Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
Read Full debateWednesday 17th May 2023
(1 year, 6 months ago)
Commons ChamberDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Watch Debate
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
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.
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.
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.
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)
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 13th June 2023
(1 year, 5 months ago)
Public Bill CommitteesDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 13 June 2023 - (13 Jun 2023)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
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.
Digital Markets, Competition and Consumers Bill (Second sitting)
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 13th June 2023
(1 year, 5 months ago)
Public Bill CommitteesDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 13 June 2023 - (13 Jun 2023)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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
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.
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.
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
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.
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.
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.
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.
Digital Markets, Competition and Consumers Bill (Third sitting)
(Limited Text - Ministerial Extracts only)
Read Full debateThursday 15th June 2023
(1 year, 5 months ago)
Public Bill CommitteesDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 15 June 2023 - (15 Jun 2023)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
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.
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.
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.
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.
Digital Markets, Competition and Consumers Bill (Fourth sitting)
(Limited Text - Ministerial Extracts only)
Read Full debateThursday 15th June 2023
(1 year, 5 months ago)
Public Bill CommitteesDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 15 June 2023 - (15 Jun 2023)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
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.
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.
Digital Markets, Competition and Consumers Bill (Fifth sitting)
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 20th June 2023
(1 year, 5 months ago)
Public Bill CommitteesDigital Markets, Competition and Consumers Act 2024 Read Hansard Text 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.
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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
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.
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.
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.
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.
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.
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)
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 20th June 2023
(1 year, 5 months ago)
Public Bill CommitteesDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 20 June 2023 - (20 Jun 2023)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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)
(Limited Text - Ministerial Extracts only)
Read Full debateThursday 22nd June 2023
(1 year, 5 months ago)
Public Bill CommitteesDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 22 June 2023 - (22 Jun 2023)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
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.
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.
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)
(Limited Text - Ministerial Extracts only)
Read Full debateThursday 22nd June 2023
(1 year, 5 months ago)
Public Bill CommitteesDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 22 June 2023 - (22 Jun 2023)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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)
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 27th June 2023
(1 year, 4 months ago)
Public Bill CommitteesDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 27 June 2023 - (27 Jun 2023)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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)
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 27th June 2023
(1 year, 4 months ago)
Public Bill CommitteesDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 27 June 2023 - (27 Jun 2023)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
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.
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)
(Limited Text - Ministerial Extracts only)
Read Full debateThursday 29th June 2023
(1 year, 4 months ago)
Public Bill CommitteesDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 29 June 2023 - (29 Jun 2023)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
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)
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 4th July 2023
(1 year, 4 months ago)
Public Bill CommitteesDigital Markets, Competition and Consumers Act 2024 Read Hansard Text 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.
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
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 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.
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
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.
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.
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.
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
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)
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 11th July 2023
(1 year, 4 months ago)
Public Bill CommitteesDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 11 July 2023 - (11 Jul 2023)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
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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?
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.
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.
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
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.
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.
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 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?
Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
Read Full debateMonday 20th November 2023
(1 year ago)
Commons ChamberDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Watch Debate 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.
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
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.
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.
Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 5th December 2023
(11 months, 3 weeks ago)
Lords ChamberDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Watch Debate Amendment Paper: Consideration of Bill Amendments as at 20 November 2023 - (20 Nov 2023)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
Lord Offord of Garvel
That the Bill be now read a second time.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
My Lords, I start my opening speech with a reference to the importance of digital. In recent decades, digital technologies have brought untold benefits to people around the world. From connecting us with loved ones in faraway places to streaming our favourite album or TV series in an instant, our lives are enriched by the services that these technologies enable. In the UK, digital technologies were fundamental to our collective response to the Covid-19 pandemic, helping businesses to continue operating and helping friends and family to stay in touch in challenging times for us all.
The digital revolution has also had transformative and hugely beneficial effects on our economy. The UK has the largest tech ecosystem in Europe. Last year, our start-ups and scale-ups raised more investment than France and Germany combined. We have more tech unicorns than any other country in Europe with eight cities having at least two unicorns, including Edinburgh, Nottingham and Leeds.
The strengths of our vibrant digital sector are numerous and closely interlinked. From our world-class universities and breadth of tech talent to our support for start-ups and our innovative financing sector, the UK is a global tech powerhouse. Furthermore, the UK leads the world in our approach and response to developments in digital technology. Just last month at Bletchley Park, the UK hosted the first AI Safety Summit, bringing together Governments, leading technology organisations, academia and civil society to inform action at the frontier of AI development.
I turn to the rationale for the Bill and the detail of its parts. Part 1 is on digital markets. The continued success of our tech sector relies on highly competitive digital markets. Firms with alternative market offerings and innovative ideas should have the freedom to grow and challenge powerful incumbents on a level playing field. This benefits consumers by giving them access to the best products at the lowest prices.
However, the UK’s competition framework is not set up to keep pace with developments in fast-moving digital markets. A handful of powerful tech firms now dominate strategically critical services, such as online search, app stores and digital advertising, and in effect set the rules of the game for other businesses and consumers. Jurisdictions around the world are now considering how best to address the unique competition challenges presented by digital markets, and the UK is playing a major part in these efforts.
The Digital Competition Expert Panel and the Digital Markets Taskforce—expert groups set up to examine competition issues in digital markets—both independently concluded that digital markets have specific features which may lead them to tip in favour of one particular firm. This restricts choice for consumers, growth for emerging digital companies, and the potential of small businesses that rely on large firms to reach their customer base. As such, both groups recommended the establishment of a new pro-competition regime for digital markets, which the Bill delivers.
Noble Lords from across the House have also investigated these competition challenges and called for action. My noble friend Lady Stowell of Beeston and the Communications and Digital Committee conducted a review of the Bill earlier this year, for which I am very grateful. They consulted a broad range of stakeholders, including tech firms of all sizes. The committee recommended some further actions for the Government’s consideration, and I have no doubt that we will discuss these in detail during the passage of the Bill. I was, however, very pleased to hear its conclusions that the Bill’s objectives are “sound” and its measures “broadly proportionate”.
The noble Baroness, Lady Jones of Whitchurch, and the noble Lord, Lord Clement-Jones, also expressed their strong support for the Bill and provided suggestions for improvement, which I also look forward to discussing further. The advice of the noble Lord, Lord Tyrie, on legislative and institutional reforms to safeguard the interests of consumers and public confidence in markets, is also at the heart of the Bill’s measures.
The Bill is divided into six parts. Part 1 establishes a new pro-competition regime for digital markets, which will be overseen by the Digital Markets Unit. The Digital Markets Unit is an administrative unit within the Competition and Markets Authority. The Bill gives the CMA tough new powers to force the most powerful tech firms to treat businesses in the UK fairly, including through targeted action to address the root causes of competition issues, and to create opportunities for innovative start-ups in the UK to compete with these powerful firms. Greater competition in digital markets will lower the prices of everyday online goods and services, giving consumers more choice and control over the fundamental services they use online. This came across clearly during the Communications and Digital Committee’s evidence sessions. For example, the consumer advocacy organisation Which? noted that the Bill will benefit consumers through “more competition” and “more innovation” in digital markets.
Part 2 concerns competition. Competitive markets deliver a variety of good-value, high-quality products for their customers, because firms which fail to deliver will be overtaken by their competitors. They also enable innovative, dynamic companies to enter markets more easily, compete on level terms, and grow and gain market share. Measures in Part 2 of the Bill will refine the CMA’s competition tools, making investigations better targeted and its enforcement action faster and more effective. These changes will allow the free market to operate more efficiently. Market inquiries will become more efficient, flexible and proportionate, while the merger regime will be updated to focus on transactions with the greatest potential to weaken competition. The measures will also grant stronger powers to investigate illegal anti-competitive conduct.
Parts 3 and 4 deal with consumer enforcement and protection. Alongside effective competition, well-functioning markets require strong consumer protections. Such protections give people confidence to spend their money, safe in the knowledge that they have the right information to make sound purchasing decisions and have ways to seek redress if something goes wrong. Noble Lords on all sides will likely have had first-hand experience of the difficulties surrounding subscription contracts, including unexpected charges and unduly complex cancellation processes. Such subscription traps cost consumers £1.6 billion a year. A host of other unfair trading practices and consumer rip-offs also remain far too common, particularly online. Research commissioned by the Government has found that, for example, on the nine most frequently used platforms by UK consumers, up to 15% of reviews are fake, with consumers more likely to unknowingly rely on well-written fake reviews when purchasing products. Moreover, many Christmas and similar savings schemes are not protected in the event of business insolvency, so if a business enters insolvency, consumers face losing the money they had deposited.
At present, public consumer law enforcement lacks teeth: the UK is currently the only G7 country not to have any civil penalties for common consumer protection breaches such as mis-selling. Enforcers can apply for court orders to stop or prevent breaches and to obtain compensation for consumers. However, businesses may still profit more than they lose from breaches of consumer law, because no financial penalties can currently be imposed for such wrongdoing.
The measures in Parts 3 and 4 beef up enforcement of consumer protections and address these consumer rip-offs. Part 3 creates a model that will allow the CMA to act faster against breaches of consumer protection, tackle more cases and protect consumers’ interests, while creating a level playing field for businesses. Part 4 includes a raft of measures to help consumers keep more of their hard-earned cash. New rights to subscription reminders and easier cancellations will help consumers exit the contracts they no longer want. This part of the Bill includes a power to add to the list of banned unfair commercial practices. This will ensure that the legislation keeps pace with changes in online consumer harms, which will give consumers greater confidence when spending and reward businesses which treat their customers fairly. Moreover, there are new protections for consumer payments to consumer saving schemes. These will ensure that financial failures such as the collapse of the Farepak Christmas savings club, which leave vulnerable consumers out of pocket, can never happen again.
Parts 5 and 6 contain cross-cutting and general provisions, including new information-gathering powers for the CMA to help boost competition in the road fuel market and protect consumers from unfair fuel prices. In addition, the Government recognise the importance of international co-operation for effective cross-border enforcement in a globalised economy. Measures in Part 5 will enhance the ability of UK regulators to co-operate internationally on competition and consumer matters, including introducing new powers to provide investigative assistance.
I come now to the Commons Report stage amendments. The Government engaged closely with parliamentarians and stakeholders throughout the Bill’s passage in the other place. Based on this engagement, a number of amendments were brought forward on Report in the House of Commons to strengthen the Bill. These amendments had two overarching aims. First, the amendments sought to strike the right balance between accountability over the CMA’s regulatory decisions and the flexibility needed for targeted and proportionate action to tackle the unique competition challenges in digital markets. Secondly, the amendments aimed to ensure that the Bill is strongly focused on consumers with the new and improved rights to deal with bad business practices, such as subscription traps, in ways that will not disproportionately burden businesses and potentially reduce consumer choice.
At a briefing I chaired last week with my noble friend Lord Camrose, I promised my noble friend Lady Stowell of Beeston that I would provide some assurances regarding the digital markets regime. First, I turn to consumer benefits. Amendments brought forward by Ministers in the other place reinforce the regime’s focus on consumers, by clarifying how the DMU will consider consumer benefits when imposing conduct requirements or taking enforcement action. Requiring the CMA to explain the consumer benefits that it expects to result at these points ensures that its decisions to impose conduct requirements are transparent and carefully considered. Clarifying the wording of the countervailing benefits exemption will improve legal clarity, and I reassure my noble friend that it maintains the same high threshold. These changes make sure that consumers get the best outcomes possible.
Secondly, I turn to the appeals of penalty decisions. Appealing penalty decisions on the merits will allow firms to challenge the value of potentially significant fines, but will not allow firms to frustrate the regime or delay regulatory intervention. This brings the regime in line with the Enterprise Act 2002, and will provide reassurance to firms that the value of a fine imposed on them is appropriate. To be clear, all other decisions, including whether or not a breach of the regime occurred, remain appealable on judicial review principles. I hope this helps address my noble friend’s concerns.
The amendments agreed in the other place bring further clarity about the DMU’s approach to regulation. Together, they ensure that the DMU’s interventions are proportionate and drive the best possible outcomes for consumers.
In closing, this Bill will drive innovation, grow the economy, and deliver better outcomes for consumers throughout the UK. It is a hugely important piece of legislation and I thank noble Lords for their involvement in and support for the Bill so far. I look forward to hearing their views today and throughout the rest of the Bill’s passage. I beg to move.
The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
My Lords, I thank all today’s speakers for their eloquent, clear and powerful contributions to what has been a fascinating debate of the very highest quality. In particular, a number of speakers referred back to the Online Safety Act debates and variants of the warm glow. I am delighted to participate in any such approach to the Bill, as is my noble friend Lord Offord. I welcome very much the support shown across the House for this legislation, with the caveats gone into by many speakers. As my noble friend said in his opening speech, this is an important Bill which will drive innovation, grow the economy and deliver better outcomes for consumers. The debate we have engaged in is demonstrative of noble Lords’ desire to ensure that digital markets are competitive and work well, and that consumers are protected from the potential harms posed by anti-competitive and unscrupulous practices.
I will respond to the questions raised, cutting across a number of issues and speakers as I go. First, my noble friend Lady Stowell and the noble Lords, Lord Bassam and Lord Clement-Jones, asked, quite rightly, whether we are watering down the Bill. Let me categorically say that that is absolutely not the intention. The amendments at Commons Report brought further clarity, and they will ensure that the DMU’s interventions are proportionate and drive the best possible outcome for consumers. I look forward to discussing this further during the Bill’s passage.
I turn to the appeals standard in the digital markets regime, which was raised by noble Lords across the House, including my noble friends Lord Vaizey, Lord Kamall, Lady Stowell, Lady Harding, Lord Black and Lord Lansley, the noble Lords, Lord Bassam and Lord Clement-Jones, and the noble Baronesses, Lady Kidron, Lady Ritchie and Lady Jones. We have considered strong and differing views about appeals from a range of stakeholders. Judicial review remains the appropriate standard for the majority of decisions in the regime, and we have maintained that for appeals of regulatory decisions, with additional clarification on the need for the Digital Markets Unit to act proportionately. Firms would already have been able to challenge decisions to impose interventions on the basis that there were disproportionate interferences with their rights under the European Convention on Human Rights. This amendment allows that challenge to happen under usual JR principles. Moving appeals on penalties to full merits brings the regime into line with the Enterprise Act 2002. It will mean that, once a breach has been found, a firm could argue that the imposition of a penalty was not appropriate, the level of it was not suitable, or the date by which it should be paid needs to be changed.
I turn to the countervailing benefits exemption, which was raised by a number of noble Lords, including my noble friends Lady Harding, Lord Vaizey, Lord Lansley, Lord Kamall, Lord Black, Lady Stowell, the noble Lords, Lord Bassam, Lord Clement-Jones and Lord Fox, the noble Viscount, Lord Colville, and the noble Baronesses, Lady Ritchie and Lady Kidron—I see the point about themes. I reassure all noble Lords that this is a further safeguard in the legislation to ensure that consumer benefits which might have been unknown when conduct requirements were first introduced can be recognised. The noble Lord, Lord Bassam, asked for an example of how this could work in practice. If an SMS firm bans an application on its platform, it might breach a conduct requirement not to apply discriminatory terms. The firm could claim that the ban was to protect user security and privacy. Thanks to the exemption’s high bar, the DMU would close its investigation only if the SMS firm provided sufficient evidence, such as an independent report from security experts. Firms will not be able to use the exemption to delay enforcement. Assessment of whether the exemption applies will take place during the enforcement investigation, which has a deadline of six months.
The noble Lords, Lord Fox and Lord Bassam, and my noble friends Lord Vaizey, Lady Harding and Lord Kamall asked about the change to the indispensability wording. The change of the language is to clarify the exemption; it maintains the same high threshold and makes sure that consumers get the best outcomes possible, whether through the benefits provided or through more competitive markets.
I thank the noble Lord, Lord Tyrie, for his detailed analysis of the work of the CMA and his continued support for the legislation. He raised the matter of proper scrutiny of the CMA. I very much agree with him on the importance of this and look forward to continuing that conversation.
The noble Viscount, Lord Colville, the noble Lord, Lord Clement-Jones, and my noble friends Lady Stowell and Lord Kamall sought reassurance that requiring the Secretary of State to approve guidance would not cause delays. The Government are committed to ensuring that approval is given in good time, in order for the regime to be in place as soon as possible. Introducing a statutory timeline for this process would limit the Government’s ability to work collaboratively with the CMA.
