. Can the Minister clarify whether his department’s definition covers many-to-many, one-to-many and one-to-one interoperability?
To be more technically clear, this would cover interoperability among and between websites, using JavaScript and web data such as URLs, as well as one-to-many interoperability, such as browser interactions with websites, and one-to-one interoperability, such as covering apps and operating systems. At present, the language of Clause 20(3) is limited only to interoperability with a platform, so it would not address abuse by interfering with web interoperability.
This may sound too detailed, but it is deliberately detailed, because the detail of standards establishes who wins commercially. Somebody has to be inside all this to make sure that we can avoid businesses locking out their competitors, because what has happened over the past 20 years is increasing amounts of locking in.
Microsoft tried to use its operating system to lock in its media player app and its browser. Google is locking in online advertisers to its systems. Apple locks in apps through the payments and App Store terms and conditions. Amazon sought to lock people into its buy box. Facebook does not allow people to cross post, and each company runs messaging platforms that work better when plugged together than when plugged in with one of their rivals. Lock-in reinforces the network effect in communications and increases each platform’s separate monopoly. Standards define which software components work with other components, while definitions help to decide which software can work with which. Definitions of what is in the browser and what is elsewhere right across the internet are critical.
As the Committee knows, there are three principal players setting these definitions. What the browser does is overseen by the World Wide Web Consortium—W3C. Other internet standards are defined by the Internet Engineering Task Force—IETF. Telecoms standards are defined by the International Telecommunication Union—ITU, which is part of the UN in Geneva. All are relevant to interoperability and it is critical that the CMA has a role in policing interoperability, not least to ensure that standards are not rigged for the benefit of the bigger players, as I have just illustrated.
The ITU is a public body, but W3C and IETF are run by private entities for their own benefit. There is a serious risk and current concern that the definitions that are vital to avoid the intermediation of the future web are being rigged for the benefit of the big tech players. Promoting interoperability between browsers and websites means that browsers are not websites and do not operate in a way that prefers the website of the browser owners. They should render websites whoever owns the website. Different functions have to be standardised and policed for this to happen. To promote online competition, businesses need to be able to compete with the dominant browser owners. To be clear, Google and Apple own or control browser engines for all Apple, Google and Microsoft devices sold worldwide—essentially, almost everything apart from Chinese systems.
It is central to digital competition that the CMA promotes open and fair interoperability, thereby ensuring that browser owners do not give themselves discriminatory preferences or otherwise use their control over one part of the system to benefit themselves at the expense of their rivals. As we go forward and technology changes, we have an opportunity to nip this in the bud rather than trying to reclaim it in the opposite direction.
I am in danger of labouring this point, but I am going to: wallets offer storage for online payment cards. Someone running a wallet business would expect that the wallet’s operation would be discrete from the browsers. You would expect a browser to operate in a non-discriminatory way, enabling all types of wallets and cards to be used. Well, in 2022, W3C passed a standard that clearly benefits the two dominant browsers by allowing them to prefer their own wallets, casting a shadow across the whole online wallets and payments business world. This happened because Google and Apple play a considerable role in the development of standards for their own benefit. If we actually want an open market, this all needs to be actively policed; I suggest that the CMA has to be central to that policing process. Without this effort, much of the other work of the DMU will be closing empty stables’ doors while chasing bolting horses.
I note that the noble Lord, Lord Lansley, had some interesting things to say about interoperability and data in the previous debate, so I will be interested in his response and those of other noble Lords to this amendment. I of course will not be moving it, but I want a full reply from the Minister and possibly some further dialogue before Report, just to see the department’s view of how the engagement on this highly technical and important issue is to be done at international level. If it is not the CMA, who and how?
Baroness Harding of Winscombe (Con)
My Lords, I will be brief. It is an honour to follow the noble Lord, Lord Fox, and his passionate exposé about the importance of interoperability while reminding us that we should be thinking globally, not just nationally. I did not come expecting to support his amendment but, as a result of that passion, I do.
I rise to support my noble friend Lady Stowell. She set out extremely clearly why stronger parliamentary oversight of the digital regulators is so important. I speak having observed this from all possible angles. I have been the chief executive of a regulated company, I have chaired a regulator, in the form of NHS Improvement, I have been on the board of a regulator, in the form of the Bank of England and I am a member of my noble friend’s committee. I have genuinely seen this from all angles, and it is clear that we need to form a different approach in Parliament to recognise the enormous amounts of power we are passing to the different regulators. Almost all of us in Committee today talked about this when the Online Safety Bill was passing through our House, and it was clear then that we needed to look at this. We have given enormous power to Ofcom in the Online Safety Act; this Bill looks at the CMA and very soon, in this same Room, we will be looking at changing and increasing the powers of the ICO, and if we think that that is it, we have not even begun on what AI is going to do to touch a whole host of regulators. I add my voice to my noble friend’s and congratulate her on the process that she seems to be well advanced in in gathering support not just in this House but in the other place.
I also express some support for Amendment 83. I am concerned that if we are not careful, the easiest way to ensure that the CMA is not bold enough is to not resource it properly. Unlike the passage of the Online Safety Act, where we got to see how far advanced Ofcom was in bringing in genuine experts from the technology and digital sector, it has not yet been so obvious as this Bill has progressed. That may be just because of the stage we are at, but I suspect it is also because the resourcing is not yet done in the CMA. Therefore, I ask the Minister for not so much an annual update as a current update on where the CMA is in resourcing and what support the Government are giving it to ensure it is able to meet a timetable that still looks painfully slow for this Bill.
Baroness Kidron (CB)
My Lords, I rise mainly to correct the record that I called the amendment in the name of the noble Baroness modest and also to celebrate the fact that I am once again back on the side of the noble Baroness, Lady Harding; it was very uncomfortable there for a moment.
I was on both committees that the noble Baroness, Lady Stowell, referred to. We took evidence, and it was clear from all sorts of stakeholders that they would like to see more parliamentary engagement in the new powers we are giving to regulators. They are very broad and sometimes novel powers. However, the point I want to make at this moment is about the sheer volume of what is coming out of regulators. I spent a great deal of my Christmas holiday reading the 1,500 pages of consultation material on illegal harms for the Online Safety Act, and that was only one of three open consultations. We need to understand that we cannot have sufficient oversight unless someone is properly given that job. I challenge the department and Secretary of State to have that level of oversight and interest in things that are already passed. So, the points that the noble Baroness made about resource and capacity are essential.
My other, very particular, point is on the DRCF. I went to a meeting—it was a private meeting, so I do not want to say too much, but fundamentally people were getting together and those attending were very happy with their arrangements. They were going to publish all sorts of things to let the world know how they, in their combination, saw various matters. I asked, “Is there an inbox?” They looked a little quizzical and said, “What do you mean?” I said, “Well, are you taking information in, as a group, as well as giving it out?” The answer was no, of course, because it is not a described space or something that has rules but is a collection of very right-minded people. But here in Committee, we make the point that we need good processes, not good people. So I passionately support this group of amendments.
I briefly turn to the amendment tabled by the noble Lord, Lord Fox, in which there is an unexpected interest in that I work with the IEEE, America’s largest standards organisation, and with CEN-CENELEC, which does standards for the European Union. I also have a seat on the Broadband Commission, which is the ITU’s institute that looks after the SDGs. Creating standards is, as a representative of Google once said to me, soft power. It is truly global, and as we create and move towards standards, there are often people in their pyjamas on the other side of the world contributing because people literally work in all time zones to the same effect. It is a truly consensual, global and important way forward. Everyone who has used the wifi today has used an IEEE standard.
Lord Tyrie (Non-Afl)
Just a short while ago, I decided that there was so much to say that I would say very little indeed. I completely agree with everything that the noble Baroness, Lady Stowell, said. As politicians, we should all be worried about a serious and growing problem that we are handing over huge powers to regulators on a monthly basis, and they will appear to the public to be accountable to nobody. If there is one book that is worth a good read, it is Unelected Power by Paul Tucker, who addresses exactly this set of issues with respect to finance and central banking. Come to think about it, it is a rather fat book, so, although I have read a large part of it myself, I suggest that the introduction and the conclusion will give noble Lords a good feel.
I will briefly join up a number of the debates we have just heard. On the one hand, we have been saying to ourselves, “We’ve got to empower David because David’s up against Goliath”, and on the other hand, it was said a moment ago that we have these huge overmighty regulators that must be held to account. There is an answer to that apparent clash of thoughts which s that while regulators have the capacity to wield huge power, many of them retreat into a comfort zone in which they do not do all the things they should. Rather, they do what they feel they can do relatively straightforwardly. Specifically, they do not wield the huge soft power they often have available to them.
Since I am going to give a long speech, I will digress momentarily to illustrate that point. When Covid struck, I was the chairman of the CMA. The hand sanitiser market started to be cornered at great speed by a small number of players, who then jacked up the price so that Mrs Wiggins, who wanted to go down to the corner shop to buy some at the only moment she dared go out, found that, instead of paying the correct price, which was probably £1.80, she was going to pay £12, £9 or something like that. I argued vigorously that we should do something about this, using consumer protection powers. I was told, “We don’t have a chance. We’ll be ignored. In any case, we might well lose the case. It’s all very complicated in terms of whether we have the power to intervene in a case like this. We certainly can’t assemble the evidence in time”, and so on. After a fortnight of persistence—I am pleased to say that the current head of the CMA was on the right side of this argument—I persuaded the top of the CMA to send a warning letter out. The practice ended immediately; that is why that big issue for the public agenda, which was leading newspaper coverage for several days, was taken away and a major problem for the Government was removed. Soft power is available to regulators in many ways but they often fail to address it.
The case for better scrutiny of regulators, digital or otherwise, has something to do with the need to hold regulators to account for the way in which they wield—or fail to wield—their power. That case has been made extensively elsewhere. In fact, I have written it down in places and published it, so I will not rehearse any of those arguments now.
I want to touch on two further points. If we are to do this job meaningfully, we need to have in place a number of things that, for example, the banking commission—I chaired it some time ago—found essential when assembling a technically competent team at pace to deal with the Libor scandal. A new body must have significantly greater resources and expertise than we currently provide to Select Committees. That will cost money. It is worth pointing out that the total cost of the work of the top eight regulators, which are meant to scrutinise the businesses on which they keep an eye, is in excess of £2 billion at the moment; that is the bill just to pay for the regulators. A few million pounds spent by Parliament to improve its oversight of those who are meant to be doing that scrutiny work would be money well spent.
The second thing that we must develop in Parliament is institutional memory, which is largely missing at the moment. There is very little institutional memory in our scrutiny bodies. It requires a group of officials who will stay the course for a significant time and are certainly not dispersed every time there is an election, which is what happens to a large number of Select Committee teams in both the Lords and the Commons, including the clerks and deputy clerks.
The third thing that we must do, which may seem obvious but is not always done—indeed, it is often not done—is keep good records. The body must have high-quality record-keeping. It has been a major bugbear of mine that, on the whole, records are not kept by Select Committees across Parliaments—that is, after an election, they start again as if everything is fresh. Incidentally, one of the reasons why the Treasury Committee has done better than other Select Committees in scrutinising across Parliaments is that it has one specialist adviser—I will not embarrass him by naming him—who works on monetary policy and the Bank of England and has been there for about 15 years. He loves his job and does only that job. He used to work in the Bank of England and knows a huge amount about it. That tiny fragment of institutional memory has dramatically improved the performance of the Treasury Committee over the years and does so today.
Lord Kamall (Con)
My Lords, I will speak to Amendment 81 in this group. I also wanted to speak to Amendment 77 in the previous group; I apologise that I was not here earlier to speak to it then.
I will refer to three notions from political science that may be relevant here. The first is that of the principal-agent theory and principal-agent problem. That is when a Government—namely, the principal—delegates authority to an agency. There is a huge body of work about delegating power to regulators, including the notion of agency slack, where the regulator does not act as was originally intended for a number of different reasons, raising the question of how you hold it accountable for that. Alternatively, it may perform very badly; for example, in some government departments there are concerns about arm’s-length bodies. How do we make sure that a poorly performing regulator is acting as it should have done in the first place?
The second notion is public choice theory. When people call for government intervention, they usually assume that officials and politicians are benign and will act in the public interest. Public choice theory suggests, however, that we must remember that individuals are also motivated by their own incentives and may act in their own self-interest at certain times—not because they are bad people, but because they are human. There are many cases of that; for example, with the housing market, most people agree that we need to build more houses, but many people just do not want their homes anywhere near those new houses. It is therefore very difficult in parts of the country for a candidate to stand up and campaign for more development because, according to public choice theory, they are acting in their own interest about wanting to get elected, even though they know that there should be more homes in the country. One of the fathers of public choice theory, James Buchanan, called it politics without the romance. It is when officials, who are well intentioned when the organisation starts up, just like politicians, suddenly do not act as was intended in the first place, because there are certain interests that conflict with each other. Therefore, how do we address that problem when it happens?
The third notion is the idea of unintended consequences. Given that we do not have complete knowledge, we should ask ourselves sometimes what happens if we are wrong. Are we absolutely sure that the JR appeals will prove a better way to achieve faster and more accurate decisions? We all support them, because many of the small challenger companies are asking us to do that—I have spoken in favour of them, as have many other noble Lords—but what if we find down the line that the appeals are taking longer, or that large companies are winning their appeals and the CMA has to start all over again? What if we find that it in fact takes longer than if we had gone to a time-limited merits appeal?
I considered laying an amendment asking for a review after three or five years, but I was worried about that, in case it became another loophole that large companies would use to undermine the JR appeals process, so I stood back. Another reason I did not do that was because the noble Lord, Lord Clement-Jones—I thank him for this—said to me, “You may well be right, but surely this should be about the accountability of the CMA to Parliament, and Parliament can question it on the issue of why some of the cases it is bringing are being lost on appeal”.
The other question that many of us politicians across the spectrum are asking is: who regulates the regulators? This comes from people right across the board. How do we make them accountable? I suggest that my noble friend Lady Stowell’s Amendment 81 addresses those three concerns. I hope that I have laid out the reasons why I support her amendment, notwithstanding some of the concerns raised by the noble Lord, Lord Tyrie.
I speak briefly to Amendment 82 in the name of the noble Lord, Lord Fox; he has raised an important issue. When I was in the European Parliament, we looked at digital regulation as well as financial regulation. I was told by many national European regulators, including those in the European Commission, and other global regulators that they had a huge amount of respect for UK regulators. Quite often, they would use what we did previously. For example, early telecoms regulators basically took what we did in the 1980s and replicated it across many countries in Europe.
I teach students about intergovernmental organisations. We can see that even the more technical intergovernmental organisations, some of which are over 100 years old, have now become more political. Companies and Governments are starting to influence soft power, as another noble Lord said. The EU, for example, wants to be the technical standard for regulation; China also wants to get involved in international bodies and to set the standards in its own interests—look at the debate over CDMA a few years ago. This is not just in the tech sector; we see its officials active in many intergovernmental organisations. I am not sure that the amendment tabled by the noble Lord, Lord Fox, is the right way to address these concerns, but he is certainly on to something and it deserves further consideration.
Lord Clement-Jones (LD)
My Lords, I am going to be extremely brief as the hour marches on: yes to Amendments 79 and 83. Most of the debate has been around Amendment 81 but I want to mention my noble friend’s Amendment 82 because the concept of lock-in is absolutely crucial. I am a big fan, particularly in the AI field, of trying to get common standards, whether it is NIST, IEEE or a number of them. The CMA’s role could be extremely helpful.
Of course, many other regulators are involved. That brings us into the landscape about which the noble Baroness, Lady Stowell, has—quite rightly—been so persistent over the course of the then Online Safety Bill and this Bill. She is pursuing something that quite a number of Select Committees, particularly her one, have been involved in: espousing the cause of a Joint Committee, as our Joint Committee previously did. It is going to be very interesting. I am a member of the Industry and Regulators Committee, which has been looking at the regulatory landscape.
These accountability, independence, resourcing and skills issues in the digital space are crucial, particularly for those of us in this Committee. For instance, the role of the DRCF and its accountability, which were raised by the noble Baroness, Lady Kidron, are extremely important. I very much liked what the noble Baroness, Lady Harding, said about us having talked about Ofcom before but that we are now talking about the CMA and will talk about the ICO very shortly; for me, AI brings a lot of that together, as it does for her.
So what is not to like about what I think is a rather cunning amendment? The noble Baroness gets more cunning through every Bill we get on to. The amendment is shaped in a way that is more parliamentary and gets through more eyes of needles than previously. I strongly commend it.
Viscount Camrose (Con)
My Lords, I shall be as brief as I can possibly be, I promise.
I thank all noble Lords for their brilliant and stimulating contributions. Amendment 79 in the name of the noble Baroness, Lady Jones of Whitchurch, would require the Government to undertake an annual assessment of the operation of the CMA, to include the DMU specifically. The CMA is already required to present and lay its annual report in Parliament. This covers the operation and effectiveness of the CMA, including a review of its performance, governance and finances. The CMA recently published a road map setting out how it will report on the digital markets regime in its annual report. Although I of course appreciate the intent behind the noble Baroness’s amendment, adopting it would run the risk of being duplicative of the CMA’s assessment of its activities, which could lead to concerns regarding its operational independence. The Government set out their priorities for the CMA in their strategic steer and the CMA reports publicly on how it meets these priorities. The Government will also carry out a post-implementation review of the regime to assess how it is delivering on its aims.
Amendment 81 from my noble friend Lady Stowell of Beeston would require additional reporting by the CMA, the Financial Conduct Authority, the Information Commissioner’s Office and Ofcom. It would require these regulators to publish annual reports on the impact of the digital markets regime on their activity and its effectiveness in supporting them in regulating digital markets. The Government agree that it is vital that regulators are held to account for their activities. Each of these regulators already produces annual reports that are laid in Parliament covering their operations and effectiveness. An additional report by each of the sector regulators would again run the risk of being duplicative and creating an unnecessary additional administrative burden. Additionally, the Digital Regulation Cooperation Forum was established in 2020 to support the co-ordinated regulation of digital markets and includes the regulators named in this amendment; the DRCF also publishes an annual report on its activities and priorities.
In response to my noble friend Lady Stowell’s important point regarding a committee on digital regulation, I agree with her that parliamentary accountability is crucial and thank her for engaging so clearly with me and my noble friend Lord Offord earlier on this topic. I absolutely recognise the problem. Perhaps I can offer to continue to engage with her on how to drive this forward. At the risk of disappointing the noble Lord, Lord Tyrie, we have a concern that the formation of parliamentary committees is a matter for Parliament, not the Government, but I welcome ongoing work to determine how best to ensure that committee structures can scrutinise the important issue of digital regulation.
Lord Bassam of Brighton (Lab)
Noble Lords will be pleased to know that I, too, intend to be brief. I am grateful to the Minister for his response: there was more detail than I thought we would get. I am also grateful to the other Members of the Committee who supported the two amendments in the name of my noble friend Lady Jones. We should congratulate the noble Baroness, Lady Stowell, for her sterling efforts in arguing her case for better regulation through specific committees of both Houses.
I assume we will return to the issue of accountability. There has been sufficient concern expressed this afternoon about the shortcomings of where we currently are. I heard what the Minister said about annual reporting to Parliament, and we all need to think more about how we can make that much more effective.
A number of noble Lords made the killer point that there is a lot coming down the line, including the CMA, online safety and data protection. All those topics demand further scrutiny to make sure that we get the very best from regulation and legislation.
Collectively, our amendments address two issues: the accountability of the Secretary of State to Parliament, and the accountability of the regulator to Parliament. They are two very important things with important principles behind them.
I was interested and impressed by what the Minister said about the staffing details; it is something we should regularly debate in your Lordships’ House. Have we got it right? Have we got the balance right? Where are the staff coming from? Have they got the right skill set?
It was a very useful debate, and I beg leave to withdraw the amendment.
Digital Markets, Competition and Consumers Bill
Wednesday 31st January 2024
(5 months, 4 weeks ago)
Grand CommitteeRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 12-IV(b) Amendments for Grand Committee (Supplementary to the Fourth Marshalled List) - (31 Jan 2024)
“Duty of the CMA: Citizens interest provisions(1) The Enterprise and Regulatory Reform Act 2013 is amended as follows.(2) After section 25(3) insert—“(3A) When carrying out its functions in relation to the regulation of competition in digital markets under Part 1 of the Digital Markets, Competition and Consumers Act 2024, the CMA must seek to promote competition, both within and outside the United Kingdom, for the benefit of consumers and citizens.””Member’s explanatory statement
This new Clause would give the CMA a duty to further the interests of citizens—as well as consumers—when carrying out its digital markets functions under Part 1 of the Bill.
Baroness Jones of Whitchurch (Lab)
My Lords, Amendment 80 raises the particular issue that was raised at Second Reading: whose interest is the CMA defending? Is it just the users of the product or service, or is there a wider citizens’ interest that needs to be taken into account? I am grateful to the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Kidron, for adding their names to this amendment and I look forward to hearing from the noble Lord, Lord Tyrie, on his amendment.
Part 1 has a specific focus on identifying the big tech companies that are so large and powerful that they can be categorised as having “strategic market status”. From the CMA’s operational plan, we know that it aims to identify three or four of these companies, in the first instance, for deep scrutiny about their behaviours and anti-competitive practices. We have a good idea which companies are likely to be in the frame for all this. They are increasingly fundamental to our lives: they help to run our public services, they store our personal data, they shape our purchase choices and social activities, they underpin our research and innovation, and they help to determine the health of our economy. Their wealth is bigger than that of many of the UK’s trading partners and, if they took their business elsewhere, our economy would certainly suffer.
When Part 1 talks about the CMA having regard
“in particular to the benefits for consumers”
that its conduct requirements will bring, you begin to wonder how it will identify the consumer interest, because, in this context, we are all consumers. We argue that this is no longer a transactional process where an individual consumer buys a product or service from one of these companies. Whether we like it or not, the behaviour of these companies influences all our lives, even if, as individuals, we do not engage in the digital world. Of course, this impact will be magnified as the AI applications speed up across our lives and as public services become digitalised.
Our amendment poses the challenge of why the CMA is acting only for consumers when it should be acting in the interests of all our citizens to ensure protection of the greater good. We raised this issue with Ministers when we met them recently and they helpfully sent a follow-up letter, conceding that the DMU taskforce had recommended that the DMU’s overarching statutory duty should be
“to further the interests of consumers and citizens in digital markets”.
It was recognised that competition in digital markets had deep interactions with a range of other issues, such as data privacy and media plurality.
However, the Government rejected the citizens’ interest proposal on the basis that it created some unhelpful overlaps with other regulators. We accept that there is some overlap with the other regulators, particularly Ofcom, but we argue that there are also large swathes of digital competition that do not easily fit under the remits of other regulators. As such, in many digital activities, no one is protecting the interests of citizens as a whole. Also, there is already a requirement for the DMU to consult key regulators before it makes an intervention, which would enable any overlap to be addressed at that point. While the Government are concerned not to make the remit of the DMU too broad, we counterargue that they risk making it too narrow if they do not add in a citizens’ interest provision.
This is clearly a probing amendment and we may well not have found the right wording, but I would be interested to hear the views of other noble Lords about whether these definitions should be broadened to encompass the interests of all citizens in the deliberation of the CMA. I beg to move.
Lord Tyrie (Non-Afl)
My Lords, as well as speaking to Amendment 80, I will say a few words about Amendment 83A in my name, which is in some ways related.
The point just made was extremely important and correct: in whose interests are these bodies acting? The answer should always be people—all of us. Commissioner Vestager, responsible for competition in Brussels, made exactly this point in evidence on several occasions and in a couple of major speeches. She is a far-sighted and bold competition Commissioner. In practice, we are all consumers, so the word “consumer” should probably catch it, but it may not convey quite as much to the public as we would like.
My amendment was triggered by an exchange that I had with the noble Lord, Lord Vaizey, earlier in the scrutiny of the Bill. In response to a question of his to the Minister, I suggested that the CMA always operates under a duty to be proportionate. When I said that, I had in mind not so much the implications of the Human Rights Act for its effect on proportionality but a more general duty to respect best regulatory practice, under which specialist regulators operate, as far as I know. Usually, this is understood to mean transparency, accountability, proportionality, consistency and, where relevant, action targeted only at cases that really require it. Some people talk about efficiency and economy in the same breath. Although I have not found that in any statute, I expect that it is to be found in various statutes.
I have subsequently checked some of this out with the House of Commons Library and others. First, a duty such as I describe is written into the Water Act, the Gas Act, the Electricity Act and the Communications Act, among others, with very similar wording to that which I have just cited. In other words, Ofwat, Ofgem and Ofcom are all subject to such a duty. I have also checked that these duties are justiciable.
Secondly, I made another, unexpected, discovery. As a result of this legislation, the CMA will become an outlier among these specialist regulators. By this legislation, we are giving the CMA specific specialist responsibilities for the digital sector. In other words, it becomes a sector regulator. But, unlike with the other specialist regulators that I have just listed, no such statutory duty to adhere to the principles of best regulatory practice will be required of it. My amendment would correct that omission.
Late last week I discovered that the City of London Law Society had made roughly the same point in its submission on the Bill. The wording in my amendment is pretty much taken from that submission. At the time I tabled it, I had not discussed it with the City of London Law Society and, since then, I have had time only for a couple of minutes with it on the phone. I cannot think of a good reason for not applying this duty to the CMA, but I can think of plenty of reasons why it should be applied.
These duties on public bodies can appear to be little more than motherhood and apple pie but, as I have discovered over the years, they can influence behaviour in powerful public bodies in quite a big way, and usually for the better. I will illustrate that. Take an accounting officer who comes under pressure to do something that he or she considers inappropriate. That happens not infrequently, as those of us who have been on the inside, or on both sides, of the public body fence will know. With a statutory duty in place, the accounting officer is much better protected and placed to be able to say, “I’m not going to go ahead with that”. That is no doubt one of several reasons why these specialist regulators have these duties imposed on them: they serve as a reminder, a backstop, for securing good conduct from those at the top of organisations, particularly those with a high degree of statutory independence.
Now, the Government—on advice, no doubt—will point in response, probably in just a moment, to codes of conduct, guidelines and other documents that already require good regulatory practice. I can see the Minister smiling. I know most of these documents quite well—as a matter of fact, I contemplated reading them out myself, but I will spare the Committee that pain and leave it to him to take the flak. The department’s impact assessments should work, in principle, to provide some of the heavy lifting as well, and they are audited by the NAO. I have seen that scrutiny in action, and it does far less to improve behaviour than a statutory obligation. It is the latter that really concentrates the mind.
More and more as we examine the Bill, the absence of a general duty on the CMA seems to be of a piece with the approach taken right across the draft legislation. We are creating a body with unprecedented powers and unprecedentedly feeble avenues for the securing of accountability. We are creating ideal conditions for executive overreach. All the necessary ingredients are being put in place as we legislate here.
First, there is the long history of patchy to poor scrutiny by Parliament, particularly by the Commons, of the CMA. As I may have pointed out on more than one occasion, I was its very first chairman ever to appear before the BEIS Select Committee, and I secured my audience by request—I said that I really would like to come along—which gives you an idea of the distance between the committee and the activities of the CMA. Of course—and I do not mean this disparagingly to anybody in this House—it is the Commons Select Committee that really counts when it comes to delivering punchy cross-examination and accountability, or at least counts most.
Parliament could do a better job, which I think was the point that the noble Baroness, Lady Stowell, made on Monday, but it would be a profound mistake, even if we got the improvements that she is proposing, to rely exclusively on Parliament to do the heavy lifting.
The first reason why we need this amendment is that we do not have much parliamentary scrutiny. Secondly, we have a body with a historically weak board, with most of the important decisions already delegated to the most senior executives, mixed-quality governance at best and a history of patchy to poor non-executive challenge of executive decisions. I realise that it is concerning that an ex-chairman should feel the need to put that on record, but it is necessary. Thirdly, as things stand, we are protecting the CMA from any substantive review at all of decisions on digital, which is a discussion we had earlier with respect to JR.
A fourth reason why this amendment is needed is that it now seems that the body is to be exempted from the core duties to conform to best regulatory practice which have been considered essential for all other sector regulators that I have checked out. My amendment would rectify that problem at least. I hope that the Minister will look favourably on the suggestion.
Baroness Kidron (CB)
My Lords, I support Amendment 80, to which I added my name. I will also say a few words about Amendment 83A in the name of the noble Lord, Lord Tyrie.
I fear that the word “citizens” might meet the same fate as the word “workers”. The argument will be made that it extends the CMA’s remit in ways that might overburden, create a lack of focus or overlap. However, the digital world has several characteristics that support the amendment in the name of the noble Baroness, Lady Jones, which would add “citizens” to “consumers”.
Lord Clement-Jones (LD)
My Lords, I strongly support Amendment 80 in the name of the noble Baroness, Lady Jones, which I have signed. She spoke powerfully about the power of big tech and its impact on democracy. My concerns, and those of many news organisations such as the Public Interest News Foundation, the News Media Association and the Professional Publishers Association, are consistent with that: we are all concerned to ensure the plurality of media as far as possible, as the noble Baroness, Lady Kidron, mentioned. She also helpfully reminded us of the duty of Ofcom, in Section 3 of the Communications Act, to
“further the interests of citizens”.
It seems to me that the CMA should be subject to exactly the same duty.
Local, specialist and national publishers are an essential part of the fabric of our society. On these Benches, we may have arguments, post Leveson, with some of the mainstream media about the appropriate legislation that should impact on it, but the media play a key role in promoting democracy, by scrutinising the Government with public interest journalism. Additionally, publishers provide vital support to industries, which often rely on the trade press to inform sectoral decision-making and provide what are described as workflow tools. A duty to further the interests of citizens as well as consumers would allow the CMA much better to prioritise media sustainability and more explicitly target anticompetitive conduct that harms media plurality.
It could be argued—I expect that the Minister is going to marshal his arguments—that the current pure consumer focus still allows the CMA to implement solutions that will help to level the playing field between platforms and publishers, but the concern of many of us is that the absence of an interest-of-citizens duty may mean that the remedies that could support a sustainable and plural media and in turn our democracy will be used less effectively than they could be, or not used at all. The argument is powerfully made that we need to include that duty. We have a precedent and there is absolutely no reason why we should not include that in the duties of the CMA.
Turning to the amendment of the noble Lord, Lord Tyrie, Amendment 83A, I feel that this is perhaps something that he expresses throughout the Bill: he has the scars on his back of being the chair of a regulator. It is a surprising omission that these principles are not included. The noble Baroness, Lady Kidron, like the noble Lord, Lord Tyrie, has done her homework and found that the CMA is exceptional in this respect. They both made an extremely good case.
Beyond those principles, how do the Government impose such things as the Better Regulation Framework on the CMA? After all, that is part of the operational standards, if you like, that are expected of a regulator such as the CMA. Not only do I support what the noble Lord, Lord Tyrie, is putting forward, but I also ask how we make sure that the regulator performs its duties in line with what is a relatively new piece of guidance, the Better Regulation Framework, going forward.
The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
As ever, let me start by thanking the noble Baroness, Lady Jones, and the noble Lord, Lord Tyrie, for drawing attention to and initiating this fascinating debate on the objectives of the digital markets regime with these amendments. Most speakers have anticipated many of my arguments in advance, but I hope none the less to persuade noble Lords of their value.
Clear objectives shape the work of the CMA, ensuring that its focus is on promoting competitive markets that drive better services, greater choice and lower prices for individuals and businesses. It is essential, in the Government’s view, that the objectives of the new regime are equally clear and support a coherent and effective regime. Amendment 80 proposes a duty for the CMA to further the interests of citizens, as well as consumers, in its digital markets work. As the UK’s competition regulator, the CMA’s existing statutory duty is to promote competition for the benefit of consumers. Consumer benefits are broad, as has been observed; they can include economic growth, innovation, media plurality and data privacy. An additional citizens’ duty that goes beyond the scope of the tools and the remit of the digital markets regime would reduce the clarity of the CMA’s role, create inconsistency with the CMA’s wider competition and consumer functions and overlap with the remit of other regulators. It is essential that the duties of the regime match the scope of its tools.
Noble Lords can all agree with the noble Baroness, Lady Kidron, and the noble Lord, Lord Clement-Jones, on the absolute, non-negotiable importance of supporting the sustainability of the press in the UK. There can be no doubt about the vital contribution of independent journalism to producing informed citizens and, therefore, democracy in this country. However, it would further confuse the regulatory landscape to require the CMA to consider issues already overseen by other expert regulators, such as online safety and data protection. Instead, the CMA will have a duty to consult other key regulators of digital markets, such as Ofcom and the FCA, where proposed interventions in digital markets impact their regulatory interests. This will ensure that the regime forms part of a coherent regulatory landscape that considers broader policy and societal concerns across digital markets.
I want to reassure noble Lords that the Government considered the advice of the CMA’s Digital Markets Taskforce and its recommendation for a citizens’ objective extensively, before consulting on it in 2021. Those we consulted were generally opposed to a role for the CMA that looks beyond its tried and tested duty to promote competition for the benefit of consumers, since this provides the greatest clarity for the digital markets regime. The CMA has testified in front of the House that it benefits from having a single, clear statutory duty. I again thank the noble Baroness for her amendment and for highlighting these important issues. However, for the reasons that I have set out, I hope that she will feel reassured and comfortable in withdrawing it.
I now turn to Amendment 83A from the noble Lord, Lord Tyrie. It would create a new requirement for the CMA to have regard to the principles of best regulatory practice when carrying out its digital markets functions under Part 1 of the Bill. Let me say at the outset that the Government agree with the spirit of the noble Lord’s amendment. Our 2021 consultation on this regime set out the Government’s principles for the pro-competition regulation of digital markets: that it should be transparent, accountable, targeted and coherent. These principles have informed how the regime is designed in legislation, from the high thresholds that we establish for SMS designation to the targeted and iterative nature of conduct requirements and pro-competition measures. Indeed, we have discussed previously in Committee the wide range of accountability mechanisms for the regime.
Earlier this month, the CMA set out its provisional approach to implementing the new digital markets regime, which aligns with our policy intent. The publication committed to the new regime being targeted, proportionate and transparent. It also included a set of operating principles that reflect the noble Lord’s concerns.
The Government’s strategic steer to the CMA sets out our expectation that the CMA should take a proportionate approach to interventions and minimise burden through transparent engagement with businesses. The CMA explains how it has taken the steer into account in its reporting to Parliament. The CMA’s prioritisation principles and annual plan set out that the CMA will target its work to that which provides the most impact for business and consumers. The proportionality amendments that the Government introduced at Commons Report stage are statutory duties narrowly targeted at conduct requirements and PCIs as the decisions that have the greatest impact on SMS firms. This amendment would introduce a very broad duty for the CMA to have regard to the principles of regulatory best practice for all its digital markets functions. An explicit requirement for the CMA to follow best regulatory practice when carrying out its digital market functions is not necessary.
Lord Tyrie (Non-Afl)
Will the Minister explain why what has been considered necessary for, as far as we know, all the other major sector regulators is not considered necessary for the CMA?
Viscount Camrose (Con)
Indeed. While the noble Lord was speaking, I was trying to look for a counter- example but I have yet to find one. I will look for examples of regimes where this does not apply and communicate that to the noble Lord.
Lord Tyrie (Non-Afl)
I am sorry to intervene a second time. When the Minister is looking for counter- examples, I would be grateful if he kept to the major sector regulators, which are the direct comparator. There are more than 500 significant quangos, and I am sure I would be able to find a few quite quickly.
Baroness Kidron (CB)
Before the Minister stands up, may I ask him whether, if he cannot find a counterexample, this amendment may find some favour with the Government?
Viscount Camrose (Con)
I will actively seek a counterexample and consider the implications of my results.
The CMA has a strong track record of following best regulatory practice across all its functions as an experienced regulator. The Government’s view is therefore that it makes sense to legislate only when it is necessary to do so, and that here there does not appear to be a problem that requires a legislative solution. For these reasons, I hope the noble Baroness feels able to withdraw her amendment.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken in support of my amendment. I am very grateful. A number of passionate contributions were made. Once again, I was impressed by the knowledge of the noble Lord, Lord Tyrie, and his doggedness in pursuing and getting to the heart of some of these issues. We always appreciate his contributions and the learning we get from them. We have described a couple of his previous contributions as a bit of a curate’s egg, but not this one. I agreed with every word he said and I thank him for that. He made his point extremely well.
Having listened to the noble Lord, it is hard not to agree that the CMA should have the responsibility to have regard to the principles of best regulatory practice. We were just debating why the CMA has to be an outlier, given that other regulators already have this duty. The Minister said that he will try to find a counterexample. The challenge to the Minister is, if he cannot find one among the 500 or so that could be there, will he agree to take this away again and have another look at the Government’s position on this? I was certainly persuaded by the noble Lord, Lord Tyrie, and I think other noble Lords were as well.
I thank the noble Baroness, Lady Kidron, who made a very thoughtful speech. She has been in this field a lot longer than me. As she said, consumers and citizens are two sides of the same coin and, unlike consumers, citizens have a long-term interest. That is the big difference. We need to take that long-term view. She also rightly asked who is defending the interests of future consumers—that is, children. I am not sure that the Minister addressed that issue. I hope that the CMA would have a responsibility to do that. Both she and the noble Lord, Lord Clement-Jones, made the point that Ofcom already has a duty to further the interests of citizens, so I hope that the Minister bears that precedent in mind.
I listened to the Minister and we agree that the CMA needs clear objectives—it has been a theme running through all our earlier debates—but then we get to how to distinguish between the interests of consumers and citizens. In the digital world, in particular, they run into each other. It is not a simple buyer-and-seller market, but a lot more complicated, as a number of noble Lords have said. It is not clear who are consumers, rather than citizens, and what impact the CMA’s decision is having on them. We argue that we need to revisit this issue in the digital world.
I tried to head off the Minister before he spoke about the problem of regulators’ overlap. The fact is that a lot of the business that we are dealing with is not traditionally covered by other regulators, so there is a regulatory gap and it needs to be addressed.
I can see that I have not persuaded the Minister, but I have not given up. I think we are right and that we will probably carry on pursuing the issue but, as I said at the outset, I am not sure I got the wording of my amendment right. We will reflect on what the Minister said and may come back to this later but, meanwhile, I beg leave to withdraw my amendment.
Lord Offord of Garvel
“(c) references to the supply, provision, acquisition or use of goods or services include the supply, provision, acquisition or use of digital content.”Member's explanatory statement
This amendment confirms that references to the supply, provision, acquisition or use of goods or services include the supply, provision, acquisition or use of digital content.
Lord Clement-Jones
Member's explanatory statement
This amendment would restore exemplary damages for collective proceedings, which subsection (1) seeks to remove.
Lord Clement-Jones (LD)
My Lords, I feel that the first cracks in government certainty are beginning to appear. We live in hope that they will increase as time goes on, with the strength of the amendments being put forward today. I will move Amendment 85 and speak to Amendments 86 and 87. I thank the noble Baroness, Lady Jones, for her support for my Amendment 85.
Clause 125 provides for exemplary damages, but explicitly states that they are not to be available for collective proceedings. The usual category of damages for competition law is breach of statutory duty and compensation for harm done and loss incurred. Where, for instance, a platform illegally harms 1,000 businesses, it harms competition but pays out only to those that plead, prove that their harm was caused by the action of the platform and prove their losses in each case. Abuse of dominance by digital platforms affects thousands of businesses; while platforms make multiple billions in profits, abuse may be identified and fines imposed, but competitive markets are damaged and those harmed are often not compensated. This makes the incentive to breach very high and the incentive for compliance very low.
The purpose of exemplary damages, which strip the wrongdoer of their gains, is to incentivise compliance with the law. They are available only where deliberate breach of the law can be proved. This is more likely where breaking the law makes economic sense for the defendants, such as where it has a major impact on a lot of small players that cannot each afford to take a case. Where many are harmed by deliberate illegal action, there is in fact an even greater case for exemplary damages being available. Government recognition that they should be available should be extended to all cases, including collective proceedings.
Exemplary damages are awarded where the defendant will have known in advance that their actions are likely to break the law but decides to go ahead anyway, as they will make more money from breach of the law than from compliance. This is often the case where a calculation is made about the income generated from many and the risk of claim from only a few. The famous Ford Pinto case, where exemplary damages were awarded, was such a case. Ford’s Pinto had a petrol tank that was prone to catching fire when in a crash. Ford calculated the personal injury costs and claims and, rather than recalling the cars and fixing the problem—which would have cost a lot—decided to leave the car in circulation. The risk of claims and payout was calculated to be less than the cost of fixing it. Ford did a cost-benefit analysis and carried on with production. The US courts awarded exemplary damages to ensure that the law was observed. The idea of the right of a court to award exemplary damages is to prevent the defendant profiting from its own wrongdoing. As such, it strips the wrongdoer of the profits gained from the breach and incentivises the defendant to comply and uphold the rule of law.
Failure to be available in collective proceedings looks to be inconsistent with the principle of incentivising defendants to comply and promote the rule of law. Where exemplary damages are claimed in the case, the claimant can seek disclosure of relevant documents from the defendant. As such, the availability of the prospect of exemplary damages will help to uncover deliberate breach. Any proceeding—including collective proceedings—is equally likely to uncover deliberate breaches. The only difference between collective and other proceedings is that collective proceedings affect a category of claimants.
These amendments would ensure that these damages are available in collective proceedings, which are much more likely to uncover deliberate breaches affecting many people. I look forward to hearing what the Minister has to say, but it seems extraordinary that they have been excluded by Clause 125.
I will not steal any of the thunder of the noble Lord, Lord Tyrie, as regards Amendment 128ZA, but I have a terrible feeling that this is another of his Trojan horses being wheeled into proceedings. I very much look forward to what he has to say and thank him in advance for the copy of his letter to the Prime Minister, which rather gives the game away as regards the consumer duty. I beg to move.
The Deputy Chairman of Committees (Lord Ashton of Hyde) (Con)
My Lords, I must inform the Committee that if Amendment 85 is agreed to, I will not be able to call Amendments 86 and 87 by reason of pre-emption.
Lord Tyrie (Non-Afl)
My Lords, I have a couple of amendments in the group on which I would like to speak. They are only dimly related, although I have started to think about ways of connecting them for the purposes of making things vaguely interesting and coherent to the Committee. It is a fairly hotchpotch grouping on that account.
The first amendment I will speak to is on the review of the CAT that I propose. The Competition Appeal Tribunal is a crucial part of the UK’s competition machinery. Its legal work is highly respected and adds credibility to the framework of law in the area as a whole. High-quality legal scrutiny gives firms confidence that they will be treated fairly. From an international perspective, fairness before the law is arguably the UK’s biggest single asset, well ahead of several others often discussed, such as the nexus of high-quality consultancies, top-flight accounting, the attraction of London as a location, time zones, language and even golf courses, which sometimes get a mention.
Baroness Stowell of Beeston (Con)
I am sorry to interrupt my noble friend—if he will allow me to call him that—who is making some incredibly important points. I know that he is a stickler for these things, but this was just about how much time we have and length of speeches. That is all. I am sure that he does not want to underplay the power of his argument.
Lord Tyrie (Non-Afl)
I have to ask the noble Baroness to bear with me for just a short while. I am being asked to speak to two amendments simultaneously, both of which are quite important, particularly the one that we are on now.
I said a moment ago that I would address some of the objections that Ministers may have heard from the department. One will have been that the CMA’s mission statement and underlying purpose implant a focus on consumers into its bloodstream. It is true that the consumer interest forms part of the CMA’s mission statement—it was found on the walls of its offices when I joined—but it is certainly not in its bloodstream. Few organisations with a responsibility to protect consumers have ever been more remote from consumers than the CMA. The intellectual framework behind the statute that it is trying to enforce is similarly abstract and technical. A consumer duty will put the consumers’ interests firmly into the CMA’s bloodstream.
A second argument against the duty that I think the Ministers will have heard will no doubt be that if the CMA takes action on competition, the consumer will always pick up the benefit. In its pure form, this is straight back to the Chicago school justification for competition policy—the approach rolled out across the world 25 years ago. A heap of academic work has now cast doubt on it. In any case, we do not need the academics, as the evidence is all around us that acting on competition alone has not been enough to stop a growth of consumer detriment and a rise in concentration ratios.
A third argument that no doubt will have been put to Ministers is that a consumer duty will get in the way of the Government’s growth objective, but that is based on the mistaken assumption that there is a trade-off between consumer protection and growth—between a healthy, functioning market with caveat emptor and a nanny state. One might characterise this as the free marketeer case against the consumer duty. I am a free marketeer. Many of our markets are not free at the moment; that is the problem. We have a massive and growing asymmetric power in many markets. Nudge, sludge, drip pricing, loyalty penalties and other rip-offs are on the rise everywhere. It is true that we can reduce these abuses by bringing more competition to these markets and that action is overdue, but it has not been strong enough so far to quell the detriment. On the contrary, abuses of market power, both digital and otherwise, have been growing.
The arguments for some form of consumer duty have been set out over the years by those at the sharp end of dealing with detriment for a very long time, not least the consumer groups. I recognise—this will be a relief to the noble Baroness—that the case I have put has touched on only a very small proportion of the arguments that they have developed in great detail over the years. I am strongly tempted, now I have been provoked, to supply her orally with a few of these, but I will resist the temptation. In any case, I have set out a summary of those arguments in numerous forms in writing in 2019-20, and then again just over two years ago. Not much has changed since then, so I will not rehearse those arguments, but I will end by summarising them.
First, a duty will greatly bolster and increase the effectiveness of the duty of expedition and the scope for interim measures that other parts of the Bill will give the CMA. The effect of all three acting together will be much greater than the sum of the parts. Secondly, it will facilitate a change of mindset that is essential for many of our competition regulators, including the CMA. The mindset of the last quarter of a century—that the CMA should restrict itself to acting directly only on competition—was a lot better than nothing, but it has also caused a lot of problems and been partly responsible for the rise in detriment that we can now see around us. Thirdly, a consumer duty will force the courts, particularly the CAT, to give the CMA more scope to act quickly and directly in the consumer interest. Fourthly, unlike most of what we are doing here, it would give us a better prospect of enabling the Government, of whatever political complexion, to have an opportunity to send a clear message to the public that they can expect powerful, independent bodies such as the CMA to act on their behalf.
Lord Holmes of Richmond (Con)
My Lord, it is a pleasure to follow the noble Lord, Lord Tyrie. The Committee certainly benefits from his expertise and experience and he is certainly never hypertrophic.
I shall speak briefly to my Amendment 106, which proposes a new clause entitled: “CMA permission for private enforcement claims”. It is a fairly simple and straightforward amendment and does exactly what the title says. Claimants have to seek permission from the CMA to bring private enforcement claims to the CAT or the High Court. The reason is clear. It is so that when we get to the end of our deliberations the operation of which forum, at what time and by whom is clear and does exactly what Parliament intended. Without this amendment there is potential to bring actions in various fora with different approaches at the same time, potentially muddying the waters and steaming up the windows and not bringing the clarity of procedure which we are seeking to achieve with the Bill.
It is a very clear amendment to have clarity and certainty about which forum at which time and to give the CMA the right to ensure that there is not muddying within the procedure, which is completely avoidable at this stage. I look forward to the Minister’s response.
Baroness Stowell of Beeston (Con)
I shall speak to Amendment 106 in the name of my noble friend Lord Holmes. Before I do, I should just reinforce my sincerity in saying that I think the noble Lord, Lord Tyrie, is making some really important points in his amendments. My concern was only to make sure that he did not lose us in his exposition, which was brilliant. I felt that some noble Lords were starting to drift away, and I did not think that was doing him any service. I want him to know that I am very interested and was tuned in the whole way through.
The reason I want to speak on Amendment 106 is that last week I raised the issue of private litigation and asked why the so-called Ofcom model had not been adopted for the Bill. Just to recap, I point out that the Ofcom model is a measure in the Communications Act which requires private litigants to seek Ofcom’s permission before making a claim to the courts or a tribunal. Its purpose is to avoid the regulator and the courts considering the same issues simultaneously and reaching conflicting findings, as my noble friend Lord Holmes has just colourfully described.
Since I raised this last week, I am very grateful for the Minister’s letter, which has been circulated to all Peers and is now in the Library, which outlined the Government’s reasoning for not adopting the measure in this digital markets regime for the CMA. As noble Lords will have seen from that letter, the Government argue that it would risk politicising the CMA because decisions about whether to approve someone taking a case to the tribunal or the courts would be appealable through judicial review, in the Government’s mind reducing certainty and clarity for stakeholders. They also argue that these issues are less prevalent for breaches of requirements imposed by Ofcom, as the primary route for redress is through the Communications Ombudsman and there is no equivalent function in the digital regime.
The Minister may make the same arguments in response to my noble friend Lord Holmes’s Amendment 106. The reason why I want to raise this again and am taking the opportunity today of doing so is because, even after getting his letter and having further conversations, I remain concerned that leaving the Bill as it stands threatens the participatory approach of the firms designated SMS, because it would disincentivise them to co-operate with the CMA. That participatory approach is critical to the success of the new regime and one of the ways in which it is considered better than the European model. It is also worth knowing that the Digital Markets Act—in other words, the European Commission’s version of this regime—includes a provision to avoid conflict between national courts and Commission rulings.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken in this debate. I have added my name to Amendment 85 in the name of the noble Lord, Lord Clement-Jones. He raised an important point about the loss of exemplary damages which could otherwise be awarded for those involved in collective proceedings. In the cases that will be considered under these regulations there may be thousands of small businesses harmed, but only those which prove that harm was done and losses were incurred would be compensated, as the Bill stands. However, it may well be that smaller players cannot afford to take a case, so there needs to be an overarching remedy to ensure compliance with the law, otherwise the defendant may profit from their own wrongdoing. The noble Lord gave some powerful examples to illustrate that. An amendment along these lines should be considered to incentivise the defendants to uphold the rule of law.
The amendment in the name of the noble Lord, Lord Holmes, raises an interesting challenge about the oversight of claims. We agree that it is important that the regulators continue to have a say on the merits of private cases that go to court. They can already intervene in private actions by submitting written observations to the tribunal. The tribunal itself has a role in which it grants a collective proceedings order before a case can go ahead. However, in recent years there has been an increase in the number of private actions brought to court, often by litigation funding firms. These tend to focus on cases where the funders anticipate the largest returns.
In the meantime, the CMA is still trying to focus its public enforcement on cases that will generate the greatest strategic significance and the widest benefit, but its resources are being stretched as the scope of its enforcement power widens. We have to find the right balance between public and private actions to achieve the widest public benefit. We need to take into account the capacity of the Competition Appeal Tribunal to deal with the increased burden of cases. The noble Baroness, Lady Stowell, pointed out that there is a solution to this: the model that Ofcom already uses, which could be used in this case. There may be other solutions, but we need to find a way forward to get this balance right.
At a recent conference Sarah Cardell, the CEO of the CMA, said that the CMA sees public and private enforcement as two complementary parts of a single overall regime. We agree with this approach and, while we are sympathetic to the proposal of the noble Lord, Lord Holmes, we would like to consider the wider functioning of the CAT first.
This leads to the amendments of the noble Lord, Lord Tyrie, who raised significant issues about the workings of the Competition Appeal Tribunal. He obviously has first-hand knowledge of this issue, and I listened carefully to what he said. He shared with us a very deep understanding of the workings of the CAT and the challenges that it faces but, the more that I listened to him, the more that I felt that trying to resolve this with two amendments to this Bill did not seem the right way forward. It felt that this was a bigger issue for another day. Just as the noble Baroness, Lady Stowell, made a fantastic exposition about the issues at stake, I did not want to put my name to those amendments, as I felt that they were too superficial to address the issues that the noble Lord, Lord Tyrie, raised.
Having said that, it might be that a fundamental review of the CAT is necessary or that another way could be found to address this in the Bill. I hope that the Minister listened carefully to the noble Lord’s concern and can offer a way to progress the issues raised by him and others in the debate to ensure that they are addressed. I therefore look forward to the Minister’s response.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
I thank noble Lords for their thoughtful amendments and considered remarks during this debate. I start by speaking to Amendments 85, 86 and 87 tabled by the noble Lord, Lord Clement-Jones, which would enable the CAT to award exemplary damages in collective proceedings.
Clause 125 amends the Competition Act 1998 to allow the courts and the Competition Appeal Tribunal to award exemplary damages in private competition claims involving individual claimants, but not in collective proceedings before it. The competition collective proceedings regime was introduced in 2015. This is an important mechanism allowing redress to be sought on behalf of large groups of customers. The bar on the availability of exemplary damages in collective actions was one of the many safeguards put in place when the Consumer Rights Act 2015 was enacted, to ensure a balanced system of collective actions before the CAT which will not lead to a culture of undue litigation and US-style class actions. These safeguards ensure that defendants are protected by avoiding vexatious and unmeritorious claims—or fishing expeditions—while allowing legitimate claims for redress to proceed, without defendants feeling pressurised to settle, despite the likelihood of a strong defence.
While Clause 125 reverses the complete ban on exemplary damages introduced by an EU directive in 2017, keeping the bar in place for collective proceedings before the Competition Appeal Tribunal remains appropriate for the same reasons that it was put in place when the regime was introduced in 2015. I thank the noble Lord and the noble Baroness, Lady Jones, for Amendment 85 and I hope that he feels reassured and comfortable in withdrawing it.
I turn to Amendment 106 on private enforcement, tabled by my noble friend Lord Holmes of Richmond. I thank him and my noble friend Lady Stowell for their contributions. This amendment would require complainants in private enforcement claims to obtain prior approval from the CMA to bring their cases in front of the CAT or High Court.
The ability to bring private enforcement claims through the CAT is an important mechanism for consumers to seek redress. This amendment would add an extra hurdle for claimants and might therefore reduce their ability to access redress and potentially limit their access to justice. Adopting an Ofcom-style approach would provide a very broad power to the CMA, which would unnecessarily add to the existing range of functions that it currently discharges. While this approach may exist in other jurisdictions, the complexity and size of competition private actions and the well-established jurisprudence of the CAT mean that it would not be appropriate in this context.
The CAT already has a specialised, well-established legal framework through which it manages cases, including certifying collective actions. This amendment would risk overcomplicating the existing framework and unnecessarily bring the CMA into highly complex and contentious litigation. I hope that my remarks have helped to address the concerns of my noble friend Lord Holmes of Richmond and that, as a consequence, he does not press his amendment.
I move now to the review of the CAT and the two amendments put down by the noble Lord, Lord Tyrie. Amendment 107A would require the Secretary of State to conduct and publish a review of the performance, governance and operation of the CAT. I thank him for his amendment and for the expertise and wisdom he brings to our debates. The CAT plays an important role in the UK’s competition regime and in providing avenues for consumers collectively to seek redress. It is right that we consider how the CAT operates to ensure that it effectively fulfils these important roles.
The CAT is already subject to significant review and scrutiny. Under the Competition Appeal Tribunal Rules 2015, which govern proceedings in front of the tribunal, the Secretary of State has a duty to review the CAT rules, including making an assessment of how the rules meet the objectives they are intended to achieve. Indeed, the Competition Appeal Tribunal Rules 2015 are currently under review following a post-implementation review in 2021. This process will ensure that the CAT continues to deliver first-class justice expeditiously.
The CAT is also in scope for the public bodies review programme, which assesses the governance, accountability, efficacy and efficiency of arm’s-length bodies. Moreover, the CAT is already subject to a variety of forms of scrutiny by Parliament and the Government. This includes laying its annual report and accounts before Parliament, ministerial appointments to the Competition Service board and regular ministerial oversight as part of departmental sponsorship arrangements.
Given the crucial role it plays in the competition system, it is right that the CAT is sponsored by the Department for Business and Trade. However, the DBT recognises the important commonalities with tribunals under the purview of the Ministry of Justice, and the CAT president and chairman are appointed by the Lord Chancellor through the judicial appointments process. We also continue to encourage the CAT to engage with its counterparts in other tribunals to continue to develop best operational practice. The scrutiny currently in place ensures that it continues to function effectively and deliver a world-class competition regime. For these reasons, I hope that the noble Lord will not move this amendment.
The noble Lord’s second amendment, Amendment 128ZA, concerns
“Economic interests of consumers duty”.
It would place a new duty on the CMA and the CAT when carrying out their functions to ensure that the economic interests of consumers and their protection from detriment are paramount. This amendment also places a duty of expedition on the CAT. The Government considered this issue when the noble Lord, Lord Tyrie, proposed such a duty in his recommendations to the BEIS Secretary of State in 2019 and concluded that this would not lead to improved consumer outcomes. There was no compelling evidence that an overarching consumer duty would allow the CMA to do anything it could not already achieve within its existing remit or that it would increase enforcement levels.
I thank the noble Lord for raising this important issue. We are in full agreement on the importance of protecting consumers, and the Bill stands testament to the Government’s commitment. The Bill will support consumers through new and improved rights, as well as enhanced powers for the CMA and the civil courts to enforce these rights. New measures will protect consumers’ hard-earned cash, boosting consumers’ rights so they have confidence in businesses and markets. However, we do not believe that placing a further statutory duty on the CMA is the right approach.
The CMA’s existing primary duty is to promote competition for the benefit of consumers. This places a clear, unambiguous and paramount duty on the CMA to deliver with consumer benefit as the end goal. We can see the impact of this work: in the three years to 2021-22, the CMA’s competition work delivered £2.1 billion in average annual consumer savings. This is important to the Government, and we have given the CMA a strategic steer to prioritise action in its discretionary activities that addresses cost of living challenges to deliver better value for businesses and individual consumers.
Lord Clement-Jones (LD)
My Lords, I thank the Minister for his comprehensive reply. Nevertheless, I found it extremely disappointing in respect of my Amendments 85, 86 and 87. There was clearly a period between 2015 and 2017 when exemplary damages were available in collective proceedings. He did not adduce any evidence that an undue litigation culture, as he described it, suddenly arose in that two-year period. His use of pejorative language about an undue litigation culture is pretty unhelpful when we are talking about groups of consumers. Other than saying that this would all lead to an undue litigation culture, he really did not deal with the substance of the reasons for having exemplary damages in these cases: to disincentivise the big tech companies simply carrying on, knowing that they were in breach, with impunity. He did not address that at all.
I do not need to tackle the other amendments as we probably need to move on fairly swiftly, but the Minister was more on point when he talked about Amendment 106, because there is a difficulty with it. We should be more sympathetic to Amendment 107A from the noble Lord, Lord Tyrie, but I agree with him that it concerns a big issue. It would be extremely helpful not just to read Hansard but to bring together some of the information about the reviews of the CAT that have been conducted. I am afraid that one of the phrases we have to take away from today is “the CAT has strayed” —any innocent observer passing by would not know what the hell we were talking about; indeed, I think the other phrase was “hypertrophic”. Anyway, we live and learn throughout this but we need reassurance about the fact that the CAT is under review, that its rules are being changed and that it is fit for purpose. The noble Lord brought that up exactly.
I was also not entirely convinced about where the accountabilities are between the Lord Chancellor, the Ministry of Justice and the Department for Business and Trade. There is more to be discussed there.
Finally, I know that the noble Lord, Lord Tyrie, is a big fan of consistency, but I am in favour of the status quo here: I do not agree with his amendment. I liked the Minister’s “unintended consequences” phrase because, if we took this seriously, in terms of paramount interests of consumers, we could be talking about short-term interests of consumers; that could be used by those who want to predatory price—to offer low prices for a while and eliminate competition, only to raise the prices later. We have seen behaviour like that. It is a favourite game of, especially, the big players, to exclude competitors only to re-emerge and raise prices. There are dangers in this “paramount” language, but the Minister has answered that question. In the meantime, I beg leave to withdraw my amendment.
Lord Sandhurst
“(1A) In section 47C of the Competition Act 1998 (collective proceedings: damages and costs), after subsection (5) insert—“(5A) An agreement under which—(a) the funder agrees to provide financial services or assistance in relation to—(i) the provision of advocacy services or litigation services, or(ii) costs that the funded party is ordered by a court or tribunal or in arbitration proceedings, or is otherwise legally obliged, to pay to any other party in relation to litigation; and(b) the recipient of financial services or assistance agrees to make a payment to the funder in specified circumstancesis not a damages-based agreement.”(1B) Where, before the passing of this Act, a person has entered into an agreement covered by section 47C(5A) of the Competition Act (inserted by this subsection (1A)), that agreement is not rendered unenforceable (or deemed to have been rendered unenforceable) by virtue of section 58AA(2) of the Courts and Legal Services Act 1990 and the amendment made by subsection (3) of that section is treated as having always had effect.”Member's explanatory statement
In response to the decision of the Supreme Court judgment in R (PACCAR Inc) v Competition Tribunal [2023] UKSC to ensure that third party litigation funding agreements in respect of proceedings in the Competition Tribunal will (with retrospective effect) not be unenforceable in competition and consumer law, so such agreements will be treated as never having been subject to restriction.
Lord Sandhurst (Con)
My Lords, my Amendments 88 and 89 are of real practical importance to injured citizens, to consumers and to businesses which have to fight large entities to recover just compensation. Clause 126 was introduced at a relatively late stage in the other place to overturn, with retrospective effect, at least some, albeit only a small part, of the damage done by a decision of the Supreme Court in July of last year in cartel litigation known colloquially as PACCAR. Clause 126 is inadequate: it does nothing like enough to overturn the damage which has been done. That decision rendered unenforceable third-party litigation funding agreements entered into by claimants with third-party funders who underwrite litigation. It did so in a way that surprised most who practise in this area, including many judges, including in the Court of Appeal.
The Supreme Court in PACCAR held—this is the important point—that if a litigation funding agreement is to be enforceable by the funder, it must, in terms, comply with the damages-based agreement regulations. Those regulations were not designed for and do not fit litigation funding agreements. There are no, or few, litigation funding agreements drafted to meet the regulations, so they are not valid, and it is difficult to draft one that would be valid. That has serious ramifications for existing and future claims, because there is no civil legal aid. The court’s decision means—this is very apposite—that the Horizon sub-postmasters would not have obtained funding: it would have been unlawful.
There are other examples: equal pay cases, including a current third-party funded case seeking to enforce the equal pay rights of over 100,000 women; SMEs, such as those affected by unlawful interchange fees imposed by Visa and Mastercard; the PACCAR case, which, I understand, involves 17,000 often small hauliers seeking compensation in truck cartel litigation for over- charging—excessive pricing—by the truck manufacturers; the Volkswagen NOx emissions group litigation, which secured nearly €200 million compensation for United Kingdom consumers and which began outside the CAT; sports injury claims, such as those in the High Court by 300 rugby players seeking compensation for the impact of head trauma; and financial mis-selling claims, such as mortgage and personal pension mis-selling or pension transfer claims and secret commissions claims. All these are now without funding.
I think we all believe that our citizens having access to justice is an essential component of a democratic society. It is important to get redress for injury and to believe that you at least have a chance of going to court to seek redress. You may lose, in which case you pay the costs. In the case of funders, they have to pay the costs for the cases they underwrite which fail. An essential element of encouraging competition and a free market is to ensure that consumers and SMEs have effective access to challenge and obtain redress from cartels and others that abuse dominant positions. Both require access to justice, which must be effective—particularly, but not always, in the CAT.
There are two types of representative action with the CAT: so-called opt-out and opt-in. Opt-out cases account for the vast majority and include high-profile examples such as the MasterCard and PlayStation cases. I understand that there is one example of an opt-in case currently in the CAT, which is the PACCAR litigation involving the hauliers. Although the current Clause 126 will put matters right for opt-out cases only, it will not help the opt-in cases in the CAT, nor will it address conventional bi-party litigation in the CAT, where a small company has to go to a funder to get support to bring action for redress against abuse by a large multinational. Worse still, as I outlined earlier, outside the CAT—that is, in the High Court—the current Clause 126 will be of no effect: it will do nothing at all, so many claimants will have no effective access to litigation funding. Group litigation is their only practicable means. I respectfully suggest that this is not an undue litigation culture, and I hope we will not hear that terminology in this context. The key issue is that the PACCAR ruling affects litigation funding in all courts, not just the CAT, and it is claimants’ only means of bringing such cases.
My Amendment 88 would restore legitimacy in the CAT to funding arrangements in opt-in proceedings and two-party actions, and Amendment 89 would restore legitimacy for consumer and competition cases outside the CAT, but only in those categories. It will not do anything, for example, for the sub-postmasters, rugby players, equal pay cases and many other types of legitimate group action. There will be no access to justice for them as matters stand. They remain in the cold because my much wider original amendment was ruled out of scope—I do not criticise the clerks. I anticipate that the noble and learned Lord, Lord Thomas of Cwmgiedd, will address noble Lords on that.
Finally, Amendment 89A by the noble Lord, Lord Hodgson, is sensible—I see no problem with regulation—but there is not much to regulate at the moment. We have to go further down the road and start with getting funding arrangements back on track. Regulation can follow swiftly. People have looked at this; I think a working party is looking at it at the moment.
I understand that the noble Lord, Lord Arbuthnot, who is here, supports my amendments but will not waste our time, if that is the right word—I mean no disrespect—by repeating what I have had to say. I beg to move.
Lord Thomas of Cwmgiedd (CB)
I will follow what the noble Lord, Lord Sandhurst, said and not waste any time repeating the arguments he so eloquently put. I agree completely with his analysis of the mistaken decision of the Supreme Court in PACCAR, and with his explanation of why it is so disastrous for access to justice. I also agree with his analysis of why it is necessary to put forward the two amendments in his name, which I have had the privilege to co-sign, but I will go further and deal with the cases that cannot be covered.
I will underline the Horizon litigation. I do not think an awful lot of people really appreciate that the Horizon scandal, and the miscarriage of justice that occurred, would never have been uncovered if there had not been litigation funding to support Mr Bates and others when they brought their complicated action against a very wealthy body. In Mr Bates’s recent article in the Financial Times, noble Lords will see, from the perspective of someone seeking access to justice, why litigation funding is important. In it, he said:
“Combined with the strength and stubborn defiance of my colleagues, such financing allowed us to take our case from Fenny Compton Village Hall to the High Court, securing justice, exposing the truth and clearing our names and reputations”.
It is essential that we put ourselves in a position where, for the future, someone in his position—as well as, as the noble Lord, Lord Sandhurst, said, infected blood claims, the equal pay claims and all claims by SMEs and others, such as rugby players—falls not within the scope of these amendments but rather outside it.
We sought to put forward another amendment to amend Section 58AA(3)(a) of the Courts and Legal Services Act 1990, on “Damages-based agreements”. We wanted to add a paragraph that would have read:
“An agreement under which … the funder agrees to provide financial services or assistance in relation to … the provision of advocacy services or litigation services, or … costs that the funded party is ordered by a court or tribunal or in arbitration proceedings, or is otherwise legally obliged, to pay to any other party in relation to litigation; and … the recipient of financial services or assistance agrees to make a payment to the funder in specified circumstances is not a damages-based agreement”.
This would have contained a further provision dealing with the position that that was to be treated as “always having had effect”. As the noble Lord, Lord Sandhurst, said, this was ruled out of scope. I have written to say that, if this matter cannot be resolved, I intend presently to have recourse to the procedure set out in paragraph 8.67 of the Companion to the Standing Orders and ask the House to consider the issue of scope. I gather that this is a rare procedure—with my inexperience, I have never come across it—so why am I prepared to take us down this road? There are a number of reasons, but I will give three.
First, access to justice is a fundamental right, and although I would love us all to have legal aid and bring back the position that used to exist, the pockets of the Ministry of Justice are somewhat empty and it does not have the funds with which to restore that, nor can I see any incoming Government of whatever complexion having that funding either. Secondly, it simply cannot be right, because Magna Carta says we should give justice to all people, to say, “We will provide access to justice to those who fall within the definition of consumer or who can bring their claims before the CAT, but the rest of you, no”. Thirdly, there is an international aspect and, in touching on this, it may be helpful to the amendment put forward by the noble Lord, Lord Hodgson.
I declare an interest in that I sit on the advisory board to a group at the European Law Institute which is looking at the whole question of third-party funding. It is looking at it simply because this is a worldwide issue. It is a worldwide market. The concern I had in relation to making this change broader than in the current amendments is that I want our citizens to be able to benefit from that market and not to be excluded. It is quite clear that the market is enormous. The working group of the European Law Institute, which is chaired, coincidentally, by Mrs Justice Cockerill, who was Judge in Charge of the Commercial Court until last year, contains a number of academics and practitioners drawn from across the world, including America, where this is a problem, and a judge from Australia. It is being taken forward because there is felt to be a need to have a clear statement of principles because this is now such a large industry. It is really a matter for the noble Lord, Lord Hodgson, to consider further, but the kind of work being done—it is anticipated that this body will report towards the end of this year or the beginning of next—may provide principles that either can be used on a voluntary self-regulating basis or will enable regulators or legislators to put in place principles that should apply. This is a worldwide industry and I do not wish people in this country to be excluded from it.
Although I do not wish to invoke this procedure today, I very much hope that the department, together with the Ministry of Justice, will look at this issue and see how we can bring about access to justice for everyone, not just a few, because a technical point of this kind is totally beyond the comprehension of any member of the British public. In this House we should not act in such a way as not to give equal justice and access to that justice to all people.
Lord Hodgson of Astley Abbotts (Con)
My Lords, I have Amendment 89A in this group. It is self-explanatory, in that it would require the Government to undertake a review of the operations of the third-party litigation funding industry along the lines that the noble and learned Lord, Lord Thomas, has just mentioned. I am afraid that at present it is a rather confused, not to say murky, area of activity in many aspects.
I shall come to that amendment in a moment, but before doing so I shall say a few tentative words about my noble friend Lord Sandhurst’s Amendments 88 and 89. I emphasise “tentative” because I am not a lawyer and this is clearly a highly technical legal area. I stand second to nobody in wishing to see access to justice for people, but I therefore want to proceed with caution, in particular having seen the legal and parliamentary talent who have put their names to these two amendments.
I mentioned my concerns to my noble friend Lord Sandhurst, and I mentioned them to the noble and learned Lord, Lord Thomas, en route to the Division Lobby the other night. I do not oppose the amendments outright because I support increased access to justice, but I am not yet sure that we would be wise to bring amendments in quickly without further consultation. Much more importantly, we should think carefully about widening class actions in an industry that is already pretty uncontrolled, totally unregulated and unaccountable. My concerns about Amendments 88 and 89 are about not so much access to justice but the sort of justice we may be accessing. We would need to consider those issues further.
I will leave those amendments there and turn to my Amendment 89A, which concerns an area that I have been following for some time, notably in a debate in your Lordships’ House on 2 March 2017, when I was grateful to have the support of my noble friend Lord Faulks and, indeed, of the noble Lord, Lord Stevenson of Balmacara, who spoke for Her Majesty’s loyal Opposition, as they then were. To make the record clear, I had to declare an interest in that debate that I was chairman of a company that provided data to companies engaged in third-party litigation funding. It provided data but did not undertake the actions. My term of office has now come to an end so I no longer have an interest to declare. That is shown on the register but I want to get it on the record.
What were we concerned about those seven years ago? The first question was: how are the funders rewarded? What is the waterfall, as it is known in the trade? For example, can the funders be reimbursed for all their expenses before the claimants receive a penny, or are 100% of expenses deducted from the sum awarded before arriving at the way that sum is split? For example, if there was a 75:25 split, with the claimants receiving 75% and the funders 25%, you might say that is okay, but if the costs of the case are 40%—they are often high—then they actually get 75% of 60%, so 45% not 75%. Those sorts of things are not made clear. We have referred to the Post Office computer system and the scandal about it. It is alleged that, of the first £58 million awarded, £46 million of that went to the funders—80%. I am not saying that is wrong—it is access to justice and people got £30 million that they would not have got—but I am not sure that would have received great public approval outside in the wider world.
Secondly, who controls the case? A lot of these cases are put into a pool and a lump of money is raised from them—£200 million to £500 million, and more. The people who run the funds like to be able to present the whole thing finished as quickly as possible. Let us suppose I am running a fund with 10 cases in it. Nine have finished and I have a pretty good record. I will press to get the 10th finished quickly because I can then turn to my investors and say, “I’ve got the whole thing wrapped up and you’ve got this return. Let’s do it again for a bigger sum of money”. Who is watching to ensure that the plaintiffs in that case are being looked after and are not being rushed to settle because the funder says, “I’m going to settle, whatever the rights and wrongs of the likely payout may be”?
Thirdly, there is the question of exposure to costs. If a case is unsuccessful, can there ever be a situation where plaintiffs could be exposed to costs in the event of the funders walking away? I think my noble friend Lord Sandhurst said that could not happen. He is a lawyer and I am not, but there is a concern that the plaintiffs could be left holding a baby without knowing they are holding a baby—without knowing how much.
Things have grown at scale. We now have a situation in which the number of cases has grown from about 46 million in 2016 to 340 million today. That means that every Member of your Lordships’ House will, knowingly or unknowingly, be part of an average five different class actions today.
Lord Fox (LD)
My Lords, I know the Minister is a big fan of innovation, so the introduction of some innovative procedure by the noble and learned Lord, Lord Thomas, will no doubt have filled him with delight. We all look forward to seeing how that wheels out.
It is a pleasure to follow the noble Lord, Lord Hodgson, who seemed, if he does not mind me saying so, to list second-order problems. How much split of the award you get depends on whether you can bring the case in the first place. If there is no case, there is no 50:50 or 75:25. Earlier, as memory serves, we talked about individual litigants and their ability to form groups, and the Government were set against that process. Here, we are again talking about a system that avoids or stops people getting together to fight the fight. We should remember clearly the power balance that we are talking about here. In the digital field, I used the example of the top five platforms. Their revenue is on the level of that of nation states. In order to fight battles with people, companies and organisations such as that, there needs to be some ability to come together and find the funding.
I am not a lawyer, but I am persuaded by the arguments advanced by the noble Lord, Lord Sandhurst, and the noble and learned Lord, Lord Thomas. When it comes to what the noble Lord, Lord Hodgson, said, there are of course code of conduct issues; generally speaking, when I have been involved in legislation, things such as codes of conduct arrive in secondary legislation, not as part of the primary legislation. I hope that he can join in debating the principle. He is right that the details of the principle are important, but I suggest that they are a second-order issue. With that in mind, what the noble Lord, Lord Hodgson, said, combined with his amendment, looks a little like long grass—
“Make me pure, Lord, but not yet”.
We need to have the debate that will be initiated by the noble and learned Lord, and others, before we start worrying about the industry code of conduct that comes behind it.
Lord Bassam of Brighton (Lab)
My Lords, the Committee should be enormously grateful to the noble Lords, Lord Sandhurst, Lord Arbuthnot and Lord Carlile, and to the noble and learned Lord, Lord Thomas, for bringing forward this group of amendments dealing with litigation costs in group actions. There is real and practical importance for those who will potentially benefit from this when seeking redress. The noble Lords have persuasively argued the case for the amendments in their names. Indeed, the noble Lord, Lord Sandhurst, gave notice that he would bring forward such an amendment with others at Second Reading. He has been good to his word.
At the time, the Minister, the noble Viscount, Lord Camrose, argued that the Government had,
“urgently addressed the potential implications of the judgment”,—[Official Report, 5/12/23; col. GC 1452.]
in the PACCAR case, which had then recently been decided by the Supreme Court. However, the Government’s solution to the problem is, as we have heard from noble Lords this evening, limited to addressing the issue for some claims in the Competition Appeal Tribunal, leaving a big problem for litigation funding agreements—LFAs—used in other proceedings. We note the Government’s view that the Bill is not the right place to deal with the wider issues, but, as currently drafted, this will create a two-tier system in the UK, whereby claimants would have different rights and different access to financial backing, and therefore different legal support, depending on the court in which they pursued their claims. Having listened to noble Lords, that cannot be right if we are to ensure equal access to justice. As the noble and learned Lord, Lord Thomas, argued, the proposed amendment to Clause 126 goes some way to addressing the issue, by widening the scope of agreements that will be placed in the pre-PACCAR position, but it does not solve the problem for cases outside the CAT.
Of course, back in early December, few of us understood the true import of LFAs, but that was before the TV drama, “Mr Bates vs The Post Office”. Now, of course, we are far more conversant with them, and so are the public. Without such arrangements, the sub-postmasters and sub-postmistresses would not have been able to challenge the Post Office in the courts, and that cannot be right.
Currently, for an LFA to be enforceable by the funder for opt-in and opt-out cases, it must comply with the Damages-Based Agreements Regulations 2013. Those regulations were introduced to deal with contingent fee agreements between claimants and lawyers, not funding arrangements with third-party funders. As I have already said, Clause 126 deals with only CAT opt- out cases. I am persuaded that we need a comprehensive solution to the problem.
We understand, as the noble and learned Lord, Lord Thomas, explained, that the noble Lords who have tabled these amendments were unable to bring forward a more comprehensive solution to the PACCAR ruling at this stage of the Bill. I was very interested in what he said because he referenced the Standing Orders of the House and the ability of your Lordships’ House to determine a Bill’s scope. It is, as he said, done rarely but we certainly did it once or possibly twice in my time as Opposition Chief Whip, to the benefit of the House. On those occasions, we sought counsel’s legal opinion, which we posted in the Library of the House. I do not think that we need counsel’s opinion on this case, having a former Lord Chief Justice and other eminent lawyers making the argument.
Assuming that the Minister is unable to offer a solution today, I assure the noble Lords behind this amendment that we will willingly support amendments brought forward to resolve the issue. Since the “Mr Bates vs The Post Office” drama, government Ministers have suddenly woken up to the salience of the issue. There is surely enough goodwill in the political system for colleagues to agree a way forward on this. Legislative time is at a premium, as the Minister will no doubt tell us, and we see this as an opportunity not to be missed and to be used.
I turn to the amendment in the name of the noble Lord, Lord Hodgson, on which he gave a very brilliant exposition. I tried to follow most of it, but I can see the force of his argument. His amendment is eminently supportable. As the noble Lord, Lord Fox, points out, it has the upside for the Government of kicking the issue into the long grass, but there is clearly a need for some review at some stage. However, I hope that the amendment in the name of the noble Lord, Lord Hodgson, becomes otiose if we can see a way forward with the route that has been pointed out by the noble Lord, Lord Sandhurst, and the noble and learned Lord, Lord Thomas, this afternoon. We should be very grateful for those noble Lords, and it is nice to know that, in the noble Lord, Lord Arbuthnot, we have a star of the silver screen in our midst. I am sorry that he is not here to hear the arguments put to his benefit. With that, I look forward to the Minister’s response.
Lord Offord of Garvel (Con)
I turn first to litigation funding and Amendments 88 and 89. I thank my noble friend Lord Sandhurst and the noble and learned Lord, Lord Thomas of Cwmgiedd, for their passionate and eloquent contributions on this important issue, both in this Room and outside.
On Amendments 88 and 89, tabled by my noble friend Lord Sandhurst, I thank him for tabling these two amendments and for giving Members the opportunity to discuss this important issue. It has offered the unique opportunity to hear from a number of noble Lords with unparalleled expertise on the UK’s legal system. As my noble friend outlined, these amendments would reverse the effect of the Supreme Court judgment in PACCAR for competition and consumer claims. This would remove the requirement for litigation finance agreements in these cases to comply with the damages-based agreements regulations.
To be clear, it is government policy to return to the pre-PACCAR position at the earliest legislative opportunity. We are committed to delivering that reversal for all the reasons that noble Lords rightly highlighted, there perhaps being no better example of the benefit of litigation funding than the case of the postmasters impacted by the Horizon scandal. That is why the Government acted within weeks of the Supreme Court’s judgment to mitigate its impact on live collective actions before the CAT.
I and my ministerial colleagues at the Ministry of Justice have been pleased to receive my noble friend’s representations regarding his amendments and the Government’s position on PACCAR. I recognise the efforts that he and colleagues have made, working within the scope of the Bill, to return proceedings in front of the CAT to their pre-PACCAR condition. However, any action taken through the Bill must be aligned with the Government’s intention to return to the pre-PACCAR position across the whole of the justice system, as publicly set out by the Lord Chancellor. I assure noble Lords that we and our colleagues in the Ministry of Justice are examining this matter urgently and considering the best possible way to achieve this objective. In the meantime, I ask my noble friend not to press his amendments, with the assurance that the Government will continue to work closely with him, ahead of Report, to identify opportunities to address his laudable concerns, within the scope of the Bill or elsewhere.
I turn to Amendment 89A on a review of the litigation funding industry, I thank my noble friend Lord Hodgson of Astley Abbotts for tabling this amendment and for his contribution to the debate in this Committee on this important issue. My noble friend raises some important considerations about the litigation funding sector. Ensuring that access to justice is maintained and properly managed is a critical issue, and I welcome this debate.
As my noble friend outlined, this amendment would require the Secretary of State to conduct a review of the application of litigation funding arrangements to competition and consumer law matters. My noble friend’s amendment sets out the factors that he believes such a review should consider. To be clear, although there has been much debate about litigation funding during the passage of the Bill, responsibility for litigation funding remains a matter for the Ministry of Justice. Although I appreciate the limited remit of this amendment, it is right that any review considers the application of litigation funding across the entire justice system.
On competition matters, I note that the CAT rules and guide to proceedings provide for significant scrutiny of funding agreements in collective proceedings, which are looked at as part of the tribunal’s consideration of whether it is just and reasonable for a person to act as a class representative. The CAT has also extensively considered the application of these rules, including in the light of the PACCAR ruling. Although this is not a matter for my department, I assure my noble friend that the Government are already considering options for a wider review of the litigation funding market and its regulation. The Civil Justice Council may be asked to undertake such a review, given the need to ensure access to justice and the attractiveness of the jurisdiction. Given its independence, it may be unhelpful to specify the scope and timing of such a review at this stage. However, I expect colleagues from the justice department to update this House once that review is agreed. To that end, I thank my noble friend Lord Hodgson and hope that he is sufficiently reassured not to move the amendment.
Lord Sandhurst (Con)
My Lords, I am very grateful for the words of my noble friend the Minister. I should perhaps say this in respect of what my noble friend Lord Hodgson had to say: I accepted at the beginning that it is time now for regulation. Funding has been around since at least 2003 and I know, because I acted as leading counsel—I have no interest now—for funders in the case of Arkin. It was, in effect, a failed competition case, and the question was whether it was lawful and so on. To cut a long story short, the Court of Appeal said that the agreement was perfectly lawful; the case having been lost, it ordered the funders to pay the defendant’s costs up to but not exceeding the amount that they had underwritten—a cap, known as the Arkin cap. It is not always followed, but that is the general rule. It may well be that it is time for a review.
I remind the Committee of something that I drew attention to in my Second Reading speech, namely the statement by the then Parliamentary Under-Secretary of State, my noble friend Lady Neville-Rolfe, in Committee on the Consumer Rights Bill on 3 November 2014. In respect of legal litigation funding agreements, as opposed to damages-based agreements, she said that
“there is a need for claimants to have the option of accessing third-party funding so as to allow those who do not have a large reserve of funds or those who cannot persuade a law firm to act pro bono to be able to bring a collective action case in order to ensure redress for consumers. Blocking access to such funding would result in a collective actions regime that is less effective … Restricting finance could also create a regime which was only accessible to large businesses. This would weaken private enforcement in competition law, which is of course not the Government’s wish or intention”.—[Official Report, 3/11/14; col. GC 583.]
I think that is enough said, in the light of my noble friend the Minister’s observations about my noble friend’s Amendment 89A. I am very grateful for what has been said by the Minister about my amendments. I say only this: something will have to be delivered by the time we get to Report, or it will be a very interesting day out in the main Chamber. I beg leave to withdraw my amendment.
Lord Offord of Garvel
“(4) In subsection (7), after “(3)” insert “, (3A)”.8A (1) Section 40 (section 39: supplementary) is amended as follows.(2) In subsection (4), after “section 39(3)” insert “or (3A)”.(3) In subsection (5), before “or (4)” insert “, (3A)”.”Member's explanatory statement
This amendment would amend sections 39 and 40 of the Enterprise Act 2002 so that extensions under the new subsection (3A) of section 39 (inserted by paragraph 8(3) of Schedule 5 to the Bill) are treated in the same way as extensions under subsection (3) of that section.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would make it clear that a period extended under any subsection of section 39 of the Enterprise Act 2002 can also be extended under any other subsection of that section (rather than just specified subsections).
Lord Offord of Garvel
Member’s explanatory statement
This amendment is for consistency with my amendment to Clause 130.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would clarify that references in 40A of the Competition Act 1998, as amended by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
Member’s explanatory statement
This amendment would clarify that references in section 111 of the Enterprise Act 2002, as amended by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
“24A In section 120 (review of decisions under Part 3), in subsection (2), in paragraph (a), for “(3)” substitute “(1A)”.”Member’s explanatory statement
This amendment would amend the reference in section 120(2)(a) of the Enterprise Act 2002 to section 110(3) of that Act so that instead refers to section 110(1A) of that Act (which this Bill is replacing it with).
Member’s explanatory statement
This amendment would clarify that references in section 174D of the Enterprise Act 2002, as amended by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would clarify that references in new section 35B of the Competition Act 1998, inserted by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
Member’s explanatory statement
This amendment would clarify that references in new section 94AB of the Enterprise Act 2002, inserted by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
Member’s explanatory statement
This amendment would clarify that references in new section 94AB of the Enterprise Act 2002, inserted by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
“12A In section 120 (review of decisions under Part 3), in subsection (2), in paragraph (a), for “94A(1)” substitute “94AA(1)”.”Member’s explanatory statement
This amendment would amend the reference in section 120(2)(a) of the Enterprise Act 2002 to section 94A(1) of that Act so that instead refers to section 94AA(1) of that Act (which this Bill is replacing it with).
Member’s explanatory statement
This amendment would clarify that references in new section 167B of the Enterprise Act 2002, inserted by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
“18 In section 179 (review of decisions under Part 4), in subsection (2), in paragraph (a), after “section” insert “167A(1) or”.”Member’s explanatory statement
This amendment would provide that decisions under new section 167A(1) of the Enterprise Act 2002 are not “decisions” for the purposes of section 179 of that Act (because they would instead be able to be appealed under section 114 of that Act, as applied by new section 167B(6) of that Act).
Lord Offord of Garvel
“(za) omit “Regulations made by the Secretary of State under section 68A or”;”Member’s explanatory statement
This amendment, and my other amendment to this Schedule, are to take account of an amendment made by the Energy Act 2023 to section 124(5) of the Enterprise Act 2002 (which this Schedule also amends).
Member’s explanatory statement
See the explanatory statement to my other amendment to this Schedule.
““consumer” means—(a) a person (“P”) acting for purposes that are wholly or mainly outside P’s business, or(b) a person acting in the name of, or on behalf of, P in relation to P’s purposes;”Member’s explanatory statement
This amendment would expand the definition of a consumer to make it explicit that it includes third parties working on behalf of a consumer, as is the case for traders.
Lord Fox (LD)
My Lords, I congratulate the Deputy Chairman of Committees, who once again did a magnificent job. I speak on behalf of my noble friend Lord Clement-Jones to move Amendment 108 and speak to all the other amendments in this group that are in his name—seven in total. Talk has rightly centred on the CMA’s role in standing up for consumers. This whole group focuses on an important area where consumers are in danger of not getting the best possible treatment as a result of the flexing of market power. The amendments are designed to probe the competitive relationship between providers of a service and legitimate third-party agents who sell those services on.
Online intermediaries in marketplaces can serve a valuable role, helping consumers exercise choice and explore a wider range of options for their needs, ultimately supporting competition and innovation, as long as this is done in a transparent manner. Perhaps the most obvious arena for this sort of activity is the travel industry: flights and hotel bookings. There is of course a natural struggle between the provider of services—the airline, for example—online travel agencies or OTAs, and the third player, which is the platform. This is usually Google.
The question that this group poses is: what is the CMA’s role in the competition between these parts of the industry? It also asks: how is consumer choice maintained or enhanced in that activity? My noble friend’s amendments are designed either to explore the need to protect consumers who make bookings through a third-party agent, or to ban activity that could mislead consumers about the merits of booking through a third-party agent. There are of course other elements to these relationships, and I hope this debate can flesh those out as well.
There is certainly evidence that some low-cost airlines are extensively using their market power to advance their own commercial gain while potentially eroding protection and choice and inflating prices for millions of UK holidaymakers. For example, since December 2023, most OTAs have been prevented by Ryanair from booking flights on behalf of consumers. This rendered the OTAs unable to fulfil holidays that include a Ryanair flight. I understand that a consequence of this is that it is almost impossible for consumers to book an ATOL-protected package holiday that includes a Ryanair flight. I do not have full confirmation of that, but that is my belief. It is difficult not to conclude that this blocking was designed to push customers towards booking hotels as well as flights through Ryanair, rather than as part of a package holiday through an OTA. It is easy to conclude that Ryanair was able to do this because of the market power it holds over its routes.
For its part, in a regulatory announcement Ryanair welcomed the removal of its flights from OTA websites, promising lower fares “where necessary” to encourage all passengers to book directly on ryanair.com. The fact that it did not reference the fact that it had caused the removal of the OTAs in the first place, and its use of the phrase “where necessary” regarding pricing, are clear indications of its instinct in this move. I use this example to demonstrate how serious and real things are for this sector and the consumers it serves.
The question for debate here is: how could and should the CMA act to balance the relationships that surround service providers and third-party agents? The relevant provisions here are in Clause 223, on the prohibition of unfair commercial practices, and Schedule 19, on
“Commercial practices which are in all circumstances considered unfair”.
Together, these provisions set out a list of conduct to which the consumer protections in Part 4 will apply automatically in all cases.
The list in Schedule 19 is relatively granular, so it can be extended in scope easily to deal with these issues. For example, as set out in Amendment 136, Schedule 19 could include:
“Refusing to enter into (or otherwise blocking) a transaction with a consumer on the basis that the consumer is acquiring the trader’s product through a third party acting on its behalf”.
Secondly, it could include:
“Refusing (or otherwise blocking) third party agents, acting on a consumer’s behalf, the necessary means to make or manage the consumer’s purchase”,
thereby degrading the consumer experience. Thirdly, it could include:
“Making a materially inaccurate or disparaging claim about third party alternatives through which a consumer could otherwise acquire the trader’s product”.
Fourthly, it could include:
“Imposing higher prices for a consumer who chooses to acquire a trader’s product through a third party acting on its behalf than for a consumer who acquires that product directly, in particular without providing such consumer with a clear, accurate and complete explanation as to the reason for such a price increase”.
Fifthly, it could include:
“Any act or omission which deprives a consumer of sufficient freedom to make an informed choice as to whether to purchase a product directly from a trader or to engage a third party to make such purchase on their behalf”.
We then need to ensure that the protections afforded by Part 3, on enforcement of consumer protection law, and Part 4, on consumer rights and disputes, apply equally to consumers irrespective of whether, for example, they have made flight bookings through OTAs acting as consumers’ agents or they have booked directly with the airline. The relevant provisions of the Bill relating to the definition of a “consumer” are in Clause 147, on relevant infringements, and Clause 223, on the prohibition of unfair commercial practices.
In both cases, the definition of “trader” is already explicitly extended to circumstances in which a person is acting personally or through another third party on their behalf. This concept of indirect consumer-trader relationships should be extended to the definition of “consumer”. A new paragraph should be introduced in Clauses 147 and 223 to make it explicit that it is immaterial for the purposes of that definition whether a consumer chooses to engage with a trader directly or through a third party acting on the individual’s behalf as an agent. These proposed changes are set out in Amendments 108 and 129.
Other references to indirect booking need to be provided for—again, to include the provision that it is immaterial whether a consumer engages with a trader directly or through a third-party agent. The relevant clauses here are Clause 230, on rights of redress, and Clause 243, on the meaning of “transactional decision”. Amendments 145 and 146 would make it explicit that the protections in Part 4 apply to contracts entered into by the consumer with traders, both directly and indirectly.
Given the sort of behaviour already in the market, we also need to introduce the concept of misleading or aggressive commercial practices by a trader, which are designed either to deter consumers from booking through third parties—including OTAs, which book flights on consumers’ behalf as their agents—and/or to prevent such third parties from making such bookings. In other words, we need to outlaw those practices.
This time, the relevant provisions of the Bill are in Clause 224, “Misleading actions”, and Clause 226, “Aggressive practices”. These clauses deem commercial practices to be unfair if they involve misleading actions or aggressive practices that cause the average consumer to take a transactional decision they would not have taken otherwise. A new subsection should be introduced in each of Clauses 224 and 226 to make explicit that, for the purposes of Clause 224(1)(a), “misleading information” includes
“an action where the overall effect is to deter the average consumer from using third party agents to conclude transactions on their behalf, including disparagement relating to such third parties”.
For the purposes of Clause 226, in the context of determining whether a commercial practice uses harassment, coercion or undue influence, account should be taken of
“whether the practice significantly impedes the average consumer’s freedom of choice in respect of whether they choose to make a booking directly with a trader or to use a third-party agent to conclude transactions on their behalf”.
This is the effect of Amendments 139 and 141. The Minister will understand that this is an important example of the potential misuse of market power, to the detriment of consumers. We await his response.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank the noble Lord, Lord Fox, for that introduction. He made an excellent argument about why we should include third parties working on behalf of consumers in the remit of the Bill. As he described, this particularly relates to package travel firms.
Whether using a legacy airline or a low-cost carrier, all of us will have booked flights online. These days we have unprecedented freedom to fit our travel arrangements to our specific requirements and then pay for them at home, at the office or on our phones. But how many of us have had the far less welcome experience of discovering, a few minutes later, that our deal was not as good as we thought and that there were cheaper fares for the same flight? This is frustrating and unfair, and, unfortunately, it is due to deliberate anti-competitive practices, many of which the noble Lord described.
Low-cost airlines—LCAs—have transformed the aviation landscape. They have disrupted the market, offering travellers unprecedented choice and competition. Their rise in the UK has empowered consumers, democratising air travel and making it affordable for a much broader demographic than used to be the case. The greater availability and lower cost of flights to and from the United Kingdom has, in turn, led to the rise of online travel agencies and tour operators, known as OTAs. These offer travellers a wide array of pre-packaged holiday options, which include flights, accommodation and add-on activities. The convenience of being able to plan and book an entire trip from the comfort of one’s home has fuelled the popularity of online package travel. OTAs are becoming extremely popular and convenient ways for families to plan, book and pay for their holidays.
However, in recent years the low-cost airlines, themselves once the industry disruptors, have felt threatened by the newer online travel agencies. The industry is witnessing a growing trend of complex anti-competitive actions aimed at stifling competition. One such tactic is curtailing seat availability to specific destinations, which renders them inaccessible through OTAs or individual bookings unless bundled as airline packages. Another anti-competitive tactic is to introduce cumbersome verification procedures for passengers who book through OTAs rather than directly with the airlines, adversely affecting the consumer experience. Unfortunately, in this battle for market share between the LCAs and the OTAs, the consumers are often the casualties.
The situation is made still more opaque for consumers by the existence of 13 different types of airfare. I am grateful to my noble friend Lord Leong, who has looked into this. He tells me—I will mention only the most common six—that there are normal fares, point-to-point fares, excursion fares, APEX fares, PEX and super-PEX fares, and branded fares. Additionally, some come with specific restrictions, some are non-refundable, others cannot be exchanged or transferred, and none of these restrictions is immediately obvious or consistent with ticket types.
Lord Offord of Garvel (Con)
My Lords, this group of amendments concerns package travel. I will address Amendment 108, along with Amendments 129, 136, 139, 141, 145 and 146. I thank the noble Lord, Lord Clement-Jones, for tabling them and the noble Lord, Lord Fox, for speaking to them so eloquently. These amendments cover the same theme: the use of third parties in contracts between consumers and traders.
I reassure the noble Lord that the protections sought in these amendments are mostly provided for in other parts of consumer law, which I will detail. For example, Clauses 224 and 226 prohibit traders using misleading information or aggressive practices. This prohibition would already cover situations involving a consumer’s decision on whether to use a third-party agent. Similarly, Amendments 145 and 146 seek to make clear in the legislation that a consumer enjoys consumer rights, whether they purchase from a trader directly or via a third-party agent. However, in either situation the contract is between the trader and the consumer, and therefore the consumer benefits from the relevant consumer rights. Amendment 146 focuses on the transactional decisions related to purchases from a trader. Whether the decision is carried out by the consumer themselves or a third party is not relevant. The consumer that the contract is with will receive the relevant consumer rights. The practical effect of Amendments 145 and 146 is already achieved through consumer law.
I shall record two instances in which these amendments would have an adverse and unintended effect and thus why the existing wording of consumer law is set out the way it is. Consumer protection requires a consumer-to-trader relationship for consumer rights to apply. If, as suggested in Amendments 108 and 129, the definition of a consumer were changed to include third-party agents, they would in effect also become consumers in the eyes of the law. That means that the consumer’s relationship with the agent would be classed as a consumer-to-consumer relationship instead. Should there be an issue between the consumer and the third-party agent, the consumer would then no longer benefit from the same consumer rights as ordinarily apply. The amendment suggested by the noble Lord would broaden a very established principle of consumer law with this unintended effect.
I shall conclude my response—including the matters raised by Amendment 136—with reference to travel agents and the sale of package travel holidays, as I believe that may have inspired some of the noble Lord’s amendments. This is a sector in which it is common for consumers to use agents on their behalf. I am aware that issues have arisen between online agents and flight operators. Ministers in my department were pleased to meet representatives from an online travel agent and an airline recently to understand the issues from all perspectives.
Through our markets regime, the Government have ensured that the CMA has significant powers to investigate and act if it finds that businesses are behaving anti- competitively in a market. It is right that those matters are for the CMA to determine itself.
Separately, the Department for Business and Trade carried out a call for evidence on the Package Travel and Linked Travel Arrangements Regulations 2018 during September-December 2023. Those rules set the consumer protection framework for package holidays. It is vital that consumer protections for package holidays, as a key consumer leisure activity and expense, provide strong protections and that regulations support consumers to access choice and a competitive market. I am pleased to confirm that we are now analysing a substantial volume of responses, including from consumer groups, package organisers and suppliers, such as airlines. The operation of airlines and travel agents is governed by PTRs and ATOL. Those are being reviewed. That is the appropriate way to consider these issues.
Given the noble Lord’s interest, once further analysis has been undertaken, I will be eager to share with him the Government’s response to that consultation. I hope that, in light of what I have set out, he will be comfortable to withdraw his amendments.
Lord Fox (LD)
I thank the Minister for his response and for his offer to look through the data, which we will be happy to pick up. I thank the noble Baroness, Lady Jones, for her support and for enlightening me on the intricacies of airline ticketing. I suggest that there may well be a new class Z, which she and I will get, where our luggage gets lost as a result of what we have been saying here today.
Central to the Minister’s response is that all this exists already in some form or other, or the words have not been quite crafted correctly. Saying that the existing protections are there belies the fact that there are problems today. If those existing protections were 100% where they should be, doing what they should, the noble Baroness and I would not be able to stand up and list the problems that exist. It behoves us and the Minister to talk between Committee and Report, including my noble friend Lord Clement-Jones, to set out where there are clear issues at the moment and where there could be changes, even if we did not use the words contained in these amendments.
There are problems, and it would help if the Minister acknowledged that. The existing wording and the use and interpretation of those laws is not solving those problems, so there is something to sort out here, one way or another. With that said, I beg leave to withdraw the amendment.
“(c) the collective interests of consumers include avoiding any detriment that might be incurred by consumers if the United Kingdom does not reach a level of net zero carbon emissions by the year specified in section 1 of the Climate Change Act 2008.”Member’s explanatory statement
This amendment would mean that part of the test of whether a commercial practice had committed an infringement would be whether the commercial practice had failed to protect consumers from any detrimental effects arising from a failure to achieve net zero by the year specified in the Climate Change Act 2008 (currently 2050).
Baroness Jones of Whitchurch (Lab)
My Lords, I shall also speak to Amendment 134 in my name. I am grateful for the support from the noble Lord, Lord Clement-Jones, and the noble Baronesses, Lady Kidron and Lady Bennett, in doing so. I also support the amendments in the name of the noble Baroness, Lady Hayman, and the noble Lord, Lord Holmes, on the issue of the right to repair, and I look forward to hearing their contributions shortly.
Amendment 109 focuses on Part 3 of the Bill, which addresses the enforcement of consumer protection law. It sets out what would be a relevant infringement of the law by a commercial practice or trader. Our amendment would add a simple but important addition to that list. It says that the collective interest of consumers would be harmed by a company if by their actions they prevented the UK from reaching net zero emissions by 2050 as defined by the Climate Change Act.
We know from the latest reports of the Committee on Climate Change and the Office for Environmental Protection that the Government are missing a number of the key targets that would get us to net zero in an organised and timely manner. There are numerous missed opportunities for action, such as slowing down the rollout of electric vehicles and the failure to retrofit homes to save energy. This has not been helped by the decision to create new gas drilling licences in the North Sea.
However, it is not just a government responsibility to deliver net zero; it falls to companies to play their part. For example, every fossil fuel company that ignores its responsibility to move towards renewable energy, and every company that sells products created by the destruction of the Amazon rainforest, is contributing to consumer detriment as global warming impacts the planet. All the advertising companies that promote these products have a responsibility to protect consumer interests too.
In the UK, we are already seeing the adverse impact of global warming, as more extreme weather events become commonplace. Communities that might have been flooded once in a generation now face the heartbreak of properties being flooded every couple of years. Farm crops are being destroyed by drought or flooding, losing farmers their livelihoods. Of course, there are many other examples.
My point is that individuals and communities should have some redress under consumer law for the detriment caused by the companies and traders that deliberately delay or reverse our progress to net zero. This is what our Amendment 109 would go some way to achieve. It may be that we have not got the wording right—this is a probing amendment—but it nevertheless raises a fundamental issue about consumer rights that needs to be addressed.
Amendment 134 adds to the list in Schedule 19, which covers commercial practices which are, in all circumstances, considered to be unfair. It specifies that greenwashing actions, such as those giving the impression that a product is sustainable, is recyclable or has a low carbon footprint when these claims are not supported by evidence, should be considered unfair.
This continues to be a widespread practice. Consumers, particularly young people, want to do the right thing, but they are given no help in making informed choices. The EU has already identified around 230 separate sustainability labels and 100 green energy labels, half of which have weak or non-existent verification. The situation in the UK is no different.
Meanwhile, the Advertising Standards Authority has been slow to act and has ruled against only a tiny number of adverts. Many complaints of greenwashing are not investigated and the barrage of spurious environmental claims is falsely persuading consumers that corporations have embraced their environmental concerns. This greenwashing is all around us and we are not convinced that the existing regulators, including the Adverting Standards Authority, have the resources or the determination to hold the perpetrators to account.
When this issue was raised at Second Reading, the Minister replied:
“This is indeed an important issue, which we hope is already covered by existing regulations”.—[Official Report, 5/12/23; col. 1453.]
This is our point: if it is covered by existing regulations, they are not effective. Therefore, adding greenwashing to the list of banned practices would give consumers new opportunities to challenge the misleading product descriptions and adverts that are commonplace.
