Digital Markets, Competition and Consumers Bill
Wednesday 17th May 2023
(2 years ago)
Commons ChamberDigital 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, 11 months ago)
Public Bill CommitteesDigital 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, 11 months ago)
Public Bill CommitteesDigital 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, 11 months ago)
Public Bill CommitteesDigital 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, 11 months ago)
Public Bill CommitteesDigital 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, 10 months ago)
Public Bill CommitteesDigital 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, 10 months ago)
Public Bill CommitteesDigital 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, 10 months ago)
Public Bill CommitteesDigital 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, 10 months ago)
Public Bill CommitteesDigital 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, 10 months ago)
Public Bill CommitteesDigital 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, 10 months ago)
Public Bill CommitteesDigital 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, 10 months ago)
Public Bill CommitteesDigital 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, 10 months ago)
Public Bill CommitteesDigital 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, 10 months ago)
Public Bill CommitteesDigital 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
(1 year, 5 months ago)
Commons ChamberDigital 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
(1 year, 5 months ago)
Lords ChamberDigital 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
(1 year, 5 months ago)
Lords ChamberDigital 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 scheme