My noble friend Lord Holmes and the noble Lord, Lord Vaux, raised the importance of the independence of the regulator, and the noble Baroness, Lady Kidron, spoke about the risk of regulatory capture. I agree that this is an absolutely vital issue. The noble Lord, Lord Bassam, and my noble friend Lord Holmes asked about the resourcing and tools of the DMU. I reassure them that the Government have full confidence in the DMU’s resourcing. There are currently around 70 people working in DMU roles, and we expect the DMU to be around 200 people in steady state.
A number of noble Lords, including my noble friend Lord Black, the noble Viscount, Lord Colville, the noble Lord, Lord Clement-Jones, and the noble Baronesses, Lady Kidron, Lady Bennett, Lady Jones and Lady Ritchie, raised the importance of support for the press sector, with which I agree. The digital markets regime aims to address the far-reaching power of the biggest tech firms and help rebalance the relationship between those platforms and other businesses, including publishers. This will make an important contribution to the sustainability of the press, which is so important in all aspects of our lives.
The noble Viscount, Lord Colville, the noble Lord, Lord Fox, my noble friend Lord Black and the noble Baroness, Lady Ritchie, asked about the final offer mechanism and how this will work. The final offer mechanism is a backstop measure to help resolve sustained breaches of conduct requirements relating exclusively to fair and reasonable payment terms, where other DMU tools are unlikely to resolve the breach in a reasonable timeframe. Unlike the Australian and Canadian models, the final offer mechanism is not a standalone tool to force negotiations. It forms just one part of the DMU’s holistic toolkit for promoting competition in digital markets. The DMU will be able to impose conduct requirements on the firm from day one of its designation, including requirements to ensure fair and reasonable terms. However, we recognise that some stakeholders may be concerned about SMS firms frustrating the process. Here, the CMA can seek to accelerate the stages before the final offer mechanism, making use of urgent deadlines on enforcement orders and significant financial penalties, where appropriate.
The noble Lord, Lord Knight, and the noble Baronesses, Lady Bennett, Lady Jones and Lady Uddin, asked if the regulator will have sufficient power to deal with imbalances in access to data. The answer is yes. These are exactly the kinds of issues that the DMU will be able to address.
The noble Viscount, Lord Colville, and the noble Baroness, Lady Uddin, asked how the digital markets regime will address the rise of artificial intelligence. The regime has been designed to be tech-neutral, future-proof and flexible enough to adapt to changing digital markets.
I now turn to questions raised today on the competition part of the Bill. I note the interest from my noble friend Lord Sandhurst in the recent Supreme Court judgment on the status of litigation funding agreements—LFAs—and its potential impact on the ability to bring collective actions on behalf of consumers across the legal system. The Government have urgently addressed the potential implications of the judgment on claims under competition law, and we feel this has provided some much-needed certainty to funders and claimants. I also note the interest from my noble friend and others across the House in extending this to all parts of the civil legal system. While I am advised that this Bill is not the appropriate vehicle to deliver this aim, I can assure noble Lords that the Ministry of Justice is actively considering options for a wider response.
I now turn to the consumer part of the Bill. Several noble Lords, including my noble friend Lord Black, the noble Lords, Lord Vaux, Lord Clement-Jones and Lord Bassam, and the noble Baroness, Lady Jones, posed questions about the approach taken in the Bill on subscription traps. The measures being taken forward are the ones which are necessary and proportionate to ensure that consumers are treated fairly and understand what they are signing up to, while balancing further costs and regulatory burdens on businesses.
A number of noble Lords—I hope noble Lords will forgive me if I do not read out the full list, because there are far too many of them and it might test everyone’s patience—raised concerns about potential unintended consequences for charities in relation to the new subscription rules, in particular their ability to claim gift aid. Donations to charities where nothing is received in return are not subject to the subscription rules. Generally, charities will only be in scope if they provide auto-renewing contracts to consumers for products and services in return for payment. This is consistent with other consumer protection laws. I reassure the House that it is not the Bill’s intention to undermine access to gift aid; we are examining this issue closely and will provide a further update in Committee.
Many noble Lords, including the noble Lords, Lord Bassam and Lord Fox, raised other consumer harms such as drip pricing and fake reviews. The Government have recently consulted on proposals to address these and other practices, and our upcoming consultation response will set out next steps. The noble Baroness, Lady Bennett, also mentioned misleading green claims. This is indeed an important issue, which we hope is already covered by existing regulations.
I agree with the noble Baroness, Lady Hayman, and my noble friend Lord Holmes that the right to repair is important. The right-to-repair regulations which came into force on 1 July 2021 address some of the issues she raised. My noble friend Lord Offord, as the responsible Minister, would be happy to meet her to discuss this further.
My noble friend Lord Holmes raised concerns about Henry VIII powers. Where the powers to amend primary legislation would permit major changes to the legislation concerned, they are subject to the draft affirmative procedure.
I hope that in wrapping up I have responded to at least most of the points raised by noble Lords today. I note that there were other issues raised which I have not addressed, such as alternative dispute resolution and secondary ticketing. I look forward to discussing those items and others during the Bill’s passage. Let me once again thank all noble Lords for their contributions and engagement, not just today but in the lead-up to it. My noble friend Lord Offord and I look forward to further and more detailed debates on these matters and many more besides in Committee.
Lord Fox (LD)
Before the Minister sits down, I should say that I mentioned the central role that standards and the setting of future standards have. The Minister need not answer the question now, but could he write to me about the strategy, in a sense, and the involvement that the DMU might have, or should have, in future standards-setting for the technology?
Viscount Camrose (Con)
I apologise to the noble Lord for not addressing that. Absolutely I will write.
Lord Offord of Garvel
That the bill be committed to a Grand Committee, and that it be an instruction to the Grand Committee that they consider the bill in the following order:
Clauses 1 to 36, Schedule 1, Clauses 37 to 57, Schedule 2, Clauses 58 to 124, Schedule 3, Clauses 125 to 127, Schedule 4, Clause 128, Schedule 5, Clause 129, Schedule 6, Clauses 130 to 136, Schedule 7, Clause 137, Schedule 8, Clauses 138 to 142, Schedules 9 to 11, Clause 143, Schedule 12, Clause 144, Schedule 13, Clauses 145 to 149, Schedules 14 to 15, Clauses 150 to 207, Schedule 16, Clauses 208 to 213, Schedule 17, Clause 214, Schedule 18, Clauses 215 to 223, Schedule 19, Clauses 224 to 253, Schedule 20, Clause 254, Schedule 21, Clauses 255 to 282, Schedule 22, Clauses 283 to 293, Schedule 23, Clauses 294 to 299, Schedule 24, Clauses 300 to 307, Schedule 25, Clauses 308 to 323, Schedule 26, Clauses 324 to 325, Schedule 27, Clauses 326 to 355, Title.
Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
Read Full debateMonday 22nd January 2024
(10 months ago)
Grand CommitteeDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: HL Bill 12-II Second marshalled list for Grand Committee - (22 Jan 2024)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
Baroness Harding of Winscombe (Con)
My Lords, as we start this phase of the Bill, I declare my interests, in particular my husband’s close involvement with the Bill in the other place as the Member of Parliament for Weston-super-Mare. We rarely get involved in the same issues at the same time, but in this case we are.
Like other noble Lords, I am keen to see this Bill reach the statute book, but also keen to ensure that we minimise the degree of legal ambiguity. I thank the many companies that have given us briefings in advance of Committee, but note how many of them have felt incredibly uncomfortable in doing so and have sworn us all to secrecy about having even been talking to us in private, for fear that their commercial relationships will be prejudiced. We must recognise the enormous commercial power that the companies that this Bill aims to regulate already exert. Making sure that the Bill is clear, and that we are not inadvertently creating legal loopholes, is probably the most important thing that we will do in this House as we give it the degree of scrutiny that we like to give here.
Loopholes do not need to be permanent. If you have already got large market power, loopholes just need to slow the process down. When I ran a challenger business competing against a very large incumbent in telecoms, BT, we used to say all the time that BT’s regulatory strategy was to walk backwards slowly—I think that was even said in public, about 20 years ago. That was its strategy.
This is exactly what the big technology companies are doing worldwide. They know that regulation is coming to this sector but are walking backwards as slowly as they can. We see this very clearly with the EU’s Digital Markets Act where, so far, every potential SMS-equivalent firm has challenged its designation through every stage of the courts that it can. We should go into this Committee with our eyes wide open that that is exactly what will happen with this legislation as well. Giving clarity wherever possible will therefore be essential.
With that in mind, I support Amendments 1, 3, 4, 5 and 6 in their endeavour to give clarity on two important issues: first, whether the CMA can use work that it has already done; and, secondly, that it is impossible to have clarity about what will happen in technology markets over the next five years. Does my noble friend the Minister agree that it is important that the Bill gives clarity on those two issues? If the amendments as currently drafted do not achieve that, what can we do to ensure that we do not look with horror in a few years’ time when each SMS designation is in a JR, with technology companies challenging the CMA’s ability to use historic work or its lack of crystal ball-gazing, which will inevitably have come about?
I also have considerable sympathy with Amendment 7 from the noble Viscount, Lord Colville. We will come to the question of the Secretary of State’s powers in a number of parts of this Bill. In this case, I can see why we should be worried about the ability of individual companies—this is only from the media—with regulatory lobbying budgets of at least $1 billion to influence a single person because, however moral and upstanding they are, it is likely to be quite great. I have some sympathy with the amendment, but the requirement for a Secretary of State decision via the affirmative process is the strongest parliamentary scrutiny available to us. Does my noble friend acknowledge that this is a potential risk? If it is, what additional safeguards would he suggest if he does not like the removal of this power? I recognise that it is possible that we have not captured all the reasons why you might not want to designate a firm as having strategic market status.
We will come back to these issues again and again in our many days together in this Room, because this is really about giving clarity of intent. Will my noble friend confirm that he shares the intent of these amendments?
The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
My Lords, I am pleased to speak on this first day of Committee and thank all noble Lords for their continued and valued engagement on the DMCC Bill, which, as many noble Lords have observed, will drive innovation, grow the economy and deliver better outcomes for consumers. I am grateful for noble Lords’ continued scrutiny and am confident that we will enjoy a productive debate.
I start by briefly speaking to government Amendments 11 and 12, which I hope noble Lords will support. They make the strategic market status notice provisions consistent by obliging the Competition and Markets Authority to provide reasons for its decision not to designate a firm following an initial SMS investigation.
I turn to Amendment 1, tabled by the noble Baroness, Lady Jones of Whitchurch. The amendment seeks to ensure that the CMA will be able to use, in its SMS investigations, previous analysis undertaken in related contexts. I agree entirely that the CMA should not have to repeat work that it has already done and should be able to draw on insights from previous analysis when carrying out an SMS investigation, when it is appropriate and lawful to do so.
I offer some reassurance to the noble Baroness that the Bill as drafted permits the CMA to rely on evidence that it has gathered in the past, so long as it is appropriate and lawful to do so. As she highlighted, a strength of the regime is the flexibility for the CMA to consider different harms in digital markets. I suspect that this is a theme that we will return to often in our deliberations, but being prescriptive about what information the CMA can rely on risks constraining the broad discretion that we have built into the legislation.
Amendments 3, 4, 5 and 6, tabled by the noble Lord, Lord Clement-Jones, would make it explicit that the CMA must consider currently available evidence of expected or foreseeable developments when assessing whether a firm holds substantial and entrenched market power in a digital activity. Amendment 3 would remove the duty for the CMA to consider such developments over a five-year period. The regime will apply regulation to firms for a five-year period; it is therefore appropriate that the CMA takes a forward look over that period to assess whether a firm’s market power is substantial and entrenched, taking account of expected or foreseeable developments that might naturally reduce the firm’s market power, if it were not designated.
Without an appropriate forward look, there is a risk that designation results in firms facing disproportionate or unnecessary regulation that harms innovation and consumers. However, the CMA will not be required to prove that a firm will definitely have substantial and entrenched market powers for the next five years—indeed, that would be impossible. The CMA will have to give reasons for its decisions to designate firms and support any determination with evidence. As a public body, it will also be subject to public law principles, which require it to act reasonably and take into account relevant considerations. Therefore, in our view, these amendments are not necessary.
Amendment 7, tabled by the noble Viscount, Lord Colville of Culross, seeks to remove the power for the Secretary of State to amend by regulations subject to the affirmative procedure the conditions to be met for the CMA to establish a position of strategic significance. I recognise, first, that Henry VIII powers should be used in legislation only when necessary. To the point raised by my noble friend Lady Harding, I also recognise the importance of limiting the scope for too much disputation around this and for too many appeals. In this case, however, the power helps to ensure that the regime can adapt to digital markets that evolve quickly and unpredictably.
Changes in digital markets can result from developments in technology, business models, or a combination of both. The rapid pace of evolution in digital markets, to which many have referred, means that the CMA’s current understanding of power in these markets has changed over the past decade. The concept of strategic significance may therefore also need to evolve in future, and the conditions to be updated quickly, so that the regime remains effective in addressing harms to competition and consumers effectively. The affirmative resolution procedure will give Parliament the opportunity to scrutinise potential changes. It will provide a parliamentary safeguard to ensure that the criteria are not watered down, and should address the noble Lord’s concerns regarding lobbying. For these reasons, I believe that it is important to retain this power.
Lord Knight of Weymouth (Lab)
To look at Clause 6 and the four conditions laid down there, they appear pretty generic, in terms of size; the number of undertakings; the position in respect of digital activity, which would allow an extension of market power; and the ability to influence the ways in which other undertakings conduct themselves. They are generic conditions, so can the Minister give us a bit more of a taste of the kind of thing that just might crop up? I know that he does not have a crystal ball, but could he tell us what might crop up that would require these Henry VIII powers to be used?
Viscount Camrose (Con)
I would struggle to name a particular one, but if we were to look back over the last five to 10 years we might reflect that there have been a number of developments in markets that have been largely unpredictable and that technology changes might drive further developments. The point is to create a balance between predictable and durable legislation and the ability to adapt to changes in business practice and technology as they emerge. As a thought experiment, if we were to flip it round and say, “No, we have to stick with only these four things for the duration of the eventual Act”, many of us would be concerned about an ongoing inability to adapt to change in what is a fast-moving marketplace that is likely to see an accelerating pace of change, rather than anything else.
That said, I hope my words provide the noble Baroness and noble Lords with sufficient assurance not to press their amendments.
Lord Clement-Jones (LD)
My Lords, the Minister rather glossed over the importance of Clause 5. In Clause 2(2), the SMS conditions are that
“the undertaking has—
(a) substantial and entrenched market power (see section 5), and
(b) a position of strategic significance”.
The conditions in Clause 6 are rather formulaic, in the way that the noble Lord, Lord Knight, talked about, but the determination, examination and assessment in Clause 5 as to whether an undertaking has substantial and entrenched market power is really important. The Minister glossed over this and said that it is not necessary to have a determination based on current evidence and that this forward-looking element must be in there.
Can the Minister confirm that he has taken advice within the department from competition lawyers who deal with this kind of potential challenge on a daily basis? He seems extraordinarily complacent about the fact that big tech will look at that assessment and say, “The evidence is not there. It’s all speculation for the next five years. You haven’t based it on the actual conduct in our market currently, or indeed an adjacent market”. No doubt we will come to that later in another group. This is absolutely at the core of the Bill, and all the advice that I get, whether from the Open Markets Institute or others, is that this is a real failing in the Bill that could open up a litigation problem for the CMA in due course.
Viscount Camrose (Con)
I certainly do not intend to gloss over any of these issues. I can confirm that the department receives extensive advice on these matters, as have those working on the Bill, not only from competition lawyers but from other stakeholders in the market of all different sizes and types, and indeed from the CMA itself. To turn around the noble Lord’s position, if we make a designation that is designed to last for five years, it is crucial that we take into account existing evidence and what is foreseeable today when determining whether to make that designation. Nobody is being asked to be overly speculative, but it is possible to identify existing trends and available information that can form part of the analysis, and use that to make the determination, particularly as the CMA will then have a duty to explain in detail the rationale behind its decision to designate a firm with SMS, or indeed not to do so.