I look forward to hearing from other noble Lords who have amendments in this group but, in the meantime, I beg to move Amendment 109.
Baroness Hayman (CB)
My Lords, I declare my interest as chair of Peers for the Planet. I have Amendments 128A and 145A in this group but, before I speak to them, I will say just a couple of words about Amendments 109 and 134, on which the noble Baroness, Lady Jones of Whitchurch, just spoke. I very much support them both. I would certainly have added my name to that on greenwashing, had I not been later to the party than others. Along with the taxonomy for green investments, this is something that the Government have to take seriously if people are to be given the right choices and not deceived about the choices that they make.
My Amendments 128A and 145A cover the right to repair, an issue that Amendment 201, in the name of the noble Lord, Lord Holmes of Richmond, also addresses. They are cross-party amendments, and I am grateful to the noble Baronesses, Lady Ritchie of Downpatrick, Lady Harding of Winscombe, and Lady Bakewell of Hardington Mandeville, for their support. The intent of these amendments is to set a timetable for government to ensure that consumers can more easily and affordably repair their electrical and electronic devices by ending the practices that cause premature and planned obsolescence and ensuring that repair information and affordable spare parts are made available.
Lord Holmes of Richmond (Con)
My Lords, it is a real pleasure to follow the noble Baroness and agree with every word that she said. I particularly applaud the specificity around software and hardware becoming obsolete by software not being maintained by the manufacturers who, in effect, make obsolete well before its time the hardware that sits alongside that.
I rise to speak to my Amendment 201. In many ways, the only build I would put on what the noble Baroness has said is around expanding to broader sectors the whole concept of right to repair. Perhaps before my time, or perhaps not, there used to be a symbol, a mark of quality, on many products: “Made in Britain; built to last”. That can go well beyond these shores, but it is not a bad line to consider when we think about right to repair.
All that my Amendment 201 seeks is for products to have their proper, natural and appropriate life cycle. We are in the middle of an environmental emergency, with difficult macroeconomic headwinds and a cost of living crisis. Right to repair speaks to all these issues. In no sense is it the silver bullet, but it is an important part of what we can practically and effectively and should do. It is not increased, burdensome regulation; it is taking a very British approach to a particular problem and with very little difficulty solving it within this Bill.
Amendment 201 proposes changing the Consumer Rights Act 2015 by inserting a right to repair so that, before a purchase is made, information must be provided on the repairability of a good, including whether it has been produced with repairability in mind, whether there are spare parts and how to access them, and the likely cost involved. Similarly, in situations where repairs can be performed safely by the purchaser, the information required includes whether information exists on how to do so, and, if so, how the purchaser can get their hands on it. It is straightforward and it makes economic, environmental and social sense.
To echo what the noble Baroness said, it is—this is positive—a particularly British way of going about things. We can cut those piles of unnecessary electric waste, change how technology operates and have a positive impact across so many sectors of our economy, positively benefiting our society. I look forward to the Minister’s response; this would be a good amendment to accept.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow the noble Lord, Lord Holmes; I agree with the intent if not exactly the detail of his amendment—I will come back to that. It is also a great pleasure to take part in the debate on this group of amendments, so ably introduced by the noble Baroness, Lady Jones, and following the powerful arguments presented by the noble Baroness, Lady Hayman. As at Second Reading, much of what she said about right to repair is exactly what I would have said, so I will not say it again; I will just cross-reference her speech, as I did at Second Reading on the same subject.
I have attached my name to Amendment 109 in the name of the noble Baroness, Lady Jones, as well as her Amendment 134 on greenwashing. Had there been space, I would also have attached my name to the amendments on right to repair. The noble Baroness, Lady Hayman, and I have been having a little race in various groups.
I start with Amendment 109. It is worth reflecting for a moment on the fact that, as a country, we have legally binding climate and emissions targets. The Committee on Climate Change has been awaiting a new chair for 18 months—reports suggest that at least two Members of your Lordships’ House are in line for that and waiting to find out their fate—and its chief executive has just stood down. Despite all that, it put out a statement yesterday—handily, given the timing of today’s Committee—stressing strongly that, following COP 28,
“the obligation on every country is now to push even harder”
on climate action. It said that the UK needs
“even greater domestic climate ambition to reinforce the UK’s international standing”—
something that the Government are often concerned about. Crucially, it noted
“a significant delivery gap to the UK’s Nationally Determined Contribution (NDC) of reducing emissions by 68% by 2030”.
The independent Committee on Climate Change is saying that we are not doing enough, what we have now is not sufficient and we are not meeting the international obligations that we have signed up to. It is in that context that we need to look at Amendment 109, which could be hugely powerful. We are talking about commercial practices failing to protect consumers in the promotion and supply of goods and services by digital means. This relates to the detailed discussion we had on the previous group of amendments about flights and package holidays and the ways in which they are promoted and people are given information about their environmental impacts.
Since our conference in Brighton last autumn, the Green Party has been calling for a ban on high-carbon advertising. The noble Baroness, Lady Jones, may not entirely thank me for this, but I suggest that this amendment, in essence, implies a ban on high-carbon advertising. For the avoidance of doubt, this is a suggestion not that we should stop anyone flying or taking any action that they need to, but about whether we should allow expensive, continual bombardment—on the internet, from digital screens everywhere we go, on public transport and from every quarter—to purchase things that we might not otherwise have purchased.
Lord Lucas (Con)
My Lords, I very much like Amendment 134 and hope that the Government will find their way to supporting it. It seems to me important that, since it is well drafted, we should go down this route of making sure that claims of environmental effectiveness are real.
In that context, I was delighted by the exposition of the noble Baroness, Lady Bennett of Manor Castle, on Amendment 109, which makes it clear that it is a bit of greenwashing: a Labour Government, should we ever have one, would not put this amendment into effect because it is so broad, all-encompassing and dangerous that they would never do it. Labour is merely proposing it now so that it can seem a bit green.
I like the electrical repair direction. When I moved my daughter into her student flat, I was able to test the fire alarm by turning on the Hoover. I am cautious about amateurs repairing electrical goods and, if we did anything along that line, I would want to make sure that it was focused on professional repairs. It is iniquitous that mobile phones are being made with glued-in batteries so that you cannot renew them. Therefore, I very much support the direction that my noble friend Lord Holmes has taken, as something that is implementable now—I like its breadth too—to make sure that consumers are given the information about whether the product they are buying can be repaired and, therefore, will have a good second-hand value and a long life. As we start to focus on the iniquity of throwing stuff away, it will start to move manufacturers, because such products will become more popular.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I speak in support of the noble Baroness, Lady Hayman, on Amendments 128A and 145A—inserting a new clause on the right to repair—to which I added my name. The noble Baroness set out very clearly the arguments that support this detailed and transparent amendment. I regret that I was unable to take part at Second Reading.
I declare my interest in being married to an engineer who believes, as did my father before him, that everything should be capable of repair, and who suffers frustration and fury when he finds that a product has been designed in such a way as to deliberately prevent this from happening. “Planned obsolescence” is the phrase that manufacturers use to justify their manufacturing methods.
As a country, we are already committed to the right to repair through EU regulations of 21 June. This is limited to fridges, dishwashers, washing machines and TVs. However, this provides no consumer protections on the cost of parts, and limits consumer rights of repair to a small number of specified operations. It deprives them of the right to buy parts or even see repair manuals. There is no timeline for extending the right to other electrical or electronic products. We need a general right to repair all electronic and electrical products now. Otherwise, we will wait until 2030 just to legislate for a few consumer products at a time. Consumers are struggling to make their money go round; repair and reuse would help them now.
The evidence suggests that the UK is falling behind. The EU has legislated for access to software updates for five years, and spare parts and manuals for mobile phones and tablets for at least seven years after a product is withdrawn. It mandates repairability information for consumers at the point of sale, and it is now in trilogues on a more far-reaching right to repair, including prioritising repair over replacement inside guarantee, and the right to repair at a reasonable cost outside guarantee.
As has been said, this is not limited to the EU. Six US states have already legislated for right to repair, with 10 more considering legislation to start this year. These right-to-repair laws cover a range of products, from smartphones to farm equipment, and offer consumers access to spare parts, tools, and repair information to enable repair for minimum periods.
The Government’s argument against this amendment is that it will be burdensome for manufacturers, especially smaller manufacturers, but its effect would be to require firms to retain some spare parts and manuals, and make arrangements for paid-for repair, as they already have to for some kitchen goods and TVs for five to seven years. This is not disproportionate.
Current restrictions on the right to repair favour larger firms over smaller employers, such as independent repair companies and parts suppliers. This is why the amendment proposes banning within one year the most egregious anti-competitive and anti-consumer measures pursued by larger firms. The legislation allows five years for the Government to legislate for the right to repair in order to get the legislation right. Were the Government minded, they could exclude the smallest manufacturers to give them more time to comply.
I am at a loss to see how this might stifle innovation by industry. The amendment would put consumers in the driving seat by enabling them to choose when to switch to more innovative products when it is in their interest, rather than be forced to do so by prohibitively expensive or unavailable spare parts, or by perfectly functional products that stop working only due to software updates. Surely the Government want the consumer to be in control.
The right to repair is genuinely popular. Research by Cardiff University found that 65% of respondents are regularly frustrated by products that break before they should; 62% believe products are currently too difficult to get repaired; 75% agree that the Government should require manufacturers to make products more repairable; and 85% support expanding the right to repair to cover all consumer products. Men’s sheds and repair shops are springing up all over the place in our market towns. Repair is popular.
I know from my own experience that a quote for a repair can be eye-watering and that I can buy a cheaper model that does the same job, especially when it comes to washing machines, dishwashers, and fridge-freezers. Households on tight budgets are forced into a cycle of regularly replacing cheap machines with new cheap machines, rather than repairing existing machines to keep them in use for longer. This also leads to the cost of disposal of the redundant machine, often resulting in fly-tipping—the scourge of the countryside.
Throwaway products are fuelling climate change, growing our toxic waste mountain and ripping off the British public. People are stuck in a cycle of throwing things away and then buying costly new electronics, which is bad for their wallets and bad for the environment. Right now, the UK is the second-largest producer of electronic waste in the world per capita, as the noble Baroness, Lady Hayman, said; it is worth repeating. Too often, inefficient waste management is prioritised over waste prevention. This has to be minimised. This amendment would address these issues.
I turn to the other amendments in this group. Amendment 201 in the name of the noble Lord, Lord Holmes of Richmond, is very similar in essence to Amendments 128A and 145A. We support it as a means of ensuring that consumers are protected in terms of repair and maintenance.
Amendments 109 and 134, in the name of the noble Baroness, Lady Jones of Whitchurch, attempt to ensure that consumers are protected. They would help the country move towards net zero and would assist with climate change mitigation. Consumers are reliant on the information provided for them and this has to be accurate. Greenwashing tactics need addressing. Both the Government and the CMA must ensure greenwashing does not happen, or is at least minimised. We support all the amendments. We are all singing to the same tune; there is cross-party support across the Committee and I look forward to the Minister’s positive response.
Lord Offord of Garvel (Con)
My Lords, on this group of amendments on net zero and the collective interests of consumers, I thank the noble Baronesses, Lady Jones and Lady Bennett, for their Amendment 109, which would explicitly provide that consumers’ collective interests include avoiding any detrimental effects that they may incur by not reaching net-zero carbon emissions by 2050. I am grateful to the noble Baronesses for raising the important issue of protecting consumers during the transition to net zero. At present, where environmental issues arise, the court or enforcers already have the requisite powers to take action, including by tackling misleading green claims which affect consumers’ purchasing decisions. In addition, in its annual plan, the CMA listed
“helping to accelerate the UK’s transition to a net zero economy”
as one of its priorities.
We are already making strong progress towards net zero by 2050. The UK has reduced its emissions further and faster than any other major economy. To that end, we feel that there are sufficient measures already in place to protect consumers during the transition to net zero. I hope that the noble Baroness, Lady Jones, will feel sufficiently reassured to withdraw her amendment.
On the right to repair, I thank my noble friend Lord Holmes and the noble Baroness, Lady Hayman, for their Amendments 128A, 145A and 201 and, in the latter case, for our recent discussion on the issue, where we had much of a meeting of minds.
The Consumer Protection from Unfair Trading Regulations 2008 are being restated in the Bill and prohibit unfair commercial practices. These include misleading actions which are likely to affect a consumer’s decision-making, so consumers are already protected from misleading statements made by traders on the availability of spare parts. Furthermore, there is a range of activity across government presently which support the aims of the proposed amendments, which in summary focus on sustainability and ensuring that products are repaired, where feasible.
The Department for Energy Security and Net Zero’s eco-design initiative aims to encourage the uptake of products which use less energy, resources and materials through product-specific regulations. The Department for Environment, Food and Rural Affairs is responsible for waste and resources policies, including preventing waste occurring in the first place. Both departments work with the DBT to ensure that, over their lifetime, products use less energy. This ultimately saves carbon, reduces waste and helps households and businesses to reduce their energy bills.
New and updated eco-design measures introduced in summer 2021 have, for the first time, included requirements for manufacturers to make spare parts available and replaceable with commonly available tools, as well as to provide information to professional repairers to assist with repairs. These new requirements cover dishwashers, washing machines and washer-dryers, refrigeration appliances, televisions and other electronic displays. The measures will help to establish a “right to repair” for consumers, as part of a more resource-efficient economy. Defra has recently set out aims in its new waste prevention programme to move to a circular economy by keeping goods in circulation for as long as possible and at their highest value. This includes increasing the reuse, repair and remanufacture of goods. We are consulting now on reforms to the Waste Electrical and Electronic Equipment Regulations and will consult later this year on reforms to the batteries regulations. We have also launched a separate call for evidence on reforms to the WEEE regulations to seek views on how they can further support the circular economy by incentivising more sustainable product design and higher levels of reuse of electrical products.
Further, from 29 April 2024, the new product security regulatory regime will require manufacturers to publish information on the minimum length of time that security updates will be provided for consumer connectable products. However, mandating a minimum security update period before the impact of these measures is known could run the risk of imposing obligations on businesses disproportionate to a product’s lifespan and any associated security benefits. The Government have committed to a post-implementation review of these new measures to understand their impact before any further action is considered.
Similarly, adding rights to repairability to consumer law now will oblige retailers to pre-emptively seek information from the manufacturers of products that they sell. More work is required before this is suitable for the Government to ask. In the meantime, it would mean greater costs and a reduction in choice for consumers. It may also have implications for our WTO and international treaty compliance, as it would constitute a new technical barrier to trade about which we would need first to notify and consult partners.
Lord Fox (LD)
I welcome what the Minister says, in some respects. Will the issue of updating electrical and electronic products be part of that review, too? In other Bills, we have discussed who has the obligation to maintain software updates for equipment from the perspective of safety as well as longevity. I hope that the review takes that into consideration, too.
Lord Offord of Garvel (Con)
I thank the noble Lord, Lord Fox, for that. There is a lot of information, and it is reasonable that I write to the noble Lord about the gamut of the consultation that is going on. As I said in response to the noble Baroness, Lady Hayman, a lot of consultation work is going on in the two main departments—business and Defra. It is therefore only fair that we spell that out, and we are happy to do so.
To finish what I was saying, I hope, on the basis of what I have said and those assurances, that noble Lords will not press their amendments.
I turn now to Amendment 134, on greenwashing, for which I am grateful to the noble Baronesses, Lady Jones of Whitchurch, Lady Kidron and Lady Bennett of Manor Castle, and the noble Lord, Lord Clement-Jones. The amendment would add specific greenwashing claims to the list of banned practices in Schedule 19. Misleading consumers about the environmental qualities or impact of goods and services so that it leads them to take a different purchasing decision is already against the law. Further, initiatives are under way, including the CMA’s draft guidance on sustainability agreements between businesses, which are aimed at helping to achieve environmental goals. The CMA has also published guidance on environmental claims on goods and services to help businesses understand how to communicate their green credentials without misleading consumers.
Part 3 of the Bill will strengthen consumer protection enforcement by allowing public enforcers to make applications to the court, which will not only stop the infringing conduct but allow the imposition of financial penalties. In addition, the Bill introduces new powers for the CMA to take action more quickly against bad business practices, without needing lengthy court action, and to give penalties of up to 10% of turnover for those breaking consumer law.
In summary, given that greenwashing is already prevented in law, our priority is to keep these existing interventions under review to observe their impact before rushing into further legislative action. For these reasons, I hope that noble Lords will feel comfortable not to press this amendment.
Baroness Bennett of Manor Castle (GP)
My Lords, before the Minister sits down, I come back to his response to Amendment 109 about not meeting our net-zero targets. I can probably paraphrase what he said as, “It’s all fine here and everything’s on track”. How would he align that with the statement from the Committee on Climate Change yesterday that there are significant delivery gaps for our NDCs for 2030?
Lord Offord of Garvel (Con)
I thank the noble Baroness for that. This is not a perfect science. We are on a journey to net zero and will get there by 2050. We have been very clear on the milestones that we need to hit along the way. As far as the UK is concerned, there is absolutely no going back on our commitment to hit that target, but it is a transition, and it will take a generation. I am very clear that we will get there.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords for their support for my amendments on achieving net zero, tackling those who get in the way of it and tackling greenwashing. I must say that the noble Baroness, Lady Bennett, had a wider interpretation of my Amendment 109 than I had intended. As I said at the outset, it was only a probing amendment, and she has given me good cause to go away and look at the wording of all that again, because it certainly was not going that far. It has provoked a good debate, and we had some genuine issues out on the table on it.
I also thank the noble Baroness, Lady Hayman, the noble Lord, Lord Holmes, and others for making the case so eloquently on the right of repair. We have had a really good debate on this, and I cannot possibly hope to acknowledge all the important points that noble Lords made. Those who know me will know that I have long been an advocate for the circular economy and for the right of repair as an essential part of that strategy, but it feels that action is painfully slow: it is estimated that there are enough unused cables in UK households to go around the world five times, along with 20 unused or redundant electronic items in each. But, instead of having a policy to repair and reuse, electronics manufacturers continue to use up the earth’s scarce resources producing new products, the latest models, which often replace perfectly functioning earlier models.
We cannot go on consuming at this level, as we will run out of the materials needed to produce the goods in the first place, so we need to go back to the design phase and product manufacturing, tackle the scourge of built-in obsolescence, and make spare parts and repair services the norm rather than the exception. The Government’s latest eco-design standards are a step forward, but they deal with only one part of the market. That is why a more comprehensive action plan is needed.
On this issue and others, the Minister said not to worry as they are already covered by current legislation. But it is obvious to all of us that, whatever the wording in the legislation, this is not working in practice. He gave the example of Defra having a policy on, or aiming for, the circular economy, but it has been aiming for this for a long time now. What it needs is action to ban the practice of firms deliberately preventing repair. Consultation, which is what is being proposed, is really not enough. I hope that the Minister can understand our frustration on this. These issues have been around for a long time. They are not new, and it does not feel that sufficient action is being taken.
The Minister said that this is a burden on business, but I do not think it is. It is an opportunity for innovation and new jobs, and an opportunity to save materials and money. We need to ensure that we do not have more waste and that we use the resources we have to best effect. A lot of businesses understand that but not all, and that is the problem.
I also thank the Minister for his response to my amendments. I genuinely believe that he understands and supports the environmental challenge but, again, that is not enough: we need to address the regulatory failings that are allowing greenwashing and global warming to continue. Whatever the current regulations and laws, it is quite clear that those regimes are not properly addressing their responsibility in these areas. Again, we need to look further at that. There is huge frustration that policies are not being translated into action and leading to enforcement. Where are the examples of these policies being enforced?
Digital Markets, Competition and Consumers Bill
Monday 5th February 2024
(5 months, 3 weeks ago)
Grand CommitteeRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 12-VI Sixth marshalled list for Grand Committee - (5 Feb 2024)
Baroness Morgan of Cotes
“(1A) A commercial practice also meets the specified prohibition condition if the commercial practice targets consumers with marketing material for products intended to be used by that person to take their own life.”
Baroness Morgan of Cotes (Con)
My Lords, it is a pleasure to speak here this afternoon. I apologise to the Committee for not being able to speak at Second Reading. I declare my interest as the founder and trustee of a mental health charity in Leicestershire, the Loughborough Wellbeing Centre.
It will not surprise my noble friend the Minister, I suspect, to know that this is a probing amendment. However, given that we are debating in this part of the Bill the enforcement of consumer protection, the matter that I raise relates directly to the greatest harm that a consumer can suffer: their death.
In June 2022, I asked my noble friend Lord Parkinson the following Oral Question: what plans do
“Her Majesty’s Government … have to address online retailers’ algorithmic recommendations for products that can be used for the purposes of suicide”?
At the time, the most obvious Bill to address this matter was the Online Safety Bill, which, as we know, focused on harmful content in particular. In my follow-up question, I said:
“When a particular well-known suicide manual is searched for on Amazon, the site’s algorithmic recommendations then specifically suggest material that can be used, or easily assembled, into a device intended to take one’s own life. If this is not to be regulated as harmful content under the Online Safety Bill, how can this sort of harm be regulated?”—[Official Report, 27/6/22; col. 434.]
This amendment is particularly close to my heart because, sadly, when I was a Member of Parliament, a constituent bought a manual on Amazon then completed suicide. The amendment would amend Clause 149 by expanding the specified prohibition condition definition by adding a commercial practice that
“targets consumers with marketing material for products intended to be used by that person to take their own life.”
I am grateful to the Mental Health Foundation for its support with this amendment.
Even today, Amazon continues to algorithmically recommend products that can be used to take one’s own life to users viewing suicide manuals online. To be specific, users searching for a suicide manual will be recommended specific materials that are touted as being highly effective and painless ways to take one’s own life. Amazon facilitates users purchasing the key items that they need, from instructions to materials, in a few clicks. I would like to think that this is not intentional.
In the overwhelming majority of cases, such automatic recommendation will be harmless and will help consumers to find products that might interest them. However, in this instance, a usually harmless algorithm is functioning to provide people with material that they may use to end their own lives. This risk is not just theoretical. Amazon is recommending products that there have been concerted public health efforts to address in this country and which are known to have caused deaths. So as not to make them better known, I will not name them.
It is particularly important that Amazon ceases to highlight novel suicide methods, as its recommendation algorithm currently does by recommending products to users. There is clear evidence that, when a particular suicide method becomes better known, the effect is not simply that suicidal people switch from one intended method to the novel one but that suicide occurs in people who would not otherwise have taken their own lives. This probing amendment is intended to draw the Government’s attention to this concerning issue. I have spoken about Amazon today given its position in the market and its known bad practice in this area, but the principle of course goes beyond Amazon. New retailers may well emerge in the future and a principle should be established that this type of behaviour is not acceptable.
While I suspect that my noble friend the Minister is going to tell me that the Bill is not the right place for this amendment, I hope that he will agree that a crackdown on these harmful algorithmic recommendations to protect consumers—it was the word “consumers” that meant that it was not suitable for the Online Safety Bill—is needed, in the spirit of consumer protection sought in the Bill. I hope that, at the very least, he will agree to meet me to discuss this further and to help me to raise it with the relevant department, if it is not his. I beg to move Amendment 110.
Lord Lucas (Con)
My Lords, I have one amendment in this group, Amendment 110A, which will be echoed in subsequent groups as part of a general concern about making sure that trading standards are an effective body in the UK and are able to do what they are supposed to do to look after consumers.
As the Minister will know, because we were part of the same conversation, the CMA is concerned that trading standards may have been reduced to the point where they are not as effective as they ought to be. Looking at some of the local cuts—in Enfield, for instance, four officers have been cut down to one—and listening to various people involved in trading standards, there is a general concern that, as they are set up and funded at the moment, they are not able to perform the role that they should be. Given the importance that enforcers have in the structure that the Government are putting together, I am asking in this amendment that the Government review that effectiveness, take a serious look at the structures that they have created and their capability of performing as they would wish under the Bill and report within a reasonable period.
Lord Clement-Jones (LD)
My Lords, I entirely support what the noble Baroness, Lady Morgan, had to say in her probing amendment. It takes us back to the Online Safety Bill debate. The final question that she asked is crucial: if not here, where? We must have a means of being able to prevent the sale of these products. She has highlighted it and I hope that the Minister has a satisfactory reply, so that, in short order, we can make sure that these products are not for sale in these online marketplaces.
I also entirely support the amendment tabled by the noble Lord, Lord Lucas. It will become clearer and clearer as we move through the groups that adequate resources are required for trading standards. We impose a large number of duties on them, yet we appear not to give them the resources. In fact, their resources have dwindled over the years, as I know that the noble Earl, Lord Lindsay, and my noble friend Lady Bakewell would have outlined if they had been present. In respect of their amendments, which I will come on to later, I am the understudy’s understudy, because the noble Earl, Lord Lindsay, cannot be here today, I gather, nor can my noble friend Lady Bakewell. It falls to me to make a fist of talking to Amendments 112 all the way through to 127, which I will attempt. The noble Lord, Lord Bassam, will be making an even better attempt in the name of the noble Baroness, Lady Crawley, as I understand. Hopefully, the Minister will take on board what we have to say when the time comes.
Very briefly, I want to speak to Amendments 111 and 122, which relate to increasing the scope of the monetary penalties under the Bill. Amendment 111 applies this to Clause 157 for court enforcement orders when the public designated enforcer, such as the CMA, considers that a person is engaged or is likely to engage in a commercial practice that constitutes a relevant infringement and the court makes such an enforcement order on the public designated enforcer’s application. Amendment 222 applies this to CMA final infringement notices under Clause 181, for when the CMA imposes an infringement notice after an investigation into suspected infringements.
Current drafting limits the penalties to
“£300,000 or, if higher, 10% of the total value of the turnover (if any) of the respondent”.
However, a respondent may have made a huge profit as a result of infringements. Fines of a mere £300,000 are unlikely to incentivise good behaviour. In circumstances where 10% of the total value of the turnover is higher, our legal advice is that the UK would typically follow current EU practice, unless something in UK legislation specifically allowed it not to do so, such as we propose in these amendments. In the EU, the fine has to relate to the turnover of the activity in issue and its duration, which, in practice, makes it a much smaller number. To get to group worldwide turnover requires evidence of head office involvement. It should be made clear that to calculate the penalty amount the CMA and the court are able to take into account the profit made by the respondent.
Penalties are supposed to provide an incentive not to break the law, which raises the real question: why are fines related to turnover at all? To ensure good behaviour, they should strip the lawbreaker of the profits gained from lawbreaking. Where a platform can harm millions and only a few take it to task if it pays off the fee, breaking the law pays back handsomely. Authorities could be given the power to directly award exemplary damages of this type in these circumstances. In practice, fines are a fraction of turnover and profits. The largest fine to date was the €4.3 billion imposed on Google in respect of its Android device restriction, which is a long way ahead of other recent fines, but Google makes something of the order of $70 billion a quarter in turnover.
This amendment would also focus on the abusive practice, not the abuse only in relation to effects in one market. For example, Google changed its algorithm in 2007 to promote its own products at the top of its search results. It does so for news, maps, images, shopping and things such as flight booking. That pushes more relevant and better businesses down the rankings so that they get less business and competition is distorted. The practice is governed by an algorithm called universal search. The EU Commission had the resource only to investigate shopping; the fine was €204 billion. Google carries on discriminating in all areas but shopping. A fine could and should be calculated in relation to the abusive practice, of which shopping is an example; otherwise, breaking the law pays and behaviour does not change. Seeing the fine in relation to the profit gained from the practice would be fair. It would deprive the wrongdoer of the gains from breaking the law and is likely to change behaviour. An account of profits could easily be done.
I turn to Amendments 112 to 120 in the names of the noble Earl, Lord Lindsay, my noble friend Lady Bakewell and the noble Baroness, Lady Crawley. As I said, unfortunately none of those proposers is able to be present today, but all their amendments relate to widening the scope of how appropriate court action can take place and they all come under the banner of consumer protection and enforcement, especially for a level playing field to operate in the current marketplace.
Amendments 112, 113 and 114 are about consumer protection orders and undertakings under Clause 159 and cover applications to the appropriate court for an online interface order or an interim online interface order. Clause 159 extends the court’s online interface powers to the enactments, obligations and rules of law categorised as domestic infringements and it is to be welcomed. The Explanatory Notes to the Bill give examples of where online interface orders could be useful, especially in the area of underage sales products. This has been thrown into sharp relief by the Government’s proposals on banning the selling of vapes to underage children and young people. In relation to weights and measures, it is possible that, in order to avoid local inspection systems in the UK, an online supply of short-weight goods would need urgent follow-up with an application for an online interface order against the third-party overseas website where rogue traders are mis-selling to UK consumers.
Lord Bassam of Brighton (Lab)
My Lords, I was initially going to say that this is a disparate group of amendments but, as I have heard the arguments adduced, I have realised that it has more coherence to it.
The Committee should pass a vote of thanks to the noble Baroness, Lady Morgan, for tabling her amendment. This is an incredibly sensitive issue and one that in spirit we completely support—why wouldn’t you? If I were in the noble Baroness’s position, having dealt with cases of the sort that she has, I, too, would probably be mounting a campaign on this. We should be grateful to the Mental Health Foundation for the support that it has given. It cannot be right that usually harmless algorithms are used for another purpose like this and it would be helpful if we could get some clarity to the law.
This issue raises highly sensitive issues about online purchases. It is hard to envisage that any commercial undertaking, whether online or trading on our high streets, would deliberately market a product knowing that it was likely to be used for acts of self-harm and far worse. I will listen carefully to what the Minister has to say on this. If there is something that can usefully be done in legislation and there is an opportunity to do it here, we should take that opportunity.
I turn to the amendment tabled by the noble Lord, Lord Lucas, which initially I thought put the cart before the horse, but I do not think so any more. It is a neat amendment that is usefully placed. The noble Lord is looking at how the effectiveness of trading standards is measured and looking at their resource and support.
About 20 or 30 years ago, I was a trading standards national officer. I was not a trading standards officer, but I used to lobby government for resources on behalf of trading standards, which always used to say they did not have enough resource. The answer from the Government at the time was pretty much the same as I am expecting the answer to be this afternoon: that the Government are resourcing trading standards well and that they do a very good job. However, there is a good case for reviewing their effectiveness, particularly in the light of the other amendments in this group.
I will come back to Amendment 111 in a moment, but Amendments 112 to 120 relate very neatly to the scope and jurisdiction of weights and measures—ie, trading standards. They would significantly broaden the responsibilities of trading standards officers, who presumably would take on investigatory and enforcement responsibilities on a shared basis with the CMA. We have sympathy with these amendments because there is a strong case for local enforcement. I understand that people living in a locality might want to go to their local authority trading standards officers for advice, support and encouragement in seeking enforcement against rogue online traders. If we embark on this route there will need to be protocols in place so that duplication does not occur and so that there is good advice and information from officers locally working in tandem with CMA officials, and of course there would be a question of resource and support for local trading standards officers. Ministers and the Government may think that this is a valuable route, but the relationship between central and local enforcement needs to be explored. These amendments valuably focus light on that, because people in any community anywhere in the country will want to know how they can access their rights as consumers dealing as much online as in the high street and offline. We have a lot of sympathy for the amendments in the name of my noble friend Lady Crawley, the noble Earl, Lord Lindsay, and the noble Baroness, Lady Bakewell.
I will go back to Amendment 111. As the noble Lord, Lord Clement-Jones, argued, it is really about the detail of the enforcement of penalties and their range and scope. In general terms, we support the notion that penalties should take account of the profitability of the company which is in breach of enforcement orders—breaking the law. Again, it will be interesting to hear the Minister set out the Government’s policy in this field and explain to us how it is going to work. I look forward to the Minister’s response.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
My Lords, I am extremely grateful to noble Lords for their amendments in this group and for their valuable contributions on these important issues. I will start by discussing Amendment 110. moved by my noble friend Lady Morgan, whose continued leadership on this very serious and hugely important topic is commendable. Amendment 110 would make the marketing of products intended to be used to take one’s own life a specified prohibition, which would therefore be enforceable under Part 3. Like everyone who spoke, I—and the Government—recognise the tragic consequences of suicide and how so many lives and families have been devastated by it. The Government do not underestimate the gravity of this issue, and that is reflected by the measures already in place around suicide prevention and, indeed, the steps we have taken to clamp down on the advertising and supply of pro-suicide materials.
First, we have strong, well-defined laws in relation to complicity in another person’s suicide, such as the Suicide Act 1961. Building on that, where content on the internet reaches the threshold for a criminal offence under the Suicide Act 1961, the Online Safety Act will place new duties on all in-scope user-to-user services proactively to tackle it.
Under the Online Safety Act, search services have targeted duties that focus on minimising the presentation of illegal search results to users, and protecting children from such search content. These duties will play a key role in reducing traffic directed to websites with content that encourages or assists suicide, reducing the likelihood of users encountering this content. The Act also places duties on providers to protect children from harmful content that encourages, promotes or provides instructions for suicide but that does not meet the criminal threshold. Separately, the independent Advertising Standards Authority bans adverts that may cause harm or serious or widespread offence, including adverts containing references to suicide.
These approaches are supported by the Government’s suicide prevention strategy for England. As part of that, the Department of Health and Social Care leads a cross-government and cross-sector group established to rapidly identify and proactively tackle emerging methods of suicide. Through this group’s close working, there are currently over 30 live actions and interventions to reduce public access to, and limit awareness of, emerging methods, with further commitments made in the strategy. These include seeking to tackle at source the suppliers of harmful substances for the purposes of suicide, and the development of a new national process that both captures intelligence and subsequently issues alerts to relevant parts of the health, care, education and justice systems on any emerging methods or risks to be aware of.
Amendment 110 is set against this background. Its laudable intent does not fit with the purpose of Clause 149 and, by extension, Part 3. This amendment would use Part 3, which is merely an enforcement vehicle for existing duties, prohibitions or restrictions, to define and impose on traders a substantive legal prohibition. Once again, I am extremely grateful for my noble friend’s amendment. I applaud her passionate sponsorship of this vital issue and would be delighted to meet, as requested. However, at this moment, I hope she feels reassured enough by existing measures to withdraw the amendment.
I am grateful to my noble friend Lord Lucas for Amendment 110A. The Government fully agree with him that, as with any statute, Part 3 needs to be kept under review to ensure that it achieves its intended real-world impacts. However, it is important to note that the court-based consumer enforcement regime under Chapter 3 of Part 3 is not new. In general, it updates and simplifies the current court-based enforcement regime in Part 8 of the Enterprise Act 2002. There are therefore existing mechanisms for reviewing the effectiveness of consumer enforcement, which we believe to be sufficient.
First, public designated enforcers already review and report on the enforcement interventions they undertake. For example, since 2019, the Association of Chief Trading Standards Officers has produced annual impacts and outcomes reports that show the impact of local authority trading standards services in England and Wales. Both the Chartered Trading Standards Institute and the Society of Chief Officers of Trading Standards in Scotland conduct workforce surveys and publish reports that cover issues such as staffing and enforcement actions. Regulators such as the CMA, the Financial Conduct Authority and Ofcom provide transparent statements about their enforcement work and publish annual reports that evaluate their past year’s performance. These regulators are accountable to Parliament and subject to scrutiny by parliamentary Select Committees.
This ongoing reporting is complemented by dialogue with government about enforcement priorities and capability. For example, the CMA, which has a central co-ordination role in the network of public designated enforcers, already has a statutory role to provide advice to government on matters relating to its functions, including consumer enforcement. The Government may therefore request the CMA to provide information or advice on any gaps in enforcers’ powers or capabilities. The Government have committed to respond publicly to such advice within 90 days, clearly indicating the steps we will take in response.
Lord Clement-Jones (LD)
Before the Minister moves on, would he be so kind as to point out which bit of the Long Title prevents the amendment of the noble Baroness, Lady Morgan, from being incorporated into the Bill? This is an important issue and he gave us no real comfort about what other powers might be available to remedy the kind of situation that the noble Baroness talked about. Secondly—I sound like a taxi driver—Amendment 110A talks about resources for trading standards but, as the Minister well knows, local authorities are in dire straits. It is not just a question of saying that their funding is not ring-fenced; it is also about the Government making sure that trading standards are adequately resourced for consumer protection. How are they going to ensure that?
Lord Offord of Garvel (Con)
I thank the noble Lord for his intervention. As I said on my noble friend Lady Morgan’s Amendment 110, we are dealing with a serious issue. I took great pains to run through the various layers of protection currently on the statute book and outlined why the Government believe that this is covered elsewhere and is not within the scope of the Bill. I have also said that I will meet my noble friend and look at this in more detail to see whether we need to look further at the Long Title, to which the noble Lord referred.
Lord Bassam of Brighton (Lab)
Is the noble Lord saying that it is not outside the scope of the Bill?
Lord Offord of Garvel (Con)
We are saying that there is extensive protection built up around this sensitive issue and that there should not be further legislation made within the scope of the Bill, but that, if we need to look at it further, we can do so before Report.
Every local authority always wants more money. It is a feature of UK public life and it is up to local authorities to decide how to spend their money appropriately. As we all know, some are better run than others. Funding is not ring-fenced and it is up to local authorities to make sure that standards are maintained in their area.
Amendments 111 and 122, tabled by the noble Lord, Lord Clement-Jones, pertain to profits from infringements and the calculation of penalties. They would ensure that profits made from engaging in an infringing commercial practice can be expressly reflected in the calculation of a monetary penalty imposed through an enforcement order made by the court or a final infringement notice given by the CMA. I thank the noble Lord for his amendments and I absolutely agree with the intent behind them. In fact, work is under way to produce a comprehensive set of regulations, which could be made under Clause 203, to set out the amounts that are to be treated as comprising a person’s turnover when calculating the maximum penalty that can be levied.
Our intention is that any profits accruing from the relevant infringement will be captured by this methodology, but we consider that this maximum penalty calculation will be a technical exercise that needs to be supported by robust and detailed methodology, which is therefore better suited to secondary legislation. I hope that the noble Lord is sufficiently reassured that this important issue will be addressed.
Lord Clement-Jones (LD)
My Lords, I am sorry to keep interrupting the Minister, but this is quite an important factor. Is he saying that secondary legislation can expand the way that the primary legislation is interpreted? I was talking in my amendment about trying to get hold of the profits of abuse, so that the penalties should include a profit-based penalty, but the Minister seems to be saying, “Yes, we can do that with secondary legislation”. Is that really what he is saying?
Lord Offord of Garvel (Con)
Yes, that is exactly what I am saying. In order to get a profit, one has to start with turnover. A detailed mechanism is required to look at how these P&Ls work and, rather than being in the Bill, this needs to be examined as a technical exercise. There needs to be a methodology put together for it; we will therefore do that in secondary legislation.
Amendments 112 to 120 relate to online content take-down powers and were tabled by my noble friend Lord Lindsay but presented by the noble Lord, Lord Clement-Jones. These amendments would give trading standards departments in Great Britain the power to apply to a court for online interface orders and interim online interface orders to modify, restrict or take down illegal content displayed online.
We welcome the spirit of my noble friend’s amendments. Indeed, the Government have published their consultation response on proposals to empower additional enforcers, besides the CMA, to apply to a court for online interface orders. We have committed to give this additional power to public designated enforcers. These enforcers include, but go beyond, trading standards departments—for example, sector regulators such as Ofcom, which already have consumer enforcement powers under Part 3 of the Bill. We would be pleased to discuss with noble Lords how best to enact these important changes to ensure that the use of this power is governed by adequate procedures.
Lord Bassam of Brighton (Lab)
Is it therefore envisaged that the Government will give extra support to local trading standards officers, so that they will have these take-down powers? That seems to be the implication of what the Minister is saying—that it is not just Ofcom or the CMA but that there will be local enforcement as well, so there will be that combination.
Lord Clement-Jones (LD)
Just to add to that question, is the Minister saying, “It’s going to happen but we just need to get the procedures right and add them”? Is that really all we are waiting for?
Lord Offord of Garvel (Con)
I thank the noble Lords. That is indeed the spirit of what we are saying. We are, in the Bill, giving a power to the courts that will contain the online interface orders. The Government have published a consultation to enable additional enforcers, including the CMA, to apply to a court for these online orders. We are saying that, within the current architecture, we believe that we have the power to do what is required, but that we can make changes after the fact to ensure that the power is governed by adequate procedures.
Lord Clement-Jones (LD)
My Lords, that is slightly eliding the situation. The Minister was talking about the CMA but, earlier, I understood him to be talking about trading standards. Are trading standards going to get those powers and is it just a question of ensuring that we get the procedures sorted out?
Lord Offord of Garvel (Con)
I thank the noble Lord. There is obviously a little confusion about this, so we will need to set it out, which we will do between Committee and Report, to ensure that we know precisely the order of events here.
Lord Bassam of Brighton (Lab)
That is important, because the Minister was talking about the actions in the court while the noble Lord, Lord Clement-Jones, and I were concerned not just with that but with where the enforcement law is going to come from. In the Minister’s letter to us, it would be most helpful if he could set out who will have those enforcement powers and how the mechanisms will work, given the interface between the different enforcing agencies. That would give consumers a degree of comfort.
Lord Offord of Garvel (Con)
I am happy to do that. We will look at that in a bit more detail and write accordingly.
We come to some minor technical government amendments, Amendments 121, 123, 124 and 128, which in the main are minor and consequential. They are intended to provide clarity on how the relevant provisions function and on continuity between the current consumer enforcement regime and the reformed regime under Part 3. I hope these government amendments will be supported. I thank noble Lords once again for their amendments and for their considered remarks on this group.
Lord Clement-Jones (LD)
My Lords, before the Minister sits down, I wonder if he will take another look at Clause 157(5) regarding the amount of monetary penalty that can be imposed. The limitations seem to be there in black and white, yet the Minister is saying that secondary legislation can change that subsection in due course. If he cannot give me an answer now, would he be able to write to all of us? This is an important point.
Baroness Morgan of Cotes (Con)
My Lords, I am grateful to my noble friend the Minister for his response, which I will come back to in a moment.
I thank the noble Lords, Lord Clement-Jones and Lord Bassam, for their support for my amendment. It is small but, I hope, would be highly effective if it were accepted. The noble Lord, Lord Clement-Jones, and I spent a long time debating the Online Safety Act last year. It is clear that online marketplaces are not covered. My noble friend the Minister mentioned user-to-user sites and search engines. They are obviously online marketplaces and highly significant businesses—I have mentioned Amazon but there are others—and I do not think the Department for Business and Trade should be agnostic about harmful materials sold on these sites.
I thank the noble Lords who have spoken on Amendment 110 for the sensitivity that they have shown on this difficult topic. I am grateful to my noble friend for the offer of a meeting to look at the scope of the Bill before Report. I will of course withdraw Amendment 110 at this stage, but I look forward to that meeting and further discussions on this important topic.
Lord Offord of Garvel
Member's explanatory statement
This amendment would clarify that references in this Clause to maximum amounts of daily penalties are maximums per day, not in total.
Lord Offord of Garvel
Member's explanatory statement
This amendment would clarify that references in this Clause to maximum amounts of daily penalties are maximums per day, not in total.
Lord Offord of Garvel
Member's explanatory statement
This amendment would clarify that references in this Clause to maximum amounts of daily penalties are maximums per day, not in total.
Lord Lucas
“4A In paragraph 28(1), after “goods” insert “or articles””Member's explanatory statement
This amendment would seek to allow evidential articles to be taken at the same time as goods under paragraph 28 of Schedule 5 to the Consumer Rights Act 2015.
Lord Lucas (Con)
My Lords, I beg to move Amendment 124A and to speak to Amendments 124B and 124C. These are all small amendments aimed at making trading standards a bit more effective in practice. Amendment 124A would allow trading standards to seize, as well as the suspected counterfeit goods, articles—for instance, clothing used by the trader that puts them at the scene of the crime. At the moment, trading standards do not have the right to seize such articles of evidential value and they would very much like to have it, since it would make it easier to convict rogues.
As for Amendment 124B, at the moment, trading standards are not allowed to open a vehicle if that is where the goods are being stored, because it does not fall within the definition currently used in the Bill—or at least they believe that is the case. They would like, should all the goods concerned be in a van, to be able to open the van.
As for Amendment 124C, sometimes these can be big crimes of hundreds of thousands of pounds. Level 3 just does not meet the case; it is just a bit off the profit. They would like to see the judge able to set the level of the fine to accord to the crime—Gilbert and Sullivan would have approved.
Lord Clement-Jones (LD)
My Lords, once again, with the indulgence of the Committee, I will speak on behalf of my noble friend Lady Bakewell to Amendments 125, 126 and 127.
Before doing so, I say that I support the amendments of the noble Lord, Lord Lucas, which strike me as extremely practical. It must be extremely frustrating when faced with some of the restrictions. This point about vehicles seems to me a particular irritant for trading standards officers—a vehicle being defined as premises. What era are we living in?
We need to bring the powers of trading standards officers up to the 21st century, which is very much the spirit in which Amendments 125, 126 and 127 have been tabled by the noble Earl, Lord Lindsay, my noble friend Lady Bakewell and the noble Baroness, Lady Crawley. Amendment 125 would delete paragraph 17 of Schedule 5 to the Consumer Rights Act, which at present requires trading standards officers to exercise physical powers of entry to premises—this is in the digital age—before accessing information and the seizing of documents that may be needed in criminal proceedings. Accepting this amendment would be an opportunity to finally update the powers of trading standards in this respect. It would have the effect of changing their information-gathering powers to enable documents requested in writing without the need for physical entry to be used in criminal proceedings. This means also relieving the undue burdens placed on businesses and trading standards officers.
For legitimate businesses there is presently the burden of having to interrupt their normal business to provide the requested documents there and then, whereas, under what is proposed in this amendment, if the request is made in writing rather than physically, they will have more time to source the required documents and even seek legal advice should they wish to. For the small band of trading standards officers, the requirement to exercise physical powers of entry across the country to seize documents they may need to use in criminal proceedings is not cost-effective for their cash-strapped local authorities. If a local authority in, say, my noble friend’s Somerset had to deal with a case in Cumbria, it would simply not be viable for this to happen. The criminal activity could go unpunished and the public and consumer would still be at risk from rogue-trader activity.
In the impact assessment for the Bill, it is accepted that:
“Consumer rights must keep pace with market innovations, so that consumers remain confident engaging with businesses offering new products and services”.
That is a good statement, but for this sort of consumer confidence to become more robust, the enforcement powers of trading standards need to be seriously updated and not inhibited by the present inflexibility.
Amendments 126 and 127 propose to substitute the words “England or Wales” and “Scotland” for the words “United Kingdom” in paragraph 44(3) and 44(2) of Schedule 5 to the Consumer Rights Act. The effect of these amendments would be to add a new paragraph to Schedule 16 to the Bill, which would give new powers to trading standards officers to operate across UK national borders where necessary. Cross-border activities should be included in the Bill; current legislation does not make it clear that trading standards officers in England and Wales can exercise their powers across the border with Scotland, or vice versa, even though consumer protection is a reserved power. In fact, the current legislation implies that this cross-border enforcement activity is not permitted, and we are told that, currently, trading standards officers err on the side of caution. Who can blame them in the circumstances? For the success of these new powers and the Bill to take root, trading standards officers should be able to pursue and enforce across the whole of the United Kingdom.
Lord Leong (Lab)
My Lords, I thank all noble Lords who have spoken. We are grateful to the noble Lord, Lord Lucas, the noble Earl, Lord Lindsay, the noble Baroness, Lady Bakewell, and my noble friend Lady Crawley for bringing forward this group of amendments relating to Schedule 16, which is introduced by Chapter 6, Clause 207. They seek to amend Schedule 5 to the Consumer Rights Act 2015.
Amendments 124A and 124B appear to add clarity without altering the intention of the Bill as written. Having said that, we would be interested to hear from the Minister whether there is any reason these changes should not be enacted.
Amendment 124C would make a more substantial change to financial penalties. The current level 3 is no deterrent or obstruction. A mere £1,000 is just petty cash for most businesses, whereas level 5, which is an unlimited fine, would serve as a deterrent and perhaps support some co-operation in investigation. We would like to hear from the Minister whether there has been any assessment of the suitability of obstruction being a level 3 fine since the Consumer Rights Act came into law in 2015. We also seek clarification on whether this is the right place to make such a change, given that its impact would be much wider.
Amendments 125, 126 and 127, tabled by the noble Earl, Lord Lindsay, with the support of my noble friend Lady Crawley and the noble Baroness, Lady Bakewell, make a lot of sense in pursuing investigations in all parts of the United Kingdom, not just England and Wales. That was succinctly explained by the noble Lord, Lord Clement-Jones, so I shall not repeat the point. This would obviously be a matter for the Scottish Government. If the Government agree on the merits, is this something they have discussed with their Scottish counterparts?
The amendments in this group are sensible and designed to be helpful. They should be supported. We look forward to the Minister’s response.
Lord Offord of Garvel (Con)
My Lords, I thank noble Lords for their amendments and their considered contributions regarding Schedule 5 to the Consumer Rights Act 2015, which details the investigatory powers available to consumer law enforcers. As many noble Lords have noted, building a case against rogue traders and rectifying bad business practices not only starts with but depends on enforcers having the right powers to investigate suspected breaches. This is important for all enforcers, but especially so for local authority trading standards departments that typically exercise the full range of Schedule 5 powers. The Government are committed to ensuring that trading standards and other consumer enforcers have the requisite powers to carry out their important work, so we value the perspectives shared by noble Lords today.
Amendment 124A, moved by my noble friend Lord Lucas, would allow “articles” that fall outside the definition of “goods” to be seized and detained by enforcers when exercising their seizure power under paragraph 28 of Schedule 5. I thank my noble friend for this amendment and hasten to reassure him that its intent is, in our view, comprehensively achieved by the statute as it stands. The definition of “goods” under Schedule 5 already encompasses any tangible moveable items. It is not restricted to the goods sold by the trader to consumers. Further, other provisions in Schedule 5, such as the power under paragraph 29 to seize documents where an enforcer reasonably suspects they may be required as evidence in proceedings, can be relied on should there be any doubt as to whether such items are seizable. For these reasons, I hope my noble friend will agree to withdraw his amendment.
On Amendment 124B, on breaking open a vehicle, I again thank my noble friend Lord Lucas for tabling it. This relates to the power under paragraph 31 that allows enforcers either to require a person to break open a container or to open a container themselves in order to seize and detain goods, among other things. It is indeed important that investigators are not frustrated by arguments about what constitutes a “container” and therefore the current definition is broad and means anything in which goods may be stored. Therefore, the definition is capable of including a vehicle that is storing, or may be being used to store, goods which may disclose a breach of legislation.
However, enforcers must consider what exercise of investigatory powers is appropriate in the circumstances. For example, an enforcer may inspect products under paragraph 25 of Schedule 5 for the purposes of checking the compliance of those products with relevant legislation. If the product in question is a vehicle, an enforcer cannot break open the vehicle as that is allowed only for certain purposes, which do not include product inspection. Therefore, I hope my noble friend is reassured that the statute is already sufficiently permissive in the appropriate circumstances and will not press his amendment.
Lord Clement-Jones (LD)
My Lords, the Minister seems to have said two directly conflicting things—that you cannot do something, but that he hopes that his noble friend is convinced that the powers are wide enough. Did we mishear him?
Lord Offord of Garvel (Con)
I hope that the noble Lord did not misunderstand me. I think we said that this is already covered in legislation. The definition is capable of including a vehicle that is or may be being used to store goods that may disclose a breach of legislation. We are being clear that the definition of “goods” is sufficiently broad to include goods or vehicles. I was coming on to say that an enforcer may inspect products under paragraph 25 of Schedule 5 for the purposes of checking the compliance of those products with relevant legislation, so we are tying this back to the relevant legislation. We believe that the definitions are already sufficiently wide and therefore there is no need to further legislate.
Lord Fox (LD)
That is beginning to be helpful, but the Minister will be aware that different local authorities are receiving different legal advice. Some are comfortable with the definition that he has given and others are uncomfortable with it. At some point, possibly during Report, a Pepper v Hart definition that solidly allows legal officers in local authorities to make the decision that a car is a container in particular circumstances would, at the very least, be helpful. Perhaps adopting the amendment of the noble Lord, Lord Lucas, would be even more so.
Lord Offord of Garvel (Con)
I was not aware that there are different definitions in different local authorities. That seems a valid point to address, so we will look at it before Report.
Amendment 124C is on fines for obstructing enforcement officers, for which I again thank my noble friend Lord Lucas. This addresses the question of the appropriate level of fines for the offence of obstructing an enforcement officer, under paragraph 36 of Schedule 5. Currently, the fine must not exceed level 3 on the standard scale, which is £1,000. Amendment 124C would increase that to level 5—an unlimited amount. I fully agree with my noble friend that any sort of obstruction, whether intentionally failing to comply with instructions or knowingly giving misleading information, is a serious matter that must be subject to criminal enforcement.
The current level of the fines was subject to previous government consultation ahead of the introduction of the Consumer Rights Act 2015. It was set to reflect the deterrent purpose of the offence, proportionately and consistently with comparable criminal offences. For example, the penalty for obstructing a police officer or an officer of His Majesty’s Revenue and Customs is set at a maximum of £1,000, which is level 3. We consider that the current level of these fines continues to be proportionate to the offence, consistent with comparable regimes. I once again thank my noble friend for his consideration of this issue and hope that my explanation persuades him not to press his amendment.
I thank my noble friend Lord Lindsay and the noble Baronesses, Lady Bakewell and Lady Crawley, for tabling Amendment 125, which was presented by the noble Lord, Lord Clement-Jones. It would end the prohibition on enforcers to use information provided by a person in response to a written information notice in criminal proceedings against that person. Prohibitions of this sort apply throughout the UK legal system and serve to help protect a person from self-incrimination when enforcement authorities are given broad powers to send information notices to compel the production of information.
The Government have listened carefully to trading standards departments, which consider that removing this prohibition would enable them to gather evidence needed for consumer prosecutions more easily. We have been told that using other information-gathering powers comes with operational challenges, such as having to resource travel outside the local area to carry out investigations. We are keen to work with enforcers to address these challenges. However, this prohibition is an important protection. It safeguards a right that is recognised under English common law and the Human Rights Act.
In summary, Amendment 125 stems from an operational issue that does not justify rolling back well-established legal protections. I therefore hope the noble Lord will feel able not to move this amendment.
Lord Clement-Jones (LD)
Are the Government really saying, more or less, that they do not recognise that the world has gone digital? Will the Minister spell out the principles of common law that prohibit them from allowing trading standards officers to do what we set out in the amendments?
Lord Offord of Garvel (Con)
This says that the Government have the overarching legislative position, but the trading standards departments operate locally, and it is important that central government listens to local government. That consultation listened carefully to the trading standards departments and has come back saying that they believe that removing this prohibition would enable them to gather evidence better and more easily for consumer protection. We follow the local authorities in their requirements.
I turn to the use of investigatory powers across the UK. Amendments 126 and 127, again tabled by my noble friend Lord Lindsay and presented by the noble Lord, Lord Clement-Jones, would permit any trading standards department based anywhere in Great Britain to carry out investigations anywhere in the UK. Current law already allows English and Welsh trading standards departments to use their investigatory powers in parts of England and Wales outside that department’s local area. The same is true for trading standards departments in Scotland, which can already use their investigatory powers anywhere in Scotland.
Extending the powers to investigate across the UK fails to recognise that Scotland has its own legal jurisdiction separate from the single legal jurisdiction of England and Wales. I draw noble Lords’ attention to the fact that consumer protection is a transferred matter in Northern Ireland, where trading standards are a central government function, in contrast to Great Britain’s local authority model. These differences across the UK’s nations provide examples that I hope will persuade the noble Lord not to move Amendments 126 and 127.
Lord Bassam of Brighton (Lab)
I want to tempt the noble Lord to give us a bit more explanation on this. If I understood what he said rightly, it is quite in order for trading standards officers to begin an investigation in their local authority areas and, because it is clearly a broader issue and a company they are looking at operates nationally, it is okay for them to go after it elsewhere. But, when an English trading standards authority wishes to pursue someone in Scotland, is the Minister really saying that, because the Scottish law is different and so on, they could not mount an investigation that had to take place partly in Scotland because that is where the company is operating or trading from? That seems a bit of a gap in provision if it is the case and, if it is not, I would have thought that there needs to be some form of understanding and set of protocols between and across the authorities operating on each side of the border. I am thinking particularly of border authorities in Northumbria and Cumbria working with trading standards authorities in the lowlands. This must be an issue there quite regularly.
Lord Offord of Garvel (Con)
What we are referring to here is that, within these legal jurisdictions, there are differences, not least of all the way prosecutions are conducted in England and Wales versus Scotland and Northern Ireland. Each of those jurisdictions can operate holistically within these jurisdictions. I will write to clarify, but I am pretty sure that the UK remains a united kingdom and, if there is a requirement for someone in England to speak to someone in Scotland, that can still happen. I will find out exactly how it does.
Lord Bassam of Brighton (Lab)
The noble Lord is such a strong unionist that I would be surprised if that were not the case.
Lord Fox (LD)
When the Minister writes that letter, perhaps he could extend it to include the United Kingdom Internal Market Act because that seems not to have been taken into consideration. Some of us here today—at least two of us—participated in the lengthy discussions about differing standards across borders and how they might be enforced, and this seems to fall well into that territory. What consideration has been made of that Act in drawing up the terms of the Bill? It would be helpful if the letter set out the various positions within the internal market Act and how they have been represented in the Bill.
Lord Offord of Garvel (Con)
I thank the noble Lord. I share his interest in this matter, and that was exactly what I was intending to examine. The United Kingdom Internal Market Act is a fundamental new piece of architecture that, on us exiting the EU, allows us to trade as one single nation, and I will always be promoting that.
Lord Lucas (Con)
My Lords, I am grateful to my noble friend for his answers to my amendments, particularly for his offer of a continuing dialogue between Committee and Report. It seems clear to me that there is some different understanding out there regarding the ambit of the powers. I am content with the answers that he has given but would like to make sure that not only is that understood but that that understanding can have effect without something being added to the Bill. However, that is a conversation that we can conveniently have not now, so I beg leave to withdraw the amendment.
Lord Offord of Garvel
“Estate Agents Act 1979
A1 In section 3 of the Estate Agents Act 1979 (orders prohibiting unfit persons from doing estate agency work), in subsection (1)—(a) in paragraph (ba) for “section 217, 218 or 219 of the Enterprise Act 2002” substitute “section 155, 158 or 162 of the Digital Markets, Competition and Consumers Act 2024”; (b) in paragraph (bb) for “section 217 of the Enterprise Act 2002” substitute “section 155 of the Digital Markets, Competition and Consumers Act 2024”.”Member's explanatory statement
This amendment makes a consequential amendment to the Estate Agents Act 1979 as a result of the repeal by the Bill of Part 8 of the Enterprise Act 2002.
Lord Clement-Jones
Member’s explanatory statement
This amendment seeks to prevent confusion amongst consumers about packaging that is designed to mimic a well-known brand.
Lord Clement-Jones (LD)
My Lords, in moving Amendment 130 I will speak also to Amendment 135, which is another amendment in the names of the noble Earl, Lord Lindsay, my noble friend Lady Bakewell and the noble Baroness, Lady Crawley. This is an opportunity to remedy the long-standing, unaddressed market practice of misleadingly similar packaging of consumer products—that is, packaging which mimics that of familiar branded products. Amendment 130 would introduce a strengthened brand practice in Schedule 19.
Misleadingly similar parasitic packaging, otherwise known as copycats or lookalikes, adopts the distinctive features of familiar branded products to dupe shoppers into believing that it has the same qualities, reputation and/or origin as the brand when it does not. Shoppers buy the copy based on these mistaken assumptions and can pay more than they would were the product distinctively packaged. Such packaging is extremely prevalent in the grocery market. It inflates consumer prices and prevent shoppers making informed, accurate decisions.
The evidence I have seen is convincing that packaging mimicry misleads consumers in substantial numbers and distorts buying decisions. The similar packaging plays on shoppers, exploiting the fact that they self-select products from the shelf. Stores stock so many products that decision-making must be, and is, fast—typically around two seconds per choice. Labels are not studied closely. Colour and shape are more powerful stimuli than words and prompt shoppers to buy a product that they did not intend to buy, to pay more and to believe that products have similarities. I have a whole string of assessments here from research such as a UK IPO study, neuroscience research and a 2023 study called The Psychology of Lookalikes.
In 2008, the Competition Commission considered such packaging an issue for consumer protection. During consultations and the debate on the Consumer Protection from Unfair Trading Regulations 2008, the then Government stressed that public enforcement would be effective. This has not proved to be the case. There has been only one successful enforcement action by trading standards in the past 15 years—in 2008 itself—and no enforcement by the CMA.
IP rights are insufficient. Copiers tend to design around registered IP rights, such as trademarks, designs and copyright, to avoid infringement. A passing-off action is impractical, as proving consumer confusion to a court’s satisfaction is complex, particularly when a copier argues that the use of a different product name avoids misrepresentation. The evidence that IP rights are ineffective can be seen in the persistent prevalence of such copies on the market, with two large retailers adopting it as a business strategy largely unchallenged. Affected branded businesses are unprotected, as there is a gap in IP protection. The original copied brand is no longer distinctive; it is devalued, sales are lost and costs increase. Overall, return on investment in innovation, reputation and quality is reduced. Other products in the same category may lose sales if shoppers switch to the copy, assuming leading brand quality at a lower price, potentially leading to delisting.
For the unlawful copier, sales are boosted as shoppers buy their products by mistake or trust them unduly. They can also charge higher prices; the evidence shows that this could be by as much as 10%. The ultimate solution, of course, is not for offending products to be removed from the market, just that they be repackaged distinctively. This would preserve shopper choice, strengthen competition and reduce prices. Amendment 130, as proposed, would benefit many thousands of shoppers and branded companies of all sizes, particularly SMEs, wherever in the UK they are based.
I now turn to Amendment 135 and should say that the next group contains an amendment, Amendment 137, that is also on fake reviews, so this is a bit of a foretaste of what is coming down the track in the next group. Amendment 135 would add two more practices to the list in Schedule 19 of 31 commercial practices that are in all circumstances considered unfair and bad practice. The two additions are, first, a new paragraph 32:
“Stating or otherwise creating the impression that reviews of a product are submitted by consumers who have actually used or purchased the product without taking reasonable and proportionate steps to check that they originate from such consumers”;
and, secondly, a new paragraph 33:
“Submitting, or commissioning another legal or natural person to submit, false consumer reviews or endorsements, or misrepresenting consumer reviews or social endorsements, in order to promote products”.
How often do we all look to see what people have said about a product or service or, indeed, a bed and breakfast before we commit to buying? I suspect that young people are particularly vulnerable to wanting to participate in something that has a good review and appears to be popular.
The Government propose adding fake reviews to the list of practices in the future, but there is no logical reason why they should not be included now. Adding fake reviews to this important list would make them both criminal and civil breaches, as we understand it. Trading standards see the widespread practice of giving fake reviews as clearly fraudulent in nature, and therefore it should be a criminal offence. Fake reviews appear to be particularly prevalent for health supplements, where a single course of some miracle ingredient will cure your arthritis for ever—that resonates with me. Large sums of money can be invested by those suffering constant pain in an effort to get some relief, only to find that they have wasted their money.
I understand that there is a proposal. The Smarter Regulation response was quite clear that there is considerable demand for this. That response contains a great deal of other material as well and is very useful. I think the latest version is dated 24 January this year, so it is hot off the press, essentially. There is this proposal to add fake reviews in the future via a separate statutory instrument, but why should they not be included in the Bill at this stage? The language has been proposed by the Government. This is a growing distortion of the online marketplace. It is unfair to legitimate businesses and completely deceives consumers who may rely on accurate information to validate their choices. I very much hope that the Minister will say that on Report it will be perfectly viable to include language on fake reviews in the Bill. I beg to move.
Lord Lucas (Con)
My Lords, I have Amendment 131 in this group. It is my understanding, and of course the Minister may correct me, that the investment that a student makes in their university course comes under the Bill—that the relationship is one between consumer and provider. Indeed, since this is the largest purchase that a student will make before they buy a house, it seems entirely appropriate that the sort of safeguards in this Bill should apply to university courses. If that is the case, then paragraph 29 on page 362 forbids universities marketing their courses to children, and that does not seem quite right. I would like to understand how the Government see the confluence of those two factors.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise to speak briefly on Amendment 133 in the name of the noble Baroness, Lady Jones of Whitchurch, to which the noble Baroness, Lady Kidron, and I have attached our names. I express support in passing to the attempts to restrict fake reviews, which are clearly an absolute plague online and a cause for considerable concern. I, like many other consumers, very much rely on reviews these days. I am also interested in the amendment of the noble Lord, Lord Lucas. I very much oppose the whole structure by which students are regarded as consumers. The Green Party’s position is that education is a public good, which should be provided for free, but his point raises some interesting questions, on which I would be interested in the Minister’s answers.
Amendment 133 is about so-called drip pricing. I found various government surveys producing different figures on the cost of this to consumers, ranging from £1.6 billion to £2.2 billion each year. We are all familiar with this, unsurprisingly, given that more than half of entertainment providers, transport providers and communications businesses use this as a regular practice: “Get this bargain price. Get in now. Click here: it will cost you only £10”. Mysteriously, as you go through the process, the price keeps going up and up. People fill in all the steps in the forms, fill in their names, tick to say that they have read the terms and conditions—even though they have not—and spend all that time and energy, but suddenly the price is three times what it started as. They feel as though they have spent all that time, so it is worth going hunting around again? Do they have that time?
What we are seeing is very much a change in what might have been considered service businesses; consumers are instead servicing them, with their time, energy and efforts. This is an important area, on which people need transparency. In the cost of living crisis, it is worth noting that so-called budget airlines are particular offenders. Most people think, particularly for a long-distance journey, that luggage is not an optional extra, not to mention that a family travelling should not have to pay extra for seats together. Amendment 133 is a particularly important amendment and I look forward to the Minister’s response.
Lord Bassam of Brighton (Lab)
My Lords, my noble friend has added her name to that of the noble Lord, Lord Clement-Jones, on his Amendment 130. We share his concern that online marketing should not be used to promote products or services by mimicking particular brands. In some ways, it is much easier to fool consumers online into thinking that a particular product has the same characteristics and spec as a branded product. As the noble Lord argued very well, we are all familiar with how cheaper and sometimes inferior products on the shelves are designed to mislead the purchaser. This simple amendment is worth supporting for that reason alone.
I was thinking back to an incident not that long ago, when I was misled into buying a product like Lemsip, simply because the colour of the packaging was almost identical. It was so simple and easy to take the thing off the shelf and put it into the basket but, when I got home, the product was inferior. This is about not just price but quality. This amendment is well worth our support.
Amendment 131 from the noble Lord, Lord Lucas, asks an important question. It is a niche issue for this legislation, but I am nevertheless looking forward to hearing the Minister clearly explain that universities can or cannot continue to market themselves to pupils and parents. All parents, along with their children, want to receive accurate information that is easily accessible and, more importantly, verifiable so that informed choices can be made. As the noble Lord argued, this is one of the more expensive areas of parents’ expenditure on their child’s education and it is only right that we set high standards for the content of the material that is made available to those making applications, and that it is verifiable.
I now turn to Amendments 132, 133 and 144 in the name of my noble friend Lady Jones. Amendments 132 and 144 should be taken together. They would insert into Schedule 19, which deals with commercial practices, the circumstances considered where there is an unfair reference to the marketing of a counterfeit or dangerous good and would empower enforcement officers to require the removal of relevant listings from the internet. We think that this is a fairly self-explanatory process, which should provide protection for consumers from shoddy goods. If the Minister insists that this is not the place for these amendments, perhaps he can explain how else consumers are to be protected and how else this false marketing is to be tackled.
Lord Offord of Garvel (Con)
I thank noble Lords for the amendments in this third group, concerning banned practices. I will take them not necessarily in numerical order.
I start with Amendment 132, tabled by the noble Baroness, Lady Jones of Whitchurch. It would ban in all circumstances the marketing of counterfeit and dangerous products online. Misleading claims in marketing are already offences under consumer protection law and, for unsafe products, product safety law. The Bill makes it clear that online marketplaces, which can facilitate the sale of these products, must act with professional diligence. This can include taking appropriate steps to ensure that counterfeit and dangerous products are not sold or promoted in a marketplace.
The Government recently consulted on strengthening the public understanding of those duties. Our response to that consultation committed us to undertake further work with stakeholders, including platforms, other business stakeholders and consumer groups, in order to identify the scope and content of further guidance in this area and how that work should best be communicated and set out; I would welcome the noble Baroness’s input into that work. Further, the product safety review includes proposals specifically aimed at tackling the sale of unsafe goods online. The Government will publish a response to that consultation in due course; again, I look forward to being able to share that with the noble Baroness and to discussing next steps.
Ultimately, online platforms have brought huge consumer benefits, including by vastly increasing the range of products available to consumers. The Government are committed to ensuring that platforms bear appropriate responsibility for ensuring that unsafe or counterfeit products do not reach consumers, but we seek to do so thoughtfully and in consultation with the public and industry to ensure that any new regulation does not jeopardise those consumer benefits or harm economic growth. I hope that the noble Baroness, having heard this, will feel able not to move her amendment.
Amendment 144, also in the name of the noble Baroness, Lady Jones, would give public enforcers a tailored power to require that the marketing of fake or counterfeit products was removed from the internet. The Government consultation response that I just mentioned also includes a commitment to empower additional enforcers to apply to court for interim and final online interface orders under Chapter 3 of Part 3 of the Bill. These orders facilitate the removal of online content that breaches consumer law. In that context, I assure the noble Baroness that we welcome and intend to honour the spirit of the amendment. I look forward to further discussion on this matter with noble Lords. I hope that, with this reassurance, the noble Baroness will not move Amendment -144.
I thank my noble friend Lord Lindsay for Amendment 135 and his input on this matter of fake reviews. Amendment 135 would add commercial practices related to fake reviews to the list of banned practices in Schedule 19. The Government agree that the law against fake reviews should be strengthened. Following our recent consultation on proposals to tackle fake reviews, and recognising the strong parliamentary interest in this issue, the Government have set out in their response our intention to add the relevant practices to Schedule 19 to the Bill.
It is important to get the details right. I would like to work with your Lordships to ensure that the new rules meet our shared aims of reducing the number of fake reviews that customers encounter online and being clear to businesses on what their duties are when publishing reviews. I would be delighted if noble Lords would meet me to discuss this further. I hope that what I have just set out will mean that my noble friend Lord Lindsay feels comfortable not to move his amendment.
I thank the noble Baroness, Lady Jones, for Amendment 133. It would add drip pricing to the list of banned practices in Schedule 19 to prevent traders adding mandatory fees to the price of a product during the purchasing process. Likewise, the Government agree that the law should be strengthened to protect consumers from hidden fees that can cause them to pay more than they have been led to expect. As we set out in our response to the consultation on improving price transparency, published on 24 January, it is the Government’s intention expressly to prohibit the drip pricing of mandatory fees in this Bill. I would be delighted to discuss this with noble Lords. I hope this means that the noble Baroness will feel comfortable not to move her amendment.
Baroness Jones of Whitchurch (Lab)
My Lords, all these messages about being prepared to talk further are very welcome; I am sure that we will take the Minister up on them.
Part of the issue about drip pricing and the Government’s response to it is the distinction that they have now made between mandatory extra charges and optional ones. I have a horrible feeling that most of the examples we can think of, such as the airline example, will be classified as optional extra charges, which will not be covered by Schedule 19. Can the Minister say more about that?
I think we are all on the same page but a lot of optional charges are misleading in the sense that they are really charges; the noble Baroness, Lady Bennett of Manor Castle, talked about families sitting together or your luggage going on a long-haul flight. I am sorry that we keep quoting flights, because there are many other areas where this applies, but it seems to me that the Government have made a false distinction here between things that you have to pay, which are mandatory and which the Minister is saying will go under Schedule 19, and the rest, which are most people’s experience of drip pricing; as the Minister was explaining, that will not be covered—but I might have misunderstood what he was saying.
Lord Offord of Garvel (Con)
I thank the noble Baroness for that. A distinction has been made as per that wording. As the consultation has come back, there has been a view on the distinction between those two areas, but the whole point of consulting noble Lords between Committee and Report is to allow further investigation, discussion and/or justification of that.
Lord Bassam of Brighton (Lab)
I want to persist a bit more on that. We are now almost at the end of Committee, and Report is probably two or three weeks away. That is not a lengthy period in which to get the drafting right and for us to have that discussion, so I ask that we get a really early draft of these amendments. The wording is important and that will help my noble friend Lady Jones to form a view about whether it covers what we are after here.
Baroness Bennett of Manor Castle (GP)
This is of great concern to many consumer groups, so it is important to publish and make it publicly available so that people are able to examine, think about and get legal advice on it. It is not just the people in this Committee but broader society that really needs to have the chance to input into this crucial issue.
Lord Offord of Garvel (Con)
I thank both noble Lords for those interventions. I am happy to get this to noble Lords as quickly as possible. The whole point of the consultation is to allow consumer groups, which are very vocal on this issue, to be heard, and they have already fed into the process, but I take the point about expedition.
I thank the noble Lord, Lord Clement-Jones, for his Amendment 130 on product packaging. It seeks to legislate against traders potentially copying packaging or other reference material in order to mislead consumers into thinking that the product in question is from the original manufacturer or mislead them about the specifications or characteristics of the product. I thank the noble Lord for giving us a number of examples, which we can all recognise. I agree with him about the importance of ensuring that consumers are not misled.
However, we believe the concerns underpinning this amendment are already addressed through the prohibition on misleading actions in Clause 224 and the banned practice in paragraph 14 of Schedule 19 to the Bill. These prohibit promotions that mislead consumers into thinking that they are purchasing a product or service from a particular manufacturer when they are not. The provision in Schedule 19 achieves what this amendment seeks to do and applies equally to all products and services. Should a trader try to copy another well-known product’s packaging, this would be deliberately misleading to the consumer looking to purchase a product, as currently set out in the banned practice in paragraph 14 of the Schedule and Clause 224.
The noble Lord, Lord Clement-Jones, referred to previous CMA work on this issue. I am pleased to say that there is currently an in-depth CMA study of the grocery section, which has already spurred government action on price labelling rules. The study continues and I would expect it to pick up poor practices of the sort he highlighted. The noble Lord also made an important point about the importance of effectiveness. The additional powers given to the CMA and the courts under Part 3 aim to achieve just that. I hope he will feel comfortable in withdrawing his amendment.
I thank my noble friend Lord Lucas for his Amendment 131, which seeks to exclude universities from the currently banned practice of advertising that includes a direct appeal to children to buy products or to persuade their parents or other adults to buy products for them. This schedule replicates the banned practice in paragraph 28 of Schedule 1 to the Consumer Protection from Unfair Trading Regulations 2008.
There is no evidence that these regulations, which have stood since then, have prevented universities or similar institutions from providing information on themselves or the courses they offer. The banned practice in question is unlikely to stop universities or other providers advertising their courses. However, to ensure that there is no misunderstanding, further information on application can be clarified in a non-statutory way, such as through the guidance that will be issued for the Bill. The noble Lord, Lord Bassam, also pointed out the importance of universities providing accurate information. This is an area where there has previously been enforcement action, which highlights the importance of it being within the scope of consumer law. I hope that my noble friend Lord Lucas will feel comfortable not moving his amendment.
Lord Clement-Jones (LD)
My Lords, I thank the Minister for that almost totally positive response. There is quite a lot to take away from it. I thank the noble Lord, Lord Bassam, for his supportive remarks on Amendment 130 and the noble Baroness, Lady Jones, for signing it.
That was a useful walkthrough of the Government’s response on smarter regulation. What we all want to see is it translated into the Bill at the earliest possible opportunity. Earlier in our discussion, we talked about the need for speed, but we have here the ideal opportunity to enshrine in Schedule 19 the provisions on both drip pricing and fake reviews in the way we have talked about. Indeed, I am pleased that the Minister talked about further discussions between Committee and Report on some of the other aspects in amendments put forward here by the noble Baroness, Lady Jones. The Ministers seem to be beckoning us through an open door; I hope that that is the case and that we do not find it slammed suddenly when we come to Report. Honing the wording between Committee and Report could produce a good result. I am pleased that the Minister was so positive in almost all respects. In one case, he said that it could already be covered, but this Bill is the ideal vehicle to get these things, which were promised in the consultation response, absolutely enshrined.
The one really interesting area—it struck me immediately when I saw the Government’s response—concerns the difference between “obligatory” and “optional” in terms of the drip pricing arguments. We need to get to grips with this because we do not want to see, by a technicality, companies such as airlines—we have talked about airlines before in Committee—escape liability because we have not got the wording quite right. The noble Baroness was absolutely right to raise this issue because the language that the Government used in their response was a bit ominous in that respect.
I look forward to those discussions. In the meantime, I beg leave to withdraw the amendment.
Lord Clement-Jones
“32 Submitting a fake review, or commissioning or incentivising any person to write or submit a fake review of products or traders.33 Offering or advertising to submit, commission or facilitate a fake review, or hosting offers or advertisements for fake reviews without taking reasonable and proportionate steps to remove them.34 Publishing or providing access to reviews of products or traders without taking reasonable and proportionate steps to prevent consumers from encountering fake reviews.35 Presenting reviews or information about reviews in ways which will mislead average consumers about the reviews that a product or trader has received.”Member’s explanatory statement
This amendment would introduce measures to protect consumers from fake reviews.
Lord Clement-Jones (LD)
My Lords, the Committee may get a slight feeling of déjà vu when it comes to my Amendment 137 but we were assured that it covers a different topic and it is therefore perfectly legitimate to have it in a different group. However, there are other aspects—in particular Amendment 143, which I want to speak to in moving Amendment 137. I will be brief.
As we have heard, the Minister is positive about discussions on how we will enshrine fake reviews. As we know, the Government’s response was designed to improve consumer price transparency and product information for consumers. We very much share that intent. They have highlighted how legislation will tackle fake reviews. Any lack of criminal enforcement would be a major concern so I hope that that will be part of the subject we will discuss.
Of course, we know the impact of fake reviews. Amendment 137 is a different way of dealing with the issues. Fake reviews have been identified by the Federation of Small Businesses as one of the three primary problems experienced by smaller firms when trading on digital marketplaces, so preventing the proliferation of fake reviews will support both consumers and businesses; that is a point we should make. This should be added to the Bill.
The one question I have is this: have the Government had discussions with Trustpilot? It would like to see the Government’s proposed wording extended, particularly to the hosting issue. I do not know whether the Minister has a brief on that. I was quite impressed by the Trustpilot briefing and the evidence it gave. It has concerns about other parts of the wording but, for me, the most powerful aspect is making sure that those who host fake reviews are penalised. I hope that the Minister has an answer to that.
Amendment 143 is where I am again the sorcerer’s apprentice. This is an amendment to Clause 288. It seeks further to protect consumers from rogue traders and their unfair practices. It is something that I know the Chartered Trading Standards Institute is keen to see put into practice. It is a breach of Clause 225 of the Bill for a trader to engage in a commercial practice that is a misleading omission, meaning the practice omits material information. That is defined as
“information that the average consumer needs in order to take an informed transactional decision”.
There is much discussion in the consumer field about what information is needed by a consumer and what is merely desired. For instance, there is no specific requirement for a trader to give his or her name and address. Clause 228 adds an additional breach of omitting material information from an invitation to purchase; it states that there are a number of specific matters that are considered to be material and where it could be an offence if the information is not provided to the consumer, so surely things can only get better. However, an invitation to purchase is currently defined in the Bill as
“a commercial practice involving the provision of information to a consumer … which indicates the characteristics of a product and its price, and … which enables, or purports to enable, the consumer to decide whether to purchase the product or take another transactional decision in relation to the product”.
The point that the Chartered Trading Standards Institute and trading standards officers are making in this context is that, in their day-to-day experience, many rogue traders targeting vulnerable consumers, often in their own homes, do not give a price when offering to do work. If they do not give a price, they will not come under this new obligation in the legislation and will get away with their shoddy work or criminal activity, hence the opportunity in this amendment to remove price from the definition of an invitation to purchase. It would automatically mean that the practice is not an invitation to purchase and, therefore, that the information listed in Clause 228 is not considered material information.
To sum up, removal of price in the definition of invitation to purchase would increase consumer protection, as it would automatically make such things as price, the identity of the trader and his or her address become material information. It would therefore be a breach to provide this information to the consumer. I look forward to what the Minister has to say in respect of those two amendments.
Lord Lucas (Con)
My Lords, I have a clutch of amendments in this group. Amendment 138A continues the series of improvements to trading standards regulations. Before we came under EU regulation, we had considerable freedom to deal with pricing abuses. As one of the many advantages from Brexit, I do not see why we should not go back to the situation we used to have.
Amendment 138B looks at the rights that consumers have and what happens when a business ignores them. At the moment, if a business is denying or ignoring rights, trading standards has to take action under the Enterprise Act 2002 by way of a court injunction. It is slow and expensive, so I cannot see why that should not be dealt with under the scope of this Bill.
I hope that Amendment 140 will draw out from the Government an understanding of what information ought not to be omitted. If, for instance, a trader knows that a particular product has a series of adverse and well-informed reviews or has resulted in poor consumer experience, do they have to share that information? If they have it, they will probably be disinclined to be open with it, but do they have to provide it? How far should a trader go to share information of which they are aware and which they know exists but which they would not normally include in marketing their product? Some elucidation of the limits of this would be much appreciated.
Amendment 145B comes back to trading standards. At the moment, the time limit in the Bill is one year. Trading standards operates an intelligence-led approach: it lets information build up for a while before it takes action to make sure that it is acting in cases of consistent abuse rather than one-off problems. Time is then taken to investigate and it takes more time to get to court, so it is very easy to exceed that one-year time limit—particularly in relation to the earlier offences in a group of offences. Two years would be a better expression of the practical length of time that it takes trading standards to bring cases to court.
Lord Holmes of Richmond (Con)
My Lords, I rise briefly to speak to Amendment 140 in my name to add some more fuel to this already well-stoked fire and to set out exactly what we mean in the Bill when we talk about good faith and indeed the lack thereof where a trader does not take into account the interests of the consumer in terms of product design or information about the product or seeks to exploit the consumer because of their biases or particular views to induce a purchase or a desire for a particular product. Amendment 140 merely adds to the excellent amendment, as already set out. I look forward to the Minister’s response.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken in this debate. I am pleased to have added my name to Amendment 137 in the name of the noble Lord, Lord Clement-Jones, which deals with the issue of submitting or creating fake reviews by adding it to the list in Schedule 19 of commercial practices which would always be considered unfair. This is the issue that we touched on in the earlier debate. I am pleased that we have the chance to raise this today because it has been an issue of concern for some time. It is good to get the chance to debate and pursue this, and it is good to hear that the Government are also keen to do that.
We argue that this is not just about the effect fake reviews have on consumers; they affect businesses as well. They damage the livelihoods of many small traders—restaurants and hotels, for example—when their business is deliberately targeted by damaging reviews, or the local competition down the road receives glowing fake reviews which take trade away from the legitimate trader, so this has a business element as well as a consumer element. At the same time, Which? reports that the proliferation of fake reviews for online product sales results in consumers being more than twice as likely to choose poor quality products. We heard a little bit about how that works in the earlier debate.
Urgent action is undoubtedly needed to bring quality standards back into online sales and marketing so that people are not duped. As we have heard, since the amendment was tabled, the Government have produced their response to the consultation on improving price transparency and product information for consumers. It proposes that the Government will add fake reviews to the list of banned practices in Schedule 19. I am grateful to the Minister for hosting a meeting last week where we had a chance to discuss this. It is good to hear that the Government have finally decided to act on it.
However, there are still some outstanding concerns. Concerns have been raised by Trustpilot and others that the fact that the proposed wording lacks clarity. The Government saying that they will work with the Office of the Parliamentary Counsel to clarify the wording is a sign that they have not yet got this quite right. Can the Minister clarify the timescale for that additional work? When will we see the outcome of it?
Concern has also been raised that the Government’s proposals do not address the role played by internet service providers and social media in promoting fake reviews. The noble Lord, Lord Clement-Jones, raised this issue. What action will we take against those who host and reproduce these fake reviews, often knowingly?
Concern has been expressed that the penalty for promoting fake reviews is subject only to civil, not criminal, enforcement. Can the Minister explain a bit more about why that decision was taken? In the meantime, we argue that our Amendment 137 addresses those concerns. We look forward to further talks along the lines that the Minister has proposed, and we hope that he will agree to work with us and the Committee to produce a government amendment that is both clear and comprehensive.
The noble Lords, Lord Lucas and Lord Holmes, helpfully sought greater clarity on consumer rights to prevent consumers being misled or manipulated. The noble Lord, Lord Clement-Jones, rightly mentioned the additional measures needed to protect us from rogue traders. I am grateful to the noble Lord, Lord Lucas, for asking a series of small but important questions around his almost probing amendments. It is important to have clarification on the record, and I hope that the Minister will be able to give it.
The noble Lord, Lord Holmes, helpfully raised the issue of good faith and asked how we can bring some standards back into trading and the exchange of information. Again, I hope that the Minister will be able to clarify that.
We have had a positive discussion on these important points. It is good to hear that there will be further discussion. In the meantime, I look forward to hearing what the Minister has to say.
Lord Offord of Garvel (Con)
My Lords, I turn now to the fourth group of amendments, which concern unfair commercial practices.
I thank the noble Lord, Lord Clement-Jones, for Amendment 137, which would add commercial practices related to fake reviews to the list of banned practices in Schedule 19. The Government agree that the law against fake reviews should be strengthened. Following our recent consultation on proposals to tackle fake reviews and recognising the parliamentary interest in this topic, the Government have set out their intention to add the relevant practices to Schedule 19. It is important that we get the details right.
The noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones, mentioned the concerns raised by Trustpilot around the hosting of fake reviews as well as the hosting and facilitation of fake review training. The Government are sympathetic to these issues. My ministerial colleagues have previously met Trustpilot to discuss such matters. I assure both noble Lords that the hosting of fake reviews is already addressed by our proposals; that said, I would be happy to meet them to discuss this topic further. For the time being, I hope that the noble Lord, Lord Clement-Jones, will feel comfortable to withdraw his amendment.
I again thank my noble friend Lord Lucas for his amendments. Amendment 138A specifically references “pricing” when considering whether a trader is misleading the average consumer. Clause 224 already states that
“an overall presentation which is likely to deceive the average consumer”
is a misleading action. Price clearly forms a part of this overall presentation. I understand the importance of the regulations being robust and clear and I greatly appreciate my noble friend’s close scrutiny of these clauses, which was very much apparent in his remarks. We believe, however, that such a point is better reflected in the accompanying guidance to the Bill. I will ensure that my noble friend’s point is reflected as such.
Amendment 138B specifically seeks to add ignoring or denying consumer rights to the definition of a misleading action. Should a trader make a false or misleading claim about the rights that the consumer has, with a view to denying, ignoring or misinforming them, the existing wording in Clause 224(1)(a), which prohibits the provision of “misleading information” on a
“matter relevant to a transactional decision”,
would apply.
Amendment 140 on misleading omissions would in effect require information that is relevant to a decision about the purchase of a good or service to be provided to the consumer. I believe that the current Clause 225 is an appropriate requirement for information that a consumer needs to be provided. As this requirement is well established in law, it gives traders and consumers certainty on what the information requirements are. The amendment could also give rise to uncertainty in the legislation, which may place additional burdens on traders, such as the potential costs of gathering such information. Although I understand and appreciate what my noble friend is trying to achieve with this amendment, I believe that the Bill as drafted strikes the right balance between consumer protection and not overburdening traders.
Amendment 142 would add examples of where a trader is not acting in good faith to the definition of professional diligence in this chapter. I am grateful to my noble friend Lord Holmes for raising these issues. Misleading consumers in any way that may cause them to take a different transactional decision is already prohibited. Furthermore, there are specific provisions that protect consumers against undue influence and prohibit exploiting vulnerabilities. Clause 226, for example, protects consumers against aggressive practices that exploit any vulnerability. Given the nature of these exploitative practices, we consider that they would be better explained in guidance accompanying the Bill. I would be happy to discuss this with my noble friend ahead of that new guidance being prepared.
I thank my noble friend Lord Lindsay for tabling Amendment 143 to change what constitutes an invitation to purchase. Actions that are considered an invitation to purchase attract specific consumer rights. For example, traders making an invitation to purchase must provide the individual with the information listed in Clause 228. The Government believe that the changes proposed by this amendment would expand the definition too far; it therefore has the possibility of bringing with it unintended consequences. We are of course committed to protecting consumers. Provisions in Chapter 1 of this part of the Bill already achieve a similar aim to this amendment, prohibiting traders from making misleading statements or omissions in respect of all commercial practices.
Amendment 145B, tabled by my noble friend Lord Lucas, seeks to extend the discovery period of an offence under Chapter 1 of Part 4 of the Bill from one year to two years. Again, I understand his rationale for this. It can often take time for trading standards to gather the evidence to pursue a prosecution against a trader who is breaking the law. However, it is also a key principle of our justice system that investigations should be carried out efficiently and in a timely manner. This is important in protecting the rights of both consumers and those accused of criminal offences. We believe that one year to bring criminal proceedings following discovery is the right balance between expedience and giving authorities the time that they need to carry out investigations.
Lord Lucas (Con)
I am grateful to my noble friend for his answers, by and large, but I do not understand how Clause 245 is supposed to work. I cannot see how, in its wording, it provides protection for vulnerable persons. I look specifically at Clause 245(2), which states:
“References … to the average consumer … are to be read as references to an average member of the group mentioned in subsection (1)”,
which refers to a vulnerable consumer. So the wording of the Bill is reducing the level of comprehension required and therefore the level of information being provided for the comprehension of that vulnerable group. It therefore makes vulnerable groups open to exploitation. What am I misunderstanding here? In what way does Clause 245 provide additional protection for vulnerable groups? How does it raise the standards that traders have to meet when they are faced with a vulnerable group?
Lord Offord of Garvel (Con)
I thank my noble friend for that question. The intention of Clause 244, combined with Clause 245, is to afford a higher level of protection in legislation to those who are vulnerable. It sets out how the “average consumer” should be interpreted regarding vulnerable persons. Therefore, if there is some confusion about their rights having been diminished in some way when in fact the Bill is intended to enhance those rights, I think we should get clarification, so I will write to my noble friend on that matter.
Lord Lucas (Con)
I shall be clearer after reading my noble friend’s remarks.
Lord Clement-Jones (LD)
I thank the Minister for his reply to this disparate group of amendments. I thought the discussion about information raised by the noble Lord, Lord Lucas, was crucial because this is so important to the consumer, particularly the vulnerable consumer. I look forward to seeing the Minister’s letter of clarification, or whatever it is that he will come up with, in due course.
I thank the Minister for his response to Amendment 137, which was, in a sense, rehearsed in the previous group. I thank the noble Baroness, Lady Jones, for her support. She raised some important aspects about timescale and criminal offences. I am assuming that how the whole fake review aspect is dealt with predicates whether we can also have criminal liability. If it is added to Schedule 19, it gets criminal liability, but if it is dealt with in another way, it may not. Clarification of this is important because only two areas, I think, in Schedule 19 are excluded from criminal liability. All the rest get criminal liability. Therefore, it is important that the Minister can give that assurance when we have these discussions that that will be the case.
On the guidance that the noble Lord, Lord Lucas, talked about, I hope the Minister’s reply was that that will be part of what we deliver. The unfair practices guidance will be really important. Just today, the Minister clarified, for example, the brands issue, saying that it is covered by paragraph 14, or whatever it was, of Schedule 19, and that it is not necessary to add that wording. This is all part of important guidance, I suspect, in the end. Expecting people to read the Minister’s words in Committee in the House of Lords might be slightly unreasonable, so I hope that the guidance will nail down the interpretation of some of these aspects of Schedule 19, which will clearly be important legislation.
I think there will be great disappointment about the response to Amendment 143. There was a kind of circular argument that it is going too far—but going too far in what respect? The classic “unintended consequences” were raised as well. There is a set of buzz phrases that one can produce in these circumstances, and “unintended consequences” is one of them, but I did not hear a convincing reason why pricing should not be excluded from an offer to purchase. It strikes me that trading standards officers are correct that this could be a potential loophole. There was perhaps a bit of “not invented here” as well, particularly regarding the amendments tabled by the noble Lord, Lord Lucas, on “properly inform”, which I thought were rather good compared to the existing wording. However, we will, no doubt, continue these discussions. In the meantime, I beg leave to withdraw the amendment.
Lord Offord of Garvel
“ScheduleChapter 1 of Part 4: consequential amendmentsAdministration of Justice Act 1970 (c. 31)
1 In section 40(3A) of the Administration of Justice Act 1970 (punishment for unlawful harassment of debtors), for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.Trade Descriptions Act 1968 (c. 29)
2 In section 12(3) of the Trade Descriptions Act 1968 (false representations as to royal approval or award, etc.) for the words from “and” to “2008” substitute “has the same meaning as in Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024 and, for the purposes of this section, a commercial practice is unfair if it would be unfair for the purposes of that Chapter”.Hallmarking Act 1973 (c. 43)
3 In section 1 of the Hallmarking Act 1973 (prohibited descriptions of unhallmarked articles)—(a) in subsection (4C) for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”;(b) in subsection (4D) for the words from “satisfying” to “action)” substitute “an unfair commercial practice involving a misleading action for the purposes of that Chapter”.Prescription and Limitation (Scotland) Act 1973 (c. 52)
4 In paragraph 1 of Schedule 1 to the Prescription and Limitation (Scotland) Act 1973 for paragraph (af) substitute—“(af) to any obligation arising by virtue of rights of redress under Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024;”.Companies Act 1985 (c. 6)
5 In paragraph 17 of Schedule 15D to the Companies Act 1985 (disclosures), omit sub-paragraph (k).Copyright, Designs and Patents Act 1988 (c. 48)
6 (1) The Copyright, Designs and Patents Act 1988 is amended as follows.(2) In section 114A(2)(bb) (forfeiture of infringing copies, etc.: England and Wales or Northern Ireland) for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(3) In section 114B(15) (forfeiture of infringing copies, etc.: Scotland), in paragraph (d) in the definition of “relevant offence”, for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(4) In section 204A(2)(bb) (forfeiture of illicit recordings: England and Wales or Northern Ireland), for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(5) In section 204B(15) (forfeiture of illicit recordings: Scotland), in paragraph (d) in the definition of “relevant offence” for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(6) In section 297C(2)(bb) (forfeiture of unauthorised decoders: England and Wales or Northern Ireland) for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(7) In section 297D(15) (forfeiture of unauthorised decoders: Scotland), in paragraph (d) in the definition of “relevant offence” for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.Trade Marks Act 1994 (c. 26)
7 (1) The Trade Marks Act 1994 is amended as follows.(2) In section 91 (power of commissioners for revenue and customs to disclose information), for paragraph (d) substitute—“(d) Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024.”(3) In section 97(8)(d) (forfeiture; England and Wales or Northern Ireland) for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(4) In section 98(14) (forfeiture; Scotland), in paragraph (d) in the definition of “relevant offence” for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.Enterprise Act 2002 (c. 40)
8 In EA 2002—(a) in Schedule 14 (provisions about disclosure of information) at the appropriate place insert— “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024.”;(b) in Schedule 15 (enactments conferring functions) at the appropriate place insert—“Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024.”Licensing Act 2003 (c. 17)
9 -In paragraph 23 of Schedule 4 to the Licensing Act 2003 (personal licence: relevant offences), for the words from “regulation” to “2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.Companies Act 2006 (c. 46)
11 In paragraph 25 of Schedule 2 to the Companies Act 2006 (specified persons, descriptions of disclosures etc for the purposes of section 948), omit paragraph (j).Regulatory Enforcement and Sanctions Act 2008
12 In Schedule 3 to the Regulatory Enforcement and Sanctions Act 2008, at the appropriate place insert—“Digital Markets, Competition and Consumers Act 2024, Chapter 1 of Part 4.”Consumer Rights Act 2015 (c. 15)
13 (1) Schedule 5 to the CRA 2015 (investigatory powers: enforcer’s legislation) is amended as follows.(2) In paragraph 10—(a) omit “regulation 19(1) or (1A) of the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277);”;(b) at the appropriate place insert—“section 229(1), (2) or (3) of the Digital Markets, Competition and Consumers Act 2024.”(3) In paragraph 18(b) for “the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277)” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.Online Safety Act 2023 (c. 50)
14 (1) The Online Safety Act 2023 is amended as follows.(2) In section 59(6) (“illegal content” etc) for “the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277)” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(3) In section 218(3)(b) (power to amend section 40) for “the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277)” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(4) In section 222(6)(b) (power to amend Schedule 7) for “the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277)” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.”Member’s explanatory statement
This Schedule makes amendments that are consequential on the revocation of the Consumer Protection from Unfair Trading Regulations 2008 and the commencement of Chapter 1 of Part 4 of the Bill.
Lord Offord of Garvel
“(2) Schedule (Chapter 1 of Part 4: consequential amendments) contains further consequential amendments relating to this Chapter.”Member’s explanatory statement
This amendment moves the consequential amendments to primary legislation that were previously in clause 249 into a new Schedule (see my amendment to insert a new Schedule after Schedule 19). The new Schedule contains the moved consequential amendments and additional ones.
Lord Lucas
Member’s explanatory statement
The purpose of this amendment is to focus discussion on the effects of paragraph (c).
Lord Lucas (Con)
My Lords, we now move on to subscription contracts. I would very much like to understand the reason for Clause 252(2)(c). The Government seem to contemplate that, if a consumer enters into a contract providing for the recurring supply of goods, is liable to pay for each supply and has no right to bring the contract to an end, the consumer deserves no protection under this Bill. What are these contracts? I am delighted to say that I have failed to enter into such a contract in my life. I did not know that such a contract, where there is no right for the consumer to cancel under these circumstances, existed or was common. What is Clause 252(2)(c) aimed at in terms of practice out in the real world? Given these contracts, whatever they are, why does the consumer not deserve protection from them? I beg to move.
Lord Mott (Con)
My Lords, it is a pleasure to take part in this fifth day of Committee. I will speak to Amendments 148A and 148B, which pertain to an exclusion to the subscriptions chapter. Subscription contracts are becoming increasingly popular in our society. I support the Government’s ambition to ensure that consumers are given strengthened protections in these contracts. However, I wish to ensure that we target the right kinds of contracts and businesses with the new subscription requirements.
Schedule 20 has an exclusion for foodstuffs delivered by an unincorporated trader; to my reading, this appears to target certain micro-businesses. To qualify for this exclusion, a trader must deliver foodstuffs on its own behalf and must not be a body corporate. I support the need for a narrow, targeted exclusion for micro-businesses providing local goods and services, but I worry that the requirement not to be a body corporate will unfairly impact on incorporated micro-businesses that have similar characteristics to unincorporated ones.
For example, businesses such as a farm shop or corner shop providing local food subscriptions, or a vineyard providing locally produced wine on subscription, will be caught by the subscriptions chapter if they are incorporated, but not if they are unincorporated. To me, this appears to be an unfair technicality impacting these businesses; many small micro-businesses may fall through the cracks of the exclusion. That is why Amendments 148A and 148B in my name would change the requirement for a business not to be a body corporate to a requirement for a business to be a micro-business, as defined by Section 33 of the Small Business, Enterprise and Employment Act 2015.
These amendments would ensure that micro-businesses delivering foodstuffs locally benefit from the exclusion even if they are incorporated. They would retain all the other requirements so that the exclusion rightly remains targeted on only the smallest businesses. I hope that the Government understand the need for tweaks to this exclusion and are therefore minded to support these amendments.
Lord Clement-Jones (LD)
My Lords, I will speak to Amendments 150 and 151 and Amendments 153 to 167. This is a rather voluminous set of amendments, but they are all designed to try to bring the pre-contract information requirement for subscription contracts back to some of the language of the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. The theme for these provisions is: if it ain’t broke, why fix it?
These amendments seek to maintain the flexibility for traders currently provided by those regulations by taking account of the limited time and space available for providing pre-contract information for certain formats and connected devices, and by recognising that certain key pre-contract information may be apparent from the context. The new clauses—Clauses 254 and 255—together with Schedule 21 are designed to replace the pre-contract information requirements for subscription contracts set out in the regulations. The clauses establish two sets of pre-contract information: a long set of full pre-contract information that must be given or made available to consumers before they sign a contract and a shorter set of key pre-contract information that must be given to the consumer all together, separately to any other information. The latter set must be displayed in such a way that it does not require the consumer to take any steps, such as clicking a link, and it must be displayed prior to the consumer entering into the contract.
But the Bill does not provide for the limited time and space allowances established by Regulation 13(4) of the CCR, which are necessary for certain formats and connected devices. In addition, the Bill does not reflect the flexibility provided by the CCR in terms of recognising key pre-contract information that is apparent from the context. This one-size-fits-all approach is not appropriate, given the many different types of subscription contract and consumer journey that the Bill is intended to cover, and given the varying screen sizes that consumers may use to enter into a contract, particularly on mobile devices.
These amendments are designed to amend Clauses 254 and 255 and Schedule 21 to provide more flexibility for the presentation of pre-contract information. They would import a standard of reasonableness to a trader’s assessment of whether information is apparent from the context. They would distinguish between the timing of pre-contract information and full pre-contract information, in line with the current approach of the CCR. They would enable traders to choose the most appropriate techniques to bring the pre-contract information to the attention of the consumer. They would add a new clause to reflect the limited time and space allowances provided by Regulation 13(4) of the CCR—this is necessary for certain screen formats and connected devices. They would enable traders to choose how best to present pre-contract information in a clear and comprehensible manner, on the basis that providing information all at once will not always be the most effective or transparent approach. They would simplify information about cancellation and avoid duplication. They would remove the pro-rated monthly price from the key information about a subscription, as this may confuse consumers, and they would make clear that certain information should be presented only if applicable.
In summary, it is not clear why we are going so much further than the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations, which, in the view of many, have worked quite well. Of course, we will deal with the difference in the cooling-off requirements—also covered by the CCR—when we debate the amendments of the noble Lord, Lord Black, in a few groups’ time. In the meantime, I very much hope that the Government will adopt a rather more flexible approach than they seem to have in the Bill as it stands.
Baroness Jones of Whitchurch (Lab)
My Lords, I will speak briefly on this group because I am very aware that we will have a more substantive debate on subscriptions in the coming groups, so forgive me if I am very brief on some of the issues raised.
I am very grateful to the noble Lord, Lord Lucas, for his amendment. We have consistently argued for clarity, and he is right to hold our feet to the fire over the meaning of the consumer bringing the contract to the end. I am grateful for him probing a little more on what that actually means, and I look forward to hearing the Minister’s clarification on this.
I was concerned when I first read the amendments of the noble Lord, Lord Clement-Jones, that they seemed to be an unnecessary watering down of the rights of consumers under the consumer contracts regulations and introduced some ambiguity where there had previously been clarity. He has gone some way to clarifying what he meant by this. It is very unusual for me to be at odds with him. He might know far more about the subject than I did, because I was just going on what I was reading. I would be happy to talk to him more about it.