Lord Lansley (Con)
Apologies; I had not intended to intervene on this group, but I am confused and I wonder if my noble friend might be able to help me. We have the word “entrenched”. Obviously, we are talking about “substantial and entrenched”, but “substantial” is not really in debate since, if it has strategic significance, it is likely to be substantial; the issue is with “entrenched”.
A theme that I might develop later on other aspects is to look at our legislation in the context of what has been done by the European Union in its Digital Markets Act. We are doing things differently—and better, I hope—but my point is that the European Union looks at the question of what it describes as an “entrenched and durable position”. That seems to have two aspects to it: the first, “entrenched”, is that it exists and has existed for some time; and the second, “durable”, relates to it being foreseeable that it will continue to exist in future. We have lost the word “durable” and retained “entrenched”, but we are applying it in relation only to what is foreseeable—forward-looking assessment. I am confused about why it is only a forward-looking assessment. The relevant regulation from the European Commission looks back three years to establish whether it is entrenched, and looks forward to see whether it is durable or whether there are foreseeable developments that would give rise to such an entrenched, significant market status. I am looking for both and, at the moment, I cannot see both; I see only the forward-looking part.
Viscount Camrose (Con)
Indeed. I am afraid that the use of the word “durable” in this context is new to me. I will very happily take that forward and consider whether it might be a valuable addition to the guidance here. To focus on the outcomes that we want here, we want a reasonably derivable position that the existing entrenched power of the potentially SMS-designated firm is likely to last for the five-year period. We want to ensure that any evidence or analysis supporting that position is presented as part of the report that details why the decision is taken. I will take forward the use of the word “durable”.
Lord Lansley (Con)
Would it be fair to say that the contention in this legislation is that the determination that there is a position of strategic significance also satisfies the argument of whether such substantial market power exists? This further assessment is really about whether it is likely to be entrenched and durable over the five-year period, since the designation extends for five years. This is looking forward over those five years. I think it is perhaps not absolutely clear how these two clauses are intended to be considered together for this purpose.
Viscount Camrose (Con)
I take note of my noble friend’s point. There may be many areas on which all of us in this Committee end up disagreeing, but one that I doubt we will disagree on is the need for absolute clarity in all these measures. I am very happy to commit to taking that away and seeing whether there is an appropriate form of words that can deliver the clarity that noble Lords are seeking.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken. I very much echo the thanks expressed by the noble Baroness, Lady Harding, to all the companies and business that have given evidence and come forward to speak to us. It is true that, for a number of them, they have taken risks to do that. It is a sad fact of life now that their very survival could be at stake if some of their concerns become public. That is why we are here today, I suppose. That is where the market has left us and there is a need to address that.
To pick up on the points made by the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Harding, about the CMA’s assessment, I think that we have had a useful discussion with the Minister around all that. I certainly want to look at Hansard and at the reassurances that the Minister has tried to give on this. I very much take the point, incidentally—as mentioned by the noble Viscount, Lord Colville, in moving his amendment—that SMS status does not mean that they have done anything wrong, so I do not want to get too hung up about giving that status in the first instance. What is important is how we follow that up and look at their behaviour going forward. As the noble Lord, Lord Clement-Jones, spelled out, there is a danger that, if we are not careful, those who are given that category will game the system. That is what we are all anxious about.
I am not sure that the wording achieves what the Minister wants. I think that we are all genuinely clear on the outcomes that we want, as the Minister said, but the current wording does not achieve that. The five-year forward plan is playing into the hands of the wrong people, and we will not come out with the outcomes that we want if we stick with the current wording, so I very much welcome the chance to have further discussion about that.
Baroness Kidron (CB)
My Lords, I too faced a glitch, having wanted to add my name to these amendments. Since we are at a new stage of the Bill, I declare my interests as set out in the register, particularly as an adviser to the Institute for Ethics in AI at Oxford and to the Digital Futures centre at the LSE and as chair of the 5Rights Foundation. I support the noble Lord, Lord Clement-Jones, who has, with this group of amendments, highlighted that job creation or displacement and the quality of work are all relevant considerations for the CMA. I think it is worth saying that, when we talk about the existential threat of AI, we always have three areas of concern. The first is the veracity and provenance of information; the second is losing control of automated weapons; and the third, importantly in this case, is the many millions of jobs that will be lost, leaving human beings without ways to earn money or, perhaps, a reason for being.
There are two prevailing views on this. One is that of Elon Musk, who, without telling us how we might put food on the table, pronounced to the Prime Minister
“There will come a point where no job is needed – you can have a job if you want one for personal satisfaction but AI will do everything”.
The other, more optimistic view is that boring or repetitive work will go, which is, in part, beautifully illustrated by David Runciman’s recent book, The Handover, where he details the fate of sports officials. In 2021, Australian and US line judges were replaced by computers, while Wimbledon chose to keep them—largely for aesthetic reasons, because of the lovely Ralph Lauren white against the green grass. Meanwhile, Carl Frey and Michael Osborne, in their much-publicised 2017 study assessing the susceptibility of 702 different jobs to computerisation, suggested that sports officials had a 98% probability of being computerised.
In fact, since 2017, automation has come to all kinds of sports but, as Runciman says,
“Cricket matches, which traditionally featured just two umpires, currently have three to manage the complex demands of the technology, plus a referee to monitor the players’ behaviour”.
Soccer has five, plus large teams of screen watchers needed to interpret—very often badly—replays provided by VAR. The NBA Replay Center in Secaucus employs 25 people in a NASA-like control room, along with a rota of regular match officials.
It would be a fool who would bet that Elon Musk is entirely wrong, but nor should we rely on the fact that all sectors will employ humans to watch over the machines, or even that human beings will find that being the supervisor of a machine, or simply making an aesthetic contribution rather than being a decision-maker, is a good result. It is more likely that the noble Lord, Lord Knight, is correct that the algorithm will indeed be supervising the human beings.
I believe that the noble Lord, Lord Clement-Jones, and his co-author, the noble Lord, Lord Knight, may well prove to be very prescient in introducing this group of amendments that thoughtfully suggest at every stage of the Bill that the CMA should take the future of work and the impact of work into account in coming to a decision. As the noble Lord made clear in setting out each amendment, digital work is no longer simply gig work and the concentration in digital markets of behemoth companies has had and will continue to have huge consequences for jobs across supply lines, as well as wages within markets and, most particularly, on terms of employment and access to work.
AI is, without question, the next disruptor. Those companies that own the technology will be dominant across multiple markets, if not every market, and for the CMA to have a mandate to consider the impact on the workforce is more than sensible, more than foresightful; it is in fact a new reality. I note that the Minister, in responding to the last group, mentioned the importance of foreseeable and existing trends: here we have one.
Lord Bassam of Brighton (Lab)
My Lords, I am sure the noble Viscount has more important things to say than I have, but it falls to me to make a few comments from the Opposition Benches on this. While listening to my noble friend Lord Knight, I was reflecting that we might be the last profession ever to be dismissed or appointed by algorithm and wondering whether that is a good or a bad thing. I leave that for the Minister to ponder while I make my observations.
The noble Lord, Lord Clement-Jones, introduced these amendments with his customary skill and guile. No doubt, like the rest of us, he has been extremely well briefed by the Institute for the Future of Work; I pay tribute to my noble friend Lord Knight for his work in that regard. This group of amendments is extremely important. We know that, with algorithms, new digital technology and thinking, just as the history lesson from my noble friend showed, it is really important when technological revolutions happen that we grasp the moment to think about their wider social and economic impact—with this, in particular, the impact on the world of work.
On the face of it, these amendments would provide a valuable extension of the CMA’s remit and role and could lead to protection of consumers and workers from the adverse impacts brought about by the activities of digital companies that operate in a dominant position in the marketplace. As the noble Lord, Lord Clement-Jones, said, the near-monopoly position of some companies means that wage and price fixing are a real concern. The ability of the CMA to monitor, comment and have an impact on conduct could have a wider and beneficial impact on ensuring that the market works not only well but fairly and with equity. It is the case that social, environmental and well-being risks and impacts, including work conditions and the environment are under increasing scrutiny from consumer and corporate sustainability perspectives.
The noble Lord, Lord Clement-Jones, referenced the World Economic Forum’s Global Risks Report and the EU’s new corporate sustainability due diligence directive 2023, to be introduced later this year. They exemplify the importance and salience of the issue. As he said, this all suggests that consumer interests can extend to local supply chains, so, as a consequence, informed decision-making will need to have better information on work impacts in the future. Consumers are, as has been said, both consumers and workers, and they are bound to take much greater interest in digital workplaces. From these Benches, we therefore support, in general terms, better monitoring, intervention and information sharing by the CMA; if these amendments achieve that objective, they are certainly worthy of our support. The Minister will have to persuade us otherwise, or explain that the CMA will have the scope to use its powers to satisfy the objectives behind the amendments in the name of the noble Lord, Lord Clement-Jones.
I was intrigued by the reference by the noble Baroness, Lady Kidron, to sports officials being put out of a job. I am a big football fan, as many colleagues will know. It just seems to me that VAR is a great example of how you can generate even more activity and interest by the digitisation of assessments and the use of algorithms to judge whether something is or is not offside. We are happy to support these amendments; we think they potentially touch on a vital aspect of the CMA’s work and we look forward to what the Minister has to say about them.
Viscount Camrose (Con)
My Lords, I apologise to the noble Lord, Lord Bassam, for jumping the gun before his interesting words. I reflect that the algorithm that puts exactly this combination of people in this Room would be fairly complex—but a good one.
I thank the noble Lord, Lord Clement-Jones, for using several amendments to raise the important issue of the impact of technologies, such as artificial intelligence, on workers and the nature of work. I also thank the noble Lords, Lord Knight and Lord Bassam, and the noble Baroness, Lady Kidron, for their contributions to what is an important part of our deliberations.
The Government of course recognise that new technologies can create challenges and risks, as well as opportunities and benefits. I agree with noble Lords that the impact of technology on work and workers deserves attention, and I will respond to each amendment in turn. However, I also hope that noble Lords agree that it is of paramount importance that this regime is effective and focused on promoting competition for the benefit of consumers, which is the CMA’s area of expertise. I know that future amendments propose that the CMA’s focus should go beyond that, so perhaps the bulk of that can be left for that debate.
The CMA has been considering future issues in the space of competition, and indeed recently published its first horizon-scanning report on 10 trends in digital markets and how they may develop over the next five years and beyond. However, the Government feel that wider issues around the impact of digital technologies on work and workers—those that do not impinge directly on competition for the benefit of consumers—are better dealt with elsewhere.
Amendment 2 would allow the CMA to establish that there is a link to the UK for the purposes of designating a firm with SMS when a digital activity is likely to have a substantial impact on work or work environments in the United Kingdom. The CMA’s objective is, as I say, to promote competition for the benefit of consumers, and it is important that the digital markets regime is focused on competition.
The current criteria to establish a link to the UK ensure that the regime is targeted and proportionate, and draw on similar approaches in other legislation, including Chapter 1 of the Competition Act 1998. However, this amendment would allow the CMA to link a digital activity to the UK on the basis of impacts that are explicitly unrelated to competition. It would therefore detract from the aims of the regime, which are competition focused. It would also be inappropriate for the CMA to assess impacts unrelated to competition, which is its area of expertise and jurisdiction.
Amendments 18 and 23 would ensure that the CMA can require the SMS firm, through conduct requirements, to carry out and share an assessment on wider social impacts. I agree with noble Lords that it is of crucial importance that users are given the information necessary to make informed decisions about the services they use. The current objectives and list of permitted types of conduct requirements have been carefully drafted to ensure that the regime can protect consumers and businesses that rely on SMS firms via targeted and tailored rules. Conduct requirements can be imposed for the purposes of the trust and transparency objective, to ensure that those who use or seek to use the relevant digital activity have the information they need to understand the terms on which the activity is provided. This amendment would go beyond the scope and competition remit of the CMA, potentially creating new burdens and additional complexities, which could slow down effective enforcement.
Amendment 56 would expand the concept of an adverse effect on competition to include the displacement or alteration of work conditions or environments within the United Kingdom. Pro-competition interventions are designed specifically to address the root causes of the substantial and entrenched market power which gives rise to strategic market status. Where adverse working conditions intersect with or create a substantial negative impact on the competition within a particular market or industry, it may be relevant for the CMA to consider these. However, explicitly amending the definition of adverse effects on competition to include workplace conditions would skew the focus of the regulator away from competition and shift PCIs away from the established precedent of the markets’ regime. During a PCI investigation, the CMA may identify actions that other regulators or public bodies would be better placed to act upon. This may include the DMU referring issues such as workplace conditions to a relevant regulator, better placed to deal with these key issues.
Lord Knight of Weymouth (Lab)
Which regulators is the Minister thinking of? I am interested in Clauses 107 and 108, which are about regulatory co-ordination and information sharing, and whether there is something we should do there with those regulators. If he could give us a hint as to which regulators he is thinking of, that would be really helpful.
Viscount Camrose (Con)
I refer to the digital regulators themselves—the ICO or the FCA and Ofcom—or indeed regulators with oversight of employment law.
Amendment 61 would enable the CMA to require algorithmic impact assessments, to assess the impact of algorithms on society and the environment, including working conditions, if it considered such information relevant to its digital markets functions. I agree wholeheartedly with the noble Lord about the importance of understanding the impact of algorithmic systems on society, the environment and working conditions in the UK.
Lord Bassam of Brighton (Lab)
Is the Minister saying that it is up to the CMA to decide whether it is a relevant consideration?
Viscount Camrose (Con)
Yes, I think that I am saying that. The CMA, over the course of its investigations, can come across information beyond its own competitive remit but relevant for other regulators, and then could and should choose to advise those other regulators of a possible path for action.
Lord Knight of Weymouth (Lab)
In that sense, could the CMA ask for an impact assessment on the algorithmic harm that might be carried out? Would that be in the power and remit of the CMA?
Viscount Camrose (Con)
The CMA does have power and remit to request an algorithmic impact assessment. I will take advice on this, because I believe that the algorithmic assessment that it undertakes must be in the direction of understanding anti-competitive behaviours, rather than a broader purpose. I will happily take advice on that.
As the Bill stands, the CMA will already have sufficient investigatory powers to understand the impact of complex algorithms on competition and consumers. The suggested expansion of this power would fall outside the role and remit of the CMA. Moreover, the CMA would not have appropriate tools to address such issues, if it did identify them. The Government will continue to actively look at whether new regulatory approaches are needed in response to developments in AI, and will provide an update on their approach through the forthcoming AI regulation White Paper response.
I thank the noble Lord once again for raising these important issues and hope that he feels able to withdraw the amendment.
Lord Clement-Jones (LD)
I thank the Minister for his considered reply, and thank all those who have taken part in this extremely important and interesting debate, particularly the amplification by a number of noble Lords of some of the issues.
I was very much taken by what the noble Lord, Lord Knight, had to say about the risks for workers—hired, managed, fired. He used the word “dehumanising”, which was very powerful. The noble Baroness, Lady Kidron, referred back to some of the really interesting papers about automation from Osborne and Frey and others over the years, telling us that it is not just Elon Musk but, perhaps I might say, other more serious people who are warning us about the dangers of automation.
At the end of the day, I think the question is how relevant this is to competition. Those of us putting forward and supporting these amendments believe that monopoly, concentration and the power of big tech have the ability to determine working conditions. The Minister talks about this detracting from the CMA’s duties, saying that it is beyond its competition remit and so on. We think it is mainstream; we do not think that it is just an add-on to the CMA’s duties. There is a very strong argument for a wider focus by the CMA.
It feels rather like the Minister is passing the parcel to another regulator. It was instructive that we had to scrabble around at the back end of Clause 107 to see what other regulator might be available to deal with this, but there is nobody to pass this parcel to: this is a direct consequence of concentration and monopoly power. We should include these considerations in what the CMA does. It should have the power to insist on an algorithmic impact assessment.
I think the noble Baroness, Lady Kidron, used the word prescient. We need to be prescient and think forward to the future and the power of the algorithm, artificial intelligence and big tech. Our working population are extremely vulnerable in these circumstances. I do not get the feeling that the Government are really taking their duties to protect them seriously. I am sure that we will have further debates on this. In the meantime, I beg leave to withdraw Amendment 2.