I of course understand that some mobile devices are too small to display complex pre-contract information. I am sure that we have all been guilty of ticking the box to say that we accept the terms and conditions when we have not actually read them. However, there should be a responsibility on traders to publish the pre-contract details in a simpler form, using better digital design, rather than being given more legal flexibility about how that information is communicated, which rather lets them off the hook. Maybe this is a discussion that we could carry on outside this debate.
Meanwhile, I am grateful to the noble Lord, Lord Mott, for raising the question of microbusinesses and what conditions should apply before the subscription contract regime kicks in. He raised a very interesting question which I have some sympathy with, about very local traders in a locality such as a farmer’s vineyard. I would be interested to hear what the Minister has to say on this, because we need to protect against the unintended consequences of what he is saying. We need to double check that we are not encouraging rogue businesses to re-describe themselves to get through the loophole, but I am sure that he will address that point when he replies.
As noble Lords can see, I am sitting on the fence on most of these amendments, and I am happy to stay there for the time being. I look forward to hearing what the Minister says, which might persuade me either way.
Lord Offord of Garvel (Con)
I thank noble Lords for their contribution to the group of amendments, which is concerned with subscription contracts. I again thank my noble friend Lord Lucas for introducing this topic and for his amendment. Amendment 148 would alter the definition of a subscription contract, meaning that contracts where a consumer does not have the right to bring a contract to an end would be brought within the scope of the chapter.
If we were to expand the definition in this way, many parts of the chapter would serve no purpose. For example, if a consumer were to enter a one-year contract for a service which had fixed payments spaced throughout the year, but the contract expires automatically at the end of the year and no further payment would be taken, the consumer would not need regular reminder notices about their contract as they would not have the right to end that contract before it expires. If, however, the contract automatically renews at the end of the year, rolling over into to another year-long contract, then the consumer has an opportunity to bring a contract to an end and therefore would benefit from being reminded that they can end their contract before it auto-renews.
I will give another example, as my noble friend requested, which may illustrate the point more clearly. If a consumer were to enter a contract with a builder for house renovations and pays in instalments, the consumer would rightly not have a right to cancel the contract before the payment period ends. The provision in the Bill would therefore not apply. Of course, where contracts do not contain a right to be brought to an end, they will continue to be regulated by the existing consumer contracts regulations 2013, where applicable. I hope that my noble friend finds this explanation satisfactory, and that he will therefore feel comfortable withdrawing his amendment.
Lord Clement-Jones (LD)
I thank the Minister for the way he has set that out. Will he explain how much consultation there was and the nature of it over the introduction of Schedule 21?
Lord Offord of Garvel (Con)
I think I should write to the noble Lord to give that in detail.
I turn to the exclusion for microbusinesses. Amendments 148A and 148B, tabled by my noble friend Lord Mott, would replace the requirement for a business to be unincorporated in order to benefit from the delivery of foodstuffs exclusion, with the requirement to be a microbusiness as per Section 33 of the Small Business, Enterprise and Employment Act 2015. The purpose of the unincorporated aspect of the exclusion is to safeguard against larger businesses restructuring in such a way as to benefit from the exclusion, ensuring that only microbusinesses benefit and that there is greater consumer protection in the food subscriptions market.
My noble friend has raised an interesting point about the application of this chapter to certain incorporated microbusinesses, such as local farm shops, that I am keen to explore. However, the amendment as drafted may not work as intended. That is because Section 33 of the Small Business, Enterprise and Employment Act sets out only broad criteria by which microbusinesses should be defined and defers much of the detail to regulations that have yet to be made. With that said, I am happy to work with my noble friend further to understand his concerns and to ensure that the exclusion captures the right businesses. I therefore hope he is suitably reassured.
In her remarks, the noble Baroness, Lady Jones, raised the important point about ensuring that the exclusion for microbusinesses remains narrow and well-targeted to ensure maximum consumer protection. I wholeheartedly agree with her on this matter, and I assure her that that is the Government’s intention. I thank noble Lords once again for their amendments and for their valuable contributions to this debate.
Lord Lucas (Con)
I am grateful to my noble friend for his response to my amendment, which I will read with care when I have Hansard in front of me. For now, I beg leave to withdraw the amendment.
Lord Mendoza
“14 Membership subscriptions which qualify as gifts to charity in accordance with the provisions of the Income Tax Act 2007, Part 8, Chapter 2 (gift aid).”Member's explanatory statement
This amendment would list charity membership subscriptions which qualify for Gift Aid as an excluded contract pursuant to Clause 253 and Schedule 20 (Excluded Contracts) of the Bill.
Lord Mendoza (Con)
My Lords, in moving Amendment 149, I declare my interest as the chairman of Historic England, which also has oversight of English Heritage, which looks after our national heritage collection.
The subject of this amendment was raised by many noble Lords—probably at least a dozen—at Second Reading: the treatment of automatically-renewing membership subscriptions for charities. These subscriptions are vital and a brilliant example of how commercial many of our charities, both large and small, have become in the way they augment their operating models with a regular membership subscription, which can be paid by direct debit monthly or annually. I know that we have all received all sorts of advice from large charities such as the National Trust, Kew, Tate, English Heritage, the Royal Horticultural Society, the RSPB, the Royal British Legion and so on. We can tell how important it is to them.
These membership subscriptions are treated as donations, but they come with membership benefits such as magazines, newsletters and free parking. I have just looked at the Natural History Museum, where you get free or discounted entry into its silent discos. All sorts of things are provided but, as noble Lords know, under the Income Tax Act the subscriptions are treated by HMRC as donations. They are eligible for gift aid—this is the key thing—provided that the payment is not subject to any condition as to repayment. That is what you would expect; if you give £100 to a charity, you do not expect to be able to ask for it back again next month. If it is a donation it is clearly not refundable, but noble Lords can see that there is a lack of clarity here.
I mentioned some of the numbers at Second Reading because they are significant. The National Trust is getting on for somewhere between 5.5 million and 6 million members—I cannot get a precise number. That is not that far short of the membership of the TUC, to give noble Lords some idea of the scale and extraordinary success of that organisation. Its membership subscription income is nearly £230 million, of which £47 million relates to the gift aid rebate. Similarly, English Heritage, the organisation that looks after the national heritage collection, as I said, has an income of £130 million, and membership subscription is its largest source of revenue at £48 million. Other organisations are similar. Tate, which I have just looked up, has £16 million in membership subscription income. The RSPB has £46 million in subscription income.
This amendment tries to place this kind of specific membership subscription income, which is narrowly defined as
“gifts to charity in accordance with … the Income Tax Act”,
to try to get them included in Schedule 20, on page 369 of the Bill ,as a category of excluded contract. I know that my noble friend’s department has done a lot of work on this with Treasury and HMRC officials, so I look forward to hearing whether there is any further update on how they might deal with this situation. The Minister has also expressed his assurance that there is certainly no desire in the Bill to somehow limit the application of gift aid to these charitable subscriptions, so it will be important to do this. The proposed amendment is simple and clear, but I will wait to hear what he says.
We must remember that these charities operate mostly on a break-even budget and their budgets are very hard to balance. They try to balance it across their operating model, looking at not just these membership subscriptions but admissions, fundraising and commercial ventures. They would find it very hard to withstand a sudden withdrawal of the ability to claim back these significant amounts of contribution through the gift aid process, so I look forward to some reassurance from my noble friend.
Lord Harris of Haringey (Lab)
My Lords, first, I should apologise to the Committee that this is my first involvement in the Bill. Secondly, I declare my interest as chair of the Fundraising Regulator, which overseas and regulates charitable fundraising. I want to say how important the amendment moved by the noble Lord, Lord Mendoza, is. The number of charities that are potentially affected by this is enormous.
I am quite clear that this is an accidental consequence of what the Government are trying to do in the Bill. It was never aimed at undermining the financial position of charities but the reality is that, because of the rules that exist on the way in which gift aid operates, it would have that effect. It would mean that you would be entitled, as a consumer, to change your mind suddenly. Okay, I believe that people can change their mind, but most people who enter into subscriptions do so on the basis that they have made that decision and want to give money to the charity concerned.
The problem arising is that the HMRC rules would not allow gift aid to be paid on any contribution where there was such an opportunity to return in that way. The whole purpose of a charitable donation is that you have given it to the charity concerned not because you are looking to get a series of benefits back but because you are making a donation. That is why gift aid is allowed. This was an unintentional consequence of what is otherwise a series of sensible protections for consumers. I hope that, when he responds, the Minister will make it clear either that he can accept his noble friend Lord Mendoza’s amendment or that this loophole will be closed.
Lord Vaizey of Didcot (Con)
My Lords, I support the amendment of the noble Lord, Lord Mendoza, as well and declare my interest as a trustee of Tate. Everything that has been said is absolutely accurate. This is one of those situations where we are all on the same page, in the sense that I think the Government recognise that this is an issue that needs some clarity. It is certainly not their intention at all to put charities in a position where they will lose access to gift aid based on subscriptions or donations that are given to them on a regular basis by the people who support them.
The noble Lord, Lord Mendoza, indicated that many charities depend on membership subscriptions; that is the vernacular used when you join an organisation such as the National Trust or take out a membership with Tate. Certainly, by my now being poacher turned gamekeeper, as it were, and being on the board of a large museum, I see at first hand just how important subscriptions are to Tate. They are a really important revenue generator; we are very successful in securing memberships. They are a way forward for a lot of our national charities to engage a wide community who may not be able physically to visit the museum or organisation. People who live abroad can also potentially become members, although I appreciate that they would not necessarily be able to give gift aid in that respect. This is a huge way forward and it would be a retrograde step if charities found themselves in a difficult situation.
I gather that the Government have made it absolutely clear that, if you take out a subscription and receive nothing in return, that will to all intents and purposes be an annual or monthly donation on which gift aid can be claimed. However, as the noble Lord, Lord Mendoza, indicated, a lot of ancillary benefits now come with membership as a way of attracting people to take it. Obviously, in the case of museums, that might be free entry to their paid exhibitions and a regular magazine. I was unaware until the noble Lord rose that silent discos are now part of the mix—although I gather that the Natural History Museum calls them dino discos, which makes them even more attractive and means that I will leave this Committee and immediately take out a subscription.
The reason that the amendment has been put forward is to provide clarity in the simplest way. Charities are exempt from VAT and can claim gift aid. This does not provide a Trojan horse, where a private company says “Okay, the way to get around the welcome consumer protections that the Government are bringing in is to claim that we are a charity”. Charities have to go through a lot of hoops to become a charity, so exempting them from Schedule 20 would provide exactly the clarity that is needed.
As I say, we are here to listen to the Government because we know that they recognise that this is—I was going to say “a problem”—an issue. The Government are therefore in a great position to tell us what their thinking is as this is a discussion between those of us who have concerns and the Government who recognise those concerns and want to allay them with either their own amendment or clarity from the Minister.
Baroness Young of Old Scone (Lab)
My Lords, I regret my inability to be present at Second Reading. I support Amendment 149 from the perspective of having been chief executive of two membership charities—the RSPB and Diabetes UK—and my current experience as chair of the Woodland Trust. All three of these charities, and many others about which noble Lords have heard tonight, rely significantly on membership subscriptions and the associated gift aid for their important works. There are big numbers of people involved. As noble Lords heard, the RSPB has more than 1 million members and the Woodland Trust is hotly pursuing it and increasing its membership.
However, I take a slightly different perspective from that of the noble Lord, Lord Mendoza, because it is important to understand that the relationship of membership charities with their members is not transactional. It is not about saying, “You give us this money and we will give you these services”. It is not like that at all. There are ancillary things that members get, but I would not have thought that there are many cases of people giving money to these charities simply in return for the services that they might receive. It is more of a relationship of trust, in which members become part of the charity’s family. The membership donation is unconditional and unrestricted. The member says, “I trust you, as an organisation, to continue to do good things with my money, as you have demonstrated in the past”.
As noble Lords have heard, eligibility for gift aid means that membership subscriptions cannot be cancelled, although they might not be renewed if members fall out with the organisation. The risk is that that very different non-transactional relationship is swept up with the idea of subscription contracts and that, somewhere along the line, these charities lose their valuable gift aid. I am sure that the Minister will assure the Committee that that is not intended but, as much as I trust his assurances, it would be safer if Amendment 149 were agreed and added to Schedule 20 to the Bill.
Baroness Harding of Winscombe (Con)
My Lords, I fear that sometimes it is not enough that everything on an issue has been said; we have to make sure that everyone has said everything that needs to be said. I will be extremely brief but, as I raised this at Second Reading, I lend my voice in support of my noble friend Lord Mendoza’s amendment.
Can the Minister straightforwardly assure us that it is not the Government’s intention to prevent charities being able to access gift aid on membership subscriptions? If he can make that assurance, I expect him, as does the noble Lord, Lord Harris, either to accept this amendment or explain to us the Government’s alternative cunning plan to achieve the goal that I hope everyone in the Committee has.
Lord Clement-Jones (LD)
My Lords, I cannot think of a better introduction to an amendment than the different speeches we have heard. I belong to many of the organisations that have been mentioned. We all have a personal interest in so many of the organisations that depend on subscriptions.
The noble Lord, Lord Mendoza, talked about the impact of the possible loss of gift aid; the noble Lord, Lord Harris, on the issue of why gift aid could be lost; the noble Lord, Lord Vaizey, about the importance of subscriptions going forward; and the noble Baroness, Lady Young, about the different kinds of relationship this represents. To round it off, the noble Baroness, Lady Harding, started to hold the Minister’s feet to the fire with the questions that need asking. This amendment has been comprehensively and extremely well spoken to.
We have all had the NCVO briefing, which has a galaxy of different organisations all making the point that the Government really need to create an exemption. This is a very elegant solution that I hope the Government will adopt but, as the noble Baroness, Lady Harding, said, the Government need to reassure us that this was not intended as part of the new subscription regime. I very much hope that, at this moment, the Minister and the department are cooking up a solution as good as the one that the noble Lord, Lord Mendoza, has put forward, or that they are simply going to accept this. In terms of the arguments made, this has been a slam dunk. I would have thought that accepting the amendment of the noble Lord, Lord Mendoza, is a total no-brainer, otherwise I can see Report stage being carnage.
Lord Bassam of Brighton (Lab)
My Lords, I congratulate the noble Lord, Lord Mendoza, for scripting such a simple and clear amendment. We are acting as co-signatories, and it seeks, very simply, to exempt third sector charities from the effective limitations on subscription contracts in the Bill.
I appreciate that there have already been several attempts to find a solution to this conundrum, including amendments in the Commons. I understood that Ministers were not particularly attracted to this solution, which seeks to list charity membership subscriptions which qualify for gift aid as an excluded contract pursuant to Clause 253. We were a bit reassured by the letter that Kevin Hollinrake, the Minister in another place, wrote to the National Trust, setting out the Government’s position. He said that it was not their intention to create uncertainty about how different legislation might apply. His letter, dated 23 November, also said that cross-departmental work was being undertaken to consider whether clarification would be beneficial. Having listened to everybody this evening, it is pretty clear that it would be beneficial.
If this approach does not meet the happiness threshold for Ministers, this debate is the opportunity for the Minister to explain where the Government’s internal departmental thinking has got to and what other solutions might be available. The Minister argued in his letter to the National Trust that Chapter 3 of Part 4 is unlikely to apply because there is no contract to be deemed a subscription contract. Given the net value of gift aid to charities—for the National Trust it is £47 million, English Heritage is £100 million et cetera—we think there needs to be clarity. We cannot leave a degree of uncertainty. It certainly does not appeal to us to do that at this stage, given the law of unintended consequences. We cannot rely on an assurance that it is deemed unlikely that the legislation would have the effect that many of the charities that we have been talking to have said it would. The charities need certainty and clarity as well.
If it is not this amendment, what amendment will be brought forward? As the noble Lord, Lord Clement-Jones, said, carnage could definitely occur on Report if we do not get a ready-made solution. It needs to be put right and put right now.
Lord Offord of Garvel (Con)
I am extremely grateful to my noble friend Lord Mendoza for moving this amendment and for his compelling speech. I also thank other noble Lords who spoke so passionately on this issue.
Amendment 149 would exclude charity membership subscription contracts eligible for gift aid from the scope of the Bill’s subscription contracts chapter. Many of us have heard strong representations from stakeholders on this matter and it has been valuable to hear the contributions from noble Lords today. It is clear that a number of charitable organisations have concerns about the interaction between the Bill, the existing gift aid rules and the potential implications for their operating models.
Like everyone who spoke, I fully understand the valuable additional income that gift aid provides to charities; as my noble friend Lord Vaizey put it, we are absolutely on the same page as far as that is concerned. Moreover, I assure your Lordships that it is absolutely not the Government’s intention to undermine this critical income for charities.
Lord Clement-Jones (LD)
I want to clarify what the Minister just said. Does he plan to come back with a solution on Report? Otherwise there is going to be jeopardy. If the Bill goes through and the Government anticipate doing something after that, charities are going to be in a really difficult position. Presumably the Minister is pledging to come back with a full solution on Report.
Lord Bassam of Brighton (Lab)
Before the Minister replies to that point, what is it about the amendment moved by the noble Lord, Lord Mendoza, that is so objectionable? I heard the Minister say that charities are not usually excluded from the effects of legislation in the way that the amendment suggests, but I do not see why they could not be made exempt for this particular purpose.
Lord Offord of Garvel (Con)
I thank both noble Lords for their interventions. To take the latter point first, it is absolutely the case that charities are required to live within the statute book generally and are not given exclusions. To take the point made by the noble Baroness, Lady Young, I accept that there are commercial elements to these donations. That may not be the primary purpose but they are commercial none the less, and there are examples where benefits are given to donors in return for donations.
Baroness Young of Old Scone (Lab)
That is the exact opposite of what I was trying to get across, so obviously I was not being very clear. The point is that the vast majority of donors give donations to an organisation for the good work that it carries out, rather than because it is a subscription to a particular service. It is therefore not a transactional relationship. It is not, “I will pay you to get this delivered”; it is, “I will pay you because you do really good stuff and I want you to keep doing it”. It is a non-transactional relationship, while subscription contracts are a very transactional relationship. That is the point I was trying to get across.
Lord Bassam of Brighton (Lab)
I have another point that the Minister might like to think about. Interestingly, the noble Lord, Lord Mott, was arguing for an exemption for micro-businesses. The Minister said earlier that he would be interested to discuss ways in which that might be practicable. Why can we not have a similar discussion on the point about an exemption for charities?
Lord Vaizey of Didcot (Con)
On that point, if the Minister is saying that charities should not be exempt from the law, of course we all agree. If an employee of a charity is treated badly, they are perfectly entitled to take the charity to court and get compensation. The key point here is that membership subscriptions have been able to have gift aid claimed on them and HMRC has made it clear that gift aid is claimable. Now that charity subscriptions are being brought actively within the scope of the Bill by not being exempted, gift aid will be removed by HMRC as a result.
It would be different if we were starting from a position where charities had never been able to claim gift aid and had, in effect, been offering commercial subscriptions. In the same way, when you go into a shop at Tate and buy something that is defective, you have all the consumer protections available to you. You are not giving a gift aid donation when you buy a mug at Tate; you are buying a mug and if it falls on your cat’s head when you get home, you will be able to sue Tate. That is fine, but subscriptions are clearly gift-aidable donations which are now being actively brought within the scope of this Bill.
Lord Harris of Haringey (Lab)
My Lords, the Minister said that he would come back on Report, but it would be helpful if he would come back before Report so that all noble Lords can consider how he does so and table amendments accordingly.
Lord Offord of Garvel (Con)
I thank noble Lords for their contributions. I can confirm that we will come back before Report. The objective is to get a solution for this issue and to have a satisfactory outcome, so that we avoid carnage in the other place.
Lord Mendoza (Con)
My Lords, I am so grateful for the support of noble Lords. The range of experience and advice we have had in this Room is admirable. It is incredible and so helpful that we have the chairman of the Fundraising Regulator right here. I am grateful for the comments of the noble Lord, Lord Harris, and the interjection of my noble friend Lord Vaizey. I had the same thought.
Lord Vaizey of Didcot (Con)
On a point of information, every time I make a speech where I am sycophantic about noble Lords, I end up in Private Eye. I hope my noble friend is aware of that.
Lord Mendoza (Con)
I hope that results. I am grateful to the noble Baroness, Lady Young, for her intervention. Of course, she is right: people contribute to charities because they care deeply about the charity’s mission. Although, as she said, there is no transactional element, if you go on the website of the Natural History Museum or the Tate and to “Buy a membership”, they will clearly list all the benefits that you get, so there is an element of transaction to it. I wanted to bring that out, so that it is clear to the Treasury and HMRC when they concoct whatever regulations they are concocting that we make sure that gift aid is still claimable and that these membership subscriptions still count as a donation to support the charity’s mission. It may be that some charities describe their membership differently from others. I have not checked the Woodland Trust’s website; it may well be completely different from that of a museum or the National Trust.
I am grateful for the support of my noble friend Lady Harding, who could not have been clearer in her request to my noble friend the Minister. I am also grateful to the noble Lord, Lord Clement-Jones, for supporting this amendment and contributing his remarks.
To add to the last point that was made about the simplicity of our amendment, we are trying to exclude charities not completely but just from this narrow point of gift aid, which was carefully defined at great length in the Income Tax Act 2007. We are trying to exclude just this one thing. Perhaps my noble friend the Minister will be able to go back to HMRC or the Treasury to see whether they can find some way of supporting this amendment. It seems clear and simple, without introducing a whole set of other complexities.
I am grateful to my noble friend the Minister for giving me the opportunity to talk with the Secretary of State today. I certainly received reassurances from her and, as I say, that should bring some comfort to the Room. I am grateful to noble Lords for this debate. I beg leave to withdraw the amendment.
Digital Markets, Competition and Consumers Bill
Wednesday 7th February 2024
(5 months, 3 weeks ago)
Grand CommitteeRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 12-VI Sixth marshalled list for Grand Committee - (5 Feb 2024)
Lord Lucas
“12 A summary of the charges that the consumer may incur if they use the service during a cooling-off period but then cancel the contract.”Member’s explanatory statement
Alongside another amendment in the name of Lord Lucas, the purpose of this amendment is to focus discussion on how use of a subscription contract during a cooling-off period is charged for if the contract is cancelled within the cooling-off period, and the information that the trader must publish in that regard.
Lord Lucas (Con)
My Lords, in speaking to this amendment, I will also speak to Amendment 191, and in doing so declare my interest as the proprietor of the Good Schools Guide, an organisation that derives substantial income from subscription contracts, although we do not operate any automatic renewal of them.
The problem I am looking at, which certainly applies to us, is that within the cancellation period for a subscription such as ours, the purchaser can, if they so choose, get all the value they are ever going to get from a subscription. They can just go through the online service and print out everything that might possibly interest them, and then cancel. With other subscription services, the value is received more evenly through the contract, but ours can be focused at a particular time. Under those circumstances, a fair arrangement would be that if a consumer cancels and has received substantial value, they can be charged, on a basis set out beforehand, for the value they have actually had. I beg to move.
Lord Black of Brentwood (Con)
My Lords, I will speak to the stand part notices in my name on Clauses 262, 263 and 264. I am grateful to the noble Lord, Lord Clement- Jones, for adding his name to the stand part notices on Clauses 262 and 264. I will also speak to Amendments 221 and 224, in my name. As these and other amendments in the next group have a special relevance to media businesses, I remind noble Lords of my interest, declared at the start of Committee, as deputy chairman of the Telegraph Media Group, which is a member of the News Media Association.
I hope noble Lords will forgive me if I make just a few general remarks about the issue of subscriptions, to set my amendments in this group and the next in context. I applaud the aim of tackling the nuisance of subscription traps. It is imperative to make sure, however, that the day-to-day operations of reputable traders are not adversely impacted by the measures designed to achieve this. This is important for businesses in many industries that benefit from a degree of commercial certainty in their operations as a result of subscriptions. In the creative economy, it is especially so for hard-pressed publishers that are painstakingly building sustainable business models through subscriptions at a time of considerable economic challenge. Concern has been expressed across the creative sector and beyond, as demonstrated by the briefing documents I have received, and other noble Lords may have, from the News Media Association, techUK, the Federation of Small Businesses, the Online Dating and Discovery Association, the Professional Publishers Association, the Motion Picture Association, the Association for UK Interactive Entertainment and the Commercial On-Demand and Broadcasting Association.
All noble Lords will know that the impact of digital has brought about the destruction of the old print-based business model that for generations supported our free press at a national and local level. Publishers have had to reinvent themselves, and subscriptions are a key part of that new commercial reality. In a world of infinitely free content, it is remarkable that many publishers have begun to turn the tide on the notion that news provision, which is very expensive to create, should be free at the point of access. A business like the Telegraph, which I work for, now has over 1 million subscribers across print and digital. That is the key to the future, because the business of high-quality journalism is an expensive one. This Bill must help, not hinder.
We all feel passionately about the democratic importance of a thriving press—the noble Lord, Lord Clement-Jones, spoke about it movingly in Committee last week—but we have to give publishers the freedom to survive and grow. As it stands, the Bill endangers that because of the unintended consequences of the measures within it, which will introduce onerous and unnecessary new requirements on all types of subscriptions. This will drive up costs, stifle innovation and, paradoxically, reduce consumer choice. The Bill is supposed to be about helping consumers, but it does not achieve that. As I have observed in Committee on other areas, we are willing the ends but not the means.
The issue is that the Bill treats all subscriptions as though they were an endemic problem and unwanted by consumers, but that is not the case. By the Government’s analysis, four out of five adults in the UK have at least one subscription, often many more, providing them with convenience, consistency and choice. Only 5% of subscriptions are unwanted. There is a danger that we are creating a sledgehammer to crack a nut and are doing so in a way that significantly undermines all the good done by the rest of the Bill, in ushering payment for content and more equitable terms by the dominant tech platforms. It is about giving with one hand and taking away with the other.
The Government’s own impact assessment suggests that the package of measures will cost businesses £1.2 billion in the first year alone, with SMEs the hardest hit. The Government are supposed to be committed to reducing regulatory burdens on business, using regulation only as a last resort. Here, it seems to be the first resort and it has not been thought through, with no proper consultation.
The problems with subscriptions fall into four areas. This group covers cooling-off periods and the implementation period for the legislation. We will come to reminder notices and cancellation rights in the next group. The amendments that I have tabled tackle the issues brought about by the Bill’s well-intended but overly prescriptive subscription provisions. I hope that the Government will support them and bring forward their own amendments on Report.
I will deal first with cooling-off periods in Clauses 262 to 264. The Bill as it stands retains the 14-day cooling-off period under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, referred to as the CCRs. It starts once a contract is entered into or the consumer has taken physical possession of goods. However, the Bill amplifies the CCRs by introducing the concept of a renewal cooling-off period, which would apply at the point that a consumer transitions from a free trial or discounted introductory offer period to a contract charged at full price and each time a contract renews on to a term of 12 months or more.
While I have no problem with the existing 14-day cooling-off period under the CCRs, the renewal cooling-off period is a deeply harmful expansion of regulation, based on burdensome, EU-derived consumer law. I thought, perhaps mistakenly, that we were supposed to be making the most of the so-called Brexit freedoms rather than, ironically, gold-plating restrictions that have been manufactured in Brussels.
This is particularly true when viewed alongside the other provisions on subscriptions that the Bill introduces. For example, the new and detailed pre-contract information will ensure awareness of the product costs and renewals. Reminder notices will then reinforce awareness of a consumer’s ongoing contract. Furthermore, when transitioning from a free trial or discount period to a full-price-paid contract, or when renewing a subscription, a sufficient opportunity to establish the nature, characteristics and functioning of the product will already have been made available to the customers, which frankly makes these provisions redundant, creating harm and doing no good.
We should seek to retain the concept of a cooling-off period, as a grace period, applicable where a contract has been taken out erroneously—but not apply it at each and every renewal point. Consumers will be very aware that they have a subscription, given that they will be inundated with reminder notifications and will therefore have plenty of notice to cancel a subscription before it renews. Although they will do nothing to tackle the problem of subscription traps, which are at the heart of this Bill, the terms of this Bill will undermine a legitimate commercial strategy of discounted prices and trial periods, from which consumers can exit, in a way that puts unnecessary and burdensome constraints on businesses to grow and acquire new customers. Those discounted offers are important for consumers, especially at the time of a cost-of-living crisis.
Think what this would mean for a digital broadcaster or video-on-demand provider. Each time a customer entered into a subscription contract, they would receive a cooling-off period. This would allow them, for example, to binge on a specific series—as I am sure we have all done—or watch a sports event, and then withdraw immediately and receive a refund. The Bill does not put any limit on how many times a customer can enter into a contract and then exit using the cooling-off period. In effect, therefore, it will make trial periods redundant because it would make little commercial sense to provide customers with a trial period and a cooling-off period.
The point is that CCRs already tackle this issue by allowing consumers to request immediate access to digital content by acknowledging that the 14-day cooling-off period would no longer apply upon the supply of that content. It seems quite wrong to me that this Bill does not expressly retain this principle. I am sure that the Minister will tell us that the Government have said that they will consult on how the new cooling-off period in this Bill will work in practice, including whether a waiver of the rights should apply to certain types of subscription contracts.
Although that is encouraging and I am grateful for it, it still leaves the additional unnecessary cooling-off provisions on the statute book, meaning huge uncertainty for subscription-based businesses. Also, we have yet to see any detail on the scope of the promised consultation on a potential waiver for this provision, which gives little comfort. Far better to remove these provisions entirely—that is the point of these amendments—especially as their aims are already achieved elsewhere, in Part 4 of the Bill, and enshrined in the existing CCRs. This would still protect customers but would allow digital businesses, which are the future of the creative economy, the opportunity to expand and flourish.
I will speak briefly on Amendments 221 and 224 to Clause 334. The changes proposed in this legislation are very significant, even if the amendments in this group and the next are accepted, and will have many implications for British businesses. However, the Bill currently makes no explicit provision setting out how long businesses will have to implement these changes, which will be very onerous for many traders to implement. The Government will introduce a commencement order in due course, but there is obviously a clear benefit to giving the businesses that will be impacted—particularly SMEs, as the Federation of Small Businesses has pointed out—time to implement the changes effectively.
For legislation that brought in changes of a similar scope, such as that implementing the GDPR requirements, businesses were given more than two years to prepare for substantial change. The Government have delayed the implementation of the Health and Care Act’s advertising restrictions for two and a half years, until October 2025, in order to allow the sector to prepare for them. One business I spoke to estimated that it will take at least 10 months of development work to ready its systems for compliance with the Bill as it stands.
Amendments 221 and 224 would introduce a two-year implementation period after the passage of the Bill and a start date broadly in line with similar precedents. This period would allow businesses sufficient time to adapt their practices and systems in order to comply with the new regulations, reducing the burden of immediate changes and facilitating a smoother transition. I look forward to hearing what my noble friend the Minister has to say on these points.
Lord Vaizey of Didcot (Con)
I will briefly speak to my noble friend’s amendments. I declare an interest as a broadcaster on Times Radio, which is owned by News UK. The point is clear: the Government’s intentions are perfectly honourable. They seek to protect consumers and give them a simpler way to enter into a subscription contract and to cancel one.
However, as I hope my noble friend has made clear in his excellent and detailed speech, things are never quite that simple. From the 2013 consumer contracts regulations, it is clear that, 10 years ago, the Government recognised the changing nature of the services, particularly digital ones, that consumers are now using. It is also clear that the savvy consumer, dare I put it that way, will potentially be intelligent enough to work out that they could take out a contract with a subscription service —it could be a video service through which they want to watch a particular series, or a content service such as the Times if they want to read a particular article—take advantage of the cooling-off period and not pay for that content.
For service contracts such as these, it is important that Parliament support both sides of the equation. We do not take the contribution that content services make to our economy nearly seriously enough, and we still live in a climate where too many people believe that content should be free. As content providers have struggled with how to cope with delivering digital content, moving from free ad-supported models to subscription models, it is important that the Government take into account the pressures they face and reach a reasonable compromise in order to do so.
I fully support the arguments put forward by my noble friend Lord Black. They have been well rehearsed by a coalition of people, ranging from the video games trade body to the technology trade body, the news trade body, the film trade body, the commercial broadcasters’ trade body and even the online dating app trade body, which has got in on the act as well. They are all perfectly reputable organisations whose case deserves to be heard by the Government. It is my understanding that the Government recognise the problem, and we hope that the Minister will come back on Report, as he was so co-operative in our last Committee, with a genuine solution to this conundrum.
Lord Bassam of Brighton (Lab)
My Lords, this is the starter before the main course on subscription contracts, but it is important none the less. I can reveal to the Committee that our Amendments 169 and 193 are mere probing amendments designed to test whether the Government have confidence in the Bill’s subscription provisions providing sufficient protection for digital platforms that host copyrighted content, mainly on-demand videos. A number of companies have raised this issue with us, arguing that they will be seriously out of pocket if they have fully to reimburse those who have accessed paid-for content during a cooling-off period. It is our feeling, and a view widely shared, that, although the Bill restates a lot of current consumer law on subscriptions, it does not restate many of the obvious and probably necessary exemptions that the noble Lord, Lord Black, clearly identified. We need to cover those.
At present, if I sign up to a streaming service, it is made apparent that, the moment I consume content, my statutory rights change. The Bill appears to restate some principles but not others, and it creates a lack of certainty for both sides. Some of the companies argue that they will have to pay out refunds in cases where they would not under current law. This runs the risk of creating unrealistic expectations for consumers.
The amendments in the name of the noble Lord, Lord Lucas, ask similar questions of the Minister and seek to explore how the subscription contract is paid for if it is used during the cooling-off period and then cancelled. They also seek to understand what information a trader must publish in those circumstances. The noble Lord made a good point about charging.
Turning to the amendments in the name of the noble Lord, Lord Black, he skilfully highlighted for the Committee the problems that will be caused by the way the legislation is phrased. Having heard the noble Lord, I am more on his side than I was at the outset. I am not a regular Daily Telegraph reader, nor a great fan, and this is the second time in a week I have had to plead on its behalf—this is becoming rather strange politically. I am a Guardian person, and I can see the problem replicated across the whole news world. I do not think the onerousness of the burden is justified in this case. It could be an endemic problem.
I want to hear what the Minister has to say because we need some light and dark, some nuanced thinking, about the way subscriptions work. This is not the way to bear down on the subscription trap, which I think we are all keen to deal with. This does not help us at all in that regard.
I was originally going to say of the last two amendments in the name of the noble Lord, Lord Black, which seek to create a two-year implementation period, that I was not particularly convinced, but having heard the argument, I have reversed my view. If we do not have a solution, I suspect those two amendments could be very helpful in trying to resolve some of the problems this is creating. There is merit in those amendments.
We need to approach this issue in more forensic detail. I want to hear what the Minister has to say, because I do not want us to further undermine the news market. We live in a time when there is less ability and facility to report than we are used to. Moving from broadsheets to online content is changing the way in which the news world operates. My son works in the news world, and he understands these things far better than I do. We need solutions, and the way the legislation is currently phrased does not provide us with one that protects the value and importance of news in an open democracy such as ours.
Lord Clement-Jones (LD)
My Lords, this has been very interesting debate. There is a common theme—that these clauses are a very blunt instrument. At one end of the spectrum, we have the amendments in the name of the noble Baroness, Lady Jones, which attempt to get to grips with what this is all about and whether these clauses are fit for purpose; and at the other end we have had clear demonstrations that they are not. I am very grateful to the noble Lord, Lord Black, in particular, for his comprehensive and persuasive introduction. I started off fairly convinced of the case—I did not sign all his amendments, but I signed two clause stand part notices—but, like the noble Lord, Lord Bassam, I am now pretty convinced that the clauses are not quite fit for purpose. For the digital economy, we need to be much more wary about how the prescribed cooling- off period works.
I started off thinking that this is an issue that only the subscription and video-on-demand side should be concerned about, but having listened to the noble Lord, Lord Black, I realised that there is a much wider set of interests. The noble Lords, Lord Lucas, Lord Vaizey and Lord Bassam, described a much wider landscape that should be concerned.
I started by considering the disruption to subscription video-on-demand services—the so-called streamers. That is why I signed the notice from the noble Lord, Lord Black, opposing Clause 262 standing part. All the representations I received pointed out that this is really business-critical for UK operators such as Netflix and Disney+. I think the noble Lord, Lord Vaizey, used the expression binge-watch; if you can do that and get a refund, why bother keeping your subscription? We need to make sure that those services are safeguarded.
A number of noble Lords pointed out that Ministers in both the Commons and this place have expressed concern, saying that they understand the issue and are going to consult; but in the meantime, there is a huge amount of uncertainty. We potentially have it in black-letter law that the cooling-off periods are as set out in the Bill. We do not know what kind of consultation will take place, what kind of flexibility might be operated, and so on. In the meantime, we have a perfectly workable set of consumer contract regulations, which the parties would be happy to apply. That was very much the case the noble Lord, Lord Black, rightly made.
Important principles are set out in the CCRs, such as that consumers can request that the supply of digital content begins before the end of the 14-day cancellation period. So it is perfectly possible to have a provision that safeguards both the service provider and the consumer in these circumstances, but that principle is not imported into the Bill. I do not know why. On Monday, I asked the Minister what consultation had taken place. I have used the expression “blunt instrument”, but these are really important new provisions. The noble Lord, Lord Bassam, was absolutely right: they are based on the best of intentions, but they are so blunt that they will be a real problem for some of our digital services.
I hope the Minister will not regard our proposals as “not invented here”, and that the Government will not motor on with these provisions without taking a long, hard look at them. This is one of those circumstances where we would all be a lot happier if we reverted to a regulation-making power, got rid of some of these clauses and had a proper super-affirmative provision in the Bill, for example, enabling a discussion about all these aspects of subscription contracts. We heard about the absolute unhappiness with the impact on charities and gift aid when discussing the previous group; that demonstrates the total bluntness of these provisions. I do not think anybody will be very happy with them —the charities, the streaming businesses, the subscription media services or the dating services. There is a huge amount of unhappiness, which I hope the Minister will respond to.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
I thank noble Lords and noble Baronesses for their amendments and their interesting and informed contributions to the debate on this first group of amendments, on subscription contracts.
I will first address the amendments tabled by my noble friend Lord Lucas, which relate to the cooling-off period. Amendments 168 and 191 would create an additional requirement for businesses to inform consumers of the charges they may incur if they use a subscription but later cancel their contract during a cooling-off period. I agree that it is important for consumers to know what charges they could incur when they exercise a right to cancel during a cooling-off period. However, I assure my noble friend that the Bill already makes sufficient provision for this. The full pre-contract information listed in Schedule 21 provides information on the consequences of a consumer exercising their right to cancel during a cooling-off period. This includes information on any refund the consumer may be entitled to and any reason why that refund might be diminished. That information must be given or made available to consumers as close in time as is practicable to a consumer entering into the contract. Therefore, although I appreciate the intent behind my noble friend’s amendments, I hope he is reassured that sufficient provision is already made in the Bill.
Lord Clement-Jones (LD)
My Lords, I am sorry to interrupt the Minister, but it might give the Box a chance to answer the question before the end of his response. Do the current provisions in the Bill contain the principle that I mentioned, which was set out in Regulation 37 of the consumer contracts regulations, where consumers can request that the supply of digital content begins before the end of the 14-day cancellation period, acknowledging that they would then cease to have the right to cancel from that point of supply? If not, why not, as that would be the ultimate protector of these digital services?
Lord Offord of Garvel (Con)
I will come to that once I have some input from behind me. This is obviously a key part of the group.
Amendments 169 and 193, tabled by the noble Baroness, Lady Jones of Whitchurch, address the provision of information in relation to the consumption of digital content during the renewal cooling-off period. I understand that the noble Baroness wishes to ensure that the Bill provides sufficient protection for digital streaming platforms if a consumer has accessed digital content and then cancels their contract during the renewal cooling-off period. The Government will consult on the relevant return and refund rules that apply in this situation and other similar circumstances. This will ensure that rules are fair and practical for businesses and consumers. It will also enable consideration of any specific issues for particular industries or circumstances if needed—for example, digital content, perishable goods or bespoke products.
As part of that consultation, we will include a policy proposal of introducing an explicit waiver from refund rules for digital content, recognising the circumstances that the noble Baroness set out. We aim to consult before the end of the year. This is directly to avoid the scenario that these digital steaming firms fear. It is also important that those rules can be reviewed—
Lord Clement-Jones (LD)
My Lords, I apologise. If the Minister is undertaking this consultation and looking at a provision of that description, can he also describe which power, in the part of the Bill we are dealing with, will give the Secretary of State the ability to do that, as well as the process by which it would be introduced and the timing?
Lord Bassam of Brighton (Lab)
The noble Lord, Lord Clement-Jones, partly covered the point that I was going to ask about. I want some more detail about how this waiver will operate. That is where the noble Lord and I are coming from. Perhaps the Minister can flesh that out a bit more, because it is important. I am delighted that the notion of a waiver will be consulted on, but the question of how it works will be important, too.
Lord Clement-Jones (LD)
My Lords, it could answer the Regulation 37 question.
Lord Offord of Garvel (Con)
The point is that we have to consult on this. The matter has been raised by all sides of the Committee and there are specific reasons for it. The consultation is as it says. Rather than trying to go through this line-by-line at the Dispatch Box, I will try to set it out in writing for everyone, so that we can see exactly what we mean by it. If I have any input in the meantime from behind me, I will share it with noble Lords.
I turn now to the clause stand part notices tabled by my noble friend Lord Black—that Clauses 262, 263 and 264 should not stand part of the Bill—and his consequential Amendment 194. The net effect of these changes would be to reverse the cooling-off period in the Bill to the status quo established by the 2013 consumer contracts regulations. In particular, the cooling-off period for consumers after a free trial or year-long subscription automatically renews, introduced by this Bill, would be removed. The Government’s objective is to protect consumers from the specific harms associated with subscription contracts, while also considering the needs of businesses. We believe that the Bill correctly finds that balance. The Government expect that the protections provided through the Bill will have £400 million- worth of consumer benefit per year.
This measure protects consumers who have signed up to a trial period that then rolls into a higher-cost term. It also applies when contracts automatically renew on to a period of 12 months or longer, which usually, by definition, incurs a substantial financial outlay. Indeed, our consultation showed that many people forget to end their subscriptions before they automatically renew, especially after a trial, so we view this as an important provision that must remain in the Bill.
We understand that some businesses, particularly digital streaming services, are concerned about how the cooling-off periods will work in practice. As I mentioned, noble Lords should be assured that we will publicly consult on the cancellation return and refund rules to make sure that we get this right and—to be clear—to avoid refunds being payable to consumers exploiting the cooling-off period. The Bill allows for the Secretary of State to make the necessary regulations by affirmative procedure. That will be done before the subscription rules come into operation, following the consultation. I hope that this reassures the noble Lords on these points.
I turn now to the final amendments in this group, Amendments 221 and 224, also tabled by my noble friend Lord Black. The amendments would mean that the subscription contract provisions in the Bill come into force two years after the day on which the Act receives Royal Assent. The Government fully understand that businesses need clarity about when the new rules will come into effect and that they need sufficient time to make appropriate preparations. I am pleased to assure noble Lords that the subscription regulations will commence no earlier than October 2025. In the meantime, we will continue to engage with stakeholders to understand the impact of implementing the new rules and to ensure that businesses have enough time to adapt their operations accordingly.
The detail on return and refund rules will be set out in secondary legislation and the Government have committed to consult publicly on those rules. Clause 265 gives the Secretary of State the power by regulations to make further provision in connection with the consumer’s cooling-off right. Those regulations are subject to affirmative procedure, which I hope will assure my noble friend. I am grateful for my noble friend’s amendments and I hope that he feels reassured by my remarks.
Baroness Jones of Whitchurch (Lab)
Did the noble Lord get a response from the Box?
Lord Offord of Garvel (Con)
The Box feels that the point has been covered—but I will write to noble Lords and cover it with them.
Lord Lucas (Con)
My Lords, I am grateful to my noble friend for his positive reply to my first amendment, where the use of a subscription during the cooling-off period is covered by the powers in the schedule. I was not clear about that on reading it, so it is good to know. As I understand it, nothing in the Bill would prevent a trader from saying to a person, “No, you cancelled a subscription before. I am not going to let you take out a new one.” There is no right of a person continually to enter into subscriptions with the intent to cancel. They can do it once and then they have been rumbled. That is my understanding. If I am wrong, I hope that my noble friend will correct me.
I should also be grateful if he gave me some guidance in relation to Amendment 192 on the meaning of “give” in Clause 264(1), which I do not see defined in any way. When the consumer has to be given a notice, does that imply that the consumer receives it? Email addresses go in and out of use. People change them. There can be blockages of various kinds on them, because some were paid for, or some may be limited by size. One could get into a situation where the trader may think that the person has done something and has sent out the notice but it has never got through, or it can get into someone’s spam trap or, as in this place, it can be blocked by someone else’s spam arrangements of which one would not have cognisance.
My interest in Amendment 192 is whether it would be fairer to do this by making sure that the notice had been received by having some acknowledgement from the subscriber. I cannot see, as an operator of a subscription service, that this is difficult to deal with—one just does not renew until one gets the confirmation, which is a click on the screen. That is not difficult to implement. If we just have “give” as a loose term in the clause, it will allow people to continue saying, “We told you but not in a way in which you are ever likely to notice”—as in The Hitchhiker’s Guide to the Galaxy. We should try to avoid that in the Bill, so I should like to see if it is possible to get something firmer by way of making sure that the consumer knows that they are renewing the contract. That said, I look forward to subsequent conversations with my noble friend and I beg leave to withdraw the amendment.
Lord Black of Brentwood
Member’s explanatory statement
See explanatory statement to amendment at Clause 256, page 170, line 28 in the name of Lord Black of Brentwood.
Lord Black of Brentwood (Con)
My Lords, what a start. I shall also speak to Amendments 175 to 189, and to the stand part notice on Clause 257. I am again grateful to the noble Lord, Lord Clement-Jones, for adding his name to Amendments 170 and 185 to 188. The amendments in this group relate to reminder notices and cancellation rights.
Let me deal first with those amendments that relate to Clause 256. I support the Government’s intent to ensure that businesses send more regular reminders to customers. These can play an important role in ensuring that customers are not trapped in unwanted or forgotten subscriptions and, indeed, ensure that they can get the best deals on offer, which is important for consumers facing cost of living pressures. But such measures need to be proportionate and targeted at the practices of bad actors that cause consumers the greatest level of harm, not at the entire sector.
At present, the Bill requires traders to provide six-monthly reminders to all customers with subscriptions and sets out in painstaking detail what the reminders need to include. This is predicated on what I think is an erroneous assumption that the majority of customers do not know to what they are subscribed and are not actively using those services on a daily or weekly basis. It would also prohibit the trader from bundling in potentially useful information as they see fit, such as how much of a service a consumer has used during the period or the benefits of the subscription being missed by the customer, to assist the customer to make informed decisions. The prescription in the measure seems to be a missed opportunity to do something that would be genuinely useful for both businesses and customers. Indeed, these prescribed communications risk becoming a GDPR-style irritant and therefore ignored.
Viscount Colville of Culross (CB)
My Lords, I tabled Amendment 190, and I thank the noble Baroness, Lady Jones of Whitchurch, and the noble Lord, Lord Clement-Jones, for adding their names to it. I also thank Professor Christian Twigg-Flesner from the University of Warwick for his help in creating this amendment.
Clause 259 sets out the obligations of a trader when a consumer is entitled to cancel or bring a subscription contract to an end. They are limited to providing various types of notice and dealing with potential overpayments by the consumer. Many subscription contracts relate to all digital content. These will involve the provision of both personal and non-personal data under the contract. On ending the contract for a digital service, there needs to be clarity about what should happen to all the subscriber’s data.
The whole point of this amendment is that it lays duties on a trader, on the cancellation or end of a subscription contract, to ensure that the consumer gets all their data back, not just that narrowly defined as personal data. At the moment, only personal data is covered under the UK GDPR. This is defined very narrowly in Article 4. “Personal data” is defined as only
“information relating to an identified or identifiable natural person … an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier”.
Under Article 20, which covers the right of portability of data, the user can end a contract, which is tantamount to withdrawing their consent for the continuing processing of personal data. It ensures that the trader cannot use this personal data any more. Article 17 provides the consumer with the right to have the personal data erased after exercising the Article 20 portability right to download their personal data. Personal data, therefore, as narrowly defined, is well protected under the law at the end of a subscription.
However, the consumer might have a lot of other data that is not within the narrow definition of “personal data”. This is non-personal data. There is no provision under UK consumer law that deals with non-personal data following the end of a contract. This would have been covered by the 2019 EU directive on digital content and digital services, in Article 16, but that came into force only on 1 January 2022, long after the UK had left the EU.
Amendment 190 will deal with the absence of protection for non-personal data in English law. It will give the user control over all their data, both personal and non-personal. Proposed new subsection (7) protects all the consumer’s data created under the contract. This covers both personal and non-personal data. Proposed new subsection (8) allows for all this data to be returned to a user within a “reasonable period” after the end of the contract. Proposed new subsection (9) gives a balance to these consumer rights by creating exemptions for the trader to have to return the data, especially if it is part of a bigger dataset that cannot be easily separated out. Proposed new subsection (10) is particularly important, because it prevents the trader continuing to use the consumer’s non-personal data at the end of the contract.
As I have explained, “personal data” is very narrowly defined. This leaves a mass of data created by the consumer during the contract that will need to be protected at the end of the contract. It will be if this amendment is adopted. Surely, the Minister would want the trader to return all the digital data that the consumer created on the platform, and to prevent the trader continuing to exploit it for financial gain.
To give noble Lords an example of the dangers to consumers if this amendment is not adopted, a consumer might want to end their subscription to their account at Flickr, the photo-sharing platform. At the moment, the clause will ensure that all the photos that identify the user will be regarded as personal data and returned to them. However, it might well not cover all the other photos that do not directly identify them. They could be holiday pictures of beaches in Greece, historic buildings or wildlife that they placed on the Flickr platform during their contract.
Once the contract is finished, Flickr can currently keep all the other photographs that the consumer has taken and refuse to return them. Furthermore, it can use them for financial gain. Likewise, a user’s comments placed against somebody else’s photos can be retained on the site by the trader after the end of the contract. On Flickr, the original author’s name is changed to a randomly chosen two-word alternative. However, the comments can be detailed and the consumer might well want to retrieve them, but they currently will not be able to.
Baroness Stowell of Beeston (Con)
I have not been involved in Part 4 of the Bill and the Communications and Digital Select Committee did not include it in the work that we did to study the Bill last year, so I must say from the outset that I am speaking in a personal capacity.
Like other noble Lords who spoke on the previous group, I have received a lot of correspondence from various media and tech firms that rely on subscriptions as part of their business model. I am concerned on their behalf to guard against overly prescriptive measures which could threaten their sustainability, especially in such a competitive arena, which is why I have sought to familiarise myself with the Bill and have listened to what has been put forward. I should also declare that I am a vice-chair of the All-Party Parliamentary Group on Customer Service and take a keen interest in the frustrations people experience at the hands of service providers, especially when they feel that the channels of communication available to them for queries and complaints, or to cancel, are designed for the benefit of businesses, not their fee-paying customers on whom businesses rely for their income and survival.
In his response to the first group, my noble friend the Minister referred as an example to consumers who take out limited-time free or discounted subscriptions online and then get caught in full subscriptions which they cannot cancel unless they telephone a number that they have probably struggled to find online. Then, when they get through, they enter into a battle of wills with a telephone handler who just will not let them go. I have sympathy with that experience, having endured it, but if I do not want to stay, I make sure that I do not continue to subscribe. I also recognise that it is important for consumers to have a place to go to negotiate when they feel that they could get a better deal, as my noble friends Lord Black and Lord Vaizey identified. I will come back to that in a moment.
Having listened and looked at the Bill so far, my conclusion is that, concerned as I am to make sure that we get the right outcomes for consumers, I am not convinced by some of the solutions in the Bill. My noble friend Lord Black’s argument in favour of secondary legislation to address some of these issues has merit, as there appears to be significant and understandable concern from a range of subscription businesses about changes to the cooling-off period. There seem to me to be conflicting shifts in different directions—of both vague and detailed new methods for cancellation at the same time—in the Bill, so I think that more time to get this right could be justified.
I was struggling to follow what my noble friend the Minister said about consultations in response to the last group, but what is proposed does not seem that convincing to me when we are writing things into the Bill before completing the consultations necessary to get it right. What I do not want, as a result of the Bill becoming an Act, is consumers being irritated because of the frequency with which they start receiving computer- generated messages asking if they want to renew a contract or, perhaps worse, because they are no longer able to telephone a firm to threaten to cancel in order to negotiate better terms, if they no longer have that facility because of something else that has been offered to them.
Two basic things seem critical to me. The first is the guaranteed facility that if you subscribe online, you can cancel online. That is one of the most annoying things in what consumers feel at the moment. The second is that phone lines for customer service, whether the issue is a query, a complaint or somebody wanting to cancel something, have numbers that are readily available and that the lines themselves are staffed by people trained and equipped to assist individuals to the customer’s satisfaction—and for their benefit, not the benefit of the firms.
That is what we ought to be trying to achieve through this legislation and, at the moment, I am not convinced that that is where we will end up. I am not a business figure myself, but I know that the best way for any business or public service to succeed is for its customers to get the service they are paying for, to be treated with the respect they deserve and to be satisfied that they have got a fair deal as a result. I just feel that we are losing sight of this.
Perhaps I may finish with one small point about the proposed cooling-off measures. My noble friend Lord Vaizey ran through various examples of when a consumer might take out a subscription and take advantage of that subscription in a cooling-off period, without paying any fee at all. One of the examples he gave was of a consumer taking out a newspaper subscription to read just one article, or a day’s edition, for free. Clearly, that would be wrong. Journalism is expensive and the best of it cannot be done for free, but not everybody who wants to read a newspaper or an article wants to take out a subscription. To many consumers, subscriptions are another bill—and they do not want another bill. I urge all newspaper publishers to put in place, as soon as they can, a mechanism for consumers to buy just one day’s edition or 24 hours of access to the website, without them having to take out a monthly subscription.
Lord Vaizey of Didcot (Con)
My Lords, I support my noble friend Lord Black on his amendments and will respond to the excellent remarks made by my noble friend Lady Stowell. It is interesting how she ended her remarks, because I read in a free email newsletter this morning that, apparently, a lot of newspapers—led in fact by Will Lewis, who was obviously educated when he was at the Telegraph by my noble friend Lord Black —are looking at a mix of models now. Some people are saying that the freemium model, or free with ads, is dead but also that the subscription model may be dead, and that there will be a mix in how people can, effectively, find a way of paying for what is normally excellent content online from reputable brands. Things are developing, so perhaps my noble friend Lady Stowell is wrong to say that she does not have experience of business; clearly, she has an instinct for it. Anyway, I digress.
I must say that I have thoroughly enjoyed being in this Committee. What has emerged from the six days in Committee is that there are clear areas at which the Committee is asking the Government to look again, but not in a hostile way. This is about an element of detail, an element of getting it right and, funnily enough, an element of both the critique and the Government having exactly the same aims. As my noble friend Lady Stowell pointed out, we want to see a world where the consumer has absolutely clear rights and an easy customer experience in taking out a subscription and in cancelling it. At the same time, we do not want to burden businesses with too much bureaucracy, but to give them a chance to develop the flexibility to grow their business models in what remains a fast-changing environment. So, my noble friend Lord Black’s argument seems clear to me.
There is a paradox in my noble friend’s argument: we are asking the Government not to be prescriptive in one area while asking them to be more prescriptive in another. On the non-prescriptive part of the argument, my noble friend’s point is clear: it seems silly to put in primary legislation exactly how often a subscription business should remind a customer that their contract is coming up for renewal. The essence of customer service is for the business to get right its relationship with the customer, so long as it is under an obligation to remind the customer clearly that their contract is coming up for renewal and they are free not to renew it.
To flip the argument, on the cancellation methods, my noble friend is again right to say that the Bill words far too vaguely the way a consumer can cancel. I previously christened an amendment on appeals against decisions of the regulator the “Whac-A-Mole amendment”; I will now christen this amendment the “carrier pigeon amendment”. It is drafted in such a way that, in theory, I could cancel my subscription to the Times—which I would never do, obviously—by sending a carrier pigeon to News UK at London Bridge and say with a straight face that I had done it authentically.
There is, again, a happy medium. It should be very straightforward to cancel a subscription. Nobody wants the situation my noble friend Lady Stowell described, which does exist: having to find a telephone number—which is hidden—and contact a call centre, and then being given the runaround. I said at Second Reading that I had in fact done exactly that. I took out a subscription to a newspaper to read an article, but I could not cancel it. It was just my luck that I happened to know the chief executive of the newspaper, and I had to ring him and ask him to cancel it for me. That is obviously unacceptable. As a Conservative, I hesitate to suggest the creation of a quango, but there must be some way for a regulator to be aware of complaints and concerns about how an organisation is behaving, and to be able to intervene to make it clear that it is not operating within both the letter and the spirit of the law.
My noble friend’s amendments take account of the business needs of subscription businesses. I understand that people will fall on one side or the other of this argument. It is an interesting point that these businesses would like a way to engage with a departing customer, and they should be able to ask, “Why are you leaving? Can we tempt you to stay?” I spend quite a lot of my time unsubscribing from the endless emails and newsletters I have subscribed to, which tend to be free. Even then, particularly if you use a service such as Mailchimp, you are asked to fill in a little questionnaire on why you have decided to unsubscribe. It is not very onerous, and I understand—even though it is a slightly odd argument —why these businesses would want the opportunity to engage with a departing customer to gather information on what was wrong with their service and how they could improve it, or to provide an improved offer to tempt the customer to stay. Certainly, as we all know from having been lobbied, many of these businesses say that, often, the initial desire to cancel a subscription is based on an irritation with the service, which can be addressed once the customer gets in touch with the provider of the subscription service.
It is important to probe the Minister on both these issues in order to get clarity on the Government’s position, while also looking at some amendments that could genuinely improve the Bill.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken in this debate. We are grappling with some important issues at the heart of Part 4 of the Bill. This group of amendments follows on quite neatly from our earlier debate, and it gives me a chance to put the other side of the problem. I have to say, the noble Lord, Lord Black, seemed to downgrade the scale of the problem we foresee. He also seemed to suggest that most businesses mean well and do well, but there are other things at stake here, such as the issues many consumers experience. I am not talking about the publishing world when I say that.
I have two amendments in this group, Amendments 173 and 174. Both are designed to address the concerns raised by consumer groups, including Which? and Citizens Advice: the problems with automatic contract renewals, such as whether somebody has satisfied the original minimum term of a phone contract, or completed a free trial in signing up to a streaming service. As the noble Baroness, Lady Stowell, said, all too often consumers are not given sufficient notice to bring their contracts to an end without incurring additional charges, or find that they face a time-consuming and confusing cancellation process.
The noble Lord, Lord Black, said that the Government’s proposals are predicated on an erroneous assumption that consumers do not know what subscriptions they have. I take issue with that too. In the last year alone, people in the UK spent £500 million on subscriptions that auto-renewed without them realising, while unused or unwanted subscriptions cost people more than £306 million a year. The fact is that contracts are being renewed and prices increased with minimum notice and without clear opt-outs. Of course, this has more of an impact on marginal groups and those on low incomes.
We welcome the Government’s attempts to address these issues in Chapter 2, obviously, but we do not feel that these measures go far enough. Our Amendment 173 would allow the consumer to opt out of their subscription auto-renewing every six months, while Amendment 174 would allow the consumer to opt out of their subscription after a discounted trial. As has been said, the fact is that many people do not realise that they are entering into a long-term auto-renewing contract with a business or service, and it is often not in the interests of the trader to make that clear when the consumer signs up, or to help the consumer make a conscious decision to continue with the subscription once it is active. We need to ensure that the initial rush of enthusiasm for a purchase does not become a long-term financial burden.
In addition, the consumer may discover after a short time that the subscription does not live up to the hype they were sold when the contract was first signed. Again, we need to ensure that they can extract themselves, and their money, from paying for something they no longer want. Our amendments would achieve this, and I hope that noble Lords will consider supporting them.
I now turn to the amendments in the name of the noble Lord, Lord Black. He made an impassioned speech about the future of the publishing sector, and we have every sympathy with what he had to say. What is clear to me is that we are talking about two different things. I am concerned that the noble Lord is forming some generalised conclusions, when there is no one-size-fits-all answer. Our amendments address the types of subscription that trap consumers—he says he does not agree with that—into paying for something they may no longer want or need. The subscriptions in the publishing world that he described are long-term ones freely given to a magazine or newspaper. They are akin to loyalty or membership subscriptions, which create, if you like, group awareness and consciousness. Of course, the same can be said for charity subscriptions to the National Trust, for example—consumers taking out a subscription for altruistic reasons, a topic we debated when we discussed gift aid on Monday.
We do not want to sabotage those freely given regular payments. However, although we are sympathetic to the general case made by the noble Lord, we do not necessarily agree that the way forward is to remove the provisions from the Bill and give the Secretary of State the power to regulate on this instead. That could mean putting at risk the hard-won protections from subscription traps that are already in the Bill. Similarly, while we are open to further discussion on this point, we are not convinced that a default 12-month period would benefit consumers.
However, I agree with the noble Lord, Lord Black, in his Amendment 185, that the reference to notifying a business that a subscription should cease
“in a single communication”
is oblique and could cause genuine confusion as to whether and how the communication is received. Therefore, we urge the Minister to address this issue and find a new form of words. There are a number of different models to choose from, but the key consideration will be whether and how we design businesses following good digital design processes to make it clear that people can communicate in a clear way.
As we know, too many traders make cancelling a contract more difficult than it should be, whether by forbidding online cancellations, putting customers on hold for extended periods or having multi-step cancellation processes, where a user is steered towards retaining the services. Whether we end up with a prominent button on a website, a dedicated email address or some other system, we must ensure an appropriate balance to make it easier for consumers to cancel a contract. Traders should have an opportunity to retain customers, perhaps through price reductions, but customers should not be placed under undue pressure or have to go through half a dozen steps to extract themselves from a contract. If the Bill were to say more about some basic design principles, some of these issues might be overcome. We would certainly welcome further discussions on this issue.
Finally, I have added my name to Amendment 190, tabled by the noble Viscount, Lord Colville. I will speak on this only briefly. He makes an important point. We will return to this question of who owns our non-personal data and our right to have it returned once businesses no longer need it in much more detail on the data protection Bill. I hope to have a longer debate with him on that basis, but I hope that the Minister can provide some reassurance that the Government are prepared to act on this issue.
In our earlier discussions, we had a huge amount of consensus, but we have gone in opposite directions on this issue. I think that we all want the same thing but are finding different words to deliver it. If we were locked in a room for half a day, we could probably come up with a solution. It might be quicker than writing lots of letters, which the Minister might otherwise have to do. I hope that we can find a way through this. We are not being deliberately awkward, but it is important that we get this right. I look forward to the Minister’s response.
Lord Lucas (Con)
My Lords, I wanted to wait until the noble Baroness, Lady Jones, had spoken, because I wanted the chance to agree with her amendment, which raises the same question that I was raising in Amendment 192. Why do you have to be locked into these subs? Why can you not be asked to resubscribe, if that is what you want to do? Why can we not give consumers a right to approach things that way and get to know a product before they know that they want it every year?
I echo what my noble friend Lady Stowell of Beeston said on newspapers. I would want to get to know the Daily Telegraph well enough to know that I want to pay for it every day. To be able to buy it once a week would be nice, but that is not an offer at the moment. Allowing consumers to get used to a product benefits business. As the noble Baroness demonstrates in her amendment, it also benefits the consumer. It should not just be a year’s subscription or nothing. We should encourage businesses to provide something in between. We certainly should not make renewal the only option that businesses look for. We should make them earn that renewal by providing a good product for a year so that customers do not want to have to be bothered with renewing it every year. That is a situation that one happily gets into with a number of charities. You know that you want to support them. They provide a good service and you just let it tick over. I do not think that anyone should be entitled to that position. They have to earn it; they have to prove it. To have a system where you do not have to tie yourself in at the beginning is estimable.
That said, I have a great deal of sympathy for what my noble friend Lord Black said. I would prefer to see a lot of this in secondary legislation. I understand that when someone cancels a subscription, the business wants a chance to correspond with them and have an argument, although I find it a huge irritant in my relationship with a business when I suddenly discover that it would do business with me on much better terms but only if I threaten to withdraw. I wish it would value me as a continuing customer and offer me good terms, rather than only benefiting discontented customers.
I think that there is a lot of good in all the amendments in this group. I echo what the noble Baroness, Lady Jones, said about the amendment tabled by the noble Viscount, Lord Colville. I look forward to seeing that in the next Bill. I just draw his attention to the likes of Ancestry.com. Its business is the accumulation of everything that everyone has added to it. You subscribe to it, but all the time you are adding information that is then available to other people. Businesses should be allowed to retain the information that you have added, if that is appropriate. I can quite see that you might want your photographs returned from Flickr, but something like Ancestry or an app about building up information about history, ecology or whatever else it might be properly retains information that individuals have contributed and it ought to be possible for an app to have that in its terms.
Lord Clement-Jones (LD)
My Lords, I am glad to follow the noble Lord, Lord Lucas, because having supported a number of amendments in this group I saw harmony rather than discord. The noble Baroness, Lady Stowell, had it absolutely right: the provisions here are both too vague and too detailed. Where the Bill should be detailed, it is vague; where it is vague, it should be—and so on. That is the essence of it.
Between us, we have a pretty good idea—I hope that it does not involve sitting in a locked room thrashing this out—of what good looks like. That is the important thing. The problem is that in this group we are debating the beginning of a contract, the reminder and the termination in one fell swoop, so it is easy to misunderstand exactly what we are talking about. The amendments tabled by the noble Baroness, Lady Jones, are extremely good, because this is all about having information at the beginning of the contract. What you do not want is too much elaboration. As long as you know up front what to expect and the kind of contract that you going to enter into, that seems to me to a sensible way forward. It is about getting the basics right and I do not think that the Government have got the basics right.
Many people think that the process by which the original consumer regulations were put together was perfectly sensible, so I disagree with the noble Baroness about whether secondary legislation would be appropriate after consultation. I think that that would be a perfectly proper way forward, rather than this rather clunky way of doing it with secondary legislation and schedules setting out so much detail. That seems a rather extraordinary way of going forward. It also seems to clash somewhat with the Government’s reluctance in other areas. No doubt the noble Lord, Lord Holmes, will speak in the next group about a lack of regulation in certain quarters—which way is a matter of mutual interest. That seems a bit paradoxical. We have to get the basics right.
The noble Lord, Lord Vaizey, made an interesting speech. He was almost suggesting that there needs to be friction at the end of a contract so that there is an excuse to engage. I am not entirely convinced by that. Luckly, he did not put an amendment down, so I do not have to disagree with that at the end of the day.
The amendments tabled by the noble Lord, Lord Black, are sensible. There is an issue about how many communications a consumer sees, but the important amendment is the one regarding qualification of “by any means”. Clause 258 is pretty extraordinary. What if a trader gets a Twitter message but they are not on Twitter? How are we expected to accept a notice given “by any means”? The qualification suggested by the noble Lord seems entirely sensible.
Lord Offord of Garvel (Con)
My Lords, we come to the second group of amendments, on subscription contracts and reminder notices. Again, I thank all noble Lords for their amendments and interventions. I appreciate that there is a lot of interest in this area of the Bill and I look forward to continuing this discussion with noble Lords between now and Report.
I will first address the amendments tabled by my noble friend Lord Black of Brentwood, for which I am most grateful. Amendments 170 and 175 to 184 relate to reminder notices. The requirement to send reminder notices is one of the targeted duties that we are placing on traders to ensure that consumers pay only for subscription contracts that they want or need. Of course, we recognise that there is a balance to be struck and we have listened to views from a range of stake- holders to ensure that we get this right. Indeed, the Government made changes to the reminder notice provisions in the other place following further consultation with industry. The Bill reflects the Government’s commitment to delivering proportionate regulation, ensuring that consumers are suitably protected from the harms of subscription traps without overburdening businesses.
I wish to reassure my noble friend that for an average monthly subscription contract, a trader will have to send only one reminder notice within a six-month period. We believe that this strikes the right balance between informing consumers about their subscriptions and not overburdening businesses.
Reducing the frequency of reminder notices, as my noble friend’s amendment seeks to do, would increase the risk that consumers end up paying for unwanted subscriptions for longer periods. To be clear, the Bill already allows for the Secretary of State to make regulations to update or modify these provisions in a number of ways, including the frequency, content and timing of reminder notices. This ensures that the Government can adapt the reminder notice requirements in future if evidence about consumer behaviour or operational practice indicates that adjustments are necessary.
Amendment 189 relates to end-of-contract notices, which a trader must send when a consumer has ended or cancelled their contract. In a similar way to my noble friend’s other amendments, Amendment 189 seeks to remove detail from the Bill. However, as with reminder notices, we think that the requirements for end-of-contract notices strike the right balance between informing consumers and not overburdening businesses.
Amendments 185 to 188, which relate to contract cancellations, were also tabled by my noble friend Lord Black. The Government are committed to the principle that consumers should be able to easily exit their subscriptions if they wish and businesses should not place undue barriers to doing so. Consumers should not, for example, be hindered when trying to leave a subscription contract or when stopping its renewal. Those are the principles behind these provisions.
However, I can assure my noble friend that we are continuing to listen to businesses and other stakeholders. We are absolutely committed to ensuring that this legislation gets the balance right between protecting consumers and supporting businesses. We of course appreciate that any communication to end a contract must be clear to a business. That is why, in the event of a dispute, the onus is on a consumer to prove that their method of ending the contract or cancelling it is sufficiently clear to the business for these purposes.
I hope that this lays to rest any concerns that your Lordships might have that a single tweet into the ether or a message via carrier pigeon, as suggested by my noble friend Lord Vaizey, could be an acceptable means of a consumer leaving a contract. We will also provide clarification through guidance for these kinds of scenarios and engage with stakeholders as we develop it. Furthermore, the Government are clear that nothing in the easy-exiting principle should prevent a trader from requesting voluntary feedback from a consumer who wants to end their subscription or from offering to give the consumer information on other products. However, these must not unduly hinder the consumer from ending their contract.
For the reasons that I have set out, including our commitment to continue to get feedback from all stakeholders on these issues, I hope that my noble friend will feel able not to press his amendments and that noble Lords who spoke to the amendments feel suitably reassured.
Amendments 173 and 174 were tabled by noble Baroness, Lady Jones of Whitchurch. Amendment 173 would impose a requirement on traders to ask their customers to agree, before entering the contract, that their subscription will renew automatically every six months or, if the period between renewal payments is longer than six months, agree each time payment is due. Amendment 174 would apply equivalent requirements but would also accommodate contracts that renew automatically after a free or low-cost trial.
I agree wholeheartedly that consumers must be protected from getting trapped in unwanted subscriptions. However, as I mentioned, the Government’s position is that the Bill currently strikes the right balance of protecting consumers without overburdening businesses and potentially reducing consumer choice. Requiring opt-ins would burden businesses and consumers with emails requiring them to confirm that the subscription can continue. Consumers who forget could inadvertently see their favourite subscriptions lapse.
I turn now to Amendment 190 in the name of the noble Viscount, Lord Colville of Culross, which would ensure that consumers can have their non-personal data returned to them after they cancel their subscription contract and would stop traders continuing to use this data. I thank the noble Baroness, Lady Jones, the noble Lord, Lord Clement-Jones, and my noble friend Lord Lucas for their contributions on this issue. I assure the noble Viscount that, where data can be used to identify a living individual, this information is already protected by the UK GDPR regime; statutory provisions therefore exist for it to be returned to a consumer. This includes data that is directly identifiable to an individual, or indirectly identifiable from that data in combination with other information.
For information that may be considered non-personal or anonymised, the Data Protection and Digital Information Bill will create a test in legislation to help organisations understand whether information is personal or anonymous. This will help bring clarity to businesses as to how to process the type of information the noble Viscount discussed. I am grateful to the noble Viscount for his amendment and hope he feels satisfied with my explanation.
Finally, I turn to the points made by my noble friend Lady Stowell. I assure her that the Government consulted on the principles of the Bill in 2021 and will publicly consult on the details of the return and refund rules. The purpose of consulting on those rules is to take account of a wide range of products, including perishable and bespoke products and services, that have been used during the cooling-off period; that is why we think it appropriate to set out this detail in secondary legislation following the consultation. I am grateful to my noble friend for her remarks and hope she feels satisfied with my explanation.
Lord Clement-Jones (LD)
Can the Minister reassure me that he will write to say how these provisions were consulted on? There is further work to be done, clearly, but it would be good to know what baseline consultation was carried out for all these extremely new, comprehensive, detailed—and sometimes vague—provisions. That is an important part of the knowledge we need to have going forward.
Lord Offord of Garvel (Con)
I thank the noble Lord and agree that it would be helpful for all of us if this were written down so we could examine it in more detail.
Lord Lucas (Con)
My Lords, I get the impression from my noble friend that this is not an area of the Bill that the Government want to move on, but I get the impression from the Committee that we would very much like to see some changes. I hope that, between now and Report, there may be some constructive conversations between me, my noble friends and noble Lords opposite to see whether we can make some consolidated suggestions to the Government that we need not argue about, so we can focus the argument on them.
Lord Black of Brentwood (Con)
I thank all noble Lords for what have proved to be good and constructive debates on both groups of amendments.
I say to the noble Baroness, Lady Jones, that I think we pretty much have a consensus. There may be some issues at the margins, but we all agree, partly because, as my noble friend Lord Vaizey said, we are not hostile to any of these intentions. We support the intentions, but we recognise that we need to support business while protecting customers. This is important because, in many ways, it goes to the heart of the creative economy and the media ecosystem. The key point that has come across from many of the excellent contributions today is that this is a rapidly evolving environment and, as my noble friend Lady Stowell said, a highly competitive one.
The whole question about digital subs is that they are a new model for the way businesses are operating. For many, that model is becoming business-critical and should therefore not be dealt with, with what the noble Lord, Lord Clement-Jones, rightly said is a blunt instrument. We should therefore not write things into the Bill that we will regret in subsequent days. I agree with a lot of what the noble Baroness, Lady Jones, said: of course there are some bad actors in this space. All we are saying is that we should not be putting into regulations things to deal just with those bad actors that would damage the much wider economy.
I hope that the Government will think again about a lot of these things. I am grateful to my noble friend the Minister for saying that we will continue discussions between now and Report. That is very important, as I think he will have the mood of the Grand Committee: that we will want to return to this area. In the meantime, I beg leave to withdraw the amendment.
Lord Offord of Garvel
Member's explanatory statement
This amendment ensures that both limbs of the test of whether a trustee is independent of the trader in relation to a trust need to be satisfied.
Lord Offord of Garvel (Con)
My Lords, I am delighted to speak to this group of amendments, and I thank my noble friend Lord Holmes, the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones, for their amendments. I will first briefly address the government amendments, and the other amendments in my closing remarks.
Amendment 195 is a minor and technical amendment which aims to clarify independence requirements for trustees overseeing funds in a consumer savings scheme, strengthening safeguards against potential conflicts of interest. Trustees must have no association with the trader or interests in the trader’s assets, ensuring that funds are controlled for the benefit of savers and independently of the trader.
This measure is essential to safeguard consumer funds against insolvency and ensure that they are used for their intended purpose. I hope that noble Lords will accept this amendment. I look forward to addressing in closing any questions or points that they may have about the amendments in this group. I beg to move.
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to follow my noble friend, if not for the fact that it seems we are going backwards and forwards at the same time, which is always a good state be in. As this is the first time I have spoken on day six in Committee, I restate my technology interests, as set out in the register, as adviser to Boston Ltd.
My two amendments in this group are concerned with artificial intelligence. It is a truism, self-evident and barely in need of stating, that artificial intelligence is already impacting many aspects of our lives—as citizens, as consumers, as businesses and as a country—so it would seem timely to review all the relevant legislation to assess its competence to deal with the challenges, opportunities and risks that AI presents for us in all those roles and capacities. I shall say more on that next month.
Today, within the scope of this Bill, Amendment 199 suggests that all legislation concerned with consumer protection be reviewed to assess its competence to deal with the challenges, opportunities and risks inherent in artificial intelligence. It is clear that a number of the concepts and provisions within consumer protection legislation and regulation will be applicable and competent to deal with AI, but there is a huge gulf between what is currently set out in statute and what we require when it comes to making the best of what we could call this future now. I shall give just one example: if we consider how algorithms are set up simultaneously to push voraciously certain content while holding back other content, it is very difficult to see how consumer protection legislation is set up to deal with that challenge. That is but one specific example.
Amendment 200 goes to the question of consumer protection and the need to label all products and services where AI has been used or is built into that product or service so that the customer can know that and determine whether she or he wishes to avail herself or himself of that product or service. In no sense would this amendment require great burdens to be placed on business in bureaucracy, administration or cost. In many ways, this is yet another example of “set AI to solve an AI problem”, with human in the loop and human oversight always present.
I suggest that these two amendments, taken together, would enable the Bill to speak positively and in a timely manner on the opportunities, risks and threats to all of us, and to try to get the optimal deployment of AI in this context when it comes to consumer protection. I look forward to the Minister’s response.
Lord Lucas (Con)
My Lords, we move from a very new problem to a very old problem. My Amendment 215B asks that the Government restore to us the protection we used to have from double-glazing salesmen. There used to be a cooling-off period. That got swept away by EU regulations. Now that we have Brexit, we have the opportunity to give consumers back the protection that they once had. At the moment, double-glazing can claim to be made to the consumer’s specification but, actually, it is not. It is a standard product, and you just tweak it a bit. There is plenty of room when you are providing double glazing, fitted kitchens or anything like that to allow consumers proper time to step back and ask themselves whether they want to go in for such an expense and whether it is something they really want to do. We ought to restore that to consumers, there being no good reason not to.
Lord Clement-Jones (LD)
My Lords, I will speak first to Amendment 215C and then come to Amendment 202. I am very much indebted to the Fair Standards Alliance for raising the issue of standard-essential patents. I thought I knew a fair bit about intellectual property and the digital world, but I was in a state of relative ignorance when the world of standard-essential patents came to me. I have had quite an extensive briefing from the Fair Standards Alliance, which has revealed the importance of standard-essential patents, particularly in the context of competition and licensing.
These patents are necessary to implement an industry standard, such as for wifi or 5G. As the market is locked into a standard, to prevent abuse of the market power, SEP owners are required to license their SEPs on fair terms. Unfortunately, there is widespread abuse of this monopoly power by SEP holders that often, I am told, do not abide by their voluntary commitments and instead seek to abuse their market dominance to force product manufacturers to sign up to unfair terms. SEP holders are regularly seeking and securing excessive licence fees from technological innovators by leveraging the threat of injunctions, which forces firms in the UK either to accept high licence fees or to exit the market. This is to the detriment of those businesses and to the wider UK economy.
Most prospective licensees cannot afford the cost of litigation or exclusion from the UK market. The recent High Court decisions in InterDigital v Lenovo and Optis v Apple demonstrate how SEP owners exploit SMEs and make excessive royalty demands that only large, well-resourced litigants can afford to challenge. Apparently, the costs of the recent SEP licensing trial in the InterDigital case were over £31 million. That is pretty breathtaking, even to one with my background as a commercial lawyer.
The costs can be ruinous to many businesses. This tactic not only threatens innovation by UK businesses but represents a strategic risk for UK priorities, such as 5G infrastructure, diversification and smart energy network security, by limiting the competing players. The availability of injunctions for SEPs gives foreign SEP holders the ability to prevent others in the UK entering, succeeding and innovating in those markets.
The Government have been considering SEP reform— I noticed the Minister nodding vigorously, earlier—for several years and have received evidence showing the abuse that businesses in the UK face. The Intellectual Property Office’s SME survey suggests that UK businesses face excessive licence fees for SEPs. SMEs are concerned by the threat of market exclusion by court-ordered injunctions and a lack of transparency about the cost of and need for the SEPs being offered.
British companies are predominantly SEP licensees. The majority of SEPs are held by companies from China, the EU and the US, with no major SEP licensors based in the UK. This means that, when SEP holders hold up innovative UK manufacturers during licence negotiations and extract excessive licensing fees, they are taking value that would otherwise be available to fund further innovative developments in the UK and are increasing costs to UK consumers.
The UK’s innovative SMEs are especially affected across all sectors, as they cannot afford expensive legal battles against large, international SEP holders. As I said, the costs were over £31 million in the InterDigital case. The problem is widespread and the Government themselves have already accepted that SEPs are an issue; for instance, in their 5G Supply Chain Diversification Strategy of 2020 and in DSIT’s wireless infrastructure strategy last year. Recent High Court decisions have independently confirmed that position. A court determined that licence rates have been significantly lower than those demanded by the SEP holders. Our judges have concluded that SEP holders are able to exert significant unfair pressure to get the deal they want.
Lord Lucas (Con)
My Lords, to pick up the noble Lord, Lord Clement-Jones, on his two amendments, I can absolutely see where he is coming from on standard-essential patents. This reflects quite a long-term failure by successive Governments to support British participation in standards setting. If one looks at the history of the telecommunications industry from when I was young, when the British were dominant, to where they are now, which is nowhere, one of the great failures and one reason why things have not located or started in the UK has been that we have not committed sufficiently high-powered, consistent energy into standards setting. We have never quite been abreast of what is happening next or been the place where people want to locate a business. It is enormously important and I made a point on this in the Automated Vehicles Bill. It applies to a lot of technical areas and we must get behind standards setting.
In relation to Amendment 202 of the noble Lord, Lord Clement-Jones, how does one know how much is AI-generated? It is rather like asking how much of a Reynolds painting is by Reynolds. Did he just touch in the eyebrow and leave the rest to his servants? Does an AI grammar checker count as AI-generated content? If the AI has made suggestions of things that one might look at, is that AI-generated? I imagine that a lot of journalists now use AI to help fill out the column inches after a hard day’s doing something else. As the noble Lord knows, given his connections with academia, this is becoming common on both sides—the teachers and the taught—so what does finding a way in which to define “AI-generated” mean? Is it AI-supported or no involvement at all? Is it not using any of the tools at hand? This is a difficult concept to go at. Surely, at the end of the day, what matters with a piece of music is how good it is, not where it came from.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken. This truly is a miscellaneous group of amendments and I will add to the miscellany of all this, because my Amendment 215A addresses the ambiguity that arises from the current laws on marketing infant formula.
Perhaps I may briefly explain the background as to why this is before us today. The Infant Formula and Follow-on Formula (England) Regulations 2007 were designed to prevent supermarkets promoting infant formula over breastfeeding. They arose because, prior to that, aggressive marketing and advertising techniques had been used by the milk formula industry to mislead parents over the best way in which to feed their babies. The current rules state that infant formula should not be advertised or promoted in a shop. They also say that no coupons, special sales offers, discounts or gifts should be offered to mothers or their families.
Meanwhile, noble Lords will be aware that the cost of infant formula has risen recently and is a huge extra burden on families, who are particularly suffering in the cost of living crisis. It is estimated that the cost increased by 22% in the past year alone. But because of the current regulations, supermarkets still cannot accept vouchers, even those provided by food banks and local authorities to purchase that infant formula. There have therefore been calls for the marketing rules to be reviewed to allow, for example, retailers to accept loyalty points, grocery vouchers and store gift cards, as well as free vouchers, for infant formula.
Our amendment addresses the current ambiguity in the regulations and calls for a review to clarify the marketing rules and their impact on the pricing and affordability of infant formula. This Bill is seen as the best mechanism to get this review under way. I should stress that our aims are to clarify the law and to tackle the unfair pricing currently taking place. However, we want to ensure that parents remain protected from the aggressive advertising that has misled them in the past. I hope that noble Lords and the Minister will see the sense of this amendment.
On a completely different issue, I listened carefully to the noble Lord, Lord Lucas, about double- glazing. I agree that he made an important point. I did not know that there were still double-glazing salesmen, but he raised them so I am sure there must be. I agree with him that, if they still exist, they should be regulated.
I turn to a completely different issue again. I am grateful to the noble Lords, Lord Holmes and Lord Clement-Jones, for their amendments on AI. We look forward to debating the Private Member’s Bill of the noble Lord, Lord Holmes, on AI regulation in the coming weeks. These Benches take this issue hugely seriously. We recognise that AI has the potential to deliver life-changing benefits for working people, from early cancer diagnosis to relieving traffic congestion, but these benefits must be set firmly in new standards and new regulation to keep people safe and their data protected. The EU and the US are speeding ahead on this while the UK is dragging its heels, so we believe that new regulations on the control of AI are essential.
I listened carefully to the noble Lords. I do not disagree with what they are trying to achieve but I query whether this is the right place to pursue these amendments. The data protection Bill will come before the House shortly; that will give us a much greater opportunity to address the impact of AI on the lives of consumers and citizens. I hope that we will have a really detailed exploration of the protections needed in that Bill at that time. However, having listened to the noble Lord, Lord Clement-Jones, on music labelling just now, I realise that I cannot just pass this issue on to the data protection Bill in the way I wanted to, because he made an important point about the consumer issues arising. Again, I have some sympathy with the noble Lord, Lord Lucas, who challenged this and asked, “How can we know? What percentage of music is AI?”
Lord Clement-Jones (LD)
I entirely agree that it is a question to be asked. Of course, there is the general principle of transparency. If you look at the amendment, you will see that it talks about content “whether assisted or generated” by AI. It could be partly or wholly generated by AI but, in transparency terms, just the knowledge that at least some of the elements were created by AI is important. The consumer can then take it or leave it, basically. If they like the sound of AI music—believe me, some of it is pretty dreadful—that is fine, but it is an acquired taste.
Lord Lucas (Con)
Will we have musicians confessing on stage that the electronics under the stage are adjusting the sound of their voice?
Lord Clement-Jones (LD)
It all depends on how sober the audience is, I suspect.
Baroness Jones of Whitchurch (Lab)
Gosh—I cannot help feeling that this is the beginning of a much longer conversation. We may not want to have that conversation now, but this is an important issue; I absolutely understand why the noble Lord, Lord Clement-Jones, is raising it. We need to find a way to ensure that consumers are properly informed.
On standard-essential patents, I am grateful to the noble Lord, Lord Clement-Jones, for explaining the background to his amendment. Again, this is an issue with which I was not familiar, but the noble Lord spoke persuasively. I hope that the Minister will agree to follow up on the Intellectual Property Office’s review and provide some reassurance that the issue is in hand.
The Minister will be pleased to hear that we support his Amendment 195. With that, I look forward to hearing his response to the various issues that we raised in this group.
Lord Offord of Garvel (Con)
My Lords, I thank noble Lords for their valuable contributions on the amendments in this group. I will address each one in turn.
I thank my noble friend Lord Holmes of Richmond for his Amendments 199 and 200, relating to consumers and artificial intelligence. I also thank the noble Lord, Lord Clement-Jones, for his remarks on this matter.
Lord Clement-Jones (LD)
Can the Minister do any better than “in due course”? Perhaps he can say “shortly”.
Lord Offord of Garvel (Con)
In a matter of time. Why do we not get the Box to define “in due course”?
I therefore assure the noble Lord that the Government’s position on what interventions may be appropriate in respect of standard-essential patents, including specifically on injunctions, will be set out more clearly in the very near future. As the Government are already addressing this issue and are due to make their policy position public soon and separately, I hope the noble Lord feels able not to move his amendment.
For the reasons set out, I hope noble Lords will not move their amendments.
Lord Leong
“Consultation: CMA powers to address issues relating to ticket sales(1) Within the period of three months beginning with the day on which this Act is passed, the Secretary of State must lay before both Houses of Parliament a statement summarising— (a) work already undertaken by the CMA in relation to the sale and resale of event tickets, and,(b) proposals for the granting of new powers or duties for—(i) the CMA,(ii) trading standards officers, or(iii) other relevant regulators or actors in this area.(2) Within the period of six months beginning with the day on which this Act is passed, the Secretary of State must consult on the detail of the proposals mentioned in subsection (1)(b).(3) In preparing and consulting on the proposals, the Secretary of State must consult—(a) ticket sellers and resellers,(b) artists and performers, or their representatives,(c) consumers and representative organisations, and(d) any other persons the Secretary of State deems appropriate.”Member's explanatory statement
This amendment is to probe what steps (if any) the Government is taking to tackle long-standing issues in the event ticket sales and resales markets. The CMA reported on its work in this field in August 2021, making a number of recommendations to Government.
Lord Leong (Lab)
My Lords, I rise to move Amendment 196, which was tabled by my noble friend Lady Jones of Whitchurch and thank the noble Lord, Lord Clement-Jones, for his support.
About 10 years ago, I promised my then seven year- old daughter a birthday treat—to take her and her friends to a live gig by a well-known American pop icon. By the time I got around to buying the show tickets, they were all sold out, and I would have had to pay several hundred pounds over the odds to secure any tickets from the secondary markets. Sadly, I had to tell my daughter and her friends that they could not go. I saw the disappointment in their faces. I could not explain or expect them to understand that they had been bitterly let down because ticket touts were exploiting a market in which regulation is broken. It felt very wrong indeed.
My noble friend Lady Jones’s Amendment 196 requires the Secretary of State to undertake a review of the operation of both the primary or original point of sale and the secondary or resale ticketing markets. The UK’s secondary ticketing market was estimated to be worth £1 billion in 2019. The very premise of this industry centres on bulk-buying tickets to live sporting and cultural events and selling them on to consumers at inflated prices. Price-gouging cruelly excludes those who cannot afford these inflated prices. Many are genuine fans and some, like my daughter, are very young. Moreover, it exploits those who can pay these prices, as some are unable to use the tickets because secondary ticketing often breaches the original purchase terms.
In August 2021, the Competition and Markets Authority set out recommendations for additional legislative safeguards and enforcement powers to stop the bulk-buying of tickets and to end the fraudulent practice of speculative selling, which is where touts list seats that they do not have, bank the proceeds upfront and then hope to secure tickets later to fulfil their orders. It will be extremely obvious to all noble Lords how open to abuse such a practice is. Genuine fans risk losing their money completely and being unable to attend, even when they believe they have a ticket. They could find themselves out of pocket or open to further exploitation if they have made plans to attend an event and the ticket purchased by them in good faith is either not valid or not available.
It took the Government almost two years to respond to the CMA’s consultation. Their much-delayed answer, in May 2023, in essence dismisses this reasonable request saying:
“it is too soon to conclude that the only way forward is further legislation focused on this market”.
The Government are leaving it to the industry to self-regulate. This clearly does not work. Their response is inadequate to both the scale of the problem and the requirements of the industry, an industry in which UK talent leads the world, with accompanying contributions to the public purse.
Several high-profile artists, acting through their management companies, have attempted to introduce additional safeguards to ensure that their legitimate fans purchase tickets in the first place and to identify tickets that are sold on for profit so that they can be cancelled. They have sought legal redress to try to force rogue ticket resellers out of business. Despite these efforts by some in the industry, there is clear evidence that market and regulatory failure is leading to significant and persistent consumer harm.
Lord Clement-Jones (LD)
It is a pleasure to follow the noble Lord, Lord Leong, who gave an excellent introduction to Amendment 196, which I signed and very much support. All the amendments in this group are of a piece; we are very much on the same page. This arises from the fact that, despite a series of very long-running investigations—we had the Waterson report, which ran to 225 pages, back in 2016 and the Secondary Ticketing report, which the noble Lord, Lord Leong, mentioned—it is widely recognised that these platforms continue to benefit from large-scale ticket touts, many of whom acquire tickets through unlawful means.
I have not buried my head in the sand. I have had conversations with some of the secondary ticket sellers, but I am unconvinced by the story they tell. I am very grateful to FanFair Alliance, which has campaigned on this issue for many years, and I pay tribute to the noble Lord, Lord Moynihan, and Sharon Hodgson MP, who has been a tower of strength in her all-party group on this subject over many years. It is clear, as FanFair Alliance has uncovered, that there is substantial evidence of speculative listings on secondary websites, where sellers list hundreds and even thousands of tickets they do not possess. You have only to look at one or two headlines, such as:
“Viagogo accused of listing non-existent tickets on behalf of seller linked to firm”.
A 2022 report by ITV detailed how the vast majority of UK festival tickets listed on the same site were fraudulently advertised by just three people. We have some egregious behaviour there. These three sellers are still actively trading on that website.
Meanwhile, in March 2023, reporters for BBC Radio 4’s “You and Yours” highlighted how a new generation of touts are exploiting ticket systems with increasingly sophisticated software and bots. I am sure that the noble Lord, Lord Moynihan, is conscious of all this. It is one of the issues that we have failed to tackle over the years.
As the noble Lord, Lord Leong, mentioned, the CMA published a series of recommendations in August 2021 that aimed to strengthen existing laws around ticket resale in order to protect consumers, including a ban on platforms allowing resellers to sell more tickets for an event than they can legally buy from the primary market and ensuring that platforms are fully responsible for incorrect information about tickets that are listed for sale on their websites. Regrettably, BEIS—actually, in May 2023 it was probably the Department for Business and Trade; it is hard to keep up with these changes in department names—opted to prioritise the
“power of competitive markets to give consumers choice and flexibility”.
That is not the same as consumer protection. As the noble Lord, Lord Leong, said, it is out of tune with public opinion in that respect.
Compounding this decision, it remains a source of immense frustration that Google and YouTube continue to permit ticket touting websites to buy themselves to the top of search results, signposting fans away from official sources of tickets. As a result, FanFair Alliance believes that it is now imperative for the UK to adopt legislation similar to that of many other countries—France, Italy, Belgium, Japan and Australia—outlawing the resale of tickets for profit while ensuring that customers who can no longer attend an event are provided with viable services to resell at the price that they paid or less. We agree.
The prime example of this is on our doorstep. In Ireland, a comprehensive piece of legislation to ban ticket-touting was introduced in 2021. Dublin shows for artists including Taylor Swift, Coldplay and Arctic Monkeys appear to be delisted by US-owned websites such as viagogo and StubHub as a result of this legislation.
A powerful and compelling case is being made for Amendment 196. I hope for this amendment. The third amendment, Amendment 198, ties some of this together. Given the situation that I have outlined and the situation that the Competition and Markets Authority has been in—its recommendations still have not been taken on board—we need a clause that would mandate the Secretary of State to submit an annual report to Parliament on the secondary ticketing market, specifically evaluating the adequacy of consumer protection against exploitative prices and other practices. As well as Amendments 196 and 197, we need to have that information and give the CMA the teeth to do this and report to the Secretary of State, who would then report to Parliament. That would allow Parliament to evaluate the functionality of the market and determine the most effective solutions to address issues related to secondary ticketing.
I very much hope that the Government will agree that they need to make a great deal more progress. Their views were expressed in May 2023, but the abuse continues. We need to do something about it.
Lord Moynihan (Con)
My Lords, I will speak to Amendments 196 and 197 in the names of the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones, so ably moved by the noble Lord, Lord Leong, whose speech was exemplary in this context, well researched and absolutely right. I declare an interest as co-chair, with Sharon Hodgson MP, of the All-Party Group on Ticket Abuse. I echo what the noble Lord, Lord Clement-Jones, said on the tireless work that Sharon Hodgson has undertaken over the years on this. She shares my deep disappointment that the Government have failed to act on this.
It is such an obvious and sensible legislative move to stamp out the abuse that takes place in the secondary market, which does not benefit any of the sports men and women who entertain us or any of the artists. It simply puts money in the pockets of those modern-day touts who, particularly in this day and age, use bots. I will move on to explain how they do that to our disadvantage and that of the true fans of sport and music.
Those who were in the House when we last had a major competition and consumers Bill will recall that we made significant changes. There was good all-party support at that point to see significant changes to ticket sales in the secondary market in what became the 2015 Act, but nothing has happened since then, and it is high time that we take action. In fact, since then we have seen a tsunami of rip-offs by the modern-day online ticket touts, at the expense of genuine music and sports fans.
The number of professional ticket touts who have migrated from the dirty mac brigade on street corners to the use of computer bots has moved from some hundreds to 3,000 to 3,500 in the UK at the moment. When Sharon Hodgson and I started work on this, the numbers were, as I say, just in three figures. As she said in another place when speaking to the Bill, professional touts
“are attacking everywhere, from stadium gigs to local venues and, increasingly, football games”.
Touting tickets for professional football fixtures is the one area of sport where that is illegal—yet it carries on. She went on:
“Yet according to Home Office figures, the yearly arrests of football ticket touts have been decreasing, dropping from 107 in 2011-12 to only 28 in the 2019-20 season”.—[Official Report, Commons, 20/11/23; col. 122.]
That is despite a rapid rise in the number of touts. There is simply not the resource available to track down these people. Criminalisation in the law is the only way that we are going to tackle this problem.
It is not as if we have not looked at it and said, “This works”. We introduced legislation for the 2012 Olympic and Paralympic Games to ban the use of secondary markets for the sale of tickets. If that was brought before all politicians of all party persuasions and agreed, as an important measure, to make sure that we had a fair ticketing policy at those Games, why is it not appropriate for all sports and arts activities?
These amendments propose the further action that is necessary to restrict secondary ticket sites from listing tickets for sale where the seller has not provided proof that they are able to sell them, which happens quite frequently. There is many an occasion when tickets go on sale before the formal tickets are launched in the market, because the ticket touts are confident that they will be able to get them and then, as preferred buyers, sell them on to the secondary market sites.
These amendments in themselves will be welcome and are very important measures for consumer protection. Think of the family that gets a forged ticket because a preferred buyer cannot get the tickets that he has promised, maybe to viagogo, but who then goes out and has the money to forge those tickets and sell them. The family comes down from the north of England or potentially from abroad and is not let in, because the ticket is fraudulent. The family might eventually get only some of its money back from the credit card company—but after much fighting and difficulty, while trying to rescue something from the sadness and tragedy that are the non-financial aspects of the effects of this secondary market.
These measures would go some way to implementing the recommendations made by the CMA to tighten up the measures focused on restricting abuse in the secondary ticket market—measures that the Government pushed deep into the long grass. The noble Lord, Lord Leong, quoted from the letter of 10 May from the Minister, in response to the CMA. Paragraph after paragraph were just kicking this into the long grass, despite the fact that, as we have heard, Professor Waterson’s independent report was absolutely significant in advising the Government on a whole series of measures to take action against the abuses in this market.
We have the work of Sharon Hodgson, which I have spoken of, and the CMA has called for legislative action in this area. We have heard from UK Music, top sportsmen and music industry leaders—yet it was all too easy to say
“it is too soon to conclude that the only way forward is further legislation focused on this market”.
What will it take? I know that the Minister will be in agreement, because he knows about this economically from his days at Lazard. He knows from his young days, when he was up in Greenock, about the power of sport in that wonderful town—how much people love it and how they hate being fleeced by the secondary market abuses that go on.
Lord Offord of Garvel (Con)
My Lords, I thank the noble Baroness, Lady Jones of Whitchurch, for her amendment, which the noble Lord, Lord Leong, spoke to so eloquently. I also thank the noble Lord, Lord Clement-Jones, for his amendment and my noble friend Lord Moynihan for adding his contribution on a subject he speaks about with great passion. I recognise that many noble Lords have a great interest in ticketing an on a personal level, as an avid sports fan, I share a lot of their frustration.
Buying on the secondary market is a matter of consumer choice. So long as consumer rights are complied with, the Government do not wish to prevent consumers having that choice. In recent years, the Government have further strengthened those rights with respect to secondary ticketing. In 2015, we legislated to ensure that consumers received fuller information on tickets they were buying on the secondary market. In 2016, we commissioned an independent study of consumer protection in the secondary ticketing market under an economist, Professor Waterson. He concluded that, providing they were enforced, the measures in the Consumer Rights Act 2015 should be sufficient to protect consumers. He also noted that there was more the primary market could do to help consumers get tickets there.
Since then, enforcement work undertaken by the CMA and trading standards has resulted in better information being provided by platforms, and the successful prosecution and fining of a number of ticket touts. We have also added further clarifications to the CRA and introduced legislation outlawing the use of bots to buy tickets for profit, on which I know my noble friend Lord Moynihan was very influential. I thank him for his work in this area. The current legislative framework is producing successful enforcement action. It will be strengthened further by the provisions in Part 3 of the Bill.
I turn to the amendment in the name of the noble Lord, Lord Clement-Jones, on ticket limits. In the last year, the Government have consulted further with the industry on applying limits on ticket purchases in the primary market to sales in the secondary market, in line with the commitments in the response to the CMA recommendations. However, we continue to believe that this will be difficult in practice. The Government’s approach—
Lord Clement-Jones (LD)
My Lords, I am sorry to interrupt the Minister. How often do the Government turn down very firm recommendations from a regulator that knows the market, such as those made in the secondary ticketing report? It is quite unusual and rather like they are second-guessing the regulator. The Minister said that it is impractical, but is the regulator not in the best position to decide whether that is the case and whether it can be enforced?
Lord Offord of Garvel (Con)
I thank the noble Lord. Yes, the Government absolutely expect the CMA to do its job but in the consultation which comes from that, there are other voices to be heard and other stakeholders to be listened to. As I said, in 2016 we had an independent study on the secondary ticketing market and we went to an economist, Professor Waterson, to give us his opinion on these matters. There is a balance to be struck.
Lord Clement-Jones (LD)
I am sorry, but Professor Waterson could not have been clearer in his 225 pages—and that was in 2016, so we have had quite a long time to chew over his recommendations.
Lord Offord of Garvel (Con)
I thank the noble Lord. The Government’s approach is definitely always to protect consumers, where necessary, and to ensure that business regulation is proportionate. We do not believe that the evidence to date justifies new and onerous secondary ticketing measures. Indeed, it may drive sellers to try to avoid compliance by selling on social media or platforms beyond the reach of UK enforcers, making buying riskier. Banning resales or resale for profit altogether risks reducing consumer protection. For example, Ireland has banned resales, yet Taylor Swift tickets for Dublin are on offer for similar prices to those at Wembley.
Lord Moynihan (Con)
I have listened to my noble friend’s argument, but what does he think the reasons would have been for the Government to ban the secondary ticket market for the Olympic and Paralympic Games?
Lord Offord of Garvel (Con)
My noble friend Lord Moynihan, who was intimately involved in them, will know about the specific case arising there. In general, the feeling in the department is that we wish to protect consumers by keeping this activity within a regulated environment. If we ban it outright, we fear that we will drive the secondary market underground. We see evidence of that in everyday activity, including concerts and football matches. We worry about what happens as sales move out of reach of the local regulators and on to the black market.
I appreciate the points made by my noble friend, who speaks passionately about this topic; I know that he cares deeply about it. On his points about football, for example, I point out that ticket resale is banned in the football market in England and Wales for public order reasons. That does not mean that we should extend it to other markets, for the reasons I have set out. I hope that noble Lords will not press their amendments.
Lord Leong (Lab)
My Lords, first, I thank the noble Lords, Lord Moynihan and Lord Clement-Jones, so much for their very kind words. This is really personal; I took a lot of time to look into this. I thank noble Lords and my friend Sharon Hodgson for their relentless and tireless work here and in the other place. I hope that, with this Bill, we can help to move this issue forward.
The days of ticket touts in dirty macs standing outside venues is gone—well, not quite: they have been replaced by bots. We have to address this. There are still examples of bad behaviour, as the noble Lord, Lord Clement-Jones, mentioned. If we do not do anything about it, the bad behaviour will continue. With the deepest respect, I humbly disagree with the Minister: this is not consumer choice; this is consumer exploitation against consumer protection. How many more consumers need to be fleeced before we do something about this?
Lord Offord of Garvel
Member's explanatory statement
The amendment would ensure that when an application to vary an accreditation is made, the Secretary of State can make variations that differ in any way from what is applied for, and not just variations that are less onerous.
Lord Offord of Garvel (Con)
My Lords, I will speak briefly to the government amendments in this group. I look forward to hearing from those who have other amendments in the group, which I will address in my closing remarks.
Amendments 203, 204 and 205 are minor and technical amendments to Clauses 295 and 296. They clarify that the Secretary of State has flexibility to impose suitable limitations and conditions on an ADR provider’s accreditation, including to reassess existing conditions, when an ADR provider applies to alter its accreditation or breaches its accreditation requirements.
Amendments 210 and 211 make consequential amendments to other legislation, including updating statutory provisions which extend limitation periods to facilitate ADR, to ensure that ADR does not result in consumers being timed out from taking court proceedings. I hope that noble Lords will accept these minor amendments, and I look forward to a debate today on ADR. I beg to move.
Lord Etherton (CB)
My Lords, I draw attention to my Amendment 209 in this group. It would require the Secretary of State, within 12 months of the commencement of Chapter 4 of Part 4, to complete a review of the provision of alternative dispute resolution—ADR—in relation to consumer contract disputes in each relevant sector. It would also require the Secretary of State to publish a report on the steps the Government intend to take to ensure the provision in each sector of accessible and affordable ADR for the resolution of consumer contract disputes.
Chapter 4 of Part 4 addresses the issue of ADR, subject to the government amendments currently being proposed. Essentially, these provisions are concerned with the terms of accreditation of ADR providers. What is lacking is any provision for making ADR schemes more available and accessible for the resolution of disputes, or even any provision for a review of potential ADR arrangements for inexpensive, speedy and efficient disposal of consumer disputes.
The noble Baroness, Lady Jones of Whitchurch, has two amendments in this group that would improve the position. One relates to a money award under ADR that is enforceable in the ordinary courts and the other seeks a review of ADR in the aviation sector. I support both those amendments, but my provision is much wider; it calls for a more general review, by the Government, of appropriate arrangements for ADR across the various economic sectors.
Earlier in Committee, I tabled my amendment on the introduction of class actions for consumer disputes, under Chapter 7 of Part 1. The Minister, the noble Viscount, Lord Camrose, said that the Government opposed anything that would provide complexity of litigation at this stage. ADR is at the other end: it provides a very accessible, simple and straightforward means to resolve consumer disputes that should be relatively inexpensive. Resorting to court proceedings is always expensive and time-consuming. They can also be intimidating for consumers. The current delays in the delivery of civil justice are well known.
It is significant that the Government are well aware of the desirability of ADR in other areas that may, in policy terms, be broadly described as those that concern consumers. In the Renters (Reform) Bill, currently in the other place, there are provisions for landlord redress schemes in the private rental sector. It is likely that all private landlords will be required by regulations to join such schemes, which will, in effect, provide an ombudsman service for tenants in the private rental sector. These schemes will provide a swift, inexpensive and accessible means to resolve disputes and pay compensation to tenants who have suffered from landlords’ wrongful action. Joined-up government policy strongly supports the extension of that kind of redress mechanism to consumer disputes generally.
For those reasons, I suggest that the Bill should provide for a government review of ADR for consumer disputes to make it more readily available as a means of accessible, inclusive, swift and appropriate resolution of consumer disputes that is appropriate for the needs of all consumers, regardless of age, income, educational level and vulnerabilities.
Baroness Jones of Whitchurch (Lab)
My Lords, it gives me great pleasure to speak to this group, partly because, for many years, I was on the board of a very good ombudsman scheme. I suppose I should own up to it being very ably chaired, at the time, by the noble Lord, Lord Clement-Jones. But that was some time ago, so I should not have to declare it as a current conflict of interest.
As a result, I have seen how the best models of ADR can work and provide quick, free, independent consumer redress without having to go anywhere near a court, which was exactly the point made by the noble and learned Lord, Lord Etherton. But, sadly, not all ADR schemes are so responsive, which is why we have tabled Amendments 208A, 209A and 209B, and why I was pleased to add my name to Amendment 209, in the name of the noble and learned Lord, Lord Etherton. He provided a very good introduction and analysis of why a review of ADR provision in the UK needs urgently to be carried out. As he rightly pointed out, this is business-friendly; it actually reduces the cost for consumers and businesses, in many ways, so what is not to like about it?
First, I should say that we welcome the measures in the Bill as far as they go. We need an improved verification system for ADR schemes. I hope that this measure will help root out misleading company schemes that masquerade as ombudsmen but, in truth, are a different branch of the same business; they lack independence and have no real incentive either to resolve consumers’ complaints or to provide appropriate redress. They have been giving ombudsman schemes a bad name. We hope that a review will tackle the more fundamental faults in the current landscape. In some sectors, there are multiple ombudsman schemes; in others, the majority of traders refuse to participate in such schemes.
Even knowledgeable consumers find it difficult to navigate the variety of schemes on offer. The information and signposting are often notoriously poor. Why would a trader notify a consumer that they have the right to go to an ombudsman when that trader may incur the cost or inconvenience of a judgment that goes against them? The bad actors—there are many of them—do not have any incentive to provide this important information. Yet the best ombudsman schemes help to improve overall service standards and breed customer loyalty for the longer term by dealing with complaints efficiently and, as I say, free of cost.
Our Amendment 209B is a case in point. The aviation sector has been plagued by stories of poor service and a lack of refunds. There is no compulsion for airlines to be part of an ombudsman scheme. The aviation ADR scheme, which exists, is not recognised by the Ombudsman Association because it did not meet its criteria for independence, fairness and transparency. It provides consumer redress for easyJet and Ryanair, among others. It once took me about 18 months of doggedness and perseverance to get a refund for a cancelled flight from Ryanair; this is not how ombudsman schemes are meant to work.
Our amendment calls for a detailed, time-limited review of ADR in the aviation sector, consulting consumers and passenger organisations in the sector as well as looking at what further regulatory measures are necessary to bring the aviation sector in line with the standards expected in the best ombudsman schemes elsewhere. I hope that noble Lords and the Minister will feel able to support our amendment, which will help bring well-overdue reform to consumer rights in this sector.
Our Amendment 208A addresses another concern around ADR schemes: how do consumers find out about them in the first place? It is crucial that details of an ADR provider are prominently displayed to consumers who have a complaint. It is not clear why the requirement to display a name and website has been taken out of the regulations; I look forward to the Minister’s explanation for this.
Our Amendment 209A addresses the issue of traders refusing to pay money awards made against them by an ADR provider. It is hugely frustrating for consumers who fight and win a case then to find that they have limited powers to enforce the compensation. This amendment would give them greater powers to have a payment enforced by a court, as would have been the case had the judgment been made in a court in the first place. Again, I hope that noble Lords see the sense of this amendment.
All these amendments complement the proposal of the noble and learned Lord, Lord Etherton, that there should be a review. I hope the Minister confirms that the Government are prepared to carry out this long-overdue ADR review; I therefore look forward to his response.
Lord Clement-Jones (LD)
My Lords, I rise to speak briefly in support of all the amendments in this group. I say “briefly” because I have a strong interest to declare as chair of the board of the Trust Alliance Group, which runs the energy and telecoms ombudsman schemes. The noble Baroness, Lady Jones, is entirely right: she was a valued and knowledgeable member of the board of what was then called Ombudsman Services. In everything she says, she speaks with a great deal of experience of the delivery of ombudsman services.
I will be extremely brief because it would not be right for me to extol the virtues of ombudsman services overly. In many ways, they speak for themselves in terms of the alternative dispute resolution process described by the noble and learned Lord, Lord Etherton. However, they are an extremely effective way for consumers to resolve complaints that they have been unable to address directly with the businesses involved.
In this context, I commend a very good House of Commons Library briefing, Consumer Disputes: Alternative Dispute Resolution (ADR), of May 2022. It describes the pros of ADR, but it also fairly describes the cons and what the dispute resolver is able to do. I regret that the ADR directive, which came into force in 2014 or 2015, was not more comprehensively adopted; otherwise, we would not be in this position. The noble and learned Lord, Lord Etherton, is entirely right: it needs extension across a much greater variety of sectors.
Lord Offord of Garvel (Con)
I thank the noble and learned Lord, Lord Etherton, and the noble Baroness, Lady Jones, for their amendments and the discussion. I also thank the noble Lord, Lord Clement-Jones, for his remarks.
Amendment 208A from the noble Baroness, Lady Jones, seeks to enhance the visibility and specificity of ADR information provided by traders. I understand her concerns, and I am glad to hear that she welcomes the provisions currently in the Bill. The Government believe that, for traders in regulated sectors, specific information requirements should be left to sectoral redress schemes. Many already make such requirements. For traders who voluntarily sign up for ADR, requirements as detailed as those suggested by this amendment would not be in keeping with the spirit of that good practice. For many businesses that voluntarily participate in ADR, doing so is a USP to their consumers.
On the proactive duty suggested by noble Baroness’s amendment, we think it important that traders and consumers have the opportunity to resolve differences through the traders’ complaints process before proceeding to ADR. Once concluded, a trader required to participate in ADR must inform the consumer about that. We consider that Clause 306, as it stands, is proportionate. It is designed to ensure the effective and useful provision of information to consumers. I therefore hope the noble Baroness will not move her amendment.
Amendment 209, tabled by the noble and learned Lord, Lord Etherton, requires the review of ADR in each economic sector within 12 months of commencement of the Bill, followed by the publication of a report. The provisions on ADR information in Clauses 301 to 304 facilitate ongoing monitoring of consumer ADR, including its accessibility and affordability. This includes the monitoring of accredited ADR providers, ensuring that consumers consistently receive fair and effective ADR services. It also facilitates the provision of information by exempt ADR providers and regulators, facilitating the oversight of redress schemes in regulated sectors.
In terms of affordability, Clause 292 ensures accredited ADR providers cannot charge consumers unless their fees are approved by the Secretary of State and are published. Nothing in the Bill prevents future mandates requiring businesses to participate in ADR in specific sectors. Legislation already compels businesses in some sectors to participate in redress schemes. Clause 306 requires traders to draw consumers’ attention to any such scheme when responding to consumer complaints.
I also highlight the July 2023 Ministry of Justice announcement, which demonstrates that ADR continues to be a topic of live government work. The MoJ has introduced integrated mediation for claims valued up to £10,000 in county courts and expects this to come into force later this year. Under this scheme, all such defended small claims would be referred to the small claims mediation service before their claim can progress to a court hearing. For the reasons I have just set out, I hope that the noble and learned Lord will feel comfortable not moving his amendment.
I again thank the noble Baroness, Lady Jones, for her Amendment 209A. This would provide that a money award resulting from an ADR process should be enforceable as if it were payable under a court order. Many forms of ADR are not binding. Here, the amendment might be counterproductive. Non-binding ADR retains a level of flexibility and informality distinct from the rigidity of court proceedings. This flexibility is crucial, as it encourages participation from businesses that might otherwise be hesitant about entering into ADR. If the consumer is dissatisfied with the outcome of this kind of ADR, they can, of course, take the matter to court. By contrast, where settlements are reached through binding ADR, they are already enforceable, and the amendment is not needed.
More generally, I hope that the noble Baroness will be reassured that Chapter 4 of Part 4 of the Bill will enhance the quality of consumer ADR in consumer markets, in particular by making the accreditation of ADR providers mandatory, subject to appropriate exemptions, which should contribute significantly to the reliability and effectiveness of ADR outcomes for both sides. I hope that the noble Baroness agrees that the Bill provides a balanced approach that maintains the effectiveness and attractiveness of ADR. I therefore hope that she will feel satisfied in not moving her amendment.
Amendment 209B, also tabled by the noble Baroness, Lady Jones, seeks to ensure that the Government conduct a review of ADR provisions in the aviation sector. The Department for Transport conducted a consultation in January 2022—the aviation consumer policy reform consultation—which examined existing ADR provisions within the sector. The consultation sought views on whether ADR membership should be mandatory, the effectiveness of ADR compliance and enforcement mechanisms, and the merits of the current system when compared to alternatives such as a single ombudsman.
The DfT’s June 2023 consultation response included commitments to improve complaint resolution for aviation customers. The DfT will work with the industry, the CAA and complaint-handling bodies to consider best practices so that airlines can best manage their own complaints processes, thereby reducing the necessity for ADR intervention for passengers.
The DfT committed to legislate when parliamentary time allows, to mandate ADR for all airlines operating to, from and within the UK, as well as encouraging more voluntary uptake from airlines and airports. The DfT also committed to explore improvements to ADR processes, including better data collection, training and increased transparency in decision-making. There is an ongoing commitment to review the current ADR model to ensure its continued effectiveness within the aviation sector. I hope the noble Baroness, Lady Jones, will feel comfortable not moving her amendment.
Lord Offord of Garvel
Member’s explanatory statement
The amendment would ensure that the Secretary of State can alter or impose conditions whenever an accreditation is varied, and not just in cases where limitations are imposed or altered.
Lord Offord of Garvel
Member’s explanatory statement
The amendment would ensure that the Secretary of State has power under clause 296(4)(a) to vary or remove existing conditions, in addition to being able to impose new conditions on an accreditation.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would omit subsection (7) of Clause 302, which is superseded by the new Clause in my name on data protection.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would omit subsection (4) of Clause 303, which is superseded by the new Clause in my name on data protection.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would omit the definition of “data protection legislation” in Clause 304, as my amendment to Clause 328 would define that term for the purposes of the whole Bill.
Lord Offord of Garvel
“Prescription and Limitation (Scotland) Act 1973
A1 (1) Section 14 of the Prescription and Limitation (Scotland) Act 1973 (computation of prescriptive periods) is amended as follows.(2) In the following places, for “relevant consumer dispute” or “relevant dispute” substitute “consumer contract dispute”—(a) subsection (1D);(b) subsection (1F);(c) subsection (1G) (in each place where it occurs).(3) In subsection (1D)—(a) after “this Act is” (in the opening words) insert “, in a case where ADR is carried out in respect of the dispute,”;(b) in paragraph (a)—(i) for “the non-binding ADR procedure” substitute “the ADR”, and(ii) for “such a procedure” substitute “it”;(c) in each of paragraphs (b) and (c), for “a non-binding ADR procedure” substitute “the ADR”.(4) In the following places, for “the non-binding ADR procedure” substitute “the ADR”—(a) subsection (1E); (b) subsection (1G)(b) and (f);(c) subsection (2) (in the definition of “qualifying request”).(5) In subsections (1F) and (1G), for “a non-binding ADR procedure” substitute “ADR”.(6) In subsection (2)—(a) omit the following definitions—“ADR entity”;“ADR procedure”;“consumer”;“non-binding ADR procedure”;“relevant consumer dispute”;“sales contract”;“service contract”;“trader”;(b) before the definition of “holiday” insert the following definitions—““ADR” has the same meaning as in Chapter 4 of Part 4 of the Digital Markets, Competition and Consumers Act 2024;“ADR entity” means a person who carries out ADR in compliance with section 291(1) of that Act (which prohibits persons from carrying out ADR unless exempt, accredited, or acting under special ADR arrangements, in accordance with Chapter 4 of Part 4 of that Act);“consumer contract dispute” has the same meaning as in Chapter 4 of Part 4 of that Act.”Limitation Act 1980
A2 (1) Section 33B of the Limitation Act 1980 (extension of time limits because of alternative dispute resolution) is amended as follows.(2) In the heading, for “cross border or domestic contractual” substitute “consumer contract”.(3) For subsection (1) substitute—“(1) In this section—“ADR” has the same meaning as in Chapter 4 of Part 4 of the Digital Markets, Competition and Consumers Act 2024;“ADR entity” means a person who carries out ADR in compliance with section 291(1) of that Act (which prohibits persons from carrying out ADR unless exempt, accredited, or acting under special ADR arrangements, in accordance with Chapter 4 of Part 4 of that Act);“consumer contract dispute” has the same meaning as in Chapter 4 of Part 4 of that Act.”(4) In the following places, for “relevant dispute” substitute “consumer contract dispute”—(a) subsection (2)(a) and (b);(b) subsection (5);(c) subsection (6);(d) subsection (7) (in each place where it occurs);(e) subsection (9).(5) In the following places, for “a non-binding ADR procedure” substitute “ADR”—(a) subsection (2)(b);(b) subsection (6);(c) subsection (9).(6) In the following places, for “the non-binding ADR procedure” substitute “the ADR”—(a) subsection (2)(c);(b) subsection (3);(c) subsection (7) (in each place where it occurs); (d) subsection (8);(e) subsection (9).Foreign Limitation Periods Act 1984
A3 (1) Section 1B of the Foreign Limitation Periods Act 1984 (extension of limitation periods because of alternative dispute resolution) is amended as follows.(2) In the heading, for “cross border or domestic contractual” substitute “consumer contract”.(3) For subsection (1) substitute—“(1) In this section—“ADR” has the same meaning as in Chapter 4 of Part 4 of the Digital Markets, Competition and Consumers Act 2024;“ADR entity” means a person who carries out ADR in compliance with section 291(1) of that Act (which prohibits persons from carrying out ADR unless exempt, accredited, or acting under special ADR arrangements, in accordance with Chapter 4 of Part 4 of that Act);“consumer contract dispute” has the same meaning as in Chapter 4 of Part 4 of that Act.”(4) In the following places, for “relevant dispute” substitute “consumer contract dispute”—(a) subsection (2)(a) and (b);(b) subsection (5);(c) subsection (6) (in each place where it occurs);(d) subsection (8).(5) In the following places, for “a non-binding ADR procedure” substitute “ADR”—(a) subsection (2)(b);(b) subsection (5);(c) subsection (8).(6) In the following places, for “the non-binding ADR procedure” substitute “the ADR”—(a) subsection (2)(c);(b) subsection (3);(c) subsection (6) (in each place where it occurs);(d) subsection (7);(e) subsection (8).Limitation (Northern Ireland) Order 1989 (S.I. 1989/1339 (N.I. 11))
A4 (1) Article 51B of the Limitation (Northern Ireland) Order 1989 (extension of time limits: non-binding ADR procedure) is amended as follows.(2) In the heading, for “: Non-binding ADR procedure” substitute “because of alternative dispute resolution in certain consumer contract disputes”.(3) In paragraphs (1)(a) and (3), for “a non-binding ADR procedure” substitute “ADR”.(4) In the following places, for “the non-binding ADR procedure” substitute “the ADR”—(a) paragraph (1)(b) (in each place where it occurs);(b) paragraph (2);(c) paragraph (4) (in each place where it occurs).(5) In paragraph (1)(b)(i), for “that such a procedure” substitute “on which it”.(6) In the following places, for “relevant dispute” substitute “consumer contract dispute”—(a) paragraph (1)(a);(b) paragraph (3);(c) paragraph (4) (in each place where it occurs).(7) For paragraph (5) substitute—“(5) In this Article— “ADR” has the same meaning as in Chapter 4 of Part 4 of the Digital Markets, Competition and Consumers Act 2024;“ADR entity” means a person who carries out ADR in compliance with section 291(1) of that Act (which prohibits persons from carrying out ADR unless exempt, accredited, or acting under special ADR arrangements, in accordance with Chapter 4 of Part 4 of that Act);“consumer contract dispute” has the same meaning as in Chapter 4 of Part 4 of that Act;“qualifying request” is a request by a party that another (A) confirm to all parties that A is continuing with the ADR.””Member’s explanatory statement
This amendment makes consequential amendments in connection with Chapter 4 of Part 4 of the Bill (alternative dispute resolution for consumer contract disputes).
“Regulatory Enforcement and Sanctions Act 2008
2A In Schedule 3 to the Regulatory Enforcement and Sanctions Act 2008, at the appropriate place insert—“Digital Markets, Competition and Consumers Act 2024, Chapter 4 of Part 4”.Equality Act 2010
2B (1) Section 140AA of the Equality Act 2010 (extension of time limits because of alternative dispute resolution) is amended as follows.(2) In the heading, for “cross border or domestic contractual” substitute “consumer contract”.(3) For subsection (1) substitute—“(1) In this section—“ADR” has the same meaning as in Chapter 4 of Part 4 of the Digital Markets, Competition and Consumers Act 2024;“ADR entity” means a person who carries out ADR in compliance with section 291(1) of that Act (which prohibits persons from carrying out ADR unless exempt, accredited, or acting under special ADR arrangements, in accordance with Chapter 4 of Part 4 of that Act);“consumer contract dispute” has the same meaning as in Chapter 4 of Part 4 of that Act.”(4) In each of the following places, for “relevant dispute” substitute “consumer contract dispute”—(a) subsection (2)(a) and (b);(b) subsection (5);(c) subsection (6);(d) subsection (7) (in each place where it occurs);(e) subsection (9).(5) In each of the following places, for “a non-binding ADR procedure” substitute “ADR”—(a) subsection (2)(b);(b) subsection (6);(c) subsection (9).(6) In each of the following places, for “the non-binding ADR procedure” substitute “the ADR”—(a) subsection (2)(c);(b) subsection (3);(c) subsection (7) (in each place where it occurs);(d) subsection (8);(e) subsection (9).(7) In subsection (8), for “(6)” substitute “(7)”.”Member’s explanatory statement
This amendment makes consequential amendments in connection with Chapter 4 of Part 4 of the Bill (alternative dispute resolution for consumer contract disputes).
Baroness Wheatcroft
“Consumer information: vote reporting(1) The FCA must make rules requiring relevant FCA-regulated persons to—(a) give consumers information on request in a machine-readable form about the exercise by the persons or on their behalf of all voting rights attached to assets in which the consumers have an interest, including in respect of any specified description of scheme or investment vehicle, within 30 days of that request being received;(b) have regard to guidance in respect of the format of the information provided under subsection (1)(a).(2) The FCA may discharge the duty in subsection (1) in respect of—(a) beneficiaries of occupational pension schemes within the meaning of section 1 of the Pension Schemes Act 1993,(b) beneficiaries of the local government pension scheme,(c) clients of personal pension schemes within the meaning of an order under section 22 of Financial Services and Markets Act 2000, and(d) clients of stakeholder pension schemes within the meaning of such an order,by making rules requiring relevant FCA-regulated persons to give the information described in subsection (1)(a) to a relevant intermediary, or make it publicly available.(3) In this section—“relevant FCA-regulated persons” means—(a) persons managing investments within the meaning of an order under section 22 of FSMA 2000, including the activity described in paragraph 6 of Schedule 2 of that Act, and(b) persons effecting or carrying out a contract of insurance within the meaning of an order under section 22 of FSMA 2000;“relevant intermediary” means—(a) in respect of subsection (2)(a), the trustees of the scheme,(b) in respect of subsection (2)(b), an administering authority of the scheme in which the consumers have an interest, and(c) in respect of subsection (2)(c) and (2)(d), the managers of the scheme.”Member’s explanatory statement
This amendment would require the FCA to make rules requiring on-request standardised reporting on company voting by investment managers and life insurers, and to provide guidance to firms on the format of that reporting. The FCA could discharge that duty in respect of the members of pension schemes by passing the information to the trustees, administering authorities and managers of the schemes, or to publish it.
Baroness Wheatcroft (CB)
My Lords, I declare my interests as listed in the register, and I apologise that I could not attend Second Reading. I will speak to the single Amendment 212. Among the Bill’s declared purposes is
“to make provision relating to the protection of consumer rights”.
This amendment is concerned with one specific but important consumer right: having visibility as to how one’s money is being used. I believe that every investor, big or small, should have easy access to see how their shares are being voted, and this amendment would be a big step in that direction.
I gratefully acknowledge the support of the noble Baronesses, Lady Sheehan and Lady Altmann, who believe in the principle at stake here. I thank the fintech firm, Tumelo, for its help in drafting the amendment. It has the support of the Association of Member Nominated Trustees, which represents board members of 700 pension schemes, accounting for more than £1 trillion of assets. That is quite some weight.
Baroness Sheehan (LD)
My Lords, I thank the noble Baroness, Lady Wheatcroft, for tabling this amendment, to which I have added my name, as I did to a similar amendment that she tabled to the Financial Services and Markets Bill. I apologise to the Committee for not being available to speak at Second Reading.
I put my name to this amendment because votes reporting is an important issue of openness and transparency that underpins good stewardship and good governance, without which the road to net zero and our nature goals becomes that much more chaotic. At this point I should declare my interest as a director of Peers for the Planet.
As things currently stand, at AGMs investment managers vote on behalf of the pension funds they manage on issues that pension savers may have concerns about. Some, if not most, savers would prefer to know what their money is signed up to, and they cannot easily find out what their money is supporting, nor can pension schemes. This is because there is zero meaningful onus on investment managers to report their actions in a full, timely and easily digestible format, and that is important as the noble Baroness, Lady Wheatcroft, highlighted. The outcome is that pension schemes do not have the information to inform their savers, and it is for this reason that the amendment has support from the Association of Member Nominated Trustees, which has £1 trillion of assets under management.
In the US, it is mandatory. There, voting at AGMs is a key tool in ensuring good corporate governance, good long-term investor returns and good economic outcomes more broadly. What assessment have the Government made of America’s way of including people in decisions made in their name about their money? Why is it that in a relatively light-touch regime that is doable, but here it is not? Why is it that UK investment managers can comply with US rules when they operate in the US but find it too burdensome to do it here? The Government say that they see the need for action, but we see no action year after year. This amendment would enable pension schemes and ultimately pension savers more effectively to hold their investment managers to account for action on climate and nature, as well as on other matters.
I fully support the noble Baroness, Lady Wheatcroft, in what she is aiming to do, and I add the support of the noble Baroness, Lady Altmann, who has put her name to the amendment. She asked me to convey her apologies to the Committee for not being present; she is not feeling well enough to have stayed to the current late hour.
I hope that once we hear from the Labour Party we will be able to say that the amendment has cross-party support.
Lord Lucas (Con)
My Lords, I very much support this amendment. We are a capitalist society, and capitalism relies on a return on capital being provided to the people who provide the capital. In that sense, our capital has become very concentrated in institutional hands. Decisions are taken by a cadre of fund managers, of whom I used to be one—well-paid people who thoroughly approve of people in industries being well paid, particularly senior managers. More and more of the profits of industry are diverted to the people running them and to the people running the investments in them, and the amount getting through to the individual investor becomes limited.
What is the force in any other direction? What is the motivation for people running a company to do more than please their fund managers? They do not have to have the interest of the individual owners at the end of this. In the end, this results in bad decisions being taken on the allocation of capital and on the flow of money within a corporation. These will not be in the interests of paying the pensions of the people whose money is invested in these companies.
Lord Clement-Jones (LD)
My Lords, it is a pleasure to follow the noble Lord, Lord Lucas, with all his experience as a fund manager, and particularly to hear what he forecast for the future: the ability of AI to deliver information in a new format that is of much greater interest and use to a consumer. I must admit, I had not really thought about that.
It is also a pleasure to follow my noble friend Lady Sheehan, and in particular to support the noble Baroness, Lady Wheatcroft, on her amendment. We are obviously saving the best for last in contributing to our final group in Committee. As a former company secretary, I well remember the noble Baroness as a financial journalist and an absolute champion of corporate governance. This appears to be an absolutely crucial part of it. In a sense, it is the other side of the coin from what you expect of the corporate; it is what you expect of those who invest in the corporate, in terms of exercising their voting rights. The noble Baroness illustrated the sorry history of the voluntary approach put forward by the FCA. I could loosely describe her amendment as trying to put some lead in the FCA’s pencil, which seems wholly needed.
The noble Baroness asked a number of further questions. A really interesting and important question is: how on earth can the US, with its relatively unregulated systems compared to ours and its culture of not regulating on a federal basis, do it on a compulsory basis when we have not? Particularly from what the noble Lord, Lord Lucas, said, it sounds as though it will be eminently possible to do this, as the technology improves, without overly imposing costs on investment managers. Indeed, it is already being done for those operating in the states. There seems absolutely no reason why the Government should not move forward in the way that the noble Baroness suggests.
Lord Leong (Lab)
My Lords, I thank the noble Baroness, Lady Wheatcroft, for tabling Amendment 212, and I thank all noble Lords who have spoken. I will be brief.
In 2019, the European Union introduced the second shareholder rights directive, which sets out stipulations regarding the utilisation of specific shareholder privileges linked to voting shares during general meetings of companies that are headquartered in a member state and have their shares traded on a regulated market located or functioning within a member state. It was brought into UK law by secondary legislation, amending the occupational pension schemes regulations of 2005, and it has now been assimilated into UK law. As per the Explanatory Notes to the regulations, they encourage investors to be transparent about how they invest and approach their engagement as shareholders. It was a negative statutory instrument, so no debates were tabled.
The amendment of the noble Baroness, Lady Wheatcroft, carries greater weight than the shareholder rights directive. It would mandate the FCA to establish regulations necessitating investment managers and life insurers to furnish standardised reports concerning company voting activities upon request. Furthermore, it would instruct the FCA to offer guidance to firms on the specific format for such reporting.
We agree in principle with the amendment that it is right for shareholders to be more transparent. The noble Baroness, Lady Sheehan, mentioned being transparent about where investments are made, which we need to know if we are to achieve net zero. This was fully supported by the noble Lord, Lord Lucas. Fund managers need to be more transparent about informing where their funds are invested.
I ask the Minister: what impact has there been on investor transparency in the four and a half years that the SRD has been in UK law? I look forward to his response.
Lord Offord of Garvel (Con)
I thank the noble Baroness, Lady Wheatcroft, for Amendment 212, which would require the Financial Conduct Authority to make rules requiring regulated persons to give consumers certain information regarding voting rights attached to assets in which the consumer has an interest. I also thank the noble Baroness, Lady Sheehan, the noble Lords, Lord Clement-Jones and Lord Leong, and my noble friend Lord Lucas for their contributions.
I appreciate the strength of feeling on this issue. I suggest that we speak to the Treasury and write to the noble Baroness on a number of her questions, in particular to draw on the comparisons with the US, with which we are so close on so many things, to understand what its experience is and where we are in comparison.
The Government recognise that transparency is crucial to effective stewardship and corporate governance by pension and other investment funds. We also acknowledge the argument that the existing voting disclosure framework is not working as well as it could. That is why, as the noble Baroness mentioned, the FCA set up the independently chaired vote reporting group in November 2022, following recommendations made by the task force on pension scheme voting implementation to develop a standardised and decision-useful framework for voting disclosure.
It is important to take a proportionate approach in implementing changes to vote reporting. Mandatory voting disclosure would be a significant departure from the FCA’s existing rules on voting disclosure. It is important that we have a globally competitive asset management sector. This means designing and implementing regulatory change in a way that considers regulatory costs as well as benefits. That is why the Government support the FCA’s approach to work closely with industry stakeholders and build consensus.
The group has made significant progress and recently consulted on its proposals for a comprehensive and standardised vote reporting framework. The Government believe that it continues to be more appropriate to wait for the group’s final output before requiring the FCA to produce further rules and regulation. I can assure the noble Baroness, Lady Wheatcroft, that, when reviewing the group’s final proposal, the Government will carefully consider whether its recommendations go far enough to address the existing issues around transparency for consumers that the noble Baroness so eloquently described, as well as what further action may be appropriate. We therefore hope that she will feel comfortable withdrawing her amendment.
Baroness Wheatcroft (CB)
I thank the Minister for what I think was an unusually conciliatory reply. I am quite cheered by what he said. I understand that we will wait to see what the FCA comes up with. I cannot say that I am overly optimistic about the FCA being effective with anything other than mandatory reporting—that will require the Government to act—but I look forward to seeing that action before too long. I beg leave to withdraw.
Lord Offord of Garvel
“5A In Schedule 14 to EA 2002 (specified functions), at the appropriate place insert—“Chapter 2 of Part 5 of the Digital Markets, Competition and Consumers Act 2024.”5B In Schedule 15 to EA 2002 (enactments conferring functions), at the appropriate place insert—“Chapter 2 of Part 5 of the Digital Markets, Competition and Consumers Act 2024.””Member's explanatory statement
This amendment ensures that: (a) information that comes to a public authority in connection with the exercise of its functions under Chapter 2 of Part 5 of the Bill is information to which section 237 of the Enterprise Act 2002 applies (which imposes a general restriction on disclosure of certain kinds of information unless permitted under Part 9 of that Act), and (b) that information to which section 237 applies can be disclosed to a public authority for the purposes of enabling that authority to carry out its functions under Chapter 2 of Part 5.
Lord Offord of Garvel
“ScheduleMinor and consequential amendmentsPart 1Amendments to Acts of ParliamentCompetition Act 1980 (c. 21)
1 The Competition Act 1980 is amended as follows.2 In section 11B(1) (references under section 11: powers of investigation and penalties), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force and,”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.3 In section 11C(1) (references under section 11: further supplementary provisions), in the words before paragraph (a)— (a) after “shall apply” insert “, as it had effect immediately before the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force,”; and(b) for “applies” substitute “applied immediately before that date”.4 In section 11D(7) (interim orders), in paragraph (d), after “penalties)” insert “as it had effect immediately before the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force”.Telecommunications Act 1984 (c. 12)
5 In section 101 of the Telecommunications Act 1984 (general restrictions on disclosure of information), in subsection (3)—(a) omit paragraph (v);(b) after paragraph (w) insert—“(x) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Companies Act 1985 (c. 6)
6 In paragraph 17 of Schedule 15D to the Companies Act 1985 (disclosures), after sub-paragraph (m) insert—“(n) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Airports Act 1986 (c. 31)
7 In section 74 of the Airports Act 1986 (restriction on disclosure of information), in subsection (3)—(a) omit paragraph (v);(b) after paragraph (y) insert—“(z) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Gas Act 1986 (c. 44)
8 (1) Section 41EB of the Gas Act 1986 (references under section 41E: application of EA 2002) is amended as follows.(2) In subsection (1), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (4)—(a) after “shall apply” insert “, as it had effect immediately before the relevant date,”;(b) for “applies” substitute “applied immediately before that date”.(4) In subsection (5)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(5) After subsection (6) insert— “(7) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”Water Act 1989 (c. 15)
9 In section 174 of the Water Act 1989 (general restrictions on disclosure of information), in subsection (3)—(a) omit paragraph (lp);(b) after paragraph (o) insert—“(p) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Electricity Act 1989 (c. 29)
10 (1) Section 56CB of the Electricity Act 1989 (references under section 56C: application of EA 2002) is amended as follows.(2) In subsection (1), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (4)—(a) after “shall apply” insert “, as it had effect immediately before the relevant date,”;(b) for “applies” substitute “applied immediately before that date”.(4) In subsection (5)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(5) After subsection (6) insert—“(7) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”Water Industry Act 1991 (c. 56)
11 The Water Industry Act 1991 is amended as follows.12 (1) Section 14B (references under section 14: powers of investigation) is amended as follows.(2) In subsection (1), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (4)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”(b) at the end insert “as those provisions had effect immediately before that date”.(4) After subsection (5) insert—“(6) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”13 (1) Section 16B (CMA’s power of veto following report: supplementary) is amended as follows.(2) In subsection (6), in the words before paragraph (a)— (a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (9)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(4) After subsection (10) insert—“(11) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”14 (1) Section 17M (references under section 17K: powers of investigation) is amended as follows.(2) In subsection (1), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (4)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(4) After subsection (5) insert—“(6) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”15 (1) Section 17Q (section 17P: supplementary) is amended as follows.(2) In subsection (6), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (9)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(4) After subsection (10) insert—“(11) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”16 In Part 2 of Schedule 15 (enactments etc in respect of which disclosure may be made)—(a) at the end of the list insert—“The following provisions of the Digital Markets, Competition and Consumers Act 2024—(a) Part 3;(b) Chapter 1 of Part 4;(c) Chapter 2 of Part 5.”(b) omit the entry for subordinate legislation made for the purpose of securing compliance with Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market. Railways Act 1993 (c.43)
17 The Railways Act 1993 is amended as follows.18 (1) Section 13B (references under section 13: application of EA 2002) is amended as follows.(2) In subsection (1), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (4)—(a) after “shall apply” insert “, as it had effect immediately before the relevant date,”;(b) for “applies” substitute “applied immediately before that date”.(4) In subsection (5)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(5) After subsection (6) insert—“(7) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”19 (1) Section 15C (sections 15A and 15B: supplementary) is amended as follows.(2) In subsection (2D), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (2G)—(a) after “shall apply” insert “, as it had effect immediately before the relevant date,”;(b) for “applies” substitute “applied immediately before that date”.(4) In subsection (2H)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(5) After subsection (4) insert—“(5) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”20 In section 145 (general restrictions on disclosure of information), in subsection (3)—(a) omit paragraph (qu);(b) after paragraph (v) insert—“(w) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”21 Schedule 4A (review of access charges by the Office of Rail and Road) is amended as follows.22 (1) Paragraph 10A (references under paragraph 9: application of EA 2002) is amended as follows.(2) In sub-paragraph (1), in the words before paragraph (a)— (a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In sub-paragraph (4)—(a) after “shall apply” insert “, as it had effect immediately before the relevant date,”;(b) for “applies” substitute “applied immediately before that date”.(4) In sub-paragraph (5)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(5) After sub-paragraph (6) insert—“(7) In this paragraph “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”23 (1) Paragraph 15 (paragraphs 13 and 14: supplementary) is amended as follows.(2) In sub-paragraph (2D), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In sub-paragraph (2G)—(a) after “shall apply” insert “, as it had effect immediately before the relevant date,”;(b) for “applies” substitute “applied immediately before that date”.(4) In sub-paragraph (2H)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(5) After sub-paragraph (4) insert—“(5) In this paragraph “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”Coal Industry Act 1994 (c. 21)
24 In section 59 of the Coal Industry Act 1994 (information to be kept confidential by the Coal Authority), in subsection (4)—(a) omit paragraph (q);(b) after paragraph (t) insert—“(u) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Greater London Authority Act 1999 (c. 29)
25 In section 235 of the Greater London Authority Act 1999 (restrictions on disclosure of information), in subsection (3)—(a) omit paragraph (ru);(b) after paragraph (v) insert—“(w) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.” Utilities Act 2000 (c. 27)
26 In section 105 of the Utilities Act 2000 (general restrictions on disclosure of information), in subsection (6)—(a) omit paragraph (w);(b) after paragraph (z1) insert—“(z2) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Transport Act 2000 (c. 38)
27 In Schedule 9 to the Transport Act 2000 (air traffic: information), in paragraph 3(3)—(a) after paragraph (rh) insert—“(ri) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”(b) omit paragraph (sa).Communications Act 2003 (c. 21)
28 In section 393 of the Communications Act 2003 (general restrictions on disclosure of information), in subsection (5)—(a) omit paragraph (q);(b) after paragraph (s) insert—“(t) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Wireless Telegraphy Act 2006 (c. 36)
29 In section 111 of the Wireless Telegraphy Act 2006 (general restrictions), in subsection (6)—(a) omit paragraph (o);(b) after paragraph (p) insert—“(q) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Companies Act 2006 (c. 46)
30 In Part 2 of Schedule 2 to the Companies Act 2006 (specified descriptions of disclosures), in section (A) (United Kingdom), in paragraph 25, after paragraph (l) insert—“(m) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Legal Services Act 2007 (c. 29)
31 In section 60(9) of the Legal Services Act 2007 (duties of the CMA), in the words before paragraph (a)—(a) after “apply”, in the first place it occurs, insert “, as they had effect immediately before the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force,”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”. Postal Services Act 2011 (c. 5)
32 In section 60(6) of the Postal Services Act 2011 (section 59: supplementary), in paragraph (a), after “CMA),” insert “as they had effect immediately before the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force,”.Civil Aviation Act 2012 (c. 19)
33 In Schedule 6 to the Civil Aviation Act 2012 (restrictions on disclosure of information), in paragraph 4—(a) in sub-paragraph (3), in the list of relevant statutory provisions, after the entry for “Water Act 2014” insert—“the following provisions of the Digital Markets, Competition and Consumers Act 2024—(a) Part 3;(b) Chapter 1 of Part 4;(c) Chapter 2 of Part 5.”(b) in sub-paragraph (4), omit paragraph (b).Part 2Amendments to other legislationEnergy (Northern Ireland) Order 2003 (S.I. 2003/419 (N.I. 6))
34 The Energy (Northern Ireland) Order 2003 is amended as follows.35 In Article 63 (general restrictions on disclosure of information), in paragraph (6)—(a) omit sub-paragraph (w);(b) after sub-paragraph (x) insert—“(y) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”36 (1) In Schedule 2 (orders altering licensable activities), paragraph 5 (references under paragraph 3: application of EA 2002) is amended as follows.(2) In sub-paragraph (1), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In sub-paragraph (4)—(a) after “shall apply” insert “, as it had effect immediately before the relevant date,”;(b) for “applies” substitute “applied immediately before that date”.(4) In sub-paragraph (5)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(5) After sub-paragraph (6) insert—“(7) In this paragraph “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”Water Services etc. (Scotland) Act 2005 (Consequential Provisions and Modifications) Order 2005 (S.I. 2005/3172)
37 The Water Services etc. (Scotland) Act 2005 (Consequential Provisions and Modifications) Order 2005 is amended as follows.38 (1) Article 5 (references: powers of investigation) is amended as follows. (2) In paragraph (1), in the words before sub-paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In paragraph (5)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(4) After paragraph (5) insert—“(6) In this article “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”39 (1) Article 10 (Article 9: supplementary) is amended as follows.(2) In paragraph (3), in the words before sub-paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In paragraph (7)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(4) After paragraph (7) insert—“(8) In this Article “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”Water and Sewerage Services (Northern Ireland) Order 2006 (S.I. 2006/3336 (N.I. 21))
40 The Water and Sewerage Services (Northern Ireland) Order 2006 is amended as follows.41 (1) Article 23 (references under Article 21: powers of investigation) is amended as follows.(2) In paragraph (1), in the words before sub-paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In paragraph (4)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(4) After paragraph (5) insert—“(6) In this Article “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”42 (1) Article 27 (CMA’s power of veto following report: supplementary) is amended as follows.(2) In paragraph (6), in the words before sub-paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In paragraph (9)— (a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(4) After paragraph (10) insert—“(11) In this Article “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”43 In Article 265 (restrictions on disclosure of information), in paragraph (5)—(a) omit sub-paragraph (s);(b) after paragraph (t) insert—“(u) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Postal Services (Appeals to the Competition Commission) (Investigations and Extension of Time Limits) Order 2011 (S.I. 2011/2749)
44 In Article 3 of the Postal Services (Appeals to the Competition Commission) (Investigations and Extension of Time Limits) Order 2011 (application of sections 109 to 117 of the 2002 Act), in the words before paragraph (a), after “shall apply,” insert “as they had effect immediately before the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force and”.Postal Services Act 2011 (Disclosure of Information) Order 2012 (S.I. 2012/1128)
45 In Article 4 of the Postal Services Act 2011 (Disclosure of Information) Order 2012, in the list of prescribed enactments—(a) omit the entry for the Consumer Protection from Unfair Trading Regulations 2008;(b) after the entry relating to the Consumer Rights Act 2015 insert—“the following provisions of the Digital Markets, Competition and Consumers Act 2024—(a) Part 3;(b) Chapter 1 of Part 4;(c) Chapter 2 of Part 5.””Member's explanatory statement
See the explanatory statement for my amendment inserting a new Clause after Clause 330.
“Review: tax rates for digital and high street businesses(1) Within the period of 6 months beginning with the day on which this Act is passed, the Secretary of State must undertake a review of the implications for competition of tax rates paid by business which operate—(a) wholly online,(b) wholly through physical premises, and(c) both online and through physical premises.(2) In undertaking the review under subsection (1), the Secretary of State must—(a) identify the number of high street shop closures in each of the last three years, (b) calculate an indicative average tax rate for each of the business categories mentioned in subsection (1),(c) consider the consequences of any differences in the average tax rates mentioned in paragraph (b) on competition, and(d) if there are significant differences between the average tax rates mentioned in paragraph (b), consider the case for reforming different forms of business taxation to reduce such differences.(3) In undertaking the review under subsection (1), the Secretary of State may carry out specific sectoral case studies which consider the particular impacts of differences in tax rates on businesses operating in those sectors.(4) Upon completion of the review, the Secretary of State must lay its findings before Parliament.”Member's explanatory statement
This new Clause, which would require the Secretary of State to carry out a review of the implications for competition of effective tax rates of digital and high street businesses, is designed to probe the Government’s plans for balancing the economic opportunities presented by firms operating in digital markets with the ongoing health of established brick-and-mortar businesses.
Baroness Jones of Whitchurch (Lab)
My Lords, this amendment comes at the end of a long debate but is none the less important. It addresses one of the main factors leading to the long and sad decline of many of Britain’s high streets: the huge disparity in costs for businesses having a physical presence in the high street compared to the cost of equivalent businesses trading online. Bricks-and-mortar businesses are now paying disproportionately more than their online competitors, which is hitting small businesses and our high streets hard.
The result is boarded-up shops that landlords have given up trying to let and an increase in anti-social behaviour as the streets become ghost towns. Yet we know that small businesses are crucial to thriving high streets, providing goods and services that are central to people’s everyday lives. More than that, they provide a community focus for people to socialise, eat and relax, helping to tackle loneliness and increasing a sense of well-being.
It is not just small businesses that have been squeezed out. Well-known chain stores such as Debenhams and Wilko, which provided core high street essentials, have failed to survive on the high street. Instead, their naming rights have been bought out by new businesses operating exclusively online.
Vibrant high streets are not just good for communities; they are vital for boosting local economic growth, creating increased demand and jobs in the retail and service sectors. The fact is that the UK’s business rates system is no longer fit for purpose. As our economy has moved more online, our tax system has failed to keep up, so there is an urgent need to rebalance the costs. High street businesses should not face huge business rate charges while their big online marketplace competitors are let off the hook.
Lord Clement-Jones (LD)
My Lords, I will speak very briefly in support of the amendment in the name of the noble Baroness, Lady Jones.
It is unfortunate that this comes at the end of our debate rather than the beginning, as it is a really important aspect of it. We have been talking about the digital world throughout our six sessions, but it is increasingly apparent that the digital world cannot meet all the emotional needs of society. It is not the perfect substitute for everything that we do in person in the physical world—for our social, shopping and other needs. If we try to make it so, it will have considerable impact on mental health.
We must strive to keep a lively, prosperous physical world in front of us on the high street, as the noble Baroness outlined. Much of this talk about taxation is above my pay grade—you always get wrapped on the knuckles by your spokesperson if you start proposing tax reform or whatever it may be—but there is no doubt that my party certainly supports business rates reforms in a variety of different ways. It also believes that the settlement on the digital taxation side through the OECD agreements has been far too modest in its impact on the major digital players. The imbalance between physical and digital traders has been far too great and has advantaged the digital players far too much. I am in total sympathy with what the noble Baroness said.
Lord Lucas (Con)
My Lords, I entirely agree with the noble Lord, Lord Clement-Jones, on that last point. It is really important that we keep at the question of how we tax digital businesses. One can no longer rely on the Irish national statistics because they are so distorted by profit shifting, a lot of it from this country—profit going abroad and being taxed at a very low rate in Ireland when it should be taxed here.
I know that this is an international matter, but we absolutely must keep the pressure up. We are getting more and more digital, so we need to have an international tax system where profits are taxed where they arise and not where Governments wish to shift them to. I know that this is hard, but I am unimpressed by the progress that the world has made in this direction. I really hope that the Government will get behind the continued efforts on this. We suffer a great deal from it.
At the other end of the scale, the Government could also do a lot better. I am sure that my noble friends will remember that HMRC made a horrendous mess of VAT in the Channel Islands in the early 2000s. Whole businesses grew up in the Channel Islands on the idea that you could ship records out to them, then they would come back VAT-free to the person in the UK who bought them because the consignment was under a certain value.
HMRC eventually dealt with that, but now there is monstrous and recurring fraud through the likes of Amazon and eBay, involving “Chinese” sellers—there is no reason to think that they are of that nationality in particular, but they are certainly Far Eastern—who HMRC does not pursue. HMRC does not effectively collect the tax that is due. It says, “Oh, it’s too hard. Oh, it’s in lots of little bits. Oh, these people move around with great velocity”. Yes, they do, but by not collecting it, HMRC not only does not get the tax but damages the UK businesses that should be able to compete on a level playing field with those overseas sellers. It is delinquent; it is an issue at the root of HMCR that we have never managed to deal with effectively, but we really must.
It is so important that HMRC realises that it should focus not only on operational efficiency in terms of how much it costs to do things and whether it gets the money back that it is investing in this, or a sufficient multiplier of it, but on whether it is doing its bit for the structure of the UK economy and the ability of businesses to start and flourish here. I pay great credit to Retailers Against VAT Abuse Schemes, which has been active these last 20 years. I hope that it will eventually be successful, but golly, it could do with more help.
Lord Offord of Garvel (Con)
Once again, I am grateful to the noble Baroness, Lady Jones, for raising this important issue, and for the remarks of the noble Lord, Lord Clement-Jones, and my noble friend Lord Lucas.
The Government are wholeheartedly committed to protecting the country’s high streets and town centres, and supporting them as they adapt to changing consumer demands. Indeed, the Government revalued business rates in 2023, with the retail sector being the biggest beneficiary. We have also provided long-term investment in our high streets and small businesses, including £2.35 billion-worth of town deals, the £830 million future high streets fund and the £4.8 billion levelling up fund. New legislation in the Levelling-up and Regeneration Act 2023 will play an important role in reviving our high streets by introducing high street rental auctions, which will empower places to tackle decline by bringing vacant units back into use, and seek to increase co-operation between landlords and local authorities and make town centre tenancies more accessible and affordable for tenants, especially for SMEs, local businesses and community groups.
The Government also launched the new £2.5 million high street accelerators pilot programme, which will empower and incentivise local people to work in partnership to develop ambitious plans to reinvent the high streets so that they are fit for the future. Accelerators will bring residents, businesses and community organisations together with their local authorities to develop a long-term vision for revitalising high streets. The pilot will run in 10 areas across England until March 2025.
We consulted in 2022 on an online sales tax, and after careful consideration we decided not to introduce it. That decision reflected concerns raised on the risk of creating unfair outcomes and complexities in defining the boundaries between online and in-store retail, including click-and-collect orders. The Government therefore do propose to pursue further changes to business rates or sales tax at this time. I hope that the noble Baroness will feel sufficiently reassured to withdraw her amendment.
Baroness Jones of Whitchurch (Lab)
My Lords, I realise that it is late in the day and that I am raising a fundamental issue at a late point. Perhaps it is straying a little beyond the main intent of the Bill; nevertheless, it is a fundamental issue, and it is important that we have aired it. I am grateful to the noble Lord, Lord Clement-Jones; as he said, our high streets are far too important to lose. As both he and the noble Lord, Lord Lucas, said, the digital world cannot meet all the needs of society, and high streets still have a fundamental role to play. We absolutely need to ensure that the community focus in high streets is revitalised. I am grateful that the noble Lord, Lord Lucas, said that we should look at other models of funding and taxation; it was a point well made.
I listened carefully to what the Minister said. It is easy to say that he is wholeheartedly committed to revitalising the high streets; that is great—we all are—and I have no doubt that initiatives such as levelling up and the pilots will have some impact, but none of those addresses the fundamental fact that it is the economic costs for the shops that is at heart here. You can make a high street look lovely, provide better police and tackle anti-social behaviour, but if the shops cannot afford to trade because they are being undercut by their online competitors, they will not stay around. Unless we take more fundamental actions on that basis and face up to what is happening at the moment, sadly, we will face continuing long-term decline.
I hear what the Minister says. I realise that this is a much bigger debate, but I really feel that the Government do not have a grip on this. They have had 14 years to sort it out but there has been a long decline on their watch. I am sorry to end on such a negative note. As I said, I am sure we will have a further chance to debate this, but I really think that our policy on reforming business rates will make a fundamental difference. Nevertheless, I beg move to withdraw my amendment.
Lord Offord of Garvel
““the data protection legislation” has the same meaning as in the Data Protection Act 2018 (see section 3 of that Act);”Member’s explanatory statement
This amendment would define “the data protection legislation” for the purposes of the whole Bill.
Lord Offord of Garvel
“Data protection(1) This section applies to a duty or power to process information that is imposed or conferred by or under any provision of this Act.(2) A duty or power to which this section applies does not require or authorise the processing of information which would contravene the data protection legislation (but the duty or power is to be taken into account in determining whether the processing would contravene that legislation).”Member’s explanatory statement
This amendment would make it clear that provisions in the Bill imposing or conferring duties or powers to process information do not require or authorise the processing of information which would contravene the data protection legislation.
Lord Offord of Garvel
“ConsultationA duty to consult under or by virtue of this Act may be satisfied by consultation that took place wholly or partly before the passing of this Act.”Member’s explanatory statement
This amendment clarifies that consultation required under or by virtue of the Bill may begin before the Bill is passed (so long as it is in compliance with the requirements for consultation as enacted).
Lord Offord of Garvel
“Minor and consequential amendmentsSchedule (Minor and consequential amendments) contains minor and consequential amendments.”Member's explanatory statement
This new Clause introduces a new Schedule that contains minor and consequential amendments relating to the Bill generally (there are other Schedules of consequential amendments relating to particular Parts of the Bill).
Lord Offord of Garvel
Member’s explanatory statement
This amendment provides that the new Clause and Schedule in my name making minor and consequential amendments come into force in accordance with regulations made by the Secretary of State.
Digital Markets, Competition and Consumers Bill
Monday 11th March 2024
(4 months, 2 weeks ago)
Lords ChamberRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 47-II Second marshalled list for Report - (11 Mar 2024)
18:10 - Division on Amendment 13 - Ayes: 217 / Noes: 192 - Amendment 13 agreed.
18:23 - Division on Amendment 14 - Ayes: 199 / Noes: 199 -
18:36 - Division on Amendment 23 - Ayes: 209 / Noes: 193 - Amendment 23 agreed.
18:51 - Division on Amendment 43 - Ayes: 204 / Noes: 192 - Amendment 43 agreed.
19:05 - Division on Amendment 56 - Ayes: 202 / Noes: 187 - Amendment 56 agreed.
Viscount Camrose
Member's explanatory statement
This amendment would remove the power for the Secretary of State to amend the conditions in subsection (1) by statutory instrument.
The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
My Lords, I am delighted that we have made it to Report and look forward to today’s debate. Before we get under way, I express my sincere thanks to all noble Lords who took part in Committee and to those with whom I have had the pleasure of discussing a number of issues that have arisen since then. I am extremely grateful for the constructive, collaborative nature of those discussions. It is clear to me that the broad support for this Bill across the House and the desire to see it pass swiftly remain undiminished, which is great to see.
The Government have tabled a number of amendments to improve the clarity and accountability of the regime. I turn first to the amendment to the Henry VIII power in Clause 6. This clause would originally have given the Secretary of State the power to amend by regulations the position of strategic significance conditions in the Bill, to allow them to be updated to account for future changes to digital markets. The Government recognise that Henry VIII powers should be used only where absolutely necessary. I noted the strength of feeling on this issue in Committee and the concerns that the power could be used to introduce broad changes to the framework of the regime. The DPRRC also noted this point in its report on the Bill, for which my noble friend Lord Offord and I were very grateful. Reflecting that strategic significance criteria have been designed to be suitably broad and technology agnostic, we are content to remove this power. Amendment 1 will do that, so I hope that noble Lords will support it.
Amendment 42 ensures that non-commercial organisations acting in a non-commercial capacity will be subject to fines with the same fixed statutory maximum amounts and/or maximum daily amounts as individuals. We expect it to be extremely rare that the CMA would ever need to fine these organisations, but the Bill should provide for all circumstances. These organisations could be subject to financial penalties for investigative breaches—for example, providing false or misleading information to the CMA.
Amendment 40 clarifies that all individuals—including, for example, sole proprietors—will be subject to penalties with fixed statutory maximum amounts and/or maximum daily amounts. Amendment 41 removes a superfluous subsection in the same clause. I hope noble Lords will support these amendments.
Amendment 48 will ensure that private actions relating to the digital markets regime can be transferred between the Competition Appeal Tribunal and the relevant court. This will reflect current practice for competition cases. Effective co-operation and information sharing between regulators is vital to ensuring efficient and coherent interventions under the digital markets regime.
Amendments 160 and 161, under the Wireless Telegraphy Act 2006 and the Postal Services Act 2011 respectively, will allow Ofcom to share information it holds with the CMA where it is necessary for the CMA to discharge its digital markets functions. Ofcom is likely to hold relevant information under these Acts that would be valuable to support work relating to, for example, mobile ecosystems and e-commerce. The amendments will also help prevent unnecessary and duplicative information requests by the CMA. The Government have also put forward Amendments 50, 53 and 159 to improve the Bill’s clarity.
Amendment 58 will ensure that the existing provision in Clause 116—which prevents information the CMA holds as part of an investigation being subject to a disclosure order—cannot be circumvented by instead seeking disclosure from another party that holds the same information.
I hope that, for the reasons I have set out, noble Lords will support the government amendments. I beg to move.
Lord Faulks (Non-Afl)
My Lords, Amendments 13 and 35 are in my name and those of the noble Baronesses, Lady Stowell and Lady Jones of Whitchurch, and the noble Lord, Lord Clement-Jones.
The Bill has been welcomed across the House and it represents a crucial step forward in regulating the digital market. I pay tribute to the level of engagement that has taken place with Ministers and officials. We have had some excellent and well-informed debates in Grand Committee. However, good though this Bill is, it is capable of improvement. I refer to my interests in the register. I am not a competition lawyer, but I do have experience of judicial review and of the operation of the Human Rights Act. I was also chair of the Independent Review of Administrative Law, which reported a few years ago.
My Amendment 13 is concerned with the use in the Bill of the word “proportionate”. Despite some heavy lobbying of the Government by big tech, the right to appeal against an intervention by the CMA will engage the judicial review test, rather than a merits test, except as to penalty. Later amendments will probe the appeal test further.
The original adjective in the Bill was “appropriate”. The word “proportionate” replaced it at a late stage of the Bill’s progress through the Commons. Why? I am afraid I have yet to receive a satisfactory answer. In Grand Committee, the noble Lord, Lord Lansley, referred to a letter from the Minister about the change. However, it did nothing to allay concerns that the change was a response to lobbying by big tech.
According to one view, it is an innocuous change; indeed, one would expect an intervention to be proportionate. The word also has a reasonable legal pedigree: for example, you can defend yourself against attack providing your response is proportionate to the attack. Whether your response is proportionate will be a question of fact, or for a jury to decide.
Judicial review, however, is not primarily concerned with the facts of a decision but with the process whereby the decision is made. Classically, the courts got involved only if a decision was so unreasonable that no reasonable public body could have reached it. The scope of judicial review has expanded to include challenges based on, for example, irrationality or failure to take into account relevant considerations. There are other grounds, but all are concerned with how the decision is reached rather than whether the court agrees with the factual findings.
Since the enactment of the Human Rights Act, the concept of proportionality has entered the law in relation to judicial review, but only in limited circumstances. I will quote the most recent addition of De Smith’s Judicial Review, as I did in Committee, which is generally regarded as the leading textbook in this area:
“Domestic courts are required to review the proportionality of decisions and enactments in two main categories of case: cases involving prima facie infringements of Convention rights and cases involving EU law”.
There are those who think that proportionality should be the test in all cases of judicial review, but that is not the law.
I cannot immediately see why an appeal in the context of the Bill should involve a convention right, but they have a habit of appearing in all sorts of places. If convention rights are engaged, proportionality comes into the analysis anyway. I understand that the Government consider that an appeal may well involve A1P1—Article 1 of the first protocol of the ECHR—which is concerned with the arbitrary inference with property rights.
To speak of human rights in the context of enormous companies such as Google, Apple or Meta is certainly counterintuitive; I do not think that that is what the framers of the European convention had in mind after the Second World War. Last week, Apple was fined €1.8 billion under the European Union’s regulation on market abuse, and there is an appeal. That perhaps gives us an idea of the context of human rights in this area.
If—and this is a big “if”—the courts consider that the convention is engaged, there will be considerations of proportionality. Amendment 35, which I believe is consequential to Amendment 13, raises precisely the same point in a further context. In choosing to put the word “proportionality” into the legislation, a court might well conclude that Parliament had deliberately used the word to widen the scope of judicial review challenge, even when no convention right is engaged. For my part, that is a risk that I do not think should be taken. Your Lordships’ House is well aware of the expensive and time-consuming nature of appeals, which of course favour larger organisations with a large legal spend. The noble Lord, Lord Vaizey, spoke at Second Reading of long and expensive battles and death by lever arch files—although he did not quite put it that way. Large companies have the resources.
A proportionality test is far closer to an appeal on the facts than one based on conventional judicial review principles. The issue as to whether an intervention is proportionate or not gives the court much greater scope for looking at those facts at greater length and greater expense and with a more uncertain outcome. I would therefore much prefer to revert to the word “appropriate”, as was originally in the Bill, which does not carry the same legal charge and does not risk expanding the basis of appeal.
In the Media Bill, criticism has been made of the use of the word “appropriate”, but, as many judges have said before, context is everything, and here it is the right word. I look forward to hearing the Minister’s response and explanation behind the change in wording.
Baroness Stowell of Beeston (Con)
Now that my friend the noble Lord, Lord Faulks, has spoken, I am happy to stand, because I hoped that he would cover all the technical aspects of his amendment, to which I have put my name.
Before I turn to the amendment, at the start of Report it is worth me reminding noble Lords and my noble friends the Ministers of something, because there are an awful lot of amendments in this group and they cover quite a bit of ground. The Communications and Digital Select Committee, which I have the privilege to chair, endorsed the Digital Markets, Competition and Consumers Bill as it was introduced in the Commons. We held quite a few hearings on the Bill last year, which came after a long period of campaigning for this legislation, and so it was one that we cared deeply about. Indeed, we applauded the Government for striking the right, careful balance on some difficult issues covered in Part 1 of the Bill, especially the appeals process, the countervailing benefits and the leveraging principle.
Lord Lansley (Con)
My Lords, with that lead-in I will say a few words about Amendment 56 and Amendments 13 and 35 in the name of my noble friend Lord Faulks, which were discussed very intensively in Committee. We are all very grateful to my noble friend Lord Offord for the extent of his response to that debate as Minister, but I fear that it gave us information on which to work but not sufficient reassurance to hold back, as my noble friend Lord Faulks has continued to press the argument.
Let me make a point about that. In the course of that debate, as the noble Lord, Lord Faulks, said, the Government’s intention seemed to be that either Article 1, Protocol 1, of the ECHR is engaged in relation to an appeal, using the arguments for the peaceful enjoyment of possessions and therefore, as the noble Lord, Lord Faulks, said, proportionality would be engaged as a consequence of that, or the ECHR is not engaged but it is the Government’s intention, by introducing this provision in the Bill, that the same test would apply. However, I fear that we need to say, as the Minister quite reasonably said in response in Committee, that there are expectations that proportionality would form part of the decision-making process of the Competition and Markets Authority as a responsible regulator. It would be expected, as the Minister said, to apply that principle in the terms on which it was done in the Bank Mellat v Her Majesty’s Treasury (No. 2) case.
The Minister referred to the “four limbs” of Lord Reed and Lord Sumption. I spent a bit of my life which I will not get back now reading some of these judgments, though it was quite interesting. It led me to go a little beyond the cases that were cited by my noble friend to the case of Pham v Secretary of State for the Home Department, where there was a really interesting discussion demonstrating that, although there was some development of the use of proportionality alongside reasonableness in determining administrative law cases, in the decisions that were being handed down there was a clear distinction between that proportionality which is linked to the reasonableness test—that is, that this was something so disproportionate that no reasonable regulator would have made this decision—and what they described as an intense review of the merits of the decision on proportionality.
Lord Etherton (CB)
My Lords, I speak to my Amendment 49. I am grateful to those across the House who have supported it. This amendment is about the fundamental right of access to justice for consumers who have suffered from breaches of requirements and directions by the CMA, as the regulator, or commitments given to the CMA. The persons against whom the requirements and directions are imposed—those who have given the commitments—may be broadly described as the “big players” in digital markets. Their definition is a complicated one, but it indicates that these are the big players. We are talking here about those such as Amazon, Apple, Meta, Google, Samsung, Nokia and more.
In addition to remedies available to the CMA for breach of such requirements, directions and commitments, as has already been mentioned, such as imposing financial penalties, or the bringing of criminal proceedings and disqualification of directors, Clause 101 of the Bill grants those, whether businesses or individuals, who have suffered loss or damage, the right to bring their own civil proceedings for damages, or an injunction, or any other appropriate relief or remedy.
In the real world, one has to ask who has the financial ability or time to take on the large players in digital markets. The answer is, only billionaires and other wealthy businesses. This is true, critically, for the purposes of my amendment, which is directed to where large numbers of individuals or businesses have been harmed by the same improper or unlawful conduct. That situation of multiple complainants is the situation to which my amendment is directed. Under the current procedural rules of the courts in England and Wales, there are very limited circumstances where more than one person can join in the same proceedings, even though they may have suffered harm or loss from the same wrongful conduct of a big player. Multiple claimants could not, for example, bring one set of proceedings where the harm or loss has been suffered on different occasions, and in different circumstances.
Representative proceedings—or, as they are usually called, class actions—would overcome the procedural limitations. These class actions can be conducted, and usually are, on an opt-out basis, so that the proceedings would embrace everyone who has suffered from the same breach, whether or not they are aware of their right to damages or other relief, unless they take steps to opt out. Provision for collective proceedings, or class actions, already exists in the Competition Act 1998, as amended by the Consumer Rights Act 2015, for breaches of competition law. My Amendment 49 would extend that provision to the rights of civil action given to consumers under Clause 101 of the Bill.
In Committee, the Minister rejected that proposal. In Hansard of 24 January 2024, he is reported as saying that
“it is also important that the CMA can take a clear lead in imposing and enforcing requirements to bring effective change in digital markets ... 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”.
He then said:
“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”.—[Official Report, 24/1/24; col. GC 255.]
I am afraid that that response to a perfectly reasonable procedural improvement for the benefit of consumers is illogical and unconvincing.
The position is that, in addition to a market regulator scheme, the Bill expressly confers a civil right of action. To say that, although such a civil right exists, the Government do not want many or possibly anybody to enforce it is to grant a right without an effective remedy. That is a basic breach of the right of access to the courts.
The leading case on this is the 2017 Supreme Court decision in what is known as the UNISON case. In that case, the Lord Chancellor decided to impose fees for claims to employment tribunals. The number of claims dropped by around 66%. The Supreme Court, having found that the fees were unaffordable for most of those people to whom the courts were a proper means of recourse, quashed the fees order on the basis that it impeded access to justice.
As I said, civil claims against the big digital market players will be unaffordable, save for a very few people. The right to an opt-out class action in the most serious cases of damage or loss suffered by multiple businesses and individuals from the same wrongful conduct will provide a practical remedy, enabling such claims to be enforced.
The Government have recently announced that they will introduce in this parliamentary Session legislation that will make third-party litigation funding lawful in order to promote access to justice. Accordingly, my amendment, together with third-party litigation funding, will provide all the necessary practical ingredients for collective enforcement of the civil rights confirmed by Clause 101.
Further, the Minister’s observation that lengthy and complex litigation is undesirable is contrary to the grant of the civil remedy in Clause 101, expressly given to those who have suffered loss or damage. Where multiple people have incurred loss or damage as a result of the same wrongful conduct specified in Clause 101, litigation would inevitably be lengthy and complex, even if brought by a single person who has the time and money to bring the proceedings.
The noble Baroness, Lady Stowell, in referring to Amendment 47, tabled by the noble Baroness, Lady Harding of Winscombe, says that it is undesirable that there should be any way in which the CMA undertakes investigations into breaches of undertakings, requirements or commitments at the same time as someone who has been harmed by the wrongful conduct brings civil proceedings. Amendment 47 specifies the circumstances in which, among other things, a court must stay proceedings.
The difficulty here, I am afraid, is twofold. In the first place, no example has been given as to where the overlap would occur. The regulatory provisions in Chapter 7 of Part 1 available to the CMA include
“Penalties for failure to comply with competition requirements”,
the imposition of criminal offences, and provision for director disqualification, but there is no provision for payment of damages to small businesses that, or individuals who, have suffered loss or damage.
Furthermore, some of the provisions in Amendment 47 are extremely vague. Take, for example, one of the situations in which it is said that there should be a stay of civil proceedings: where
“the CMA gives notice to the appropriate court or Tribunal that it is investigating the conduct to which the civil proceedings relate under this Part, or is intending to open a breach investigation … into such conduct within a reasonable time”.
What is a reasonable time? These investigations could go on for years, funded by very large, wealthy and determined players in the market. In the meantime, those who have suffered the loss will be out of pocket and will remain so. This is an opportunity to increase access to justice for those who have been given a right to recover damages or loss in a civil action against large, powerful players in the digital markets who would otherwise have no practical and efficient way of enforcing that right. We should embrace this opportunity.
Viscount Colville of Culross (CB)
I have added my name to the Minister’s Amendment 1 with great pleasure, because the Government agree that the power in Clause 6 is one the Secretary of State does not need. I have also added my name to Amendment 56 as it aims to curtail an even greater Secretary of State power. In Committee, I tabled a series of amendments to limit the Secretary of State’s powers over various stages of the Part 1 conduct requirement process. At the time, we were told that these powers were needed to ensure that the regime could respond to the fast evolution and unpredictability of digital markets. I grateful to the Minister for changing his mind on one of these powers in Clause 6 and for tabling the amendment to leave out subsections (2) and (3), which, even with the affirmative procedure, were going to give the Secretary of State unnecessary powers. It is a sensible move, as the criteria for deciding whether a digital activity should be deemed of strategic significance are, as he said, broad and well set out in subsection (1).
My concern was that the powerful tech companies, whose market dominance will be investigated in the Part 1 process, might put pressure on Ministers to amend the four criteria in Clause 6 to dilute the range of company activities under consideration for SMS positions. I am satisfied that this amendment will stop that happening. I hope that the Minister will now listen favourably to other amendments, which will be debated today, to ensure that the conduct requirement process is as swift as possible and that the Secretary of State does not have overmighty powers to intervene in the process.
I am grateful to the noble Lord, Lord Lansley, for tabling Amendment 56, to which I have added my name, to Clause 114. Subsection (4)(a) as it stands gives too much power to the Secretary of State to approve these guidelines. As I said in Committee, it was pointed out that the guidelines are the most important part of the SMS process. They set out the framework for the conduct requirement process and allow implementation of the new powers the Bill gives to the CMA to examine market-dominant activities by big tech companies.
One of the reasons for my fear of the Minister’s powers is that she might be subject to lobbying by tech companies, as the noble Baroness, Lady Stowell, pointed out, either to change the guidelines or to slow down implementation. At the moment, the Secretary of State has the power to delay approval indefinitely, and, looking to the future, when the guidelines need to be updated or revised, she or her successor could do the same thing. I am grateful to the Minister and his officials for meeting me twice to talk about this issue. I appreciate his time and attention, but I am disappointed that he and the Bill team felt unable to do anything to fetter the Secretary of State’s powers with a time limit on delay for approval. The Minister feels that a time limit would make the process brittle, and fears that an election or some big political event could cause the process to time out. I ask noble Lords to bear in mind that the amendment deals with the Secretary of State’s powers of approval of the guidelines only, not the entire procedure for setting up the guidelines. If there were an election, ministerial work would stop. However, once the new Government were in place, the time limit could kick in and start again. The Secretary of State could then approve the guidelines in 40 days or send them back to the CMA with reasons.
In my meeting with the Minister, he kindly offered to publish letters exchanged between the Secretary of State and the CMA as the guidelines were created. This seemed a wonderful offer that would go far towards ensuring transparency in the process and allay fears of backstage lobbying, and go some way towards assuaging Members’ concerns about the process of creating guidelines. Unfortunately, the Minister rescinded that offer. I ask him in the name of the openness and transparency of the Part 1 process to reinstate it.
Such a move would complement the second part of Amendment 56, whereby if the Minister does not approve of the guidelines—which would surely be the only reason for delay—an open statement of reasons as to why the guidelines could not be approved would be published. Surely noble Lords agree that transparency in the guidelines process would go far in calming any fears of it being influenced by the big tech companies.
I want very much to see this Bill on the statue book, but the Secretary of State’s powers in Clause 114 are detrimental to the Part 1 process and need to be looked at again. I hope the Minister will accept Amendment 56. If not, I will support the noble Lord, Lord Lansley, should he decide to test the opinion of the House.
Lord Black of Brentwood (Con)
My Lords, I declare my interest as deputy chair of the Telegraph Media Group and my other interests as set out in the register. I will focus briefly on three crucial amendments in this group—on proportionality, the appeals standard, and the Secretary of State’s powers—echoing points that have already been made strongly in this debate.
I fully support Amendments 13 and 35 in the name of the noble Lord, Lord Faulks. The amendment made to the Bill in the Commons replacing “appropriate” with “proportionate” will significantly expand the scope for SMS firms to appeal the CMA’s decision to create conduct requirements and initiate pro-competitive interventions.
As we have already heard, the Government have sought to argue that, even absent the “proportionality” wording, in most cases the SMS firms will be able to argue that their ECHR rights will be engaged, therefore allowing them to appeal on the basis of proportionality. The question arises: why then introduce the “proportionality” standard for intervention at all, particularly when the CMA has never had the scope to act disproportionately at law?
In this context, it is clear that the main potential impact of the Bill as it now stands is that a court may believe that Parliament was seeking to create a new, heightened standard of judicial review. As the Government have rightly chosen to retain judicial review as the standard of appeals for regulatory decisions in Part 1, they should ensure that this decision is not undermined by giving big tech the scope to launch expensive, lengthy legal cases. All experience suggests that that is exactly what would happen by it arguing that the Government have sought to create a new, expansive iteration of JR. I fear that, if the amendments from the noble Lord, Lord Faulks, are not adopted, we may find in a few years’ time that we introduced full merits reviews by the back door, totally undermining the purpose of this Act.
Amendments 43, 44, 46, 51 and 52 in the name of the noble Baroness, Lady Jones, are also concerned with ensuring that we do not allow full merits appeals to undermine the CMA’s ability to regulate fast-moving digital markets. Even though full merits are confined to penalty decisions, financial penalties are, after all, as we have heard, the ultimate incentive to comply with the CMA’s requirements. We know that the Government want this to be a collaborative regime but, without there being a real prospect of meaningful financial penalties, an SMS firm will have little reason to engage with the CMA. Therefore, there seems little logic in making it easier for SMS firms to delay and frustrate the imposition of penalties.
There is also a danger that full merits appeals of penalty decisions will bleed back into regulatory decisions. The giant tech platforms will undoubtedly seek to argue that a finding of a breach of a conduct requirement, and the CMA’s consideration that an undertaking has failed to comply with a conduct requirement when issuing a penalty, are both fundamentally concerned with the same decision: “the imposition” of a penalty, with the common factor being a finding that a conduct requirement has been breached. The cleanest way to deal with this is to reinstate the merits appeals for all digital markets decisions. That is why, if the noble Baroness, Lady Jones, presses her amendments, I will support them.
Finally, I strongly support Amendment 56 in the name of my noble friend Lord Lansley, which would ensure that the Secretary of State must approve CMA guidance within a 40-day deadline. This would allow the Government to retain oversight of the pro-competition regime’s operations, while also ensuring that the operationalisation of the regime is not unduly delayed. It will also be important in ensuring that updates to the guidance are made promptly; such updates are bound to be necessary to iron out unforeseen snags or to react to rapidly developing digital markets. Absent a deadline for approval, there is a possibility that the regulation of big tech firms will grind to a halt mid-stream. That would be a disaster for a sector in which new technologies and business models are developed almost daily. I strongly support my noble friend and will back him if he presses his amendment to a vote.
With the deadline to comply with the Digital Markets Act in Europe passing only last week, big tech’s machinations in the EU have provided us with a window into our future if we do not make this legislation watertight. As one noble Lord said in Committee—I think it was the noble Lord, Lord Tyrie—we do not need a crystal ball when we can read the book. We have the book, and we do not like what we see in it. We must ensure that firms with an incredibly valuable monopoly to defend and limitless legal budgets with which to do so are not able to evade compliance in our own pro-competition regime.
Baroness Kidron (CB)
My Lords, I will speak to Amendments 43, 44, 46, 51 and 52, to which I have added my name, and Amendment 59. Before I do, I register my support for Amendments 13 and 35, which were brilliantly set out by my noble friend Lord Faulks and added to by others. I too shall support them if they choose to ask the opinion of the House.
I also support Amendment 56 in the name of the noble Lord, Lord Lansley. I have lived experience of waiting too long for the code to come back from the Secretary of State. Even without being a bad actor, it is in the nature of Secretaries of State to have a burgeoning in-tray, and it is in the nature of codes to be on a subject that politicians have moved on from by the time they arrive. I fully support him, and 40 days seems like a modest ask given the importance of the Bill overall.
I turn to the amendments in the name of the noble Baroness, Lady Jones. I look forward to her setting them out after I have supported them. They would reinstate judicial review as the appeal standard for penalty decisions. I thank the Minister for the generosity of his time; I know he spoke not only to me but to a number of noble Lords. However, the thing I have taken away from discussions with government and during Committee is the persistent drumbeat that asserts that we are giving huge new and untested powers to the CMA. Here, we can fill in as we like: full merits on penalty, countervailing benefits, proportionality, and Secretary of State powers have been introduced simply to give a little balance. I find that unacceptable given the power of the companies and the asymmetry we are trying to address.
The reality is that the powers given to the CMA, while much needed, are dwarfed by the power of the companies they seek to regulate. The resources available to the CMA, while welcome, are dwarfed by the resources available to a single brand of a single SMS. Most of all, the CMA’s experience of regulating digital companies is dwarfed by the experience of digital companies in dodging regulation. I am struggling to understand the imbalance of power that the Government are seeking to address.
I was in Brussels on Wednesday last week and there is a certain regret about the balancing that the EU allowed to the DMA in face of the tech lobby, only to see Apple, TikTok and Meta gleefully heading to the courts and snarling up the possibility of being regulated as intended for many years—or perhaps at all. This issue was raised by the noble Lord, Lord Black. Adding a full merits appeal on penalty will embolden the sector to use the threat of appeal to negotiate their position at earlier points in the process. It will undermine the regulator’s strength in coming to a decision. Very possibly, as other noble Lords have said, it could bleed backwards into areas of compliance and conduct requirements. It is, as the noble Baroness, Lady Harding, said, creating a hole for water to get in. The companies lobbied furiously for full merits on penalties. This is not an administrative point; it goes to the heart of the regime. Full merits give the regulated leverage over the regulator.
The most straightforward way of ensuring that the regulator does not abuse its new, enhanced power, as the Government appear to fear, is to make it accountable to Parliament, as the noble Baroness, Lady Stowell, set out in full, repeatedly and with great eloquence. I am sorry that we will not have an opportunity to make our feelings on that issue felt today, but I strongly support her saying that we should not drop this issue just because it is inconvenient to deal with at this point in the electoral cycle.
Lord Wolfson of Tredegar (Con)
My Lords, I added my name to Amendment 49, which was opened in detail by the noble and learned Lord, Lord Etherton. Therefore, and also because we are on Report, I can be extremely brief. I declare my interest as a barrister. I practise, among other places, in the Competition Appeal Tribunal, for both applicants and respondents. I will make two short points, although they are linked.
First, Clause 101, particularly subsection (1), provides individual rights to consumers. Having done so, we must find an effective method to enable those consumers to vindicate those legal rights. There is no point Parliament passing laws that provide people with individual rights if there is no effective real-world mechanism for those people to vindicate and enforce those rights. Not only is that a basic proposition of the rule of law, as the noble learned Lord, Lord Etherton, said, but this otherwise risks us engaging in a legislative form of Tantalus, where we place rights just in front of people: they can see the rights, but they cannot grasp and actually use them. I submit that that would be wrong in principle. If we are going to enable people to vindicate their rights, the obvious place—in fact, the only place in our current legal system—is the Competition Appeal Tribunal, where, as the House has heard, there is already experience in both opt-in and opt-out collective proceedings.
Secondly, in Committee, it was suggested that perhaps all these rights should be exercised through the regulator, and there is therefore no need for the collective proceedings. Sometimes the law does that: sometimes we pass laws that mean that people have to go through a regulator, or sometimes an officeholder, in order to vindicate their individual positions. But we have taken that decision of principle in Clause 101(1): we have given rights to individuals and consumers in the Bill. Given that, it seems to me that the only sensible course is to provide an effective mechanism for people to vindicate their rights.
Finally, while I am on my feet, I add my voice to Amendment 13, proposed by the noble Lord, Lord Faulks. I certainly agree with what he said about proportionality. I add only this, as the sort of person who might be making this argument in future. It would be all the more easy and attractive for counsel if “proportionate” was left in the legislation, having had this debate, and for them then to say, “Oh well, Parliament must have meant a merits review, because it went into it with its eyes open”. The noble Lord, Lord Faulks, and my noble friend Lord Lansley eloquently set out the consequences of leaving the word in. Therefore, if we now leave the word in, it will be even easier for counsel—I declare again the obvious interest—to make the ingenious argument. Having had that amendment explained, it seems to me all the more important that we take the right decision in relation to it.
Lord Clement-Jones (LD)
My Lords, it is a pleasure to follow that piece of logic. I do not need to speak for very long in support of the many important amendments that have been spoken to in this group. The Minister, in Committee and in his welcome letters and meetings, has attempted to rebut the need for them—but I am afraid that, in all cases, their proponents have been rather more persuasive in wishing to see the CMA unambiguously able to exercise its powers.
In a different context, the Communications and Digital Committee, chaired by the noble Baroness, Lady Stowell of Beeston, in its report on large language models, said that there was a considerable “risk of regulatory capture”. Mindful of that, we need to make sure that the CMA has those powers.
I turn to the amendment proposed by the noble Lord, Lord Faulks, and his argument about the dangers of introducing proportionality, also spoken to by the noble Lord, Lord Wolfson. On these Benches, we fully support having that provision in the Bill, as in the noble Lord’s Amendment 13. Human rights for big tech is not really a slogan that I am prepared to campaign on.
The noble Baroness, Lady Jones, will no doubt introduce her Amendments 43, 46, 51 and 52 on appeal mechanisms for penalties, which differ from all the other decisions of the CMA. We very much support her in those amendments, and we have signed them. I also support the noble Baroness’s Amendment 59. The Minister took the trouble to write, explaining why the Government did not consider including a duty to citizens, but sometimes such clarification, as in this case, makes us only more enthusiastic for change. I am afraid that citing overlap and the creation and operation of the DRCF is not enough; nor is citing the risk of regulatory overreach, given its inclusion 20 years ago in the Communications Act. We agree with the conclusions of the original task force.
We also support the noble Lord, Lord Lansley, on the importance of placing time limits on the Secretary of State in approving the CMA guidance under the digital markets provisions of the Bill, in Amendment 56. Although I believe that the noble Baroness, Lady Stowell of Beeston, will not be pressing it to a vote, we very much support her in her relentless campaign for improved parliamentary scrutiny. This has been identified by so many parliamentary committees, not least by the Industry and Regulators Committee on which I sit. It seems extraordinary that we are still waiting to implement the kind of solution that she is putting forward, and I hope very much that the House will take forward her suggestion.
We also very much support in principle the amendment proposed by the noble and learned Lord, Lord Etherton, on collective proceedings. He may not press the amendment to a Division today, but this is a vital change that we should make to ensure that rights in this area can be properly exercised and enforced. If the noble Lord, Lord Faulks, seeks the opinion of the House on his Amendment 13, the noble Baroness, Lady Jones, on her Amendment 43, and the noble Lord, Lord Lansley, on his Amendment 56, we will support them.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have contributed this afternoon to what is a very important group of amendments. I add my thanks to the Ministers and officials for their time in the run-up to this debate in trying to resolve the many issues that we have tabled today.
I thank the Minister for tabling Amendment 1 and for listening to our concerns about the Secretary of State’s power to amend the conditions that would determine whether a tech company has a position of strategic significance. I am glad that the Minister has listened to our concerns, and we are happy to say that we accept the new proposals.
Our Amendments 43, 44, 46, 51, and 52 would reinstate judicial review principles as the means by which penalty decisions are heard, rather than being determined on the merits. I thank all noble Lords who have spoken this afternoon, and indeed those who have added their names to these amendments, for their support. As we debated in Committee and again today, these amendments are among the several we are debating in which the original balance between big tech companies and challenger firms was distorted by late government amendments on Report in the Commons. The Minister has already admitted that the changes came about as a result of lobbying by the big tech companies to No. 10. They clearly would not have done this unless they were expecting to benefit from those changes.
The debate around the appeals mechanism goes to the heart of those concerns. We know that penalties such as fines are the most significant deterrent in preventing SMS companies breaking the conduct requirements established by the CMA. There is a real concern that a merits appeals process would allow the SMS firms to deliberately delay implementation of the fines and open up the judgment of the CMA right back to square one. This is why the CMA has itself argued that it prefers the judicial review process, which is widely used elsewhere and avoids protracted litigation. We agree with the CMA and believe that appeals through judicial review will deliver swifter and more effective outcomes. We want to close down the opportunities for unnecessary litigation from huge corporate lawyers with time on their side and deep pockets to fund their activities.
As the noble Lord, Lord Black, and the noble Baroness, Lady Kidron, have said, the worrying news from Europe as to the responses so far from Apple and the other tech companies to their fines for anti-competitive behaviour underlines why it is so important to have robust and legally watertight regulation in place in the UK.
I do not think that the Minister, in Committee or in subsequent discussions, has been able to persuade us that a merits review process will not open the door to lengthy litigation designed to frustrate the whole process. If we remain unpersuaded by his arguments this afternoon, I give notice that I will wish to test the opinion of the House on Amendment 43.
These concerns also apply to Amendments 13 and 35 in the name of the noble Lord, Lord Faulks. In this case, replacing the word “appropriate” with “proportionate” has particular legal implications, which the noble Lord, Lord Faulks, has described extremely eloquently. We know that the CMA already has a duty to act proportionality, so repeating it in the Bill takes on a new legal emphasis that might lead a court to widen the scope of a judicial review challenge. In our view, “appropriate” has a much more common-sense meaning of rationality, whereas “proportionate” is a matter of judgment and is more easily disputed.
The Minister has argued that there is a need for extra clarity to reassure the tech companies on the intent of the clause. The amendment from the noble Lord, Lord Faulks, would require the CMA to act proportionately, as its current duty requires, and also appropriately. This is a win-win, which should provide the clarity that tech companies are seeking. I look forward to hearing the Minister’s further clarification on these issues, but, unless there is any new, compelling justification for the changes, we would support the noble Lord, Lord Faulks, if he chooses to test the opinion of the House.
Throughout our deliberations, the noble Baroness, Lady Stowell, has raised important questions about the need to strengthen parliamentary oversight of the CMA’s activities. Her Amendments 55 and 57 provide an excellent route to addressing these concerns. Like other noble Lords, I am sorry that they have not yet found favour with the Government and I very much hope that she will continue to pursue them.
Meanwhile, Amendment 49 from the noble and learned Lord, Lord Etherton, raises the right of consumers to bring collective proceedings where they have suffered the same harm or loss from a breach of conduct requirements. As he has argued, this is a vital lifeline for individuals or small businesses that cannot afford to finance legal proceedings alone. His amendment would create a means of effective enforcement of existing rights once a breach has occurred. We agree that we ought to find a mechanism to allow these class actions to occur in specific circumstances.
However, we also agree with the amendment of the noble Baroness, Lady Harding, that the courts need to avoid proceedings which conflict with or overlap the CMA’s ongoing investigations. We hope the Minister can provide some reassurance that the Government recognise the importance of these issues and will carry out a review. I hope this will provide sufficient reassurance to the noble Lord, Lord Etherton, that a vote on his amendment is not necessary.
Viscount Camrose (Con)
As ever, I start by thanking all noble Lords who spoke so compellingly during what has been a fascinating debate.
Amendments 13 and 35, tabled by the noble Lord, Lord Faulks, seek to remove the explicit statutory requirement for conduct requirements and PCIs to be proportionate. I appreciate that this is an issue about which many noble Lords have expressed themselves strongly, and I am grateful for the thoughtful discussions I have had with noble Lords about this, both in Committee and since. I thank my noble friends Lord Black, Lord Wolfson and Lady Stowell for their comments on this today.
We are, as has been observed, giving extensive new powers to the CMA. It is important therefore that we also include safeguards around those new powers. A proportionate approach to regulation supports a pro-innovation regulatory environment and investor confidence. That is why we have decided to make the requirement to act proportionately explicit in the Bill. This requirement reinforces the Government’s expectations on the CMA to design conduct requirements and PCIs to place as little burden as possible on firms while still effectively addressing competition issues. The Government’s view is that, for the vast majority of interventions, the DMU would have needed to ensure that they were proportionate even without this explicit provision, as Article 1 of Protocol 1 to the European Convention on Human Rights will apply to interventions that affect property rights of SMS firms, regardless of their size.
The proportionality provisions both make this explicit and ensure that it will apply in all cases, not just those where A1P1 applies, such as when future contracts are affected. The Government have considered case law about the standard of review when proportionality is under consideration by the CAT in competition cases. We do not share the view that the inclusion of these two requirements will raise the standard of review in a way that makes it materially easier for SMS firms to successfully challenge CMA decisions.
As my department has shared with the noble Lord, Lord Faulks, the CAT has held, in BAA v Competition Commission, that it must show particular restraint in second-guessing the CMA’s judgment, and also give a wide margin of appreciation to the CMA. The Supreme Court has also stressed the caution that appellate courts must take before overturning the expert economic judgments of the CMA. We remain of the view that the courts will accord respect to expert judgments of the competition regulator in relation to economic matters and will not seek to overturn DMU judgments lightly.
I hope and believe that all of us, regardless of which Benches we sit on, agree that the UK being a place of proportionate regulation, where it is attractive to start and grow businesses, should be an aim of the Bill. I hope the noble Lord and my noble friend agree and will not press their amendments.
Amendments 43, 44, 46, 52 and 51 from the noble Baroness, Lady Jones, seek to revert the appeals standard of digital markets penalties back to judicial review principles. As I outlined in Committee, the Government believe it is important that the CAT can consider the value of a fine and change it if necessary, as the penalties that the CMA can impose are likely to be significant. Parties should be able to have penalty decisions reviewed to ensure that they are fair and properly applied. Additionally, only the requirement to pay a penalty is automatically suspended on an appeal. Any other remedies put in place by the CMA would remain in place, addressing the competition harm right away. An SMS firm would be expected to comply with them regardless of the outcome of the penalty appeal.
Amendment 45 from my noble friend Lady Stowell seeks to clarify that only penalties, not the decision to impose the competition requirement or the decision that a breach has been made, would be heard on their merits. I appreciate that the intent of this amendment is to improve clarity, but we feel that its drafting does not currently address what I understand my noble friend seeks to achieve. It would currently address only breaches of conduct requirements and not PCIs or enforcement orders. Amendment 55, also from my noble friend—
Baroness Stowell of Beeston (Con)
I am grateful to my noble friend for giving way—I hope he will forgive me for interrupting him at a critical moment as he was about to say something about another of my amendments. He said that my Amendment 45 was inadequate because it did not cover sufficient bases. Would the Government consider it as a way forward if they were to expand it in a way that did cover all the bases?
Viscount Camrose (Con)
Yes, we very much understand the spirit and intent of the amendment, so I would be very happy to consider that if we could expand it to cover the bases, as my noble friend sets out.
Amendment 55, also from my noble friend, would remove the role of the Secretary of State in approving the CMA’s guidance on the regime and replace it with consultation with certain parliamentary committees. I agree with her that oversight of regulators by both government and Parliament is vital, but the Government have responsibility for the effectiveness of regulators and the policy framework that they operate in. As such, it is appropriate that the Secretary of State approves the guidance under which the CMA will deliver the regime. The CMA must already consult during the production of guidance and parliamentarians can respond to these consultations as they see fit. The Government therefore believe that this amendment is not necessary to permit parliamentary engagement with the drafting of guidance.
My noble friend Lady Stowell’s Amendment 57, also discussed in Committee, requires additional reporting from a number of regulators, including the CMA, on the impact of the digital markets regime on their activities. As each of these regulators already provides annual reporting to Parliament detailing its operations and effectiveness, we feel that additional reporting would be duplicative and create unnecessary administrative burden for regulators. The named regulators also participate in the Digital Regulation Cooperation Forum, which also produces reporting on digital regulatory issues.
Amendment 56 from my noble friend Lord Lansley would add a statutory timeframe to the approval of guidance by the Secretary of State, requiring a response within 40 days. I thank the noble Viscount, Lord Colville, the noble Baroness, Lady Kidron, and my noble friend Lord Black for their remarks and our conversations on this issue. While the Government agree that it is important that the approval of guidance takes place in a timely manner and are committed to the prompt implementation of the regime, we do not think it is necessary to amend the Bill to achieve this outcome. The Government are committed to the prompt implementation of the regime. The introduction of a deadline for the approval of guidance, while supporting this objective, could cut short productive discussion and reduce its quality.
Amendment 59, tabled by the noble Baroness, Lady Jones, introduces a duty on the CMA to further the interests of citizens as well as consumers when carrying out digital markets functions. I thank the noble Baroness, Lady Kidron, for her remarks on this. As I outlined in Committee, the Government believe that the CMA’s existing statutory duty provides the greatest clarity for the regime, people, businesses and the wider economy. The CMA already manages the interactions between competition in digital markets and wider policy on societal issues under its existing duty and through its work with the Digital Regulation Cooperation Forum.
For example, the CMA’s market study into online platforms and digital advertising considered press sustainability and media plurality among the broader social harms to consumers. The CMA and Ofcom have also published joint advice on how the new regime could govern the relationship between online platforms and news publishers.
The Bill incentivises close co-operation with key digital regulators through the explicit regulatory co-ordination provisions. The CMA will have a duty to consult Ofcom on any proposed interventions that might affect Ofcom’s competition functions for the sectors for which it has responsibility, such as broadcasting and telecoms. It would allow Ofcom to raise wider implications for media plurality.
The CMA has a clear mandate to act for the benefit of consumers in the broadest sense. The meaning of citizens in this context is unclear and risks reducing the clarity of the CMA’s core competition remit and its role in the wider regulatory landscape.
Amendment 49, in the name of the noble and learned Lord, Lord Etherton, would enable private actions relating to breaches of the digital markets regime to be brought on a collective basis. It would also require the Secretary of State to produce a report on other types of claims which might be brought on a collective basis. We commit to reviewing the provision of collective claims in a post-implementation review. It is likely they will play an important role in protecting individuals and incentivising compliance in time.
I agree that, in time, collective actions would also help increase access to redress, recognising the significant legal resources SMS firms will have at their disposal and the costs involved in bringing private actions. However, our view is that making further procedural provision for claims will not bring the best outcomes for consumers and businesses while the regime is bedding in. Consumers and small businesses will benefit most from a public-led enforcement approach.
Under the digital markets regime, the CMA—
Lord Etherton (CB)
Does the Minister accept what I said? In the Bill, currently there is no provision under the regulatory regime for the regulator to award damages for losses suffered by individual consumers.
Viscount Camrose (Con)
Yes, I believe that is the case and I accept that. But, as I said, I will commit to carrying out a review in the future to understand how best to implement a collective action basis.
Under the digital markets regime, the CMA will be—
Lord Tyrie (Non-Afl)
Can the Minister tell us when he intends that review to take place?
Viscount Camrose (Con)
I intend for it to be part of the post-implementation review of the Bill.
Under the digital markets regime, the CMA will be devising novel requirements designed to address the particular circumstances of individual firms and market conditions. The DMU will need time to establish a broad set of precedents on the new rules and their enforcement. Introducing collective actions after the regime has bedded in would mirror the approach taken to the wider competition regime, which similarly had limited provision for redress when it was first established. Collective claims would also reduce incentives for firms to engage co-operatively if there is increased concern around litigation.
Amendment 47, in the name of my noble friend Lady Harding, and spoken to by my noble friend Lady Stowell, would prevent relevant courts or the CAT issuing any judgment or remedy that would conflict with a CMA decision. It would also require any private action to be stayed for CMA investigations into the same or similar breaches. The CMA is already permitted to provide evidence and opinions to the courts in competition cases through provisions in the Civil Procedure Rules and the CAT rules. I agree that the CMA may need a greater role in providing evidence and expertise to the courts in cases relating to the digital markets regime.
The Government intend to look at the issue in more detail, as we propose updates to the Civil Procedure Rules and the CAT rules. We will consider whether the courts’ case management powers and other provisions are sufficient to ensure that the CMA can make representations to the courts.
Viscount Camrose
Member's explanatory statement
This amendment would require the CMA to publish an SMS investigation notice rather than a summary of the notice.
Viscount Camrose (Con)
My Lords, the Government fundamentally believe that public transparency is vital for the new digital markets regime. We noted the strength of feeling on this issue from noble Lords in Committee, which is why the Government have tabled amendments to enhance the transparency of the regime. The amendments will require the Digital Markets Unit to publish the full notices relating to SMS designation, conduct requirements and PCIs, so that all interested parties can access them. Amendment 54 makes it explicit that the DMU may make redactions for confidentiality purposes when publishing notices or other documents.
Finally, as a consequence of the other amendments in this group, Amendment 3 will require the DMU to send other regulators a full copy of an SMS investigation notice provided to the firm under investigation, rather than a summary. I hope that noble Lords will support these amendments, which address concerns raised in Committee on the transparency of DMU decisions. I beg to move.
Lord Bassam of Brighton (Lab)
My Lords, as the Minister described, this group has government amendments, from Amendment 2 to Amendment 38, which add greater transparency to the process adopted by the CMA in disclosing information about cases involving SMS status firms where the challenger companies have an interest. We are pleased with the Minister’s amendments and, broadly speaking, happy to give them our support, as they respond to points that a number of noble Lords made at earlier stages of the Bill about the need for greater transparency and openness.
The SMS companies are in a position of significant market strength vis-à-vis the challenger firms and have a clear interest in seeing the bigger picture when disclosure is made of information that is of material interest. By obliging the publication of the notices and orders, rather than summaries of the documents, we feel that challenger companies will have greater access to key information that may impact on their market performance. Our amendments, from Amendment 4 to Amendment 39, attempt to achieve a similar result; I suspect that Ministers will argue that their amendments have greater elegance and a similar effect.
I turn to government Amendment 54 and our own Amendment 5. We are clearly of a similar mind and share concerns about commercial confidentiality so that, where reasonable, the redaction of documents can take place. We differ in our approach simply by suggesting that there should be a system for registering the documents that are relevant; the Minister might like to think about that at a later date. In essence, this is an operational issue so, to satisfy our concerns, perhaps he can put on record that there will be an effective system for the registration of documents and a notification process that enables the challenger firms to understand better what information has been disclosed to the CMA in the course of its inquiries. On that basis, we will be content not to move our amendments, and we thank the Government for responding to the concerns behind them.
Lord Clement-Jones (LD)
My Lords, this is a very straightforward group, and I congratulate the noble Baroness, Lady Jones, and the noble Lord, Lord Bassam, on having persuaded the Government to move further on the transparency agenda. I like the description given by the noble Lord, Lord Bassam, of the government amendment being more elegant. It is nice to think of amendments being elegant; it is not often that we think in those terms. We very much support the new amendments with some of the caveats that he made.
Viscount Camrose (Con)
I thank both noble Lords for speaking so eloquently—indeed, so briefly and elegantly—and the noble Baroness, Lady Jones, for tabling her amendments, which would require the DMU to establish a process for non-SMS firms to register themselves with the DMU as an interested party. The DMU would then be required to send certain notices to these challenger firms.
The Government agree that it is important that affected parties should have access to appropriate information related to DMU investigations. That is why the Government amendments go further, we feel. They will ensure that, subject to confidentiality, the DMU is required to publish all its SMS conduct requirements and PCI notices online, where they are accessible to everyone and not just specific firms that have registered their interest, or those who might not be considered challenger firms. The noble Lord, Lord Bassam, made a point about being informed of these things: while we would prefer not to put any such mechanism in the Bill, it is straightforward to imagine mechanisms that the DMU could employ to automate that.
The CMA has already been updating its approach to identifying and seeking input from third parties, including outside of formal consultations—making calls for evidence when launching investigations, web submission portals, and information requests for businesses, among others It will be able to use these approaches to inform decisions under the new regime.
I agree very much with the spirit of the noble Baroness’s amendments, which is why these government amendments will go further, to promote transparency across the regime. I therefore welcome the statement of the noble Lord, Lord Bassam, that he feels sufficiently reassured to not press the opposition amendments at this time.
Viscount Camrose
Member's explanatory statement
This amendment would require the CMA to give a copy of an SMS investigation notice, rather than a summary of the notice, to the FCA, OFCOM, the ICO, the Bank of England and the PRA.
Viscount Camrose
Member's explanatory statement
This amendment would require the CMA to publish a notice under clause 12(2) rather than a summary of the notice.
Viscount Camrose
Member's explanatory statement
This amendment would require the CMA to publish an SMS decision notice rather than a summary of the notice.
Viscount Camrose
Member's explanatory statement
This amendment would require the CMA to publish a revised SMS decision notice rather than a summary of the notice.
Lord Clement-Jones
Member's explanatory statement
This amendment would widen the conduct requirements for designated undertakings to include an undertaking’s conduct with respect to any other digital activity that is impacted by its designated activity.
Lord Clement-Jones (LD)
My Lords, I rise to speak to Amendment 12 and support Amendments 14, 23, 34 and 60, which will no doubt be spoken to in more detail by their proponents.
Last week, several things took place. First, the European Commission issued Apple with a fine of €1.8 billion. The fine was increased due to Apple providing the Commission with misinformation during the investigation. Secondly, as many noble Lords have noted, the Digital Markets Act came into force in the EU. Thirdly, Apple took the decision last week to terminate Epic Games’s developer account, in retaliation for previous comments criticising Apple’s approach to managing the App Store.
Fourthly, Apple introduced a new core technology fee, which it announced in January. It proposes to charge any developer who takes advantage of the DMA’s benefits. In practice, it means that any developer wishing to list their app on an alternative store, or offer consumers an alternative payment method, is confronted with a new fee, despite not using any Apple service. This does not send a signal that Apple is ready to comply with new competition regulations. Such anti-competitive behaviour and the efforts of big tech to avoid meaningful regulation is exactly why the UK needs a strong digital markets regime, and a very good illustration of the tactics that some big tech operators are using.