Lord Clement-Jones (LD)
My Lords, it is a pleasure to follow the noble Baroness, Lady Kidron, whose speech segues straight into my Amendments 14 and 63. This is all about the asymmetry of information. On the one hand, the amendments from the noble Baroness, Lady Jones, which I strongly support and have signed, are about giving information to challengers, whereas my amendments are about extracting information from SMS undertakings.
Failure to respond to a request for information allows SMS players to benefit from the information asymmetry that exists in all technology markets. Frankly, incumbents know much more about how things work than the regulators. They can delay, obfuscate, claim compliance while not fully complying and so on. By contrast, if they cannot proceed unless they have supplied full information, their incentives are changed. They have an incentive to fully inform, if they get a benefit from doing so. That is why merger control works so well and quickly, as the merger is suspended pending provision of full information and competition authority oversight. We saw that with the Activision Blizzard case, where I was extremely supportive of what the CMA did—in many ways, it played a blinder, as was subsequently shown.
We on these Benches consider that a duty to fully inform is needed in the Bill, which is the reason for our Amendments 14 and 63. They insert a new clause in Chapter 2, which provides for a duty to disclose to the CMA
“a relevant digital activity that may give rise to actual or likely detrimental impact on competition in advance of such digital activity’s implementation or effect”
and a related duty in Chapter 6 ensuring that that undertaking
“has an overriding duty to ensure that all information provided to the CMA is full, accurate and complete”.
Under Amendment 14, any SMS undertaking wishing to rely on it must be required to both fully inform and pre-notify the CMA of any conduct that risks breaching one of the Bill’s objectives in Clause 19. This is similar to the tried-and-tested pre-notification process for mergers and avoids the reality that the SMS player may otherwise simply implement changes and ignore the CMA’s requests. A narrow pre-notification system such as this avoids the risks.
We fully support and have signed the amendments tabled by the noble Baroness, Lady Jones. As techUK says, one of the benefits that wider market participants see from the UK’s pro-competition regime is that the CMA will initiate and design remedies based on the evidence it gathers from SMS firms in the wider market. This is one of the main advantages of the UK’s pro-competition regime over the EU DMA. To achieve this, we need to make consultation rights equal for all parties. Under the Bill currently, firms with SMS status, as the noble Baroness, Lady Harding, said, will have far greater consultation rights than those that are detrimentally affected by their anti-competitive behaviour. As she and the noble Lord, Lord Vaizey, said, there are opportunities for SMS firms to comment at the outset but none for challenger firms, which can comment only at a later public consultation stage.
It is very important that there are clear consultation and evidence-gathering requirements for the CMA, which must ensure that it works fairly with SMS firms, challengers, smaller firms and consumers throughout the process, ensuring that the design of conduct requirements applies to SMS firms and pro-competition interventions consider evidence from all sides, allowing interventions to be targeted and capable of delivering effective outcomes. This kind of engagement will be vital to ensuring that the regime can meet its objectives.
We do not believe that addressing this risk requires removing the flexibility given by the Bill. Instead, we believe that it is essential that third parties are given a high degree of transparency and input on deliberation between the CMA and SMS firms. The CMA must also—and I think this touches on something referred to by the noble Baroness, Lady Jones—allow evidence to be submitted in confidence, as well as engage in wider public consultations where appropriate. We very strongly support the amendments.
On the amendments from the noble Lord, Lord Tyrie, it is a bit of a curate’s egg. I support Amendments 12A and 12B because I can see the sense in them. I do not see that we need to have another way of marking the CMA’s homework, however. I am a great believer that we need greater oversight, and we have amendments later in the Bill for proposals to increase parliamentary oversight of what the CMA is doing. However, marking the CMA’s homework at that stage is only going to be an impediment. It will be for the benefit of the SMS undertakings and not necessarily for those who wish to challenge the power of those undertakings. I am only 50% with the noble Lord, rather than the whole hog.
Viscount Camrose (Con)
I thank both noble Lords for speaking and for their thoughtful contributions. I will start by considering the amendments tabled by the noble Baroness, Lady Jones of Whitchurch, relating to information and transparency.
It is important to state from the outset that the Government agree it is vital that the Digital Markets Unit’s decisions are transparent and that the right information is available publicly. Currently, the DMU would be required to publish the key information related to its investigations in the summaries of its decisions. The amendments in this group, beginning with Amendment 8 and ending with Amendment 58, tabled by the noble Baroness, would create a new requirement for the DMU to send decision notices to firms that it assesses to be the most affected by decisions.
We agree it is vital that the DMU's decisions are transparent, and the appropriate information is accessible publicly. That is why the DMU is required to consult publicly before it imposes obligations such as conduct requirements or pro-competition orders. This gives third parties the opportunity to make representations on the design of interventions. While the precise nature of the consultation process is at the DMU’s discretion, we are aware of the imbalances in resources between different firms, as noble Lords have raised.
In its recently published overview, the CMA highlighted that engaging with a wide range of stakeholders will be a core principle of their approach. We therefore expect the DMU to put appropriate mechanisms in place for third parties to feed in. The consultation requirements are minimum requirements. As the CMA set out earlier this month, the DMU will undertake fair, inclusive and transparent engagement with third parties when designing its interventions. The participative approach will ensure that obligations are effective and appropriate, while minimising undue burdens and avoiding unintended consequences for both SMS firms and third parties.
However, requiring the DMU to identify appropriate third parties and send notices for each decision would introduce a significant burden on the DMU for minimal benefit. I think this will be a theme as we go through Committee: the burdens created by some of the proposed amendments are greater than they initially seem. For example, it could mean sending notices to potentially thousands of interested third parties in the case of app developers in the activity of app stores. Given this and the fact that the CMA will publish key information related to its decisions, we feel the burden would outweigh the benefit.
Amendment 14, tabled by the noble Lord, Lord Clement-Jones, would require SMS firms to inform the CMA before launching a digital activity that may give rise to competition issues. The Government agree that it is important that the CMA has access to information on potential competition issues in digital markets as they emerge. However, the CMA already has robust information-gathering powers under Part 1, supported by appropriate penalties for non-compliance. This amendment would create new burdens on the CMA, which could potentially be inundated with information. As a result, rather than focusing on priorities, the regulator would have to expend resources sifting the information provided. Further, it could introduce undue burdens on SMS firms looking to introduce innovative new products and services in areas that have healthy competition. It is important that obligations within the regime do not dissuade firms from developing innovations that are beneficial to consumers. I hope that sets out the position to the noble Lord.
Lord Clement-Jones (LD)
My Lords, so that the Minister does not have to stand up a second time, I will just add the other side of the coin to the question from the noble Lord, Lord Vaizey. The Minister seems very concerned about the workload within an SMS, but they are an SMS for a reason.
Viscount Camrose (Con)
I thank noble Lords for raising those points. My response to them both is that the key is that we are trying to set a balance between the workloads—the work that has to be performed by the regulator—and the benefit of that work for competition. We can certainly come up with examples. I shared the example of how many app developers there are and how many of them would have to exchange information with the regulator, but perhaps it would be more helpful to the Committee if I committed to giving a slightly deeper analysis of what the CMA estimates would be the time consumed on such activities and why we are concerned that it would have the potential to detract from the core basis of its mission.
Baroness Harding of Winscombe (Con)
The challenger app developers are, in essence, the customers here, so I am quite worried that I think I am hearing that the regulator cannot cope with customer feedback, whereas that is probably the most important feedback in its process. We are looking for a way of enshrining that in the legislation that does not create some overwhelming burden. To say that customers will overwhelm the regulator with feedback is back to front: they are the people that the competition regulator should most want to hear from.
Viscount Camrose (Con)
In that example, I would cast the app developers as participants in the ecosystem and the customers as the users of the app, but that is perhaps an ontological problem. Perhaps the most straightforward thing, to satisfy the Committee’s concerns that we are not idly throwing out the possibility of an overworked regulator, would be to provide the Committee with a greater analysis of why we believe we have to be careful with what information we ask them to exchange with interested parties to avoid the situation in which the paperwork exceeds the value work.
Lord Clement-Jones (LD)
My Lords, would the Minister also agree to add the whole question about the overworked SMS in his response?
Viscount Camrose (Con)
Yes. The point is that we are very happy for these firms to keep delivering innovative new products in competitive markets; we are less happy about them spending their time frustrating the will of the regulator. It is more difficult for me to comment on SMS workloads but I am very happy to comment on the regulators’ workloads.
Lord Clement-Jones (LD)
My Lords, the foundation of the Minister’s argument is SMS workload. The issue is exactly the point that the noble Baroness, Lady Kidron, made about information being power. The SMS companies will know what they are developing. They have huge teams of developers and marketeers, and they have huge amounts of information. This is a question of the CMA trying to keep abreast of what is happening in markets which are dominated by SMS companies, so it is important that there is a proactive duty on the SMS undertaking to give information to the CMA. Maybe the Minister could, as part of this letter, explain how many people there are whose job it is to gather information from the SMS companies—maybe that is the right way around—so we can judge whether it is right to require an SMS proactively to deliver information to the CMA.
Viscount Camrose (Con)
Indeed. I am happy to include such analysis in my letter. However, I observe that were I to put myself in the SMS’s shoes and I had a desire to frustrate the will of the regulator, my approach would be to provide far more information than was necessary and create a significant burden on the regulator to sift that information. Any such request or any such standing order about the information coming from the SMS to the regulator must itself be quite carefully balanced.
Lord Clement-Jones (LD)
My Lords, all the SMS has to do is put it through one of its large language models, and hey presto.
Lord Clement-Jones (LD)
That is not incompatible. These are two sides of the same coin, which is why they are in this group. I suppose we could have degrouped it.
Viscount Camrose (Con)
Indeed, and I apologise for getting slightly sidetracked on the issue. I think the outcomes we want are that challenger tech firms should be duly informed about the information they need, whether to rebut claims set out by an SMS or to understand the implications and contribute to the process of determining what interventions the regulator should need to make. In the Bill, we are trying to develop the machinery that balances both sides of that equation most effectively, and I remain concerned that we need to manage the workload requirements of the regulator so that it is optimally focused on delivering the right outcomes based on the right information.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken. We have had an excellent debate. I very much respect the experience of the noble Lord, Lord Tyrie, on this issue. I agree that there is a challenge for us in building trust in the new regime. It is a leap in the dark and, undoubtedly, we are giving the CMA/DMU considerable new powers, so it must prove its worth and prove that our faith in it is justified. I agree that there is a danger of getting that balance wrong. During the passage of the Bill, we will look at other ways of getting parliamentary and other oversight of its activities, to ensure that we get the balance in check.
I also agree that it is important that we maintain commercial confidentiality. This is an issue about sharing information, which we were just talking about. However much information is shared, we must ensure that those who are sharing it—sometimes it is very much core to their business model—respect it and do not put it in the public domain. All that must underpin our debate.
I agreed with the noble Lord, Lord Clement-Jones, that the proposals from the noble Lord, Lord Tyrie, were a curate’s egg; I was not sure either about the independent case reviewer. I worry that it would be another loophole, or hurdle, that would allow the lawyers a field day. The noble Lord, Lord Tyrie, put it there with the very best intentions, and I am happy that we talk about it, but I am not sure about it. It worries me that we are being too prescriptive by setting it out in so much detail in the Bill, but let us get that right because there will, I hope, be other opportunities to debate this.
I thank the noble Baronesses, Lady Harding and Lady Kidron, and the noble Lord, Lord Vaizey, for their support on my amendments. The noble Baroness, Lady Harding, said it very well: the amendments illustrate the inequality of arms between the SMS and the challenger firm. There will be a wealth of evidence that the CMA needs to consider. That will be a whole lot of major anti-competitive practices, a lot of which it already knows about, but there will also be some of the more minor inconveniences that are put upon some of the challenger firms. We have met with a lot of the stakeholders; sometimes what is so annoying is the irritating, almost vindictive little actions, because you have the temerity to put your hand up and say that you do not agree with the major companies. We must ensure that we capture all of that in the round, and that it is not just the major known knowns that the CMA considers.
The noble Baroness, Lady Kidron, made the point very well: there is a danger that, based on what it knows, the CMA will make assumptions about what it can win, rather than getting under the skin of what is really going on and what is right for the consumer in all this. To get under the skin, the CMA will need a lot of information, so we must ensure that it gets the right information, at the right time, from the right people. The noble Baroness and the noble Lord, Lord Clement-Jones, made the point that, as it is set out at the moment, the incumbents have all the cards. We need transparency of information to rebalance the scales in all this.
I have listened carefully to the Minister’s response. He said that the DMU is required to consult publicly before decisions are implemented, but that is probably too late to influence the outcome. By the time that it is consulting publicly, it has already made its mind up. I am not sure that that is the right point at which that major flow of new information needs to take place. The Minister argued that the burden of sending notices to thousands of parties, et cetera, would outweigh the benefit. That is exactly the information that it needs, and the noble Baroness, Lady Harding, made that point. If we have to bite that bullet, let us bite that bullet. If that is what it takes to rebalance the scales then we need to do that.
I fully admit that we might not have got the wording right to achieve that, but I think the principle is right and I am prepared to dig in on that principle. I hope we can have a further discussion on it. I think we know what we want to do. Nobody wants the SMS companies to flood the CMA with so much information that everybody drowns. We have to get it right so that it gets the right information. I do not think we have the balance right at this time, but let us talk about it some more. In the meantime, I beg leave to withdraw my amendment.
Lord Offord of Garvel
“(A1) Where the CMA decides as a result of an initial SMS investigation not to designate the undertaking to which the investigation relates as having SMS in respect of a digital activity to which the investigation relates, the SMS decision notice must include the CMA’s reasons for its decision.”Member’s explanatory statement
This amendment provides that the CMA must give reasons when it decides not to designate an undertaking following an initial SMS investigation.
Viscount Camrose (Con)
I start by thanking all noble Lords who spoke so compellingly. It was a great pleasure to listen. I must say my head is slightly spinning, it is such an eclectic group of amendments, but I will do my best to respond properly to all the points raised.
I start with the discussion on the imposition and use of conduct requirements by the regulator. I thank my noble friend Lord Holmes of Richmond for tabling Amendment 15, which would remove the conduct requirement objectives—fair dealing, open choices and trust and transparency—and instead allow the CMA to impose conduct requirements for any purpose, so long as they fall within the list of permitted types. I intend to cover only the impacts of this amendment on the conduct requirement objectives, not its impacts on the proportionality requirement, as we shall be turning to that in detail later. Both the objectives and the permitted types of conduct requirement reflect extensive and expert evidence and analysis on types of harms in digital markets. These have been set out in legislation to provide clarity up front about the types of rules that designated firms could be subject to. It is right that the powers given to the CMA have clear and defined limits, and the objectives provide an appropriate framework for them to operate within. The Government feel that this clarity of objective is essential to the success of the regime, ensuring that it remains targeted and proportionate.
Amendment 19, tabled by the noble Lord, Lord Clement-Jones, would allow the CMA to gather and publish information relating to commercial deals. I sympathise with the sentiment behind his amendment and believe this regime will provide a crucial means to address the imbalance that exists between the most powerful tech firms and other parties. The CMA will already, as part of investigatory requirements, conduct requirements and the final offer mechanism process, be able to gather relevant information about payment terms and deals, and require SMS firms to share information with third parties. The CMA will also, where appropriate, be able to publish aggregated and anonymised information. As such, we do not believe that this amendment provides the CMA with any necessary additional powers.
Amendment 30 proposes that conduct requirements on unfair use of data be amended to allow the CMA to also prevent SMS firms using copyright material without permission. I absolutely agree, needless to say, with the sentiment that properly functioning, competitive markets that respect intellectual property rights have a vital role to play in stimulating growth and encouraging innovation.
I assure the noble Lord, Lord Clement-Jones, that the CMA is well equipped to address competition issues in a range of contexts, including where these issues intersect with intellectual property rights. When making interventions, the CMA will consider a range of factors, which can include the fairness of terms in issues related to copyright, where they are relevant, on a case-by-case basis. Existing permitted types of conduct requirements already allow the CMA to set requirements for unfair and unreasonable terms, which can include payment terms.
Lord Clement-Jones (LD)
I am sorry to interrupt the Minister but that is very general. We have heard around the Room that people are really concerned. As we go forward, so many areas of intellectual property—the ingestion of copyright material, the issues with synthesisation of performances—are being affected by artificial intelligence. The kind of language the Minister is using sounds far too generic. It needs to be much more focused if we are to be convinced that the CMA really has a role in all of this. He is the Minister for both AI and IP, so he is right at the apex of this issue; maybe he is right on the point of the whole thing. He has the ability in his ministerial role to start trying to resolve some of these issues. We have the IPO coming up with a code of conduct—
Lord Clement-Jones (LD)
This is a long intervention, I agree. I would just ask the Minister to focus on the fact that this is not just any old fairness of terms but something that should be explicitly stated in the Bill.
Viscount Camrose (Con)
There is a much broader set of work looking at issues of copyright, intellectual property and artificial intelligence together—a hugely complex piece of work with many stakeholders pulling in a range of different directions. The goal of this Bill is to address that in so far as it affects competitive markets. We may debate this, but the design of the Bill is such that, in so far as competition is affected by the misuse of intellectual property or intellectual property infringements, the CMA is empowered to intervene to drive greater competition or address issues that limit competition. It is targeted only at addressing competitive issues but, in so far as they affect competitive issues, it is empowered to address IP infringement issues, as set out here.
Existing permitted types of conduct requirements already allow the CMA to set requirements for unfair and unreasonable terms, which can include payment terms. The Government are committed to our world-leading IP regime. Copyright legislation already provides a robust framework for rights holders to enforce against copyright infringement. We will take a balanced approach to the use of AI across the press sector and departments across government are working together closely to consider the impact of AI, ensuring that AI innovators and our world-leading creators can continue to flourish.
I turn to Amendments 26, 27 and 25. I thank noble Lords for their thoughtful and considered contributions on these amendments. Amendments 26 and 27 are intended to expand the ability of the CMA to intervene outside the designated digital activity. Amendment 25 also seeks to expand this power specifically in relation to self-preferencing behaviour that takes place outside the designated activity. We agree with noble Lords that it is crucial that the CMA can deal with anti-competitive behaviour outside the designated activity where appropriate. My noble friend Lord Offord and I have had a number of representations giving further examples of this kind of behaviour and we are committed to finding the right means of addressing it.
Our current drafting has sought to balance the need for proportionate intervention with clear regulatory perimeters. The regime is designed to address the issues that result from strategic market status and is therefore designed to address competition issues specifically in activities where competition concerns have already been identified. This recognises that SMS firms are likely to be active in a wide range of activities and will face healthy competition from other firms in many of them.
I assure noble Lords that the power to prevent self-preferencing is already sufficiently broad. It can apply where an SMS firm is using its power in the designated activity inappropriately to treat its own products more favourably, but without a need for those products to be linked to the designated activity. In addition, the existing power outlined in Clause 20(3)(c) to intervene in non-designated activities, which noble Lords are referring to as the whack-a-mole principle, has been carefully calibrated. It is available only where the conduct has a material impact on the strategic market status in respect of the designated activity.
The same conduct in respect of a different activity may not have the same impact on the market. It will not always be anti-competitive and may instead form a part of normal business practice in a more contestable market. The DMU will therefore take a targeted, evidence-based approach when considering intervention. The DMU can intervene via conduct requirements outside the designated activity to prevent leveraging into the designated activity or via PCIs to address an adverse effect on competition in a designated activity. Therefore, the Government’s view is that broadening the CMA’s powers would risk over-intervention, creating uncertainty for businesses and risks to innovation and investment.
Baroness Jones of Whitchurch (Lab)
Before the Minister moves on, do I understand from the beginning of that contribution that he is still looking at the wording—in other words, that he not wedded to the wording and is there some scope for either the amendment from the noble Lord, Lord Vaizey, or our amendment, or to work with him to see if we can achieve what we are trying to achieve through this or other means?
Viscount Camrose (Con)
Throughout this group, I am convinced that we are trying to achieve the same thing. I remain concerned that we have to design safeguards against regulatory overreach to enter into markets that are currently healthy, but beyond that I am very happy to explore the right form of wording or design that achieves the end that all sides are keen to establish.
Amendment 24 is intended to clarify the meaning of information being accessible. I thank my noble friend Lord Holmes for the amendment, and for the rigour and passion he demonstrated when making his points. I agree that the question of online accessibility is of great importance. All kinds of technology should be for everyone. I can provide assurance that the CMA can already consider the concept of accessibility in the broadest sense, and in a way that includes—but is not limited to—compatibility with assistive technology. I agree that it is crucial that all members of our society have the right to accessible information. The Bill as drafted provides for this and can encompass, for example, a requirement to have terms and conditions that are easily accessible on a website, in easy-to-understand language, and compatible with assistive technology.
Amendments 32 and 22 would remove the power that enables the Secretary of State to update the list of permitted types of conduct requirement and replace it with an additional open-ended type of conduct requirement. I thank noble Lords for their amendments and agree that digital markets are fast-moving and unpredictable. Future innovations are hard to foresee and will likely give rise to a range of new behaviours and ensuing harms. Although the Government have endeavoured to make the list of permitted types of conduct requirements fully comprehensive, it could become out of date in the future. The noble Viscount’s proposal to add an open-ended type of conduct requirement would, we feel, grant too wide a power to the CMA and undermine the safeguards we have set by creating a clear framework for the CMA to operate within.
It is right that both government and Parliament have appropriate oversight and scrutiny over the significant powers being granted to the CMA. Therefore, the delegated power to allow the Secretary of State, subject to parliamentary scrutiny, to update the legislation provides the most appropriate way to future-proof the regime, ensuring that it can intervene effectively and promptly on the right issues. In addition, I note that the Delegated Powers and Regulatory Reform Committee has not queried the need for this power.
Lord Clement-Jones (LD)
My Lords, we are getting on in the Committee, but I was really interested in the Minister’s interpretation point, because quite a lot hangs on that. The noble Lord, Lord Lansley, illustrated extremely well the difference between promoting and not restricting, so to speak—that is a crucial distinction. The Minister prayed in aid Clause 20(2) versus (3), but could he write on that in due course?
Viscount Camrose (Con)
I am very happy to do so. As I say, anything that ensures the clarity of the Bill is valuable and important.
On the reference to international technical standards, these can be an important tool in supporting good regulatory outcomes, and we expect the CMA to pay due regard to these, along with other relevant considerations.
Finally, Amendment 34 would place a duty on the DMU to consider opening a PCI investigation when reviewing the effectiveness of, and an SMS firm’s compliance with, conduct requirements. Conduct requirements are tailored rules to manage the effects of an SMS firm’s market power and prevent harms before they occur. PCIs will tackle the sources of SMS firms’ market power, which can arise from both structural features of a market and SMS firms’ conduct. These are different but complementary tools, and the CMA will need to carefully decide when it is appropriate to use each tool, depending on the specific competition issue at hand. This amendment risks narrowing and reframing PCIs as a tool of last resort for non-compliance with conduct requirements.
I hope noble Lords feel assured that the issues they have raised have been carefully considered and reflected throughout the Bill, and I hope that the noble Lord will be able to withdraw his amendment.
Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
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Grand CommitteeDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: HL Bill 12-II(b) Amendment for Grand Committee (Supplementary to the Second Marshalled List) - (24 Jan 2024)
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Lord Bassam of Brighton (Lab)
My Lords, I thank the noble Lord, Lord Faulks, for his neat and precise analysis of the position in which we find ourselves in the discussion on this group of amendments. This debate is a prequel to that which will follow on penalties, and we should see it in that light; the two things are very much connected, as the noble Lord, Lord Clement-Jones, made clear. Like him, I completely agreed with the noble Lord, Lord Vaizey, when he warned about using stray words. Proportionality is probably one of the most contested terms in law, and in all the 25 years or so that I have been in this House, I must have heard it in all the legal debates we have come across.
These are the first amendments seeking to restore some of the Bill’s original wording, which, as we have heard, was changed late in the day in the Commons. We are yet to receive a full explanation from the Minister of the reasons for that. The noble Lord, Lord Faulks, asked why, and we on these Benches pose the same question. Were Ministers lobbied into this and, if so, why? We support Amendments 16 and 53 in the name of the noble Lord, Lord Faulks, which, as he outlined, seek to restore the original wording of the Bill, taking out the word “proportionate”, removing proportionality as the determining factor behind a CMA pro-competition intervention and reinserting the word “appropriate”.
We have two, possibly three, sets of solutions to the problem that the Government have set. However, we also have added our names to Amendments 17 and 54, in the names of the noble Baronesses, Lady Stowell and Lady Harding, and the noble Lord, Lord Clement-Jones, with the intent of ensuring that clarifying that the condition for conduct requirements imposed by the CMA to be proportionate does not create that novel legal standard for appeals of decisions and the confusion that will flow from that. In our view, as the noble Baroness, Lady Harding, says, the original wording strikes the right balance, roughly speaking, whereas the Government’s version would weaken the intent of this part of the Bill.
The formulation of the noble Baroness, Lady Stowell, relies on prevailing public law standards—in other words, standards that are commonly understood. We take the view that we all need to know what rules we are working to, and if the Bill introduces or creates a new standard then that certainty is removed. Of course, when it comes to the issue of pre-emption, we will need to resolve the best way forward on this issue at the next stage of the Bill. For my part, I think that reversion might be the best route, but no doubt by negotiating round the Committee we can come up with a workable solution.
The amendments of the noble Lord, Lord Holmes, particularly Amendments 220 and 222, offer another way through it. However, on the face of it, for us they are useful in the context of reminding our Committee that guidance will need to be produced on the operation of this regime as it covers financial penalties and the countervailing benefits exemptions.
We have heard a lot about the new regime being flexible and participatory as a framework for regulation, and we agree with that principle. However, we think that, with this particular change, the Government strike at the heart of that and bring in a measure of uncertainty that is unwise, frankly, in this particular process. The intervention of the noble Lord, Lord Lansley, was very telling. What he told the Committee was extremely important and we should listen very carefully to what was said in that exchange of correspondence. He rather shot the Government’s fox.
In conclusion, the Minister has a bit of a difficult job on his hands here. He may feel the weight of the Committee against him. I rather hope that he can offer us a measure of reassurance and perhaps help us come to a point where the whole Committee can agree a sensible reversion or an amendment that makes the Bill as workable as it seemed when it was first drafted.
The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
I thank the noble Lord, Lord Faulks, for raising the topic of proportionality in the digital markets regime and for doing so with such a clear and compelling analysis, which I think all of us, myself included, found deeply helpful. This is of course the requirement for the CMA to impose conduct requirements and pro-competition interventions on firms only where it is proportionate to do so.
First, I reassure my noble friend Lady Harding that this change is not about introducing a new standard or meaning of proportionality but about clarifying the scope of decisions that it applies to.
Amendments 16 and 53 from the noble Lord, Lord Faulks, seek to remove the explicit statutory requirement for PCIs and conduct requirements to be proportionate. Under these amendments, SMS firms would still be able to argue that their rights to peaceful enjoyment of property under Article 1 of the first protocol of the ECHR, or A1P1, were engaged in most cases, allowing them to appeal on the basis of proportionality. I refer noble Lords to the ECHR memorandum published by the department, which explains how the regime intersects with human rights and how this relates to property rights. A1P1 protects possessions, which can include enforceable rights such as contracts, and so regulating SMS firms under the regime would commonly affect possessions, and therefore engage A1P1.
The Government have always been clear that the CMA will need to act proportionately and comply with ECHR requirements, and that imposing obligations on SMS firms will very often engage the firm’s rights under A1P1. However, having a statutory requirement for proportionality in the Bill reinforces the Government’s expectations for how the CMA should design conduct requirements and PCIs, to place as little burden as possible on firms while still effectively addressing competition issues. This should be the case even when A1P1 property rights are not engaged, which this requirement provides for.
In particular, it is worth highlighting that A1P1 rights on their own would not amount to grounds to challenge interventions that impact a firm’s future contracts. It is right that these interventions should be proportionate. I understand the concern from many noble Lords about any extension to the grounds for appeal in the regime, but we are giving extensive new powers to the CMA to regulate digital markets.
Lord Lansley (Con)
Before we move away from this point, there was an interesting use of the word “reinforces”. Am I right in thinking that my noble friend is telling us that, if the original wording in the Bill were used and the word “appropriate” was there, it would none the less be his expectation that, in making decisions about conduct requirements or pro-competitive interventions, the CMA would in fact do so in a manner that was proportionate, because that is the appropriate way in which to make those decisions? Our worry is that by “reinforcing”, my noble friend is actually opening a door.
Viscount Camrose (Con)
I will go on to speak more about this. The intention of the Government in “reinforcing” is to bring clarity, particularly since, as I say, A1P1 is not universally applicable to these cases. It brings clarity, and therefore I hope that the effect will be as much closing the door as anything else.
Lord Faulks (Non-Afl)
The Minister has talked about A1P1 and the right to peaceful enjoyment of possessions. That may come into the analysis or it may not, but he has taken the view that it may not. If it does, then it is covered by the normal doctrines of judicial review, which include proportionality. If it does not, and he says it may not, why have proportionality in at all?
Viscount Camrose (Con)
I believe that, in most cases, A1P1 rights would be invoked, but there are cases where A1P1 would not necessarily be invoked, rare as those cases are. The intention of the Government is to treat all those cases in the same way. As I say, it is important that we also consider the safeguards around the new powers. Having an explicit requirement for proportionality, rather than just the implicit link to A1P1, sets a framework for the CMA as to how it must design and implement significant remedies. A proportionate approach to regulation supports a pro-innovation regulatory environment and investor confidence. I am also aware, of course, that later we are due to debate concerns noble Lords may have about the accountability of the CMA. Without pre-empting that debate, it is worth pointing out that setting out the requirement for proportionality explicitly will help ensure that the CMA uses its powers responsibly.
Lord Clement-Jones (LD)
This all sounds as though, really, the Minister should come clean and say that what he is trying to do is bring in merits by the back door.
Viscount Camrose (Con)
It is not my intention to bring in merits by the back door, nor is it my intention not to come clean, or to conceal from Members of this Committee any intentions of the Government. All this is about producing the clarity that we need to safely deliver the wide-ranging new powers of the CMA.
Lord Vaizey of Didcot (Con)
Can the Minister clarify for the Committee at some point, perhaps by letter, at what point the penny dropped within the department, with officials, that the word “proportionate” was necessary? If the word “proportionate” is removed, does this give the CMA permission to act disproportionately?
Viscount Camrose (Con)
I am happy to provide that information in the form of a letter, and I will leave it at that for now.
Lord Tyrie (Non-Afl)
Perhaps I could answer the question: the CMA never has scope to act disproportionately in law.
Viscount Camrose (Con)
In respect of my noble friend Lord Vaizey’s concern that proportionality will affect how the CAT conducts an appeal, the retention of judicial review in Clause 103 will still apply to the CAT, which will still have to conduct an appeal when a firm raises non-ECHR proportionality arguments in a JR style. It will not become a full merits appeal.
Amendments 33 and 52, from my noble friend Lord Holmes of Richmond, also remove the statutory requirement for proportionality but, in doing so, create greater impacts on the regime. Amendment 33 would remove the obligation on the CMA to set out, in its conduct requirement notice, the objective in relation to which it must consider proportionality. However, this is a key feature for setting a conduct requirement and it is important to include it in the notice for both the SMS firm and third parties.
Amendment 52, by removing Clause 46(1)(b), would reduce the Bill’s clarity that the primary objective of PCIs is to address competition problems. It is important that the Bill is clear on the objective that PCIs must pursue. Additionally, proportionality provisions will ensure that the CMA addresses its objectives without placing unnecessary burdens on firms and harming consumers.
I turn to my noble friend Lady Stowell’s Amendments 17 and 54. As she set out in her explanatory statement, these amendments seek to clarify that the use of “proportionate” does not create a novel legal standard. The amendment would state that it is defined in accordance with prevailing public law standards. Of course, I agree with her that it is important to be clear about what we expect from the CMA and concur with the spirit of her amendments. However, I hope my explanation of this provision as currently drafted will satisfy my noble friend’s concerns.