The amendments being put forward today as regards digital markets are crucial to ensuring that the UK’s regulatory regime is fully equipped to meaningfully tackle big tech’s anti-competitive practices and prevent its circumvention and delaying tactics, and that, wittingly or unwittingly, we have not given it the ability to drive several coaches and horses through the CMA’s powers in the Bill. Equipping the CMA with a strong leveraging principle—which, thanks to the noble Lord, Lord Vaizey, we must now call the whack-a-mole principle—is therefore critical to ensure that it keeps up with such attempts to move illegal practices and fees around its ecosystems. I am not quite sure whether my Amendment 12 is belt or braces to the amendment being put forward by the noble Baroness, Lady Jones, but it is designed to ensure that what is called the leveraging principle has full play in the CMA’s powers.
The noble Viscount, Lord Camrose, said in Committee:
“We agree with noble Lords that it is crucial that the CMA can deal with anti-competitive behaviour outside the designated activity where appropriate”—
note the “where appropriate”. He went on:
“Our current drafting has sought to balance the need for proportionate intervention with clear regulatory perimeters. The regime is designed to address the issues that result from strategic market status and is therefore designed to address competition issues specifically in activities where competition concerns have already been identified. This recognises that SMS firms are likely to be active in a wide range of activities and will face healthy competition from other firms in many of them”.—[Official Report, 22/1/24; col. GC 164.]
However, the Government’s subsequent note on leveraging lays bare their limited approach to leveraging.
We need a much more comprehensive approach to the use of market power in non-designated activities, especially where activities are those such as operated by Google and Apple. For instance, Google runs Search, YouTube, its ad network, Ad Exchange and products such as Google Maps, Images, News and Shopping. All share operating systems and a browser, and fixed and common costs, and all operating system and browser costs are recovered from advertising. All search and browser and operating systems are integrated. All benefit from economies of scale, scope and network externalities. Apple, Amazon and Meta are all the same. They can account for everything as stand-alone businesses, but it is entirely their choice whether they do so; they can move costs around at will. Amendments are consequently needed to tighten up the provisions of Clauses 19 and 20—as particularly set out in Amendment 14 from the noble Baroness, Lady Jones—and ideally in Clause 29 as well.
I have signed amendments relating to countervailing benefits. Since the introduction of the Bill, we have been strongly of the view that Clause 29 could be a major loophole and that the long-term interests of the consumer could be ignored in favour of the short-term interests. On this basis, we strongly support returning to the form of the clauses as they were before Report in the Commons, as proposed by the noble Baroness, Lady Jones, in her amendments. I have sympathy with the amendment in the name of the noble Lord, Lord Lansley, too, and would support it if we felt there was sufficient support across the House.
Finally, I turn to Amendment 34 and the final offer mechanism, which is due to be spoken to by the noble Lord, Lord Black. The aim must surely be to ensure that the final offer mechanism is a credible incentive to negotiate, so that designated undertakings are not able to frustrate the enforcement process over many months or even years. The final offer mechanism would remain a last resort, used only when good faith negotiations had completely broken down but made a more credible incentive.
In closing, I should say that, if the noble Baroness, Lady Jones, wishes to test the opinion of the House on her Amendments 14 and 23, we will support her.
Lord Lansley (Con)
My Lords, I have four amendments in this group. Amendments 16 and 17 relate to the conduct requirements that the CMA can impose on designated undertakings, and Amendments 20 and 25 relate to countervailing benefits in relation to that conduct. I will come to that in a minute. Let me stick for a moment with Amendments 16 and 17.
Amendment 16 was helpfully introduced, to some extent, by what the noble Lord, Lord Clement-Jones, said about the activities in the run-up to the introduction of the Digital Markets Act in the European Union. There was a deadline of 7 March for that, and considerable attention has been paid to what Apple in particular has done in relation to that. The noble Lord made Apple’s position clear. It is saying, essentially, that we can either stay with our existing system, and it will charge 30% by way of fees for apps on the App Store, or we can go to this alternative which enables us to comply with the DMA, and Apple will offer an alternative but with a 17% fee for apps plus a 3% core technology fee, and, if you go beyond a million downloads, you will get a 50 cents processing charge per download. Those who fear that their app may go viral, with millions of downloads, are potentially facing enormous costs for processing them through the App Store. As far as all the potential users of the Apple App Store are concerned, this potentially restricts their opportunity for competition rather than enabling it.
My first point is to further reinforce that we have come together to design legislation in support of the Government that is more flexible than the Digital Markets Act. The DMA, in effect, puts the obligations into the originating Act. To change them will be considerably more difficult than would be the case for the Competition and Markets Authority in our regime to change the structure and the content of conduct requirements. Potentially, we have really good flexibility.
Amendment 16 is linked to whether the powers to impose conduct requirements enable the CMA to act in relation to the leveraging of market power in digital activities into other activities—the wider system of its business. Amendment 16 is absolutely about whether the conduct requirements that can be imposed under Clause 20 are sufficiently wide to enable the Competition and Markets Authority to structure them to limit activity which restricts competition in the way that these efforts are being pursued in relation to the Digital Markets Act. To that extent, Amendment 16 asks the Minister, if he would be kind enough to respond in this light, whether, if a designated undertaking were to behave in that sort of way, the CMA would have the power under the conduct requirements to respond and act, and to do so rapidly, to frustrate that kind of anti-competitive result.
Amendment 17 is slightly different, in that we discussed it in Committee. One of the European Union Digital Markets Act obligations is termed expressly to prevent others seeking to stop someone making a complaint to any public authority about non-compliance with the relevant obligations. I looked to see whether our conduct requirements, specified in Clause 20, cover a similar circumstance. In discussion in Committee, the Minister directed me to the “fair and reasonable terms” provision, which is very wide ranging but does not cover this, because these are not the terms of a contractual relationship between a designated undertaking and its users or potential users. It may not relate to that at all.
The Minister also directed me to the question of discrimination, but I do not think this is about discrimination between users; it is about preventing someone, who may be a user, a potential user or a potential competitor, from going to a public authority and saying, “This undertaking does not comply with its conduct requirements”. We know—I will not repeat the evidence that I gave in Committee—that there have, unhappily, been circumstances of intimidation of those who would complain to regulators about the conduct of organisations with significant market power. I return to this simply to say to the Minister that I am not yet convinced. Can he convince us that this kind of activity is covered by the conduct requirements? If it is not, will he undertake to ensure that the necessary changes are made to Clause 20, which the legislation would permit?
I will also speak to the amendments about counter-vailing benefits exemptions. Amendments 23 and 24 revert the Bill to its original wording, which would be better than where we are now. I have looked at Clause 29 from my point of view and I cannot find a good reason for it, so I thought it better to leave it out. If there is a conduct investigation and there are countervailing benefits, they should be presented to the CMA when it makes representations to a conduct investigation. Why would they be left to any other time or specified separately in the legislation?
I thought it better to amend Clause 27 such that, when making representations, the designated undertaking may give details of the benefits associated with its conduct to form part of that investigation. At that point, it should come forward if it is prepared to make commitments that the CMA could accept, without necessarily making a finding, to close that investigation.
All this should take place in Clause 27 on representations, because that is where the sequence lies. I do not understand why Clause 29 has been added at what appears to be a later stage in the sequence of the legislation. As it is a separate clause, it appears as though the benefits can be presented at an entirely separate point.
As I have also discussed with the Minister, there is an analogy with the exempt anti-competitive agreements under the Competition Act 1998. I was on the stand when that Bill was in Committee and this is a very different kettle of fish. The 1998 Act set out broad descriptions of agreements that would be deemed anti-competitive and therefore void, except if undertakings came to the Competition and Markets Authority; then the burden is on it to demonstrate that they have, in effect, countervailing benefits, such as to innovation, the consumer and the like, without an adverse effect on competition.
That is ex post regulation. That is agreements and obligations that are broad-ranging and apply across industry. Here, we are talking about conduct requirements that are optimised and designed in relation to that undertaking in the first place. This is ex ante regulation. You cannot compare ex post provisions in the Competition Act with ex ante regulation under this legislation. They are not the same kind of thing.
Therefore, again, I come back to the argument: let us not have exemptions. The use of “exemption” seems wholly inappropriate. We have here a very straightforward process. Conduct requirements require, in themselves, under Clause 24, for there to be a consultation. The undertaking should tell the CMA what the benefits associated with its conduct are at that stage.
There is a forward-looking process; the conduct requirement is supposed to look forward five years, but none the less, circumstances change. The CMA can review a conduct requirement, and the designated undertaking should come to the CMA if circumstances change and there are countervailing benefits and ask for the conduct requirement to be reviewed. Even if, under all these circumstances, a conduct investigation notice is issued, the undertaking should come forward and express what the benefits are at that point. Under none of these circumstances is there a requirement for the use of “exemption” or for an additional clause that offers countervailing benefits as such.
I dare say I will not press this, because there is probably more to be said for Amendment 23 and going back to the original wording, but it afforded me the opportunity, I hope, to explain why I think the whole proposition in Clause 29 seems misplaced.
Baroness Kidron (CB)
My Lords, I find myself in a slightly awkward position because my name is listed in support of Amendments 23 and 24, but I find the argument of the noble Lord, Lord Lansley, incontrovertible, and maybe he should press his amendment.
On the wording, I want to put on the record the view of Which?:
“This is a legal loophole for big tech to challenge conduct requirements through lengthy, tactical, legal challenges. It would tie up CMA (i.e., taxpayer) resources and frustrate the intent of the legislation. Whilst we agree with the intent of this provision, which is to encourage innovation that will benefit consumers, it is critical that these provisions do not inadvertently give designated firms a get out of jail free card from DMU decisions”
by presenting opaque consumer benefits.
I put that on the record because it is so measured in comparison with many of the emails and representations I have had, and still is absolutely categoric that this is a get out of jail card. Like the noble Lord, Lord Lansley, I do not understand why the regulator duty to be
“proportionate, accountable, consistent, transparent and targeted”,
within the context of coming to the conduct requirements and taking up any countervailing benefits at that point, is not adequate. So I will support the noble Baroness, Lady Jones, and, indeed, the noble Lord, Lord Lansley, should he change his mind in the next few minutes.
I also add my support to Amendment 60, tabled by the noble Lord, Lord Fox. I am an enthusiastic supporter of international standards. They provide for soft law and, having worked with the IEEE on a number of standards over the last few years, I see how brilliantly they work to bring disparate people together and provide practical steps for those tasked with implementation. I declare an interest in relation to the IEEE, which gives some funding to 5Rights Foundation, of which I am chair.
The point I leave with the House is that, toward the end of 2022, I had two conversations with companies that will certainly be SMS about why they were now recruiting for employees to work on standards full-time. I believe the CMA should be in the standards-writing game.
Lord Black of Brentwood (Con)
My Lords, I refer to my entry in the register of interests. I will speak to my Amendment 34, the effect of which would be to allow the final offer mechanism to be initiated by the CMA after a conduct requirement of the type allowed under Clause 20(2)(a)—to
“trade on fair and reasonable terms”—
has first been breached and the other conditions in Clause 38 are met. This includes the condition that
“the CMA could not satisfactorily address the breach within a reasonable time frame by exercising any of its other digital markets functions”.
I am very grateful to noble Lords who have added their names to my amendment.
As I explained in Committee, I am concerned that the final offer mechanism must be a credible incentive to negotiate rather than such a distant prospect that the big tech firms can delay and frustrate enforcement. The whole point of the Bill is to reduce the limitless ability of big tech to leverage its huge market power and financial and legal clout. Yet, if Google or Meta believes that the FOM will never be reached, they will happily offer publishers and content creators suboptimal deals and elongate the negotiation process, and publishers—I think particularly of the hard-pressed local press—may well be compelled to accept suboptimal deals out of commercial necessity.
It is important to note that the amendment would not rush a publisher or platform into the FOM unnecessarily. If the CMA judges that its other enforcement mechanisms would bring a swift resolution to any dispute on commercial terms, it could proceed with those remedies. Therefore, the amendment seeks merely to give the CMA a wider range of tools at an earlier stage, rather than mandating which tools it should select.
We need only to look to Australia, the first country to introduce final offer arbitration, to see just how determined some firms are to avoid fair commercial deals for the trusted content that is the antidote to a new wave of AI-generated disinformation. Less than two weeks ago, Meta, with weary inevitability, announced that it would close Facebook’s news tab feature in Australia and would not renew any of the deals made with publishers after the news media bargaining code was put on to the statute book.
At a minimum, there must be assurances that the CMA will be able rapidly to move through the enforcement stages prior to the FOM, setting short deadlines for compliance and being ready to swiftly set new or more prescriptive conduct requirements of the type allowed in Clause 20(2)(a) if the initial requirements are inadequate.
We must also be sure that, under Clause 20(2)(a), the CMA will be able to require SMS firms to share information necessary for publishers to calculate the value of their content. Without this information, publishers will inevitably be at a severe disadvantage in initial negotiations, making it nigh on impossible for “fair and reasonable terms” to be agreed. In parts of the Bill dealing with the FOM itself, it is explicitly stated that the CMA can use an information notice to require an SMS firm to give information to the CMA, and for that information to be shared with a third party, such as a publisher. Although this precise mechanism may not be appropriate for negotiations outside the FOM, if the CMA’s conduct requirements were not able to encompass a requirement for the necessary information to be shared, we would end up in a situation where the FOM was the only means to facilitate “fair and reasonable” commercial terms. Robust reassurances on this matter from my noble friend the Minister would be most welcome; I am waiting to see whether he writes “robust” down.
Finally on my amendment, I note that although this legislation ultimately cannot prevent global monopolies denying their users access to all trusted news content, the conduct requirement in Clause 20(3)(a) prevents SMS firms
“applying discriminatory terms, conditions or policies”.
We must have clarity that the CMA would be able to use this requirement to prevent the withdrawal of a service by an SMS firm—including ending the hosting of news content—if it is done in a discriminatory manner. Such discriminatory behaviour could include the removal of news content from UK news publishers in an effort to avoid payment while promoting news content from English-language titles based in other jurisdictions. That must not happen. Again, I hope the Minister can provide reassurance.
I will say very briefly that I support Amendments 23 and 24, in the name of the noble Baroness, Lady Jones, which would reintroduce the indispensability standard to the countervailing benefits exemption. When the Bill was first published, the committee chaired by my noble friend Lady Stowell found that this exemption, as drafted, constituted a “proportionate backstop”, provided that the threshold for its use remained high, and stated explicitly that the Government should not lower the threshold.
We have been told by the Minister before that the changes made in the Commons do not lower the threshold but are an effort to add clarity. Yet, Cleary Gottlieb, a law firm which has represented Google in competition cases, has itself admitted that the new standard “is arguably lower”. Unfortunately, if these amendments are not adopted, it seems highly likely that the courts will reach the conclusion that Parliament explicitly moved away from one set of words to another, the clear implication being that it wishes to create a new and novel standard, and one which would seriously undermine the whole purpose of the legislation.
On the issue of precision, it is hard to see how a move away from a well-established and understood legal concept can add clarity in this area. Since its adoption in the Competition Act 1998, as my noble friend Lord Lansley said, the indispensability standard has been tested extensively, meaning that designated firms, third parties and the CMA alike would have a huge amount of precedent to draw on if it was reintroduced into the legislation. Why on earth would we tamper with that?
As my noble friend Lord Lansley’s amendments demonstrate, it is questionable whether the stand-alone exemption is necessary at all. Therefore, given that the changes made in the Commons may well have lowered the threshold required to access the exemption and the fact that they only reduced clarity—neither of which was the Government’s stated intention—there seems no sound policy reasons not to return Clause 29 to its original form, and I will support the amendments from the noble Baroness, Lady Jones.
Baroness Stowell of Beeston (Con)
My Lords, I assure noble Lords that, having spoken at length in the first group, I will be very brief in this group, not least because my noble friend Lord Black has made my argument for me on the countervailing benefits issue, which Amendment 23, in the name of the noble Baroness, Lady Jones, addresses. I support that amendment because, as my noble friend just said and as I referred to in my remarks on the first group, there were several issues in the Bill that your Lordships’ Communications and Digital Select Committee was clear were important and should not be changed, one of which was countervailing benefits. I therefore support the amendment, which would reverse what has been changed in the Bill back to its original wording. As has been said, we know from the evidence of the last few weeks since the Digital Markets Act has been in force in Europe, and other cases have been brought against some of the respective large tech firms, that those firms will take any and every opportunity there is to exploit potential weaknesses or loopholes in legislation. That is why it is important that the language remains in its original wording.
I also support my noble friend Lord Black’s remarks about his Amendment 34. I too look forward to my noble friend the Minister giving him some assurance in robust terms.
Lord Fox (LD)
My Lords, Amendment 60 is in my name. I was expecting to be ploughing a rather lonely furrow on this amendment, so I welcome the enthusiasm of the noble Baroness, Lady Kidron, particularly as it is based on such relevant experience and came with such authority. I thank her for that.
The Minister has been very open in our discussions on these issues, which focus on two areas: interoperability and standards, which are, of course, inextricably linked. One critical area to be clarified is the importance of vertical and horizontal interoperability and the fact that each requires different responses. Clause 20 covers vertical interoperability; for example, the promotion of the use of platforms as neutral distribution channels to market for all kinds of apps. The Bill does not explicitly include interoperability between an app and a platform that operates as a distributor and, in a network sense, among websites that compete with each other and with the platforms. This is horizontal interoperability.
The department’s view is that Clause 12 is wide enough to catch all of this. The Minister said in Committee that it is the department’s contention that defining interoperability is unnecessary because it considers it to be a “commonly understood technical term”. That is welcome, but it relies on a level of interpretation and inference by the DMU because the department’s interpretation is not clear by the letter of the Bill. As such, it would be helpful if the Minister could confirm the explicit inclusion of horizontal interoperability between websites in promoting competition. Will he please confirm that Clause 20(3)(e) will not limit conduct requirements to promote interoperability with a platform only, and set out how the Bill permits the DMU to consider requirements relating to interoperability in a range of contexts, including web browsers, apps, operating systems and websites?
As far as standards are concerned, I think we agree that there is a need for open and non-discriminatory international standards to support interoperability and promote the competition at which the Bill is so firmly targeted. That this is important is illustrated by the fact that Apple recently publicly threatened to block access to the open web from its devices. For there to be competition, the open web needs to interoperate with Apple and Google browsers. This is quite a serious point. This activity is controlled via W3C standards.
The amendment I have tabled is designed to be helpful. It ensures simply that the DMU understands its role in seeking to ensure that international standards bodies are promoting interoperability, both vertically and horizontally, and hence promoting competition. Given the central importance of standards to competition, my aim is to emphasise that this is not an add-on for the DMU but a core activity. I thought the Minister might be able to accept this amendment, but if he feels unwilling to do so, I feel sure that if he could put on record this important role for the DMU, it will be an important step forward, and I look forward to his response.
Lord Leong (Lab)
My Lords, it has been illuminating to listen to the varied and valuable contributions from all noble Lords who have spoken in this debate. I thank all those who have risen to speak. As may be expected, a broad range of knowledge, differing views and important concerns has been shared and expressed. The noble Lord, Lord Clement-Jones, referred to Apple’s dominance and it not being prepared to comply with any digital legislation. This should make us mindful of what big tech is getting up to. One thing is very clear: there is a strong consensus in the House that legislation is needed to catch up with, and indeed anticipate, the rapidly changing digital landscape which even the most technophobic among us can no longer afford to ignore.
I shall speak specifically to Amendments 14, 15, 23 and 24 in the name of my noble friend Lady Jones of Whitchurch. I thank the noble Baronesses, Lady Harding and Lady Kidron, and the noble Lord, Lord Clement-Jones, for adding their names. The principle behind Amendments 14 and 15 is to ensure that the Competition and Markets Authority can tackle anti-competitive conduct in a non-designated activity, provided that the anti-competitive conduct is related to a designated activity. These amendments do not seek to hamper digital innovation but rather to create a pro-competition market in which consumer interests are safeguarded.
Viscount Camrose (Con)
As ever, I start by thanking all noble Lords who have spoken so well and clearly in this very interesting debate. I will start with Amendment 12 from the noble Lord, Lord Clement-Jones, and Amendments 14 and 15 from the noble Baroness, Lady Jones of Whitchurch, which would expand the ability of the CMA to intervene outside the designated digital activity.
As outlined in Committee, this regime is specifically designed to address competition concerns in digital activities in respect of which firms have been designated as SMS. I agree with noble Lords that the CMA must be able to deal with anti-competitive behaviour outside the designated activity where appropriate, to prevent firms leveraging power unfairly or seeking to circumvent and undermine regulation. Under current drafting, the CMA will already have broad powers to prevent and address issues of an SMS firm seeking to avoid or circumvent the regime or unfairly leverage its market power.
I hope I can reassure the noble Lord, Lord Leong, by listing these. First, there are three types of conduct requirement that can address different types of leveraging. In addition to the leveraging principle in Clause 20(3)(c), the CMA can prevent leveraging by imposing requirements to address self-preferencing under Clause 20(3)(b) and tying and bundling under Clause 20(3)(d). Additionally, PCIs can be imposed anywhere in an SMS firm’s business to address an adverse effect on competition related to a designated activity, such as a firm seeking to circumvent regulation.
Finally, the CMA will have discretion to set the parameters of an SMS designation and to define a digital activity in a broad way. This will limit the risk of harmful activity falling outside the scope of a designation in the first place. This regime has been designed to give the CMA powerful tools to address competition issues. I hope noble Lords feel reassured that, where the CMA should be able to intervene, the powers already in the Bill allow it to do so.
Amendment 60, tabled by the noble Lord, Lord Fox, would require the DMU to consider interoperability and global web standards when carrying out its duty to promote competition under the digital markets regime and to liaise with international authorities when doing so.
The CMA engages already with global digital standards where it is appropriate to do so; for example, with the World Wide Web Consortium, or W3C, the web standards development organisation. We expect that the DMU will also pay due regard to global technical standards, along with other relevant considerations, when operating the digital markets regime. As outlined in Committee, a lack of interoperability in digital markets can reinforce entrenched market positions and harm competition.
SMS designation is the gateway into the regime. The Bill allows the DMU to define digital activity for designation purposes. In defining the digital activity, the DMU will be able to capture the various ways in which the firm provides digital content or internet services as part of that. The DMU would have discretion to impose obligations on that firm, including for interoperability in relation to that digital activity.
The Bill gives the DMU comprehensive and flexible powers relating to interoperability to promote competition in digital markets, including conduct requirements that can be tailored to a firm’s specific business model and behaviour. So I would like to reassure the noble Lord that the regime’s tools can apply to both interoperability between platforms and between and among apps and platforms and other digital services.
Depending on the scope of the designation, the DMU can set conduct requirements under Clause 20(3)(e) to promote interoperability, not only with a platform but in a range of contexts, including web browsers, apps, operating systems and websites.
Other types of conduct requirement can also be used to ensure interoperability, such as requirements for
“trade on fair and reasonable terms”
under Clause 20(2)(a) or requirements to prevent restrictions on the use of other products under Clause 20(3)(h). The Government agree that promoting interoperability and having regard to global standards can be important for promoting competition in digital markets.
Amendments 16 and 17 from my noble friend Lord Lansley would add two additional permitted types of conduct requirement to tackle specific types of behaviour by SMS firms. Amendment 16 seeks to prevent SMS firms charging fees which are unjustified or could restrict access to the relevant digital activity. Under the current framework, the CMA will be able to effectively tackle this issue. The CMA could likely use its powers under Clause 20(2)(a)—the requirement to trade on fair and reasonable terms—and subsections (3)(a), (b), (c) and (d) prohibiting discriminatory treatment, self-preferencing, leveraging, and tying and bundling.
Amendment 17 would add a new permitted type of conduct requirement to deal with SMS firms attempting to stop third parties raising possible non-compliance with the CMA. Again, I can reassure my noble friend that Clause 20(3)(a) permits a conduct requirement that could prohibit an SMS firm imposing discriminatory terms. This could address retaliation by an SMS firm, including where an SMS firm has singled out a user for adverse treatment in retaliation.
I will now address the amendments relating to the countervailing benefits exemption. As set out in Committee,
“the exemption will not act as a loophole for firms to avoid conduct requirements”.—[Official Report, 24/1/24; col. GC 231.]
It is an important safeguard that reflects similar practice in the competition landscape. Under Amendments 25 and 20, my noble friend Lord Lansley proposes to remove the clause and replace it with a discretionary power to consider consumer benefits under Clause 27.
My noble friend is right to say the CMA should be able to consider consumer benefits identified by representations. Regarding the sequencing of these clauses, I reassure him that any representations that the countervailing benefits exemption should apply to would be considered among the representations under Clause 27. Clause 29 does not therefore constitute an additional step; rather, it explains how the CMA must act in relation to a specific type of representation. It would not delay or extend the conduct requirement breach investigation process. Making it discretionary for the CMA to act on a demonstrable instance of consumer benefits outweighing the harm to competition, while removing the criteria in Clause 29, would create uncertainty for both SMS firms and for third parties as to how the CMA will conduct its processes.
Lord Lansley (Con)
I am very grateful to my noble friend. Could he say therefore whether a designated undertaking that feels it can demonstrate countervailing benefits must have presented those to the CMA before the CMA concludes its findings under Clause 30—or can it do so afterwards?
Viscount Camrose (Con)
It can make a representation to the effect of countervailing benefits as part of a breach investigation, which can of course happen at any time during the life of a conduct requirement. We would expect it to make those representations at the start of or during the initial investigation. When these representations are made as part of a breach requirement, the Bill sets out the high standards required in order to accept that argument.
Lord Lansley (Con)
Sorry, may I just press my noble friend? Can he therefore say that the presentation of a countervailing benefits exemption after the CMA has made findings under Clause 30 would be void?
Viscount Camrose (Con)
A representation to the effect that there are countervailing benefits would take place as part of a breach investigation. Of course, once the investigation is complete, there is no further opportunity to do so. Have I answered the question?
Viscount Camrose (Con)
To address the concerns of the noble Lord, Lord Leong, that the current wording deviates from legal precedent, I note that, since this is a new regime, existing exemptions in different competition regimes would not be directly applicable. It is highly likely that the application of the exemption will be tested, no matter the wording.
Finally, Amendment 34, tabled by my noble friend Lord Black of Brentwood, would allow the final offer mechanism to be used after the breach of a conduct requirement, rather than after a breach of an enforcement order. This novel tool has been designed as a backstop to normal enforcement processes. It is a last resort to incentivise sincere negotiations concerning fair and reasonable payment terms between the SMS firm and third parties. I wholeheartedly agree with my noble friend that these incentives must be both compelling and credible. It is clearly preferable for parties to reach a privately agreed settlement rather than one chosen by the regulator. That is why we must ensure due consideration of less interventionist options before turning to the final offer mechanism.
However, if SMS firms try to frustrate the process or drag it out to the detriment of third parties, I agree that the DMU should be able to accelerate stages before the final offer mechanism is invoked. That is why we have ensured that the DMU will be able to set urgent deadlines for compliance with enforcement orders, supported by significant penalties where appropriate, in cases of non-compliance.
I can robustly reassure my noble friend that the CMA can, via conduct requirements and enforcement orders as well as the final offer mechanism, gather and share key information with third parties.
Finally, to his comment on the forced withdrawal of content, the Bill is able where appropriate to tackle this issue. A conduct requirement could, for example, prevent an SMS firm withdrawing a service in a discriminatory way or treating users more favourably if they purchase the SMS firm’s other products.
The Government have worked hard to strike a balanced approach to intervention. This includes ensuring that firms cannot undermine regulation, and prioritising benefits to consumers at the heart of the regime. I believe the tools, as drafted, achieve these goals, so I hope that noble Lords will not press their amendments.
Lord Clement-Jones (LD)
My Lords, I thank the Minister for his response to the various amendments. I will be extremely brief; there will probably be quite a few votes now. I thank him for a full reassurance on Amendment 60, tabled by my noble friend, on standards and interoperability. I was looking closely at the noble Lord, Lord Black, when the Minister talked about Amendment 34, and I think there was a half-reassurance there—so that is one and a half so far.
It is clear to me, having discussed countervailing benefits further on Report, that this is, if anything, more dangerous than it appeared in Committee. I am sure that the noble Baroness, Lady Jones, will have noted the mood of the House as we discussed that.
On leveraging, the Minister made a valiant attempt to go through some points where the CMA might take more into account in terms of non-designated activities and so on. But the Minister sent through the technical note, and I am afraid that, if you look at it with care, it makes quite clear the circumscribed nature of the CMA’s powers under the Bill as currently drafted. It will be very important that we take a view on that. I am sure the noble Baroness, Lady Jones, has been alert to that as well. I withdraw my Amendment 12.
Lord Faulks
Member’s explanatory statement
This amendment would restore the Bill’s original wording in relation to Clause 19.
Lord Faulks (Non-Afl)
My Lords, I invite the House to cast its mind back to the debates we had on the first group. Amendments 13 and 35 are both concerned with the use of “proportionality”. The debates in Grand Committee and today on Report have been very much cross-party: there has been a shared endeavour to improve what is an excellent Bill, which strikes an important blow in regulating appropriately the digital market and, in particular, establishing a proper balance between big tech, with its immense power, and the smaller players.
The original Bill had “appropriate”, and I wish to return to that wording. The change in the wording followed a heroic amount of lobbying by big tech, and there was a reason behind this lobbying: to make it easier to prolong, appeal and obfuscate—to use the legal might and finances that big tech has—and to possibly frustrate the whole purpose of the Digital Markets Unit.
The Minister, who has engaged with thoroughness and politeness throughout this process, did his best to reassure the House by saying that the use of “proportionate” was to reinforce the Government’s expectation that the Digital Markets Unit would act proportionately. We do indeed expect it to act proportionately, but the use of “proportionate” in this context carries a heavy legal charge, as he tacitly accepted by saying that the use of “proportionality” meant that the analysis would spill over from cases involving the Human Rights Act or A1P1 into all cases, so that the scope for challenge of an intervention would significantly increase. That is not a happy situation, as a number of noble Lords have so eloquently said in supporting this amendment.
Amendments 13 and 35 are to the same effect, and I hope that Amendment 35 is regarded as consequential on Amendment 13. I wish to test the opinion of the House.
Lord Leong
Member's explanatory statement
This amendment, along with another to Clause 20(3)(c), seeks to ensure that the CMA can tackle anti-competitive conduct in a non-designated activity, provided that the anti-competitive conduct is related to a designated activity.
Lord Leong (Lab)
My Lords, I have listened to the Minister, and I respectfully regret that I am not convinced. Our amendment is more comprehensive and would really provide a level playing field. As we have seen in the EU, big tech companies will go out of the way to circumvent any regulations. Therefore, I wish to test the will of the House.
The Deputy Speaker (Baroness Finlay of Llandaff) (CB)
My Lords, there being an equality of votes, in accordance with Standing Order 55, which provides that no proposal to amend a Bill in the form which it is before the House shall be agreed to, unless there is a majority in favour of such an amendment, I declare the amendment disagreed to.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish a conduct investigation notice in full rather than a summary of the notice.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish a statement under clause 28(2) in full rather than a summary of the notice.
Lord Leong
Member’s explanatory statement
This amendment, alongside another in my name to Clause 29, would revert the Clause back to the one first introduced in the House of Commons. This would narrow the ability of bigger platforms to claim their anti-competitive behaviour presents countervailing benefits.
Lord Leong (Lab)
My Lords, I have listened to the Minister and I am afraid I am not persuaded. Our amendment would take the Bill back to the original version as in the other place and, on that basis, I wish to test the will of the House.
Member’s explanatory statement
This amendment, alongside another in my name to Clause 29, would revert the Clause back to the one first introduced in the House of Commons. This would narrow the ability of bigger platforms to claim their anti-competitive behaviour presents countervailing benefits.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish a statement under clause 30(1) in full rather than a summary of the notice.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish an enforcement order in full rather than a summary of the order.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish a notice under clause 32(5) in full rather than a summary of the notice.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish a notice under clause 34(1) in full rather than a summary of the notice.
Lord Faulks
“(b) making the PCI would be likely to contribute to or otherwise be of use for the purpose of remedying or preventing the adverse effect on competition.”Member’s explanatory statement
This amendment would remove “proportionality” as the determining factor in relation to a decision by the CMA to make a pro-competition intervention and would restore the Bill's original wording in relation to Clause 46.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish a PCI investigation notice or a revised version of the PCI investigation notice rather than a summary.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish a pro-competition order rather than a summary of the order.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would ensure that a penalty imposed on undertaking that is not an individual is calculated by reference to the undertaking’s turnover.
“(4) Where a person is an undertaking that is part of a group, references in subsection (3) to the person’s turnover are to the turnover of that group.”Member’s explanatory statement
This is amendment is consequential on the first amendment to clause 88 in my name.
Member’s explanatory statement
This amendment would ensure that a penalty imposed on an individual or a person that is not an undertaking is calculated by reference to the amounts specified in subsection (5) (and not by reference to turnover).
Member’s explanatory statement
This amendment, alongside others in my name to Clauses 89 and 103, would revert the relevant Clauses back to the ones first introduced in the House of Commons. This would reinstate judicial review principles as the means by which appeals against penalty decisions are heard, rather than such decisions being determined on the merits.
Baroness Jones of Whitchurch (Lab)
My Lords, I listened carefully to the Minister’s response. This amendment to the way that appeals are processed goes to the heart of our concerns about the Bill. It would revert the wording to the much more sensible wording that the Government had initially in the Commons. We feel that, without our amendment, the corporate lawyers will run rings around the CMA and postpone any delays in the implementation of CMA decisions. This is an important amendment and I therefore wish to test the opinion of the House.
Lord Bassam of Brighton
“(1A) Section 114 of EA 2002 (appeals) applies in relation to—(a) a penalty imposed under section 85(4), and(b) a penalty imposed under section 87 in connection with a function of the CMA under Chapter 5 (mergers), as it applies in relation to a penalty imposed under section 110(1) of that Act (and see section 103 of this Act for provision about applications for a review relating to other penalties imposed under section 85(1) or (3) or section 87).”Member’s explanatory statement
This amendment, alongside others in my name to Clauses 89 and 103, would revert the relevant Clauses back to the ones first introduced in the House of Commons. This would reinstate judicial review principles as the means by which appeals against penalty decisions are heard, rather than such decisions being determined on the merits.
Lord Bassam of Brighton
“(2) For the purposes of subsections (1) and (1A), sections 112 to 115 of EA 2002 are to be read as if references to “the appropriate authority” were references to “the CMA” only.(3) For the purposes of subsection (1A), section 114(5A) of EA 2002 is to be read as if the words “In the case of a penalty imposed on a person by the CMA or OFCOM,” were omitted.(4) For the purposes of subsection (1A), section 114(12) of EA 2002 is to be read as if, for paragraph (b), there were substituted—“(b) “the relevant guidance” means the statement of policy which was most recently published under section 90 of the Digital Markets, Competition and Consumers Act 2024 at the time of the act or omission giving rise to the penalty.””Member’s explanatory statement
This amendment, alongside others in my name to Clauses 89 and 103, would revert the relevant Clauses back to the ones first introduced in the House of Commons. This would reinstate judicial review principles as the means by which appeals against penalty decisions are heard, rather than such decisions being determined on the merits.
Lord Offord of Garvel
“(4A) Rules of court and Tribunal rules may make provision about the transfer from the Tribunal to the appropriate court or from the appropriate court to the Tribunal of all or any part of a claim made in proceedings under subsection (2).”Member’s explanatory statement
This amendment would permit rules of court and Tribunal rules to make provision about the transfer of claims between the appropriate court and the Tribunal.
Lord Offord of Garvel
“(2) A CMA breach decision becomes final—(a) when the time for applying for a review of that decision has passed without an application being made, or(b) where an application has been made, when the application has been finally determined or has otherwise ended. (2A) For the purposes of subsection (2)(b), an application is not finally determined until any appeal relating to it has been determined (ignoring any possibility of an appeal out of time with permission).”Member’s explanatory statement
This amendment confirms the circumstances in which a CMA breach decision becomes final.
Lord Bassam of Brighton
“(b) a decision about the imposition of a penalty under section 85(1) or (3) or section 87 (but see subsection (3A) and section 89(1A));(c) a decision about the imposition of a penalty under section 85(4) (but see section 89(1A)).”Member’s explanatory statement
This amendment, alongside others in my name to Clauses 89 and 103, would revert the relevant Clauses back to the ones first introduced in the House of Commons. This would reinstate judicial review principles as the means by which appeals against penalty decisions are heard, rather than such decisions being determined on the merits.
“(3A) A person on whom the CMA imposes a penalty under section 85(1) or (3), or under section 87 in connection with a function of the CMA other than a function under Chapter 5 (mergers), may apply to the Tribunal in accordance with Tribunal rules for a review of the CMA’s decision—(a) to impose the penalty,(b) about the amount of the penalty, or(c) about the date by which the penalty is required to be paid or the different dates by which portions of the penalty are required to be paid.(3B) Where an application is made under subsection (3A)—(a) the penalty is not required to be paid until the application has been finally determined, withdrawn or otherwise dealt with, and(b) the CMA may agree to reduce the amount of the penalty in settlement of the application.”Member’s explanatory statement
This amendment, alongside others in my name to Clauses 89 and 103, would revert the relevant Clauses back to the ones first introduced in the House of Commons. This would reinstate judicial review principles as the means by which appeals against penalty decisions are heard, rather than such decisions being determined on the merits.
Lord Offord of Garvel
Member’s explanatory statement
This amendment removes an amendment to section 393 of the Communications Act 2003 as this will now be addressed by the same amendment to that section contained in Schedule 29 to the Bill (see my amendment to that Schedule at page 407 at line 23).
Lord Offord of Garvel
“(4) In order to give effect to any need to keep information confidential, the CMA may publish the notice or other document in a redacted form.”Member’s explanatory statement
This amendment would ensure that the CMA may redact documents which it is required by this Part to publish in order to give effect to any need to keep information confidential.
Lord Lansley
“(5) When the CMA seek the approval of the Secretary of State for guidance, the Secretary of State must within 40 days either—(a) approve the guidance; or(b) refer the proposed guidance back to the CMA with a statement of reasons why the guidance should not be published in that form.”
Lord Lansley (Con)
My Lords, in the debate on the first group, on Amendment 56 there was a strong view that when the Competition and Markets Authority presents guidance to the Secretary of State, the Secretary of State should either approve it or refer it back with a statement of reasons within a reasonable time, specified as 40 days, and not, as the Bill presently says, that the Secretary of State can choose not to approve it without any time limit. I am afraid, and I say it with regret to my noble friend, that we did not hear persuasive reasons to the contrary. I seek the opinion of the House on Amendment 56.
Lord Offord of Garvel
Member's explanatory statement
This amendment would prevent a court or the Tribunal from making a disclosure order requiring the disclosure or production of digital markets investigation information while the investigation to which the information relates is ongoing, regardless of who holds the information.
Lord Clement-Jones
““(1) The Tribunal may award exemplary damages in any collective proceedings.””Member's explanatory statement
This amendment would allow exemplary damages in collective proceedings, which the bill as drafted seeks to prevent.
Lord Clement-Jones (LD)
My Lords, the Minister gave a disappointing response in Committee to my amendment on exemplary damages in collective proceedings. In explaining the Government’s decision, he said:
“The bar on the availability of exemplary damages in collective actions was one of the many safeguards put in place when the Consumer Rights Act 2015 was enacted, to ensure a balanced system of collective actions before the CAT which will not lead to a culture of undue litigation and US-style class actions”.—[Official Report, 31/1/24; col. GC 371.]
That is not a particularly helpful way of describing a legitimate assertion of consumer rights in a collective fashion, given the imbalance of power that is there so often in these proceedings. We have heard about asymmetry, and this is precisely that kind of area. Why should they be denied exemplary damages when in an individual case they would have been awarded, for instance where the illegal action has been deliberate?
I thank the Minister for his letter of 27 February. In it, he says:
“These safeguards were put in place when the Consumer Rights Act 2015 was taken through the House to ensure a balanced system of collective actions before the CAT. These safeguards ensure that defendants are protected by avoiding vexatious and unmeritorious claims—or fishing expeditions—while allowing legitimate claims for redress to proceed”—
this is the point where I took a deep breath—
“without defendants feeling pressured to settle despite the likelihood of a strong defence”.
Let us consider who we are thinking of as defendants: quite often in these circumstances, they will be extremely large companies. Is it not time that we reviewed the Consumer Rights Act 2015 in that respect? Surely, in these circumstances, we are talking about big tech, which has all the market power and the ability to finance litigation till kingdom come. Have the Government engaged in any recent consultation on that? As far as I can see, the last consultation they conducted was 10 years ago. I hope that the Minister has some slightly better answers this time around than both those in his letter and in Committee.
I look forward to hearing from the noble Lord, Lord Tyrie, and I encourage him to retable his Amendment 65 on whistleblowing. The government response in Committee and in their letter of 27 February—in contrast to what I have just said—demonstrated a real interest in expanding the regime set out in the Public Interest Disclosure Act 1998. The Government now say that they are currently reviewing the effectiveness of the whistleblowing framework in meeting its original objectives. I very much hope that the Minister can give us a foretaste of the conclusions of that review. I also look forward to hearing from my noble friend Lady Kramer, who has been a champion of whistleblowing rights.
Without anticipating what the noble and learned Lord, Lord Thomas, may say, I welcome government Amendment 62, but the timescale is crucial. We on these Benches will help to facilitate a Bill putting those rights on the statute book in any way that we can. We have received a letter from the Association of Litigation Funders. Without putting too fine a point on it, it says: “This vital role of litigation funding has been highlighted recently following the increased and long-overdue coverage of the Horizon scandal. Alan Bates, the lead claimant against the Post Office, has said that the backing of litigation funders helped him and his colleagues secure justice, expose the truth and clear their names and reputations”. I cannot think of a better reason to make sure that we get the Bill on the statute book as soon as possible. I beg to move.
Lord Hodgson of Astley Abbotts (Con)
My Lords, I have Amendment 63 in this group, which is an updated and slightly amended version of Amendment 89A that I tabled in Committee. As the title of the proposed new clause says, the amendment calls for the Government to undertake a review of the third-party litigation funding industry. We discussed my earlier amendment on 31 January, and a lot has happened since. I have been blowing the trumpet since March 2017, and suddenly it appears that the walls of Jericho have fallen down.
I thank the noble and learned Lord, Lord Thomas of Cwmgiedd, who has been kind enough to send me a copy of the draft report by the European Law Institute on the principles that should govern third-party funding. The draft report contained a great deal of intellectual heavy lifting, from which I have benefited greatly.
Most importantly and significantly, I thank my noble friend the Minister and, through him, the Lord Chancellor and the Ministry of Justice for the announcement on 4 March that a review of third-party litigation funding would be undertaken. I am also grateful to my noble friend and his officials for giving me the chance to see some early draft terms of reference and for the opportunity to discuss them with him. I have a handful of points about them that I would like to put on record tonight, and I hope he will be good enough to pass them on to the MoJ, so that they may be taken into consideration as the terms of reference are firmed up.
First, in Committee I explained that I was a very strong supporter of the concept of access to justice, but that we needed to know what sort of justice was being accessed. The noble Lord, Lord Fox—I am sad that he is not in his place, but I did say I was going to mention him this evening—got after me, not entirely unfairly, saying that all my remarks were, as he put it, of second-rate importance and that, without third-party litigation funding, there was no justice at all, to which I reply: up to a point, Lord Copper.
We—and I hope the review—must not forget that the funders are profit-making entities. This in itself is entirely understandable, but a profit-making entity marches to the beat of a different drum. All I am saying is that the plaintiffs—whose interests, after all, the funders are supposed to represent—are entitled to know about the beat of that drum, the waterfall of the distribution of the proceeds, who pays costs, and all those sorts of issues. If obfuscation takes place, there should be a body—the courts, perhaps—that can step in. Equality of arms demands no less.
My second point is that I hope the review will be prepared to get down into the real practical detail of what is happening in the industry today. High-flown legal principles are really important to provide the right structure but, to be effective and worth while, the review will need people with experience of the third-party litigation funding industry and those with a preparedness to get into the detail and turn over all the stones.
Thirdly, I hope the review will examine the consequences of grouping claims together, in the way that they are put together for funding via a single investment pot. In particular, the review will need to consider the position where firms of solicitors are undertaking the grouping. As I explained in Committee, where several cases are included in a single pot, there is a danger of too early a close-out, from a plaintiff’s point of view, of the remaining case or so, when the funder would like to round up the pot and return the money to its investors. By contrast, when matters are not going so well, it may be in the funder’s interest to prolong the proceedings—not in the interests of the plaintiffs—in the hope that a greater result will come from the last few cases, and the result will be a much more satisfactory outcome. The key differentiation is that the plaintiffs have an interest in the outcome of a single case, whereas the funders have an interest in the outcome of a group of cases.
Fourth is any unwitting exposure to costs. Under the opt-in regime, individuals took their chances when they signed in—not so under the opt-out regime. I think I am right in saying that there is nothing to stop my noble friend the Minister, me, or Members of your Lordships’ House suddenly getting communications saying, “Please send us £100 for your share of unfunded costs of bringing this case”. That seems to be not a likely but a possible situation, and not a very satisfactory one.
Fifthly, for those Members of your Lordships’ House who sat through Committee and other stages of the National Security and Investment Act, when we were seeking to achieve a reasonable balance among interested parties, there is a read-across to this review. It is surely not in our national interest to have unknown funders—perhaps backed by foreign Governments—able to press for litigation claims against high-tech UK companies. Such actions can disrupt the management and development of the company or damage its reputation, and could in some cases give access to its technology. An ability for the Government and/or the courts to require disclosure of beneficial ownership could be of great advantage in the future.
Finally, we are promised a preliminary report this summer and a final report in summer 2025. This will presumably mean that the earliest we can accept draft legislation, if there is any, will be in the 2026-27 legislative programme, leading to stuff on the statute book in 2028. That is quite a long way away, and I hope we are not going to see any slippage in that timetable. I hope that I have been over-pessimistic about what might be achieved, and that my noble friend can reassure us on that.
I end as I began, by thanking my noble friend and the Government for this important development. I hope they will feel able to pass these remarks on to the MoJ and I ask whether those of us who have taken a long-standing interest in TPLF can be kept informed as matters develop, and that we shall have the opportunity to give evidence to the review in due course.
Lord Tyrie (Non-Afl)
I have tabled Amendments 65 and 153. I declare my interests, as I did in Committee and as I have set out in the register. I also declare an interest in the Bill, since I had a hand in constructing it. I can never make up my mind whether I should be declaring victory and moving on, or flagging up further improvements. I have decided to take the latter course. Unfortunately, as on a previous occasion, it falls to me to come between a number of colleagues and their dinner, so I will do my best to be brief—although there are a number of things I need to say.
Lord Kamall (Con)
I thank the noble Baroness. I am afraid that was the opposite of chivalry.
I want to speak to Amendment 153, tabled by the noble Lord, Lord Tyrie. He and I have had a number of conversations about this. I refer noble Lords to my interests as set out in the register. Having written about competition law at EU level and taken part in debates on competition issues in the European Parliament during my many years there, I was very torn between the merits appeal and the judicial review. I was tempted by the idea from my friend in the other place, the right honourable Robert Buckland, of possibly a time-limited merits appeal.
Many of us fell down on the side of judicial review because the small firms, the challenger firms, were asking for it. They believed that it was quicker and more effective. We hope that it will be. That is why many of us have supported this. But we have to ask: what if we are wrong? We do not have perfect information. What if judicial review takes longer than envisaged? Some noble Lords have said to me that the Joint Committee of Parliament that the noble Baroness, Lady Stowell, proposed would be much more effective in holding the CMA to account and ensuring that there is not a repetition of cases being restarted because they lost at JR. That argument has some merit.
However, we must take a step back and realise that, given that none of us has perfect information, we should be aware of the notion of unintended consequences. I have written about this a number of times over the years for think tanks. Often a well-intentioned government intervention that is supposed to make things better, which many people support at the time and that makes sense and looks like it will work does not turn out how it is supposed to but makes things worse.
In that spirit, I have been thinking about how we make better laws. How do we ensure that there are safeguards in place for unintended negative consequences? How do we make some redress to ensure that we change course, having thought that we were on the right course but having made things worse by not recognising the unintended consequences? In Committee, I said that I had considered tabling an amendment for a review after three or five years, or whatever. However, I am concerned that this would be seen as a loophole by the big companies, which would then hold off in order to show that JR was not working so that they could go back to merits appeal.
The noble Lord, Lord Tyrie, has solved that problem in many ways with Amendment 153. It is right that we have a review of all legislation to ensure that it has worked out as was intended and so that where there are unintended, unforeseen consequences, when it did not work as we had envisaged, we have those safeguards. A good way of doing that would be to have reviews of legislation such as the one that the noble Lord proposes here, to ensure that we could change course if it did not turn out how we intended.
I hope it will do. I hope judicial review will work. I hope it will be much quicker and we will have a much more competitive market. I hope the challengers will grow stronger, we will have more competition and see creative disruption and new challengers at every stage and consumers benefiting. Amendment 153 says, “Let’s make sure that we take stock to see whether legislation—particularly a Bill as important as this—works out as we want it to”. That is why I support Amendment 153.
Lord Thomas of Cwmgiedd (CB)
My Lords, I will speak very briefly in relation to the amendments to deal with the problem of litigation funding.
I thank the Lord Chancellor and the Ministers on this Bill for what they have done to facilitate bringing forward comprehensive legislation because it is plainly much better addressed in one simple Bill. I express also my gratitude to the Opposition, particularly the noble Baroness, Lady Jones of Whitchurch, and the noble Lords, Lord Bassam and Lord Stevenson of Balmacara, for their help. On the Liberal Democrat Benches I thank the noble Lords, Lord Clement-Jones and Lord Fox. I also thank my colleagues who are not here to support me. This is something where the Lord Chancellor has been right. He has taken the right decision. Our task now is to get it through before any events derail legislation. Any help that I can give, I am more than willing to.
Baroness Kramer (LD)
My Lords, I very much support Amendment 61 moved by my noble friend and colleague Lord Clement-Jones. I am very much a believer in equality of arms. The issue of exemplary damages speaks exactly to that. I hope very much that the Government will take that on board, because it is a fundamental principle that makes a great deal of practical difference as well when wrong has happened and when people seek redress.
I support the two amendments tabled by the noble Lord, Lord Tyrie. Briefly, on Amendment 153, regarding the five-year review, I had the privilege of serving under the noble Lord’s chairmanship on the Parliamentary Commission on Banking Standards. In many ways that was similar to this Bill, but our proposals were exceedingly radical. They required very substantial change by the financial services industry. We very much wanted them to be reviewed after a period of time. We did not manage to trap that into legislation; it did not happen. Instead, when issues became evident where we had made changes—for example, on presumptions of guilt and in areas where there was intense lobbying on ring-fencing and whatever else—changes happened but not in a coherent and sensible way that benefited from that overarching focus that we had had during the original review. That has been a real weakness. We finally have a new committee in this House, the Financial Services Regulation Committee, providing some accountability to regulators, but that is an issue that we would have picked up on much earlier had we been in the process of doing a comprehensive review. That underscores many of the points that have been made about this issue.
We live in changing times. The idea that things stand still and you can do everything piecemeal is really not appropriate. However, I will speak most on the issue of whistleblowing. I have not otherwise participated on the Bill but, when I see the word “whistleblowing”, I am afraid that I suddenly find myself lured on to the Benches.
I very much ask the Government to take this issue on board, because I agree with the noble Lord, Lord Tyrie, and others: we will never get to grips with wrongdoing in any of the areas covered by the Bill, particularly with all the new complexities and the constant change within the digital and competitive arena, until we have an effective whistleblowing regime. We need a system that leads to the follow-up of valid tips from whistleblowers. Currently, looking at different regulators in many different fields is clearly completely haphazard. Some tips are followed up, some are dismissed and some are ignored. Secondly, and just as importantly, we need a proper arrangement to protect whistleblowers from retaliation, so they will not suffer detriment by coming forward.
Our current system depends on the Public Interest Disclosure Act 1998, which was a Private Member’s Bill that was brought forward then as part of employment law. It was ground-breaking at the time but has long been shown to be utterly inadequate compared with more recent schemes, particularly in the United States. Those US schemes have had an astonishing success rate in disclosing wrongdoing, leading to prosecutions, convictions and financial penalties.
I will use an example not from the anti-trust field but from a field that I know best and with which many will be familiar—the Securities and Exchange Commission. Since it brought in its whistleblowing scheme in 2011 under the then new Dodd-Frank legislation, by the end of fiscal year 2022, it had received over 83,000 tips from whistleblowers and collected in excess of $6 billion in financial penalties. In fact, there has been so much activity in the following years that those numbers would be significantly higher if we brought them up to date.
It is also fair to assume that billions of dollars of wrongdoing have been deterred by the fear of disclosure under such an effective whistleblowing regime. Not just the SEC but a number of entities use whistle- blowing legislation within the financial field; the Commodity Futures Trading Commission—CFTC—is another example that has had the same kind of success as the SEC. I find it rather disturbing that the CFTC is now doing road trips in the UK to encourage whistleblowers who are aware of financial wrongdoing with any US connection to contact it directly. In fact, something close to a quarter of the cases it is currently pursuing have a UK-based whistleblower somewhere within them, because finance is so international. Now the people at the CFTC are very careful not to criticise any UK regulators, but it is not a compliment that they feel it is necessary to be here to get their independent message across to anyone who has come across wrong-doing, with a US connection, in the financial field.
The Public Interest Disclosure Act is inadequate for at least four reasons, some of which were mentioned by the noble Lord, Lord Tyrie. It does not require any follow-up on a tip, even if it is acknowledged to be valid. It covers only employees and not the many others, such as contractors or clients—all kinds of people come forward—who blow the whistle when they see wrongdoing. They are not covered at all and have zero protection at present. All it provides is anonymity for disclosures that are made to a prescribed group of people—basically, the regulators and MPs. Most whistleblowers are not anonymous; they will have raised issues with management, companies, employers, suppliers and clients. When they see something wrong, they do not instinctively think of themselves as whistleblowers in need of protection, and when they do, their identity is then known.
No regulator in the UK has ever acted to protect a whistleblower from retaliation. That retaliation is usually years spent in an employment tribunal or in the courts. For many whistleblowers, it is a loss of career. There is a wide scheme of informal blacklisting—we know of case after case. Many whistleblowers have to use their own resources because there is no legal aid to fight this process, so they run into financial ruin. You can imagine the mental health costs and the frequency with which families break down.
However, I have spoken to pretty much every UK regulator and typically—there are a few exceptions—they regard their own monitoring and supervision as entirely sufficient, with whistleblowing a mere marginal assistance. They also believe that whistleblowers should act out of duty and altruism, and not because there is protection from retaliation available or compensation for harm.
I have talked about the SEC and the CFTC and, prior to the Dodd-Frank legislation in the United States, which put in the strict whistleblowing rules and made them mandatory, US regulators had exactly the same attitude as the current UK regulators and the same failure to create a pattern of whistleblowing and to follow up cases. The change came with legislation.
In the sectors covered by the Bill, the rewards for wrongdoing are a huge temptation and require highly sophisticated expertise and knowledge. We can see why that is tough for a regulator to manage, unless it has a really effective whistleblowing programme. In its recent directive, the EU is now catching up with the United States in recognising whistleblowing as a key tool to expose wrongdoing early and to deter wrongful behaviour. It is time that we did the same.
I hope that the Minister takes back this message to those who are working on the reform of the whistleblowing framework, as it is really important. Sometimes one hears rumours that they are looking just to tweak existing legislation, but what is needed is a radical change that meets the needs and gives us the opportunity that an active whistleblowing community can deliver. I hope the Government will take on board that message.
Lord Bassam of Brighton (Lab)
My Lords, I promise that I am not going to stand for too long between this session and people’s desire to have supper. I have a few words to say, but I will try to keep them as brief as I can. This group of amendments deals with the interaction of the courts with regulation and redress, and we obviously support Amendment 61, in the name of the noble Lord, Lord Clement-Jones, on exemplary damages in class action cases. We will listen to the Minister’s explanation carefully and try to understand why the Government are continuing to resist this approach.
We recognise that government Amendment 62 is part of a wider initiative to put right the fallout from the Supreme Court judgment in the PACCAR case, which acted as an inhibition to litigation fee agreements that enable collective actions such as those involving the postmasters and postmistresses. If we have learned anything from Committee, it is that Ministers should live in dread of the experience of the former Lord Chief Justice, at all times. The noble and learned Lord, Lord Thomas, offered us some wise words on that occasion and I am glad—delighted, actually—to see the Government finally acting with some speed to bring forward a Bill from the Ministry of Justice that covers a wider range of cases than the current Clause 127 achieves. If the noble Lord, Lord Clement-Jones, had not quoted Alan Bates, I would have done, because I thought it was a ringing endorsement of what was necessary.
Perhaps I could task the Minister and tire him a little to put a bit more on the record about the detail, nature and extent of the short Bill when he sums up. Can he give us a clue about its introduction date?
The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
I thank all noble Lords who have contributed to the final group this evening, group 4.
Amendment 61 tabled by the noble Lord, Lord Clement-Jones, would enable the Competition Appeal Tribunal to award exemplary damages in collective proceedings. He is familiar with the Government’s position on this matter. I have been pleased to have the opportunity to discuss it with him further since Committee, and have written.
The Government consulted before introducing the collective action regime in 2015. The great majority of respondents said that exemplary damages should not be available in collective actions to ensure that firms were not unduly pressured to settle claims due to just the risk of punitive damages. Introducing exemplary damages in collective actions could also act as a disincentive to leniency applications—these are critical to the detection and enforcement of infringements by public regulatory authorities. Without effective leniency programmes and public enforcement, it could be far more difficult for private parties to pursue redress.
This view was shared by both businesses and consumer groups, including the consumer group Which?, which did not consider extending exemplary damages to collective actions to be necessary. I am sure that this will be of particular interest to the noble Lord, Lord Clement-Jones, given his commendable focus on ensuring consumers are at the centre of our thinking. The Government believe the current provisions in the Bill reflect the right approach on this matter.
Government Amendments 62 and 157 relate to litigation funding. The Government have recognised the challenge posed by the PACCAR judgment and the impact on access to justice. Furthermore, it has always been the Government’s intention to address the impact of the PACCAR judgment in full at the earliest opportunity. Since Committee, the Government have announced that it will quickly bring forward a separate Bill to enable this. I am sure that noble Lords across the House will welcome this news.
Clause 127 was introduced previously to mitigate the impact of PACCAR by enabling PACCAR-compliant funding agreements to be applied to opt-out collective actions. This clause will no longer be required, and these amendments effect its removal. I hope that noble Lords will support these amendments, along with government Amendment 66, which is a tidying-up amendment to remove a redundant cross-reference in Schedule 13.
Lord Clement-Jones (LD)
My Lords, I am sorry to interrupt the Minister but the noble Lord, Lord Bassam, and I would be keen—despite the dinner hour approaching—to know a bit more about the Minister’s plans as regards the short Bill. We want a bit more specific information about timing and what is happening. Is there a period of consultation, or can we go straight to legislation. What is the plan? With the best will in the world, we are delighted to hear what the Minister has to say, but can we have some specifics?
Lord Clement-Jones (LD)
My Lords, that is rather better than the ministerial “in due course”. That is all I can say.
Lord Offord of Garvel (Con)
I thought the noble Lord would appreciate that clarity.
Amendment 63 was tabled by my noble friend Lord Hodgson and I thank him and the noble and learned Lord, Lord Thomas, for their contributions to the debate. While the Government recognise the important role that litigation funding can play in facilitating access to justice, we are not blind to some of the challenges and opportunities to reform and improve the funding system. That is why, in recent days, the Lord Chancellor has written to the Civil Justice Council, inviting it to undertake a review of the sector. This work will ensure that claimants can get the best deal and it will expressly consider the need for further regulation or safeguards. Its terms of reference will be announced in the coming days.
Lord Clement-Jones (LD)
I am sorry my Lords; I regret to keep interrogating the Minister, but there is a clear separation, I assume, between a review as to whether or not regulation is required, in the form that the noble Lord, Lord Hodgson, talked about, and re-establishing the basis for litigation funding following the PACCAR case. I assume there is a clear distinction between the two activities.
Lord Offord of Garvel (Con)
That is correct.
Colleagues from the Ministry of Justice will be following this debate closely and will have heard the points made by my noble friend Lord Hodgson regarding the need for momentum for this review. Therefore, it would not be right to have a statutory review that would duplicate this work.
Amendment 65, tabled by the noble Lord, Lord Tyrie, is about whistleblowing. I thank the noble Lord and the noble Baroness, Lady Kramer, for their passionate contributions on this topic this evening. As I made clear in Committee, the Government recognise how important it is that whistleblowers are supported to shine a light on wrongdoing and believe that they should be able to do so without fear of recriminations. In 2023, the CMA increased the cap on rewards for illegal cartel whistleblowers from £100,000 to £250,000 to strengthen its enforcement work. Additionally, the Government are undertaking a wider review of the effectiveness of the whistleblowing framework in meeting its original objectives to facilitate whistleblowing, protect whistleblowers against detriment and dismissal, and to facilitate wider cultural change around whistleblowing.
My colleague the Minister for Enterprise, Markets and Small Business has recently mentioned in the other place that the research for the review is near completion. The Government intend to provide an update on this shortly.
Lord Tyrie (Non-Afl)
Can the Minister say whether “shortly” is the same as “quickly”, and whether it will be a comprehensive examination of the subjects or just picking off a small number of areas? What exactly is it looking at?
Lord Clement-Jones (LD)
Before the Minister stands up, I will add to that. The Minister used the word “research”, which I thought was extraordinary. “Research” is a flabby kind of expression in these circumstances. Do the Government intend to review the current state of whistleblowing with a view to ensuring there is a more comprehensive approach to it, or is this just some nice-to-have academic exercise?
Lord Offord of Garvel (Con)
I thank both noble Lords for that. The update will be provided shortly. I agree with the noble Lord, Lord Clement-Jones, on the beauty of the wording that the “research” for the review is near completion. It does perhaps need some clarification, so let us get the timetable and I will provide that as soon as possible.
The noble Lord’s continued engagement is greatly welcomed as we undertake this important work. However, we do not think it appropriate to place a new and binding obligation for a further review to be conducted within a specific timeframe. I will come back to him with exactly what the timeframe is.
Amendment 153 from the noble Lord, Lord Tyrie, would require the measures in the Bill to be reviewed at five-year intervals by an individual appointed with the consent of the relevant parliamentary Select Committee. I thank the noble Lords, Lord Tyrie and Lord Kamall, and the noble Baroness, Lady Kramer, for their contributions to the debate on this amendment. I commend its intent. However, the Government have already committed to carrying out an evidence-led post-implementation review to assess how the Bill is delivering on its aims. The CMA has also engaged constructively with parliamentary committees to support their scrutiny of its activities. This will continue in the future. Noble Lords will be aware that the CMA is also required to present and lay its annual report in Parliament, covering its operation and effectiveness.
I thank the noble Lords, Lord Clement-Jones and Lord Tyrie, and my noble friend Lord Hodgson for their amendments. I hope that they are sufficiently reassured by what I have said and do not feel the need to press them.
Lord Clement-Jones (LD)
My Lords, I thank the Minister for that response. Even on an empty stomach, there are things to be taken away from what the Minister said. I score him two and a half out of four as far as this is concerned. What he said on exemplary damages was disappointing. I cannot see why the Government do not understand that using a review that took place in 2013 as a stick to beat us with by saying that we cannot have exemplary damages for collective proceedings seems a bit perverse. Time has moved on. The whistleblowing side is the half—so nul points for exemplary damages and half a point for whistleblowing, but if there had been more than just research it might have been full marks. As regards the other two points, the fact that there will be a post-implementation review is sensible. The Minister did not say much more about the post-PACCAR pledge, but we take a little bit on trust, particularly at this time of day. In the meantime, I beg leave to withdraw Amendment 61.
Lord Offord of Garvel
Member’s explanatory statement
This clause would leave out Clause 127 of the Bill (use of damages-based agreements in opt-out collective proceedings), which addresses the Supreme Court judgment in R (PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28 in respect of certain proceedings, because the Government intends to bring forward a separate Bill addressing that judgment in respect of all proceedings.
Digital Markets, Competition and Consumers Bill
Wednesday 13th March 2024
(4 months, 2 weeks ago)
Lords ChamberRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 47-II Second marshalled list for Report - (11 Mar 2024)
19:30 - Division on Amendment 150 - Ayes: 165 / Noes: 154 - Amendment 150 agreed.
Lord Clement-Jones
“Amendment of section 58 of the Enterprise Act 2002After section 58(2A) of the Enterprise Act 2002 insert—“(2AA) The need for free expression of opinion and plurality of ownership of media enterprises in user-to -user and search services.(2AB) Media enterprises include—(a) newspapers,(b) broadcasters, and(c) providers of video on demand and audio on demand.(2AC) For the purposes of this section “user-to-user service” and “search service” are defined in Part 2 of the Online Safety Act 2023.””Member’s explanatory statement
This amendment updates the specified considerations that the Secretary of State can use to issue a public interest notice that reflect modern market conditions where new media may give rise to such concerns.
Lord Clement-Jones (LD)
My Lords, with only one amendment in this group, I have the mixed blessing of having the Minister’s undivided attention. I will be very brief as I want to give way to heavier oncoming traffic, in the form of Amendments 67 and 158. My intention in retabling this amendment on Report is to probe further the Government’s intentions as regards amending the Enterprise Act 2002, in respect of mergers of digital media.
In Committee, I pointed out that the Online Safety Bill—now Act—sets great store by the importance of freedom of expression on digital media and, in the context of competition in the media, we believe that the protection of the public interest needs bringing up to date, alongside the collective consumer interest. This was on the basis that digital media now play a significant role in the national discourse, and public interest considerations could emerge from permutations of takeovers or mergers.
In Committee, I described how Section 58 of the Enterprise Act is limited in scope, and that we should add the need for free expression of opinion and plurality of ownership of media enterprises in user-to-user and search services to the existing public interest considerations that the Secretary of State can take into account. The reply of the Minister—the noble Lord, Lord Offord—was sufficiently encouraging for me to bring the amendment back for further and better particulars. He said:
“The Government are currently reviewing the recommendations on changes to the media public interest test in Ofcom’s 2021 statement on media plurality. Ofcom did not recommend that online intermediaries or video and audio on-demand services should fall within the scope of the media mergers regime, which this amendment would provide for”.
There is always hope. The Minister went on:
“We are considering Ofcom’s recommendations carefully and, as we do that, we will look closely at the wider implications on the industry. The Government have not proposed pursuing substantive changes to the grounds for public interest interventions in mergers in this Bill. The changes recommended in Ofcom’s review can be addressed directly via secondary legislation under the made affirmative procedure, if appropriate”.—[Official Report, 29/1/24; col. GC 291.]
The Minister did not offer any detailed timetable, so this is a brazen attempt to push the Minister further in telling us what the Government really have in mind, even if it is going to be included in secondary legislation. It is quite clear, in general, that changes to the Enterprise Act are needed and should be in contemplation. I very much hope the Minister can go rather further than he did in Committee. Indeed, it may be that there is a vehicle available, in the form of the Media Bill, which could take the position further. I beg to move.
Lord Lansley (Con)
My Lords, I intervene very briefly to support the noble Lord, Lord Clement-Jones, in the intentions of his amendment. A number of noble Lords will recall that, about eight years ago, we sought that the Government would use secondary legislation to extend the definition of media enterprises under the Enterprise Act.
The point that the noble Lord, Lord Clement-Jones, is making is in this territory. Clearly, if media enterprises for these purposes were defined more widely, it would capture some of the providers that the noble Lord, Lord Clement-Jones, was talking about. At the moment, media enterprises basically consist of print newspapers or broadcasters—and broadcasters are only those that are licensed under the Broadcasting Acts.
I hope it will be evident to noble Lords that there are now many more news creators and aggregators, and sources of news, that make up the news landscape and are not comprised within the definition of print newspapers or of broadcasters under the Broadcasting Act. So we need to make sure that the specified considerations under Section 58, about free expression, accurate presentation and plurality, are applied in relation to this wider definition of media enterprises.
This was something that Ofcom said to Ministers in pursuance of the consultation about the media public interest test, I think as far back as 2021, or maybe at the end of 2022. So I suppose what I am asking is to share in the urging of the noble Lord, Lord Clement-Jones, that Ministers might take this on, and to give advance notice that—from my point of view—we should address this in the Media Bill quite soon, in order to give them further encouragement for this purpose.
Lord Bassam of Brighton (Lab)
My Lords, we are very grateful—we are always very grateful, actually—to the noble Lord, Lord Clement-Jones, for tabling this amendment, which raises a valid concern around the suitability of the current provisions in Section 58 of the Enterprise Act.
We take the view that the world has changed significantly since that legislation was put on the statute book. It was changed as a result of the passage of the National Security and Investment Act, but not in a way that addressed the points that have been properly raised by the noble Lord. Some aspects of this debate featured during the passage of the Online Safety Bill, and I strongly suspect we will revisit this on other occasions in the future, as the noble Lord, Lord Lansley, has invited us to with the Media Bill.
The noble Lord, Lord Clement-Jones, described this as a “brazen attempt” on his part. Well, I hope the Government will be open-minded about looking at whether and how the public interest notice regime could be revised in the future, to take account of different types of media provider. However, because I know that noble Lords would like to progress on to another interesting group on a similar topic, I will hand the Floor to the Minister.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
I thank the noble Lord, Lord Clement-Jones, for Amendment 64. It would expand the list of media merger public interest considerations to include:
“The need for free expression of opinion and plurality of ownership of media enterprises in user-to-user and search services”.
I previously addressed this issue in Committee, when I referred to the Government’s ongoing consideration of Ofcom’s recommendations. As suggested by the noble Lord, ensuring that our regime is updated to reflect current market conditions remains important.
My noble friend Lady Stowell of Beeston has been engaging extensively with government on changes to the wider media merger regime, and I understand that discussions have been constructive. My noble friend Lord Parkinson of Whitley Bay, who is in his place, is the Lords Minister responsible for media mergers. To avoid repetition, I will not speak to the detail of these discussions now but will leave it to my noble friend, who will return to the substance of this in the next debate. I hope the noble Lord will be able to withdraw his amendment and allow us to discuss this further when the next group is debated.
Lord Clement-Jones (LD)
My Lords, I can barely contain my excitement. It is very good to see the noble Lord, Lord Parkinson, in his place, and I very much look forward to hearing what he has to say in the debate on the next group. There is a difference in principle, though, between the amendments in the next group tabled by the noble Baroness, Lady Stowell, on ownership by foreign Governments and the future-proofing that my amendment seeks for digital media.
I very much appreciate what the noble Lords, Lord Lansley and Lord Bassam, said about the need to encompass this type of media. Whatever the content of the Minister’s response, I believe that if we do not deal with digital media in this Bill, we will need to deal with it in the Media Bill. It is a current issue; the Minister used the phrase “current market conditions”, which was a slightly odd way of describing the fact that we now have an incredibly lively digital media. After all, why do we have the final offer mechanism in the digital markets Bill? It recognises the issues related to news media and the need to make sure that there is a proper negotiation on the use of, and links to, news media. We need to make progress on this, but I will give way to the oncoming traffic of the next group. I beg leave to withdraw my amendment.
Lord Tyrie
“Review of whistleblowing provisions(1) The Secretary of State must commission an independent review, chaired by someone appointed with the consent of the relevant Select Committee of the House of Commons, of the extent to which whistleblowers are adequately protected and supported under the competition and markets regime in the United Kingdom.(2) The review under subsection (1) must consider, but is not limited to assessments of—(a) whether existing protections are sufficient to encourage whistleblowers to act;(b) what protections exist in competition regimes in other jurisdictions;(c) whether further protections should be introduced and what form they should take;(d) any matter related to whistleblowing provisions that the relevant Select Committee of the House of Commons reasonably requests that the review consider.(3) The review under subsection (1) must be published and laid before Parliament within 12 months of the passing of this Act.(4) In this section “relevant Select Committee of the House of Commons” means the Business and Trade Select Committee and any successor.”
Lord Tyrie (Non-Afl)
This was all debated on Monday evening, but I am sure that many of us have already forgotten exactly what happened then. The amendment would secure a review for improving the prospects for effective whistleblowing. The case—in my view and, it seems, those of almost everybody who participated—is unanswerable. I was not surprised that the Government did not come forward with any effective answers to it, but I was surprised—
Lord Evans of Rainow (Con)
My Lords, does the noble Lord wish to move the amendment or not? He already spoke to it on Monday, so he cannot speak once again.
Lord Offord of Garvel
Member’s explanatory statement
This amendment, which would amend section 124 of the Enterprise Act 2002 (orders and regulations), is consequential on paragraph 17(6) and (9) of Schedule 9 to the Bill which omits order making powers in section 111(4) and (6) of that Act.
“Foreign power acquisition of news media organisations(1) A foreign power (as defined in section 32 of the National Security Act 2023) may not acquire a news media organisation or publisher of news in any form ("a publisher") where the publisher's primary place of business is in the United Kingdom, unless the conditions in subsections (2) to (4) are met.(2) Investigations by the CMA under sections 44 and 45 of the EA 2002 and by OFCOM under section 44A of the EA 2002 have been completed.(3) The Secretary of State has made and published their decision under section 54 of the EA 2002 stating that there are no competition-related or consumer-related concerns.(4) Where the conditions in subsections (2) and (3) are met, the Secretary of State must by regulations approve the acquisition.(5) Regulations under subsection (4) are subject to the affirmative procedure.”Member’s explanatory statement
This amendment would prevent the acquisition of a UK news media organisation by a foreign power without the approval of both Houses of Parliament, where competition or consumer-related concerns have been raised.
Baroness Stowell of Beeston (Con)
My Lords, I will also speak to the consequential Amendment 158 in my name. I thank noble Lords who have signed my amendment: my noble friend Lord Forsyth and the noble Lords, Lord Robertson of Port Ellen and Lord Anderson of Ipswich. I am grateful to them all for their support and expertise, which have been invaluable in getting us to this point. I am sorry that the noble Lord, Lord Anderson, is unable to be in the Chamber today because of other responsibilities overseas, but he has asked me to restate his support.
I am also grateful to my noble friend the Minister and Julia Lopez, his ministerial colleague in the other place, for their constructive and generous engagement with me on this matter over the past week. I have consciously not been in contact with the Secretary of State, Lucy Frazer, mindful of her current quasi-judicial responsibilities. I will return in a moment to what action the Government might take.
I am sure your Lordships agree that freedom of the press is fundamental to a functioning democracy. Freedom of the press means freedom from government: the freedom of the media to scrutinise and hold to account those of us in Parliament on behalf of the electorate, who get to choose who governs and every Government’s fate. Upholding that unbroken principle, which we have protected for centuries, is what has prevented any UK Government owning or controlling the press. It is surely inconceivable, then, that we would sanction a foreign Government or state power to do what no UK Government have ever done or would ever do.
I want to be clear that I have no problem with foreign businesses or individuals owning UK media organisations. Today’s foreign UK media owners are a large reason why we have a thriving media environment that is financially independent of government, and I recognise the importance and value to our economy of foreign inward investment to a range of different sectors. The stark difference between foreign businesses and foreign Governments is that if the latter were allowed to own our news media, it would raise big questions about foreign policy, editorial independence and the relationship between an outlet’s owners and its coverage.
We cannot ignore that public trust in news, Parliament and the political class has fallen significantly in recent years, and allowing foreign Governments to own such a critical and sensitive part of our nation would damage public confidence in all of us yet further if it was allowed to happen. Only yesterday, Lord Ashcroft published a poll showing that two-thirds of the British public do not support foreign government ownership of UK media. The same poll showed that this is not a partisan matter, with a similar percentage of voters who support all the major UK parties sharing the same view. The British people might not always love the British media and all that it does, but the principle of press freedom certainly matters to them. This principle is in jeopardy because of the proposed takeover of the Telegraph and Sunday Telegraph and the Spectator magazine by RedBird IMI, a fund that is 75% backed by the UAE.
The action taken to date by the Secretary of State for Digital, Culture, Media and Sport and the instructions she has issued to Ofcom and the Competition and Markets Authority to investigate the takeover are very welcome and demonstrate that the Government recognise the well-evidenced concerns about the potential for editorial influence and the risk of censorship by the UAE Government. My concern, which I know that many noble Lords and Members of the other place share, is not just about the potential acquisition of those important newspaper titles. This situation has exposed that in law there is nothing that clearly prohibits the acquisition of a UK news organisation by a foreign power or organisations under significant foreign government control. So although we are relying on the Culture Secretary to reach the right decision and uphold our press freedom, nothing in the current legal framework provides certainty that she can and will do so. This is particularly worrying at a time when some parts of the UK news media face significant economic challenges.
My amendment seeks to close that gap in the law. In simple terms, my amendment would prevent the acquisition of a UK news media organisation by a foreign Government or power without the explicit approval of Parliament. If passed, it would provide an additional and vital barrier of protection for press freedom in this country. The consequential Amendment 158 would ensure that the proposed new clause in Amendment 67 would take effect immediately that the Bill receives Royal Assent.
As I said, my noble friend the Minister and Julia Lopez, the excellent Media Minister, have devoted significant time for discussions with me since I tabled my amendment. I do not doubt their commitment to finding a way to provide the legal certainty that we are currently lacking, and I know that they and officials have been working very hard on this over the past week or so.
From our most recent discussions, I expect my noble friend the Minister to set out an alternative solution when he responds to this debate. I will listen carefully to what he has to say. I am not wedded to the detail of my amendment or the procedure that it sets out, and I will be pleased if the Government propose something that is better and tighter than what I have been able to bring forward. The only question for me is whether the Government’s way forward meets a clear and simple objective: preventing a foreign Government representative or foreign state-controlled entity owning or controlling our news media.
I will not pre-empt what my noble friend might say, nor how I might respond to what he says. However, to be clear, I will have no hesitation in pushing my amendment to a vote if necessary. But I think we all recognise the gravity of the matter before us—the Government included—and I am confident, from the reaction and strong support I have received from noble Lords around the House and from Members of another place, that there is a collective desire to meet that simple objective. Indeed, we must meet it, because if we do not, the freedom of our press is at stake. I beg to move.
Lord Robertson of Port Ellen (Lab)
My Lords, I added my name to this amendment, and I commend the noble Baroness, Lady Stowell, for the energy and effectiveness of her campaign. Just before the debate started, my mobile phone produced a Sky News newsflash, which said that, at 4 pm, the Government will make a decision to accept the basis of the noble Baroness’s amendment. That is a nice piece of news to get just before you stand up to speak.
I was delighted to join the noble Lords, Lord Anderson and Lord Forsyth, in adding my name to this. Unusually, we are on the same side of the argument, although at Question Time the noble Lord, Lord Forsyth, threw out some remarks that other Members of the House will not have recognised but which were designed as an insult to previous positions I have taken on other issues.
Yesterday, I was in Prague, the capital city of the Czech Republic, congratulating it on 25 years since its entry into the NATO alliance. I made the point, as many people at the conference did, that 25 years ago the Czech Republic joined NATO, having overthrown the communist system and regained freedom after all the years in serfdom to the Warsaw Pact and the Soviet Union. The point was made that freedom is not an abstract concept but something that is very clear and precise, and it includes free speech and a free press. That is why I believe that a very significant principle is involved at this point.
As the noble Baroness said, there is no provision in the legal framework of this country at the moment to prevent a foreign Government gaining control or ownership of our media outlets. To the vast majority of the public, that would seem to be outrageous. As Lord Ashcroft’s poll showed, the fact is that a large majority of the population do not agree with the idea of a foreign Government owning our media outlets. That should come as no surprise to anybody in this House or in the other place; it seems almost self-evident. Yet we do not have that legal provision, and we should.
Lord Forsyth of Drumlean (Con)
My Lords, I congratulate my noble friend on her skill and thank the splendid, clever people in our Public Bill Office who enabled her to find a way through this legislation to have an amendment that is in scope—because, for a very long time, we thought that would not be possible. I tried with the Media Bill, and the best I could come up with was a regret Motion on the Second Reading that showed there was widespread support. The noble Baroness, Lady Stowell, deserves considerable credit for making that navigation and getting us to the point where, in her courteous way—she is much more diplomatic than me—she gives the Government an opportunity to do the right thing and support an amendment to this Bill to protect the freedom of the press in our country and, with that, the very foundations of our democracy.
I will say something about the Telegraph bid made by this curious organisation called RedBird IMI—it is a very odd bird indeed. We are told that Sheikh Mansour, the vice-president and Deputy Prime Minister of the UAE, is acting in a purely private capacity by those who wish to advance this so-called investment. Now I am a banker, but I do not really understand how you can have an investment strategy that involves paying multiples of the value of the asset and, in carrying out the bid, briefing the press to the effect that you would be prepared to have a minority interest and, presumably, not have a vote—that strikes me as an odd investment strategy indeed.
What it is, is what it is: an influence strategy. The payment of a rich price is about getting influence through the medium of the Telegraph and the Spectator magazine—it is not a commercial issue. Money talks, of course, and ownership matters. One of the very few things that I disagreed with Mrs Thatcher on was that she tended to the view that ownership did not matter. Ownership does matter, and the freedom of our press should never be up for sale.
I said in an earlier debate that he who pays the piper calls the tune—but this is not a melody. The very idea of an autocratic state with a poor record on human rights owning or holding any influence in a major British daily newspaper is utterly surreal: a country that hosts Putin, greets him as dear friend and purchases oil as he circumvents sanctions and conducts his blood-soaked regime and brutal, illegal war in Ukraine; a country whose laws ban any direct criticism of their rulers through the Government’s national media council, where citizen journalists and bloggers are targeted for criticising the regime and accused of defamation, insulting the state and posting false information with the aim of damaging the country’s reputation; a country that puts journalists in jail, deports critics and closes down any criticism; a country that is bottom of the class in international freedom tables; a country where, according to Amnesty International, at least 26 Emirati prisoners remain behind bars because of their peaceful political criticism.
The bidders at IMI promise editorial independence, just as they did in the case of CNN Business Arabic. According to the Times report of 12 January, Sultan Al Jaber, chairman of IMI, put pressure on CNN Business Arabic to avoid negative news about the UAE, despite promises to preserve journalists’ editorial independence. The Times reported that the editor-in-chief was forced out within months of his appointment for refusing to submit to requests from Al Jaber for positive coverage. Al Jaber was previously head of the UAE’s censorship agency, so had much experience in this area.
I hope I have convinced the House—I do not think I need to try very hard—that this bird cannot fly, but it is not just about this particular bird, as the noble Lord, Lord Robertson, said. No insult was intended earlier—I was just pulling his leg. There is a principle here. Foreign Governments should be nowhere near the ownership of newspapers and magazines. In fairness to the Government, no one could have predicted how this utterly bizarre bid would come to pass. I know of no democratic country that would allow a foreign state to take ownership of key national newspapers. I now regret my regret amendment. Perhaps it was a little unfair to criticise the Government for not including measures in the Media Bill and drawing the Long Title so tightly that it was impossible to amend the Bill in that respect. The debates in this House showed universal opposition. The poll by Lord Ashcroft, which has been mentioned, reflects that in the country.
This amendment may not be perfect. It is an old trick of Sir Humphrey to say, “Well, I accept the amendment in principle but unfortunately the drafting is not quite right”. From my experience of talking to Minister Lopez and from the work done by my noble friend Lady Stowell, I believe the Government are working sincerely to try to find a way of having an amendment that will produce what I believe everyone in the House would like to see. They should continue to work with my noble friend and the other sponsors to ensure that the Bill leaves this House amended. Nothing less than a complete ban on foreign Governments having any role in the governance, ownership or financing of our media is acceptable. It is, as I have said before, a no-brainer.
Lord Moore of Etchingham (Non-Afl)
My Lords, I refer your Lordships to my entry in the register. I have been on the staff of the Telegraph Media Group since 1979, so this interest bulks large in my mind; I had to confess it at once. I am very grateful for everything that has been said and to the noble Baroness, Lady Stowell, for moving this amendment. I am also very pleased that this has been a cross-party affair coming from all sides of the House.
My only regret so far is that the Government were inclined to regard this as a technical matter that had to be looked at in terms of rules. It is important to look at the rules, which DCMS is doing, but it is not really about that. As has been said by the noble Lord, Lord Forsyth, and all other speakers, this is a very important matter of principle. The delay involved has been very difficult for newspapers in general, and particularly for my own and for the Spectator, because while you do not know what will happen you cannot really get on with doing your journalism. That tends to erode things if you are not careful, so it is very important that we have got to the heart of it.
I endorse absolutely everything that the noble Lord, Lord Forsyth, said about the Abu Dhabi bid, but I am quite glad that I do not have to say it myself, because if we had had such a rule and such clarity from the start, people would not have had to get into this issue of saying rather difficult truths about many regimes across the world. We would simply have been able to say, “No, sorry, the rule is the rule, and that’s that”. I hope we can learn something from all that.
I have seen the leak, if that is the right word, so I have a rough idea about what we might hear later. I want to make two important points. One is that I hope the Spectator, and magazines like it, will be properly included in any decisions, because, as I understand the rules at present, they refer to national newspapers and not automatically to national news magazines, and I think precisely the same point should apply.
There is room for possible problems about minority ownership. It is possible, in the way that ownership works in companies, that an ownership of less than 50% can amount to a controlling interest; that can be done in a covert way or sometimes in an open way. If it were the case that, for example, RedBird IMI took a minority stake, that would be better than a majority stake but would not automatically solve the problem. I hope the Government will address that.
At the Daily Telegraph we have always been proud advocates and practitioners of a free press, but we have not particularly enjoyed having to advocate it quite so hard and so repeatedly to get the message across. I am glad to sense that the message has got across, and I am grateful to noble Lords on all sides of the House. I hope we can now move forward with due expedition.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise very briefly for two reasons. First, I offer Green support to the direction in which we are heading and join in the congratulations for the noble Baroness, Lady Stowell, on all the work she has done here.
Before I begin the second point, I declare my historical interest as a former editor of the Guardian Weekly and a former employee of the Times. I will refer to the report Who Owns the UK Media?, published last year by the Media Reform Coalition at Goldsmiths. I very much agree with what the noble Baroness said about the importance of the principle of press freedom, and with the noble Lord, Lord Forsyth, about the free press as a foundation of our democracy, and that ownership matters. But I urge all noble Lords who take part in this Report to consider how much diversity of media ownership matters.
As it says in that report, three UK publishers—DMG Media, News UK and Reach—control 90% of the print reach in the UK and 40% of the online reach. The report’s authors said there was an “urgent need for reform”, and urged Ofcom, Parliament and the Government to take action to address diversity of media ownership. If DMG Media were to buy the Telegraph Media Group, its print share would rise from 42% to 47%.
I very much welcome what I think we are about to hear and all the work that has gone into this, but I urge noble Lords to consider the much more work that needs to be done to achieve the diversity of voices that is so crucial to the strength of our democracy.
Baroness Fleet (Con)
My Lords, I rise to speak to Amendment 67, tabled by the noble Baroness, Lady Stowell, and I congratulate her on all the hard work she has done to get to this point.
I have not spoken previously on the Bill, but I specifically want to speak today as a passionate supporter of a free press and freedom of speech. As a former deputy editor of the Daily Mail and the Daily Telegraph, and the editor for seven years of the London Evening Standard, I know that anyone who buys a newspaper wants to influence society, politicians and government. All proprietors interfere. Many editors have been forced to resign because of that interference. I departed from the Telegraph with Max Hastings because the owner—the noble Lord, Lord Black—disagreed with the editor’s support for Europe. After I left the Standard, the paper became a promotion vehicle for the new owner, the noble Lord, Lord Lebedev, and his personal interests. The notion that a Government, or someone appointed by a Government, buys a newspaper other than to directly influence the newspaper is fanciful.
Lord Kamall (Con)
My Lords, a number of principles have been spoken about. I believe firmly in the principle that no Government, British or foreign, should be allowed to own a UK media outlet. When my noble friend Lady Stowell asked me whether I would support her amendment I initially declined, because I told her it did not go far enough. I apologise for that, because, as my noble friend said, the UK Government do not own any media outlet; why, therefore, should any foreign Government be allowed to do so?
We should also be absolutely clear that this is not anti-foreigner sentiment. I and, I am sure, many other noble Lords have no objection to foreign private companies owning UK news media outlets. Indeed, in my years in the European Parliament we used to refer to the Financial Times as the in-house paper of the European Commission, only to find that it was owned by a Japanese company.
There are clearly some tricky issues here in drafting the relevant law that the clever lawyers will have to navigate. For example, it is well known that Chinese non-state-owned enterprises often have strong links to the leadership of the Chinese Communist Party. Indeed, some China analysts claim that there is little difference between the Chinese Government’s influence over state-owned and non-state-owned companies, so were a non-state-owned Chinese company to bid for a UK media outlet there would also be a number of questions. That is possibly a debate for another day.
In short, like many noble Lords, I am against any government ownership of UK media organisations, whether it be the UK Government or a foreign Government. For these reasons, I support Amendments 67 and 158 in the name of my noble friend Lady Stowell.
Lord Clement-Jones (LD)
My Lords, despite the shortness of this debate, we have had some very fine and inspiring speeches. We on these Benches wholly support the amendment moved by the noble Baroness, Lady Stowell. Indeed, like the noble Lord, Lord Robertson, I find it extraordinary that we do not have this already on the statute book. Given the importance of pluralism and freedom of speech in our media, the thought of foreign Governments impacting on our media in the way that is currently threatened seems quite extraordinary.
My main purpose is to associate myself with the remarks of the noble Lord, Lord Forsyth. When he moved his regret amendment, he talked about the ownership by the UAE of a UK quality newspaper. I have spent the last 10 years campaigning for the release of Ryan Cornelius from a Dubai jail. He was unjustly imprisoned on trumped-up fraud charges, and his sentence was arbitrarily extended by 20 years in 2018, just as he was due to be released. He now faces the prospect of many more years in jail. I am all too aware of the reality that lies behind the pleasant-looking tourist Dubai. Parliament should definitely have its say before a UK newspaper falls into the hands of such a Government. All this is a result of the activities of a member of the royal court of Dubai, so it very close to home in the UAE. Not only do we as a party on these Benches wholly support this amendment, but I personally feel very strongly about the need for it.
Lord Bassam of Brighton (Lab)
My Lords, I think the whole House is grateful to the noble Baroness, Lady Stowell, for the way in which she set out the arguments behind her amendment, and for the clarity, force and power of her voice in putting those arguments forward. We are also grateful to the noble Lord, Lord Forsyth, for the way in which he has argued his case—not once, but twice, and several other times too, when he has been given the opportunity; I always enjoy his interventions. I am enormously grateful to the noble Lord, Lord Robertson, for bringing breaking news to your Lordships’ House.
It might seem slightly ironic to some that we on the Labour Benches are trying to come to the rescue of the Daily Telegraph, but there is a much more important principle at stake here. It is an obvious place to start but let me begin with first principles: Labour believes in a free and fair press without state interference. We also believe in the accurate presentation of news and in freedom of expression, which is particularly important in the context of RedBird’s attempted takeover. Our view on this matter is not shaped just by the Telegraph Media Group takeover proposal currently being considered by the Secretary of State; we would have similar concerns if other titles were subject to bids from other states. When the Minister explains to the House the Government’s intention, can he clarify the position, too, of not just newspapers but other publications? That is not to say that we do not have real concerns about the proposed sale of the Telegraph Media Group. We very much welcomed the Secretary of State initiating the investigations by the regulators. Now that their reports have been submitted, we hope that a decision will be taken in a timely way and as soon as possible, and in a way that is consistent with the quasi-judicial nature of the process.
For the avoidance of doubt, this is not to say that we oppose foreign investment in this country; we believe that inward investment in our economy is vital. The noble Baroness, Lady Stowell, spoke eloquently on that point, as did the noble Lord, Lord Kamall. However, foreign ownership of UK media organisations raises broader questions around the accurate presentation of news and, in certain cases, the free expression of opinion. Both of these, as many noble Lords have said, are vital to the long-term health of the print media sector and, more importantly, to our democracy.
I listened very carefully to the noble Baroness’s introduction and the other speeches. We have to give them all credit for the way in which they addressed the issue. I listened particularly to the noble Lord, Lord Robertson, because of his expertise, and his former role and continuing interest in security matters. While I am giving out thanks, I also thank the Minister, who helpfully found the time to meet me and my noble friend Lady Jones of Whitchurch this afternoon to discuss this important issue.
As we have seen with other legislation, most progress is often made when groups from across your Lordships’ House have open, frank discussions and then work together to agree solutions. I understand that for various reasons the text of Amendment 67 is not necessarily what all its supporters would have wanted. For that reason, and for a number of others that I will set out, we are not convinced that it presents the right response to this serious matter. Our view is that a free and fair press should be without state interference, which means without undue influence from our own state as well as others.
It is correct that the Secretary of State should take an interest in cases which raise concern on competition and plurality grounds, but her responsibilities are rightly constrained by legislation, and her ability to comment is limited by the quasi-judicial role she is playing. Where security concerns may arise, the Secretary of State will no doubt receive confidential briefings on the potential implications of different outcomes. In our view, that process must be allowed to play out. That the CMA and Ofcom have reported to the Secretary of State this week points to the well-established merger regime that has been in place in this country for some time. As part of their investigations, those independent regulators draw on expert advice and are able to obtain appropriately handled confidential information, including material that may be highly commercially sensitive. On the basis of all that information, they may then come to a judgment regarding the suitability of a takeover proposal and advise the Secretary of State accordingly. Parliament has empowered the Secretary of State and those regulators. In our view, that is an appropriate level of state interest in sensitive matters.
Amendment 67 proposes that once the regulators have carried out their work and the Secretary of State has come to a decision, it should be for Parliament to approve that decision. While we generally support parliamentary scrutiny of the Executive and their decisions, we are not convinced that the mechanism envisaged by the amendment is suitable in the light of the sensitive security and commercial information that would have to be shared to inform debate and determine the outcome of votes in both Houses.
My impression from earlier discussions with the Minister and his colleagues in other departments is that a better approach would be for the Government to acknowledge the strength of feeling in this House and commit to bringing back their own text at Third Reading. If the Minister is able to make that commitment, I hope that colleagues on all Benches will be minded to accept that offer and work with Ministers, as we will offer to do, in the coming weeks to find a satisfactory outcome.
We have enormous sympathy with the noble Baroness, Lady Stowell, on this issue. We do not feel able to support her proposition in the form it is with us today. We know it has been brought forward with the very best of intentions, intentions we support, and because we share those, we urge the Minister to respond positively to finding a way forward over the next few weeks.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord Parkinson of Whitley Bay) (Con)
My Lords, it is a pleasure to speak on this Bill for the first time, even if it is some 43 minute later than advertised by some of our free media outlets. It touches on debates we have already had in connection with the Media Bill.
His Majesty’s Government firmly believe in a free media and a free press. It is the bedrock of our democracy and an essential safeguard which ensures accountability and effective government. I know that noble Lords share that firm belief. We heard it strongly again today, not least from my noble friend Lady Stowell of Beeston, whom I thank for her work in reflecting these important principles through her scrutiny of this Bill, the Media Bill and others.
Media freedom depends on having a plurality of media through which the public can access a wide range of accurate, high-quality news, views and information. My right honourable friend the Secretary of State has championed press and media freedom from her very first moment at the Department for Culture, Media and Sport. She has been clear about its importance and has made it a personal priority.
Lord Forsyth of Drumlean (Con)
I am very grateful for what my noble friend has said. Could he clarify the position on minority stakeholders? He used the word influence. Would that mean having a small number of shares?
Lord Bassam of Brighton (Lab)
My Lords, in order to help, can we be absolutely clear that this covers minority ownership and control? We need clarity on that. The noble Lord, Lord Moore, made that point. It would help the House for the avoidance of doubt.
Lord Parkinson of Whitley Bay (Con)
The noble Lords have intervened at a helpful point, because I was about to outline that we want to ensure that the new measures do not have undesired effects on wider foreign business investment in the UK media, or on purely passive investments made by established investment funds.
In the amendment we will bring forward at Third Reading, it will be necessary to take a power to make secondary legislation to set out two points clearly: first, what limited types of established investment funds we mean, which could be split out of the general prohibition on foreign state ownership provided for by this regime; secondly, the very low threshold up to which they may be permitted to invest, which we intend to be considerably lower than the current thresholds for material influence in the Enterprise Act.
As we bring this forward ahead of Third Reading, we would be very happy to discuss the drafting with noble Lords before it is tabled so that we can discuss the detail. We will set that out in the provisions at Third Reading.
Lord Lansley (Con)
I am sorry to interrupt my noble friend but, as he knows, I am interested in the question of media enterprises more generally. Is he intending that the amendment to be brought forward will relate only to newspapers, and therefore will not touch upon broadcasters, as they will be excluded? I am not sure I understand why the presentation of news by broadcasters is to be treated differently from the presentation of news by newspapers.
Lord Parkinson of Whitley Bay (Con)
The provisions we will bring forward at Third Reading will relate to newspapers and periodical news magazines, as I have set out. It will not cover television and radio broadcasters at this time, but that is something we will continue to consider. We have already been considering it as part of our broader work on the media mergers regime. That work will continue. I am happy to speak with my noble friend Lord Lansley and others about it.
Lord Clement-Jones (LD)
Could the noble Lord go through again what will happen to an existing merger, which is subject to existing procedure? He seemed to be saying that, as soon the new provision comes in when the Bill passes, it will be subject to the new procedure as well as the old. Is that what he was saying, and how will that work?
Lord Parkinson of Whitley Bay (Con)
That is what I was saying, but it depends on when the Bill gets Royal Assent. That is in the hands of noble Lords and not just the Government. If any live case is still ongoing at the time of Royal Assent—we intend for the new provisions to come into effect at Royal Assent—then the Secretary of State will obviously follow the provisions as set out in other Acts of Parliament as decided by Parliament previously, and follow the law as enacted after Royal Assent.
Lord Clement-Jones (LD)
I have a second question. I am assuming that internet digital news media—not a newspaper—will not be covered by these provisions.
Lord Parkinson of Whitley Bay (Con)
No. I am grateful that we have separated the debate on the noble Lord’s previous amendment from this so that I can respond directly to the amendment brought by my noble friend Lady Stowell. I am grateful for his understanding of that.
The Government are focused on the reforms to media ownership rules, which were suggested in Ofcom’s 2021 review. It did not recommend that online inter- mediaries, including social media platforms, search and video/audio-on-demand services should fall in scope of that. I heard what the noble Lord said about having this debate in the Media Bill, and I look forward to doing so.
The secondary legislation provisions that I have outlined will be subject to the affirmative procedure in Parliament. Until such time as those regulations are laid and approved by Parliament, the whole regime applies to everybody caught by the general foreign state prohibition.
We have always believed that the trustworthiness of our news and the lack of government interference in it, whether domestic or foreign, is of paramount importance, which is why we are setting out today our plan to make that more explicit in the regulatory regime that exists. As my noble friend Lady Stowell is aware, work is already under way to update the media mergers regime more broadly, and I touched on that in my responses to noble Lords. We will continue to take that work forward. I hope that, on that basis, my noble friend is able to withdraw her amendment today. With renewed thanks to her and a renewed commitment to work with those who have supported her, I am grateful for the opportunity to speak today.
Baroness O'Neill of Bengarve (CB)
My Lords, for the avoidance of doubt, could the Minister clarify whether the proposed restrictions apply not only to print and broadcast media but to digital media?
Lord Parkinson of Whitley Bay (Con)
No, it is just to newspapers and periodical news magazines.
Baroness Stowell of Beeston (Con)
My Lords, I am very grateful to all noble Lords who have spoken for their support and for the powerful speeches that they have given, and I am very grateful to my noble friend for his clear and comprehensive explanation of the Government’s position, and their firm intention to bring back an amendment at Third Reading to address that simple objective that I outlined at the start of this debate.
Because my noble friend covered such a lot of ground and this is quite complex stuff, for the benefit of other noble Lords and anyone else following this debate, I shall play it back at him a little bit, perhaps in plainer English, if I may—although noble Lords must forgive me if some of it is not as plain as it would be if I was speaking outside the House.
What we have heard is that the Government will bring forward an amendment at Third Reading that will expand the definition of foreign power beyond that in the National Security Act to include individuals who might not otherwise be adequately captured. That is something that has been of particular interest and concern to some of the legal noble Lords who have been following and commenting on my amendment. The amendment will expand the definition of “newspaper” in the Enterprise Act to include news magazines explicitly. The amendment will give the Secretary of State a new power to issue a foreign state intervention notice if she is notified or becomes aware at any time of possible foreign state involvement to own, control or influence a newspaper or news magazine. Once her order is issued, the CMA must investigate and, if it establishes that it is a foreign state, as newly defined, any investment or takeover will be blocked—or, if the investment has already happened, the Secretary of State will have the power to unwind that investment. All that will come into force once the Bill gets Royal Assent, and it will apply to any live regulatory case alongside the existing procedure that the Secretary of State is following.
In addition, at Third Reading, the Government will bring forward an amendment to create secondary legislation, which will be subject to the affirmative procedure. Those regulations will define what kind of indirect foreign state entity might be allowed to make a passive investment, such as a sovereign wealth fund of a democratic state, and include a very low threshold below which such an entity could invest. The purpose of those regulations will be to preserve the opportunity of legitimate foreign investment in news media. For example—and I think that it helps to get an example to understand what we are talking about here—it has been pointed out to me that the Norwegian state investment fund has single digit investments in News Corp, Reach, which is also known as the Mirror Group, Paramount Global, which owns Channel 5, and Comcast, which owns Sky.
To me, what my noble friend has outlined today, on my simple interpretation of it, makes sense. I am very grateful to the Minister for emphasising the very low-level investment that the Government are considering for the secondary legislation that will come forward, but the precise percentage will matter. I know that he will not be able to commit now to bringing forward the regulations in draft at Third Reading, because there is a lot of work for officials to do between now and then, but I hope that he can commit to doing as much as he can at Third Reading to provide the detail that we will need to be properly satisfied that what then follows will meet all our concerns.
“(c) the collective interests of consumers includes avoiding any detriment that might be incurred by consumers as a result of advertising products and services which will have a significant impact on the United Kingdom's ability to reach a level of net zero carbon emissions by the year specified in section 1 of the Climate Change Act 2008.”Member’s explanatory statement
This amendment seeks to amend the definition of the ‘collective interests of consumers’ to include the detriment caused by advertising and promotion of high carbon products and services.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise to move Amendment 68, but it is not my intention to speak to any of the other amendments in this diverse and large group, in the interests of proceeding in a timely manner.
Noble Lords will see that this amendment seeks to amend the definition of the collective interests of consumers to include
“the detriment caused by the advertising and promotion of high carbon products and services”.