These amendments assume that there is a single public law definition of proportionality, when there is not. However, proportionality is also not a novel concept for either the CMA or the domestic courts to apply. There is domestic case law about how proportionality requirements have been interpreted. We expect that the CMA, the CAT and courts would follow the broad approach set out in the Bank Mellat 2 case, which considered proportionality in relation to the application of ECHR rights, as well as fundamental rights at common law. This is relevant when considering whether an infringement of a qualified ECHR right and/or a fundamental common-law right is justified. Noble Lords with an interest in this area will be familiar with the four-limb test set out by Lords Sumption and Reed. Previously, our domestic courts applied a separate, but broadly similar, test when considering proportionality under EU law.
In the event of an appeal against CMA interventions, it is the role of the courts to provide a definitive interpretation of the legislation, but they will likely give a certain amount of deference to the CMA as the expert regulator. When an intervention has engaged A1P1, there would be a clear link with the approach of the domestic courts to the ECHR proportionality requirements that I have already discussed. In the rare situation when an intervention did not engage A1P1, it seems logical that the courts would take an approach consistent with how they approach digital markets cases which do engage A1P1, although this could involve some modifications on a case-by-case basis.
The basic requirements of proportionality—that it balances private interests adversely affected against the public interests that the measure seeks to achieve—is well understood. As such, I hope my noble friend can appreciate that although I agree with the spirit of her amendments, in practice I do not believe they would provide the clarity they seek.
Amendments 220 and 222 from my noble friend Lord Holmes of Richmond would require the Secretary of State to publish guidance on how the appeals standard for financial penalties, proportionality and countervailing benefits exemption would operate. The amendments set out that the CMA could not impose conduct requirements, pro-competition interventions or financial penalties before this guidance was published.
I thank my noble friend for these amendments. He should be pleased to hear that the CMA will, as part of its approach to implementing the regime, produce guidance outlining its approach to delivering the regime before it is implemented. We expect this guidance to include the CMA’s approach to proportionality and the countervailing benefits exemption. The Secretary of State will have oversight of the CMA’s approach through the approval of that guidance. The Government feel that this approach strikes the right balance between maintaining the independence of the CMA and the CAT, and providing appropriate government oversight and clarity about how the regime will work. Suitable guidance will already be in place before the regime commences; as such, these amendments are not required.
I hope this has helped to address the concerns of the noble Lord, Lord Faulks, and my noble friends Lady Stowell of Beeston and Lord Holmes of Richmond, and that, as a consequence, they feel able to withdraw, or not to press, their amendments.
Lord Clement-Jones (LD)
My Lords, what harms does the Minister think the inclusion of “proportionate” is designed to prevent? What does he really think would happen if that word was not included in the Bill?
Viscount Camrose (Con)
As I said, for those cases where A1P1 cannot be engaged, they can be treated in the same way—equally proportionately to other cases under A1P1. In addition, it creates further clarity around the use of these extensive new powers for the firms that will be affected by their use. In addition, it creates another means for this newly powerful independent regulator to be held to account.
Lord Vaizey of Didcot (Con)
Forgive me for intervening to make what is more of a rhetorical point.
Lord Bassam of Brighton (Lab)
My Lords, if I might help the Minister, this legislation has been knocking around for some time now, so what was it that provided that blinding flash of official or ministerial inspiration to bring this amendment about “proportionate” so late in the day in the other place that it was tabled right at the end of the Commons process? What was it that was so compelling as to make that dramatic change?
Viscount Camrose (Con)
If noble Lords will forgive me; that was a large variety or questions. First, I can confirm right away that I have not received any lobbying from any big tech firms on this topic—none; zero. Secondly, as with any Bill, this was part of an ongoing pattern of constantly looking for means of improving the Bill, to maximise its clarity and effectiveness. I recognise the concern voiced by the Committee about this. I am very happy to set out in detail all the arguments I have attempted to make. I hope that will go some way further towards satisfying the Committee.
Viscount Camrose (Con)
I thank the noble Lord, Lord Clement-Jones, and my noble friend Lord Lansley for bringing these important amendments. It is enormously valuable and important to kick the tyres of Clause 20 and understand or assure ourselves that it works.
Amendment 18A, tabled by the noble Lord, Lord Clement-Jones, would create a new permitted type of conduct requirement, allowing the CMA to require an SMS firm to provide users with a way to pay for products and services that would provide consumer protection. I thank him for the amendment; it highlights the vital issue of ensuring that consumers are protected when using online marketplaces.
We feel that conduct requirements are already able to require that SMS firms have effective processes for handling complaints by and disputes with users or potential users. This will allow the CMA to intervene when competition issues arise in this area. My noble friend Lord Offord will be talking to the consumer provisions in Part 4 in a later sitting, and I will not tread on his toes here. However, those provisions put it beyond doubt that, where platforms promote or facilitate consumer transactions, they must act with professional diligence, in addition to more specific duties such as refraining from misleading omissions or actions or aggressive practices.
We recognise that public understanding of the requirements of professional diligence could be clearer, and we recently consulted on how price transparency and product information for consumers can be improved. The Government’s response to that consultation was published this morning, and, in the light of this, we will be undertaking further work with stakeholders to ensure that platforms’ obligations to consumers are more widely and easily understood. I would of course welcome the noble Lord’s input during that process.
Amendment 31, tabled by my noble friend Lord Lansley proposes to add a new permitted type of conduct requirement to deal with the issue of SMS firms attempting to stop third parties raising possible non-compliance with the CMA. I thank my noble friend for tabling this amendment and highlighting the importance of this issue, on which I have also received representation from affected firms.
Alongside information gathered through its own monitoring, the CMA will rely on information from third parties that will have direct knowledge of market conditions. It is therefore crucial that third parties have the confidence to speak to the regulator. I can provide assurances that the CMA will have strong powers to tackle discriminatory or unfair behaviour seeking to frustrate the regime or interfere with enforcement, where it occurs within the scope of a designated activity. Both conduct requirements and PCIs will be available to combat such behaviour, supported by the usual robust enforcement powers and penalties. I draw my noble friend’s attention specifically to Clause 20(3)(a), which, in addition to the conduct requirement
“on fair and reasonable terms”
in Clause 20(2)(a), can be used where relevant.
The CMA will also be able to intervene outside the designated activity, but not in an unconstrained way: it can use conduct requirements to prevent leveraging, or a PCI to address an adverse effect on competition in a designated activity.
Input from third parties will be crucial in ensuring the success of this regime. However, some stakeholders may have concerns about sharing information or experiences for fear of retaliation. The CMA has well- established processes for handling information and maintaining the anonymity of those providing evidence, whether informally or as part of an investigation. Recognising the importance of engagement, the CMA has also announced plans to expand this approach; for example, by establishing representative panels—one for consumers and civil society, and one for businesses and investors. This will facilitate input from third parties, which in turn will support the design and implementation of interventions.
I therefore hope that the noble Lord will feel able to withdraw his amendment.
Lord Stevenson of Balmacara (Lab)
The Minister mentioned in his address—I was grateful to him for doing so—that there was a recent announcement from the department about sneaky hidden fees or drip prices that are unavoidable, and the press report that I am reading says that they will be banned. Does not this bear directly on points made during this debate, and in particular on Clause 20? Does this mean that the Minister will bring forward amendments at a later stage?
Viscount Camrose (Con)
My preference would be to consider so doing once the Committee has had a chance to debate later sections of the Bill which go directly to consumers.
Viscount Camrose (Con)
As ever, I start by thanking all noble Lords who have spoken so powerfully in this group.
I turn first to the series of amendments on the countervailing benefits exemption. I start by addressing the proposal to remove Clause 29 as drafted, Amendment 36 from the noble Baroness, Lady Jones of Whitchurch, and Amendment 38 from the noble Lord, Lord Clement-Jones—in his absence.
Lord Fox (LD)
The Minister has already introduced a difference between the two. There is a difference between “there is no other reasonable or practicable way” and “indispensable”. They are not the same—they are not synonymous. If I have to prove that something is not practicable, that is not the same as indispensable. The Minister has absolutely proved the point.
Viscount Camrose (Con)
Again, in my opinion, the two sentences are indistinguishable in their meaning.
Baroness Stowell of Beeston (Con)
My Lords, one of the arguments that has been advanced—I did not make it in my remarks because I forgot—is that part of the problem with changing the word from “indispensable” to what is now in the Bill is that the current phrase has not been tested in the courts, whereas “indispensable” has. The argument that changing from “indispensable” to what we have now provides clarity is one that is really hard for people to accept, because the clarity it is providing is not, seemingly, in everyone’s interests. That is part of the problem here.
Baroness Kidron (CB)
I was really interested in the introduction of the word “unknown”. The noble Lord, Lord Lansley, set out all the different stages and interactions. Does it not incentivise the companies to call back information to this very last stage, and the whole need-for-speed issue then comes into play?
Viscount Camrose (Con)
I will revert first to the questions about the word “indispensable”. As I have said, the Government consulted very widely, and one of the findings of the consultation was that, for a variety of stakeholders, the word “indispensable” reduced the clarity of the legislation.
Baroness Harding of Winscombe (Con)
Before my noble friend answers that, can he shed some light on which stakeholders feel that this is unclear?
Viscount Camrose (Con)
I cannot give a full account of the individual stakeholders right now; I am happy to ask the department to clarify further in that area. My contention is that the effect of the two sentences are the same, with the new one being clearer than the old one. I am very happy to continue to look at that and listen to the arguments of noble Lords, but that is the position. Personally, when I look at the two sentences, I find it very difficult to discern any difference in meaning between them. As I say, I am very happy to receive further arguments on that.
With respect to the participative arrangements by which a decision is reached around, for example, a conduct requirement, during the period of conduct requirement design, and during the decision-making period, it is, as my noble friend Lord Lansley has stated, highly to be expected that firms will make representations about the consumer benefits of their product. During a breach investigation, on the other hand, later on in the process, a consumer benefits exemption can be used as a safeguard or defence against a finding of breach.
Sorry, but there were so many questions that I have completely lost track. Perhaps the noble Baroness, Lady Kidron, will restate her question.
Baroness Kidron (CB)
I think the Minister was in the middle of answering it and saying why something might be “unknown” right at the last.
Viscount Camrose (Con)
As many noble Lords in the debate have alluded to, we have to be clear that this is a fast-moving field, and we have to at least allow for the possibility that new technologies can provide new consumer benefits and that it is okay to argue that a new and emerging technology that was not part of the original consideration can be considered as part of the defence against a finding of breach. The fact that the intended meaning is intended to be clearer in the current drafting is aiming to provide greater certainty to all businesses while ensuring that consumers continue to get the best outcomes.
Amendment 41, from the noble Lord, Lord Clement-Jones, would change the current drafting of the countervailing benefits exemption in several ways that together are intended to ensure that the CMA is provided as soon as possible with information relating to an SMS firm’s intention to rely on the exemption. We agree with noble Lords who have spoken today that it is important that the exemption cannot be used to avoid or delay enforcement action. The conduct investigation will operate in parallel to the assessment of whether the exemption applies, meaning that the investigation deadline of six months is not affected by the exemption process. The regime has been designed to encourage an open dialogue between the CMA and SMS firms, helping to avoid delays, unintended consequences and surprises on all sides. Therefore, in many cases, if a firm intends to rely on the exemption, we anticipate that this will be clear to all parties from early on in the process.
Lord Fox (LD)
I appreciate what the Minister said. By “early on in the process” does he mean after the process has been instigated, or before? A lot of this information is needed in order to understand whether there needs to be a process in the first place. There is a chicken and an egg here, in that some of this information is up front before we get to actions and enforcement.
Viscount Camrose (Con)
Indeed. It is an important point. Right from the beginning of potential conduct requirement design or PCI design, it would be consulting very widely with all stakeholders, including SMS firms and tech challengers. As part of that consultation, consumer benefits would be expected to be stated, in what is designed to be a participative process on all sides. As I was saying, the CMA is required to consider consumer benefits early on, when setting conduct requirements. The SMS firms will therefore outline the consumer benefits associated with their conduct at that stage, long before a conduct investigation.
Finally, adding further evidential requirements risks overburdening the regulator with more documentation than necessary, and therefore potentially delaying any enforcement action. For the reasons I have set out, I hope the amendment will not be pressed.
I come now to the discussion on the powers of the CMA to enforce obligations where they have been breached by SMS firms. Amendment 43, from the noble Lord, Lord Clement-Jones, would provide the CMA with a power to impose an enforcement order requiring an SMS firm to offer fair and reasonable payment and non-payment terms to third parties for goods or services. I can confirm that, under Clause 19, the CMA already has the power to require a firm to offer fair and reasonable terms through conduct requirements, and, where these are breached, the CMA has power under Clause 31 to make an enforcement order obliging the firm to stop the breach. As such, this amendment would not give the CMA any additional powers and could risk a narrower reading of its powers by raising the question of why other types of orders are not mentioned.
Amendment 107, also from the noble Lord, Lord Clement-Jones, would allow the CMA to apply to the High Court where a firm was breaching, or attempting to breach, an obligation or one of the conduct requirement objectives set out in Clause 19(5). The objectives in Clause 19(5) are not intended to be binding on SMS firms. Their purpose is to guide the design of conduct requirements by the CMA. It would therefore not be appropriate for the CMA to find a firm in breach of these objectives.
However, I agree with the noble Lord, and others who have spoken today, that it is important that the regulator can respond quickly before irreversible harm results from SMS-firm conduct. Where urgent action is needed in relation to a suspected breach of conduct requirements, the CMA will have the power under Clause 32 to make an interim enforcement order before irreversible harm occurs. For PCIs, the CMA will be able to issue directions setting out specific steps that a firm must take to become compliant with a pro-competition order. Failures to comply with orders under either conduct requirements or PCIs can be enforced through robust penalties. There is also the possibility of affected persons applying to court to enforce relevant requirements, and to apply for injunctions under Clause 101.
Viscount Camrose (Con)
I said that the purpose of Clause 19(5) is to set the parameters for the design of conduct requirements by the CMA. Its purpose is to guide the CMA, not to bind the recipients of conduct requirements.
Amendment 48 from the noble Baroness, Lady Jones of Whitchurch, would allow the final offer mechanism tool to be used earlier in the enforcement process. The final offer mechanism is a backstop tool designed to incentivise sincere negotiations about fair and reasonable payment terms between the SMS firm and third parties. It is crucial that there is room for good faith negotiation where disputes arise from sincere differences of understanding rather than deliberate non-compliance. Overly shortening the enforcement process would greatly reduce these opportunities.
We recognise, however, that some stakeholders may be concerned about SMS firms frustrating the process and refusing to comply with these conduct requirements and any subsequent enforcement. Here, the CMA could seek to accelerate the stages before the final offer mechanism, making use of urgent deadlines for compliance with enforcement orders and significant financial penalties where appropriate, ensuring that parties will also not be able to drag their feet and delay the process. In addition, interim enforcement orders can be issued on a temporary basis during a conduct investigation, before a breach has been found. They could be used to prevent significant damage, such as a company going bust, to prevent conduct that would reduce effectiveness of future remedies or to protect the public interest. Our regime aims to tackle the far-reaching power of the most powerful tech firms.
I know that my noble friend Lord Black noted the Australian legislation. Our regime contrasts the Australian legislation in that it has been designed to protect businesses and consumers across the economy including, but not limited to, news publishers. Alongside the final offer mechanism, the DMU will have other powers to tackle unfair and unreasonable payment terms via conduct requirements, ensuring that the final offer mechanism will rarely, if ever, need to be used.
Amendments 49, 50 and 51 from the noble Lord, Lord Clement-Jones, would allow parties to submit further final offers if the CMA considers that the first were not fair and reasonable. The final offer mechanism involves a binary choice between the two final offers submitted by the parties. It is the finality of the process that creates such a strong incentive for the parties to submit fair and reasonable offers. An unreasonable offer only increases the likelihood of the CMA choosing the other party’s proposal.
Introducing scope for an additional round of bidding would undermine these incentives and would only serve to delay the securing of fair and reasonable terms for the third party. As a result, we hope, for the reasons set out, that the noble Lord feels able not to press these amendments.
Finally, this group includes two government amendments, which are both minor and technical in nature, relating to Clauses 38 and 117. These amendments clarify that digital content is included in the meaning of the phrase “goods or services” when used in Part 1 of the Bill, including when mentioned under the final offer mechanism. I hope that noble Lords will support these amendments.
Lord Kamall (Con)
I apologise—I should have maybe intervened earlier but I did not want to join the barrage, as it were. When my noble friend the Minister writes to us, as he inevitably will, I wonder whether he can help us to understand the Government’s position on countervailing benefits by outlining what they really mean by that and giving some real or hypothetical examples of where consumers may be harmed by a pro-competitive intervention by the CMA.
Viscount Camrose (Con)
Yes, indeed. I thank my noble friend for repeating the question and I apologise that I did not get to it earlier. I would be delighted to write and provide such examples.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who spoke in support of our amendments. It is worth saying at the outset that it sounds like we are being very critical of the potential SMS firms. This is not about being critical but about getting the balance right. That is what we are aiming to do. A lot of the discussion that we have had in Committee today has been about feeling that that has become out of kilter. We are trying to get the very careful balance that the noble Baroness, Lady Stowell, talked about. Her committee felt, having agonised over it, that the original wording was about right. A lot of us feel that, which is why we are so anxious and testing of the changes that have come along more recently.
As we debated and identified in the previous discussion, the CMA already has a responsibility to act proportionately. This ought to apply to its judgments about countervailing benefits as well. The noble Baroness, Lady Stowell, said that it is designed as a backstop. It is important that the threshold remains high; that is one of the key issues.
The noble Lord, Lord Fox, said that because of the word “must”—that the CMA must desist if there are countervailing benefits—it becomes almost mandatory, so there will be no opportunities for the CMA to make balanced judgments. We agree that it is far too prescriptive.
I rather liked the canter through all the preceding clauses from the noble Lord, Lord Lansley, before he concluded: why do we need Clause 29, because all those provisions are already there? He made an important point about all of that.
I listened carefully to the Minister. He repeated what he said at Second Reading: that this clause on countervailing benefits is only to pick up new, unknown consumer benefits that have not been identified before. Try as I might, I have looked at the wording of Clause 29 and I do not see that it says that there. As the noble Baroness, Lady Kidron, quite rightly pointed out, as it is worded there is a danger that the SMS companies could hold back evidence to that last backstop and then start challenging at that point. It would then be very difficult for the challenger firms to come forward with different evidence. The current wording opens up a disturbing void.
We have had a really good discussion about whether the previous wording or the new wording maintains the high threshold. I think most of us remain unclear about that. I think it was the noble Baroness, Lady Harding, who said that this new wording has not been tested in the courts, so it gives us not more certainty but more uncertainty. That is the last thing that we want at this point.
The Minister said that this was put in partly because stakeholders were confused. I would push back and say that the Select Committee chaired by the noble Baroness, Lady Stowell, looked at this in a lot more detail than some of those stakeholders have and concluded that the original wording is clearer and more robust than anything he has come back with. I hope the Minister will take that point away. I do not think he was particularly convincing about why that new wording was necessary.
On Clause 48, I have considerable sympathy with the case made by the noble Lord, Lord Black, and very much support his arguments. We do not want companies to be put in a situation where they have to accept suboptimal deals because they are running out of time and money when, if we are not careful, it could take many years for the process to be completed.
The Minister tried to reassure us, because if there was an anxiety about the time we could have interim enforcement orders, for example. However, the difference is that the final offer mechanism is more of a collaborative process. When we met with representatives from the CMA, they said that that is how they like to work: they do not want to go to court, they want to reach collaborative agreements. I feel that that our Amendment 48 would allow some of that collaboration to work along the system before it gets to the final, final offer. Again, I am not convinced by the Minister’s response on all of that. We want to keep it out of court as much as we can but he is tying the hands of the CMA too much in the way this is worded at the moment.
I am sure I have not picked up all the points but I think the Minister gets the idea that he is not really taking us with him. I therefore hope that he will reflect on these issues again but, in the meantime, I beg leave to withdraw the amendment.
Lord Offord of Garvel
Member’s explanatory statement
This amendment ensures that transactions in which an undertaking uses goods or services of a third party have the potential to be subject to the final offer mechanism.
Viscount Camrose (Con)
I very much thank the noble Lords, Lord Vaux and Lord Fox, speaking on behalf of the noble Lord, Lord Clement-Jones, and my noble friend Lord Lansley for using these amendments to raise the very important and quite subtle issues of merger reporting and assessment in digital markets. I also thank the noble Lords, Lord Tyrie and Lord Bassam, and my noble friend Lady Harding for their thoughtful contributions.
Amendment 59, tabled by the noble Lord, Lord Vaux, would extend the duty to report possible mergers, provided for in Chapter 5 of Part 1, beyond firms designated with SMS to also include firms that are subject to a designation investigation. Firms can use anti-competitive mergers to further entrench their powerful market positions, especially in digital markets, where fast-acting damage to competition can be difficult or impossible to reverse. That is why SMS firms will be required to report certain possible mergers to the CMA before they complete. However—this may be a philosophical objection as much as anything else—it would not be proportionate or in keeping with the targeted and evidence-based approach of our regime to apply this duty to firms before the conclusion of a designation investigation.
I agree with the noble Lord, Lord Vaux, that firms under designation investigation may hold powerful positions in the market; some may even have been the subject of previous CMA scrutiny. Nevertheless, it is right that the duty to report should apply only once a firm has been found to have substantial and entrenched market power following a rigorous assessment and SMS designation. To reassure noble Lords, firms under SMS designation investigation will of course remain subject to the economy-wide merger regime. The CMA will be able to intervene where their mergers would harm competition in the UK.
Amendment 60 from my noble friend Lord Lansley—
Lord Vaux of Harrowden (CB)
Before the noble Viscount moves on to the next amendment, there seems to be a slight logical problem here, in the sense that presumably the new enhanced regime was set at the level it was because those mergers are felt to be significant for a strategic market status entity. If it were to do such a merger during an investigation, it would presumably impact potentially on whether the CMA believes that it meets the SMS, and therefore it must be important that the CMA is informed about acquisitions that could impact the investigation itself. It seems that there is a circularity here, but the noble Viscount has not addressed that.
Viscount Camrose (Con)
I do indeed recognise it. As I say, it is a difficult one because equally, one cannot treat undesignated firms as designated until the designation has taken place. I am very happy to carry on considering this with the noble Lord, because the point is a powerful and important one. Before moving on, I just point out that over the course of the necessary consultation activities, it would of course emerge that a firm was considering or evaluating a merger.
Lord Vaux of Harrowden (CB)
As somebody who spent most of his life doing mergers and acquisitions, I can say that they are not always made public.
Viscount Camrose (Con)
As I said, I am very happy to carry on with this; there is a sense of rounding up the usual suspects otherwise.
Amendment 60 from my noble friend Lord Lansley is intended to give the CMA jurisdiction to intervene in a merger when an SMS firm seeks to remove or absorb a smaller firm that could reasonably be expected to compete with it in future. I agree that it is important to ensure that the CMA can act against harmful mergers, including so-called killer acquisitions. I reassure my noble friend that the CMA can and does do so under the current legislative framework.
When reviewing a merger, the CMA can already consider whether it removes a potential future competitor. This can be seen in the Meta/Giphy case where, in its forward-looking assessment, the CMA found that the merger removed Giphy as a potential challenger and consequently ordered Meta to sell Giphy. The decision was upheld by the CAT, which I hope and think shows that the CMA has the necessary legislative cover.
It has been suggested that the CMA and other regulators have not scrutinised mergers by large digital firms enough in the past. However, since the Furman review, the CMA has undertaken a comprehensive review of its merger assessment guidelines and updated them in 2021 to ensure that they more clearly reflect the CMA’s current thinking and practice on digital markets, drawing on conclusions from expert reports, analysis and cases.
Lord Tyrie (Non-Afl)
Before the Minister leaves that point, and further to the discussion we have had about the importance of the CMA taking advantage of its powers, is he able to signal that he is sympathetic to the approach that the noble Baroness, Lady Stowell, will take later on with her proposal to give Parliament much greater powers of scrutiny of the CMA, to give us a better prospect that the CMA will continue with its more activist approach to dealing with these mergers? The risk for all of us is that there is a boost in activity for a period, with this legislation and the focus and attention that we all are giving this issue, but that, over time, the CMA slips back to the very comfort zone-oriented place it seemed to be in when it implemented a number of its statutory obligations in the past.
Viscount Camrose (Con)
I thank the noble Lord for raising that point. He has alluded a number of times during our conversations to ensuring that the working culture within the CMA is suitably postured to deal with a fast-moving regime. I can indicate that I certainly have sympathy with the intent of enhancing the accountability both to Parliament and government of the CMA—with this and other ends in mind, but to ensure that it remains assiduous in its identification of opportunities to intervene.
The Bill will enhance the CMA’s ability to act to prevent harmful mergers by SMS firms. The reporting requirement will improve the transparency of merger activity in digital markets. Additionally, Clause 127 in Part 2 and Schedule 4 will introduce a new acquirer-focused jurisdiction threshold, which provides an additional basis for the CMA to review mergers involving large firms, including SMS firms.
For these reasons, I hope that the noble Lords, Lord Vaux and Lord Clement-Jones, and my noble friend Lord Lansley will be reassured for the time being and not press their amendments.
Lord Vaux of Harrowden (CB)
My Lords, I thank all noble Lords who have taken part in this short but interesting debate. I should say that I forgot to thank the noble Lord, Lord Clement-Jones, who sadly really is not here at the moment, for supporting my amendment. He is here in the spirit of the noble Lord, Lord Fox.
We have heard some excellent points—in particular the description from the noble Lords, Lord Lansley, Lord Fox and Lord Tyrie, of how regulating acquisitions in this sector is difficult and challenging. It is a sector where even quite small and apparently insignificant acquisitions can end up having a really substantial impact; we had the description from the noble Lord, Lord Tyrie, of the change in culture that will be required at the CMA to deal with that. This is an area that the Government will have to continue thinking about. We might want to discuss this further between now and Report.
I am also grateful to the noble Baroness, Lady Harding, for correcting me on Google’s desire to co-operate with the competition authorities, which is obviously most welcome. I am grateful for her correction. She is also right that my Amendment 59 is a small one, but I think that it is important, and I very much welcome the Minister’s offer to discuss it further as the process goes on. On that basis, I beg leave to withdraw Amendment 59.
Viscount Camrose
Member’s explanatory statement
This amendment clarifies that this subsection is subject to Part 2 of the Criminal Justice and Police Act 2001 as that Part is amended by Clause 77.
Viscount Camrose (Con)
I shall speak to the amendments tabled in the name of my noble friend Lord Offord. The Government have put forward some amendments in this group to support clarity and enhance predictability. These amendments will make clear the conditions of the levy that will fund the new digital markets regime and improve consistency with information-handling under the regime.
Government Amendment 62 clarifies the safeguards that will apply to the CMA’s handling of legally privileged information when using its powers to seize information. Government Amendments 74 and 75 require the CMA to address payment of the levy in its rules—for example, setting out when levy payments are due. They also ensure that the CMA is able to charge interest on late payment of levy fees.
Amendment 78 prevents existing disclosure order restrictions in the Competition Act 1998 being undermined by limiting access to restricted information for private actions brought under the new digital markets regime. This amendment will ensure that sensitive information is dealt with consistently for private actions brought under the new digital markets regime and for breaches of the Competition Act 1998. The amendment extends the same effect of existing disclosure order restrictions. It will help to maintain the integrity of CMA investigations and ensure protections for information that the CMA receives from third parties. I hope, for the reasons I have set out, that noble Lords will support these government amendments.
I turn to Amendment 70, tabled by the noble and learned Lord, Lord Etherton, which would allow private actions relating to breaches of the digital markets regime to be brought on a collective basis in the Competition Appeal Tribunal. I thank him for his amendment, and I agree that it is vital that the CMA can take a clear lead in imposing and enforcing the requirements of the new regime. The CMA works on behalf of all consumers, so a CMA-led approach to enforcement will bring the greatest overall improvement in digital markets to the benefit of all.
It is right that harmed parties should be able to seek redress, which is why we have made explicit provision to bring private actions. However, there is the risk that lengthy and complex private litigation in the early years would create uncertainty and undermine the goals of the regime as a whole, with CMA resources diverted to engaging with lengthy private actions rather than reforming digital markets. As such, it is the Government’s position that it would not be helpful to introduce collective actions at this time.
Once again, I thank the noble and learned Lord for his amendment, but I hope he will feel able not to move it.
Viscount Camrose (Con)
I thank the noble and learned Lord, Lord Etherton, for his amendment and, perhaps even more, for his articulation of it today, which was extremely helpful. I also thank other noble Lords who have spoken, including my noble friends Lord Wolfson, Lady Stowell and Lady Harding and the noble Lords, Lord Fox, Lord Tyrie and Lord Leong, for their valuable and thoughtful contributions.
I will start by shamelessly stealing my noble friend Lady Harding’s metaphor from earlier. We are looking here to achieve the Goldilocks spot when it comes to private redress. We recognise that if an SMS firm breaches a requirement imposed by the CMA, this could have serious implications for businesses and individuals. It is right that recourse to redress should be available for parties suffering harm or loss as a result of that unlawful behaviour. The right of redress is a long-standing part of common law and explicit provision is part of most regulatory regimes. Our Clause 101 makes this right explicit. Doing so will also incentivise compliance and support the credibility of the regime.
At the same time, it is also important that the CMA can take a clear lead in imposing and enforcing requirements to bring effective change in digital markets. This DMU-led approach is important in providing certainty for all parties and ensuring the regime is coherent and effective and delivers the best outcomes for consumers. We want the regime to be collaborative, but not litigious. This is why we have made provision for a public-led enforcement approach, which will ensure the CMA’s central role in ensuring the consistent application and enforcement of the regime, while still making explicit provision for parties to seek redress.
Lengthy and complex litigation in the early years of the regime in particular would run the risk of creating uncertainty for all stakeholders and could undermine the delivery of the regime as a whole, particularly where CMA resources are diverted to engage with private actions rather than focusing on reform.
The noble Lord, Lord Fox, made a very serious point about the enormous disparity in size, which I duly take seriously. Our argument is that in the formative stages of the existence of this regime, the best way to deal with that disparity in size and scale is to have public-led engagements taking primacy over collective ones.
My noble friend Lady Stowell asked about Ofcom’s role in private actions under Part 2 of the Communications Act 2003. I would be happy to write to her on this important issue, as she suggested, but I will now respond briefly to her remarks in advance of that letter.
Under the Communications Act, claimants must first seek consent from Ofcom to initiate a private action for certain breaches. We have given this model consideration but concluded that it would pose difficulties in a digital markets context. It could politicise the CMA, forcing it to make a deeply contentious decision at the outset of each private action. The decision itself would also be subject to challenge in the courts through judicial review, so it would not likely bring additional certainty or clarity. These issues are less prevalent for Ofcom’s regime, where redress is more commonly sought through the Communications Ombudsman than in the courts. For these reasons, we do not think that replicating the Communications Act mechanism would be appropriate in this regime, but, as I said, I am more than happy to write and set that out in more detail.
All of that said, I hope that noble Lords are content to accept these government amendments. I thank the noble and learned Lord, Lord Etherton, for his amendment, but I hope that he will not press it.
Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
Read Full debateMonday 29th January 2024
(9 months, 3 weeks ago)
Grand CommitteeDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: HL Bill 12-IV Fourth marshalled list for Grand Committee - (29 Jan 2024)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
Lord Clement-Jones (LD)
It is very nice and helpful to be reminded of things that I had forgotten entirely. We need to make sure that we are consistent across the board. A full merits-based standard is not, for example, used to appeal against fines issued by Ofcom under the Online Safety Act. These Benches have serious concerns regarding the insertion of two different appeal standards in the Bill, as it may decrease the deterrent effect and risk lengthier appeals, as we have heard.
If we are not successful in persuading the Government to change back to JR for penalty appeals, and a merits appeal is to be included, a number of amendments—the amendment in the name of the noble Baroness, Lady Stowell, that in the name of the noble Lord, Lord Holmes, and my amendment—are of great relevance to make sure that we do not see that drift that the noble Lord, Lord Black, talked about. A failure to do so could run the same risks as an entirely novel appeals standard. On that basis, we very much support the amendments in the names of the noble Lord, Lord Holmes, and the noble Baroness, Lady Stowell, and my own Amendment 68, which would ensure that there is no further extension of the merits appeal standards into any other part of the Bill. It is intended to have the same impact and draw a clear line in the sand beyond which no court can go.