For noble Lords who were not in Committee, I will tell the story of the origins of this, which was Amendment 109 from the noble Baroness, Lady Jones of Whitchurch. Her amendment basically set out that there would be controls to avoid detriment for any action that would prevent us reaching net zero by 2050. I pointed out to the noble Baroness that, given that at that time the Climate Change Committee was saying that we were well off track for meeting that 2050 net-zero target, the amendment, in effect, would have stopped all advertising of any product producing carbon, which I do not think was the noble Baroness’s intention.
I therefore find myself in the unusual situation of tabling on Report a more moderate amendment than we were discussing in Committee in terms of reducing carbon emissions and looking to reduce the detriment for consumers. That is why my amendment focuses on high-carbon products. As I said in Committee, high-carbon products obviously include fossil fuels, flights, SUVs and plastics, but also fast fashion, meat and dairy, and banks that are funding the likes of BP and Shell. It is worth noting, going back to when the Government first started promoting this Bill, that we were promised a huge amount of action; one of the purposes of the Bill was to provide protections from greenwashing. We have gone a long way backwards from that. My amendment is an attempt to reinstate, in a small way, what was stated to be an original intention of the Bill.
I promise that this was not co-ordinated, but I note that I speak to this amendment just a few hours after—we are very timely—another Member of your Lordships’ House, the noble Baroness, Lady Brown of Cambridge, has published an article on Business Green pointing out how the UK is not in any way on track to meet the needs of climate adaptation. She talks about us
“sleepwalking into an energy system”
that cannot be implemented and achieved, while we face flooding, extreme heat and water scarcity that will cost lives.
Therefore, this is an amendment to take us in a direction that we surely need to go. There is no right to advertise. We can decide what sort of advertising all our consumers are subjected to, particularly in the digital space, where people are bombarded, every second, with more and more adverts, and we know how advertising tracks us: once we have shown an interest in one topic, we are subject to bombardment. We do not have to say that it is open slather and you can do whatever you like in terms of advertising and promotion. Cigarette advertising is an obvious area where we have already taken quite tight action, and I note that Transport for London now restricts advertising of a range of products, including junk food, and there is talk of banning gambling promotion. France and Amsterdam are also looking at a ban similar to the one that this amendment would point us towards, banning high-carbon adverts.
It is not my intention to put this to a vote. There are so many areas of government action in which the Greens start saying something and, 10 years later, it gets delivered and becomes government policy, but we really cannot wait on climate action, as the independent Climate Change Committee says; that, of course, features Members of your Lordships’ House. We really need to act now, and if we are not going to see this from the Government in this Bill, there will be opportunities forthcoming. The Media Bill comes to mind, and we will see where we can continue to push for action in this area. I beg to move.
The Earl of Lindsay (Con)
My Lords, I shall speak to Amendments 99 to 101 and I declare an interest as president of the Chartered Trading Standards Institute. I am pleased that also sponsoring these amendments are my predecessor as president of the institute, the noble Baroness, Lady Crawley, and the noble Baroness, Lady Bakewell of Hardington Mandeville, a former leader of Somerset County Council.
Before speaking to these amendments, I thank my noble friend for using the Bill to extend online interface order provisions to trading standards, an issue we raised in Committee in amendments moved very ably by the noble Lords, Lord Clement-Jones and Lord Bassam of Brighton. I thank my noble friend also for the correspondence and discussion with him and his officials since Committee about the ongoing concerns that have prompted our amendments in this group and the next.
Amendments 99 and 100 would enable local authority trading standards officers to exercise their powers throughout the United Kingdom. Currently, the legislation implies that officers in England and Wales can exercise powers only in England and Wales but not in Scotland, and vice versa, but rogue traders operate across our internal borders and the legislation and powers that underpin trading standards and consumer protection should recognise this cold, hard reality. We fully respect the different legal jurisdictions involved. The current restriction, however, relates to the exercise of powers, not to the ability to take legal proceedings, and the legislation applies equally in the devolved nations. The restriction makes enforcement more challenging if, for example, a trader based in Scotland commits an offence in England, as trading standards officers can face legal challenges if they request documents they would be entitled to were it not for this anomaly. I should add that trading standards officers across Scotland, England and Wales support this amendment, as it would allow them to conduct investigations throughout the United Kingdom in a more efficient and cost-effective manner.
Amendment 101 would enable trading standards to access information by letter, rather than being restricted to having to exercise a power of entry to access that same information. As the Bill is currently drafted, trading standards need to visit the business in person to obtain paperwork to use as evidence in criminal proceedings. This amendment would ease the pressure on businesses, as they will then have time to gather and send any documents requested, and to seek legal advice, rather than face a trading standards officer just turning up at their business address without notice and seizing documents.
This proposal is therefore in the interests of both businesses and enforcers, and we believe that it does not breach the individual’s human rights or cause any greater risk of self-incrimination. It also reflects the financial difficulties that local authorities are facing, not least those that have declared bankruptcy. There are clear cost implications if an enforcement officer is required to drive half way across the country to obtain documents. Cases can be dropped if there is insufficient council budget for such travel. The documents I am referring to are those that the officer has the right to request and seize when on the business premises, and in those circumstances a trader would have to provide them immediately.
We believe that the ability to make a written request for documents that are held by the business and are required as evidence would substantially reduce costs to the local authority, reduce pressure on businesses and allow those breaching the legislation to be brought to justice more efficiently and cost effectively.
Baroness Crawley (Lab)
My Lords, I support the noble Earl, Lord Lindsay, and I wish to speak briefly to Amendments 99 to 101 in his name, mine and that of the noble Baroness, Lady Bakewell of Hardington Mandeville. In doing so, I apologise for not being able to speak at Second Reading or in Committee. I sincerely thank my noble friend on the Front Bench and the noble Lords on the Lib Dem Front Bench for promoting and supporting our amendments in our absence. I also thank the Minister for being so very generous with his time in meeting us between Committee and Report, and for listening so intently to trading standards officers who do this work on the ground, day after day.
The effect of Amendments 99 and 100 would be to give new powers to trading standards officers to operate across national borders when necessary. Current legislation does not make it clear that trading standards officers in England and Wales can exercise their powers across the border with Scotland, even though this is an area of reserved powers. In fact, the current legislation implies that this cross-border enforcement activity is not permitted. It would be helpful if the Minister, in his reply, could make clear the exercise of powers across borders, so that it is at least on the record for trading standards professionals.
At a post-Brexit time when the UK is building up its new internal market in goods and services, and needs corresponding consumer protection, this current questionable restriction on pursuing officers makes it very difficult to enforce legislation where a rogue trader offends across a national border. I am sure the Minister will agree that, for the success of the new internal market, trading standards officers should be able to pursue and enforce right across the United Kingdom.
Amendment 101, to which I have also added my name, would be an opportunity to finally update trading standards officers’ powers of entry, as the noble Earl said. At present, trading standards officers are required to exercise physical powers of entry to premises before information access or the seizing of documents, which may well be needed in criminal proceedings. The amendment, which we support, would have the effect of changing their information-gathering powers to enable documents to be requested in writing and without the need for physical entry, and for those documents to still be used in criminal proceedings.
This would be a lot less hassle for legitimate businesses and traders, and would give them more time to source the required documents. For the small, overstretched band of trading standards officers, the requirement to exercise physical powers of entry across the country, in order to seize documents that they may need to use in criminal proceedings, is not cost effective for their cash-strapped local authorities. Rogue traders are not constrained by local authority boundaries, and trading standards officers may have to travel long distances to obtain documents physically. Their local authorities may not be able to finance such activity, and the case would therefore be dropped. I ask the Minister to think again on this matter, to sustain consumer confidence in the consumer enforcement powers of a UK-wide trading standards profession.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I wish to speak briefly to support Amendments 99 to 101 in this group, to which I have added my name. The noble Earl, Lord Lindsay, and the noble Baroness, Lady Crawley, have very clearly set out the arguments and the rationale for our amendments, so I will not go into the same detail.
I thank the Minister for his time and that of his officials in meeting with those of us who have signed these amendments, and for his letters clarifying the position. We are grateful for the Government’s movement on several of the issues we raised in Committee. They were not actually raised by us—because of other circumstances, none of us was able to be here—but they were ably covered by the noble Lord, Lord Bassam, and my colleague, the noble Lord, Lord Clement-Jones.
Amendments 99 and 100 raise the issue of how trading standards operate across borders throughout the country. This is causing them considerable concern, and I will not repeat what has already been said, except to say that trading standards are a vital local authority service, but not one that attracts the same level of support as children’s services or disability services. I declare my interest as a vice-president of the LGA.
Local authority budgets are stretched beyond what is needed to make many vital services safe for the consumer. On Amendment 101, trading standards needs support in order to operate as effectively and efficiently as it can to protect the public. Requesting documents by post is more cost effective than going to the trouble of crossing the country to fetch documents. Trading standards needs to be able to operate effectively across the whole UK, and I support this amendment.
Lord Clement-Jones (LD)
My Lords, it is very good to see the full team back on the trading standards amendments. I congratulate all three noble Lords on their championing of trading standards. They need the powers that are being argued for in these amendments; they are the unsung champions of the consumer, and we should support them.
My main purpose in rising is to speak to Amendments 69, 91, 92 and 152. As regards Amendment 69, on misleadingly similar parasitic packaging, it was encouraging to hear the Minister confirm in Committee that the prohibition of misleading actions in Clause 224 and the banned practice in paragraph 14 of Schedule 19 will address the long-standing unaddressed practice of misleadingly similar packaging.
However, those provisions matter little if they are not enforced. During consultations and the debate on the Consumer Protection from Unfair Trading Regulations 2008, the then Government stressed that public enforcement would be effective and efficient. This has not proved to be the case, with just one enforcement action by trading standards in 2008—albeit a successful one. If shoppers are to be protected from this misleading practice, there must be a realistic expectation that the Bill’s provisions will be enforced.
Historically, the Government have placed the duty on public enforcers. That is unrealistic, as trading standards face diminishing resources. The CMA stated clearly that misleadingly similar packaging is a consumer protection, not an IP, issue, following its investigation of the groceries market in 2008. Yet is has undertaken no hard or soft enforcement and did not include it in its recent scrutiny of the grocery sector; there is no sign that it will take a different approach in the future. There are no other realistic public enforcement options available. For the Bill to make a difference, it is essential that affected branded companies are granted powers to bring civil cases using the Bill’s provisions on the specific practice of misleadingly similar packaging alone. It has been ignored by public enforcers for the last 15 years, despite the many examples that appear year on year. Granting affected brand owners such powers would mean that shoppers would have the protection envisaged by the Bill, and affected brand owners would have more effective redress at no cost to the taxpayer.
Amendments 91 and 92 concern an area of concern for the retail industry, expressed by its representative body, the British Retail Consortium, in which I was an active participant more years ago than I care to remember. The well-established and well-used primary authority system enables a business to request assured advice from a primary authority that it has appointed. Provided that the business follows the advice, it cannot be prosecuted by any local authority for its actions. Under the Bill, the CMA will receive additional powers on consumer protection, whereby it will move to administrative fines that are potentially very high. I am informed that the CMA currently refuses either to provide assured advice of its own or to accept primary authority advice. It says that it may not agree with the advice and that it would be too costly, ignoring the fact that it is at a cost to the business. That undermines the primary authority system and will do so even further when the CMA receives its new fining powers because businesses will feel unable to rely totally on primary authority advice for what they are doing in the overlapping areas.
The amendments attempt to deal with that, either by requiring the CMA to provide assured advice itself, as set out in Amendment 91, or, perhaps more practically, by accepting primary authority advice as binding up to the point that it may be repealed if it is shown to be inaccurate, as set out in Amendment 92. That would mean that a business could rely on it for anything it does up to any repeal. It should also be remembered that the CMA can, if it wishes, act as a supporting regulator, whereby it can be called on to provide its view to a primary authority when that authority is looking at providing advice in an area of relevance and overlap to the CMA.
Finally, it should be noted that the CMA has decided to provide what is, in effect, assured advice on competition matters in the sustainability area; namely, it has agreed not to prosecute a business that seeks its advice and follows it in a small area on the competition side. This means that, in principle, the CMA does not seem to be opposed to such an approach. Green claims on the consumer side are a key area of uncertainty for business, an area where assured advice would in fact be most useful.
I turn to my final amendment, Amendment 152. As I explained in Committee, standard essential patents are patents that are necessary to implement an industry standard, such as wifi or 5G. Because the market is locked into a standard, and to prevent abuse of the market power that this situation conveys, SEP owners are required to license their SEPs on fair terms. Unfortunately, there is widespread abuse of this monopoly power by SEP holders. The principal issue raised with me by the Fair Standards Alliance is the threat of injunctions; the costs to many businesses can be ruinous. This tactic not only threatens innovation by UK businesses but represents a strategic risk for UK priorities, such as 5G infrastructure diversification and smart energy network security, by limiting the competing players. The availability of injunctions for SEPs gives foreign SEP holders the ability to prevent others in the UK from entering, succeeding and innovating in those markets.
The Minister, the noble Lord, Lord Offord, gave a somewhat encouraging response in Committee—I keep using the word “encouraging” about his responses, although I keep hoping for better—to the effect that the Government would set out their thinking in the very near future, and that that would include the question of injunctions.
After many months of consultation, the IPO has published its 2024 forward look on this issue. It has reported its findings to Ministers and has agreed key objectives concerning SEPs. Those are
“helping implementers, especially SMEs, navigate and better understand the SEPs ecosystem and Fair Reasonable and Non-Discriminatory (FRAND) licensing … improving transparency in the ecosystem, both pricing and essentiality; and … achieving greater efficiency in respect of dispute resolution, including arbitration and mediation”.
Although the IPO has confirmed that SMEs are especially disadvantaged by the current SEP regulations, it states, disappointingly, on injunctions that
“we have concluded that we will not be consulting on making legislative changes to narrow the use of injunctions in SEPs disputes”,
with very limited justification for the decision, saying simply that it was taken after
“careful consideration of the evidence, operation of relevant legal frameworks and international obligations”.
The Coalition for App Fairness has pointed out to me that a day after the IPO announcement, the European Parliament voted by a large majority to approve its own SEP regulation. The EU framework will include the creation of an SEP register, database and essentiality checks; a defined maximum total royalty for an SEP; and an independent, expert-led conciliation process to establish the fair price for SEPs, which, crucially, will block the use of injunctions while the process is taking place. That seems entirely appropriate. The EU has proved that such a regulatory regime can be delivered; why cannot the UK Government, with all the freedom of Brexit? What is the basis for the IPO decision? What evidence, legal frameworks and international obligations prevent it from dealing with and legislating on injunctions? Why cannot the IPO likewise establish a truly fair SEP licensing ecosystem?
The least the Government can do is give more detail to the many SMEs affected by this decision. The forward look states, rather lamely:
“The IPO will continue engagement with relevant industry and institutions to continue to inform our ongoing policy development and implementation of those actions set out above”.
What on earth does that entail? That is pretty mealy-mouthed. What benefit will there be from that?
Lord Stevenson of Balmacara (Lab)
My Lords, this is a wide-ranging group; there is good news hidden in the middle of it, and bad news—we will have to wait for the Minister to respond to get a full picture. Others have spoken in some depth and so I will not try to repeat what has been said. I certainly will not try to follow the noble Lord, Lord Clement-Jones, whose expertise exceeds the combination of everybody’s in the Chamber at present. On SEPs, I can only stand back in amazement that he has been able to understand what is being recommended by the IPO, let alone to have come forward with a plan that might take us a bit further down the track that we clearly ought to have gone down.
I turn first to the questions the noble Baroness, Lady Bennett, raised, which cut to the heart of what, is in some senses, the purpose of the Bill. I am afraid that she rather weakened her case at the end by saying that it was a much broader basis for debate and discussion than could be encompassed within this Bill; I think she saw it primarily as a way of continuing a much larger battle, and I wish her well with that. In that sense, we do not need to take this forward. However, I hope that the Government are taking note of the impacts that some of the provisions in the Bill are having, in the sense that it is not achieving the aims and objectives, which I think we all share, of making sure that we reduce carbon and try to meet targets which have been set for us in the long term on this. Therefore, greenwashing will continue, but we hope that it will be better in scope and that the focus will be more across the range of government activity.
On imitation packaging, as the noble Lord, Lord Clement- Jones, said, we have also been discussing this for a number of years in various Bills as they have come forward, and it is good that the assertion now is that in Clause 224 and Schedule 19, there will be help. However, the question is, of course, enforcement. I would be grateful if, when the Minister comes to respond, he could give us a bit more information about how that might happen in practice.
The questions raised by the noble Earl, Lord Lindsay, and supported by “the team”, as it was described, are a continuation of debates and discussions we have been having in this House for as long as I have been here—and I certainly have participated in them. It is good to see the government amendments in as far as they go, but the three remaining questions, as raised in Amendments 99, 100 and 101, need answers. I hope the Minister will expand on where the Government have taken us so far and give us some assurances.
Lord Offord of Garvel (Con)
I thank noble Lords for their amendments, contributions and questions. I turn first to Amendment 68, proposed by the noble Baroness, Lady Bennett of Manor Castle. This amendment would provide that consumers’ collective interests included avoiding any detrimental effects resulting from the advertising of high-carbon products and services. The Bill already protects consumers during the transition to net zero. Enforcers can take action to tackle misleading green claims. Moreover, helping to accelerate the UK’s transition to net zero is one of the priorities in the CMA’s new annual plan. I hope that this reassures the noble Baroness.
Amendment 69, from the noble Lord, Lord Clement-Jones, would prohibit the use of packaging that is similar to that of other products. The promotion of imitation packaging is already a banned commercial practice, as listed in Schedule 19. Part 3 strengthens the civil enforcement regime, ensuring that enforcers can tackle misleading replica goods. I hope the noble Lord will therefore not press his amendment.
Lord Clement-Jones (LD)
My Lords, that is a bit terse, even by the Minister’s standards. I think we need to hear a little more about the form of enforcement, because the amendment is about the unsatisfactory nature of current enforcement. I referred to there having been only one enforcement since 2008, despite the fact that it was successful. What guarantee do the welcome recipients of the provisions in paragraph 14 of Schedule 19 have that there will be an effective enforcement regime?
Lord Offord of Garvel (Con)
The view of the Government in this legislation is that the banned commercial practice is banned already, as set out in Schedule 19, and that a strict civil enforcement regime is already in place, strengthened by Part 3. It is down to enforcers to tackle these misleading replica goods; our view is that it is up to the enforcement regimes to enforce under the current law.
Lord Clement-Jones (LD)
My Lords, I am not sure that the Minister has a full brief about the nature of the available enforcement. Will he write to me to provide a few more particulars and give more assurance in this respect?
Lord Stevenson of Balmacara (Lab)
My Lords, it is important that we unpick the point made by the noble Lord, Lord Clement-Jones, which I think was touched on but not addressed by the Minister. If we rely on civil remedies, we are not really addressing the problem that there is, in effect, an opportunity, for those who wish to, to exercise criminality; this surely cannot be left to the civil courts.
Lord Offord of Garvel (Con)
As some clarification is required, I am happy to write further on the matter.
Amendments 70, 71 and 93 to 98 are technical government amendments. The Bill empowers the courts to impose monetary penalties for a breach of consumer law and procedures. To accommodate the different processes by which court orders are served or enforced in Scotland and Northern Ireland, the amendments provide that prescribed penalty information may accompany an order in a separate notice, as well as being contained within it.
On government Amendments 72 to 90, on online interface and the powers of consumer law enforcers to tackle illegal content, I thank noble Lords who have contributed on this important issue. I am pleased to bring forward government Amendments 72 to 90 to give all public designated enforcers take-down powers to tackle infringing online content. The amendments enact the commitment made by the Government in their recent consultation response.
I thank the noble Lord, Lord Clement-Jones, for Amendments 91 and 92. Amendment 91 would require the CMA to provide advice on a business’s compliance with consumer law on request. It would also prevent enforcement action by any enforcer if the advice were complied with. The CMA already provides general guidance and advice on compliance. It is businesses’ responsibility to comply with the law, referring to guidance and seeking independent legal advice where necessary. It would not be appropriate to transform the CMA into a bespoke legal advice service. The amendment would also drain CMA resources from much-needed enforcement activity. Moreover, Amendment 92 compels the CMA to accept primary authority advice received by a business where that advice has been complied with. It is common practice for the CMA to consult the primary authority before taking action; this strikes the right balance and avoids binding the CMA to such advice, thus inappropriately neutering its discretion. I hope the noble Lord will agree that the purpose of a direct enforcement regime is for the CMA to enforce faster and more frequently; these amendments would diminish this objective and remove the deterrent effects of the regime.
Lord Clement-Jones (LD)
My Lords, does the noble Lord understand the need for certainty of advice when it is given by a primary authority and that the primary authority must feel, when it gives that advice, that it has the full backing of the CMA? There seems to be no assurance that this is under consideration or even a matter of concern.
Lord Offord of Garvel (Con)
We are clear that the CMA provides general guidance and advice, but it is the responsibility of businesses to comply with the law. If the CMA is transformed into a bespoke legal advice service, it will not be doing the work it is meant to do, which is focusing on enforcement. Therefore, we believe the balance is right in the mechanism put forward.
Turning to trading standards and Amendments 99, 100 and 101, I am grateful to my noble friend Lord Lindsay and the noble Baronesses, Lady Bakewell and Lady Crawley, for their continued advocacy for trading standards departments and for meeting with me on these issues. I very much enjoyed meeting the case officers in this place. Amendment 101 would end the prohibition on enforcers using information that a person has been compelled to provide under broad information notice powers in criminal proceedings against that person. This prohibition safeguards a person’s right not to self-incriminate—a long-established right protected by the common law and the Human Rights Act. The courts have held that material which exists independently of the will of the suspect, such as pre-existing data obtained during a search of the suspect’s premises, may be admissible in a criminal trial against them. By contrast, to comply with an information notice, a person will likely be required to generate documents. Legislation already permits trading standards departments to exercise their investigatory powers outside their local authority boundaries, including by carrying out in-person inspections of business premises. We have been informed that trading standards departments have used these on-site powers to secure documents from traders suspected of an offence and then relied successfully upon such documents in prosecutions against them.
Amendments 99 and 100 would permit any trading standards department based in Great Britain to carry out investigations across national borders. As I committed to my noble friends in writing, I have asked government officials to work further with trading standards to identify practical measures supporting greater cross-border co-ordination. To clarify, if an infringer is based in Scotland and the offence has caused harm in England, the English enforcer can pursue a prosecution through the English courts and vice versa—the procurator fiscal can prosecute a case where a trader is based in England but the infringement was committed in Scotland. All court orders in respect of consumer protection breaches have effect in all parts of the United Kingdom, regardless of where they have been made. We are open to exploring a variety of options, for example, exploring how best to facilitate local authorities across the country to exercise investigatory powers on behalf of each other. I have asked them to consult with trading standards when developing guidance on this legislation to ensure clarity on what it provides for. Once again, I thank my noble friend and the noble Baronesses for their engagement on this issue.
Government Amendments 102 and 103 make further consequential amendments to the Estate Agents Act 1979. They achieve consistency in how the Act applies to non-compliance with obligations under the court-based and the CMA direct enforcement regime.
Turning to standard essential patents, raised by the noble Lord, Lord Clement-Jones, through Amendment 152, I can confirm that the Government have now published their key objectives on SEPs and a forward look at work to be conducted in 2024. This follows input received in 2023 from key stakeholders from industry. The Government will first take forward non-regulatory interventions where action can be taken now. Later in 2024, the Government will launch a technical consultation on other potential interventions. On the question of injunctions, the Government believe that other measures, such as guidance, information on SEP licensing and how to respond to SEP disputes, is a proportionate government response at this stage. A resource hub will provide guidance that will enable businesses to better understand the SEP licensing system and the UK courts’ approach to the remedies available for patent infringement and existing services available for dispute resolution. The IPO will also continue engagement with relevant industry and institutions to continue to inform our ongoing policy development and interventions. My noble friend Lord Camrose has confirmed that his department will be making steps in what the noble Lord, Lord Stevenson, has described as a very complicated area.
I hope that this will—
Lord Clement-Jones (LD)
I am sorry to intervene again. The Minister is really confirming what the IPO has advised in its forward look. The Minister is saying, “Yes, this is important, but we are not going to do anything about injunctions”. Does he recognise the asymmetry in all this? This is why SMEs need enforcement to be looked at much more carefully in terms of the amendment that I have tabled. What is the essential objection to going forward with some kind of change, given that the rest of the proposals from the IPO seem to be pretty satisfactory?
Lord Offord of Garvel (Con)
On the basis that my noble friend Lord Camrose has responsibility for the IPO, he has kindly offered to write to the noble Lord on this matter and give further clarification.
This has been a varied and valuable debate. I thank noble Lords again for their engagement. I hope the assurances that I have provided will therefore give noble Lords confidence not to press their amendments.
Baroness Bennett of Manor Castle (GP)
My Lords, I thank the Minister for his response, though I am not sure “confidence” is quite the right word for the emotion I am feeling at the moment.
I said that I would comment only on my Amendment 68, but I must make brief reference to commend the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Crawley, for doing what many think your Lordships’ House should be restricted to—providing modest improvements and ways to help the Government make the system work better. I do not think it should be restricted to that, but it is certainly important that it does it. Reflecting on the trading standards issues, it was not mentioned but is worth noting that the Chartered Trading Standards Institute noted last year that, in the last decade, the number of trading standards officers in local authorities has halved, so they need anything that makes their work easier. The Government would, I am sure, say that they believe in efficiency and government productivity, and the suggestion from the noble Baroness seemed to be designed for that purpose. None the less, those are very technical areas, so I will park them there, as I will park the government amendments.
Regarding my Amendment 68, we will be watching closely what the CMA does in terms of action on green- washing. There is a general belief that the Bill simply does not have the teeth, or strength, that it needs. The overall issue—that we are way beyond our current targets on climate emissions—was not addressed by the Minister. I thank the noble Lord, Lord Stevenson of Balmacara, for the comments and strength he brought to the intention to see more action in this area. In the meantime, I beg leave to withdraw the amendment.
Lord Offord of Garvel
Member's explanatory statement
This amendment provides that, where an order is made requiring payment of a monetary penalty, the requirement to provide monetary penalty information (see clause 203) within the order may instead be met by providing the information in a separate document. This will ensure that if any such information is not known at the time of making the order it can be included instead in that document.
“(9) In the application of subsection (4) to Scotland, “service of the order” includes service of an extract order in execution of or diligence on the order.” Member's explanatory statement
This amendment is consequential on my other amendment to clause 158.
Member's explanatory statement
This amendment enables all public designated enforcers to apply for online interface orders, and interim online interface orders, instead of only the CMA.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
“(4A) Section 154 (CMA directions to other enforcers) applies where it appears to the CMA that another public designated enforcer intends to make an application for an online interface order, or an interim online interface order, as it applies in relation to intended applications for enforcement orders and interim enforcement orders, but for this purpose the reference to such other enforcer in subsection (2)(b) is to be taken as a reference only to such other public designated enforcer.”Member's explanatory statement
This amendment extends the power of the CMA to give directions to other enforcers intending to make an application for an enforcement order or an interim enforcement order so as to include intended applications by other public designated enforcers for online interface orders and interim online interface orders (see my first amendment to Clause 160).
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Member's explanatory statement
This amendment is consequential on my first amendment to Clause 160.
Lord Offord of Garvel
Member's explanatory statement
This is amendment is consequential on my amendments to clause 158.
“(5) References in subsections (1) and (2) to an order include references to a notice accompanying such an order given under section 158(4).(6) In the application of this section to Scotland, the references in subsections (1)(e) and (3) to an order being served include service of an extract order in execution of or diligence on the order.”Member's explanatory statement
This amendment is consequential on my amendments to clause 158.
Member's explanatory statement
This amendment provides that, where an order is made requiring payment of a monetary penalty under new paragraph 16A of Schedule 5 to the Consumer Rights Act 2015 (see Schedule 16 to the Bill), the requirement to provide the information listed in paragraph 16A(7) within the order may instead be met by providing the information in a separate document. This will ensure that if any such information is not known at the time of making the order it can be included instead in that document.
Member's explanatory statement
This amendment is consequential on my first amendment to Schedule 16.
Member's explanatory statement
This amendment corrects a drafting error.
“(12A) In the application of this paragraph to Scotland, the references in sub-paragraphs (7) and (8) to an order being served include service of an extract order in execution of or diligence on the order.”
Lord Offord of Garvel
Member's explanatory statement
This amendment provides that orders under the Estate Agents Act 1979 prohibiting unfit persons from doing estate agency work can be made in cases where a person has failed to comply with an undertaking given to the CMA under clause 185 of the Bill.
“(c) after paragraph (bb) insert—“(bc) has failed to comply with a requirement imposed by a final infringement notice given under section 182 of that Act in relation to estate agency work; or”Member's explanatory statement
This amendment provides that orders under the Estate Agents Act 1979 prohibiting unfit persons from doing estate agency work can be made in cases where a person has failed to comply with a final infringement notice given by the CMA under clause 182 of the Bill.
Baroness Hayman
“(5A) Section (Right to repair) confers the right to repair on consumers.”
Baroness Hayman (CB)
My Lords, I rise to move Amendment 104 and speak to Amendment 118, tabled in my name. I declare my interests as chair of Peers for the Planet. I express my gratitude to my supporters, the noble Baronesses, Lady Harding of Winscombe, Lady Ritchie of Downpatrick and Lady Bakewell of Hardington Mandeville. I also thank the external organisations that have supported us with evidence and briefings.
With these amendments, we return to the issue raised in Committee of the suite of consumer rights known as the right to repair. As I explained then, the current lack of such a consumer right to repair means that many of us have experienced intense frustration at non-existent or overpriced spare parts for broken electrical and electronic equipment, which we are repeatedly told will be more expensive to repair than simply to replace. The least well-off households, on tight budgets, therefore get forced into a cycle of regularly replacing cheap equipment rather than being able to repair it and keep it in use for longer. As well as the economic impact on families and consumers, this wastes scarce resources, such as rare metals, while producing large amounts of waste for landfill. The UK now produces the second-highest per capita amount of electrical and electronic waste in the world.
My amendment would task the Government with producing a strategy to enhance the consumer’s right of repair for electrical and electronic products, and would put a stop to restrictive practices that undermine consumer efforts to repair and continue to use the products they own. As I said in Committee, there is widespread public support for action. That support was echoed around the Committee when we debated it and is evidenced in the extreme popularity of television’s “The Repair Shop”. I am grateful for the support of its presenter, Jay Blades, when he said that too often our efforts to repair things
“are blocked by manufacturers’ badly designed products or unaffordable spare parts. Extending a right to repair would help us rediscover the joy and skill of restoration, repair and redesign”.
I am extremely grateful to the Minister, the noble Lord, Lord Offord, and his team of officials, from both his department and others, for their extensive engagement on this topic since Committee, but I am afraid that I remain unconvinced that everything is well and that there is no need for an overarching strategy. I recognise that a number of limited initiatives are under way, but I am afraid the reality is that the work that is being undertaken falls short of the necessary scale, breadth and urgency if we are to improve the consumer’s experience.
In addition, there is no clear point of accountability for this work at the centre of government. Responsibilities are split between at least three departments. The Department for Business and Trade is engaged in relation to post-Brexit product safety standards. Defra ostensibly owns waste and resource management policies across the board, but all responsibility for the repair of electrical and electronic products now rests under the eco-design regulations, which sit at DESNZ. But DESNZ focuses on reducing domestic greenhouse gas emissions, rather than on the repairability of products such as computers, tablets and smartphones.
My decision to return to this issue, with some limited changes in response to criticisms made in Committee, has been influenced by two additional points. First, I discovered that under the Northern Ireland protocol, where the single market in fact includes eco-design, eco-labelling and battery legislation, consumers in Northern Ireland will be able to repair phones, smart- phones and tablets, and to see a repair index in the energy label from next year. They will also be able to replace all batteries in consumer products from 2027. These rules come from the EU, which, like many other jurisdictions, is pressing ahead with its own reforms. This leads me to believe that the complexities that the Minister has previously outlined are not insuperable and that the Government, if they can do it in Northern Ireland, could extend similar protections to consumers in England, Scotland and Wales.
The second point that makes me return to the subject is the letter published yesterday by Philip Dunne MP, the chair of the Environmental Audit Committee in the House of Commons. That letter criticised and bemoaned—that is probably fair—the progress that has been made in the three and a half years since the committee’s report on electric waste. The letter says that adequate progress is simply not being made. In November 2020, the EAC said that the Government should enshrine the right to repair in law. In February 2021, the Government responded that they
“would explore whether requirements to improve repairability … could be considered for a wider range of products”.
More than three years later, they are still exploring but are yet to discover a single additional product for which they might legislate for increased repairability. I fear that the necessary action will simply not happen unless someone in government takes a grip—I can think of no one better than the Minister we have with us today—and we can see a coherent strategy and plan and the accountability for its implementation.
I believe I have responded to most of the points the Minister made in Committee. He also suggested that adding the right to repair to consumer law would oblige retailers to pre-emptively seek information from manufacturers, adding to costs and reducing choice. My amendment would not do that. It would put the obligation on manufacturers to proactively provide the data—it would not put the duty on retailers; nor do I think the amendment could possibly fall foul of WTO rules when so many other WTO members are doing similar things.
I simply do not believe that the progress made already is sufficient or that there are insuperable barriers to doing what needs to be done. The argument that we can rely on progress that is glacial at best simply does not hold water. Everyone seems to think that this is a good idea. No one argues against having better-designed and easier-to-repair products. It is just that no one seems to be willing to grasp the nettle to do anything about it. This amendment would make sure that they did. I beg to move.
The Earl of Lindsay (Con)
My Lords, I will speak to Amendments 109 and 115. Once again, I do so with the co-sponsorship of the noble Baronesses, Lady Crawley and Lady Bakewell.
I will address Amendment 109 first. Fake reviews can cause loss, detriment and harm to consumers and law-abiding businesses. The government amendment that adds fake reviews to the practices in the schedule is therefore welcome. However, that amendment makes the practice an “excluded description”, meaning that enforcement action can be taken only through the civil route.
All the other banned practices, except two relating to matters under the remit of the Advertising Standards Authority, allow enforcement officers to take action through either the civil or the criminal courts. That depends on what is most appropriate and proportionate in the circumstances. If it is deemed that 29 out of the current 31 practices should have the option of a criminal penalty, we strongly believe that fake reviews should also be in this category, as the practice is arguably more serious and causes greater detriment to consumers and reputable businesses than a number of the other practices in that list. Making fake reviews either a civil or a criminal breach would send a strong message to those looking to deceive consumers and would give enforcers the opportunity to take stronger action if and when necessary.
I turn to Amendment 115. Invitation to purchase is a complex area of the legislation, and the Bill differentiates between this and “misleading omissions”. A commercial practice is a misleading omission if it omits “material information”; in other words, information the average consumer needs to make an informed decision. It can be challenging to decide what is information that consumers want and what is information that consumers need. If a practice is an invitation to purchase, a number of matters are identified as being material information. Therefore, an omission of any of these breaches the legislation and allows enforcement action to be taken.
One of those matters is the trader’s name and address. Rogue traders often approach vulnerable consumers offering unnecessary and substandard work, but without giving a price before starting the work. As price is part of the definition of invitation to purchase, in such circumstances the practice is not an invitation to purchase and so the trader’s name and address are not specifically material information. This is to the detriment of the consumer. This information is unlikely to be considered material information under misleading omissions, and the Companies Act 2006 does not require the provision of a name and address if a trader has no trading name or is trading under his own name.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I put my name to two sets of amendments in this group: Amendments 104 and 118 on the right to repair, and Amendments 109 and 115 on trading standards issues.
I will speak first to the right to repair. The noble Baroness, Lady Hayman, set out clearly the rationale behind these amendments, and I know that she has been working with the Minister and officials to try to get some traction on this issue. Part of my role in the House, for my party, is waste: how to minimise it, how to deal with it when it is created, and how to prevent it being created in the first place.
I was also brought up to repair what was broken and give items a new lease of life; the Screwfix catalogue is always lying around somewhere in our house. If you are going out for the evening and have a full skirt, which is no longer fashionable and can be unpicked, it is relatively easy to sew it back up into something more appealing, ready to wear out and wow your friends in the evening. This is not the case when a washing machine goes wrong and starts to flood the kitchen floor.
The amendment is very detailed and gives plenty of time for manufacturers to adapt their practices and start thinking again about abandoning their wasteful practices, which force the hard-pressed consumer to buy a replacement for an item that, with a little thought, could well have been repaired and lasted much longer, instead of joining the heap of white goods at the local household waste recycling centre and then landfill. The right to be able to repair an electrical or electronic item or household product should be universal.
The noble Earl, Lord Lindsay, set out the arguments for Amendments 109 and 115 extremely well. While I understand that the Government do not believe that fake reviews should be a criminal offence, it is difficult to understand why, if there are currently 31 schedule practices, of which 29 are both civil and criminal breaches of the CPRs, two, including fake reviews, should be subject to civil breaches only. Of the 29, it is up to the judgment of the officer whether they take civil or criminal action. Many of the “fake review” fraudulent claims and activities are deliberately targeted at children and the elderly—the most vulnerable in our society. Civil action does not give the protection they deserve or require.
I have received a contribution from the National Trading Standards eCrime Team; it is a case study. A consumer is looking to buy a dehumidifier, so googles “dehumidifiers”; Google or other search engines show top results at the top of the page, which are usually Google adverts. The advert shows a 5-star-rated product. The consumer clicks on that product link, which takes them to a website that spotlights reviews that look genuine about how amazing the product is. The consumer buys the product and the money is taken from their bank, but it is a totally fake site with fake reviews and the products do not actually exist. There are 600 cases of consumers being tricked by fake reviews on this site and product alone; there is a detriment here of £90,000. There are multiple examples of this with lots of different products. Consumers are being drawn to sites using fake reviews and handing over their money, and the products do not arrive as they do not exist. I am sympathetic to the Minister’s wish not to increase the number of activities that come under the “criminal activity” banner but remain convinced that action is needed on this issue.
On invitation to purchase and the subject of price, I am grateful for the Minister’s clarification but remain concerned that a rogue trader will make a particularly good case that the price being quoted is the total cost to the consumer, only later to add in other costs and taxes. This is not something we are used to in this country. In America I can decide to buy something for $25, having looked at the price label, but when I get to the checkout I find I am charged $27.50, as both local and national tax have been added. All Americans are used to this; it is only the uninformed tourist who gets caught out, but usually only once.
I remain convinced that those targeted by rogue traders are those who may not be aware that VAT or material costs are not always included in the initial price quoted. Will the Minister see whether there is some way in which our request on this issue can be accommodated?
Baroness Crawley (Lab)
My Lords, as the third of the consumer protection enforcement team mentioned by the noble Lords, Lord Clement-Jones and Lord Stevenson, I have added my name to Amendments 109 and 115.
Amendment 109 concerns the issue of fake reviews; this has already been well set out by the noble Earl, Lord Lindsay, and the noble Baroness, Lady Bakewell. It is worth looking again at Hansard and the example from the noble Baroness, Lady Bakewell, of the live evidence we have received from the National Trading Standards eCrime Team as to the sites where people are handing over their money as we speak, thinking they have read a legitimate review and bought an amazing product, but the product does not exist.
I recognise the move that the Government have made in adding fake reviews to the list of 31 commercial practices that are, in all circumstances, considered unfair and banned practices. However, trading standards sees the practice of giving fake reviews as clearly fraudulent in nature, and therefore it should be a criminal as well as a civil offence, if the circumstances are correct for that judgment to be made. At the moment, we are confined to looking at fake reviews as a civil offence.
Fake reviews are also a growing distortion of the online marketplace. They are unfair to legitimate businesses and completely deceptive of consumers. This amendment is important in making fake reviews a criminal as well as a civil offence. I hope that the Minister understands the seriousness of this—I am sure he does—and will think again about his stance on this amendment.
Lord Moynihan (Con)
My Lords, I rise to speak to Amendment 150, which builds on the work undertaken in this House at the time of the Consumer Rights Act 2015. I am fully supported by the indefatigable Sharon Hodgson, the MP for Washington and Sunderland West in another place, who is the co-chair of the APPG on Ticket Abuse; I am the other co-chair. Many leading musicians, sportsmen and sportswomen also support further action, as does FanFair Alliance.
Amendment 156 seeks to protect the many people who buy tickets for popular sport and arts events from the fraudulent abuse provided by a poorly regulated secondary market, a term coined by touts in 2008 to provide their activities with a veneer of respectability. What we are dealing with is a black market that profits from ticket obtained in bulk, illegally. Promoters whose terms and conditions are ignored have, in effect, lost the ability to sell tickets to the public at face value. To see hundreds of thousands of attempts by bots to harvest tickets in bulk for a single event is not uncommon. These amendments simply seek to implement recommendations made by the Competition and Markets Authority and to provide important safeguards for consumers. As evidenced by the security team at the O2, there are daily stories of families travelling to London to go to sold-out events finding on arrival that the tickets they had bought in good faith were fraudulently sold and unsuitable for admission. They have no recourse available to them at the time of the event. They have lost all the costs they incurred for travel and a hotel, to which must be added the bitter disappointment of missing what might be the event of a lifetime for them and their children, and all the incidental costs of the process.
In 2007, when I joined the campaign against modern-day ticket touts, there were approximately 120 full-time ticket touts in the United Kingdom. By 2015, the number had risen to 400, who regularly attacked primary ticketing systems using aggressive software to harvest tickets in bulk—400 too many when we were working on the Bill which resulted in the Government accepting many of our amendments. Today, there are not 400, there are between 3,000 and 4,000 touts, not based only in the UK but attacking ticket systems for UK events. This explosion has been brought about by the advent of mobile and digital ticketing. Whereas touts previously had to wait for paper tickets to arrive by post, they can now harvest tickets and send them out in an instant from mobile devices and apps.
Put simply, this aggressive software takes the form of scalper bots, computer programs which can store the details of hundreds of credit cards, which, at the press of a button, sweep the market for tickets for popular events while the likes of us and, more importantly, many families across the country are filling in all their details online, often waiting a long time for their applications to be processed, only to find that all the tickets have been sold. Within minutes after filling in the forms, the tickets they were seeking appear on secondary ticketing sites, at vastly inflated prices, benefiting only the touts and the secondary platforms. Most ordinary fans do not stand a chance against this. This is particularly true, sadly, at the Royal Albert Hall, where the market provides evidence that board members and trustees can benefit from the corrosive practices of the secondary market, which I address in Amendment 151.
The truth is that tickets are being harvested by today’s ticket touts in bulk. To do so, they have perfected their trade to the point that they have become “trusted suppliers” for the likes of viagogo and StubHub and guarantee the delivery of a large number of tickets before they have gone on sale to the public. If, for whatever reason, they fail to deliver their tickets, many resort to printing fraudulent tickets and delivering them to the secondary market to retain their trusted supplier status in the future, to the detriment of consumers who turn up to the concert or sport event to find that they are turned away.
My noble friend the Minister kindly wrote to Members of the Committee and was correct when he said that ticketing is more secure. However, the same technology also enables touts to carry out larger attacks on ticketing systems than ever before due to the increased portability of digital tickets. Frankly, the ticketing industry is on the cusp of losing the ability to sell tickets to genuine fans at an affordable price, thus depriving the lowest-paid, hardest-working fans of the ability to see their favourite artist or sports team.
In writing to the Members of the Committee, my noble friend the Minister mentioned the trial resulting in the conviction of two touts and the subsequent £6 million forfeiture order. They used dishonest and fraudulent tactics which would have been found out far sooner if the amendments before the House this evening were on the statute book. National Trading Standards, whose budget has been frozen for many years, has stated that it simply does not have the budget to pursue any more cases of this kind. The number of touts now attacking ticketing systems makes it an impossible task for law enforcement to prosecute some, let alone all, of them to the point where it would disrupt their activities and protect consumers.
Recently, viagogo has taken to concealing the face value of tickets behind an icon. This is a loophole in consumer protection that needs to be closed. Consumers should be able to see clearly the original price of the ticket they are about to purchase, as well as the ticket tout’s details, in order to check that the business they are buying from even exists. That would have helped both the cases that are currently under consideration by the courts.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise very briefly. I spoke on these important subjects in Committee, and I am not going to repeat everything I said. I want to speak specifically on Amendment 104 on the right to repair, which the noble Baroness, Lady Hayman, so powerfully introduced, just to make a couple of additional points. She said that we are per capita the second-highest producer of e-waste in the world. It is interesting that we were talking about the security implications of this Bill in an earlier group on media ownership. With the incredible amount of e-waste in the world—53 million tonnes in 2022—and the need for rare earth minerals and the other minerals that go into these replacement products, it is worth saying there is a security implication to this that people may well not have thought of.
The noble Baroness, Lady Hayman, said that the Minister said that things were heading in the right direction. It is worth noting that there are a couple of areas where it very clearly is not. Increasingly, producers of devices, particularly phones, are hard-coding error messages into their product, so that if a third party tries to repair it, there is an error message and the device will not work any more. That has very clearly got worse, not better. There is also an increased amount of parts pairing, in which individual parts are tied to the device they are shipped with using a unique serial number, so you cannot get a replacement part put in. Again, the device will stop working. I think that was a really important point to make.
I have two points to make about how much further other parts of the world have gone. First, it was EU regulations that forced the latest iPhone to include a USB-C charging point rather than a proprietary one. That has both saved resources and saved people money, because the cost is about 1/10th of the proprietary charger, so this is also a cost of living issue. Secondly, I note that Germany and Austria have subsidies for repairs to allow low-income people to get electronic devices repaired when they would not be able to afford to do so otherwise. Please let us get some progress here.
Lord Clement-Jones (LD)
My Lords, my noble friend Lady Bakewell has clearly set out our support for Amendment 104 by the noble Baroness, Lady Hayman, and Amendments 109 and 115 by the noble Earl, Lord Lindsay, so I will not repeat what she has said. I shall speak to Amendments 107A and 107B relating to fake reviews, Amendments 105, 106, 110 and 111 regarding electrical safety and Amendment 108 on package travel.
The issue of electronic safety is a relatively new entrant in our discussions on the Bill, for which I apologise, but charities such as Electrical Safety First and Which? as well as the Government’s own Office for Product Safety and Standards have repeatedly found unsafe goods listed on online marketplaces. For instance, one investigation undertaken by Electrical Safety First found that 93% of products bought from online marketplaces were unsafe.
The Government have made a series of commitments on both online safety and product safety, included committing to ensuring that only safe products could be placed on the market now and in future, ensuring that the product safety framework was fit for purpose and making the UK the safest place in the world to be online. In my view, failing to address the sale of unsafe goods within the Bill means that they will fail to achieve their objectives in protecting consumers and promoting competition, and in addition will continue to fail in achieving their objective of ensuring that the UK is the safest place in the world to be online and that only safe products are placed on the market. By not including the sale of unsafe products within the scope of the Bill, it seems that the Government are allowing the UK to become what has been described as a Wild West for unsafe products.
There is a clear interrelationship between scams and unsafe products. For instance, Electrical Safety First found unsafe devices claiming to save consumers energy being sold on the online marketplace eBay. Not only were these devices ineffective at saving consumers energy, but they were also unsafe, placing consumers and their homes at the risk of electrical shock and fire. By not including unsafe products in the Bill, the Government therefore continue to place consumers at risk on a daily basis.
Consumers shopping on online marketplaces in other jurisdictions are better protected than UK consumers —in the EU, Australia and the USA, to name but three. The UK is clearly not moving at the same pace as comparable countries when it comes to regulating online marketplaces. The Bill is an opportunity to address that, but in its current form it is a missed opportunity to protect consumers.
I turn to Amendments 107A and 107B. In September 2023, as we know, the Government consulted on adding fake reviews to the unfair commercial practices list via Schedule 19 to the digital markets Bill, and now we have the government amendments to the Bill to reflect that. They are welcome so far as they go, but it is perplexing—informed organisations such as Trustpilot are perplexed—as to why the Government are not placing a stronger duty on social media firms and ISPs that host the sale of fake reviews. The wording does not expressly bring social media and internet service provider sites within scope where these are used by review sellers and brokers to offer their services. That seems extremely unsatisfactory, given that the Bill is so far through its scrutiny, and it is only on Report here in the Lords that we are seeing the wording that the Government intend to use to ensure that fake reviews are included in Schedule 19 on commercial practices.
Amendment 107A seeks to ensure that there is no loophole in the application of new paragraph 12A(4) inserted by Amendment 107. The inclusion of the words “for the facilitating of” in paragraph 12A(4)(b) could be read narrowly to suggest that the purpose of the service is relevant. In our view, providers of certain services such as social media sites that host the sale of fake reviews could potentially use that as a technicality through which to avoid liability by claiming that the purpose of the service they offer is not for doing anything covered by sub-paragraphs (1) and (2), and therefore this provision is not applicable in the event of abuse.
Is the Minister of the view that the facilitation of the sale of fake reviews by social media and internet service providers will be in the scope of this legislation under paragraph 12A(4), given the integral role that such services can play in enabling fake reviews to find customers? If not, why is such a gap being left in the legislation? Apparently, the Government are citing the legal scope constraints that act to limit their ability to tackle activity that happens upstream. I do not know what discussions have taken place between Trustpilot and the Government, but that sounds rather extraordinary.
I turn to Amendment 108. Since our discussions in Committee, it seems that Ryanair has started to work with some online travel agents. That definitely sounds like a win for our debates if we can take it as such, but other low-cost airlines are still resisting booking through agents, causing various harms to consumer protection, as we have discussed. The Minister’s statement about the package travel restrictions call for evidence is welcome, but the matter under discussion has always been a wider point regarding the use of third-party agents. Hence I have come back with one of the amendments that I tabled in Committee.
The Minister made one or two points in Committee that are worth picking up. He said that
“the contract is between the trader and the consumer, and therefore the consumer benefits from the relevant consumer rights”.
He also said that whether the transactional decision
“is carried out by the consumer themselves or a third party is not relevant. The consumer that the contract is with will receive the relevant consumer rights”.
Yes, the consumer is entitled to protection, but where an agent is involved this requires either the trader to pay the agent or the agent to stump up the refund themselves. That position also does not reflect the regrettable truth that consumers are being discriminated against because they choose to book through third parties.
The Minister brought up the question of the consumer-to-trader relationship and whether or not traders would
“become consumers in the eyes of the law”.
However, the issue is not that the agent becomes the consumer but that consumers who book directly through a third party are equally protected.
The Minister said that
“the Government have ensured that the CMA has significant powers to investigate and act if it finds that businesses are behaving anti- competitively in a market”.
It is not the CMA’s market powers that are in dispute; the problem is that the CMA is not acting to use those powers to investigate key consumer markets, despite clear evidence that competition is not working well.
The Minister also said:
“The operation of airlines and travel agents is governed by PTRs and ATOL. Those are being reviewed. That is the appropriate way to consider these issues”.—[Official Report, 31/1/24; cols. GC 394-95.]
Although important, neither of those addresses the misuse of market power and the damage that this is causing to consumer protection and to the viability of the market. Neither the PTR or ATOL regimes protect consumer choice or promote competition. The loss of that is the real threat, which can be addressed only through a CMA market review.
Finally, as regards ticketing, I very strongly support the amendment in the name of the noble Lord, Lord Moynihan. I salute him and Sharon Hodgson MP for their work through the all-party ticketing group throughout the years. In Committee, the noble Lord, Lord Offord, said that the Government do not wish to prevent consumers having choice in respect to secondary ticketing, but surely it should be an informed choice, in the way that the noble Lord outlined in his amendment. The Minister talked about the fact that the Government have legislated to give consumers fuller information on tickets that they are buying on the secondary market, but that is still not full information.
Lord Leong (Lab)
My Lords, I thank all noble Lords who have spoken in this debate. Once again, I have been extremely impressed by the range of expertise and the depth of insight. Conscious of the time we have all been here, I will address some of the key amendments as briefly as I can.
Amendments 104 and 118, in the names of the noble Baronesses, Lady Hayman, Lady Bakewell, Lady Ritchie and Lady Harding, would require the Secretary of State to publish a strategy conferring the right to access repair. They would also ban practices which prevent repair or prematurely terminate software support. The right to repair is an essential part of the circular economy. Many businesses understand that this is an opportunity for innovation, creating new jobs, saving money, reducing waste and saving scarce resources.
We are sympathetic to the noble Baroness’s amendment. The noble Baroness, Lady Hayman, has made strong arguments for her amendment, and she has a lot of support around this House for action to be taken on this issue. We are, in principle, supportive of the right to repair and its contribution to the circular economy, although we recognise that the impact on the sector will be significant. We would, therefore, encourage the Minister, if he cannot accept this amendment today, to make a firm commitment at the Dispatch Box that the Government will work with the noble Baroness, across departments, to ensure that real progress will be made on this issue in the near future.
We support Amendments 105 and 106 from the noble Lord, Lord Clement-Jones. These would make selling goods online, when they do not meet specified safety requirements, constitute an unfair commercial practice. Additionally, we are broadly sympathetic to Amendment 108 in the name of the noble Lord, Lord Clement-Jones, which lists five new unfair commercial practices. However, we would welcome proposals for further discussion.
Moving on to fake reviews, Amendment 109, in the names of the noble Earl, Lord Lindsay, and the noble Baroness, Lady Crawley, would insert provisions around fake reviews of products into Schedule 19. We welcome government Amendment 107, which adds various activities relating to fake reviews directed at consumers to the list of unfair practices in Schedule 19 to the Bill.
However, we would encourage the Government to adopt Amendments 107A and 107B from the noble Lord, Lord Clement-Jones. These propose small improvements to address the role played by internet service providers and social media in promoting fake reviews. If the Minister does not accept these amendments, can he explain why ISPs and social media are not specifically covered within the government amendments?
We must not forget the real-life consequences of the issues at stake among all the technical details. We all remember the awful tragedy of the Grenfell Tower fire in June 2017, which killed 72 people and injured 70 more. The source of this blaze was recently identified as a faulty fridge-freezer. Even one more preventable death from recalled products, where there are known risks to consumers, would be one too many. We urgently need to act to do whatever we can to prevent further tragedy.
The following amendments address this issue directly. Amendment 110, again in the name of the remarkably industrious noble Lord, Lord Clement-Jones, would make it a misleading action to sell goods online without taking reasonable steps to ensure that they have not been subject to a product recall. Amendment 111 would require the Secretary of State to make regulations to define the “reasonable steps” set out in Amendment 110. Amendment 120, in the noble Lord’s name, defines the terms “online marketplace” and “safety requirements”, which we support.
The Government set up the Working Group on Product Recalls and Safety to bring together experts from fire services, trading standards, consumer groups and industry. They were tasked with identifying the causes of fire from white goods—everyday items such as dishwashers, washing machines, tumble dryers and fridge-freezers—and the actions needed to reduce them. Experts suspect that selling recalled and faulty goods via online stores and social media platforms is common practice. I ask the Minister: when did this working group last meet? Are there are plans for consultations to explore this dangerous behaviour?
Moving on to drip pricing, we thank the Government for listening to our concerns in this area and bringing forward Amendments 112, 113 and 114. We ask the Government specifically to keep the definition of mandatory fees under review.
Amendment 115, in the name of the noble Earl, Lord Lindsay, is a sensible one, proposing that price should be removed from any invitation to purchase so that it is not an inducement to buy.
The following government amendments are technical, clarificatory and consequential and we are broadly in agreement: Amendments 116, 117, 119, 121, and 141 to 149.
In Committee, I spoke about the UK’s secondary ticketing market. It is estimated to be worth £1 billion annually. The industry model is to purchase tickets for sporting and cultural events in bulk, and then resell them at inflated prices, as referred to by the noble Lord, Lord Moynihan. Such practices exclude people who cannot afford artificially high prices and exploit the people who can. Several renowned artists, through their management firms, are implementing measures to ensure that genuine fans secure tickets initially, and to identify and nullify tickets resold for profit.
I am pleased to speak to Amendment 150 in the name of the noble Lord, Lord Moynihan, supported by the noble Lord, Lord Clement-Jones, and my noble friend—and good friend—Lady Jones of Whitchurch. Not only would it prevent bulk-buying of tickets, it would end the fraudulent practice of speculative selling. This is where touts list and sell seats they do not have, bank the proceeds and then hope to secure a ticket later to fulfil an order. This is despicable. I respectfully remind the Minister that these practices most certainly are not good examples of competitive markets, nor do they give consumers genuine choice and flexibility.
Online ticket touts create nothing except misery for fans. They exploit the market and distort it, purely for their own profit. The voices of the creatives, the ones both we and their fans want to support, are calling for the Government to act. We on this side will support the noble Lord, Lord Moynihan, if he seeks to test the opinion of the House on Amendment 150. Of course, we will consider and vote for it in its place on the list.
Finally, we support Amendment 151, which addresses a very specific situation. When a trustee of a charity receives tickets in respect of their role, they must not resell them on a secondary ticketing site for more than face value plus a handling charge.
I hope the Minister has been persuaded by my whistle-stop summary, and as I catch my breath, I will listen with interest to his response.
Lord Offord of Garvel (Con)
As ever, I start by thanking noble Lords for their amendments and all who spoke for their important and considered contributions. On Amendment 104 on right to repair, tabled by the noble Baroness, Lady Hayman, it has been a great pleasure to discuss this with her during this process and, indeed, since Committee. I also thank the noble Lord, Lord Leong, and the noble Baronesses, Lady Bakewell and Lady Bennett, for their impassioned contributions on this issue.
Noble Lords may recall from Committee that there is much excellent work under way in this area across government, involving in my department, Defra, the Department for Energy Security and Net Zero and the Department for Science, Innovation and Technology. Waste prevention and eco-design are two key strands of this work. As well as this cross-government work, Defra, which published Maximising Resources, Minimising Waste last year, is currently setting up the necessary programme management and governance functions around that work, and will work closely with other government departments, including those with a consumer perspective, to achieve these goals. I appreciate the point that there is a lot to co-ordinate here, and I hope that this governance will reassure noble Lords that the problem is being gripped. The Government will also set out in a future publication how each scheme interacts and adds up into a coherent whole.
I appreciate the point that the noble Baroness made about Northern Ireland, and we will of course consider carefully the implications of new EU regulations in Northern Ireland. Naturally, we will adopt an approach that best suits the UK circumstances when designing our own regulations; we are always open to allowing for more or less any objective that would even improve on the EU’s regime.
While I am sympathetic to the intent of these amendments, the Government’s view is that there is already a strategic framework in place for supporting right to repair. I greatly appreciate all the work that the noble Baroness, Lady Hayman, is doing in this space. Of course, her continued input would be greatly welcomed as this work progresses. I have said to her before that we are violently agreeing on the need for this to happen, and I am very happy to work with her to move forward.
I turn to Amendment 108, tabled by the noble Lord, Lord Clement-Jones, relating to third-party agents. I would like once again to reassure him that the protections sought in these amendments are mostly provided for elsewhere in consumer law. Clauses 225 and 227 prohibit traders using misleading actions or aggressive practices, including influencing a consumer’s decision on whether to use a third party. A particular dispute between an airline and an online travel agent has often been raised, including in Committee, when discussing this issue.
The CMA has significant powers to investigate and act if it finds that businesses are behaving anti-competitively in a particular market. It is right that those matters be determined by the CMA as it sees fit, which means that I cannot comment on its work—but I can assure the noble Lord that it is alive to this issue. More broadly, we have recently consulted on the package travel regulations that govern many of these sectors, and I look forward to sharing the response to the call for evidence.
I turn to the issue of invitation to purchase, and thank my noble friend Lord Lindsay for his Amendment 115, as well as the noble Baroness, Lady Bakewell, for her contribution on this issue. The amendment would remove the requirement that a price is provided before an action is considered an invitation to purchase. Actions that are considered an invitation to purchase attract specific consumer rights. The Government believe that the changes proposed by this amendment would expand the definition too far, rendering the invitation to purchase provisions unworkable in practice. The Government are confident that sufficient legal protection is already in place for circumstances in which vulnerable customers engage rogue traders to undertake services on their behalf. In the Consumer Rights Act 2015 there are pre-contract information obligations on traders to provide identity and contact details. Nevertheless, I draw your Lordships’ attention to my commitment for officials to continue to work with noble Lords to identify practical measures to support trading standards officers.
The noble Baroness, Lady Bakewell, raised an important point about VAT. I can provide an assurance that pricing information must already include any relevant taxes, including VAT, and VAT and pricing information is also subject to the Price Marking Order that the Government consulted on last year. We will introduce secondary legislation to improve transparency, including on all taxes.
Baroness Hayman (CB)
My Lords, I am extremely grateful to everyone who has taken part in this debate. I have to say that I have never really experienced such violent agreement—as the Minister put it—from both Front Benches, and such little appetite for doing anything about it, or for any action. So I have to say that I think we are missing a legislative opportunity to do something that would have enormous support both in the country and, I believe, among individuals around the House. However, I really do not want to be churlish. I am genuinely grateful to the Minister, because he has spent a lot of time and thought on this issue and I recognise that he is confident that progress will be made without legislation.
I will just say that I think it would be prudent if I put a note in my diary, for maybe nine months’ time, to put down an Oral Question to see exactly what progress we have made. At the same time, I might remind myself to look very carefully at the Labour Party manifesto to see what its policy on waste actually is. On that note, I beg to leave to withdraw my amendment.
Lord Offord of Garvel
“12A “(1) Submitting, or commissioning another person to submit or write—(a) a fake consumer review, or(b) a consumer review that conceals the fact it has been incentivised.(2) Publishing consumer reviews, or consumer review information, in a misleading way.(3) Publishing consumer reviews, or consumer review information, without taking such reasonable and proportionate steps as are necessary for the purposes of—(a) preventing the publication of—(i) fake consumer reviews,(ii) consumer reviews that conceal the fact they have been incentivised, or(iii) consumer review information that is false or misleading, and(b) removing any such reviews or information from publication.(4) Offering services to traders—(a) for the doing of anything covered by sub-paragraph (1) or (2);(b) for the facilitating of anything covered by sub- paragraph (1) or (2) to be done.(5) For the purposes of this paragraph—(a) “consumer review” means a review of a product, a trader or any other matter relevant to a transactional decision;(b) “fake consumer review” means a consumer review that purports to be, but is not, based on a person’s genuine experience;(c) a consumer review conceals the fact it has been incentivised if—(i) a person has been commissioned to submit or write the review, and(ii) that fact is not made apparent (whether through the contents of the review or otherwise);(d) “consumer review information” means information that is derived from, or is influenced by, consumer reviews;(e) a person “submits” a review or information if they supply it with a view to publication;(f) “writing” includes creating by any means; (g) “commissioning” includes incentivising by any means (and “commissioned” is to be read accordingly);(h) “publishing” includes disseminating, or otherwise making available, by any means;(i) publishing in a “misleading way” includes (for example)—(i) failing to publish, or removing from publication, negative consumer reviews whilst publishing positive ones (or vice versa);(ii) giving greater prominence to positive consumer reviews over negative ones (or vice versa);(iii) omitting information that is relevant to the circumstances in which a consumer review has been written (including that a person has been commissioned to write the review).”Member’s explanatory statement
This amendment adds various activities relating to fake reviews directed at consumers to the list of unfair commercial practices in Schedule 19 to the Bill.
Lord Offord of Garvel
“(b) the total price of the product (so far as paragraph (ba) does not apply);(ba) if, owing to the nature of the product, the whole or any part of the total price cannot reasonably be calculated in advance, how the price (or that part of it) will be calculated;”Member’s explanatory statement
This amendment, along with my amendment to insert new subsections (3A) and (3B) into clause 229, requires a trader to set out in an invitation to purchase the total price of a product including any mandatory fees, taxes and charges that apply to the purchase of a product rather than “drip-feeding” such amounts during the transaction process.
Member’s explanatory statement
This amendment is consequential on my other amendments to clause 229.
“(3A) For the purposes of subsection (2)(b) the total price of a product includes any fees, taxes, charges or other payments that the consumer will necessarily incur if the consumer purchases the product.(3B) For the purposes of subsection (2)(ba) (and subject to the matters mentioned in subsection (6)) the information given must—(a) be such that it enables the consumer to calculate the total price, and (b) be set out with as much prominence as any information that is set out in compliance with subsection (2)(b).”Member’s explanatory statement
See the explanatory statement for my amendment to clause 229(2) (on page 153, at line 12).
Lord Offord of Garvel
Member’s explanatory statement
This amendment, and my other amendment to clause 232, changes the parliamentary procedure for regulations under clause 232 so that any regulations made under the clause (not just the first) are subject to the affirmative procedure.
Member’s explanatory statement
See the explanatory statement to my other amendment to clause 232.
Lord Offord of Garvel
“(aa) the descriptions of practices mentioned in paragraph 12A of that Schedule;”Member’s explanatory statement
This amendment provides that the new unfair commercial practice relating to fake reviews provided for by my amendment to Schedule 19 will be an excluded description of practice for the purposes of clause 236(7) (and accordingly will not be subject to criminal liability).
Lord Offord of Garvel
“(2A) In section 74(3) (interpretation of Chapter)—(a) in paragraph (b) for “the Consumer Protection from Unfair Trading Regulations 2008 (S.I. 2008/1277)” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”; (b) in paragraph (c) for “those Regulations (see regulation 19 of those Regulations)” substitute “that Chapter (see section 230 of that Act).”Member’s explanatory statement
This amendment makes a further amendment to the Online Safety Act 2023 that is consequential on the revocation of the Consumer Protection from Unfair Trading Regulations 2008 and the commencement of Chapter 1 of Part 4 of the Bill.
Lord Offord of Garvel
“(5) See section 274(4) to (8) for how this Chapter applies in relation to a contract that—(a) was an excluded contract at the time it was entered into, and(b) on subsequently ceasing to be an excluded contract, becomes a subscription contract.”Member’s explanatory statement
This amendment is consequential on my second amendment to clause 274.
Lord Offord of Garvel (Con)
My Lords, I am delighted to speak to this group of amendments, and I thank the noble Lord, Lord Clement-Jones, and my noble friends Lord Lucas and Lord Mendoza for their amendments. I will first address the government amendments.
Amendments 122 to 125, 138 and 139 aim to address the concerns raised by my noble friend Lord Mott about certain microbusinesses, such as small local farm shops, being unintentionally captured by the new subscriptions rules simply because they are incorporated. Together, these amendments alter the requirement for a business to be unincorporated in order to benefit from the exclusion. Instead, a business will benefit from this exclusion so long as it meets the “micro-entity” thresholds in the Companies Act 2006. The other requirements of the exclusion, which require a business to deliver foodstuffs to the home or workplace without the use of couriers, remain unchanged. This ensures that the exclusion remains well targeted and captures only the smallest of businesses. I am grateful to my noble friend for highlighting this issue, and I hope he is reassured by these amendments.
Lord Mendoza (Con)
My Lords, Amendment 126 is in my name. I declare my interests as set out in the register, particularly as chairman of Historic England, which also has oversight of English Heritage. I want to talk about the very narrow point the amendment tries to cover, which is the specific treatment of contracts relating to charity membership subscriptions. I am sure that many in this House have purses and wallets bulging with membership cards for museums and wonderful organisations such as the National Trust, English Heritage, the Woodland Trust, and so on, and this issue is causing great concern across the charity sector. I am sure many noble Lords’ inboxes have been filled with briefings and pleas from charities. The point is a very narrow one: according to the Income Tax Act 2007, if a subscription is refundable, it will become no longer eligible for gift aid, which is a very large number for charities up and down the land.
I have been grateful over the last weeks for the assiduous attention of my noble friend the Minister and the Bill team. I am also grateful to organisations we have probably all heard from, such as the NCVO, the National Trust and English Heritage, for helping with the background on this. I was even more impressed, as my noble friend the Minister has set out, that the issue was directly referred to with its own lines in the Budget, and that the Treasury has committed to amending gift aid legislation by SI before this part of the Bill comes into force.
As the Minister has said previously, there is no intention to change the status quo on the eligibility of gift aid on these membership subscription contracts. However, I will make three points. No specific changes are being proposed for the provisions in the Bill so there will be a contradiction, before it is sorted out, between this primary legislation and the Income Tax Act 2007, which creates uncertainty. I know it creates uncertainty because we talk to charities, and they need security and confidence and the ability to plan and budget their operations. I know that the noble Lord, Lord Clement-Jones, has put a lot of work into this and I look forward to hearing him present his mechanism for the timing of how this might be helped.
In a way, despite the lines in the Budget, the Government’s amendments have conferred only a general power on the Treasury to make secondary legislation: there is no statutory commitment to get around to actually doing so before these measures come into force. This raises a risk that the provisions of the Bill could be enacted by this or a future Parliament without the issue actually being resolved. The Government’s amendments do not address the concerns raised regarding the application of consumer protections to charity memberships, which are treated as donations for tax purposes. We are certainly not asking for charities to be exempted from consumer protections, and I agree with my noble friend the Minister that many parts of a charity’s operations should not be—its shops, restaurants, cafés, and so on.
However, it cannot be right that we apply a cooling-off period to a form of charitable donation in the same way that you would to a TV subscription service. If I put £5 in the tin for the Royal British Legion, I do not expect to be able to claim it back the following week, saying “I made a mistake”. Membership subscriptions are accepted as donations under the Income Tax Act, and have been for a long time; donations are not refundable, so how can you have a cooling-off period? You have circular contradiction going on. Naturally, I prefer that these contracts might be protected by the amendment as I have set it out; it simply puts this very specific narrow bit of a charity’s operation—membership subscription contracts—into Schedule 21. I am very grateful to the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones of Whitchurch, for helping get these points across.
Charities are concerned, and perhaps while the Government are in a giving vein during the Third Reading of the Bill, they might reconsider putting in this very small amendment, which would provide huge relief for charities, and the certainty and reassurance they need, because they do such incredible work right across the country, and they are deeply concerned.
Lord Lucas (Con)
My Lords, I will speak briefly to Amendment 127 in this group. I do not hold, in any particular way, to my choice of wording, but I am fairly sure the Government’s choice of wording is not right. We all receive a huge quantity of emails; we do not want multiplicity—we want effectiveness—and to demand that these emails come separately is a mistake. I hope the Government will see this as an opportunity to rationalise and reduce the size of my inbox and everybody else’s inbox. If we allow more than one thing to be in the message, then the prominent message must be the statutory one. To have it in the subject line and in the first sentence, so that it comes up in the summary when you look at what the email is about, would be a better way of putting it than my amendment, but I am sure the Government can improve on that.
Lord Black of Brentwood (Con)
My Lords, I refer to my earlier declarations of interest.
I raised a significant number of issues relating to subscription contracts in Committee. I am very grateful to both my noble friends on the Front Bench for listening to those arguments, and for bringing forward amendments to deal with them, and I strongly support them. They help fulfil the Government’s aims without placing unacceptable burdens on business.
There is only one remaining issue that we dealt with in Committee, and that is why I am supporting the amendment in the name of my noble friend Lord Lucas. His amendment would remove the prescriptive wording that is currently in the Bill and allow for traders to provide notices
“in a clear and prominent manner:”
His wording simply recognises that the prescribed renewal information is at the heart of the notice and must not be skewed out of view, while allowing for other beneficial information to be included, if desired. I am sure all noble Lords will be very happy that it ensures notices do not become a GDPR-style irritant, but something which is actually helpful to consumers. It would certainly be counterproductive if consumers experienced information fatigue and stopped opening communications from traders or simply opted out of them all together.
Equally, it will alleviate the burdens on traders, who may feel obliged to send emails around the time of renewal notices, to provide information on alternative deals, packages and so on, which could otherwise be dealt with in one communication. As my noble friend said, there may be other ways of dealing with it, or other wording, and I look forward to hearing what the Minister has to say about this amendment, which I support.
Lord Clement-Jones (LD)
My Lords, I am going to be extremely brief as I think we are all anxious to move towards seeing whether the noble Lord, Lord Moynihan, will move his previous amendment to a vote.
There is a common factor here; all these amendments were designed to flush out the Minister to give more assurance and information, and in large part that has been successful. There are still some outliers in terms of reminder notices; the Minister is well aware that there are some players, like Adobe, who will find, when they work it out, that they are going to have to give five notices for an annual contract. I do not know whether the Minister has looked at that and has answers to it.
Baroness Jones of Whitchurch (Lab)
My Lords, I hope that I too can be brief. When we discussed the provisions on subscription contracts in Committee, there were a number of concerns raised about the original wording. There was, at the time, a recognition that some consumers were being trapped into subscription contracts from which they could not easily withdraw. There was a further issue of subscription auto-renewing without people realising, which cost individuals an estimated £500 million a year.
However, against that, there was a strong case made for the many regular subscriptions for the goods and services which were genuinely wanted and loved, and for the many other subscriptions to good causes and charities on which those organisations depended. There was a growing consensus among noble Lords that we had not got that balance right, so I am very pleased that the Minister has listened and engaged with these concerns and we are pleased with the Government’s amendments now tabled.
First, we welcome the decision to exclude micro-entities, such as milkmen and farm shops, from the provisions.
Secondly, it is helpful that the new amendments clarify the way that consumers should notify the business that they wish to end a contract. We would have welcomed a clearer provision for a simple on/off toggle button to end subscriptions; we hope that the Government will keep that option under review.
Thirdly, we welcome the new government proposals to prevent binge-watching of digital content for free during the cooling-off period. The noble Lord, Lord Clement-Jones, has further amendments on this issue which provide helpful clarification on those outstanding issues. I hope the Minister can provide some reassurance that these issues will be kept under review.
We are pleased that the Government have addressed the very real concerns from the charity sector that gift aid claims would be lost under the new regulations. The Government have explained that this requires a change to the Treasury regulations and have given an assurance that these changes will be implemented before this section of the Bill comes into force in October 2025. I pay tribute to the persistence shown by the noble Lord, Lord Mendoza, in trying to resolve this issue, which we have been pleased to support. His Amendment 126 pursues this issue, and I know that there are many in the charity sector who would like further clarity and certainty on how those assurances can be delivered in practice. I was pleased to hear from the Minister that they will be subject to further engagement with stakeholders to get this right, and I think that is the way forward.
The amendments proposed by the noble Lord, Lord Clement-Jones, helpfully set out a route that could be taken to bring about a successful resolution, and I hope the Minister can confirm that those principles will underlie any ongoing discussions.
Finally, Amendment 127 from the noble Lord, Lord Lucas, raises the need for reminder notices to be prominent in any correspondence, and we very much support the intent behind his amendment. We hope the Minister will feel able to give the reassurances that the noble Lord, Lord Lucas, seeks, that these issues will be addressed.
Overall, the provision in the Bill has made good progress, but it is not the end of the matter. I hope the Minister can assure us that the operation of these changes will be kept under review and, if necessary, brought back to the House for further attention. I look forward to the Minister’s response.
Lord Offord of Garvel (Con)
Once again, I thank all noble Lords for their passionate and eloquent speeches. I turn to Amendments 126A, 126B and 127A in the name of the noble Lord, Lord Clement-Jones, and Amendment 127 in the name of the noble Lord, Lord Lucas, relating to reminder notices.
The purpose of these notices is to give consumers essential information about their next renewal payment, and how to end their subscription if they no longer want it. That is why they are only required ahead of certain payments being taken, where the consumer could alternatively avoid paying by exercising their right to end the contract. We believe reminder notices are particularly important for 12-month contracts that automatically renew, given that a consumer may commit to another full year of payments if they miss the opportunity to end their contract.
For such contracts, businesses will only need to send two reminder notices per year, with one other reminder required if the contract starts with a free trial. We believe this is reasonable and strikes the right balance between ensuring consumers are prompted to consider their ongoing subscription and ensuring businesses are not overburdened.
I turn now to Amendment 127, tabled by my noble friend Lord Lucas, and I thank my noble friend Lord Black for his contribution, also relating to reminder notices. I am grateful to my noble friend for his amendment and I agree with him that businesses must be able to provide other information in these notices, such as promotional or advertising material. It is, after all, a key means of engaging with customers. However, as drafted, this amendment would mean that, while the reminder notice must be clearly given, the essential information that must be contained in the notice could get lost in marketing material. Therefore, while the Government cannot accept the amendment in its current form, I commit to bringing forward government amendments at Third Reading which will seek to strike the right balance on this topic.
Our amendments will allow businesses to provide other material—as they choose—in a reminder notice, but they will also ensure that the required information remains the most prominent information in the notice. This approach will ensure consumers receive clear and timely information about their current subscription, while allowing businesses the opportunity to provide promotional offers or other information in a reminder notice.
I turn to Amendments 131, 133 and 134, tabled by the noble Lord, Lord Clement-Jones, on cooling-off periods. I share the noble Lord’s intent to ensure the cooling-off rules work for digital content providers. As I explained in my earlier remarks, before introducing the relevant secondary legislation for how refunds work during cooling-off periods, the Government will consult on a “use it and lose it” proposal. It is essential that we consult on this proposal, as the proposal, or a version of it, may well apply to other services or products, such as personalised goods.
We have focused mostly on the digital sector today, but many other sectors, with different circumstances, may also be relevant. In light of this, we do not agree that detailed arrangements just for digital content should be in the Bill. The full range of sectors should be considered in consultation, and such detail is better suited to secondary legislation, which can be updated when required. That is why we have made it very clear, through our Amendments 136 and 137, that secondary legislation can take account of different products and circumstances. That is also why the noble Lord’s Amendment 135 is not necessary. Its objective is already achieved with the existing drafting and has been explicitly clarified through the Government’s own amendments.
I now turn to Amendments 126 and 140 on gift aid, tabled by my noble friend Lord Mendoza and the noble Lord, Lord Clement-Jones, respectively. I also thank the noble Baroness, Lady Jones of Whitchurch, for her contribution on this topic. For the reasons set out earlier, we do not consider excluding memberships which qualify for gift aid to be the best way to address this issue. Instead, the Treasury will amend the gift aid regime to ensure that it is compatible with the subscriptions chapter. As I have already said, the Treasury has shown its firm intention to lay the necessary legislation with the statement recently made in last week’s Budget.
On the points raised by the noble Lord, Lord Clement- Jones, we do not consider placing such conditions for the commencement of the chapter as the best way to achieve these aims. Noble Lords rightly point out that charities will need clarity on how consumer and gift aid regimes work together. I assure your Lordships that we will work closely with the Treasury, HMRC and the charity sector to provide guidance where needed before the regime commences.
For the reasons stated earlier, we do not consider that there should be specific detail about the cooling-off period in the Bill for particular products or services. However, we will consult before the end of the year and will be sure to engage closely with the charitable sector to understand issues specific to it.
As I emphasised earlier, the purpose of consultation is to develop rules which are fair and workable for traders and consumers and take account of circumstances such as those set out by the noble Lord. This will inform the secondary legislation that will be needed for the regime to be operable, and therefore we do not think a specific requirement that the regime cannot commence without it is necessary. As I mentioned before, the law is clear that, where a consumer donates regularly to a charity without receiving goods, services or digital content in return, this will not meet the definition of a subscription contract. Such donations are therefore out of scope of the chapter.
I hope this reassures noble Lords of the Government’s intent and that therefore they will not feel the need to press their amendments.
Lord Offord of Garvel
Member's explanatory statement
This amendment, along with my other amendments to Schedule 21, provides that a contract for the supply of foodstuffs etc delivered to the consumer’s home is excluded from the subscription contracts regime if the trader’s business is a “micro-entity”, which is assessed on the basis of the business’ turnover, balance sheet and number of staff, regardless of whether the business is incorporated or not.
“(3A) For the purposes of sub-paragraph (1), a business is a micro-entity in each financial year, other than its first financial year, that the condition in sub-paragraph (3B) or (3C) is met in relation to the business.(3B) The condition in this sub-paragraph is met if—(a) the business is carried on by a company, and(b) the company qualified as a micro-entity in accordance with section 384A of the Companies Act 2006 in relation to the preceding financial year.(3C) The condition in this sub-paragraph is met if—(a) the business is not carried on by a company, but(b) if the business had been carried on by a company, the company would have qualified as a micro-entity in accordance with that section in relation to the preceding financial year.(3D) In the first financial year of a business, the business is a micro-entity for the purposes of sub-paragraph (1) if (and for so long as) the person carrying on the business believes on reasonable grounds that the person will qualify as a micro-entity in accordance with section 384A of the Companies Act 2006 in relation to that financial year (or would do so if the person were a company).”Member's explanatory statement
See the explanatory statement for my other amendment to Schedule 21.
“(5) In this paragraph—“company” has the same meaning as in the Companies Act 2006 (see section 1 of that Act);“financial year” —(a) in relation to a business which is carried on by a company, means the company’s financial year in accordance with sections 390 to 392 of that Act;(b) in relation to a business which is not carried on by a company, means a year, beginning on 6 April and ending on the following 5 April;“first financial year” —(a) in relation to a business which is carried on by a company, means the company’s first financial year in accordance with sections 390 to 392 of the Companies Act 2006;(b) in relation to a business which is not carried on by a company, means the first financial year in which the business begins trading.”Member's explanatory statement
This amendment is consequential on my other amendments to Schedule 21.
Lord Offord of Garvel
“(a) in a way which is straightforward, and”Member's explanatory statement
This amendment sets out the principle that must inform the way in which a trader enables a consumer to bring a subscription contract to an end.
Member's explanatory statement
This amendment enables a consumer to exercise a right to bring a subscription contract to an end by notifying the trader by any clear statement of their decision to bring the contract to an end. The concept of a consumer ending a contract by making a clear statement of their decision to do so is already in use in consumer law.
Lord Offord of Garvel
Member's explanatory statement
This amendment enables a consumer to exercise a right to cancel a subscription contract for breach of an implied term under the Chapter by notifying the trader by any clear statement of their decision to cancel the contract. The concept of a consumer ending a contract by making a clear statement of their decision to do so is already in use in consumer law.
Lord Offord of Garvel
Member's explanatory statement
This amendment enables a consumer to exercise a right to cancel a subscription contract during a cooling-off period by notifying the trader by any clear statement of their decision to cancel the contract. The concept of a consumer ending a contract by making a clear statement of their decision to do so is already in use in consumer law.
Lord Offord of Garvel
Member's explanatory statement
This amendment makes clear that the power under clause 266(1)(a) may be exercised to provide that a consumer may lose the right to cancel during a cooling-off period if the consumer chooses to receive digital content or services during that period.
“(3A) Provision under subsection (3)(a) and (b) may secure the result (for example, in cases where a consumer has been supplied with digital content or services under a contract before it is cancelled during a cooling-off period) that—(a) the consumer remains liable (partly or fully) for payments falling due before the cancellation of the contract, and(b) the consumer is entitled to a reduced or no refund.”Member's explanatory statement
This amendment makes clear that the power under clause 266(1)(b) may be exercised to provide that a consumer remains fully or partly liable, and so is not entitled to a refund or a full refund, in respect of payments they have made under a subscription contract before cancelling it during a cooling-off period, for example where the consumer has received digital content or services during that period.
Lord Offord of Garvel
Member's explanatory statement
This amendment clarifies that the Chapter does not apply in relation to any contract that was entered into before clause 253 comes into force. This is to ensure that it does not apply to a contract that was not a subscription contract when it was entered into before that clause comes into force (e.g. because it was an excluded contract) but then becomes a subscription contract after that clause comes into force.
“(4) Subsections (5) and (6) apply where—(a) a trader enters into a contract that is an excluded contract,(b) but for it being an excluded contract, the contract would have been a subscription contract, and(c) on a later day (the “relevant day”), the contract ceases to be an excluded contract and, accordingly, becomes a subscription contract.(5) This Chapter applies to the contract with the following modifications— (a) sections 255 and 256 (pre-contract information) do not apply;(b) section 257 (reminder notices) applies as if—(i) in subsection (1), the reference to a trader entering into a subscription contract with a consumer that does not involve a concessionary period were a reference to a trader entering into the contract,(ii) the reference in subsection (2)(a) to the day that the contract was entered into were a reference to the relevant day, and(iii) subsections (3), (4) and (6) were omitted;(c) section 258 (content and timing etc of reminder notices) applies as if, in subsections (3) and (4), references to the period specified by the trader in pre-contract information were references to the period specified by the trader in information given under subsection (6) of this section;(d) section 261 (terms implied into contracts) applies as if—(i) in paragraph (a), the reference to the duty set out in section 255(1)(a) were a reference to the duty set out in subsection (6) of this section;(ii) paragraph (b) was omitted;(iii) in paragraph (d), the reference to pre-contract information were a reference to the information given under subsection (6) of this section;(e) section 263 (right to cancel during cooling-off periods) applies as if subsection (1)(a) were omitted.(6) As soon as reasonably practicable after the relevant day, and in any event before the end of 12 months beginning with that day, the trader must give to the consumer key pre-contract information and full pre-contract information in relation to the contract, other than any such information that is excluded by subsection (7).(7) Information is excluded by this subsection if—(a) it relates to the initial cooling-off period under the contract;(b) it relates to a period mentioned under section 253(3)(a) (initial concessionary period) and the relevant day falls after the end of that period.(8) For the purposes of the duty under subsection (6)—(a) it is irrelevant whether any of the information required has already been given to the consumer before the relevant day,(b) section 255(5) applies as it applies for the purposes of the duty under section 255(1)(b), and(c) paragraph 13 of Schedule 22 is to be ignored.”Member's explanatory statement
This amendment provides for how the subscription contract regime applies to a subscription contract that was initially excluded from the regime as a result of being a contract of a kind listed in Schedule 21 but later falls to be included in the regime as a result of no longer being a contract excluded under that Schedule.
Lord Offord of Garvel
“(a) a bankruptcy order having been made in relation to the trader (or, in Scotland, the trader’s estate having been sequestrated),(b) a winding up order having been made in relation to the trader as a result of the trader’s insolvency,(c) an appointment of a liquidator (otherwise than following the making of a winding up order) as a result of the trader’s insolvency,(d) the trader being in administration,(e) the appointment of an administrative receiver (or, in Scotland, a receiver) in relation to the trader, or(f) in any jurisdiction, the trader being subject to an order or procedure that corresponds to any order or procedure mentioned in paragraphs (a) to (e).”Member's explanatory statement
This amendment broadens the definition of insolvency for the purposes of the Chapter.
Lord Offord of Garvel
“(4A) In subsection (4)(a)(i) the reference to limiting (or further limiting) the accreditation to particular descriptions of ADR or of special ADR arrangements includes, in particular, limiting it to ADR relating to consumer contract disputes that have already been referred for ADR or to special ADR arrangements that already exist (as the case may be), whether for a limited period or otherwise.”Member's explanatory statement
The amendment clarifies that the powers of the Secretary of State under clause 297 to limit or further limit the scope of an accreditation includes limiting it to finishing off subsisting referrals of disputes for ADR and/or operating existing special ADR arrangements.
Member's explanatory statement
This amendment ensures that the requirement that new conditions imposed on an ADR provider’s accreditation must be ones that the Secretary of State considers necessary to secure compliance with prohibitions applies also to other variations made by the Secretary of State to the accreditation.
“(6A) In subsection (6) “existing conditions” means the existing conditions disregarding any previous variations made under subsection (4)(a) or (7)(b).”Member's explanatory statement
This amendment clarifies which existing conditions are being referred to in clause 297(6).
Member's explanatory statement
This amendment provides that the duty to keep new conditions imposed on an ADR provider’s accreditation under review, and to revoke such conditions if no longer necessary, extends also to other variations made in respect of the accreditation.
Member's explanatory statement
This amendment is consequential on my amendment to clause 297 at page 201, line 36.
“(b) by notice to the ADR provider vary the accreditation for the purpose of revoking or reversing the effect of all or any of the variations, to the extent that the Secretary of State considers that they are”Member's explanatory statement
This amendment is consequential on my amendment to clause 297 at page 201, line 36.
Member's explanatory statement
The amendment would bring the language in line with references elsewhere to the variation of an accreditation
Member's explanatory statement
The amendment would bring the language in line with references elsewhere to the variation of an accreditation
Lord Moynihan
“Requirements on secondary ticketing facilitiesAfter section 92 of the Consumer Rights Act 2015 insert—“92A Requirements on secondary ticketing facilities(1) A secondary ticketing facility must not permit a trader or business to list tickets for resale unless the trader or business has provided evidence of proof of purchase to the ticketing facility, or evidence of title to the tickets offered for resale.(2) A secondary ticketing facility must not permit a reseller to sell more tickets to an event that they can legally purchase from the primary market.(3) A secondary ticketing facility must ensure that the face value of any ticket listed for resale, and the trader or business’s name and trading address are clearly visible, in full, on the first page the ticket is viewable on.(4) The information required by subsection (3) must be unabbreviated, and must not be hidden behind an icon, drop down menu or other device.(5) A secondary ticketing facility must make it clear to traders and businesses based overseas that sell tickets to UK consumers and target UK consumers through paid or sponsored advertisements or paid infomercials that they are subject to UK legislation.””Member's explanatory statement
This amendment imposes requirements on secondary tickets sites regarding proof of purchase, ticket number limits and the provision of information, with the aim of reducing fraud. These requirements are in line with recommendations made by the CMA.
Lord Moynihan (Con)
My Lords, I am very grateful to the noble Lord, Lord Leong, who highlighted that we should listen not solely to the musicians—the Arctic Monkeys, Mumford & Sons, Little Mix, Radiohead and many others—who called for these changes but to the true fans who are being scalped. It was interesting that my noble friend the Minister, to whom I listened carefully, totally avoided recognising that it is the Competition and Markets Authority that knows the scale of this problem better than anyone else and that has proposed these changes. As the noble Lord, Lord Clement-Jones, stated, it is very rare for the Government both to ignore and to reject the clear recommendations made by the CMA.
Amendment 150 is a simple and effective way to protect true sports and music fans at the big-ticket concerts across the UK. If it is right for the French, the Irish and in New York City—and if it was right for every Member on this side of the House during the build-up to the Olympic and Paralympic Games in 2012, when we voted unanimously for far more onerous measures—it is right today for this House to help true fans.
It is with great sadness that I was not persuaded by my noble friend the Minister when he sought to apply to that point. Therefore, I seek to test the will of the House.
Lord Offord of Garvel
Member's explanatory statement
This amendment, together with my other amendment to clause 335, ensures that the power to make regulations containing consequential amendments is conferred on the Treasury rather than the Secretary of State if the regulations only contain amendments to tax legislation, in compliance with the usual approach. This would, for example, enable the Treasury to make amendments to the Income Tax Act 2007 so as to ensure that gift aid can continue to be claimed in the case of payments made under subscription contracts between consumers and charities.
“appropriate authority” means—(a) in the case of regulations under this section that contain amendments only in relation to tax, the Treasury;(b) in any other case, the Secretary of State;”Member's explanatory statement
See the explanatory statement for my amendment to this clause at line 2.
Lord Offord of Garvel
“(4A) In the case of regulations under section 335 made by the Treasury, the references in subsections (3) and (4) to each or either House of Parliament are to be read as references to the House of Commons only.”Member's explanatory statement
This amendment secures that the power to make regulations under clause 335 containing only amendments to tax legislation are subject to procedure in the House of Commons alone, in compliance with the usual approach for such powers in recognition of the financial privilege of the Commons. See also my amendments to that clause providing for the power to be exercisable by the Treasury.
Lord Offord of Garvel
Member's explanatory statement
This amendment is consequential on my amendment leaving out Clause 127.
Lord Offord of Garvel
“(ai) Part 1;”Member's explanatory statement
This amendment to section 393 of the Communications Act 2003 relocates the previous amendment to that section made by clause 109(3) (which is omitted by my other amendment to that clause).
“(ai) Part 1;” Member's explanatory statement
This amendment would add Part 1 of the Bill to the provisions listed in section 111(6) of the Wireless Telegraphy Act 2006 (information sharing by OFCOM).
“(aa) Part 1;”Member's explanatory statement
This amendment would add Part 1 of the Bill to the provisions listed in Article 4 of the Postal Services Act 2011 (Disclosure of Information) Order 2012 (information sharing by OFCOM).
Digital Markets, Competition and Consumers Bill
Tuesday 26th March 2024
(4 months ago)
Lords ChamberRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 53-I Marshalled list for Third Reading - (25 Mar 2024)
The Lord Privy Seal (Lord True) (Con)
My Lords, I have it in command from His Majesty the King to acquaint the House that His Majesty, having been informed of the purport of the Digital Markets, Competition and Consumers Bill, has consented to place his interest, so far as it is affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Offord of Garvel) (Con)
My Lords, I will make a brief statement on the devolution status of the Bill. Parts 3, 4 and 5 of the Bill include provisions within the legislative competence of the Northern Ireland Assembly relating to consumer matters. The legislative consent process is not engaged in Scotland or Wales.
As noble Lords will be aware, the Executive and Assembly have only recently been restored in Northern Ireland. After the return of the Northern Ireland Assembly and Executive on 3 February, my ministerial colleague the Minister for Enterprise, Markets and Small Business wrote to his counterpart in Northern Ireland, seeking their agreement to initiate the legislative consent process and to support a legislative consent Motion in the Northern Ireland Assembly. Since then, my officials have been in regular contact with the Northern Ireland Civil Service and we are hopeful that the legislative consent process will progress swiftly over the coming weeks.
Although it has not been possible to secure consent by this time, we take great comfort from the engagement that has taken place with the Northern Ireland Civil Service throughout the passage of the Bill, including via correspondence between Permanent Secretaries. I take this opportunity to thank the officials in the Executive and express my gratitude for the close working to date. There has historically been a policy and enforcement imperative in Northern Ireland to maintain parity with Great Britain in relation to consumer protection matters. With the support of the Northern Ireland Office, my officials have liaised with the relevant Northern Ireland departments to ensure that the Bill considers and reflects the relevant aspects of devolved legislation. We remain committed to ensuring sustained engagement on the Bill with all three devolved Administrations as it progresses through Parliament.
Amendment 1
“Mergers involving newspaper enterprises and foreign powers(1) Schedule (Mergers involving newspaper enterprises and foreign powers) makes provision for the purposes of preventing foreign powers from gaining control or influence over newspaper enterprises.(2) The amendments made by that Schedule—(a) apply in relation to enterprises ceasing to be distinct on or after the effective date, but not in relation to enterprises ceasing to be distinct before the effective date;(b) apply in relation to arrangements in progress or in contemplation on or after the effective date which, if carried into effect, would result in the creation of a foreign state newspaper merger situation by virtue of enterprises ceasing to be distinct on or after the effective date.(3) In subsection (2), “the effective date” means 13 March 2024.”Member’s explanatory statement
This amendment, together with my amendment inserting a new Schedule after Schedule 6, makes provision for the purposes of preventing foreign powers from taking control of newspaper enterprises.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord Parkinson of Whitley Bay) (Con)
My Lords, I am here to speak to the amendments in this group which stand in the name of my noble friend Lord Offord of Garvel, and I am happy to update your Lordships’ House on the work that has taken place since our debates on Report to implement a regime to ban foreign state ownership of newspapers and news magazines. As I noted on Report, we have heard the strength of concerns expressed in Parliament, and from my noble friend Lady Stowell of Beeston in particular, about foreign state ownership of UK newspapers and news magazines.
His Majesty’s Government agree that the importance of these publications to our democracy cannot be overstated: newspapers have always been, and must continue to be, free to develop relationships with their readers and develop editorial lines supporting different positions. The plurality of views across different newspapers ensures that there is a wide range of views supporting a culture of argument, debate and challenge, which in turn contributes to a healthy democratic society.
His Majesty’s Government are therefore taking steps to preserve the freedom of the press, recognising the risks that foreign state ownership of, or control or influence over, the UK’s newspapers and news magazines could pose to democracy and to free speech. Foreign state ownership, if used to develop or control narratives which align with another state’s interests, may over time corrode trust in our media as a whole. That is why many countries already have laws limiting foreign state ownership, and why we are creating a new regime which will prevent foreign states having any stake in a UK newspaper or news magazine.
These amendments will amend the Enterprise Act 2002 to create a new foreign state intervention regime for newspapers and news magazines, I am delighted that my noble friend Lord Forsyth of Drumlean has put his name to Amendment 1, which leads the amendments in this group. Getting from a regret amendment on the Media Bill to joint signatures on this Bill in a matter of weeks is testament to the collaboration we have had across your Lordships’ House in our discussions, and I thank him for that.
Under the new regime, the Secretary of State will be obliged to give the Competition and Markets Authority a foreign state intervention notice where she has reasonable grounds to believe that a merger involving a UK newspaper or news magazine has given, or would give, a foreign state or a person associated with a foreign state ownership, influence or control. The CMA will be obliged to investigate and provide a report to the Secretary of State on the merger or potential merger. If it concludes that the merger has resulted or would result in a foreign state newspaper merger situation, the Secretary of State will be required by the statutory provisions to make an order to block or unwind the merger.
Our amendments expand the definition of “foreign power” to capture a wide variety of actors, including senior members of a foreign Government and officers of a governing political party acting in a private capacity. The legislation will also apply to mergers involving persons associated with a foreign power to ensure that we are capturing all possible ways in which a foreign state could seek control or influence over a UK newspaper or news magazine. Direct investment in newspapers of any size will be banned in future under this new regime.
It is, however, essential that these new measures do not have undesired effects in relation to wider business investment in UK media. We will therefore introduce an exemption for investments where the stake is below 5% of the total investment being made. This would apply to passive investments by established and pre-existing sovereign wealth funds, pension funds or similar.
We will introduce this threshold by regulations made under the affirmative procedure, giving noble Lords and Members in another place the opportunity to scrutinise the detailed proposals. We will bring these regulations forward after Royal Assent to this Bill. My colleagues and I would be very happy to engage with noble Lords as we do so.
I make it clear that the regime brought about by these amendments, and the exemption which will be provided for in secondary legislation, applies only to newspapers and news magazines in order to safeguard our free press from government involvement, whether domestic or foreign.
As I have set out before, we already have a robust media mergers regime, which enables the Secretary of State to intervene if she believes that public interest considerations are, or may be, relevant to a merger. This new foreign state ownership regime works in parallel and complements the existing regime. Our focus is not on foreign investment in the UK media sector in general but is targeted specifically —noble Lords have rightly made the distinction—at foreign state investment in newspapers and news magazines.
Of course, the Government remain committed to encouraging and supporting investment into the United Kingdom. We recognise that investors deploying capital into this country rely on the predictability and consistency of our regulatory regime. The UK remains one of the most open economies in the world, and investment is crucial to our plans for growth and jobs, and for our prosperity. The UK has the highest stock of foreign direct investment in Europe. The recent Global Investment Summit signalled investors’ confidence, with nearly £30 billion in investment commitments being made. These amendments will not change the UK’s investment potential. As I said, we are targeting foreign state investment in a narrow but important part of the UK market to safeguard the health of our democracy.
As I noted on Report,
“the Secretary of State is currently considering a live merger case under the Enterprise Act regime on which I cannot comment further today. With regard to any live case, if it is still ongoing when the changes come into effect, the Secretary of State will continue to follow the process set out in the existing regime and will also apply the new measures”.—[Official Report, 13/3/24; cols. 2042-43.]
In tandem, I can confirm to your Lordships’ House that we will be consulting on expanding the media mergers and the new media foreign state ownership regime to apply to online news websites. This will bring the regimes up to date in order to reflect modern news consumption habits and better protect the freedom of our media.
I am grateful to my noble friends Lady Stowell and Lord Forsyth, to the noble Lord, Lord Bassam, and to others opposite and from across the House for their constructive engagement and collaboration on these amendments. I hope that they will enjoy your Lordships’ support.
Finally, I will briefly mention Amendment 4, tabled by my noble friend Lord Offord, which is not related specifically to foreign state ownership of media enterprises, but which is part of this group. Amendment 4 is a minor and technical amendment relating to other amendments made by Schedule 4 to the Bill. It clarifies how certain sections of the Enterprise Act 2002 are applied for the purposes of deciding if a special merger situation has been created under the special public interest merger regime. I beg to move.
Baroness Stowell of Beeston (Con)
My Lords, I thank my noble friend and his officials for the time and attention they have given this matter since Report. I know that officials have worked very hard, including over weekends, so I am truly grateful to them. I also pay tribute to the Media Minister, Julia Lopez. When I first met her to discuss my amendment three weeks ago, she gripped the issue immediately. I believe it is because of her energy and support for the clear objective of protecting press freedom that the Government have got behind her in bringing forward amendments in such a short space of time. Julia Lopez deserves much credit.
On the Government’s amendments, for me, the best way to understand their proposed way forward is to see it in two stages. Stage 1 deals with the block to foreign powers owning, controlling or influencing UK news. Stage 2 is the exemption for investment in UK news from legitimate foreign state investment funds. Both those stages, or parts, are important to the sustainability of the UK news industry.
I support the Government’s amendments as they relate to stage 1, and noble Lords will see that I have not retabled my own amendment. I am satisfied that they are in line with the promises my noble friend made from the Dispatch Box two weeks ago. In my view, they deal with the legal uncertainty that the RedBird IMI-proposed deal to buy the Telegraph titles and the Spectator has exposed when it comes to the involvement of foreign powers in our news media. It is worth restating that, as concerning as the UAE financial backing via IMI in that case is, the issue is bigger than that one deal and is a matter of principle.
As I understand the government amendments and what my noble friend has just said, the Government have broadened the definition of “foreign power”, and any individual or entity now captured by that definition will be blocked completely from owning, controlling or influencing our newspapers or news magazines. These provisions will take effect immediately once the Bill receives Royal Assent. Once completed, stage 1, as I might describe it, protects press freedom from the control or influence of foreign powers. Stage 2, which provides the exemption for legitimate, indirect foreign state investment funds to make passive investments in our news industry, will be covered by secondary legislation to follow once the Bill is enacted.
This exemption is important for obvious reasons, as my noble friend has already said. The news industry needs investment just like any other, and we must not exclude perfectly legitimate foreign state investors such as sovereign wealth funds or state pension funds that are not directly government controlled. As I said on Report, foreign state investment funds such as the Norwegian sovereign fund already invest in some of our news organisations.
I think I heard my noble friend set out the Government’s commitment to the threshold for this category of foreign state investors in the news industry being set at 5%. It is worth reflecting on that, because, at 5%, it is still above the approach of such funds which typically invest around 1 to 2% in corporations within any sector, yet it is a lower threshold than what is permitted by the CMA to prevent material influence, reflecting the fact that we are seeking to prevent any foreign state influence in UK news. I welcome the 5% threshold.
Obviously, we have yet to see the details of the secondary legislation, and Parliament will have to scrutinise that carefully before it can be approved. I welcome my noble friend’s commitment to engage Parliament before those regulations are laid. I think I heard my noble friend correctly, but can he reassure me that my understanding is correct that any individual or entity blocked at stage 1 will not qualify for exemption at stage 2? In other words, the exemption at stage 2 is for an entirely different kind of entity from that which will be blocked at stage 1.
I am pleased that my noble friend has reminded the House that any live regulatory case will be captured by the new legislation once it is enacted, and I am also pleased that he has confirmed that foreign state ownership of online UK news websites will be dealt with swiftly, also via secondary legislation and the affirmative procedure, once the Government have completed their consultation. There remains the question of foreign state ownership of our commercial public sector broadcasters and other commercial UK news channels. That said, of course, there are some regulatory protections already in broadcasting because of the Ofcom licensing regime. It would none the less be helpful if my noble friend could say whether the department is reviewing policy in this area also.
In conclusion, I will make three simple points. First, none of these legislative changes affect general foreign investment in or ownership of UK newspapers or news magazines, which is and will remain very welcome. Secondly, the exemption for legitimate investment by foreign state investment funds is important to the financial sustainability of our news industry. Finally, just to be clear, the UK remains open for business in the same way it has always been. All that Parliament is doing by making these changes is ensuring that our fundamental principle of press freedom is not up for sale.
I look forward to my noble friend’s replies to my questions, and we will, of course, review the secondary legislation carefully once it is ready. But, overall, I commend my noble friend on the Government’s work in recent weeks and I thank him for it.
Lord Forsyth of Drumlean (Con)
My Lords, we are at Third Reading and this is not a time for long speeches, but I want to congratulate my noble friend and his colleagues on having listened to what was said. He remarked that I had gone from moving a regret amendment to signing an amendment. I gently point out that it is not me who has moved position.
I am struck by how the attempts to get this dealt with under both the Media Bill and this Bill came across the problems of the Long Title of the Bill and getting it in order. Going from an amendment that was 16 lines long to one that is 16 pages long tells us how much hard work has gone into this with the civil servants in both departments that are affected. It is fashionable to be rude about this place and the work it does, which I believe is outstanding, but it is even more fashionable these days, even among some Ministers, to criticise the Civil Service. To turn this around in this period, and to do it with such diligence and careful consideration, is a great tribute to the officials in those departments. It just goes to show that, contrary to what is believed, if Ministers give a clear view of what needs to be done, the Civil Service is more than capable of delivering that.
The noble Baroness, Lady Stowell, has done a fantastic job on this. I agree with everything that she said, and I see no need to repeat it. My understanding—I am very conscious of Pepper v Hart here—is that what the Minister has said from the Dispatch Box is absolutely clear. I have to say that, when I read the amendment, I thought, “Is this secondary legislation a Maginot line that will enable a future Government to get around the clear principle that no foreign Government should be able to own or influence in any way a newspaper or a news magazine?” The words that have been stated from the Dispatch Box make me confident that that is not the position. That has to be right. After yesterday’s events, it is inconceivable that the Chinese Government could own 1% or even one share of a British newspaper.
The carve-out is sensible, if sensibly applied, and there will be an opportunity for this House and the other place to consider it. I very much look forward to this legislation receiving Royal Assent, which will mean that there is a complete ban on any foreign Government having either ownership or influence over our press. That must be right in a free and democratic society.
Lord Faulks (Non-Afl)
My Lords, I also pay tribute to the Government, Ministers, officials and lawyers for their speedy response to the amendment put down on Report by the noble Baroness, Lady Stowell, and others. I declare an interest as the chair of the Independent Press Standards Organisation, which regulates 95% of the printed press and its online manifestations.
I shared with many other noble Lords concern about the prospective acquisition of the Daily Telegraph and the Spectator by the United Arab Emirates—or at least the acquisition of a substantial part of those important titles. It seems to me that this amendment will make this sort of acquisition much more difficult, if not impossible, as soon as the Bill becomes law.
I agree with other noble Lords that it is most important in framing the necessary secondary legislation that the driving principle behind the amendment, which is to prevent foreign state ownership of newspapers, is reflected appropriately. There is a risk that too tightly drawn definitions might catch wholly benign investors who might have a very modest and non-active interest in newspaper organisations. Sovereign wealth funds have already been mentioned, and the noble Lord has given assurances in this area. I do not entirely agree with the noble Lord, Lord Forsyth, in his citation of Pepper v Hart and its importance, but none the less we will be much reassured by anything the Minister might say. I also ask him to consider the position of banks which may provide a newspaper organisation’s finance. Banks are often part of a consortium, and one part of a consortium may well be a bank with a connection to a foreign state. It is important that that is not captured.
There has been a deliberate choice by those drafting these amendments to change the language of the Enterprise Act 2002, which speaks of “material influence” to provide in the amendment that a relevant merger situation arises where one party acquires “influence” over another. That is plainly a much lower bar. I imagine that the change is designed to protect against somewhat unconvincing assertions by prospective acquirers of an interest in newspapers that editorial independence is protected by some form of editorial board or other Chinese wall. I welcome the Minister’s clarification on this.
The definition of a newspaper in the amendment is,
“a news publication circulating wholly or mainly in the United Kingdom or in a part of the United Kingdom on any periodic basis”.
That seems to exclude news websites or broadcasters. News websites are increasingly a source of news for consumers, many whom have deserted conventional newspaper models. It may be that more power and influence can in fact be obtained there than in the traditional format. I hope that the Minister can continue to reassure the House that these websites are in the Government’s sights, simply on the basis of consistency. I venture to suggest that the Media Bill might provide an appropriate parent for relevant provisions to bring websites into the same category as newspapers. I welcome clarification on that.
The provisions make it clear that the Secretary of State must—I emphasise the word “must”—
“make an order … reversing or preventing … the foreign state newspaper merger situation”.
There is no discretion here. That makes it all the more important that any exemptions should provide that remote or benign interest in newspapers by various emanations of foreign states will not necessarily fall foul of these provisions.
I would like to make it clear that I am entirely in favour of the thinking which animates this amendment, but it is inevitable that when an amendment is drafted, at considerable pace, at a late stage in the progress of a Bill, there may be gaps or ambiguities. Freedom from state interference is of fundamental importance. Our newspaper industry is not in anything like the healthy state it once was, and its vulnerability is what makes newspapers potentially prey to outside investment from foreign states which seek influence. However, important though it is to keep our newspapers free of such influence, we want them to survive and, indeed, to prosper. I hope that the amendment entirely comprehends that aim.
Finally, I simply ask for clarity—the drafting is impressive, but sometimes the meaning is a little hard to tease out—on how the Minister envisages parliamentary involvement in the case of a contentious merger situation.
Lord Lansley (Con)
My Lords, I intervene just briefly. I am very pleased to take the opportunity to follow what the noble Lord, Lord Faulks, was just saying because it touches directly on the points I was going to make.
First, I am very grateful for the conversations I have had with the noble Lord and Minister Lopez in his department. I look forward to further debate about the extension to online news services. It will certainly be my intention to table amendments to the Media Bill to enable us to consider how the media public interest test is to be applied in relation to this wider definition of news providers, since the definitions are clearly now out of date—I can say that, having been part of the Puttnam committee on the 2003 legislation.
My noble friend has done an amazing piece of legislative work. I just have to ask, as I did on Report, why it would not have sufficed to have added a new specified consideration to Section 58 of the Enterprise Act 2002, in effect on the need to prevent the acquisition, control of, or influence over newspapers or newspaper periodicals by any defined foreign power. As my noble friend says, we have 16 pages; frankly, we could have done it in about three lines, but clearly there are differences in terms of the bar that has to be crossed and the requirement on the Secretary of State. As the noble Lord, Lord Faulks, said, the Secretary of State must do these things, as opposed to the discretion under the current merger regime, but it seems to me that, with a new specified consideration, the current merger regime would provide the necessary powers. For example, it was sufficient for the purpose of meeting the capability to deal with a public health emergency in Section 58 as a specified consideration, or to maintain the stability of our financial system, as specified after the financial crisis, in Section 58. I am not at all clear why we have departed from the same approach in this case. There is a risk that we end up with overlapping and very complex provisions relating to one type of merger situation as opposed to other merger situations, but we will come on to discuss that.
On Report, I raised with my noble friend the question of broadcasting. We can return to that in the Media Bill, but, of course, where broadcasters are concerned, we have the benefit of the relationship to the Ofcom standards code, which does not apply in relation to newspapers. I hope we can revisit that when we come to the Media Bill.
Lord Clement-Jones (LD)
My Lords, I want to revert very briefly, and thank the noble Lord, Lord Offord, for his statement about the status of the Bill in Northern Ireland, before commenting on Amendment 1. I very much hope that those discussions go as quickly as possible in the circumstances. I also welcome the noble Lord, Lord Leong, back to the Opposition Front Benches, and hope that he is in much better form.
I start by congratulating the noble Baroness, Lady Stowell, and the noble Lords, Lord Forsyth, Lord Robertson, and Lord Anderson, on what is really a triumph. I thank the Minister, in particular, the noble Lord, Lord Parkinson, for producing something so comprehensive, and perhaps complicated. As someone who is rather used to replies such as “in due course” or “we’re going to produce guidance”, it just shows what government can do swiftly and decisively when it really gets the bit between its teeth. It means that we are not going to take many more excuses in future.
I very much hope that, as the noble Lords, Lord Faulks and Lord Lansley, said, we will not lose sight of the digital news media agenda as well, because it just demonstrates what is possible through this change to the Enterprise Act. There is a broader agenda, and that needs addressing. I very much hope that, as other noble Lords have said, the secondary legislation really is consistent with the intent demonstrated today, both in what the Minister had to say and in the intent of the proposers of the original amendment. It is very good that the Minister has, in a sense, confirmed that it will impact on the RedBird proposal, if that proposal is still current on the effective date, given the circumstances. I entirely agree with the noble Baroness, Lady Stowell, that this is a matter of principle; it is not about the particular country. However, I do feel strongly about the particular country, so in these circumstances, we are entitled to be pleased that this is going to be the case in terms of this particular transaction.
The noble Baroness raised questions about the threshold, and I very much hope that the Minister can answer them. I thank him, and I think there is general satisfaction across the House. This demonstrates what the Government can do when they get the bit between their teeth.
Lord Bassam of Brighton (Lab)
My Lords, this has been a fascinating and illuminating series of speeches on the potential foreign ownership of UK news titles, particularly the Telegraph and the Spectator, by RedBird IMI. I echo the words of the noble Baroness, Lady Stowell: this is a much larger issue than that newspaper group. There is a fundamental principle involved here, which is why all sides of the House wanted to rally round the issue.
We have witnessed not only the magical transformation of the noble Lord, Lord Forsyth, from agent provocateur, but the Government moving at a speed we would welcome elsewhere in public policy; it is something to behold for the future. We have come to understand better just how complicated the terms of international trade are and how careful we need to be when legislating to prevent the law of unintended circumstances kicking in.
Protecting the freedom of the press—and our politics—from foreign state interference is an important issue. That is why we supported the calls for government action, an issue I raised in January, and for decisive intervention. As I carefully explained to your Lordships’ House last week, we supported the spirit of the amendment tabled by the noble Baroness, Lady Stowell, but not its detail. We on these Benches were genuinely concerned about security and the need to have a more comprehensive solution to the difficulties the Government face in tackling this issue. We can fairly say that those concerns have been more than adequately met with 16 pages of complex legislation, drafted magically by lawyers working at great pace; I congratulate them on that, and the officials in the Box. In particular, I congratulate the noble Baroness, Lady Stowell, and the noble Lord, Lord Forsyth, on his advocacy for this issue and his intelligence; both have applied pressure to secure a desirable outcome.
Most of the questions I wanted to ask have already been put, but I do have a few concerns, some of which have already been rehearsed in part. First, does the exemption referenced in the amendment cover just passive investments, and what would that mean in this context? Secondly, does it fully cover sovereign wealth funds and pension funds held by them, and what is their relationship with banks? Will there be a capping regime, and what will its thresholds be? Thirdly, will there be a 100% block on foreign state ownership, notwithstanding the 5% threshold the noble Baroness, Lady Stowell, mentioned? What action can the Minister spell out for us on online publications such as the Independent and online-only magazine titles? I liked the suggestion from the noble Lord, Lord Faulks, that this might be picked up in the Media Bill. Whether the Media Bill will enable that, given its long title et cetera, is obviously a question for the clerks, but one that we should certainly ask.
We on these Benches have been more than happy to lend our support to this issue because of the importance in our political landscape of protecting a free and independent press that is not handcuffed by our state. On such issues, it is vital that there is cross-party unanimity. I am sure that noble Lords opposite will, in the future, want to do all they can to protect the integrity of that position, should a paper perceived to be of a different political colour come under a similar threat, whenever that might be. With that said, we await the Minister’s reply to the questions asked, which need a response. I congratulate all those concerned on bringing this difficult situation to a happy conclusion.
Lord Parkinson of Whitley Bay (Con)
My Lords, I am grateful to noble Lords for their support for these amendments and the work undertaken. I thank my noble friend Lady Stowell for commending the work of Julia Lopez, the media Minister, and indeed the department and the officials more broadly. My noble friend also acknowledged the specific quasi-judicial role of the Secretary of State in her ongoing determination of the case before her, but acknowledged that she obviously has a role in all this. On the broader question of media mergers, my right honourable friend the Secretary of State of course remains very much involved as well, but I thank my noble friend for her appreciation for both. I agree with my noble friend Lord Forsyth in his praise for the civil servants who worked thoroughly and quickly on this matter, including over Mother’s Day weekend. I am grateful for that recognition.
My noble friend Lord Forsyth rightly pointed out that he has not moved since tabling his regret amendment to the Media Bill. The Government have made explicit and put beyond doubt what was implicit and possible in the existing regime, as I set out on Report. We are very happy to take the opportunity to do that clearly, in the way that we do through these amendments, and, indeed, to set out now the new lower threshold. My noble friend Lady Stowell is right: we will set it at 5%, which is considerably lower than the existing threshold. I am glad that my noble friend welcomes that. She is right in the characterisation of what I said: anyone blocked at what she calls stage 1—the new automatic block on foreign state investment—will not be able to be exempted at what she calls stage 2. She is right, as well, to make the distinction between foreign investment and foreign state investment, and to make it clear, as I was very happy to, that the UK remains open for business. This is a discrete area and an important one in our national life, which is why we are acting in the way we have.
My noble friend Lord Faulks and the noble Lord, Lord Bassam, asked about the role of banks. We do not think that, in the ordinary course of events, debt and debt refinancing from foreign banks which have a state interest should be captured, unless the structure of the transaction gives rise to concerns about influence. We are considering precisely how debt and debt refinancing should be treated in cases where the structure of debt may give rise to concerns about foreign state investment organisations. But as I say, as we bring these provisions forward in secondary legislation, I am very happy to continue conversations with noble Lords and, indeed, to have conversations with those who will be directly affected.
My noble friend Lord Faulks invited me to set out what we are doing in consulting shortly on expanding the existing media mergers regime and the foreign state ownership provisions, to include online news websites. That will enable us to make changes that ensure that online news, whether from an established newspaper group or an online publisher, is covered by the media regime and the new measures we are introducing for foreign state media ownership.
The Secretary of State will maintain a quasi-judicial role in media mergers. The public interest regime will remain as it is, but we are adding a new parallel foreign state intervention regime. The Secretary of State will not have discretion under that; she will have to follow the report of the Competition and Markets Authority, both on whether there is a foreign state merger and an exemption. She would need to lay an order before Parliament to block a transaction, which would be under the negative procedure. We will debate what I have announced in the provisions that we will bring forward after Royal Assent, setting out an exemption for investments where the stake is below 5%, and noble Lords will have the opportunity to scrutinise that under the affirmative procedure.
I am grateful to noble Lords who have engaged with us and our officials in recent days as we work on these amendments. I am glad that they have your Lordships’ support. I beg to move.
Lord Forsyth of Drumlean (Con)
Before my noble friend sits down, when can we expect the secondary legislation to appear?
Baroness Stowell of Beeston (Con)
Can I ask a question as well, to save the Minister from getting up several times? I do not think that he said anything about broadcasting. Where is the department on reviewing policy in that area?
Lord Bassam of Brighton (Lab)
Can the Minister also clarify the point about online publications? Will these be included within the statutory instrument?
Lord Parkinson of Whitley Bay (Con)
We will shortly consult on expanding the existing media mergers to look at online. The new regime will not cover TV and radio broadcasts at this time, but we will continue to consider that in our broader work on the media mergers regime. As my noble friend Lord Lansley pointed out, there are specific additional protections through the regime to which they are subject under Ofcom.
My noble friend Lord Forsyth rightly asks when we will bring in the secondary legislation. We want to do it after Royal Assent of this Bill, which is in the control of Parliament, not just the Government. Officials are working on it already. I cannot commit to a date for its introduction, but I am happy to commit to continuing our conversations as we work on it and before we introduce it after Royal Assent.
Lord Faulks (Non-Afl)
I have one more question, if I may? I asked about the change in wording in the Enterprise Act from “material influence” to “influence”. I suggested that there might be a reason behind that. Can the Minister clarify the thinking behind the change?
Lord Parkinson of Whitley Bay (Con)
I will reply in writing, if my noble friend is happy with that, so that I can give him the legalese which he would want.
Lord Offord of Garvel
“(b) in such a way that the information referred to in subsection (1) is more prominent than any other information given to the consumer at the same time, and”Member's explanatory statement
This amendment removes the prohibition against a trader giving a consumer any other information at the time they give a reminder notice but requires that the information that must be contained in a reminder notice must be more prominent than any other information that is given.
Lord Offord of Garvel (Con)
My Lords, I am delighted to move Amendment 2, which mirrors the intention of the amendment tabled by my noble friend Lord Lucas on Report on reminder notices, an amendment which was also supported by my noble friend Lord Black, the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones.
Amendment 2 would remove the requirement for businesses to send reminder notices separately from all other information. Instead, other information can be given at the same time as a reminder notice, so long as the required information is the most prominent information. This amendment will ensure that the Bill strikes a better balance between ensuring that consumers are reminded about their ongoing subscription while enabling businesses to streamline their communications and provide other information which they consider to be useful to consumers in these notices.
I hope that your Lordships agree that this amendment delivers upon the undertaking I made on Report to address this issue, and therefore that noble Lords will support it. I beg to move.
Lord Clement-Jones (LD)
My Lords, I am delighted that the Minister has come back at Third Reading as he undertook to and that he has produced this amendment. I am only sorry that the noble Lord, Lord Lucas, is not present to be able to take the credit for it.
Baroness Jones of Whitchurch (Lab)
My Lords, we welcome the Government’s amendment on subscription reminder notices. As has been said, the noble Lord, Lord Lucas, made a very sensible intervention when we debated this in Committee and on Report, and it provides a helpful clarification to service providers. I hope that this amendment and the other changes that we made on Report have now struck a much better balance between businesses’ needs and consumer interests.
We look forward to hearing details of the department’s further work on implementing the gift aid protections and other work on cancellation methods, but, for now, we are pleased with the progress that has been made on the Bill and we wish it a speedy onward passage.
Lord Offord of Garvel (Con)
I thank my noble friends Lord Black and Lord Lucas, and today the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones, for their continuing engagement on this topic and on the Bill more broadly. I am pleased they agree that the Government have achieved the right balance between business and consumers on reminder notices and that we have ensured that businesses’ communications with customers can be more streamlined.
Lord Offord of Garvel
“(za) section (Mergers involving newspaper enterprises and foreign powers) (and Schedule (Mergers involving newspaper enterprises and foreign powers));”Member's explanatory statement
This amendment provides for the provision inserted by my amendments relating to foreign control of newspaper enterprises to come into force on the day on which this Bill is passed.
Lord Offord of Garvel
“(3A) In subsection (5), after “deciding” insert “whether two or more enterprises have ceased to be distinct at a time or in circumstances falling within section 24,””Member's explanatory statement
This amendment clarifies that, following other amendments made by Schedule 4 to the Bill, section 59(5) to the Enterprise Act 2002, which refers to the creation of a relevant merger situation, also includes a reference to two or more enterprises ceasing to be distinct (which is a requirement for there to be a relevant merger situation).
Lord Offord of Garvel
“ScheduleMergers involving newspaper enterprises and foreign powersIntroduction
1 In EA 2002, Part 3 (mergers) is amended as follows.Prohibition on newspaper enterprise mergers involving foreign powers
2 After Chapter 3 insert—“Chapter 3AMergers involving newspaper enterprises and foreign powers70A Intervention by the Secretary of State(1) The Secretary of State must give the CMA a notice (a “foreign state intervention notice”) if the Secretary of State has reasonable grounds for suspecting that it is or may be the case that—(a) a foreign state newspaper merger situation has been created, or(b) arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a foreign state newspaper merger situation.(2) A foreign state intervention notice must describe the foreign state newspaper merger situation to which it relates.(3) For the purposes of this Chapter a foreign state newspaper merger situation has been created where—(a) as a result of two or more enterprises ceasing to be distinct, a relevant merger situation would have been created by virtue of section 23(1) if the modifications in Schedule 6A had effect,(b) one of the enterprises concerned is a newspaper enterprise, and(c) as a result of the enterprises ceasing to be distinct, a foreign power is able to control or influence the policy of the person carrying on the newspaper enterprise, or is able to control or influence that policy to a greater extent.(4) Schedule 6B makes provision about the circumstances in which a foreign power is able to control or influence the policy of a person for the purposes of this section (and references to a foreign power being able to control or influence the policy of a person to a greater extent are to be interpreted accordingly).(5) A foreign state intervention notice—(a) comes into force when it is given, and(b) ceases to be in force when the matter to which it relates is finally determined under this Chapter (see section 70F).70B Investigation and report by the CMA(1) Where the Secretary of State gives the CMA a foreign state intervention notice, the CMA must, within such period as the Secretary of State may require, give the Secretary of State a report in relation to the case.(2) The report must include—(a) a summary of representations relevant to the case that have been received by the CMA, and(b) a decision as to whether the CMA believes that—(i) a foreign state newspaper merger situation has been created, or(ii) arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a foreign state newspaper merger situation. (3) The CMA must carry out such investigations as it considers appropriate for the purposes of producing a report under this section.(4) For the purposes of its investigation the CMA must invite representations from the enterprises concerned in the case.70C Intervention to prevent foreign control of a newspaper enterprise(1) Subsection (2) applies where the Secretary of State has received a report under section 70B stating that the CMA believes that—(a) a foreign state newspaper merger situation has been created, or(b) arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a foreign state newspaper merger situation.(2) The Secretary of State must make an order containing such provision as the Secretary of State considers reasonable and practicable for the purposes of reversing or preventing the creation of the foreign state newspaper merger situation identified in the report.(3) An order under subsection (2) may contain—(a) anything permitted by Schedule 8 (provision that may be contained in certain enforcement orders), and(b) such supplementary, consequential or incidental provision as the Secretary of State considers appropriate.(4) An order under subsection (2)—(a) comes into force at such time as is determined by or under the order, and(b) may be varied or revoked by another order.(5) Paragraph 2 of Schedule 7 (enforcement regime for public interest and special public interest cases: order for the purposes of preventing pre-emptive action)—(a) applies in relation to a foreign state intervention notice as it applies in relation to an intervention notice, and(b) for this purpose, is to be read as if—(i) sub-paragraph (10) were omitted;(ii) for sub-paragraph (12), there were substituted—“(12) In this paragraph “pre-emptive action” means action which might prejudice a foreign state intervention notice or a report under section 70B, or might impede the taking of any action under this Part in relation to such a notice or report”70D Other powers under this Part(1) Nothing in this Chapter limits the exercise of powers in relation to a foreign state newspaper merger situation under other provisions of this Part.(2) The powers in this Chapter may be exercised in relation to a foreign state newspaper merger situation regardless of whether any other power under this Part has been exercised in relation to the case.(3) The CMA must, in considering whether to make a reference under section 22 or 33, bring to the attention of the Secretary of State any case which it believes may be relevant to the duty in section 70A(1).70E Meaning of “foreign power”(1) In this Chapter, “foreign power” means—(a) the sovereign or other head of a foreign state in their public or private capacity,(b) a foreign government or part of a foreign government,(c) the head or senior members of a foreign government in their private capacity,(d) an agency or authority of a foreign government, or of part of a foreign government, (e) the head or senior members of an agency or authority of a foreign government, or of part of a foreign government, in their private capacity,(f) an authority responsible for administering the affairs of an area within a foreign country or territory, or persons exercising the functions of such an authority,(g) a political party which is a governing political party of a foreign government, or(h) the officers of a political party, which is a governing political party of a foreign government, in their private capacity.(2) A political party is a governing political party of a foreign government if persons holding political or official posts in the foreign government or part of the foreign government—(a) hold those posts as a result of, or in the course of, their membership of the party, or(b) in exercising the functions of those posts, are subject to the direction or control of, or significantly influenced by, the party.(3) In this section—“foreign country or territory” means a country or territory outside the United Kingdom, the Channel Islands, the Isle of Man or the British Overseas Territories;“foreign government” means the government of a foreign country or territory;a“government” includes persons exercising the functions of a government;“territory” includes the constituent territories of a federal state.70F Other interpretation(1) For the purposes of this Chapter, section 44(10) is to be read as if the definition of “newspaper” included a news publication circulating wholly or mainly in the United Kingdom or in a part of the United Kingdom on any periodic basis.(2) For the purposes of this Chapter, a matter is finally determined when the Secretary of State—(a) makes an order under section 70C(2), or(b) publishes under section 107 a report of the CMA under section 70B which the Secretary of State has received and which states that the CMA has decided that the CMA believes that—(i) no foreign state newspaper merger situation has been created, or(ii) no arrangements are in progress or in contemplation which, if carried into effect would result in the creation of a foreign state newspaper merger situation.70G Regulations(1) The Secretary of State may by regulations change the meaning of—(a) “foreign power”, or(b) “newspaper”,for the purposes of this Chapter.(2) Regulations under subsection (1)(a) may, among other things—(a) provide for a description of person to be treated as if they were not a foreign power, and(b) frame any such description by reference to—(i) the independence of persons from other descriptions of foreign power, or(ii) the interest which persons have in a newspaper enterprise.(3) The Secretary of State may by regulations apply any provision made by or under Chapter 1, with or without modifications, for the purposes of this Chapter (including by way of amendments to the modifications in Schedule 6A).(4) Regulations under this section may, among other things, make provision having effect on or after 13 March 2024.”3 After Schedule 6 insert—“Schedule 6ADetermination of when a foreign state newspaper merger situation has been createdApplication of sections 23 to 29
(1) Sections 23 to 29 apply for the purposes of Chapter 3A of Part 1, subject to the following modifications.(2) Section 23 is to be read as if—(a) in subsection (1), for the amount in paragraph (b), there were substituted “£2 million”;(b) in subsection (9), for paragraphs (a) and (b), there were substituted—“(a) in relation to the giving of a foreign state intervention notice, the time when the notice is given;(b) in relation to the giving of a report by the CMA under section 70B, the time of the giving of the report.”(3) Section 24 is to be read as if—(a) for subsection (1)(a) there were substituted—“(a) the two or more enterprises ceased to be distinct enterprises before the day on which—(i) in a case to which section 23(9)(a) applies, the foreign state intervention notice relating to them is given, or(ii) in a case to which section 23(9)(b) applies, the CMA gives its report relating to them under section 70B,and did so not more than four months before that day; or”;(b) in subsection (1)(b), after “distinct enterprises” there were inserted “, including facts about whether or the extent to which a foreign power is able to control or influence the policy of a person carrying on a newspaper enterprise as a result of the enterprises ceasing to be distinct enterprises,”;(c) the reference to the CMA in subsection (2)(a) included a reference to the Secretary of State;(d) for subsection (2)(b) there were substituted—“(b) it is given to the Secretary of State or the CMA more than four months before the day on which—(i) in a case to which section 23(9)(a) applies, the foreign state intervention notice relating to them is given, or(ii) in a case to which section 23(9)(b) applies, the CMA gives its report relating to them under section 70B; or(c) the facts are made public more than four months before the day on which—(i) in a case to which section 23(9)(a) applies, the foreign state intervention notice relating to them is given, or(ii) in a case to which section 23(9)(b) applies, the CMA gives its report relating to them under section 70B.”(4) Section 25 is to be read as if—(a) subsections (4) and (5) were omitted;(b) the powers to extend time-limits under section 25 were not exercisable by the CMA before the giving of a foreign state intervention notice by the Secretary of State.(5) Section 26 is to be read as if—(a) in subsection (3)—(i) “materially” were omitted; (ii) for “may, for the purposes of subsections (1) and (2), be treated” there were substituted “is to be treated, for the purposes of subsections (1) and (2),”;(b) for subsection (4) there were substituted—“(4) For the purposes of subsection (1), in so far as it relates to bringing two or more enterprises under common control, where a foreign power is already able to control or influence the policy of a person carrying on a newspaper enterprise to some extent, the foreign power is to be treated as bringing the newspaper enterprise under its control if anything is done which results in the foreign power being able to control or influence the policy of that person to a greater extent (whether by virtue of acquiring more shares or voting rights in the person, directly or indirectly, or otherwise).”(6) Section 27 is to be read as if—(a) references to the “decision-making authority” were to “the CMA or the Secretary of State”;(b) in subsection (5), for “a reference” there were substituted “deciding whether or when a foreign state newspaper merger situation has been created”.(7) Section 28 is to be read as if, in subsection (4), the reference to the “decision-making authority” were to “the CMA or the Secretary of State”.(8) Section 29 is to be read as if—(a) in subsection (1)—(i) the reference to the “decision-making authority” were to “the CMA or the Secretary of State”;(ii) for “a reference” there were substituted “deciding whether or when a foreign state newspaper merger situation has been created”;(b) in subsection (2)(a)(i) “materially” were omitted;(c) in subsection (2)(a)(ii), for “degree” there were substituted “extent”;(d) subsection (2)(b) and (3) were omitted.Application of the Enterprise Act 2002 (Anticipated Mergers) Order 2003 (S.I. 2003/1595)
(1) The Enterprise Act 2002 (Anticipated Mergers) Order 2003 applies for the purposes of Chapter 3A of Part 1, subject to the following modifications.(2) In Article 3, the words before paragraph (a) are to be read as if, for “in relation to references and notices”, there were substituted “for the purposes of Chapter 3A of Part 1 of the Act”.(3) Article 3(a) is to be read as if—(a) in the substituted version of section 27(5), for “a reference” there were substituted “deciding whether or when a foreign state news paper merger situation will be created”;(b) the substituted version of section 27(6)(a)(i), for “the reference” there were substituted “the foreign state intervention notice relating to the situation”.(4) Article 3(b) is to be read as if—(a) in the substituted section 29(2)(a)(i), “materially” were omitted;(b) in the substituted section 29(2)(a)(ii), for “degree” there were substituted “extent”;(c) in the substituted section 29(4), for “the reference” there were substituted “the foreign state intervention notice”.Schedule 6BControl or influence of a person by a foreign powerPart 1Conditions for control or influence(1) A foreign power is able to control or influence the policy of a person for the purposes of section 70A if one or more of the following conditions is met. (2) Condition 1 is that the foreign power holds, directly or indirectly, any of the shares in the person.(3) Condition 2 is that the foreign power holds, directly or indirectly, any of the voting rights in the person.(4) Condition 3 is that the foreign power holds the right, directly or indirectly, to appoint or remove an officer of the person.(5) Condition 4 is that the foreign power has the right or ability to direct, control or influence to any extent, the person's policy or activities (in whole or in part, and whether directly or indirectly), despite not meeting condition 1, 2 or 3.(6) Condition 5 is that—(a) the trustees of a trust, or the members of a partnership, unincorporated association or other entity, that is not a legal person under the law by which it is governed, would, if they were a foreign power, meet one or more of conditions 1 to 4 (in their capacity as such) in relation to the person, and(b) the foreign power has the right or ability to direct, control or influence to any extent the activities of that trust or entity (in whole or in part, and whether directly or indirectly), or has any other interest in, or right over or in relation to, the trust or entity, or any of the trustees of the trust or the members of the entity, whether directly or indirectly.2 In this Schedule, “officer”—(a) in relation to a body corporate, means a director, member of the committee of management, chief executive, manager, secretary or other similar officer of the body, or a person purporting to act in any such capacity;(b) in relation to a partnership, means a partner, a person purporting to act as a partner or a person concerned in the management or control of the partnership or who purports to act in the capacity of a person so concerned;(c) in relation to an unincorporated association other than a partnership, means a person who is concerned in the management or control of the association or purports to act in the capacity of a person so concerned.Part 2InterpretationInterpretation
3 This Part makes provision about the interpretation of this Schedule.Joint interests
4 If a foreign power holds a share or right jointly with another person (whether or not a foreign power), each of those persons is to be taken to hold that share or right.Joint arrangements
5 (1) If shares or rights held by a foreign power and shares or rights held by another person (whether or not a foreign power) are the subject of a joint arrangement between those persons, each of those persons is to be taken to hold the combined shares or rights of both persons.(2) A “joint arrangement” is an arrangement between the holders of shares (or rights) that they will exercise all or substantially all the rights conferred by their respective shares (or rights) jointly in a way that is pre-determined by the arrangement.(3) For the meaning of “arrangement”, see paragraph 12.Calculating shareholdings
6 (1) In relation to a person that has a share capital, a reference to holding any of the shares in that person is to holding any shares comprised in the issued share capital of that person. (2) In relation to a person that does not have a share capital, a reference to holding any of the shares in that person is to holding a right to share to any extent in the capital or, as the case may be, profits of that person.Voting rights
7 (1) A reference to the voting rights in a person is to the rights conferred on shareholders in respect of their shares (or, in the case of a person not having a share capital, on members) to vote at general meetings of the person on all or substantially all matters.(2) In relation to a person that does not have general meetings at which matters are decided by the exercise of voting rights, a reference to exercising voting rights in the person is to be read as a reference to exercising rights in relation to the person that are equivalent to those of a person entitled to exercise voting rights in a company.8 In applying this Schedule, voting rights in a person held by the person itself are to be disregarded.Shares or rights held “indirectly”
9 (1) A foreign power holds a share “indirectly” if the foreign power has any stake in a person and that person—(a) holds the share in question, or(b) is part of a chain of persons—(i) each of which (other than the last) has any stake in the person immediately below it in the chain, and(ii) the last of which holds the share.(2) A foreign power holds a right “indirectly” if the foreign power has any stake in a person and that person—(a) holds that right, or(b) is part of a chain of persons—(i) each of which (other than the last) has any stake in the person immediately below it in the chain, and(ii) the last of which holds that right.(3) For the purposes of sub-paragraphs (1) and (2), a person (“A”) has “any stake” in another person (“B”) if—(a) A holds any shares or voting rights in B,(b) A is a member of B and has the right to appoint or remove an officer of B,(c) A is a member of B and controls alone, or pursuant to an agreement with other shareholders or members, any of the voting rights in B, or(d) A has the right or ability to control or influence B to any extent, despite not being within paragraph (a), (b) or (c).Shares held by nominees
10 A share held by a person as a nominee for another is to be treated as held by the other (and not by the nominee).Rights treated as held by person who is able to control their exercise
11 (1) Where a person controls a right, the right is to be treated as held by that person (and not by the person who in fact holds the right, unless that person also controls it).(2) A person “controls” a right if, by virtue of any arrangement between that person and others, the right is exercisable only—(a) by that person,(b) in accordance with that person’s directions or instructions, or(c) with that person’s consent or concurrence. Arrangements
12 (1) For the purposes of this Schedule, “arrangement” includes—(a) any scheme, agreement or understanding, whether or not it is legally enforceable, and(b) any convention, custom or practice of any kind.(2) But something does not count as an arrangement unless there is at least some degree of stability about it (whether by its nature or terms, the time it has been in existence or otherwise).Rights exercisable only in certain circumstances etc
13 (1) Rights that are exercisable only in certain circumstances are to be taken into account only—(a) where the circumstances have arisen, and for so long as they continue to obtain, or(b) when the circumstances are within the control of the person having the rights.(2) But rights that are exercisable by an administrator or by creditors while a person is in relevant insolvency proceedings are not to be taken into account even while the person is in those proceedings.(3) “Relevant insolvency proceedings” means—(a) administration within the meaning of the Insolvency Act 1986,(b) administration within the meaning of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or(c) proceedings under the insolvency law of another country or territory during which a person’s assets and affairs are subject to the control or supervision of a third party or creditor.(4) Rights that are normally exercisable but are temporarily incapable of exercise are to continue to be taken into account.Rights attached to shares held by way of security
14 Rights attached to shares held by way of security provided by a person are to be treated for the purposes of this Schedule as held by that person—(a) where apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in accordance with that person’s instructions, and(b) where the shares are held in connection with the granting of loans as part of normal business activities and apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in that person’s interests.Part 3Power to amend circumstances in which there is control or influence15 (1) The Secretary of State may by regulations make provision—(a) to change (by increasing or decreasing) the proportion of shares or rights which a foreign power must hold in a person carrying on a newspaper enterprise, whether directly or indirectly, in order for the foreign power to be able to control or influence the policy of a person for the purposes of section 70A;(b) to change (by increasing or decreasing) the proportion of shares or rights which is to be held by persons in a chain of persons for the purposes of determining whether shares or rights are held indirectly;(c) about assumptions which are to be made when determining whether a foreign power is able to control or influence the policy of a person, including assumptions framed by reference to the ownership of shares or voting rights by any person; (d) about the extent to which a foreign power needs to be able to control or influence the policy of a person in order to control or influence that policy for the purposes of section 70A, including provision about a foreign power that is already able to control or influence the policy of a person to some extent being able to control or influence that policy to a greater extent;(e) to change or supplement Part 1 of this Schedule so as to include circumstances (for example, circumstances involving more complex structures) that give a foreign power a level of control or influence in relation to the policy of a person broadly similar to the level of control or influence given by the conditions in paragraph 1;(f) in consequence of any provision made by virtue of paragraph (e), to change or supplement Part 2 of this Schedule so that circumstances specified in that Part in which a person is to be regarded as holding an interest in another person correspond to any of the conditions in paragraph 1, or would do so but for the extent of the interest.(2) The provision that may be made under this paragraph, read with section 124(2)(a), includes—(a) different provision for different descriptions of foreign power, and(b) different provision for different persons or descriptions of person in a chain of persons.(3) Regulations under this paragraph may, among other things—(a) confer a discretion on the CMA;(b) make provision having effect on or after 13 March 2024.”Further amendments
(1) In section 86 (enforcement orders: general provisions), in subsection (6), after “section” insert “70C,”.(2) In section 88 (contents of certain enforcement orders), in subsection (1), after “section” insert “70C, ”.(3) In section 94(8) (rights to enforce certain orders)—(a) after “made by the Secretary of State under” insert “section 70C(2),”;(b) for “paragraph 2 of that Schedule” substitute “paragraph 2 of Schedule 7”.(4) In section 107 (further publicity requirements)—(a) in subsection (3), after paragraph (g) insert—“(ga) any foreign state intervention notice given by the Secretary of State;(gb) any report of the CMA under section 70B which the Secretary of State has received;”(b) after subsection (11) insert—“(12) The Secretary of State must publish any report of the CMA under section 70B which the Secretary of State has received within the period of 7 days beginning with the day on which the Secretary of State receives the report.”(5) In section 109 (attendance of witnesses and production of documents etc), in subsection (A1)(b), at the end insert “or a foreign state intervention notice under section 70A”.(6) In section 110A (restriction on powers to impose penalties under section 110), after subsection (8) insert—“(8A) Where the section 109 power is exercised for the purpose mentioned in section 109(A1)(b) in connection with a matter that is the subject of a foreign state intervention notice under section 70A, the relevant day is the day when the matter to which the notice relates is finally determined under Chapter 3A (see section 70F).” (7) In section 118 (excisions from reports), in subsection (1)—(a) omit the “or” at the end of paragraph (aa), and(b) at the end of paragraph (b) insert “, or(c) a report of the CMA under section 70B.”(8) In section 120 (review of decisions under Part 3), in subsection (1A), after paragraph (a) insert—“(aa) a decision of the CMA or the Secretary of State in connection with a foreign state newspaper merger situation;”.(9) In section 124 (orders and regulations under Part 3)—(a) in subsection (3)—(i) after “59(6A)” insert “, 70G”;(ii) after “above)” insert “, or paragraph 15 of Schedule 6B,”;(b) in subsection (5), after “65(3)),” insert “70C”;(c) after subsection (6) insert—“(6A) A statutory instrument containing regulations under section 70G or paragraph 15 of Schedule 6B may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”(d) in subsection (10), after “58(3)” insert “or 70G, or paragraph 15 of Schedule 6B”.(10) In section 127 (associated persons), in subsection (1)—(a) omit the “and” at the end of paragraph (aa), and(b) after that paragraph insert—“(ab) for the purposes of section 70A(3);”(11) In section 129 (other interpretation provisions), in subsection (1), at the appropriate place insert—““foreign state intervention notice” means a notice under section 70A(1);“foreign state newspaper merger situation” is to be interpreted in accordance with section 70A(3);”(12) In the table in section 130 (index of defined expressions), at the appropriate place insert—
“Foreign state intervention notice | Section 70A(1) |
Foreign state newspaper merger situation | Section 70A(3)” |
See my amendment inserting a new clause after clause 129.
Lord Offord of Garvel
Member's explanatory statement
This amendment is consequential on my amendment inserting a new Schedule after Schedule 6.
Lord Offord of Garvel
“(6) For subsection (6A) substitute—”Member's explanatory statement
This amendment is consequential on my amendment inserting a new Schedule after Schedule 6.
Member's explanatory statement
This amendment is consequential on my amendment inserting a new Schedule after Schedule 6.
Member's explanatory statement
This amendment is consequential on my amendment inserting a new Schedule after Schedule 6.
Lord Offord of Garvel (Con)
My Lords, I add my thanks to all noble Lords who have been involved in the diligent scrutiny we have given the Bill in recent months. The Digital Markets, Competition and Consumers Bill will drive innovation and deliver better outcomes for consumers by addressing barriers to competition in digital markets and tackling consumer rip-offs. I am very grateful to noble Lords for the dedication, attention and time that they have given to the Bill before your Lordships’ House.
I want to express my particular appreciation to Members on the Front Benches, including the noble Baroness, Lady Jones of Whitchurch, and the noble Lords, Lord Stevenson of Balmacara, Lord Bassam of Brighton, Lord Clement-Jones and Lord Fox, for the courteous and constructive manner in which they have engaged with me on the Bill. I wish to extend my sincere thanks to my noble friends Lady Stowell and Lady Harding of Winscombe, and to the noble Baroness, Lady Kidron, for their invaluable contributions and clarity of views both during the debate and outside it. I emphasise my gratitude to the noble Lords, Lord Faulks, Lord Tyrie, Lord Kamall, Lord Holmes of Richmond, Lord Lansley, Lord Vaizey of Didcot, and the noble Viscount, Lord Colville of Culross, for their detailed consideration of Part 1 of the Bill. I am very grateful to them all; they have asked important questions and given much time and energy to the Bill, and it is a better Bill for that.
My noble friend Lord Lindsay and the noble Baronesses, Lady Crawley, Lady Bakewell and Lady Hayman, have championed consumer issues, for which I am most grateful. I also pay tribute to the noble Baroness, Lady Bennett of Manor Castle, for raising the important issue of net zero.
On Report, the Government made a number of amendments to the Bill with regards to subscription contracts. I thank my noble friends Lord Black of Brentwood and Lord Lucas for their engagement and collaboration on these issues. I am also most grateful to my noble friend Lord Mendoza for his work in highlighting the Bill’s impact on the ability of charities to claim gift aid.
On the issue of foreign states acquiring UK news organisations, to which my noble friend Lord Parkinson has spoken, I again thank my noble friend Lady Stowell of Beeston and the noble Lords, Lord Forsyth of Drumlean and Lord Robertson of Port Ellen, who so passionately highlighted the principle of freedom of the press.
I conclude by recording my gratitude for the invaluable support and assistance of my noble friend Lord Camrose. I put on the record my thanks to the Bill team, my private office, and all the officials and lawyers in the Department for Business and Trade, the Department for Science, Innovation and Technology, and the Competition and Markets Authority, who have provided such thorough support and expertise. I beg to move that the Bill do now pass.
Baroness Stowell of Beeston (Con)
I hesitate to rise, because I realise I am probably testing the patience of the House, having already spoken in Third Reading. I just wanted to say a couple of things.
I thank my noble friends Lord Camrose and Lord Offord on the Front Bench for their work on this Bill. As they will know, this is legislation for which the Communications and Digital Committee has been calling for several years—it started under the chairmanship of my predecessor, my noble friend Lord Gilbert. It is something that I have been pleased to take a very active involvement in, and I am very pleased to support it passing.
As we think about what this Bill is trying to achieve and why, it is worth also remembering why we in the UK are forging a different path from the ones that Europe and the US are on. In the last few days, we have seen the US DoJ launch a major anti-trust lawsuit against Apple. In the EU, the Commission is taking serious measures against some of the big tech firms to make them comply with the spirit and letter of its new Digital Markets Act. Both situations have an ominous sense of being exactly the kind of lengthy legal battles that favour big tech, which we are trying to avoid.
The House has rightly voted on a number of measures to try to ensure that our regulation can work as it is meant to, in a timely, proportionate and less confrontational manner. That is what the Government are seeking to do with this legislation.
As the Bill leaves here and enters its final stage, I emphasise two measures from among the amendments passed by this House. First, the deadline for the Secretary of State to approve CMA guidance is key in keeping things on track and avoiding concerning delays. Secondly, if the Government and the Commons cannot accept the amendments to revert the appeals process on fines back to JR standard, I hope that my noble friends within government will consider putting a clarification in the Bill that the appeals process on fines cannot be changed in ways that undermine the JR standard or open up avenues for more expansive and protracted legal challenge.
That aside, I am grateful to the Government for bringing forward this important legislation. It will mark out our regulatory regime as different from those in other parts of the world that are having such a big impact—and not necessarily in good ways.
Lord Clement-Jones (LD)
My Lords, it is a pleasure to follow the noble Baroness, Lady Stowell. I agree with a huge amount of what she said.
I reiterate the welcome that we on these Benches gave to the Bill at Second Reading. We believe it is vital to tackle the dominance of big tech and to enhance the powers of our competition regulators to tackle it, in particular through the new flexible pro-competition powers and the ability to act ex ante and on an interim basis.
We were of the view, and still are, that the Bill needs strengthening in a number of respects. We have been particularly concerned about the countervailing benefits exemption under Clause 29. This must not be used by big tech as a major loophole to avoid regulatory action. A number of other aspects were inserted into the Bill on Report in the Commons about appeals standards and proportionality. During the passage of the Bill, we added a fourth amendment to ensure that the Secretary of State’s power to approve CMA guidance will not unduly delay the regime coming into effect.
As the noble Baroness, Lady Stowell, said, we are already seeing big tech take an aggressive approach to the EU Digital Markets Act. We therefore believe the Bill needs to be more robust in this respect. In this light, it is essential to retain the four key amendments passed on Report and that they are not reversed through ping-pong when the Bill returns to the Commons.
I thank both Ministers and the Bill team. They have shown great flexibility in a number of other areas, such as online trading standards powers, fake reviews, drip pricing, litigation, funding, cooling-off periods, subscriptions and, above all, press ownership, as we have seen today. They have been assiduous in their correspondence throughout the passage of the Bill, and I thank them very much for that, but in the crucial area of digital markets we have seen no signs of movement. This is regrettable and gives the impression that the Government are unwilling to move because of pressure from big tech. If the Government want to dispel that impression, they should agree with these amendments, which passed with such strong cross-party support on Report.
In closing, I thank a number of outside organisations that have been so helpful during the passage of the Bill—in particular, the Coalition for App Fairness, the Public Interest News Foundation, Which?, Preiskel & Co, Foxglove, the Open Markets Institute and the News Media Association. I also thank Sarah Pughe and Mohamed-Ali Souidi in our own Whips’ Office. Last, but certainly not least, I thank my noble friend Lord Fox for his support and—how shall I put it?—his interoperability.
Given the coalition of interest that has been steadily building across the House during the debates on the Online Safety Bill and now this Bill, I thank all noble Lords on other Benches who have made common cause and, consequently, had such a positive impact on the passage of this Bill. As with the Online Safety Act, this has been a real collaborative effort in a very complex area.
Baroness Jones of Whitchurch (Lab)
My Lords, before the Bill passes, I put on record my thanks to the Ministers—the noble Viscount, Lord Camrose, and the noble Lord, Lord Offord—as well as the noble Lord, Lord Parkinson, who made a guest appearance. I also put on record my huge appreciation for the Bill team for their timely letters and briefings, and their immense good humour when we asked for even more information.
The whole experience has been a good illustration that, when we fully engage in discussion on a Bill, we can deliver genuine improvements that have broad support. I hope that our colleagues in the Commons appreciate the careful thought and hard work that is behind these changes. I hope that we do not have to be here again on this Bill, but I reiterate that our door is always open if further discussions would help. For now, I hope that the Bill will soon be on the statute book and I look forward to its progress.
Digital Markets, Competition and Consumers Bill
Tuesday 30th April 2024
(2 months, 4 weeks ago)
Commons ChamberRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Commons Consideration of Lords Amendments as at 30 April 2024 - (30 Apr 2024)
15:59 - The House divided: - Ayes: 273 / Noes: 159 - Question accordingly agreed to.
16:13 - The House divided: - Ayes: 276 / Noes: 161 - Question accordingly agreed to.
16:26 - The House divided: - Ayes: 274 / Noes: 162 - Question accordingly agreed to.
16:39 - The House divided: - Ayes: 272 / Noes: 162 - Question accordingly agreed to.
16:52 - The House divided: - Ayes: 273 / Noes: 163 - Question accordingly agreed to.
Mr Deputy Speaker (Sir Roger Gale)
I must draw the House’s attention to the fact that financial privilege is engaged by Lords amendments 35, 36, 42, 112, 117, 128 and 132 to 134. If those Lords amendments are agreed to, I will cause the customary entry waiving Commons financial privilege to be entered in the Journal.
Clause 19
Power to impose conduct requirements
The Minister of State, Department for Business and Trade (Kevin Hollinrake)
I beg to move, That this House disagrees with Lords amendment 9.
Mr Deputy Speaker
With this it will be convenient to discuss:
Lords amendment 12, and Government motion to disagree.
Lords amendment 13, and Government motion to disagree.
Lords amendment 19, and Government motion to disagree.
Lords amendment 26, and Government motion to disagree.
Lords amendment 27, and Government motion to disagree.
Lords amendment 28, and Government motion to disagree.
Lords amendment 31, and Government motion to disagree.
Lords amendment 32, and Government motion to disagree.
Lords amendment 38, Government motion to disagree, and Government amendment (a) in lieu.
Lords amendment 104, and Government motion to disagree.
Lords amendments 1 to 8, 10, 11, 14 to 18, 20 to 25, 29 to 30, 33 to 37, 39 to 103 and 105 to 148.
Kevin Hollinrake
It is a pleasure to bring this groundbreaking Bill back to the House. It will drive innovation and deliver better outcomes for consumers across the UK by addressing barriers to competition in digital markets and tackling consumer rip-offs. We believe it strikes the right balance, not deterring investment from big tech while encouraging investment from challenger tech. I thank Members of both Houses for their careful scrutiny and I commend the collaborative cross-party approach taken during the Bill’s passage to date.
I will start with the amendments that the Government made in the other place. They add vital new provisions to the Bill and I hope hon. Members will agree to them. Part 1 of the Bill establishes a new pro-competition regime for digital markets, which will be overseen and enforced by the Competition and Markets Authority’s digital markets unit. Following engagement with Members in the other place, we have bolstered transparency provisions to require the CMA to publish more of the notices provided to firms designated with strategic market status, or SMS.
All interested parties will now be able to access the information contained in those notices, ensuring that there is greater clarity on the DMU’s decisions relating to SMS designation, conduct requirements and pro-competition interventions. A number of hon. Members have called for provisions addressing asymmetry of information to be introduced to the Bill, so we hope this change will be welcomed.
On part 2 of the Bill, which deals with wider competition reforms, hon. Members will recall that on Report the Government added a provision on litigation funding, whose purpose was to restore the previously held understanding of the status of litigation funding agreements under the Competition Act 1998. Those provisions were important in providing a route to justice for groups with limited resources—for example, our sub-postmasters.
That step was taken in response to an earlier Supreme Court judgment that had made litigation funding agreements unenforceable. The Government have since acted by introducing the Litigation Funding Agreements (Enforceability) Bill, which will deliver on our commitment to addressing the impacts of that judgment in all types of proceedings. Consequently, the provisions in this Bill have been removed, as they are no longer required.
We also introduced new measures to part 2 to address concerns about the potential ownership of UK newspapers and news magazines by foreign states, as we heard very recently from the Secretary of State for Culture, Media and Sport. The Government know that we cannot overstate the importance of those publications to our democracy and have therefore taken decisive action to preserve the freedom of the press. By establishing a new regime within the Enterprise Act 2002, the Bill will prevent foreign states from having ownership of, or control or influence over, a UK newspaper or news magazine.
The Government are extremely grateful for the support offered by Members of both Houses in the development of these new measures. In particular, we thank Baroness Stowell of Beeston and Lord Forsyth of Drumlean for their engagement, and my hon. Friend the Member for Rutland and Melton (Alicia Kearns), who first secured a debate on the issue in January.
Parts 3 and 4 make important updates and improvements to UK consumer law. Having consulted on a series of reforms at the end of last year, the Government amended the Bill in the other place to introduce new measures that address fake reviews and drip pricing. Many hon. Members called for the Government to address those harms through the Bill, and I am pleased to say that we have been able to do so, following our public consultation.
We have also made amendments to further strengthen the ability of public bodies to enforce consumer law. We did so by extending so-called take-down powers to a wider range of enforcers. There has been a healthy debate in both Houses about the measures in the Bill aimed at tackling subscription traps. We listened carefully to the concerns expressed in the other place about the potential impact of those measures on charities and their ability to claim gift aid. In response, the Government amended the Bill to enable the Treasury to update gift aid rules. That mitigates any concerns about the Bill’s impact on charities. We are grateful to Lord Mendoza for highlighting the issue and for his engagement.
We also made a series of amendments to provide greater assurance and clarity for businesses about the new subscription measures, including addressing concerns about exiting contracts, cancellations, reminder notices and cooling-off periods. I hope that hon. Members agree that the amendments improve the Bill.
Sarah Olney (Richmond Park) (LD)
The Liberal Democrats welcome the fact that the Government are finally acting on the CMA’s recommendation, but will the Government support amendment 104, which is backed by the Liberal Democrats? It is about imposing requirements on secondary ticket sites. Often, people purchasing tickets from the sites do so at huge mark-ups on the face value of the ticket, and the ticket in question does not actually exist. The amendment would address those issues, reducing the risk of fraud by requiring proof of purchase. Does the Minister agree that we must do everything we can to ensure that this legislation is as robust as possible, to crack down on this type of fraud?
Kevin Hollinrake
I thank the hon. Lady for her intervention and for the amendment, which I will speak to in a moment. The Government have agreed to undertake a review of both primary and secondary markets, and I will deal with those issues later in my remarks. [Interruption.] I hear from the shadow Front-Bench spokespeople, but I think that is something that Labour proposed in earlier amendments, so obviously they have changed their position on that issue—not for the first time.
Finally, the Government made a number of minor amendments to the Bill in the other place. The majority are tidying-up measures, or otherwise small tweaks to the Bill, to ensure that it achieves its policy intent as effectively as possible.
I will now set out the Government’s position on the 11 non-Government amendments that were made to the Bill in the other place. The majority of the amendments seek to reverse or alter amendments made to the digital markets part of the Bill on Report in this House. There were three aims behind the Government’s package of amendments on Report in the Commons: first, to provide greater clarity to parties interacting with the regime; secondly, to strengthen the regime’s safeguards for the extensive new regulatory powers; and thirdly, to enhance the accountability of the regulator. The Government tabled the amendments following careful consideration of the views expressed by hon. Members across the House. We remain convinced that our amendments struck the right balance between the accountability of the CMA’s regulatory decisions and the flexibility to allow for targeted and proportionate action that tackles the unique competition challenges in digital markets.
Sir Robert Buckland (South Swindon) (Con)
My hon. Friend is right that the amendments that were agreed on Report in this House struck the right balance, and I am afraid that on this occasion I wholly disagree with the way their lordships characterised the matter in their debate. We are not arguing for a wholesale replication of the telecoms regime; we are simply making sure that, particularly with regard to penalties, which will be pretty onerous—and rightly so—there is proper discretion to allow a reviewing tribunal and reviewing court to consider the matter carefully, in a way that balances out the need for rigour and for temper when it comes to the power of the regulator.
Kevin Hollinrake
I thank my right hon. and learned Friend for his intervention and his earlier engagement, when he made his position on that point clear. He is right to say that penalties can be significant—up to 10% of global turnover—so it is fair that we allow organisations to challenge penalties on the merits of the case, but maintain the ability to impose pro-competition interventions and conduct requirements on platforms. The amendments made in the other place risk undermining that careful balance. For example, amendments to revert the appeals standard for fines to judicial review principles, to which my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland) referred, would remove a valuable safeguard on the significant new powers that the Bill gives the CMA, as would the removal of the requirement on the CMA to act proportionately. Meanwhile, amendments to the countervailing benefits exemption risk making the exemption less clear for stakeholders. Consequently, the Government have tabled a motion to disagree with those amendments.
Damian Collins (Folkestone and Hythe) (Con)
The point about a “proportionate” response is relevant. In the original drafting of the Bill, the word used was “appropriate.” The Government changed that to “proportionate” on Report in this House, and the Lords have sought to reverse that change. What does the Minister think was disproportionate, if you like, about the word “appropriate”? What about it struck the wrong balance? Ministers keep saying that they think things strike the right balance, but they never really explain why.
Kevin Hollinrake
We have engaged significantly, throughout the Bill’s passage and before it was introduced, with large tech and challenger tech. Our understanding is that all those cohorts are happy with where the Bill is today. Certainly, during that engagement, concerns were raised about the term “appropriate,” but the clear position that we expressed to those who raised that concern was, “Of course, there is a requirement on the CMA to act proportionately.” Putting that in the Bill does not undermine its basic principles. In fact, we understand from the situation in the European Court of Human Rights, and the property rights emanating from it, that all those things are baked in anyway, so we do not feel that the wording weakens the legislation at all, but it does strike the right balance between those two different courts.
Sir Jeremy Wright (Kenilworth and Southam) (Con)
It is clearly important that we understand what “proportionate” means in this context. Is the Government’s position that proportionality implies that there is more for the CMA to think about than just how effectively the imposition of a conduct requirement would fulfil the CMA’s requirements? If so, what can the Government do to make that clear, so that courts and tribunals that consider such cases do not fill in the gaps themselves? The words “appropriate” and “proportionate” could be interpreted quite widely if the Government are not clear about what they mean by them.
Kevin Hollinrake
My right hon. and learned Friend will know from his legal background that the term “proportionate” is well established in law. Of course, the courts play an important part here. We do not prescribe everything in our legislation; there is quite rightly the opportunity for people to challenge certain decisions by the CMA. Clearly, we are trying to reduce the ability of large tech to prevent investment from smaller tech. That is the balance that we are striking, but we do not want to discourage investment from big tech, so the requirement for the CMA to act proportionately is reasonable.
Sir John Whittingdale (Maldon) (Con)
The Minister suggested that stakeholders were now satisfied with the Bill. I can tell him that there is concern about the change from “appropriate” to “proportionate.” The fear is that it will enable the courts to look more broadly, and will allow more scope for challenge than was intended when the term “appropriate” was used. Can he confirm that that is not the Government’s intention?
Kevin Hollinrake
It is not our intention. Our intention is to strike a balance. As I have said, the courts’ approach to proportionality was set out by the Supreme Court in Bank Mellat v. Her Majesty’s Treasury (No. 2), when the Court described the elements to be considered, including, most notably,
“whether a less intrusive measure could have been used”
and whether there is a fair balance between the intended objectives of the measure and the effects on the business that the measure applies to. That is a sensible balance to strike. Of course, some stakeholders want to go further in certain directions, while others do not want us to go as far, and we are trying to strike that balance. We welcome big tech’s investment in the UK, but we also welcome investment by challenger tech, and through this groundbreaking Bill—the only one of its kind in the world—we are striking that balance.
We have listened carefully to arguments relating to the Secretary of State’s approval of CMA guidance. Lords amendment 38, which was tabled by Lord Lansley, adds a timeline for the Secretary of State approving CMA guidance relating to the new regime. In response, we have tabled amendment (a) in lieu, which would achieve a similar effect by introducing a statutory 30-working-day timeline for the Secretary of State to approve the necessary guidance. We believe that that addresses concerns about the ability of the digital markets regime to start tackling competition problems without delay. We hope that hon. Members will support amendment (a).
On secondary ticketing, a non-Government amendment —to which the hon. Member for Richmond Park (Sarah Olney) referred—was made in the other place to the consumer part of the Bill. Amendment 104, which was tabled by Lord Moynihan, seeks to introduce additional regulatory requirements on ticket resale sites. Those requirements would cover proof of purchase, ticket limits and the visibility of certain required information, such as the face value of a ticket. Both Lord Moynihan and the hon. Member for Washington and Sunderland West (Mrs Hodgson) have spoken passionately on that topic during proceedings on the Bill. We are hugely grateful for their work highlighting the malpractice in the resale market.
To be clear, the Government are absolutely committed to protecting consumers from fraudulent activity in the secondary ticketing market. However, it is our view that protections for consumers are already provided by existing consumer law. The law imposes specific information requirements in relation to secondary ticketing that go above and beyond those in general consumer law. That includes the requirement for all resellers—be they traders or consumers—and secondary ticketing platforms to inform a buyer about the face value of a ticket and the restrictions on its use. The Government’s position is therefore that the secondary ticketing market is already suitably regulated. That said, we recognise the strength of feeling on this matter, which has been expressed by Members of the other place and in certain quarters of this House, so we commit today to undertaking a review of ticketing practices and how they impact on consumers. The review will look at both primary and secondary markets—in other words, sellers and resellers. We believe it important to consider both markets together.
Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)
I am very grateful to the Minister for giving way. I know that we have debated this point before, and I will discuss it further in my contribution, but I make the point again that there may be legislation, but it is not working. There have been only two prosecutions in all the time since the Consumer Rights Act 2015 was passed. If further legislation was not needed, why did we bring in legislation to protect tickets for the Olympics?
Kevin Hollinrake
It is not right to say that there have been only two prosecutions—
Kevin Hollinrake
I will just finish this answer. There have been two sentences. Two people got a £6.1 million fine. There were four more successful prosecutions in Leeds Crown court only very recently, and sentence is due to be imposed on those individuals. The hon. Lady raises important points, and did great work on the all-party parliamentary group, and I will always listen to her. We are undertaking a review looking at primary and secondary markets, and she will have every chance to give her input to that review, just as anybody else will. I look forward to hearing her representations.
Barbara Keeley (Worsley and Eccles South) (Lab)
The Government claim that they are doing enough, but that is just not the case. Here is an example for the Minister: on secondary ticketing sites, three tickets for the Taylor Swift show on 21 June are going for £72,000. They had a face value of £170 each. How is the market working?
Kevin Hollinrake
I agree that some of the examples are shocking. The key question is what measures we will put in place to address them. Ireland, for example, completely banned secondary sales, yet the prices seen on the internet are equivalent to what the hon. Lady describes, so there is no perfect solution that has already been tried. However, we are very happy to look at the evidence, look at what might be done, and do something that is effective, rather than crowd-pleasing. That is what we are committed to doing.
The reality is that some organisers are simply much more successful than others at preventing large-scale unauthorised resales. The ticket market is clearly evolving rapidly. Our review will therefore consider evidence from businesses and platforms operating in ticketing and resale markets, as well as venues, artists, enforcers and consumers. The Government intend the review to take place over nine months, after which we will consider any appropriate further action. [Hon. Members: “You won’t be there.”] Members who are commenting from a sedentary position should beware of overconfidence.
I very much hope that hon. Members will support the Government’s position today. I especially hope that Members in both Houses will note our movement in two important areas: the Secretary of State’s approval of CMA guidance for the new digital markets regime, and secondary ticketing. These changes are considered and balanced, and I urge Members in the other place to consider their position on the other amendments that our motions today seek to reject. Throughout the Bill’s passage, the Government have listened carefully to the arguments presented, and in response, we have made a series of significant changes where we recognise that improvements could be made. It is important that we now reach full consensus on the Bill’s final form, so that it reaches the statute book without further delay.
Sir Chris Bryant (Rhondda) (Lab)
First, I pay tribute to my much-loved neighbour, my hon. Friend the Member for Pontypridd (Alex Davies-Jones), who led for Labour during the last round of proceedings on the Bill, and to my hon. Friend the Member for Feltham and Heston (Seema Malhotra), who led for us when the Bill was introduced.
Might I say a few words about the Minister? I do love the Minister. Members sitting on the Government Back Benches will not have been able to see the little wry smile playing on his face as he made his speech. Unfortunately, Hansard is not able to record that element of the way he presented his case. I will let the House into a secret: there are two versions of the Minister, or rather the Member. There is the Back-Bench Member, who I passionately agree with on nearly everything, and then there is the Government Minister, who has the Back-Bench Member sitting inside him somewhere, but has managed to lose him while taking on corporate and shared responsibility on the Government Front Benches. I bet that if he were in the Parliament that follows the next general election, and we debated these matters all over again, he would be articulating what I am about to say almost word for word, but today, he has articulated the Government position.
Sir Chris Bryant
Of course I will, to the right hon. Gentleman—another gentleman for whom I have a great deal of respect, and with whom I occasionally disagree.
Sir John Whittingdale
I just wonder whether the transformation that the hon. Gentleman describes, which occurs when somebody moves from the Back Benches to the Front Bench, applies equally to the Opposition and the Government.
Sir Chris Bryant
The right hon. Gentleman knows more about bobbing between the Back Benches and the Front Bench than most Members of Parliament in history, I think. It is obviously a problem; I do believe in shared responsibility of Government—we want Governments to act as a single body, and not irresponsibly—so I understand, but none the less, it is perfectly appropriate to tease the Minister when he has such a wry smile on his lips.
This Bill is a classic instance of how the Tory chaos of the past few years has been bad for Britain. It is long overdue, as the Minister said: it started in the Commons more than a year ago, on 25 April 2023, and it is so delayed that the carry-over motion had to be carried over. I cannot remember that happening for many years, but the Government had to do it last week. The Bill used to strike the right balance between the needs of different parts of the market, but the right hon. Member for Maldon (Sir John Whittingdale) was absolutely right to say that many stakeholders are certainly not happy with where the Government have landed. Intense lobbying of Downing Street from some parts of the market has led to the Government tabling amendments that would fatally undermine the Bill’s purpose and make it impossible for the CMA to do the job that we want it to do, namely, ensure fair competition in digital markets in the interests of consumers, investors and wider society.
Sir Jeremy Wright
How would a tribunal consider the appropriateness of a CMA intervention without considering the detail and merit of it?
Sir Chris Bryant
The point is that either the change is necessary because a new and different measure is being adopted by the Government, in which case it is a lower threshold and therefore inappropriate, or the change makes no difference whatsoever, in which case it is unnecessary. The normal standards for deciding whether an amendment is appropriate would lead us to ask, “Is it necessary, or does it provide a good remedy?” I do not think that either is the case, which is why Labour does not support the Government’s wording.
The second set of amendments, Lords amendments 12 and 13, deal with countervailing benefits. Just to prove that Labour Members speaking from the Dispatch Box are very consistent with one another, my next sentence was effectively said by my hon. Friend the Member for Pontypridd in a previous debate: the countervailing benefits exemption allows the Competition and Markets Authority to close an investigation of a breach of a conduct requirement if a firm can demonstrate that its anti-competitive conduct produces benefits that outweigh the harm and are therefore indispensable. On Report in the Commons, the Government significantly reduced the threshold for that exemption, removing the word “indispensable” and merely requiring that
“those benefits could not be realised without the conduct”.
It sounds the same, but it is different—subtly but importantly different. The Lords amendments would remove that paragraph and alter the next line so that it reads
“the conduct is indispensable and proportionate to the realisation of those benefits”.
I will make two points in this area. First, as I think everybody accepts, the “indispensable” standard is a well-understood concept in UK competition law: it is used in the Competition Act 1998, which I do not believe to be as outmoded as some Members have suggested. Secondly, the courts would interpret Parliament’s deliberate move away from an existing, well-understood standard as intending to create a new, lower threshold, which again will inevitably allow the big tech firms greater scope to launch complex legal challenges.
If the Government really do not see any distinction between the two thresholds, the most obvious compromise would be to reinstate the word “indispensable” alongside the Bill’s new wording and to clarify, today at the Dispatch Box and in the Bill’s explanatory notes, that the “indispensable” standard and the new form of words inserted by the Government have an identical meaning. Otherwise, there is a risk that the courts will seek to explore further whether Parliament has deliberately created a new threshold and standard.
I simply say to the Minister that I remember, when he was on the Back Benches and we had lengthy discussions about the powers of Companies House, that he was very keen on making sure that Companies House had the powers it needed to do proper investigations. He regularly made the point that lots of people have very deep legal pockets, and that does not necessarily mean that the consumer always wins out. I would argue that it is the same in this case.
Lords amendments 26 to 28 to clause 89 and Lords amendments 31 and 32 to clause 103 relate to appeals. The Bill originally had judicial review as the appeal standard for all CMA decisions under part 1, but in the Commons the Government moved to merits appeals for penalty decisions. I accept that this is only about penalty decisions, but I none the less believe that it is dangerous because, while the new regime is intended to be collaborative, it is ultimately the threat of fines that will incentivise big tech firms to comply with the CMA’s decisions. If there is no prospect of a fine, whether large or small, those large tech firms may well decide to be less collaborative.
There is the even greater danger that merits appeals on penalty decisions bleed back across the Bill into regulatory decisions, giving big tech firms greater scope to frustrate and challenge the CMA’s decisions. While it is correct that the courts are generally able to distinguish between judicial review and merits elements of appeals—that point has been made in previous debates by the former Attorney General, the right hon. and learned Member for Kenilworth and Southam (Sir Jeremy Wright)—it does not eliminate the concern about the two bleeding into each other, especially if the two streams take place together in the same case. If the Government are unable to reinstate judicial review appeals across part 1, as we would prefer, a clarificatory amendment should be inserted in the Bill to provide certainty that appeals on penalties cannot impact on other regulatory decisions to eliminate scope for speculative challenges.
It is worth bearing in mind that the chief executive of the CMA has made it clear that the authority wants the judicial review standard to apply. She welcomed effective judicial scrutiny of its decisions, but said:
“We think that the JR standard achieves that.”
She went on to say that her experience of merits appeals was that they result in
“very protracted litigation”,
making it
“a lot harder to reach constructive, collaborative outcomes”,
because
“all eyes are on that litigation process.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 7, 8, Q4.]
Let me come on to the matter of ticket touting, and Lords amendment 104. I start by thanking Lord Moynihan—a Conservative peer, of course—for tabling this amendment and for his significant work across many years. When I have not agreed with every sentence from my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) on this subject, I have sometimes felt the scratches on my back from her very elegant fingernails, but she has also done enormous work, and I think she is much to be praised for it. There are many others in the House of whom that is true as well, including all those sitting next to her on the back row, who I am sure will catch your eye later, Mr Deputy Speaker.
I start from a very simple principle: the value of a ticket—whether for the rugby, the football or a gig at the O2—is created by the artists, the promoters and, above all, the fans. Yes, the secondary ticketing market can help all three, because sometimes people buy more tickets than they need or are unable to attend for whatever reason, but the abuse of the secondary market can lead to artists, promoters and fans all losing out, and abuse is rife.
I will take an example of a case that has already been through the courts. It is that of Lynda Chenery, Mark Woods, Maria Chenery-Woods and Paul Douglas, who bought and resold concert tickets worth £6.5 million. They bought them on primary sites, including Ticketmaster, before reselling them on secondary ticketing platforms, such as Viagogo, at inflated prices. They used endless tricks, including sending customers ripped envelopes to imply that the tickets had been lost in transit or using fraud juice, which involved the use of Tipp-Ex correcting fluid or more sophisticated digital methods, to amend tickets. They held their customers in open derision. Having scammed one person into paying £535 for a ticket for the Harry Potter west end show, they referred to him in an email as “another idiot”. These people are despicable parasites preying on fans, and we need to go far further to address this issue.
This practice prices many fans out of the market and adds no value whatsoever to the creative process, at a time when creators are in desperate need of making a living out of their craft. In 2016, one ticket for Adele at the O2 arena in London was listed on GetMeIn for £24,840, which is 290 times the face value of the ticket. Nobody in the Rhondda would be to afford such a ticket. Incidentally, Wimbledon faces exactly the same set of problems.
Viagogo is today selling two tickets for Pink at the Millennium stadium in Cardiff on 11 June for £498 each. I think the fans could perfectly legitimately start shouting:
“What about us?
What about all the plans that ended in disaster?”
It is not obvious what the original price was for those tickets. On Viagogo, people can get one ticket for Peter Kay at the O2 on 4 May for £302, or tickets for “The Book of Mormon”—it has been in the theatre for several years, and is a wonderful, hilarious show—on 4 May at £420 each. In a way, the one that upsets me the most is that tickets for the ballet “The Winter’s Tale” at the Royal Opera House on 3 May—a Friday night—are £1,006 each, but people can buy those tickets from the Royal Opera House for £140, because there is taxpayer involvement in supporting the Royal Opera House.
We could say the same of StubHub, on which two standing tickets for Doja Cat in Glasgow on 11 June with a face value of £162 are selling at £1,002. This is a pernicious industry. It is parasitical, it does nothing for the creative industries in this country and we must tackle it.
Mrs Hodgson
I waited until my hon. Friend got to the end of all those disgraceful, abhorrent examples. Will he clarify for me a fallacy that the touts often put around about me and my hon. Friends—they will say the same about him? They say that we want to stop people being able to resell their tickets when they cannot go—they have bought them in good faith and genuinely cannot go. Will he clarify that that is not what any of us seeks to do? I of course want people to be able to resell their tickets, but at face value. Does he agree?
Sir Chris Bryant
I completely agree, and that is Labour party policy. I am used to fallacies being written about me, and I have seen many written about my hon. Friend as well. I am sure we will all get over it. Incidentally, that is why, as I shall come on to say later, it is very important that we have a free press that is able to say what it wants, free from the intervention of state owners from other countries.
My hon. Friend is absolutely right. Of course, it is perfectly legitimate for somebody who has bought a couple of tickets for Saturday night and who suddenly finds that they are ill, that they have to go to a family engagement or that they have bought tickets for the wrong night to be able to sell them on at face value, or perhaps for a little bit more simply to cover the cost of administration and things like that. However, this is a market that is not working. It is an example of market failure, not an example of market success.
Barbara Keeley
My fingernails are nothing like as bad. Does my hon. Friend agree that the problem is actually worse than just the prices he quoted, of which he gave some really good and powerful examples, because of the selling of tickets that do not actually exist—fraudulent tickets? I have heard from a number of venues about the selling of tickets that should go to carers or young people. People are turning up at events such as those at the O2 and other venues with these tickets and being turned away, often when they have travelled to London and paid for hotels. So there is all the disappointment and the financial loss of that on top of the ticket prices.
Sir Chris Bryant
I completely agree, and my hon. Friend is absolutely right. There are terrible instances of all sorts of different scams, and—this is the honest truth—remarkably few prosecutions. Whether the number is two, four or five, it should be in the hundreds. [Interruption.] Six—half a dozen—great!
The truth is that we all know instances from our constituencies of people who have faced precisely these problems. I have had constituents say to me, “I feel too embarrassed to own up to having bought these tickets.” I remember going past the Millennium stadium in Cardiff, or Arms Park in the old days, and we all despised the ticket touts, just as we did outside a Kate Bush concert or whatever. Sometimes, however, we were just so desperate that we bought the tickets, and they of course turned out to be fraudulent or non-existent, or they were allocated to specific kinds of people that did not include us. All those points are worth making, and I would add this one: all local authorities have trading standards offices but many are now so depleted because of the state of local government finances that it is very difficult for anybody to get proper recompense and a deal.
Sir Chris Bryant
Well, we have moved on and it is about time the Government moved on—in fact I look forward to the day when the Minister moves on from Government Benches to here on the Opposition Benches. The idea of a review at the dog end of a Parliament and at the end of the regime is absolutely pathetic, and I am glad the Minister is laughing at himself for even presenting the suggestion today.
Let me end with an area of agreement. We were glad that the Government, under pressure, tabled Lords amendment 117 on mergers involving newspaper enterprises and foreign powers along the lines of measures that we and others, including a large number of Conservative MPs and peers, had called for. Of course the UK must remain an open economy; we welcome foreign investment in many sectors in the UK. But we agree that in this limited area, the state ownership of UK newspaper and media companies must be a matter for concern, which is why we support the Lords amendment. We will need to make sure in future years that it is adequate to the situation we find, not least bearing in mind many of the comments made earlier by Members on both sides of the House regarding the rather fluid world we are moving into, where newspapers are a rather outdated concept and social media and other forms of online media are far more significant. We will keep that under review, therefore, but we welcome the amendment the Government have tabled.
This long-delayed Bill could go forward with strong, unanimous support if the Government abandoned their tilt towards the few potentially monopolistic companies and set aside their objections to the Lords amendments. Those objections are either completely otiose or they are dangerous. The Minister says they make no difference, I say they do, but on either grounds they should go, so we support their lordships in their amendments.
John Penrose (Weston-super-Mare) (Con)
May I start by saying that this was and still is a good Bill? It does an enormous number of very important things and I am glad to see that it has broad acceptance and agreement on both sides of the House, although with some minor points of disagreement. It contains many of the measures that I personally called for in my Government-commissioned review of competition policy called “Power to the people” a little while ago, and it definitely updates and makes some much-needed changes to our competition and consumer laws. However, I share some of the concerns raised today about the Government’s opposition to four of the amendments that have come back from the Lords.
I do not have worries about the Lords amendments themselves because, as we have just heard from the Opposition Front-Bench spokesperson the hon. Member for Rhondda (Sir Chris Bryant), they mainly seek to restore the effect of clauses that were in the Bill when it originally came to this House. What worries me is that the wrong people are clapping. The changes that the Government have made, in many cases by seeking to resist Lords amendments, seem to many people to be on the side of the big tech firms rather than on the side of consumers, of sharper competition, of more consumer choice and of standing up for the man and woman in the street. I therefore earnestly hope that the Minister will be able to channel his historical zeal for these things in his closing remarks and reassure me, and I am sure others as well, that that is not the Government’s intention and that they remain committed to those things—that the fire still burns brightly in his eyes to make them happen.
I start by saying that the Government have already done some of that work with amendment (a) in lieu of Lords amendment 38—they have replaced the Lansley amendment with a version of their own—dealing with the amount of time that the Secretary of State can take in dealing with guidance put forward by the CMA to make sure it is not unduly delayed. That is extremely welcome and a very good measure, and I enthusiastically support it. However, we have already heard about two other things in particular. One is the role of judicial review in dealing with penalties. I share the concern that in moving away from a judicial review standard for penalties to a full merits review we may get bleed-across—that clever lawyers working for big tech firms may effectively be able to broaden the scope through clever use of legal techniques to prolong their attempts to walk backwards slowly and prevent justice from being done. I therefore devoutly hope that my good friend the Minister will be able to clarify that he expects to be able to show to us—either from the Dispatch Box now, or in guidance or another kind of clarification in due course—that it will not be possible for bleed-across to happen and he will be able to take any steps that may be needed.
Kevin Hollinrake
I am very happy to make that commitment. We believe the Bill draws a clear distinction between infringement decisions and penalty decisions. After taking legal advice on this matter and looking at previous competition case law considering similar issues, the Government consider that neither the Competition Appeal Tribunal nor the higher courts will have any trouble making that distinction for digital markets appeals. We have clarified that in the explanatory notes, which I hope provides reassurance that there is little risk of bleed-back from the merits appeal standard for penalty appeals to appeals on other types of decisions.
John Penrose
I thank the Minister for that intervention and, emboldened by my success so far in getting him to front up, I move on to my second point, which has similar concerns around it: the issue of countervailing benefits. We have heard from the Opposition spokesman about that, so I will not go through it all again, but it would be enormously helpful if, either now in a further intervention or in his closing remarks, the Minister could be clear about the new wording, which we have already heard about in his speech. I hope he will make it clear—again, either through clarifications now or in guidance—that it is not intended to be in any way a lower standard than what we had before when this Bill first came to the House, and that it is either the same or tougher. I am pausing just briefly to see whether he wants to intervene.
Kevin Hollinrake
The revised wording did not change the effects of the clause. Strategic market status firms will still have to prove that there is no other reasonable and practicable way to achieve the same benefits for consumers with less competitive effect.
John Penrose
We are making marvellous progress and ending up with changes being confirmed on the Floor of the House in a way I do not think I have seen before, so let us keep going.
John Penrose
I am sure this will be an equally constructive intervention, of course.
Sir Chris Bryant
Would it not be even more helpful if the Minister were to say he would change the explanatory memorandums as well?
John Penrose
I am sure the Minister will grab that opportunity in his closing remarks, if he so wishes. At least he has taken the opportunity to stand up and give us public reassurances on the record about the standard that is intended. It is clear that it is no lower than it originally was, which is an important change.
Kevin Hollinrake
The shadow Minister and I are having this debate vicariously, but I just note that the wording in the explanatory notes has not changed.
John Penrose
I am on a roll here.
The final of the four issues in question is proportionality. We have had the debate already, so I do not propose to repeat the concerns, but it would be helpful if the Minister, either now or in his closing remarks, clarified that the new and amended standard that is to be applied is no lower. I think he said something to that effect earlier to the former Attorney General, my right hon. and learned Friend the Member for Kenilworth and Southam (Sir Jeremy Wright), but it would be helpful just to nail that one down and drive the nail home, if the Minister can. It is important for everybody to understand whether that new standard is any lower at all; it should be the same or higher.
John Penrose
The Minister is nodding, but I do not know whether he intends to intervene again.
John Penrose
We will have to preserve our souls in patience for the Minister’s closing remarks. I will declare victory very shortly. It has been a helpful set of interventions, and I thank him for that.
My final point is not related to these Lords amendments, but to a commitment that the Minister made at the Dispatch Box on Report in response to an amendment on better regulation that I had tabled with the support of a great number of parliamentary colleagues. He made a commitment that a set of conclusions, matching a set of standards whose wording he and I had agreed in advance, would be in place before the Bill receives Royal Assent. Clearly we are getting close to that date—I hope very close—and I understand that a Government White Paper may be in the offing, but I am not sure whether that will arrive before Royal Assent. My point is intended not to delay Royal Assent, but to bring forward the White Paper or whatever document the Government may be thinking of.
Based on conversations I have had so far, I am also concerned that not all the commitments the Minister made from the Dispatch Box may be in that White Paper. I therefore urge him to make sure that between now and Royal Assent, he works assiduously with his fellow Ministers to make sure they have got the memo that should gone round after he made those commitments.
Richard Thomson (Gordon) (SNP)
Scottish National party Members continue to support this Bill, and we support each of the Lords amendments. Notwithstanding the rather dizzying pinball rattle of interventions that went on between the Minister, the shadow Minister and the hon. Member for Weston-super-Mare (John Penrose), I will be a bit of a traditionalist stick-in-the-mud and stick to the wording in the amendments and the Bill, no matter what references might be made subsequently to the ghosts of debates past in Hansard.
On Lords amendment 9 and “proportionate” versus “appropriate”, it might seem to people outside this Chamber that we are dancing on a pinhead, but such distinctions matter. It is important that decisions of the Competition and Markets Authority should be allowed to stand wherever they deserve to, but that means not allowing unnecessary wriggle room to creep in for entities with deep pockets to challenge decisions not on the basis of principle, but on the grounds of what those entities consider proportionate. We consider that replacing the word “proportionate” is appropriate in this case, and we support the Lords amendment on that basis.
Lords amendment 13 reinserts the word “indispensable”. As the shadow Minister said, that term is well understood in competition law, but it also happens to be proportionate and appropriate in this case. It is entirely possible to envisage anti-competitive behaviour that can bring about consumer benefit either as a direct or indirect consequence, but we are clear that any benefits that arise should be such that they cannot be done without or forgone and that the test should be set accordingly.
With Lords amendments 26, 28, 31 and 32, we have believed throughout the Bill’s passage that the judicial review level is the appropriate appeals standard, rather than a full merits review. That is why we support those Lords amendments.
Damian Collins
I will speak briefly on the question that I raised earlier in the debate about the change of language from “appropriate” to “proportionate” and follow on from the remarks of my hon. Friend the Member for Weston-super-Mare (John Penrose). On one level, what the Minister is saying now—similar to what the Minister in the House of Lords, Lord Camrose, said in the debates there—is that proportionality is implicit in the law anyway and that the rights an organisation would have under article 1 of the European convention on human rights would apply anyway. Ministers are saying that bringing this language into the Bill is therefore a tidying-up exercise that re-emphasises rights that people already have. On another level, Ministers are also saying that this change creates a better balance, which means that there will be some change in how things work. It is important at this point that the House is clear about what is intended with this change.
There is a concern that the change effectively opens up a full merits appeal basis, which we have been keen to avoid doing in all the debates on this Bill as it has gone through both Houses. The Government have rightly resisted calls from big tech companies to bring that in, because it is a recipe for multiple and lengthy litigations, just as with every single measure of tech regulation that exists as a whole. That is not the intention.
Let us say that a company may be guilty of overcharging in an app store, but the cost to the consumer is relatively low. Would an intervention from the CMA be proportionate? Overcharging in the mobile app market may exist, but ultimately companies are happy to pay it and it is a relatively small charge. Would a big intervention by the CMA be a proportionate response? There are so many competing priorities, and often the individual consumer cost of some of these measures would be low, but there is the business significance of a company self-preferencing a service to the exclusion of other companies from the market. The company might say, “There is no particular consumer detriment to this, because the price is relatively low”, but it drives strategic market status. We have already seen in the European Union with the Digital Markets Act that the companies are challenging the designation of strategic market status, and they are looking for grounds to challenge at every opportunity, and we must expect that they will do the same thing here as well. That is why we should be clear that we are clear about what we mean.
My hon. Friend the Member for Weston-super-Mare invited the Minister to say that effectively, in terms of enforcement and how the courts should interpret it, the change should not make any difference from the original drafting. He invites the Minister to say that we should not be concerned that moving from “appropriate” to “proportionate” is moving from saying that the regulator should do what is within its rights to do—it is appropriate because it has the power to do it and it has made an intervention based on that power—to saying, “Even if it was appropriate for it to do it, it should not have done it, because it was disproportionate.” What would the grounds for that disproportionality be?
It is really important that the guidance to the legislation makes clear what we should expect on how the CMA can determine to find what it believes are proportionate responses, with that not being easy to dismiss on the grounds that the cost to consumers may be relatively low or the impact limited to a certain area of business.
Sir Jeremy Wright
My hon. Friend is, as ever, making a good case. As he knows, I agree with him about the need for the Government to be clear about what these terms really mean. One thing that we are not talking about today but which is linked to the question of definitions is what we mean by “consumer benefit”. Does he agree that there may be a difference between benefit to the current consumer and a benefit to the future consumer and that we should be clear in the Bill, should we not, that “consumer benefit” includes future consumers as well as current ones?
Damian Collins
My right hon. and learned Friend makes an important point. We could have a digital service provided for free, self-preferenced by a big company, offering a new service to its customers—how could there be a consumer detriment in that? But a consequence of that could be constriction of the market and the driving out of other businesses. The mobile mapping market is a really good example: Google Maps and Apple Maps totally dominate a market that used to have multiple competing companies in it. Now it does not, and there could be future consumer detriment in that.
That is why it is important that this is an ex-ante regime, which anticipates not just the detriment that may exist now, but future consequences. That is such an important principle for digital markets, which have tended to see the consolidation of market power in the hands of a relatively small number of players, who often do not compete against each other directly but dominate certain sections of the market, be it through the mobile ad market, search and retail.
There are only in effect two app stores, and given the lack of interoperability, they are virtually monopolies. We see those things already, and the development of large language model systems and the massive acquisition of data required for AI to run them is consolidating that market largely into the hands of the five or six companies that have enough data to be effective operators within it. That means that, in the future digital market world, any challenger tech developer will have to access its market and customers through the services provided by a relatively small number of companies. That is important.
I would be grateful if the Minister said in winding up whether he believes that the Bill offers a better balance. Has that balance changed, or has it not, and it is just a question of language and interpretation of meaning? What does it mean? I hope we all agree that, through making this change, we are not seeking to open up the legislation to wider judicial challenge, with more ruling through the courts, more lengthy delays and costs to try to bring forward the CMA’s interventions.
Barbara Keeley
I rise to speak against the Government motion to disagree with Lords amendment 104. As we have already heard, the amendment seeks to safeguard fans from fraudulent abuse, which is rife in the secondary ticketing market. It is an important amendment on an issue that, as we have heard—it is worth saying again—has had much work invested in it by my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) and her colleagues on the all-party parliamentary group on ticket abuse. It also had great attention in the music industry, which is loud in its support for tackling ticket touting. Anyone who has tried to buy a ticket for a popular concert knows the frustration of losing out on tickets, only then to see the same tickets at 10 times the price on the secondary market.
Touting goes deeper than mere frustrations: it prices fans out of attending music, cultural and sports events; it damages the relationship between venue, artist and fan; and it undermines confidence in our live music industry. Yet, despite the calls of major UK music industry bodies, including UK Music and Live music Industry Venues & Entertainment, the Government have consistently failed to act.
Last year, the Government rejected the recommendations of the Competition and Markets Authority to strengthen legislation and protect UK consumers from illegal practices in the secondary ticketing market. At the time, the CMA warned that unless there was reform, illegal reselling prices would become worse. Lords amendment 104 would implement the recommendations of the Competition and Markets Authority to provide safeguards for consumers. Those are basic protections, such as ensuring that a reseller cannot sell more tickets than they can legally purchase on the primary market, and ensuring that tickets cannot be sold without proof of purchase. It is deeply disappointing that the Government cannot commit even to those basic safeguards.
Under the Government’s watch, the situation has become much worse. In 2007, there were an estimated 150 full-time ticket touts in the UK. Now there are about 4,000 touts attacking ticket systems for UK events, using bots to harvest tickets in bulk. Instead of being used as a resale platform for fans who can no longer make it to an event, ticketing websites are increasingly being used by large-scale touts who harvest tickets on the primary platform—using bots to skip the queue—and sell them on at many times the original price, sometimes speculatively. Ordinary fans do not stand a chance against that; they are the ones who are losing out. The situation has become so bad that police forces in some areas are having to launch public awareness campaigns warning about ticket touts after hundreds of reports of ticket fraud.
Lloyds Banking Group was recently forced to issue a warning to its customers about the risk of buying resold tickets after 600 of its customers reported being scammed when they tried to buy resale tickets for Taylor Swift’s Eras tour. It has been estimated that resale for the UK leg of that tour alone has led to more than £1 million being lost to fraudsters so far. That is happening despite clear messaging from the promoters of the tour that resale tickets bought outside approved channels will be turned away at the door.
As I said earlier, the Government can claim that they are doing enough, and the Minister seems happy with that, but he should look again at those secondary ticketing sites, where he will see three tickets for Taylor Swift’s show on 21 June going for over £72,000. That obviously shows a completely malfunctioning, dysfunctional market.
The Minister cannot claim that the market is functioning for fans and artists—it is actually functioning for touts and the platforms they use. Lords amendment 104 is just one measure that would begin to counter the damage done by ticket touts. I am glad to say that Labour has now committed to going a step further.
Labour would significantly strengthen consumer rights legislation to restrict the resale of tickets at more than a small set percentage over the price the original purchaser paid for it, including fees. Labour would limit the number of tickets that individual resellers can list to the number that individuals can legitimately buy via the original platform. Labour would make platforms accountable for the accuracy of information about the tickets they list for sale, and would ensure that the Competition and Markets Authority has the powers it needs to take swift and decisive action against platforms and touts in order to protect consumers.
The Minister cannot keep sticking his head in the sand. As the Competition and Markets Authority warned in 2021, illegal reselling practices have become worse due to a lack of action. We are now getting to a situation where artists and venues are on the cusp of losing the ability to sell tickets to genuine fans at an affordable price, and working families are being priced out of seeing their favourite artists or their favourite sports team.
Music, culture and sports events must not just be for the elite—the people who can afford thousands of pounds. How can the Government and the Minister justify their opposition to Lords amendments that would keep open access for fans to sport, to arts and to culture? I hope that he will listen to Opposition Members and not press the motion to disagree with this reasonable and modest amendment.
Mrs Hodgson
I welcome the opportunity to speak in this debate, and it is a pleasure to follow my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley), who is doing some great work in this area, formulating our policy for when we will hopefully be in government after the election. I am speaking in the debate in my capacity as chair of the all-party parliamentary group on ticket abuse and to support Lords amendment 104, which relates to the secondary ticketing market.
Before I begin, I reiterate that the sole purpose of the amendment is to protect British consumers from organised crime and to reduce the harm caused by the unlawful and exploitative activities of online ticket touts. Aspects of the amendment have already been recommended by the Competition and Markets Authority, which recognised back in 2021 that the UK needs stronger legislation to tackle the resale of tickets. It is not just me who has been banging on about this since forever—the CMA is also calling for it, having looked at the market for many years.
It has to be said that Lords amendment 104 will not come with any cost to the UK taxpayer either. If it fails to become law, the only beneficiaries will be scammers, fraudsters and the overseas websites that they operate from. So Members will be voting either in the interests of the British public or in the interests of ticket touts.
The Minister said in his opening remarks that all Opposition Members are doing is crowd-pleasing; I am sure I heard his words correctly. I think he will find that the crowd all have votes. This has been a fan-led campaign. Perhaps pleasing the crowd is not always a bad idea. We are here to represent the people, after all. For too long, this Government have allowed an online black market for ticket resale to thrive via websites such as Viagogo, StubHub, Gigsberg, Ticombo and Seatsnet. The public—the crowd, as the Minister called them—are sick to death of it.
Andrew Gwynne (Denton and Reddish) (Lab)
I commend my hon. Friend for all her work over a very long period on this important issue. It is important to support the Lords amendment because so many of our constituents are deprived of even the chance of getting a ticket for a sports match, pop concert or whatever, as they cannot beat the bots. Is that not the inherent unfairness?
Mrs Hodgson
It absolutely is. It is not a level playing field at all. I was going to come to the bots, and the fact that nobody has yet been put behind bars for having used bots, even though they are illegal, and are the tool that touts use to harvest tickets, so that they can scam the rest of the population and all our constituents. I am happy to stand here and crowd-please—I will do it until my dying breath—because that is what we are here to do. We should do the right thing for the public, and they are calling for us to regulate this market.
Sir Chris Bryant
I do not want my hon. Friend’s dying breath. Did she notice that the lovely Minister did not even present a single argument against any of the elements in the Lords amendment? He did not make the argument on why the Government do not support it, even though it is a patently obvious and sensible measure.
Mrs Hodgson
That is a good observation. To hazard a guess, the Minister probably agrees with the Lords amendment. He is a decent chap, and I think he sees the right in it, but he is sitting on the Government Benches. He is always welcome to come and join us on these Benches—it is quite a popular thing to do lately. If he wants to come over here, we will sort this out. It would be great if he was part of that, which is probably deep down what he would like to do.
All the websites that we are talking about are based outside the UK. They employ, essentially, no British staff—maybe a handful at most, but it is hard to check. They all masquerade as marketplaces where fans can buy and resell with other fans, but we know that is not true. All are dominated by large-scale online touts committing criminal offences to harvest tickets in bulk, as my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said in his excellent intervention. That has led to a highly lucrative resale market worth hundreds of millions of pounds.
This is not small fry anymore. Face-value tickets are syphoned away from genuine fans and sold back to them at highly inflated prices. My hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) said in her excellent speech that the number of touts has gone from hundreds to many, many thousands. It is getting out of proportion. This is best summed up by Chris Allison, the former deputy assistant commissioner at the Metropolitan police. Following a four-year investigation of touts post the Olympics—those tickets were protected in law, as I mentioned earlier—he stated:
“Touts are part of organised criminal networks often involved in other crimes”.
In recent years, enforcement bodies such as the CMA, National Trading Standards and the Advertising Standards Authority have tried, with varying degrees of success, to intervene in this broken market, either to prosecute the touts who are unlawfully defrauding music and sports lovers, or to force the ticket resale websites to comply with consumer protection legislation. And, oh my, the CMA has tried so hard to force those websites to comply, using the measures that it has to hand, which are not enough. It has even asked for further measures; as we heard in the last debate on this subject, the Government rejected that.
This has become an increasingly complex situation to sort out. That is why the Labour party is seeking to follow the examples of countries such as Ireland, France and Australia by capping the price at which tickets can be resold. Let me draw the House’s attention to my private Member’s Bill in 2011, which sought to do just that: cap resale at face value plus 10%, as the shadow Minister, my hon. Friend the Member for Rhondda (Sir Chris Bryant), said. That would allow someone reselling tickets to reclaim extra costs, such as booking fees.
Contrary to what has been written about me over many years, I do not want to stop any fans from reselling their tickets if they can no longer go to the event. I just want the industrial-scale, parasitic scalping to stop. However, until we get to that point—and while the Conservatives are still in government—it is important that current legislation is made as effective as possible. They could ensure that now. The small measures that we are talking about do not go as far as we plan to go, but they would be a start in preventing consumer harm and making it harder for bad actors to thrive.
I support Lords amendment 104, introduced by my friend and co-chair of the all-party parliamentary group on ticket abuse Lord Moynihan, with the assistance of Lord Clement-Jones, Baroness Jones and others. We have Lord Moynihan to thank for the amendments to the Consumer Rights Act 2015 that got through small measures that we hoped would be the panacea for all the problems in the secondary market, but nine years later, that Act has not fixed this broken market. That is why we need this amendment.
In the amendment, proposed new section 92A(1) of the 2015 Act would compel touts to provide proof of purchase to the ticketing facility, or evidence of title to the tickets offered for resale. That is common sense, pragmatic and cost-free. The provision would target traders and businesses only, and as my hon. Friend the Member for Worsley and Eccles South said, would eliminate the speculative selling that is endemic on platforms such as Viagogo, and the emotional devastation and physical risk that comes with it. I have seen numerous cases of what she spoke about: people being turned away, after having travelled from one end of the country to the other at great expense, and having booked overnight accommodation. They find that they cannot get into the theatre, the O2, the concert or whatever it may be, because they have invalid tickets.
Someone wrote to me recently who got in touch with Viagogo before the event because they feared that they had an invalid ticket. They were told to try their luck on the door, regardless of the fact that it was an invalid ticket. They knew that they would be turned away at the door with this Taylor Swift ticket, but were told, “Just try your luck. If you can’t get in, we’ll give you a refund.” They would have to fight for it first, and it would take six months if they were lucky. This person was also told, “Why not sell it on? List it again, and we won’t charge you a fee.” It is outrageous that she was supposed to pass it on. I have emails between her and Viagogo to back this up. She was being encouraged to sell on a ticket that she knew was invalid, causing more victims. Those are the sorts of practices that these websites use.
In August 2022, an ITV investigation based on data from FanFair Alliance found that two thirds of festival tickets on Viagogo were fraudulently listed by just three individuals. These resellers are relatively few in number but account for 90% to 95% of the tickets sold on platforms such as Viagogo. Let us think about that: just three major touts were selling 90% to 95% of festival tickets. Other platforms, such as Gigsberg, are 100% reliant on businesses and traders, many of whom my APPG and the CMA believe are acting illegally.
Subsection (2) of proposed new section 92A would crack down on the industrial harvesting of tickets by preventing resellers from selling more tickets to an event than they can legally purchase from the primary market. That is just common sense, surely. This was first recommended by the CMA in August 2021, almost three years ago. It made the proposal after a six-year enforcement investigation that concluded, as I said, that the CMA needed “stronger laws” to tackle illegal ticket resale. This change would make it easier for genuine fans to access tickets instead of professional touts looking to make a parasitical profit.
Despite the fact that, as my hon. Friend the Member for Denton and Reddish said, using bots and other malicious software is illegal, touts do so without fear of prosecution, as no one has yet been prosecuted for using bots for the industrial harvesting of tickets. Artists such as Ed Sheeran and Taylor Swift have repeatedly stated that they do not wish for their tickets to be touted. Artists get upset when their loyal fans blame them for not protecting them from touts, even though they do try. Both Taylor Swift and Ed Sheeran have gone to great lengths to try to protect their fans from the touts.
Subsections (3) and (4) of proposed new section 92A force touts to clearly state the face value of any ticket listed for resale—again, surely that information should be provided—and to ensure
“the trader or business’s name and trading address are clearly visible, in full, on the first page the ticket is viewable on.”
The information
“must not be hidden behind an icon, a drop down menu or other device”,
which is what actually happens. The Consumer Rights Act states explicitly—these are Lord Moynihan’s reforms, which were added to the 2015 Act—that platforms must legally provide buyers with seat locations, face-value prices and restrictions, for example. They should be provided
“in a clear and comprehensible manner”
and
“before the buyer is bound by the contract for the sale of the ticket.”
Before they purchase, consumers have a right to know what they are buying, and who they are buying it from. That is in current law, but Viagogo has a track record of hiding face value behind what we call “hover text”, or small, tiny icons marked “FV”, so you have to know what you are looking for to find it. It obscures trader identities behind a tiny star icon, and only reveals a trader’s identity after the user enters their credit card details and has gone through the CAPTCHA process, so the user has often committed to buying before they know who they are buying from and what the face value is. That is in straight contravention of the 2015 Act.
On 99.9% of other websites, CAPTCHA is used to protect consumers. On Viagogo, it is used to protect the identity of its commercial suppliers—in other words, touts. Details of any ticket restrictions—for example, the information that resale is only allowed at face value—are provided in an unclear and incomprehensible manner, and are often buried in the middle of other small print, and then negated by claims about Viagogo’s “guarantee”—that is a very loose term if you are on Viagogo’s website.
Those practices are purposely misleading for most, but even more so for those who are visually impaired, tourists who do not speak fluent English, or older people without niche technical skills, who could be buying tickets for a grandchild’s birthday. I have had lots of grandparents in touch with me. As someone said—I think it was my hon. Friend the Member for Worsley and Eccles South—they then feel stupid. I have had such a number of emails from people saying, “This is my fault. I was stupid. I should have known better. I should have checked.” We should not allow companies to exist that do this in such a big way. They say, “Buyer beware”; that is Viagogo’s motto, I think. It is probably hidden on its website. What is happening is not right, and it is up to us to protect consumers; that is what Parliament is for. We should not allow this to happen on such a scale.
Furthermore, experts involved with the all-party parliamentary group on ticket abuse have found that large numbers of sellers are based abroad, or have links to forms of organised crime all the way up to convicted drug dealers, money launderers and bank robbers. The secondary ticketing market is not full of “classic entrepreneurs” as a former Chancellor and former Culture Secretary, the right hon. Member for Bromsgrove (Sir Sajid Javid), would have us believe. They are serious criminals. If Members want to see when he said that, it was in 2011 when he was helping to talk out my private Member’s Bill.
Andrew Gwynne
My hon. Friend is making a really important point. She rightly points out the degree of criminality at the highest end of the organisations that are responsible for the touting industry, and the lack of prosecutions. It is actually quite a good business proposition for them, is it not? It is relatively risk-free. They are probably more likely to get sentenced for being an international drug dealer than for selling the tickets.
Mrs Hodgson
It is very interesting that my hon. Friend has come to the same conclusion I have. I have made that exact point in many interviews over the years: why would anybody go out and rob banks or do any sort of crime for which they might get caught, when they could just be a ticket tout? They’ll make a fortune and nobody will come after them, not even the taxman. There will be no hand of the law on their shoulder. There have been only two cases and six prosecutions in all the time I have been campaigning on this issue. So yes, it is time we sorted it out. It is just not acceptable.
The recent case that I think the Minister referred to earlier involved individuals being convicted for buying and reselling tickets worth £6.5 million—£6.5 million. They have been caught, but that is because they are right up at the top end. There will be people making £1 million, half a million pounds, £2 million or £3 million who have not been caught. There are so many touts. The case involved using multiple, often fake, identities to buy large numbers of tickets with multiple credit cards. However, convictions are extremely few and far between, despite thousands of professional touts operating.
Finally, those who trade in the UK must be subject to UK laws—surely we all agree with that. Subsection (5) of proposed new section 92A states:
“A secondary ticketing facility must make it clear to traders and businesses based overseas that sell tickets to UK consumers and target UK consumers through paid or sponsored advertisements”—
in some cases using Google and trusted publications, or even sponsoring podcasts by trusted influencers—
“or paid infomercials that they are subject to UK legislation.”
The vast majority of suppliers to Viagogo and other secondary platforms are commercial businesses. A significant proportion are based outside the UK, as I said, but they target UK events to derive the highest possible profit. Likewise, none of the websites have offices in the UK. There are no UK jobs at stake, apart from a handful. It has been quite hard for me and my team to check and be sure of the numbers, as these companies are all registered in tax havens and overseas. However, the damage and exploitation occur in the UK at the expense of artists, athletes and fans, without any fear of the current toothless UK law.
Viagogo has already had its wings clipped, partially, by CMA orders over the years, but in my opinion it is nowhere near enough. It has repeatedly shown that it cannot be trusted to mark its own homework. For instance, elsewhere Viagogo was fined 7 million Australian dollars for misleading consumers, €20 million for breaking the law in Italy and €400,000 in France for breaking the law around rugby world cup tickets. Yet we heard the Minister’s colleague, the Minister for Media, Tourism and Creative Industries, spouting the Viagogo lines of defence from the Dispatch Box just a couple of weeks ago—go figure! This is all on the record, because my hon. Friend the Member for Worsley and Eccles South raised it in a point of order a couple of weeks ago, just after the Minister for Media, Tourism and Creative Industries did it.
Unless legislative action is taken to stop this black market, it will continue to grow and cause further damage. This modest amendment effectively plugs loopholes in legislation, and ensures that music and sport fans of all ages have the information that they need before they make that purchase. I implore everyone here today to please support Lords amendment 104 and start putting fans first—or else move aside so that we can do so.
Alex Davies-Jones (Pontypridd) (Lab)
It is an absolute privilege to follow my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson)—my good friend—who has been a tenacious campaigner on this issue for so many years, and I implore Ministers to listen to her and note her expertise. I ask them please to back Lords amendment 104. A review is not good enough in the dying days of a failing Government; we desperately need action now.
It is a pleasure to speak in the debate. I proudly saw this Bill through part of its Commons stages in my previous role as the shadow tech and digital economy Minister, and it is fantastic to see it so ably steered through the House today with the support of my good friend and neighbour, my hon. Friend the Member for Rhondda (Sir Chris Bryant).
As we have heard, what was draft legislation for so long has been woefully slow to materialise. It had sat on the shelf since 2018, so it is nice to finally see it brought back to the House today and to see the Government taking action. I welcome it, as does the Labour party more widely, having led the way in calling on the Government to ensure that large tech companies are governed by proper regulations to allow for competition in our digital markets. Labour has long called for measures to protect consumers, enhance innovation and promote competition in digital markets in order to unlock growth and level the playing field for smaller businesses. In the midst of a Conservative cost of living crisis, this measure could not be more timely, and the need for it has been constantly confirmed in conversations I have had with constituents in Pontypridd.
Let us not forget that it is been over a year since the legislation was first proposed here. Owing to internal chaos and conflict, the Tories have long delayed the Bill, and it is disappointing that we are now being given a watered-down version of the original Bill and that its delay is causing us to fall behind our European partners. The UK has the potential to lead the way, but the Government have instead chosen to take a back seat and to be led. To say that the Bill is overdue is an understatement. Since it was promised, we have seen the digital world continue to change, grow and expand at an incredible and exponential rate. We have seen a significant growth in artificial intelligence technology hitting the mainstream, and tech is becoming more and more central to our homes, jobs and social lives. Our post-covid world has adapted to hybrid, tech-dependent working styles, and jobs in all sectors have accommodated that preference.
Whether it be for work, shopping or our social lives, we are all spending more time online. I see that—sadly—in my own habits, as well as those of my colleagues and constituents. I believe we can all agree that a thriving digital economy in which all sectors and all businesses become digital is vital for the UK’s economic growth, but the Government have nevertheless failed to keep up. Now that they have finally decided to deliver this albeit watered-down legislation, it is up to them to ensure that it survives and, if it does, to protect it from further watering-down changes. So far, I am not convinced that that will be the case. The Government have tabled an amendment in lieu of one of the Lords amendments, but they are ignoring the remainder. While most of the disagreement relates to different semantic interpretations of the wording, it is important that we get the wording right so that the Bill works in practice and not just on paper.
I am afraid that these frustrations are not new. Many of them are not dissimilar to those that my colleagues and I raised during the Committee stage of the Online Safety Act 2023. Let us be clear: while big companies have a significant impact on our economy, that power should never be extended to our legislative process. The process of forming and scrutinising legislation should be entirely independent from any private company interest. Parliamentarians and our Government should not be influenced in any circumstances, because we as public servants should be here for our people—our constituents— rather than being here to promote and advance the interests of big companies and big tech. What is more important to the Government: appeasing big companies or acting for the good of the people they are supposed to represent? If it is not appeasing big companies, why will they not revert to ensuring that the CMA’s interventions are appropriate rather than proportionate?
We all know that this change will have a significant impact on the scope of the big tech firms to challenge CMA decisions under judicial review. Given that courts have to navigate these new and broader grounds for judicial review appeals against those decisions, big tech firms are provided with huge, limitless legal budgets and bottomless pockets to tie up the CMA in lengthy legal disputes. It is imperative that the Lords amendments remain in their original form to hold big tech firms accountable, to limit their scope to appeal and to reduce the ambiguity in relation to court interpretation about which we have heard today.
Moving beyond those concerns, this Bill is still absolutely necessary, which is why it has the support of the Labour party, as do the Lords amendments. We all know that the digital economy has opened new markets for businesses and has given consumers access to new information, but with rivals unable to compete with the world’s most powerful global companies, they do not sit on an equal footing. Google has a more than 90% share of the 7.3 billion search advertising market in the UK, and Facebook has over 50% of the £5.5 billion display advertising market. That is completely unfair, and constitutes both a challenge to businesses and a detriment to consumers.
This means that everyday consumers have little to no autonomy over their online choices, or in how much data they have to give out. As for businesses, this is limiting their innovation, as their ideas are likely to be quashed by an algorithm and they are therefore unable to compete by any reasonable and fair means. For example, Amazon’s use of its position as a marketplace, a publisher and a bookseller has been detrimental to the potential and work of independent booksellers who are pushed aside because they cannot compete with these huge companies and the advantages that the marketplace affords them. I am glad to see that the Lords amendments recognise the importance of user choice, autonomy and independence from the big companies that are pushing an agenda and escaping scrutiny.
Why, then, have the Government shied away from this? If, as they claim, the wording maintains the same high threshold, why will they not clarify the fact that the “indispensable” standard and the new standard are equal? What exactly are they afraid of? Big tech must be held accountable, and must not be able to complicate legal proceedings and escape scrutiny. Surely that point should not cause disagreement. Why have the Government again moved to a merit appeals approach to penalty decisions? This is completely unworkable. Proceedings must take a judicial review approach, which means that a decision will be judged on the basis of its lawfulness rather than its correctness or the views of a tribunal. This approach will fail to incentivise big tech firms to comply with CMA decisions.
While the Tories’ watering down of the Bill may initially appear trivial, in fact it will only encourage big tech to challenge the decisions of the CMA. If we want the Bill to be workable—to be worth the paper on which it is written—we must ensure that it is clear, precise and unambiguous. Given that the judicial review and merits elements of appeals could bleed into one another—which is causing concern—ambiguity is already rife in this Bill.
The Government must reverse their watering down of this all-important legislation or, at the very least, clarify exactly what the changes to the wording represent. That is exactly why the Lords amendments are so necessary. I urge the Government to reconsider them with the seriousness that they deserve and, at the minimum, to make efforts to compromise, as they have done with one of them. The same must be done for the other three in question.
The Lords amendments would bring small businesses on to a level playing field, and protect the autonomy and pockets of our consumers. If the Bill fails to do that and is watered down any further, it will not be worth the paper it is written on. The Government can do the right thing. They should take the opportunity to do so, and I implore them to do so.
Ms Lyn Brown (West Ham) (Lab)
Today I want to speak in support of Lords amendment 104 and the Lords amendments relating to foreign state ownership of UK newspapers, and I will raise some questions about the Lords amendments relating to consumer protections against unfair subscription practices and the use of fake reviews. I will start by setting out my overall support for the Bill and establishing a bit of context for why it is so important to get the regulation of the digital economy right.
Over the past decade, our economy has obviously been transformed by digital change. In many ways this has brought benefits but, equally, it has brought new harms—new ways that unscrupulous individuals and companies can exploit us all. People in our communities are affected by the failures of existing digital regulation, and I would argue that it is often communities like mine that bear the brunt. In Newham we have significant digital exclusion, and massive damage has been caused to family finances by the cost of living crisis.
Andrew Gwynne
It comes back to the point about bots. Even the most tech-savvy person cannot beat the bots, and once those bots get going, they sweep away all the tickets and genuine fans cannot get them. That is so unfair—almost as unfair as the extortionate prices that these companies charge for the tickets they have swept up using those bots.
Ms Brown
My hon. Friend is absolutely right. We have families struggling to buy tickets for their children who are desperate to go and see x band or y band, and then they find themselves ripped off and unable to have that treat, which was massively looked forward to.
I give huge credit to my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) for her years of dedicated campaigning in this area. Her work has helped to bring this issue to the forefront of debate, and to make it clear that legal change is necessary to protect our cultural industries and consumers from the touts. We on the Opposition Benches have a clear policy to stamp out ticket touting so that no one is able to charge a large mark-up on resold tickets.
Sir Chris Bryant
Is it not important to emphasise that this issue needs legislation? Lots of venues have tried their level best to get it right. For instance, the O2 Arena only endorses the use of its reseller, AXS, which is only allowed to sell tickets at 10% above the original price—precisely what we are saying should be available to everybody else—but the venue cannot stop other companies effectively nicking all the tickets because of the use of bots. That is why we need legislation.
Ms Brown
I absolutely agree with my hon. Friend. We have tried to nip this in the bud by bringing it to the public’s attention, putting pressure on individuals and encouraging action to be taken, but we need legislation to stamp it out.
I like the fact that in Labour’s proposed legislation there will be an upper limit on the number of tickets that an individual can resell, in order to make organised ticket touting an unprofitable practice. People who honestly buy tickets and then find that they cannot attend should absolutely be allowed to sell their tickets on—that is in the consumer’s interest and the best interests of our constituents—but culture and sports fans should no longer be gouged and exploited. Thankfully, there is a Lords amendment before us today that would ensure that very thing. It was put forward by none other than the Conservative Lord Moynihan. It would go some way to implementing these protections, but despite that the Government seem determined to oppose change and go no further in protecting consumers from ticket touts, even though they acknowledge that the problem persists.
Frankly, I know that my constituents will want to understand why the Government appear determined to stand in the way of greater protections even when they are being put forward by one of their very own noble Lords. Why are the Government ignoring the voices of fan organisations and creatives who want a fair, properly regulated market in event tickets? I think the Minister might have a job of work to do in convincing my constituents that this is about sound regulation rather than the failed free market ideology of the former Prime Minister, the right hon. Member for South West Norfolk (Elizabeth Truss). We in this House must not forget the importance of protecting Britons from unfair practices, and we must always remember to put them first.
We know that this is far from the only area where poor regulation of our cultural and media markets poses serious risks to consumers and communities alike, so I want to say a few words about the large number of Lords amendments on the state ownership of our newspapers. I thank my Opposition Front-Bench colleagues for demonstrating leadership and pressing for action on this issue, and I welcome the Government’s amendments in the other place following those calls. It is important that there is now something like cross-party consensus on this, because we live in a world where distrust is stronger and misinformation thrives.
I know that many of us share the fear that genuine, honest journalism is becoming a rare commodity, and the impacts of that are massive right across our society. Failure to promote a trustworthy media landscape fuels conspiracy theories and extremism, and it distracts attention from the genuine, massive challenges that face us as a country and as a world. We should all fear becoming a society that is riven by division, because all our communities lose out from that. I believe that only scammers, extremists and tyrants ultimately benefit.
I am not saying that foreign state ownership of UK newspapers would lead directly to those media outlets spewing division, hate and lies, but I am seriously worried about the further impact it would have on public trust in our media. We all need to recognise the greater potential for interference in our democracy from foreign states if they own media outlets directly.
We cannot just act to block foreign state takeovers of papers—our agenda needs to be wider than that. We need to support impartial and independent public interest journalism through the BBC, including the fabulous World Service, which is so important and currently in significant financial difficulty. We need, obviously, to continue acting to improve the regulation of online social media spaces where, as we know, trust is near extinct and where so much harm is done to the most vulnerable in our communities. Amendments against foreign ownership of newspapers are only a tiny part of the solution, but they are a step forward. I welcome the action taken on this issue in the other place, which has improved the Bill.
Finally, I will speak to some of the wider amendments made in the other place to better protect consumers from scams and exploitation. As we know, the abuse of subscription services by hiding cancellation options affects people in every part of our country. People are steadily losing money, month after month, to services that they do not want but do not know how to cancel. Citizens Advice estimates that £300 million a year is being spent on unwanted subscriptions. Obviously this is of even more concern where people are not completely digitally literate, so I hope the Minister might tell us more about what work is being done to monitor and update the digital inclusion strategy. It is a bit of a shock that there has been no update for about 10 years. According to Age UK, nearly 6 million older people, including many of my constituents, cannot use the internet.
One constituent recently told me about how they missed a hospital appointment because they lost the message telling them about it. We all know that this is all too common, and that it creates unnecessary and unfair barriers to accessing so many of our public services and just taking part in everyday life.
Frankly, the examples I have seen show that anybody can be impacted, because it is often massively harder to cancel a subscription agreement than to enter one. That is just blatant and egregious, and it is difficult for any of us to navigate. Additional protections in law simply cannot come soon enough, and there is widespread recognition that greater clarity is needed in regulations. Regulators will obviously need to be more active in holding the providers of subscription services to account where they use exploitative tactics against consumers. The test is whether the Bill will deliver that.
I welcome the debate in the other place on how this will be implemented in law and, slightly unusually, I give credit to the Minister in the other place for rightly engaging with probing amendments and for seeking to maintain stronger protections for consumers. I hope the Minister here today will say more about where the Bill ultimately stands. Will the regulator have the clarity and confidence it needs to start enforcing against exploitative practices, or will we be back here in a few years after the regulations have been tested and found sadly wanting?
I argue that the lack of a clear prohibition on creating fake reviews was an omission from the original Bill. Shadow Ministers and Opposition colleagues have called for greater clarity on that since Second Reading, almost a year ago, so I welcome the measures that have now been included. In our everyday lives, when we look for goods and services online, many of us have little alternative but to rely on reviews. Fake reviews are clearly a massive threat to genuine competition, and they are effectively an open door for scammers and cowboys to rip people off further. Again, I hope the Minister might say a little more on the final position.
There was significant debate in the other place on probing amendments that questioned whether stronger provisions were needed, particularly on the responsibilities of platforms and internet service providers that host fake reviews. Is the Minister absolutely confident that those platforms are clear about the actions they must take to stop their services being abused by fake review scammers?
Kevin Hollinrake
With the leave of the House, I will respond to some of the points raised in this fruitful, constructive debate. I reassure the shadow Minister that I have lost none of my mojo or ambition to ensure a fair and level playing field for businesses. That is a vital part of this legislation. At times I may smile when I am at the Dispatch Box and there are a couple of reasons for that; not only am I generally a happy guy but I am pleased to see this groundbreaking legislation being brought into effect. It is probably one of only two major pieces of legislation around the world that does what it does. We should welcome that and the fair and level playing field that will result from it.
I do not accept what the shadow Minister says about the Government having caved in and weakened some of the Bill’s provisions. It is fair to say that some of the platforms would like us to have changed the Bill radically from how it was when it was presented to Parliament. We think we have very much held the line on its provisions and how it will ensure that consumers and smaller businesses get a better deal. We do not accept that it will bring about “bleed back”, as he puts it, between the on-the-merits provisions of penalties and other regulatory decisions. We have been clear on that and our legal advice is of the same mind.
Secondary ticketing is a key part of the debate, having been raised by various Members. We absolutely see that there is good practice in some primary markets, where there is control as to resales. We should learn from best practice, such as ID requirements on the resale of tickets. That is within the gift of those in the primary markets, so we are keen to develop the review to ensure that we look at both the primary and secondary markets, as the Opposition called for in an amendment tabled earlier in the Bill’s progress.
Sir Chris Bryant
I am grateful to the Cheshire cat for giving way. Does he oppose the Lords amendment on ticket touts because of the proposed new subsection stating that there needs to be “proof of purchase” for secondary ticket marketing, or because details of the “face value” of the ticket have to be provided? It is difficult to determine why the Minister opposes the Lords amendment other than because it is an inconvenience to government.
Kevin Hollinrake
We believe that those measures, such as on the face value of the ticket, are already covered by the current legislation and enforcement. The Government have certainly gone a lot further than previous regimes have: we strengthened the terms and guidance in 2017; we banned ticketing bots—the hon. Gentleman mentioned that but did not seem to understand that it had been outlawed in 2018; and we improved enforcement action by the regulators, as we have seen six successful prosecutions under the new regime. I remind him that where other jurisdictions have supposedly gone further in banning resale, such as in Ireland, no prosecutions have taken place. We are trying to ensure that we have a balance and that our provisions work well.
Kevin Hollinrake
I will address the hon. Lady’s points in a moment, as I am keen to respond to some of them.
Sir Chris Bryant
If the Minister goes to the Viagogo website and tries to buy a ticket, he will see on the first page that it says the ticket is £420 or whatever. Can he see the original value of the ticket? No. Can he see whether it is a validly purchased ticket? No. That is the problem that the amendment would solve. It would be simple for the Government to agree to the amendment and then we can get the Bill through.
Kevin Hollinrake
We believe those provisions are already there. I have quite happily used Viagogo on many occasions, as other people have when reselling tickets. Of course we will keep looking at the primary and secondary markets, and at the interaction between the two, so that we can develop the right way to regulate the market, in a future Parliament.
Kevin Hollinrake
I will come to the hon. Lady’s points in a moment.
On the things we are doing to hold big tech to account, I can assure my hon. Friend the Member for Weston-super-Mare (John Penrose) that the fire burns brightly in me. I do not think we have moved away in any material way from ensuring that this legislation is fit for purpose and does what it sets out to do. As I said in response to his earlier intervention, we do not believe there is any bleed-across between the merits-based approach to penalties and other regulatory interventions. The revised wording about the countervailing benefits exemption did not change the effects of the clause and did not change the guidance in the explanatory notes.
As my hon. Friend is aware, we are doing a lot of work on regulation. We have engaged on regular occasions to ensure that gets to where he wants. On costs and benefits, he will have noticed we brought forward the growth duty for our economic regulators quite recently, as well as the smart data road map. I know he waits with bated breath for the White Paper that will come forward shortly.
I thank the hon. Member for Gordon (Richard Thomson) for his support for the legislation. We do not think the change from conduct is indispensable to the benefits; benefits could not be realised without the conduct materially changing the position in any way.
My hon. Friend the Member for Folkestone and Hythe (Damian Collins) said that we had moved to a different balance. I do not think I said that; I am happy to clarify my remarks about proportionality. We have provided more certainty and clarity around that position, which we always thought was part of the way the CMA would make its decisions. He made points about how the regulator would view, for example, the significant charges made across the Xbox platforms, which both charge 30% to the people who have e-commerce through those payment systems. As he said, businesses might not think that is too much, but we both know that it is not businesses that pay that ultimately, but consumers. The requirement for the CMA to make interventions for the benefit of consumers is in its very DNA, so I think it would act in those situations.
The hon. Member for Worsley and Eccles South (Barbara Keeley) talked about the secondary ticketing position. I hear her points, and the points raised by the hon. Member for Washington and Sunderland West (Mrs Hodgson), very clearly.
Barbara Keeley
I counsel the Minister against what he is doing. As his colleague in the Department for Culture, Media and Sport team did recently at oral questions, he is repeating the arguments that the platforms use. It is sad to hear Ministers repeating the same lines that a global chief officer of Viagogo came out with when they were over here. In Ireland, fraud activity has not increased—because the legislation is working., and that is why there are no prosecutions in Ireland. We would be in that situation if we had that legislation. As my hon. Friend the Member for Washington and Sunderland West probably wants to point out, it is alright to say that the use of bots is illegal, but nobody is being prosecuted for the illegal use of bots to wholesale-buy tickets; it is happening, so I counsel the Minister and his ministerial colleagues’ against their constant repetitions, which are not plausible to anybody outside.
Kevin Hollinrake
The hon. Lady is right to say that there is a difference between legislation and enforcement. We urge the authorities that have responsibility to enforce those provisions to make use of them. In Ireland, where the resale of tickets has been banned, inflated prices are still a feature of the ticket markets. Tickets for Taylor Swift’s Dublin shows are selling well in excess of their face price on the internet in Ireland, but no prosecutions have been made.
Kevin Hollinrake
May I make it clear that I was not accusing the hon. Member for Worsley and Eccles South of crowd pleasing? As I said in my earlier remarks, and as I will say to the hon. Member for Washington and Sunderland West before she intervenes, we should not simply take measures that are crowd pleasing in the hope they will work but they are ineffective. That is not to say that we do not think further measures are required.
Mrs Hodgson
On the point about Taylor Swift and whether any of her tickets have been sold on the secondary market in Ireland, I challenge the Minister to take another look at that rather than taking the word of his officials or whoever has told him. I have been told that no Taylor Swift tickets are on sale on Viagogo in Ireland. She has stated that her tickets will not be valid if they are resold on a secondary platform, so they will not be found on a secondary platform in Ireland.
Kevin Hollinrake
Yes, I have just googled sellers of tickets in Dublin, and people can buy tickets well in excess of face value on the platform. I could not find them on Viagogo, but other platforms are selling those tickets. We are trying to do something that is effective. I am very happy to continue to engage with the hon. Lady, as she makes a very compelling case. I shall continue to look at what she says and continue to engage with her. I am very keen to ensure that we get to the right place, so that we protect consumers, but allow a fair, free market to work properly.
Andrew Gwynne
I am very grateful to the Minister for giving way. I want to take him back to his comment that what was needed was not new legislation, but better enforcement. The enforcement authorities would presumably be trading standards. What is the reason there are not the prosecutions that we would all like to see? Is it because trading standards has been run into the ground and does not have the capacity to do the job that he is expecting it to do? Is it because of the complexity of the market? And which trading standards is responsible: the one where the platforms are based, the one where the person who bought the ticked is based, or the one where the concert is being held? That makes enforcing this measure really difficult.
Kevin Hollinrake
I thank the hon. Member for his points. I said not that legislation was not needed, but that there was no point in having legislation without enforcement. There have been six successful prosecutions by trading standards, but is he saying that he wants to fund trading standards to a greater degree? I understand some of the pressures on local authorities across the country; there are pressures on the public finances generally. If he has a solution to that and can provide lots more money to local authorities, he should have a word with his Front-Bench team, because that has not been Labour’s policy.
Gen Kitchen (Wellingborough) (Lab)
Unlike with trading standards, many cash-strapped families and young people fall for online scams, because they are on the hunt for bargains on Facebook Marketplace and, to a lesser extent, on eBay and Vinted. They are often at the mercy of being ripped off with very little protection and little to no help from local trading standards because of that confusion over whether it is where the buyer is or where the seller is. In particular, that is because they are for more casual and lower-value transactions. Can the Minister confirm whether that will be in the review as well?
Kevin Hollinrake
I thank the hon. Lady for her intervention. She makes a very good point. I am happy to look at the concerns that she raises. We will look at the concerns raised by all stakeholders, Members of this House and people further afield to ensure that, when we carry out this review, we get to the right place.
The hon. Member for Pontypridd (Alex Davies-Jones) seems to think EU legislation is stronger than ours. Let me point out that appeal standards consider the merits across the piece in the European Union; they do not in the UK, as they are confined to a very small element of it.
Finally, I am pleased that the hon. Member for West Ham (Ms Brown) supports the Bill and very pleased that she supports freedom of speech. Digital inclusion is very important. The Under-Secretary of State for Science, Innovation and Technology, my hon. Friend the Member for Meriden (Saqib Bhatti) is working very hard on social inclusion and social tariffs of broadband through the cross-ministerial group. We are very keen to ensure that reminder notices for subscriptions are very clear for all our consumers.
To conclude, I urge all Members on both sides of the House to carefully consider the amendment that I have proposed in lieu of those made in the other place. I hope that all Members will feel able to support our position.
Mr Deputy Speaker (Mr Nigel Evans)
Taylor Swift seems to be everywhere, even in the House of Commons, doesn’t she?
Question put, That this House disagrees with Lords amendment 9.
Digital Markets, Competition and Consumers Bill
Tuesday 14th May 2024
(2 months, 2 weeks ago)
Lords ChamberRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 75-I Marshalled list for Consideration of Commons Reasons and Amendment - (13 May 2024)
16:13 - Division on Motion C2 - Ayes: 221 / Noes: 222 - Motion C2 disagreed.
17:00 - Division on Motion E1 (as an amendment to Motion E) - Ayes: 228 / Noes: 213 - Motion E1 agreed.
Viscount Camrose
That this House do not insist on its Amendments 9 and 19, to which the Commons have disagreed for their Reason 19A.
The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
My Lords, I will also speak to Motions A1, B, B1, C, C1, C2 and D.
I start by thanking noble Lords for their constructive input and careful scrutiny during the passage of the Bill. We have created legislation that will drive innovation and deliver better outcomes for consumers across the UK by addressing barriers to competition in digital markets and tackling consumer rip-offs.
The Bill has been strengthened in many places in this House. However, today, I will speak to Motions A to D, which address amendments that remain to be agreed across the Bill. The Government ask that this House does not insist on the amendments rejected in the other place and that it agrees to the amendment proposed in lieu of changes proposed by noble Lords.
Lord Tyrie (Non-Afl)
Does the Minister not agree that since, with a merits appeal, a fine could be reduced to nugatory amounts, that what would be considered equivalent to a full merits review of the substantive decision?
Viscount Camrose (Con)
That would be in respect only of the fine itself. Any other element of the decision, such as the imposition of new conduct requirements or other actions taken to correct anti-competitive effects in the market, would stand and would have been standing throughout the appeal in any event.
I turn to Motion B, which addresses Amendments 12 and 13, on the countervailing benefits exemption, moved by the noble Baroness, Lady Jones of Whitchurch. The amendment looks to revert the clause back to its original wording of
“the conduct is indispensable ... to … those benefits”.
The Government’s revised wording, which replaces “indispensable”, does not change the effect of the clause. It still requires the same high threshold to be met and has the same safeguards. To qualify for the exemption, SMS firms must establish that all the criteria are met. There must be no other reasonable, practicable way to achieve the same benefits to consumers with a less anti-competitive effect. I hope that noble Lords feel reassured that the Government’s drafting maintains the same robust threshold and keeps consumers at the heart of the pro-competition regime.
Your Lordships will remember Amendment 38, tabled by my noble friend Lord Lansley, which sought to place in the Bill a 40-day timeframe for the Secretary of State’s approval of CMA guidance. The Government listened carefully to concerns led by my noble friend relating to a risk of delay in the digital markets regime. We are absolutely committed to getting this regime up and running to start fixing competition problems and deliver greater consumer benefit.
To reinforce this commitment, the Government have tabled Amendment 38A in lieu. This takes the spirit of my noble friend’s amendment and merely adjusts the time limit to working days to align with other timelines in the Bill. It also asks for reasons if guidance is not approved within the time limit. I hope that this provides reassurances to noble Lords about our commitment to the digital markets regime. I thank my noble friend for championing this matter in earlier debates and for his support for the amendment in lieu.
Once again, I thank noble Lords for their contributions during the Bill’s passage and I look forward to others during this debate. Across this House, we are all committed to making the DMCC Bill the best and most effective legislation it can be. I therefore invite noble Lords to agree the government Motions before them. I beg to move.
Motion A1 (as an amendment to Motion A)
Lord Faulks
Leave out from “House” to end and insert “do insist on its Amendments 9 and 19.”
Lord Faulks (Non-Afl)
Many of your Lordships will be familiar with the arguments we have had on the Bill. The important point to stress is that there has been a general welcome of this legislation. I would also like to stress that a measure of cross-party co-operation was the hallmark of the scrutiny of the Bill during its passage through your Lordships’ House. Ministers and officials have given their time generously in meetings and have responded promptly and helpfully to the issues that scrutiny has thrown up.
At the heart of the Bill is the regulation of the internet in a way that should prevent market abuse, in particular by big tech. Helpful though the Government have been, they have not provided answers to some important questions, hence amendments being passing on Report. These have been sent back to us by the House of Commons without the Government—save in one respect—making concessions.
One of the areas that gave noble Lords particular concern is the inclusion of amendments in the House of Commons at a late stage, following lobbying of the Government by big tech. A prospective intervention by the regulator is unlikely to be welcomed by big tech companies and, given their enormous legal budgets, will inevitably be challenged. The change of wording from “appropriate” to “proportionate” will make such challenges easier. A reversion to the Bill’s original wording will help to restore balance, and it is hoped that the amendments in my name and those in the name of the noble Baroness, Lady Jones, on appeals against interventions, will achieve that. Our amendments on Motion C are intended to prevent a seepage of arguments on penalty, which involves a merits test, into the judicial review test, which applies to the intervention itself.
Why have the Government made this late change of “appropriate” to “proportionate”? They have been rather coy about this. There has been some waffle—I am afraid I must describe it as such—about increased clarity and the need for a regulator to act in a proportionate manner. That is quite so but, on further probing, the reasoning was revealed: it is intended to reflect the level of challenge derived from jurisprudence from the European Court of Human Rights and the CJEU, where human rights issues are engaged. I remain bewildered as to why big tech has human rights. This is not what the framers of the convention had in mind.
But if—and it is a big “if”—a convention right is engaged, proportionality is the test, or at least part of it. This is a much lower bar than the normal judicial review test. If the Bill remains unamended, this lower bar will apply to challenges whether or not a convention right is engaged. This is good news for big tech and its lawyers, but not for the Bill and its primary purpose.
I ask the Minister this specific question: if the convention right is engaged, proportionality comes into the analysis anyway, but what if a court were to decide that A1P1—the relevant “human right”—was not engaged? With the Bill unamended, proportionality would apply to a non-convention case, greatly to the advantage of big tech. Is my understanding correct?
It seems that big tech has got its way and that litigation wars can commence—a great pity, most specifically for the smaller players and for the ostensible rationale behind the legislation.
On Motion C1, the test for appeals on penalty is to be a merits-based one, rather than the higher bar that a judicial review standard would, or should, involve. The amendments before your Lordships’ House are intended to prevent seepage from one test to another. His Majesty’s Government say that the courts are well used, in different contexts, to applying different tests as part of an analysis. This is true—in theory. My concern is that if I were advising Meta or Google about an intervention and a consequent hefty fine—this is not an advertisement—it is inevitable that I would advise in favour of appealing both aspects of the intervention: against conviction and sentence, as it were.
It is relatively easy to insulate arguments in criminal cases. One question is, was the conviction unsafe? Another is, was the sentence too long? In the emerging world of internet regulation, however, it is likely to be far more difficult in practice. The question of whether an intervention was disproportionate—disproportionate to what?—will inevitably be closely allied to that of whether the penalty was excessive or disproportionate: another win for big tech, and a successful piece of lobbying on its part.
I look forward to words of reassurance from the Minister. In the meantime, I beg to move.
Lord Clement-Jones (LD)
My Lords, I will speak to Motion B1 and briefly in support of other motions in this group.
Last December, at Second Reading, I said that we on these Benches want to see the Bill and the new competition and consumer powers make a real difference, but that they can do so only with some key changes. On Third Reading, I pointed out that we were already seeing big tech take an aggressive approach to the EU’s Digital Markets Act, and we therefore believed that the Bill needed to be more robust and that it was essential to retain the four key competition amendments passed on Report. That remains our position, and I echo the words of the noble Lord, Lord Faulks: that the degree of cross-party agreement has been quite exemplary.
As we heard on Report, noble Lords made four crucial amendments to Part 1 of the digital markets Bill: first, an amendment whereby, when the Competition and Markets Authority seeks approval of its guidance, the Secretary of State is required within 40 days to approve the guidance or to refuse to approve it and refer it back to the CMA; secondly, an amendment reverting the countervailing benefits exemption to the version originally in the Bill, which included the “indispensable” standard; thirdly, amendments reverting the requirement for the CMA’s conduct requirement and pro-competitive interventions to be “proportionate” back to “appropriate”; and fourthly, amendments reverting the appeals standard to judicial review for penalties.
We welcome the fact that the Government have proposed, through Motion D, Amendment 38A in lieu, which effectively achieves the same aims, ensuring that the approval of the CMA guidance by the Secretary of State does not unduly hold up the operationalisation of the new regime. However, the Government’s Motions A, B and C disagree with the other Lords amendments.
Baroness Jones of Whitchurch (Lab)
My Lords, I am pleased to support the Motions in the names of the noble Lords, Lord Faulks and Lord Clement-Jones. My Motion C2, which proposes Amendments 32B and 32C in lieu, is in this group.
Throughout the course of the Bill, we have been grateful to the Ministers for their engagement and willingness to reconsider its provisions. We are pleased with a number of concessions which have considerably strengthened the consumer protections within it.
However, the issues at the core of the Bill, which are the ones we are dealing with in this group, remain unresolved. This is the Bill that was meant to even out the balance of interests between the big tech companies and the challenger firms. We heard numerous examples of why this was necessary, why challenger firms were being squeezed out of the market and why the CMA needed to have new powers to create a fair and balanced regime. We originally had a Bill that did just that. This was before the big tech companies intervened and objected to the Government’s proposals. The new version we have in front of us now weighs the scales very much in their interests again.
In the Commons, Minister Kevin Hollinrake claimed that the Government had engaged significantly with both large tech companies and the challenger firms on these changes and that,
“all those cohorts are happy with where the Bill is today”.—[Official Report, Commons, 30/4/24; col. 178.]
I have to tell the noble Viscount the Minister that this simply is not the case. Many firms remain unhappy with the changes introduced to the original Bill and that they have not been matched by the necessary assurances on the practical and legal consequences that will follow, so our objective all along in framing our amendments was to make the Bill legally watertight, to take out ambiguity and to give the CMA the best chance of assessing and moderating the conduct of the tech companies deemed to have strategic market status.
We have been keen to use the wording that is already legally recognised and does not increase the scope for the lengthy, costly and often strategic legal cases which we sometimes see in this field, challenges which could be used delay or undermine the CMA’s attempts to level the playing field. Clarity has to be of the essence. We and the noble Lord, Lord Faulks, have amendments to Motion C, and he has eloquently raised the legal concerns which continue to concern us as well.
Our Amendments 32B and 32C address an area of ambiguity that may give lawyers an open door to revisit CMA decisions to impose a penalty when conduct requirements have been breached. This concern was also raised in the Commons debate. For example, Conservative MP John Penrose described the possible impact of the government changes, such that
“clever lawyers working for big tech firms may effectively be able to broaden the scope through clever use of legal techniques to prolong their attempts to walk backwards slowly and prevent justice from being done”.—[Official Report, Commons, 30/4/24; col. 188.]
I could not have put it any better myself. To address this concern, our amendment makes it clear that appeals on penalties in such cases cannot revisit the original decision, whether to impose conduct requirements or that such requirements have not been complied with. Rather than leaving it to ministerial assurances or non-binding additions to the Explanatory Notes, our amendments would make it absolutely clear that merits appeals on penalties are on only the amounts and other points of detail and not the CMA’s decision to act, something that colleagues have referred to as “bleed back” at previous stages. This amendment represents a compromise. We would have preferred a switch back to the use of judicial review on all aspects of appeals, as preferred by the CMA, but in the absence of such a concession I hope noble Lords will see the value of our proposals.
We are not convinced by the assurances offered in the Commons by Minister Hollinrake that the courts will understand how the rules should be applied; the noble Viscount the Minister repeated this today. As the noble Lord, Lord Faulks, ably demonstrated, there are conflicting legal views on this and few precedents on which we can rely. There is also a remaining concern that where a number of issues are dealt with by the CMA concurrently, the evidence may overlap, which would impact on a merits decision on appeals. Our amendments address these concerns. I hope the Minister sees the sense in our proposal. It merely reflects what the Government say they want to achieve, but which they are refusing to put in legislation. Challenger firms and other interested parties cannot grow and compete with warm words alone, so I give notice that I am minded to test the opinion of the House on this important issue.
The noble Lord, Lord Faulks, also made a compelling case on his Motion Al with regard to proportionality. We have debated this issue before; I do not need to repeat the arguments. We continue to believe that the original wording that the CMA’s conduct in regulating digital markets should be “appropriate” rather than “proportionate” sets the right standard. I hope the Minister will be able to confirm that the Explanatory Notes will be amended to make it clear that the use of “proportionate” is not intended to set a heightened standard for appeals grounds.
Viscount Camrose (Con)
My Lords, I thank all noble Lords who have contributed to the debate today and, of course, throughout the development of this legislation. It has been a characteristically brilliant debate; I want to thank all noble Lords for their various and valuable views.
I turn first to the Motions tabled by the noble Lord, Lord Faulks, in relation to appeals and proportionality. I thank him for his continued engagement and constructive debate on these issues. We of course expect the CMA to behave in a proportionate manner at all times as it operates the digital market regime. However, today we are considering specifically the statutory requirement for proportionality in the Bill. We are making it clear that the DMU must design conduct requirements and PCIs to place as little burden as possible on firms, while still effectively addressing competition issues. The proposed amendments would not remove the reference to proportionality in Clause 21 and so, we feel, do not achieve their intended aim, but I shall set out the Government’s position on why proportionality is required.
On the question of the wording of “appropriate” versus “proportionate”, proportionality is a well-understood and precedented concept with a long history of case law. “Appropriate” would be a more subjective threshold, giving the CMA broader discretion. The Government’s position is that proportionality is the right threshold to be met in legislation due to the fact that it applies, in the vast majority of cases, because of ECHR considerations. It is the Government’s view that the same requirement for proportionality should apply whether or not ECHR rights are engaged.
As Article 1 of Protocol 1—A1P1—of the European Convention on Human Rights will apply to the vast majority of conduct requirements and PCIs imposed by the CMA, with the result that the courts will apply a proportionality requirement, we consider it important that it should be explicit that there is a statutory proportionality requirement for all conduct requirements and PCIs. We believe that proportionality should be considered beyond just those cases where A1P1 may apply, in particular when a conduct requirement or PCI would impact future contracts of an SMS firm.
The courts’ approach to proportionality in relation to consideration of ECHR rights has been set out by the Supreme Court, and we do not expect them to take a different approach here. Furthermore, the CAT will accord respect to the expert judgments of the regulator and will not seek to overturn its judgments lightly. I hope this answers the question put by the noble Lord, Lord Faulks.
On appeals, I thank noble Lords for their engagement on this matter, and in particular the noble Baroness, Lady Jones of Whitchurch, for setting out the rationale for her Amendments 32B and 32C, which seek to provide further clarity about where on the merits appeals apply. I want to be clear that the Government’s intention is that only penalty decisions will be appealable on the merits and that this should not extend to earlier decisions about whether an infringement occurred. I do not consider these amendments necessary, for the following reasons.
The Bill draws a clear distinction between penalty decisions and those about infringements, with these being covered by separate Clauses 89 and 103. There is a Court of Appeal precedent in BCL v BASF 2009 that, in considering a similar competition framework, draws a clear distinction between infringement decisions and penalty decisions. The Government consider that the CAT and the higher courts will have no difficulty in making this distinction for digital markets appeals to give effect to the legislation as drafted.
I now turn to the Motion tabled by the noble Lord, Lord Clement-Jones, in respect of the countervailing benefits exemption. I thank the noble Lord for his engagement with me and the Bill team on this important topic. The noble Lord has asked for clarification that the “indispensability” standard in Section 9 of the Competition Act 1998, and the wording,
“those benefits could not be realised without the conduct”,
are equivalent to each other. I want to be clear that the exemption within this regime and the exemption in Section 9 of the Competition Act 1998 are different. This is because they operate in wholly different contexts, with different criteria and processes. This would be the case however the exemption is worded in this Bill. That is why the Explanatory Notes refer to a “similar” exemption, because saying it is “equivalent” would be technically incorrect.
Having said that, the “indispensability” standard and the threshold of the Government’s wording,
“those benefits could not be realised without the conduct”,
are equally high. While the exemptions themselves are different, I hope I can reassure noble Lords that the Government’s view is that the standard—the height of the threshold—is, indeed, equivalent. The Government still believe that the clarity provided by simplifying the language provides greater certainty to all businesses, while ensuring that consumers get the best outcomes.
I thank the noble Lord, Lord Clement-Jones, for his question in relation to the Google privacy sandbox case. The CMA considers a range of consumer benefits under its existing consumer objective. This can include the privacy of consumers. It worked closely with the ICO to assess data privacy concerns in its Google privacy sandbox investigation and we expect it would take a similar approach under this regime.
I urge all noble Lords to consider carefully the Motions put forward by the Government and hope all Members will feel able—
Viscount Camrose (Con)
Indeed. In principle I am very happy to update the Explanatory Notes, but I need to engage with ministerial colleagues. However, I see no reason why that would not be possible.
Meanwhile, I hope all noble Lords will feel able to support the Government’s position.
Lord Pannick (CB)
My Lords, before the Minister sits down, may I just press him on proportionality? I understand the argument to be that a proportionality test should be applied in this context even though it is not required in all cases by the European Convention on Human Rights. I see the Minister nodding. Will that now be the general position of the Government, because it is not the law in relation to judicial review generally that there is a proportionality test? If that is to the position of the Government, it would be a very significant development which some of us would welcome and some of us would not. I declare an interest, of course, as one of those lawyers referred to by the noble Baroness, Lady Jones, as looking to take advantage on behalf of their clients. It is a very real issue; how far does this go?
Viscount Camrose (Con)
It goes only so far as its application to the Bill now. I am not aware of any further measures to take it into other Bills and would not expect to see any.
Lord Faulks (Non-Afl)
My Lords, I am grateful for the Minister’s response on that issue. I asked him the same question that I have asked throughout these proceedings—it is the same question posed by the noble Lord, Lord Pannick—and there does not seem, with great respect, to be an answer to it. The Minister has mostly allowed, to use a cricketing metaphor, the matter to go past the off stump without playing a shot. What really seems to be the position is that he says that proportionality will apply, even if the Human Rights Act or a convention right is not involved. But I think that, in answer to the noble Lord, Lord Pannick, the Minister is saying, “But only in the case of this Bill”. What that means is that big tech is getting a special privilege not afforded to any other litigant in any other context. I ask noble Lords, “Is that a good look?” I do not think that it is.
The Commons reason for preferring “proportionate” to “appropriate” reads as follows:
“Because it is appropriate for the CMA to be required to act proportionately in relation to conduct requirements and pro-competition interventions”.
I do not know whether that was supposed to be a joke, but it is profoundly unsatisfactory. The Government have missed a trick—or rather, they have succumbed to considerable pressure. I welcome the Bill because there is a great deal about it which is good. Having thought very carefully, and with considerable reluctance, I propose to withdraw my amendment.
Viscount Camrose
That this House do not insist on its Amendments 12 and 13, to which the Commons have disagreed for their Reason 13A.
Viscount Camrose (Con)
My Lords, I have already spoken to Motion B. I beg to move.
Motion B1 (as an amendment to Motion B)
Lord Clement-Jones
Tabled by
Leave out from “House” to end and insert “do not insist on its Amendment 12, to which the Commons have disagreed for their Reason 13A, and do insist on its Amendment 13.”
Lord Clement-Jones (LD)
My Lords, if this is not a non-parliamentary expression, I will say that the Minister has come within a gnat’s whisker of where we need to be. I rely on his assurances about Explanatory Notes, because they will be important, but I do not move Motion B1.
Viscount Camrose
That this House do not insist on its Amendments 26, 27, 28, 31 and 32, to which the Commons have disagreed for their Reason 32A.
Viscount Camrose (Con)
My Lords, I have already spoken to Motion C. I beg to move.
Baroness Jones of Whitchurch
Moved by
At end insert “, and do propose Amendments 32B and 32C in lieu—
Baroness Jones of Whitchurch (Lab)
My Lords, the Minister said more or less that he agreed with our position but did not see the need for the amendments to be on the face of the Bill. The argument he gave was that the courts would have no difficulty in distinguishing the penalties from the earlier elements of the case—but, as we have already heard this afternoon, some of those legal disputes are just beginning. It is not as clear-cut as we would like, legally, and therefore we do feel the need for that clarification to be in the Bill. I therefore wish to test the opinion of the House on Motion C2.
Viscount Camrose
That this House do not insist on its Amendment 38, and do agree with the Commons in their Amendment 38A in lieu.
“(5) When the CMA seek the approval of the Secretary of State for guidance, the Secretary of State must— (a) approve the guidance, or
(b) give reasons to the CMA for not approving it.
(6) The Secretary of State must comply with subsection (5) before the end of the 30th working day after the day on which the CMA seek the Secretary of State’s approval.”
Lord Offord of Garvel
That this House do not insist on its Amendment 104, to which the Commons have disagreed for their Reason 104A.
The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Offord of Garvel) (Con)
My Lords, I too thank noble Lords for their constructive engagement and debate during the passage of this Bill and echo the remarks of my noble friend Lord Camrose on the importance of this legislation. Since noble Lords last discussed secondary ticketing, the Government have given further thought to addressing the concerns raised in both Houses. We still do not see the merit in more or duplicative regulation at this stage. Enforcement action using the existing rules has already resulted in jail sentences for two touts as well as a confiscation order of £6.1 million. We are also awaiting sentencing on four recent prosecutions later this month.
Crucially, there have been rapid changes in the ticketing market in the last few years. Greater use of app-based verification and staggered ticket releases mean that businesses in the primary market can, if they wish, easily manage secondary ticketing. However, it is evident that good practice must go further and wider. That is why the Government are committing to carry out a review of the ticketing market as a whole, including primary sellers, so that good practice can be spread further. The most recent review by the CMA examined only the secondary market, but it is our belief that seeking to address benefits and protections purely through action in the secondary market will not deliver the best outcomes for consumers. For this reason, the review will consider issues such as why some primary sellers seem to be more successful than others at getting tickets directly into the hands of genuine fans, and what we can learn from that. The review will take place over nine months, after which the Government will consider any appropriate further action.
The Department for Business and Trade is ready to work with DCMS and start the review as soon as possible after the Bill receives Royal Assent. We will welcome input, expertise and views from this House and the other place, as well as from venues, artists, promoters, ticket sellers and resellers, enforcers and consumers. I encourage noble Lords to back the Government’s review to ensure meaningful and evidence-based recommendations following its conclusion. I invite noble Lords to agree the Motion and I beg to move.
Motion E1 (as an amendment to Motion E)
“Secondary ticketing facilities
(1) After section 92 of the Consumer Rights Act 2015 insert—
“92A Requirements on secondary ticketing facilities
(1) A secondary ticketing facility must not—
(a) permit a trader or business to list tickets for resale unless the trader or business has provided evidence of proof of purchase to the ticketing facility, or evidence of title to the tickets offered for resale, or
(b) permit a reseller to sell more tickets to an event than they can legally purchase from the primary market.
(2) A secondary ticketing facility must ensure that the face value of any ticket listed for resale, and the trader or business’s name and trading address are clearly visible, in full, on the first page on which a purchaser can view the ticket.
(3) The Secretary of State may by regulations made by statutory instrument—
(a) add or amend conditions on secondary ticketing facilities,
(b) specify appropriate forms of proof of purchase for the purposes of subsection (1)(a), and
(c) specify the form or forms in which the name and trading address required under subsection (2) must be displayed.
(4) Regulations under subsection (3) may not revoke conditions on secondary ticketing facilities.
(5) Regulations under subsection (3) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”
(2) Within the period of nine months beginning with the day on which this Act is passed, the Secretary of State must lay before Parliament the outcomes of a review of the impact of subsection (1) on the operation of the secondary ticketing market.
(3) In preparing the review under subsection (2), the Secretary of State must consult—
(a) ticket sellers and resellers,
(b) artists and performers, or their representatives,
(c) consumers and representative organisations, and
(d) any other persons the Secretary of State deems appropriate.
(4) The review under subsection (2) may, if the Secretary of State deems it appropriate, consult on or specify new conditions to be placed on secondary ticketing facilities under the powers in section 92A of the Consumer Rights Act 2015.
(5) The obligation under subsection (2) may be met by a review begun before the passing of this Act.””
Lord Moynihan (Con)
My Lords, I declare an interest in having been co-chair of the APPG on Ticket Abuse, my fellow co-chair being Sharon Hodgson MP. We worked together to protect sport fans and concert- goers from abuse in the secondary market for decades. I start by thanking my noble friend the Minister for the interest he has taken in the subject and for arranging the opportunity to talk through the issues concerned. I also stress the cross-party support and co-operation on this issue. I believe we have reached a degree of consensus about what we are trying to achieve with this amendment in lieu, and I hope we will continue, during the exchanges this afternoon, to reach agreement.
Put simply, this amendment covers two aspects: a review, as requested by the Government, which was the main outcome of the proceedings in another place; and two small but critical amendments. The first is that anybody should have to provide evidence of proof of purchase to the secondary market if they intend to sell tickets, just as you would in any other secondary market, which would avoid the extensive fraud in the UK under the current legislation. The second is to make sure that the trader’s name and the face value of the ticket listed for resale are clearly visible on the ticket. That would bring us up to date with modern technology and the changes in law and technology over the last 10 years.
Lord Clement-Jones (LD)
My Lords, I support Motion E1 and pay fulsome tribute to the noble Lord, Lord Moynihan, for his expertise and tenacity. Thanks to his efforts and those of Sharon Hodgson MP, and after a long campaign with the All-Party Group on Ticket Abuse, we were able to include certain consumer protections in the ticketing market in the Consumer Rights Act 2015. The noble Lord’s amendment on Report sought to introduce additional regulatory requirements on secondary ticketing sites for proof of purchase, ticket limits and the provision of information on the face of tickets. That would have secured greater protection for consumers and avoided market exploitation, which is currently exponentially growing on platforms such as viagogo.
As we have heard, the Ministers—the noble Lord, Lord Offord, and the noble Viscount, Lord Camrose—in their letter of 1 May to noble Lords, offered a review that would take place over nine months, which would make recommendations for Ministers to consider. But that is simply not enough, as the noble Lord, Lord Moynihan, has demonstrated. The Minister, the noble Lord, Lord Offord, seems to believe from his own experience—unlike the rest of us—that everything is fine with the secondary market and that the answer to any problem lies in the hands of the primary ticket sellers. However, the noble Lord, Lord Moynihan, in his brilliantly expert way, demonstrated extremely cogently how that is absolutely not the case for the Minister’s favourite sports of rugby and football, where the secondary resellers are flagrantly breaking the law.
Lord Leong (Lab)
My Lords, I will speak to Motion E1 in the name of the noble Lord, Lord Moynihan. Like the noble Lord, Lord Clement-Jones, I thank him and my honourable friend the Member for Washington and Sunderland West for their relentless campaigning and enduring diligence on this issue.
The current system is not working. It is not strong enough to stop a shadowy oligopoly of parasites on talent: unscrupulous people who are profiteering from genuine fans who want to see their heroes perform live. Tickets for many high-profile events, which by their very nature are extremely limited in supply, are being resold for many times their face value. Genuine sports supporters and music fans are being ripped off.
I will give just one example. The original price of the most expensive seated tickets for Taylor Swift in Edinburgh next month was £194 each. I went online to book mine last night, dedicated Swiftie fan that I am, and the cheapest seated tickets with unrestricted views were more than £500 each for two together. The most expensive pairs were £3,646 each—more than 19 times the original price. If I were to buy them, I would wonder to whom that additional money, almost £7,000, was going. It is obviously not going to Taylor Swift—or Tay Tay, as we fans call her.
Sports clubs and artists pitch their prices at a level which they think is fair and which enables them to make a profit: a price that allows their fans to enjoy their work—often a special occasion that will be remembered for a lifetime. When they see their fans charged excessive prices, they are right to believe that their hard work, talent and reputations are being exploited. These excess profits are not going to those who have worked hard to develop sporting prowess or exceptional skills as a performer; they are going to unscrupulous organisations which are often difficult to track and prosecute and which are prepared to exploit existing loopholes and take risks by breaking the law, knowing that they are unlikely to be caught. Such organisations employ sophisticated technology to distort a necessarily restricted market. In his response on day 2 of our debate, on 13 March, the Minister argued his case for not accepting amendments on this issue. The noble Lord, Lord Moynihan, has, with characteristic persistence and diligence, convincingly rebutted those arguments and perhaps alerted the Minister, as he set out earlier, to just how easy it is to be misled, overcharged and ripped off by the various online sites which operate in the secondary market, perhaps even saving him from an expensive mistake the next time he chooses to see an international rugby or football match or even a pop concert.
The CMA made recommendations in relation to secondary ticketing that are covered by this amendment, as the noble Lord set out earlier. The first was to ensure that secondary tickets can be sold only with proof of purchase of the original ticket, to avoid speculative sales of tickets which may not have been bought and might not be provided—a recipe for rip-offs. The second was to limit the number of resales by a single reseller to the amount that can legally be purchased on the primary market. If a reseller is offering tickets in groups larger than this, that must indicate that the additional tickets have been misdescribed or misappropriated and potentially that the purchaser could unknowingly be receiving stolen goods. The amendment also requires that secondary sellers make the original face value of the ticket clearly visible to the purchaser. Subsection (3) of the new clause inserted by the amendment gives the Secretary of State powers to impose or amend conditions for resellers in response to further loopholes being found by resellers to get around these reasonable and legal restrictions, if any emerge in the future.
The second part of the amendment is equally important. It formalises the Government’s non-legislative commitment to undertake a review over the next nine months, as mentioned earlier by noble Lords. By the time that review finishes, the Consumer Rights Act 2015 will be 10 years old. It is already showing its age in the face of the rapid technological advances allowing unscrupulous companies to exploit fans and performers. The review will enable the Secretary of State to identify emerging risks—the unknown unknowns—and respond to rapidly changing technology as touts inevitably seek to exploit the loopholes of the future.
Every year, fans spend millions of pounds of their hard-earned money on these special occasions. It should not go to touts or resellers who exploit the system and play fast and loose with consumer law. The devil is in the detail here and it is also in delay. The time to act is now. The combined weight of the concerns and arguments of the noble Lord, Lord Moynihan, the CMA, the entertainment and sports industries, consumer groups and ordinary fans is difficult to resist. I am impressed by the Minister’s resolve in the face of this tsunami, but I hope that he will now support this amendment. If the noble Lord, Lord Moynihan, wishes to test the will of the House, we on this side will support him.
Lord Offord of Garvel (Con)
My Lords, I thank all noble Lords who have debated the topic of secondary ticketing today. It has been an interesting and constructive discussion on a very important topic.
Turning to Motion E1, tabled by my noble friend Lord Moynihan and regarding secondary ticketing, I thank the noble Lords, Lord Clement-Jones and Lord Leong, for their contributions. I also thank my noble friend for his thoughtful engagement on issues in the secondary ticketing market and his commitment to work with the Government on solutions. As he will know, following our meeting last week and engagement since then, we share many of these concerns—although we differ slightly in our judgment of the best means of addressing them.
This Government have already brought in extensive and successful legislative protections for consumers buying on the secondary ticketing market. These go above and beyond standard consumer rights and require both ticket resellers and platforms to provide ticket information to buyers.
It is appropriate to consider the amendment in Motion E1 in detail. Proposed new subsection (1)(a) requires that a platform seeks confirmation of proof of purchase or evidence of title before allowing a ticket to be listed. It does not set out what might satisfy such requirements, so this is likely to come down to a question of due diligence as a platform to be challenged.
Moreover, it is already a criminal offence, as unfair trading or fraud for traders, to offer for sale a product that cannot be legally sold. Recent prosecutions included breaches of the Fraud Act as part of their basis. Similarly, speculative selling is something that the CMA has sought to address through enforcement, because actions such as that mentioned in relation to the SRU—selling tickets not even issued yet—are not allowed under current law.
Proposed new subsection (1)(b) seeks to apply primary sale ticket limits to the secondary market but, having consulted primary agents, we feel that this is impractical. The number of tickets that a person can purchase depends on the event. It would be difficult for a platform to know what, if any, limits there were for each event, especially when tickets are sold through multiple primary agents.
Proposed new subsection (2) imposes requirements to make clearly visible information about the face value of the ticket, and the trader’s name and business address. Both these elements are already required by UK law; existing legislation requires this information to be “clear and comprehensible”. This is a clear general provision, its application in the circumstances being one for regulators and the courts. There is a greater risk of loopholes if certain practices are specifically provided for but others are not.
In his review, Professor Waterson recommended that enforcement action be taken to drive compliance. That has happened with CMA action, and we have seen successful prosecution of ticket touts, as evidenced by the case of R v Hunter and Smith, which resulted in prison sentences and financial confiscations. However, at that time, the CMA review did not look at the primary market.
During the passage of the Bill, we listened to arguments by noble Lords opposite about the merits of a review of the market as a whole, looking not just at what happens on the secondary market, but at how tickets flow from the primary market. We can better establish the practice and interventions that will deliver benefits and protections for consumers and support events going on in the UK.
I admire my noble friend Lord Moynihan’s dogged commitment to this issue. He wants to beef up the existing rules, but we already have extensive rules in this area. This issue will not be solved simply by adding more and more legislation; it will be solved by better implementation. We have started by radically boosting enforcement powers in Part 3; the next step is to understand how tickets move from primary sale to the secondary market, for different events, in different venues.
On that basis, I urge noble Lords to support the review that we have set out today, and to consider carefully the Motion put forward by the Government. I hope that all Members feel able to support our position.
Lord Moynihan (Con)
My Lords, I thank noble Lords from across the House. We have covered the ground extensively again. I particularly thank the Minister; I think it is the first time, in the whole process, that he has engaged in the detail of the amendment while accepting with me the need to take action. If he had done that somewhat earlier in the process, we might have made progress, but it gives me significant confidence that he has done it today. We now have the opportunity to consider improving the wording, and we can do so by passing the Motion that is in front of your Lordships’ House. We will see whether we can take practical steps, rather than make an outright rejection, and a request, as happened in the other place, for a further six-month review.
I very much welcome what the Minister said, but I was not convinced, primarily because what he said was that we needed clear and comprehensible information on the front of the tickets, yet we do not have that. They are impenetrable because they are hidden behind icons, and that is the very purpose of the key amendment. Had he therefore accepted the principle, he would have accepted the amendment.
We have made significant progress today. We can and should continue this debate, so I ask noble Lords to support consumers, sports fans, and those attending major music events, against the corruption that currently exists. I do so with a strong belief that we can get this right and put into legislation in this country the necessary steps and protections to make life a lot easier for those—not just the two cases that have come to court—who night after night, throughout the United Kingdom, are turned away from major events because of the fraudulent abuse of the secondary market. With that in mind, I would like to test the will of the House.
Digital Markets, Competition and Consumers Bill
Tuesday 21st May 2024
(2 months, 1 week ago)
Commons ChamberRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Manuscript Amendment as at 21 May 2024 - (21 May 2024)
15:57 - The House divided: - Ayes: 217 / Noes: 268 - Question accordingly negatived.
Madam Deputy Speaker (Dame Eleanor Laing)
I advise the House that Mr Speaker has selected the manuscript amendment in the name of Sir Chris Bryant. Copies are available in the Vote Office.
After Clause 308
Secondary ticketing facilities
The Minister of State, Department for Business and Trade (Kevin Hollinrake)
I beg to move,
That this House disagrees with the Lords in their Amendment and proposes Amendments (a) and (b) to the Bill in lieu of the Lords Amendment 104B.
The Bill will drive growth and deliver better outcomes for consumers across the UK. Both Houses have now reached agreement on digital markets measures relating to appeals, proportionality, the countervailing benefits exemption and guidance. However, the Bill returns to the House today as the need to agree on secondary ticketing remains outstanding.
Lords amendment 104B, tabled by Lord Moynihan, would introduce additional regulatory requirements on resale sites. In our view, new regulations should be considered only if they are necessary, proportionate and future-proof, and should not duplicate existing rules. Simply adding new rules and regulations that add little to what is already there is not the answer to the problems of the secondary ticketing market.
The first provision that the Lords seek to add to the Bill would require secondary ticketing platforms to obtain proof of purchase of the ticket from the reseller before listing the ticket for resale, but it is already a criminal offence—of unfair trading or fraud—for a reseller to offer for sale products that cannot be legally sold.
Alun Cairns (Vale of Glamorgan) (Con)
I pay tribute to my hon. Friend for his work, as well as to Lord Moynihan, who has doggedly pursued this matter with the Government. My hon. Friend rightly points out that making additional regulations for the sake of it is not something that we as a Government would support, but can he tell me why the Competition and Markets Authority has prosecuted so few people under the current regulatory structure over recent years?
Kevin Hollinrake
We believe that the problem is about enforcement, not regulations. The reason why the CMA has not prosecuted anybody is that it does not have the responsibility or the right to prosecute sellers on ticketing sites. It has jurisdiction over the platforms, but not the sellers. We are giving the CMA that opportunity and those powers, which we think will make a profound difference.
Secondly, the Lords amendment requires that the ticket’s face value and trader’s details be clearly visible to the consumer, but likewise, existing legislation already provides that traders must make that information clear and comprehensible. The amendment would also prevent resellers from selling more tickets than can be legally purchased from the primary market. We agree with the principle, but believe that to be unenforceable. Many sources on the primary market sell tickets, and each has their own ticket limit.
Sarah Olney (Richmond Park) (LD)
The Bill could have such a significant impact in tackling the issues associated with secondary ticket sites, and could reduce instances of fraud and online scams. I do not understand why the Minister is so reluctant to commit to the recommendations made by the CMA. That is all we want implemented through the Lords amendment.
Kevin Hollinrake
The CMA report differs from the amendment proposed by the Lords. We believe that Lord Moynihan’s requirements relating to face value and the address of the trader are already covered. What is missing from the amendment is the ability to enforce regulations. There have been prosecutions only recently, a couple of months ago; there has been a four-year sentence and a £6 million confiscation order, so we are seeing prosecutions by National Trading Standards, but we believe that the CMA will have a more profound effect if it can tackle this issue.
Angus Brendan MacNeil (Na h-Eileanan an Iar) (Ind)
My question is similar to that of the hon. Member for Richmond Park (Sarah Olney). I just do not understand why the Government do not get involved with this. From what I have read of the Lords debate and what Lord Moynihan said, that is exactly what happened for the London Olympics in 2012. Ireland has got rid of the secondary market because it thought it very corrosive indeed. I also understand that fans are frequently in tears outside venues such as the O2 because they have bought the wrong tickets from the secondary market. As the political wing of the very noble tartan army, I would not want fans to be unable to get into games at the Euros in the coming weeks because of irregularities in the secondary market. If that happens, will the Minister commit to coming back and changing tack?
Kevin Hollinrake
The hon. Gentleman raises important points. Alongside what we are doing to give the CMA more enforcement powers, which we think are needed, we are also committing to a review of the primary and secondary market over the next nine months, in order to see what else can be done to ensure that the secondary ticketing process is fairer for consumers.
Angus Brendan MacNeil
The Minister is generous in giving way, and I appreciate it. Has he spoken to his counterparts in Ireland about what they have done in this area, why they have done it, and what the effects have been? That might be instructive.
Kevin Hollinrake
Yes, we are aware of what is happening in Ireland, where there is a complete prohibition on secondary ticketing sales. Our concern about that is obvious: secondary sales are then just driven underground into a black market. That is what we have seen in Ireland. Indeed, tickets to see Taylor Swift in Dublin are available on the internet at exactly the same, or a similar, price as tickets to see her in the UK, so we do not think that is a solution. We are looking for a practical solution that works across the piece.
A person could purchase multiple tickets from different sources on the primary market and resell them on a platform. That would make it nearly impossible for either the platform or an enforcer to calculate what the total limit of tickets should be. We must avoid the trap of thinking that we are solving problems simply by adding words to legislation. We should not be tempted to devise legislation that cannot be implemented.
We believe that the solution lies not in more regulations, but in regulation—in other words, enforcement. This House has already radically strengthened the CMA’s enforcement powers in part 3 of the Bill. That strengthening applies to all consumer law, including on secondary ticketing. The CMA will have civil fining powers, and fines could total 10% of the global turnover of firms breaking consumer law. New powers will mean that the CMA can process many more cases even more quickly.
However, the Government appreciate the strength of feeling in both Houses on the issue of secondary ticketing. We have therefore tabled Government amendments to further strengthen the enforcement powers. Amendments (a) and (b) in lieu of Lords amendment 104B will give the CMA new powers, first to enforce existing rules against unfair buying-up of tickets using electronic bots, and secondly to enforce existing rules on the information that platforms and resellers must present to consumers. That is in addition to the Government’s previous commitment to review the primary and secondary ticketing markets. That review will allow us to gain a deep understanding of how tickets flow from the primary market to the secondary market. It will also include consideration of the timeliness and effectiveness of the information that must be provided to buyers, and of what reassurance is necessary for consumers to be confident that ticket offers are genuine.
Taken together, the CMA’s new enforcement powers and the upcoming Government review represent a clear strengthening of consumer protections. They will help to ensure that further steps can be taken in future, in the light of the good practice that has recently been emerging in the market.
Angus Brendan MacNeil
I am again grateful to the Minister for giving way, but like the hon. Member for Richmond Park (Sarah Olney), I am still stumped as to why the Government are not the champion of the consumer—the small person or small family who face the disappointment of financial loss. I hear what the Minister says about laws being enforced—that could apply to any law—but laws also have a deterrent effect, and it would be quite useful to have that deterrent effect.
Kevin Hollinrake
The hon. Gentleman makes a fair point. I agree with him about the deterrent effect, but to me, that deterrent effect is delivered through enforcement and prosecutions, which are making it easier to deal with the platforms. As for the Lords amendment, information such as the seller’s address is already required under schedule 2 to the 2013 consumer contracts regulations, and the face value of the ticket must be displayed under clause 90(3)(c) of the Consumer Rights Act 2015, so that is already covered. It is enforcement that we need to improve.
Sir Philip Davies (Shipley) (Con)
Does the Minister agree that the selling-on of tickets has always happened, and always will? It is important to reinforce existing safeguards, rather than making the secondary ticketing market unviable and pushing people into unregulated spaces where they get no protection at all. At the moment, they do get protection from most of the sites that sell tickets on the secondary market.
Kevin Hollinrake
I absolutely agree with my hon. Friend. The concern is that we would simply drive people into a black market; that seems to have happened in Ireland. The CMA has said that capping prices, which is what the Opposition want, would not reduce the incentive to resell, for exactly the reasons my hon. Friend has pointed out, so through the Bill, we are taking the pragmatic step of increasing the enforcement of current regulations, while also looking at the wider picture, in the review, to see whether improvements can be made. We think that is the right balance.
In conclusion, I encourage this House to agree with the Government’s position on Lords amendment 104B, and accept the Government’s proposed amendments (a) and (b) in lieu. It is imperative that Royal Assent be achieved without further delay, so that the legislation can be implemented and the Bill’s benefits realised as quickly as possible.
Sir Chris Bryant (Rhondda) (Lab)
I beg to move manuscript amendment (a), leave out from “House” and insert
“agrees with the Lords in their Amendment”.
I confess that I am completely perplexed as to why the Government have adopted the attitude that they have taken today. The Bill could have gone through both Houses quite easily and have steamed ahead to Royal Assent if they had simply agreed to these very minor recommendations from the House of Lords. We do something very similar to what the amendment suggests in relation to Olympics tickets, partly because the Olympics’ organisers insist on such legislation for any Olympics, but we also do something very similar for sporting events. The question of why we do not do exactly the same for music, comedy and other events is legitimate.
Sir Chris Bryant
The Minister has only just sat down, but now he is intervening on me.
Kevin Hollinrake
I just wanted to address one of the points that the hon. Gentleman makes. He talks about the Olympics, for which there was a complete ban on resale. Is that what he is proposing?
Sir Chris Bryant
No. If the Minister will listen for a few more minutes, I will get on to precisely what we recommend. Indeed, he may remember that in the last debate on this issue, I said very clearly that we do not intend to ban all resale. If somebody has a ticket that they bought themselves, not through a bot, but is unable to use it and wants to resell it, that should be a perfectly legitimate process, but the price should be capped at a sensible level—at something like 10% or 15% above the original cost.
Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)
I just want to help the Minister correct the record. Through the Olympics legislation, we as a Parliament did not ban resale; we said that resale had to be authorised. I did not want him to have that wrong on the record.
Sir Chris Bryant
Indeed. I will come to authorised resale later, because it is a real problem with the way that the market operates. Fans are very unclear whether the ticket they have bought through the secondary market is authorised by the original vendor—that is, the venue or one of its authorised vendors—and therefore whether they will actually be admitted in the end. That is one of the problems: even when fans are paying very inflated prices, they are not certain that the ticket they are buying is a genuine ticket that will gain them admittance to the event they have paid for.
Over the years, Members have repeatedly given evidence—
Sir Chris Bryant
I ask the hon. Gentleman to let me make a little progress. I am still on the first sentence of my speech.
Over the years, Members have repeatedly given evidence that the secondary ticket market is not working: with tickets advertised with no declaration as to whether they are real, or of their face value; websites that only declare the face value of a ticket at the very last stage, with a clock ticking away and the fan already hooked; fake tickets being sold, leaving consumers out of pocket and completely in the lurch; tickets sold without evidence of proof of purchase, or of the seller’s title to the tickets; and websites circumventing artists and venues’ policies on the resale of tickets.
Taylor Swift tickets with a face value of £75 are presently selling on Viagogo for £6,840. If a Foo Fighters fan from the Rhondda wanted to buy a ticket to see them at Cardiff’s Principality Stadium, it would have cost them £95 direct from that stadium; on Viagogo today, that exact same ticket would cost them £395. If a child from the Rhondda who loves space and hopes to one day become an aeronautical engineer wanted to see “Tim Peake: Astronauts - The Quest to Explore Space” at Swansea Arena, they would have paid £48.75 face value; on Viagogo, they would have to find £134. This is about much more than just price gouging and ripping people off from their hard-earned money: it is robbing children of their chance to be inspired, to spark a creative idea, to see a career in our growing creative industries, or to learn from an expert. That is why I wish the Government were adopting the measure passed by the House of Lords.
Fans, the people who really create the value, are being excluded from live concerts. The UK’s secondary ticketing market is estimated to be worth £1 billion annually, but it is rife with fraud and scamming, which affects people every single day. I would not even mind if just some of the inflated price money went into the creative industries, and into training young people and providing them with a creative education, but not a single penny of it does. It is set to get worse, too: ticketing security expert Reg Walker has reported “a massive escalation” of harvesting using software. People who have long used bots to bulk-buy items such as iPhones are now turning to ticket touting because it is more profitable, and according to Reg Walker, there is a new generation of young, tech-savvy armchair touts
“smashing ticket systems to bits”.
It is a market that simply does not work, and Labour will fix it.
The Lords have given us a perfectly sensible measure. Their amendment establishes a legal requirement that secondary ticketing facilities must not permit a trade or business to list tickets without evidence of proof of purchase or evidence of title, a matter not mentioned by the Minister. It forbids a reseller from selling more tickets to an event than they can legally purchase on the primary market. It requires the face value of any ticket listed for resale, and the trader or business’s name and trading address, to be clearly visible in full on the first page on which a purchaser can view the ticket—I have had a bit of debate with the Minister about that proposal, so I will come on to the specifics later. It also requires the Government to lay before Parliament the outcomes of a review of the effect of these measures on the secondary ticketing market within nine months of Royal Assent. I cannot understand why any sane person would oppose such a measure, unless it was purely and simply for ideological reasons.
Angus Brendan MacNeil
On such ideological reasons, the Conservative party claims to be the party of Adam Smith, but if we read “The Wealth of Nations”, we see that the behaviour of the rentier class is not exactly praised by Adam Smith, and this is pure rent seeking. As the hon. Gentleman said, this is taking a ticket at £75, charging 90 times that and doing nothing to add any value at all. This is rent seeking, and ideologically it should be opposed by the Conservative party.
Sir Chris Bryant
The hon. Member makes a very good point. Indeed, in the main the market is a good thing—it can operate to produce good and efficient outcomes in society—but in this case the market is not working, and where the market does not work, the state has to intervene.
I cannot understand why any sane person should oppose such a measure, but unfortunately the Government have. Their amendment (a) in lieu is a weak sock puppet of a concession. It does not strengthen the rules; it simply leaves them in place. It does not prevent tickets from being sold without evidence of proof of purchase or the seller’s title to the tickets. It does not limit the quantity of resale tickets to the original number limited by the seller or artist. It leaves in place the current system for showing the face value of a ticket, despite the fact that section 90(8) of the Consumer Rights Act 2015, in my view and in the view of everybody who has spoken to Members about this, is very opaque and open to interpretation—or, I would argue, open to deliberate misinterpretation by the secondary ticketing market.
For instance, Viagogo does not say “face value”, but has a little box that says “FV”, which is not explained anywhere on the website, and people have to click on that. If Viagogo genuinely wanted to be open and transparent, it would say “face value”, and put the price at the very beginning. StubHub is similarly advertising tickets for Taylor Swift on 21 June at £711, but nowhere on the first page does it give the face value. I note that, if someone goes on to the second page, it says $75 there, but I am told that that is not the actual cost of the ticket. Seatsnet has tickets for Murrayfield—for Taylor Swift again—selling at £1,294.79 or £1,092.15 each, and nowhere does it give the face value of the tickets. Interestingly, AEG Presents and AXS, which are managing the tickets for the concerts at Murrayfield, say that tickets are strictly not to be resold:
“Any tickets found to be purchased via re-sale on the non-official secondary market will not be valid for entry into the concerts.”
In other words, it is completely in doubt whether the tickets being sold at £711 or £1,294 are tickets that will actually gain admittance for an individual.
James Wild (North West Norfolk) (Con)
The hon. Gentleman referred to Viagogo, and I have just gone on to its website. He mentioned the “FV” symbol, but when I click on it, it tells me the face value of the ticket. Did I misunderstand the point he made?
Sir Chris Bryant
Yes, the hon. Member did misunderstand the point I made. Why does it not just say “face value”, instead of “FV”, which would be perfectly simple? For that matter, why should people have to click on it? The point of the Lords amendment is very clear, and it is that people should know from the very first time they see the ticket what the face value of that ticket is. I am perfectly happy, if people want to be scammed, that they should be free to be scammed, but they should at least know from the very first point at which they seek to buy a ticket what the face value of the ticket is.
Sir Chris Bryant
I will give way to the hon. Member, although I am keen to move on.
Sir Philip Davies
I am very grateful. As the hon. Gentleman was struggling so much with the previous intervention, I thought I would intervene and give him a way out. If he gets his way, all that will happen is that all of these tickets sold on the secondary market will be sold by spivs outside the location of an event. Why does the hon. Gentleman think that consumers will be better protected by spivs selling these tickets outside the event than by their being sold on official secondary ticket markets?
Sir Chris Bryant
The secondary ticket market is the spivs: it is precisely the same set of people scamming the system and the public. They are taking advantage of people’s desire to get tickets, and thereby making the market simply not work in the interests of the creators of the art, the fans, or the stadiums and venues themselves. That is why we want to take action.
Angus Brendan MacNeil
The hon. Gentleman is quite right about the market not working. The point that has been missed hugely by Conservative Members is that a finite number of tickets are going on sale, and this finite number is being gobbled up by the spivs, speculators and whoever online. He mentions the guys outside a venue, but they can only hold so many tickets. It is the scale of this, as I heard the hon. Member for Washington and Sunderland West (Mrs Hodgson) say from a sedentary position. Without the Lords amendment that has been proposed, this is being allowed on an industrial scale. Why are the Government and the Conservative party willing to see people ripped off? It is just unbelievable.
Sir Chris Bryant
I rather agree with the idea that some Conservative Members actually want people to be ripped off, and maybe that is what we have seen for the last 14 years when we have seen taxes rise, but what we get for the taxes has diminished.
The Minister says that he wants to give more powers to the CMA to be able to enforce the action. The problem with that is that the CMA itself gave evidence that, when it tried to take Viagogo to court, it came up against inherent weaknesses in the existing consumer protection toolkit, and the Government are not adding anything to that consumer protection toolkit whatsoever. Indeed, they are deliberately voting down precisely what they said they wanted.
Sir Chris Bryant
No, the Minister will get to reply afterwards, I am sure. [Hon. Members: “Oh!”] So the Minister is begging. I will give way to his begging.
Kevin Hollinrake
I beg the hon. Member’s leave, but can I draw his attention to the comments of the CMA before the Bill Committee? One witness said exactly this in response to the point he has just raised:
“We think that many of the changes in the Bill will address those weaknesses directly by giving us civil fining powers for the first time.”––[Official Report, Digital Markets, Competition and Consumers Bill Public Bill Committee, 13 June 2023; c. 7, Q3.]
It is not right to say that the CMA is getting no more ability to oversee this regime.
Sir Chris Bryant
No, because I read that completely differently from the way the Minister does. If the Minister were right, why is it only at this stage that he has chosen to bring forward amendment (a) in lieu? Precisely as with every single step of the way on ticket touting that we have seen over the last 14 years, somebody moves an amendment in the House of Lords—quite often Lord Moynihan, wonderful man that he is—and the Government are dragged kicking and screaming to introduce sensible measures that have cross-party support, but that the Government object to for some bizarre ideological reasons.
Labour will strengthen the consumer rights legislation to protect fans from fraudulent ticket practices, restricting the resale of more tickets than permissible and ensuring anybody buying a ticket from the secondary market can see—clearly, easily, readily and absolutely unambiguously —what the original price of that ticket was and where it came from. All of this could have been done today if the Government had not rejected the Lords amendment, but supported Labour on the cross-party amendment from the Lords. However, they have put touts before fans, and profits before the public.
If Labour is given the chance to form a Government, we will also go further. We will restrict the resale of tickets at more than a small set percentage over the price the original purchaser paid for it. No more touts buying a £50 ticket and selling it on for £500; no more bulk buying of seats for Taylor Swift concerts that could go to a 13-year-old fan from Wigan, but instead go to a millionaire from the US. No more scalping of our creative industries and artists, who set reasonable prices for their tickets, only to find somebody else making money off their talent and hard work by reselling them at 10 times the price. Ministers say that the CMA will enforce more, but I doubt that anything will change as a result of anything the Government are intending to do with this measure.
Madam Deputy Speaker (Dame Eleanor Laing)
I call the SNP spokesman.
Richard Thomson (Gordon) (SNP)
It is a pleasure to speak in this debate, much as I wish we were not here, because we would not need to be here if the Government had done the decent, sensible thing and accepted the Lords amendment.
We have heard stories in interventions and substantive contributions, and in past debates, about the effect of an under-regulated secondary market that leaves fans paying over the odds for tickets, and places experiences beyond the financial reach of families. There is also a high risk involved that tickets purchased that way will not even grant entry to the events, and I had hoped that by this stage the Government might have read the room, understood that, and decided to respond in a meaningful manner. Let us be in no doubt: the Government amendment does little other than add the Competition and Markets Authority to the list of bodies that are able to enforce the already existing and inadequate rules on secondary ticket sales. As just about all Opposition Members can see, even if Government Members cannot, the existing rules are not working as well as they are intended to work.
Angus Brendan MacNeil
My hon. Friend makes a good point about the powers given to the CMA, and I wonder whether the Government can increase the ability to finance and give capacity to the CMA to deal with this sort of stuff, or is this just something that has been passed on in paper?
Richard Thomson
Perhaps the Minister will be able to deal with that question when he responds to the debate. Certainly the measure might bring a bit more resource, but it will also spread the resource for the CMA that little bit more thinly. The fact that the rules are not working as effectively as they need to has been evidenced in previous debates, when we have heard of obscure charging practices, of pressure to pay with countdown timers, and of the exorbitant end prices that often result.
The Government amendment is fine as far as it goes. It might bring a little more resource to the problem and a more strategic capability when tackling rule-breakers. I also gave two cheers when the Minister announced the promise of an inquiry at the tail end of the previous debate, but the Government are still not taking those practical measures that could be taken today with amendment 104B to clean up the marketplace for secondary ticketing.
Amendment 104B would involve measures such as a requirement to provide proof of purchase or evidence of title for the tickets for sale, which would forbid resellers from selling more tickets than they would legally have been able to purchase from the primary market. It would ensure that the face value and end price paid are clearly visible, along with the name and trading address of those doing the secondary vending. Crucially, it would also allow secondary legislation to be introduced, which could take account of and bring in anything from the inquiry that the Minister has announced, and it would compel the Secretary of State to have concluded that work within nine months. Contrary to what the Minister says, I believe that the measures in Lords amendment 104B are proportionate and add clearly to the existing Bill.
Lord amendment 104B is a bit like Lords amendment 104 which came before it. Indeed, it is almost the holy grail of amendments—it is popular, it does not cost anything, and more to the point it would be effective and do the right things in the right way for the right reasons. I do not think I am speaking out of turn when I say that hardly any Government in these isles, whether Labour in Wales, the SNP in Scotland or the Conservatives at UK level, are so overwhelmed with public support and good will at this time that they can afford to turn down good ideas when they are presented to them on a plate. It is therefore baffling that the Government would seek once again to steer these practical and effective measures off the road and into the ditch.
I will conclude my remarks by remarking on the “Dear Colleague” letter that was sent from the Minister yesterday, in which he expressed a clear desire to get the Bill on to the statue book without delay. Not a single Member of the House looking at the Bill in its totality would want it to be delayed, but we want it to go forward into legislation in as strong a form as it can be. That, for me, clearly means going forward in a way that can tackle the egregious abuses of people’s trust, and the reasonable expectations they have when they participate in the secondary ticketing market. Accepting the Lords amendment would allow everyone to do that, and I hope the Government will take heed of the genuine strength of view that exists on this matter, not just within this House or the other place, but outside and among the population at large, and that they will allow the Bill to progress as amended accordingly.
Barbara Keeley (Worsley and Eccles South) (Lab)
I rise to support Lords Amendment 104B, which seeks to safeguard fans from the fraudulent abuse that is rife in the secondary ticketing market. Like my hon. Friend the Member for Rhondda (Sir Chris Bryant), I am really disappointed that the Government have repeatedly refused to accept the amendments to the Bill tabled by Lord Moynihan. In fact, for many years before that, they have failed to act as advised by my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) and her colleagues on the all-party parliamentary group on ticket abuse, supported by FanFair Alliance.
The Lords amendment includes the minimum of protection that fans deserve. It would ensure that anyone reselling a ticket has to show evidence that they have bought the ticket in the first place. As we have been hearing, that is a big issue in the secondary market, where ticket touts often list tickets that they do not own. The Lords amendment also aims to stop touts from listing more tickets to an event than they can legally purchase from the primary market.
If the Minister looks at Viagogo’s listings for BBC Radio 1 upcoming Big Weekend, he will see that touts based in Germany are selling more than 10 times as many tickets as can legally be acquired. He has said that measures to do anything about that are unenforceable, but that should not be an excuse. We cannot be standing here in this House and saying that a law that we could pass is unenforceable—it is ridiculous.
Another important measure in the Lords amendment is provision for a review to be published within nine months of the Bill passing. That is an urgent issue, and the Government must be ambitious in acting to tackle it.
I point out again to the Minister that action to crack down on ticket touting has significant support from the music industry and fans. Regulating against exploitative secondary ticketing practices is part of the manifestos put forward by music industry bodies including Live music Industry Venues and Entertainment and UK Music.
Many promoters, artist managers, venues and musicians have been highly critical of the market as it currently operates and called on the Government for urgent action to tackle the problem, but it is not just a problem for the music industry; foremost, as we have heard, it is an issue for fans. It is now commonplace for fans to miss out on tickets to sporting and cultural events only to see those same tickets on sale on a secondary ticketing site for far more money than they can afford.
With about a third of UK ticket buyers in the lowest socioeconomic bands, those inflated prices are reinforcing inequalities. The price of a ticket can make a significant difference to social and cultural inclusion, in some cases enabling marginalised or disadvantaged groups the opportunity to access events.
It is important that many venues and artists now endeavour to widen access to tickets by through-ticket pricing to certain groups, but that approach is undermined when touts use software to restrict fans’ access to the primary market and then force them on to resale sites such as Viagogo, which charge prices at the top of what consumers can bear, as we have been hearing. For example—this is disgraceful—I have been told that touts will buy up discounted tickets intended for young people, for people in wheelchairs, for carers and for others, and sell them on at the going rate on the secondary market to increase their profit margins. That has a serious impact on those consumers, who are then refused entry at the door, as well as impacting on the venue or artists that had subsidised tickets, and on the people for whom the lower priced tickets had been intended and who can no longer afford to attend the show.
I have spoken about music so far, but touting also affects other live events such as sport. Most recently, we have seen Viagogo listing up to 100 tickets for the England versus Iceland friendly at Wembley on 7 June, despite the fact that listing football tickets is illegal on unauthorised platforms—including Viagogo’s platform—for reasons of the safety of fans. When The Guardian journalist Rob Davies highlighted the listings on social media, Viagogo took down the tickets straightaway. Resale platforms should not be waiting to be caught out before complying with the law, but that is what we are seeing.
Another example of a secondary resale site having to be pushed into acting by media coverage was a recent BBC “Watchdog” report that raised concerns that some customers have not been able to receive a refund from Viagogo after being sent invalid tickets. Beth from Salisbury told the programme that she had booked a trip to Singapore to see her husband’s favourite band Coldplay as a thank you to him for his unwavering support during her cancer treatment. The two tickets to the show were bought through Viagogo for £500, but when the tickets arrived, the piece of paper said
“this is not a valid ticket”.
When she tried to get a refund, she was refused, despite the fact that Viagogo has a guarantee, apparently. In fact, it only refunded Beth’s money for the faulty ticket after the BBC “Watchdog” report. Given the weight of evidence of market dysfunction, which we have heard here and in the other place, it is disappointing that the Minister insists that the Government are already doing enough. If that is the case, why not agree to the amendment and see what comes out in the review?
Sir Philip Davies
The hon. Lady is making a good argument for what the Minister said—ensuring better enforcement of existing regulations. That seems to be the thrust of her argument, and what the Government say that they are delivering.
Barbara Keeley
It is just not happening. As we heard the last time we debated this issue a few weeks ago, just six people have been convicted of ticketing fraud—four of them in the past week. The exploitative practices that my hon. Friend the Member for Rhondda (Sir Chris Bryant) and I have talked about continue to be rife on resale platforms. The Minister must accept that this derisory and dismal record must not continue. Labour has committed to a range of strong measures to crack down on ticket touts and fix this broken system for fans. Will the Government start to accept the weight of evidence and do the same?
Mrs Hodgson
I am thrilled to follow my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley), who has done so much work on this matter in the past few years, especially since she took on the brief. She made an excellent speech.
Here we are again. I see that we have been joined by the hon. Member for Shipley (Sir Philip Davies), who back in 2011 did the terrible thing—he might not think it was, but I do—of talking out my private Member’s Bill, the Sale of Tickets (Sporting and Cultural Events) Bill. If it had been passed, we would not be here today, because we would have already fixed this broken market well over a decade ago. I welcome him to his place—I know he likes to keep an eye on his handiwork.
Angus Brendan MacNeil
It is a great shame that the hon. Lady was not listened to 13 years ago, but I have a feeling that, unfortunately, after the Euros, with a political microscope on this issue, we will be back here an awful lot sooner than we think.
Mrs Hodgson
Sadly, if amendment 104B is not accepted today, that might be the case.
I welcome the opportunity to speak in today’s debate, as short as it might be. I am sure that the Minister is aware that I am here in my capacity as chair of the all-party parliamentary group on ticket abuse, which has done some great work in this area. I support the Opposition’s manuscript amendment, and therefore support the revised Lords amendment 104B as it relates to the secondary ticketing market. As others have done, I thank the excellent Lord Moynihan for his continued efforts as co-chair of the all-party group to regulate black market resale sites such as Viagogo. He is right to do so, and I commend his tenacity and brilliant work over many years. I fully supported the original amendment 104, but I warmly welcome the difficult decision to reintroduce the amendment with some notable changes.
The Government’s reason for rejecting the original amendment was:
“Because protections for consumers in relation to secondary ticketing are adequately provided for under existing legislation.”
However, despite uncontrolled touting taking place on an industrial scale, with tickets resold through sites such as Viagogo, there has not been a single prosecution under the Breaching of Limits on Ticket Sales Regulations 2018, no convictions for using bots under the Digital Economy Act 2017, and only two major tout prosecutions, with six individual convictions, since 2017. I can hardly see how the Government can describe current legislation as adequate.
Angus Brendan MacNeil
The hon. Lady mentioned Lord Moynihan. For context, it should be remembered that he was a sports Minister in Margaret Thatcher’s Government. If a Thatcher Minister is anti-market—the charge made from the Conservative Benches against anyone who supports his amendment—either the world has gone topsy-turvy or the Tory party has gone so far to the right it has lost itself.
Mrs Hodgson
The hon. Gentleman makes exactly the correct point. Lord Moynihan was a highly respected Minister, and he is hardly a lefty—or whatever it is that people call people like me.
Angus Brendan MacNeil
The hon. Lady has touched on the industrial scale of this practice, and we have heard about touts outside venues. Families may be thinking of buying tickets, and committing themselves to travelling and spending money on hotels, and that is what is wrong. If that happens again, the Government should face those families and explain why it has happened.
Mrs Hodgson
That is a very good point. As much as none of us wants to see any unhappy, devastated fans at any of these venues, we will probably have to face those images, in the emails from those fans, on our television screens and maybe on the front pages of newspapers. We have to be prepared for that, and I am sure that the Minister would be sad to see it.
If the Government are truly committed to another review, I know that Lord Moynihan—as we have heard, a highly respected Conservative Lord and a former Minister—has already been recommended to them as a possible chair. [Interruption.] I hope that the hon. Member for Shipley is agreeing with me. I hope he agrees that that would be a very fair and pragmatic selection. It is one that I would wholeheartedly support.
I will conclude. On two occasions the Lords, having listened to evidence and the stated views of the CMA, have voted through these amendments, but Ministers seem hellbent on ignoring the views of the other place. The Lords have sent a clear message to the Government, asking them to look at the facts and think again. I ask the Minister once again: will he finally side with fans, artists and athletes, support Lords amendment 104B today, and not let this be another opportunity wasted by the Conservative Government? As I said in our last debate on this matter, they should either start putting fans first, or move aside so that we can.
Kevin Hollinrake
With the leave of the House, Mr Deputy Speaker, I will address the points that have been raised during the debate.
The hon. Member for Rhondda (Sir Chris Bryant) presented a cap on ticket prices as his solution to this problem, but that flies in the face of the evidence given by the CMA in its report. It said that such a measure would not significantly diminish the incentive, and the misconduct would therefore continue. However, it was good to hear the hon. Gentleman finally admit that the market is a good thing—that, coming from an Opposition Member, is a revelation.
There is a common factor between what was said by the hon. Gentleman and what was said by the other contributors to the debate. He said, for instance, that face value was not made sufficiently clear on the various secondary sites, but there is a key saying clearly what face value is on the first pages of the Viagogo and StubHub websites. All those points relate to one thing and one thing only, namely enforcement, because the requirements are there in the existing legislation. We are keen to bolster enforcement. He says that we are somehow kicking and screaming to do so with this amendment, despite the fact that this Government have unilaterally brought forward this legislation. Part 3 offers huge new powers that were not added through an amendment in the Commons or the Lords; they were on the face of the Bill from day one.
Sir Chris Bryant
The Minister knows that Taylor Swift tickets are being sold. The organisers of those concerts have said that tickets sold on unauthorised secondary ticket markets are not valid. Would he therefore encourage people to buy tickets only from authorised ticket vendors and not from those that are unauthorised, which include Viagogo?
Kevin Hollinrake
I would certainly advise any consumer to comply with the rules set out by the primary market. It is quite clear that the primary markets can do a lot more about restricting secondary sales, and we have been quoted examples of that today, including the way the Olympics was run, the way that football matches are run and the way that Glastonbury is run. All those things have very tight controls on secondary markets, which is in the gift of the primary market.
The hon. Member for Gordon (Richard Thomson) asked about resources, as did the hon. Member for Na h-Eileanan an Iar (Angus Brendan MacNeil). The CMA’s budget is £122 million, so we feel that it has the necessary resources available to it. The fines and penalties can be kept by the CMA for its enforcement activities.
The hon. Members for Worsley and Eccles South (Barbara Keeley) and for Washington and Sunderland West (Mrs Hodgson) made similar points about the inappropriate resale of tickets—for England football matches, for example—and refunds that have not been processed properly. Only six people have been prosecuted for abuse in this sector, and we want to see more. Prosecutions for the use of bots have not been brought forward, and the amendment allows the CMA to do that. All the concrete action that the hon. Member for Worsley and Eccles South calls for is about enforcement, not more regulations. I absolutely agree with that, and we want to ensure that there is more enforcement in this space.
It is of paramount importance that we get this Bill on to the statute book so that it can start delivering for businesses and consumers as soon as possible. I thank all who have helped to get to this place, including the Clerks, the officials in the Department and the Bill team. I thank them for their hard work on this legislation, and I hope that all Members will feel able to support our position.
Question put, That the amendment be made.
Digital Markets, Competition and Consumers Bill
Thursday 23rd May 2024
(2 months ago)
Lords ChamberRead Full debate Digital Markets, Competition and Consumers Act 2024 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 87-I Marshalled list for Consideration of Commons Disagreement and Amendments in Lieu - (23 May 2024)
Lord Offord of Garvel
That this House do not insist on its Amendment 104B and do agree with the Commons in their Amendments 104C and 104D in lieu.
“Enforcement of requirements relating to secondary ticketing
(1) CRA 2015 is amended as set out in subsections (2) to (4).
(2) In section 93 (enforcement of secondary ticketing provisions in Chapter 5 of Part 3)—
(a) after subsection (2) insert—
“(2A) The Competition and Markets Authority may also enforce the provisions of this Chapter.”;
(b) in subsection (3) for “and (2)” substitute “, (2) and (2A)”.
(3) In paragraph 11 of Schedule 5 (investigatory powers etc: enforcer’s legislation), in the table, at the appropriate place insert—
“The Competition and Markets Authority | The Breaching of Limits on Ticket Sales Regulations 2018 (S.I. 2018/735)”. |
(a) in sub-paragraph (2) for “local weights and measures” substitute “enforcement”;
(b) in sub-paragraph (4) for “the Department of Enterprise, Trade and Investment” substitute “the enforcement authority which imposed the financial penalty”;
(c) in sub-paragraph (5)(a) after “Investment” insert “or by the Competition and Markets Authority”;
(d) after sub-paragraph (7) insert—
“(7A) The Competition and Markets Authority may use the proceeds of a financial penalty for the purposes of any of its functions (whether or not the function is expressed to be a function of the Authority).”
(5) In the Breaching of Limits on Ticket Sales Regulations 2018 (S.I. 2018/735), in regulation 5 (offences: prosecution and penalties), after paragraph (2) insert—
“(3) The Competition and Markets Authority may enforce these Regulations.””
“Breaching of Limits on Ticket Sales Regulations 2018 (S.I. 2018/735) | (1) The CMA” |
The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Offord of Garvel) (Con)
My Lords, it is an honour to speak for the final time on the Bill. Noble Lords will be aware that we have one issue remaining, relating to secondary ticketing.
Lords Amendment 104B tabled by my noble friend Lord Moynihan would introduce additional regulatory requirements on resale sites. The Government’s position remains that this amendment adds new regulation without a clear purpose; this is because the consumer protection it seeks is already covered by existing law. There are important consumer protection issues in the secondary ticketing market, but simply adding new rules and regulations which add little to what is already there is not the answer. This is not a problem with the rules; it is about strengthening their enforcement. Already, this House has radically strengthened the CMA’s enforcement powers through Part 3 of the Bill. The strengthening applies to all consumer law, including secondary ticketing.
However, the Government have listened to the strength of feeling in both Houses on the issue of secondary ticketing. As such, the Minister for Enterprise, Markets and Small Business tabled government Amendments 104C and 104D in another place further to strengthen these enforcement powers, first, to enforce existing rules we have against unfair buying-up of tickets with electronic bots and, secondly, to enforce existing rules on information that platforms and resellers must present to consumers. This is in addition to the Government’s previous commitment to review the primary and secondary ticketing markets. Taken together, the new enforcement powers for the CMA and the upcoming government review represent a very clear strengthening of consumer protections. I hope noble Lords appreciate the steps the Government have taken on this issue and, as such, will not insist on their amendment.
Lord Moynihan (Con)
My Lords, I thank the Minister for his work on my amendments. As he rightly pointed out, they are the last amendments outstanding on this Bill. I thank the usual channels for their assiduous consideration of whether this should go further at this stage. We have seen some concessions from the Government, which are much appreciated. There is a huge amount of additional work still to be done, and obviously I am sorry that the amendments tabled originally were not accepted in full, but I am very grateful to the Minister for taking some action in the new clause which was agreed in another place the day before yesterday.
I conclude by saying that I will do everything in my power to return to this campaign on behalf of the true fans of sport, music festivals and music events in what I hope will be just a matter of months. In the meantime, I thank the Minister and his outstanding civil servants for all the hard work they have done, not least with the CMA in recent months, and express my gratitude to the whole House for its support.
Lord Clement-Jones (LD)
My Lords, I do not propose to go over old competition ground, but like the noble Lord, Lord Moynihan, our attitude to Motion A is not to oppose it but to be somewhat disappointed at the Government’s response; on the other hand, we welcome the fact that they have added new enforcement proposals and provisions and the promised review. I think it is quite unaccountable that they have resisted the almost irresistible force of the noble Lord, Lord Moynihan; it has been a sight to behold his persistence throughout not only this Bill but previous Bills. I am quite confident that eventually his campaigning will bear fruit because, when we look at the terms of the amendments that were not agreed to by the Commons on providing evidence of proof of purchase and of title to tickets, among other things they are only common sense and very good consumer protection.
I add my thank you valedictory to the Minister, his colleague the noble Viscount, Lord Camrose, who I see is riding shotgun today, and the noble Lord, Lord Parkinson, who made a cameo appearance on the Bill and was the Minister involved very heavily in the Online Safety Bill proceedings. Both Ministers have always been willing to engage. They have not always conceded, but they have always listened, so I thank them very much indeed for all their service. It has been a pretty long ride when one looks back to the beginning of the suite of digital Bills in the past two years, starting with the Online Safety Bill, then the digital markets Bill, and now the non-lamented data protection Bill, and I look forward to further digital legislation in the autumn or the beginning of next year.
Baroness Jones of Whitchurch (Lab)
My Lords, I add my thanks, first, to the Ministers. As the noble Lord, Lord Clement-Jones, said, they have worked assiduously, and we have felt as if we were constantly in their company over the past six months or so. They have always been courteous and had a listening ear, and I thank them for that. I, too, add my thanks to the members of the Bill team for all their hard work in preparing the Bill and the quite substantial amendments on occasions that have been agreed on concession. I particularly thank the stakeholders in the wider scope of the Bill, the challenger firms and the consumers who have been so active in helping us shape what is becoming a good Bill.
I am sorry that the Government did not see the sense of what I thought was an extremely reasonable amendment from the noble Lord, Lord Moynihan. We remain hugely disappointed in Motion A for the reasons that we have ready rehearsed which I do not need to repeat. I particularly thank the noble Lord, Lord Moynihan, and Sharon Hodgson who have campaigned on this issue for many years. I hope that in due course they will get their reward.
I have to say that, if elected, a Labour Government would strengthen consumer rights legislation to protect fans from fraudulent ticket practices, to restrict the sale of more tickets than permissible and to ensure that anyone buying a ticket on the secondary market can see clearly the original price and where it comes from. We will put the interests of the fans and the public first on this. Nevertheless, we believe overall that this is a good Bill that takes the first steps to regulating the behaviour of the big tech companies, which is long overdue, giving a bit more security to challenger firms and adding protection to consumer rights. We are grateful for the concessions made along the way that have indeed improved the Bill. At this stage in the proceedings, we think it is right that the Bill do now pass and that we do not need to debate it any further.
Lord Offord of Garvel (Con)
I am very grateful to noble Lords for their contributions today and throughout the passage of the Bill. I commend especially my noble friend Lord Moynihan for his dogged determination on this issue and the sentiments that he has expressed consistently throughout the passage of the Bill. I also pay tribute to my noble friend Lord Camrose, who has done more than ride shotgun; he has done the heavy lifting on the digital markets piece of this legislation, and I thank him for that contribution. I thank the Opposition Benches led by the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones, for a consistently collaborative approach on these matters. The engagement we have had has been comprehensive.
I also thank all those who have helped us get to this place, including the clerks, officials and, of course, the Bill team led by Georgie Clarke, for their hard work on this legislation. This Bill will be vital in driving growth, innovation and productivity and in protecting consumers. I am honoured to see it through its final stage today, and I look forward to it becoming an Act of Parliament. The Bill has benefited from widespread support from across both Houses as well as detailed scrutiny from many noble Lords and Members in the other place. I thank all noble Lords for supporting our position and wishing the Bill well.
Motion A agreed.
Royal Assent
Friday 24th May 2024
(2 months ago)
Lords ChamberRead Full debate Read Hansard Text Amendment Paper: HL Bill 87-I Marshalled list for Consideration of Commons Disagreement and Amendments in Lieu - (23 May 2024)