I am sorry that we do not have the noble Lord, Lord Lansley, here to reveal perhaps another letter from a Minister. We had an interesting discussion last Wednesday, when the noble Lord, Lord Lansley, quoted the letter, sent to Damian Collins and Sir Robert Buckland, about the nature of the intention behind including “proportionate”. It said:
“In practice this means that firms will be able to challenge whether the DMU could have achieved its purpose for intervention through less onerous requirements”.
In a sense, that is a massive invitation to litigation, compared to ordinary JR. If that move is an invitation to litigation, think how much further along the road we are travelling if we go for a merits test for the fine and the penalties. I hope the Minister will therefore reverse course back to the pre-Report situation in the Commons; that would give a great deal of satisfaction around this Committee.
The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
I thank the noble Baroness, Lady Jones, for raising the important subject of digital markets appeals through Amendments 64, 65, 67, 71 and 72. I thank noble Lords for their powerful and compelling contributions. I am glad of the opportunity to set out the Government’s position.
These amendments seek to revert the changes made in the other place to the appeal standard of digital markets penalties. This would mean that penalties would be subject to judicial review principles, instead of being heard on their merits. It is important that decisions made by the CMA can be properly reviewed to ensure they are fair, rigorous and based on evidence. As the Bill stands, the key decisions—particularly the regulatory decisions that will drive the benefits from this regime—will be appealable on judicial review principles. Only penalty decisions will be appealable on the merits. This will provide SMS firms subject to penalties with additional reassurance, without compromising the regime’s effectiveness.
Penalty decisions will come at the very end of the regulatory process, if at all. They do not have the same impact on third parties as other decisions in the regime. Conduct requirements and pro-competition interventions will already have been in place to address their intended harm before penalty decisions are considered. Decisions on penalties are different from those about imposing requirements: they are more about making assessments of facts. They will assess what the SMS firm has or has not done. Other decisions that the CMA will take in the regime are forward-looking expert judgment calls. It is appropriate that the latter be given a wider margin of appreciation through a judicial review standard than decisions to impose penalties.
To address the point made by many noble Lords, I make it clear that challenging penalties does not open up the question of whether a breach occurred, or whether a conduct requirement or PCI was right in the first place. I will set this out in more detail in response to the next set of amendments—but perhaps I should say, as I did on the first day of this Committee, that I am happy to listen to and take forward any form of words that strengthens the clarity or intent of the Bill. As I said, the intent of the Bill is that the decision about whether a breach has occurred is made on JR principles.
The digital markets measures, as with other CMA regimes, have always treated penalties differently in the regime. For example, they are automatically suspended upon appeal, unlike other decisions. This would also have been the case under JR. We have aligned penalty appeals with those under the Enterprise Act 2002, as was said, so that parties can challenge these decisions on the merits to ensure that the value of penalties is suitable. The regimes in the Enterprise Act apply to firms from all sectors, rather than just tech firms. In addition, to give two examples, penalties are appealed on the merits in the financial services and markets regime, administered by the Financial Conduct Authority, and, under the Water Industry Act, overseen by Ofwat. In the EU’s Digital Markets Act, penalty appeals are similar to merits reviews in the UK.
Lord Vaizey of Didcot (Con)
I found my noble friend’s remarks very helpful, because they shone a brief light on the Government’s position. Is he saying that, by introducing an on-the-merits appeal for fines, the Government are effectively allowing the CAT to substitute its decision for that of the regulators, whereas if it were a judicial review it would simply have to send back the decision on the quantum or the timing of the fine back to regulator; in which case, he may have a point?
Viscount Camrose (Con)
I hope very much that I have a point. I think it would be best for me to write to my noble friend and the members of the Committee to clarify that.
Lord Faulks (Non-Afl)
I am listening very carefully to what the Minister says. It would be helpful if he would give an idea of the sort of arguments that would be open to somebody who is challenging a decision as to the fine and the merits. Will they be circumscribed simply by saying, “Well, it was too much”, or will they be able to look in some detail at the whole process and the interventions that ultimately resulted in the fine? How will those two things be kept separate from each other?
Viscount Camrose (Con)
As the noble Lord says, the intent is to keep those two separate. During and on the merits appeal for the penalty, the penalised firm could argue that the value of the penalty exceeded the crime, or that the breach took place inadvertently or by accident. It could not argue, however, that no breach took place; the fact that a breach took place is the premise against which the rest of the penalty appeal takes place. If the firm then wants to appeal that no breach took place, that would be done under JR, not on the merits.
The boundaries of the merits appeal process are explained in the Explanatory Notes for Clause 89. If those can be made any clearer, I am happy to engage on that. We will continue to listen to any concerns that noble Lords have on this important point.
I turn now to Amendments 72A and 72B from the noble Lord, Lord Tyrie. I thank him for his amendments, which raise an important question about the appeal standard across the wider digital markets regime. These amendments would align the appeal standard of all regulatory decisions in the regime with appeals carried out against Ofcom’s decisions taken under the Communications Act 2003. I am sure that many noble Lords are aware that the appeal standard in the Communications Act regime is often referred to as judicial review-plus. Although Parliament amended the Act in 2017 so that these appeals are to be decided on judicial review principles, the CAT has ruled that, due to retained EU law, it must also
“ensure that the merits of the case are duly taken into account”.
To turn back to this Bill, the Government heard the strong views expressed by your Lordships on the Select Committee, among others, on the importance of retaining judicial review. The changes made by the Government in the other place sought to uphold the use of the well-known judicial review principles for appeals in the new regime, except for those about penalties, as I have already discussed. Judicial review principles balance robust scrutiny of the CMA’s decisions with the need for the CMA to use its expertise to act quickly and iteratively to resolve issues.
As we discussed on the second day in Committee, the Government have made an explicit requirement for the CMA to consider proportionality when imposing conduct requirements and PCIs. As I set out during that discussion, it is right that interventions should be proportionate, but we are clear that any appeals of these matters should be heard under standard judicial review principles.
Lord Tyrie (Non-Afl)
In which case, it is clearly not the Ofcom standard, is it? The Ofcom standard imports a measure of appeal on the merits. Why are the Government continuing to assert that this is the Ofcom standard? It is nothing of the sort.
Viscount Camrose (Con)
I suggest that I set out a comparison in writing and perform the analysis as to the differences, should there be any, between the two.
Noble Lords expressed a concern on the second day in Committee that there should not be ambiguity in how appeals will be conducted. Introducing a requirement in a new domestic regime that requires an analysis of unrelated retained EU law to be able to understand how an appeal should be decided risks creating that kind of ambiguity. Complicating the appeals standard with EU case law would slow down appeals while the boundaries of what is captured by JR-plus are agreed.
Regarding decision-making, the noble Lord, Lord Tyrie, mentioned the CMA independent panel. Our approach to internal decision-making balances accountability and independence. Launching major market-shaping investigations under the regime will be reserved for the board. A board committee will oversee the regime’s regulatory interventions. At least half the members of the committee will be non-executive directors and members of the CMA’s independent panel. This make-up will ensure an independent perspective and the ability to develop deep expertise over time.
I hope that the reasoning I have put forward provides the necessary reassurances to noble Lords and that they will feel able not to press their amendments.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken. Again, in the vast majority of the contributions, we seem to have reached a wide degree of consensus, although not totally, in the light of that from the noble Lord, Lord Tyrie.
Noble Lords have made a number of important points. The noble Baroness, Lady Stowell, was quite right to take us back to the practicality of appeals on a merits basis; I will come back to the Minister’s response on all that because things are still not clear. How can we be sure that such an appeal will not open the whole case up again? That is at the heart of what we are debating here.
The noble Lord, Lord Holmes, said that we do not really understand why this must be different. Why is it such a special case? It has not been explained to us why this exception has been made.
I very much appreciate the point made by noble Lord, Lord Faulks: at the heart of this issue is whether we want regulation by the DMU or by the courts. There is a real danger of us drifting towards the latter with the Government’s amendments.
The noble Baroness, Lady Harding, rightly reminded us that regulators cannot afford to take too many risks. There is a fundamental imbalance, with regulators perhaps being forced to be risk-averse because they do not have the budgets of the big tech companies. We understand the danger of the David and Goliath situation that we are in here. It is all too easy to create a system where big tech companies’ lawyers can rule the roost.
The Minister said that decisions on penalties will address what an SMS firm has or has not done. He said that a decision will address not whether a breach has occurred but what led to the breach. Our concern is that we are going to go back over all the evidence of what led to a breach, whereas the fine at the end of it represents the end of the decision-making and is meant to be the deterrent. Again, I will look at Hansard and the Minister’s subsequent letter, but it seems to me from his explanation that he risks opening the whole case up again.
I listened carefully to the noble Lord, Lord Tyrie. I understand his experience in all this. Importantly, he said that there is not just one model here—that is, we have a number of regulators that do things differently. As he pointed out, the Government have previously supported the JR model; we must be reminded of that. The noble Lord also raised his concern about what happens if mistakes are made. If mistakes are made, they would be made in the process leading up to the decision, not the subsequent fines. A merits appeal on the fine would not really help if the decisions had happened further up the decision-making process.
I agree with the noble Lord, Lord Vaizey, that the regulators are not perfect. However, as we have discussed and will discuss again, we need stronger regulatory oversight. That will come—indeed, it needs to come—from stronger parliamentary oversight, which we will continue to debate in our discussions on this Bill.
I come back to the fundamental point made by the Minister. I listened to him carefully but I am still not clear how he will keep the stages separate. How will he keep the decision-making separate from the decision on the penalty? If SMS firms argue that the penalty is too high, they will have to revisit the evidence leading to the decision.
Lord Offord of Garvel
Member's explanatory statement
This amendment would omit the definition of “data protection legislation” in Clause 107, as my amendment to Clause 328 would define that term for the purposes of the whole Bill.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
My Lords, I am delighted to speak on the third day in Committee. I reiterate the sentiment articulated in the first session by my noble friend Lord Camrose that the Bill, importantly, will drive growth, innovation and productivity and ensure that businesses and consumers in the UK reap the benefits of competitive markets. I thank noble Lords for their contributions throughout the passage of the Bill and for their continued scrutiny and debate.
I turn to a number of miscellaneous amendments put forward by the Government that affect different parts of the Bill. Amendments 214 and 219 introduce a new clause and schedule into the Bill that make amendments to other pieces of primary legislation, consequential to provisions in Parts 2, 3, 4 and 5 of the Bill. The consequential amendments fall into three groups. The first amends sectoral legislation that applies, with modifications, the information-gathering power given to the CMA for its merger control functions in Section 109 of the Enterprise Act 2002. Where that power is applied for non-merger related purposes, the changes made by Part 2 of the Bill—which make express provision about the extraterritorial reach of the power and strengthen the civil sanctions regime that supports its enforcement—are not to apply. The schedule makes provision accordingly.
The second group of amendments is in consequence of Part 3, and the repeal of Part 8 of the Enterprise Act 2002 and its replacement with Part 3 of this Bill. The third group is in consequence of provision in Chapter 1 of Part 4 and Chapter 2 of Part 5, to amend legislation which otherwise restricts disclosure by regulators and others of information relating to individuals and businesses. This will permit them to disclose information for the purposes of the enforcement of consumer protection law, unfair trading and the provision of investigative assistance to overseas regulators.
Amendment 223 amends the commencement provision in Clause 334, so that the new clause and schedule can be commenced alongside the substantive provisions to which they relate.
Amendment 213 will ensure that information that comes to a UK public authority in connection with its power to provide investigative assistance to an overseas authority in Chapter 2 of Part 5 of the Bill will be covered by the information disclosure restrictions and gateways in Part 9 of the Enterprise Act 2002. This ensures that a public authority can share the information that it has collected on behalf of an overseas authority with that overseas authority. This will be in line with relevant safeguards, including personal data protection and safeguards for commercially sensitive information. To help ensure that the investigative assistance regime operates efficiently, the amendment will also enable UK authorities that hold information to which Part 9 applies to disclose that information to another UK authority to facilitate the provision of investigative assistance by that UK authority.
I turn to data protection override. Amendments 73, 206, 207, 208, 216 and 217 are minor and technical amendments which will make provision in relation to data protection across the Bill. Amendment 217 adds a new clause that clarifies that no provision in the Bill would require or authorise the processing of data that would contravene data protection legislation. Amendments 73, 206, 207, 208 and 216 remove provisions that previously applied only to some specific powers and insert a definition of data protection legislation that applies across the whole Bill.
On pre-commencement consultation, Amendment 218 adds a new clause to clarify that:
“A duty to consult under or by virtue of this Act may be satisfied by consultation that took place wholly or partly before the passing of this Act”.
The provision clarifies that the CMA has the flexibility to begin consulting before Royal Assent to ensure that the full set of reforms in the Bill can be implemented as soon as possible.
I hope that noble Lords will accept these amendments. I look forward to addressing any questions or points that they may have about them. I beg to move.
Lord Clement-Jones (LD)
My Lords, this is quite a set of amendments and the Minister rather rattled through his speech, but I have only one question: why are they now being included in the Bill here in Committee? Why were they not in the original version of the Bill? What is the motivation behind these new amendments? I am always a little suspicious. With the data protection Bill coming down the track, we will have hours of endless excitement. The words “data protection” and “government” are sometimes a bit of a red rag, so one always has to kick the tyres quite hard on any provision that appears to be opening a door to disclosure of data and so on. Obviously, in a competition context, it is most likely to be commercial confidential information, but the Minister needs to explain what kind of information we are talking about and why we need to have these provisions included at this stage.
Lord Leong (Lab)
My Lords, I thank the Minister for his overview and explanation of the various government amendments. I look forward to his response to the question from the noble Lord, Lord Clement-Jones: why now? These are mainly technical and tidying-up amendments and we are in broad agreement with most of them in this group.
Amendment 217 makes it clear that any imposed or conferred duties to process information do not contravene data protection legislation. That is welcome. Amendment 213 ensures the disclosure of information under Chapter 2 of Part 5 of the Bill, which allows UK regulators to provide investigative assistance to overseas regulators. This is in line with the restrictions on the disclosure of certain kinds of information found in the Enterprise Act 2002, which is fine. I ask the Minister what assessments are in place to safeguard the sharing of such details with autocratic regimes, which may not have robust governance and accountability systems in place and whose values we do not share? On Amendment 218, I ask the Minister whether the intent is similar to that of Amendment 1, as set out so eloquently by my noble friend Lady Jones of Whitchurch on the first day of Committee?
Finally, I refer to Amendment 216, which replaces the definition of data protection legislation for the whole of the Bill, so the definition in Amendments 73 and 208 are removed. Can the Minister confirm that such a definition is consistent with Article 8 of the European Convention on Human Rights and the Enterprise Act 2002? I look forward to the Minister’s response and comments.
Lord Offord of Garvel (Con)
I thank the noble Lords for their questions. I will first address the question from the noble Lord, Lord Clement-Jones. I do not see the shadows that he sees within the amendments. Unlike in the first part of the Bill, which introduces new bodies, units and legislation, we are here looking back consequentially at the Enterprise Act and Consumer Protection Act and building on them. The amendments simply improve the Bill while maintaining the overall policy intent and approach and the procedure, which is technical in nature. For example, we will go through the whole list of consequential Bills to which data protection applies to make sure that we have got a single concept of data protection across all the various Bills that consequentially apply.
The data protection amendment does not change but merely clarifies the application of existing data protection legislation across the Bill, as mentioned by the noble Lord, Lord Leong. Information of relevance will mostly be commercially sensitive information, as the noble Lord suggested. In answer to the second question of the noble Lord, Lord Leong, about international information disclosure, it will be governed by Part 9 of the Enterprise Act, which ensures appropriate safeguards.
I look forward to discussing more of these substantive measures later today and in future sessions. However, having answered the questions, I hope that the amendments can now be accepted. I beg to move.
Lord Leong (Lab)
My Lords, I thank all noble Lords who have contributed to this debate. I will refer first to Amendment 73A, which my noble friend Lord Knight of Weymouth set out so succinctly. Let us remind ourselves that the digital regulation co-operation forum, the DRCF, was founded by the CMA, the Information Commissioner’s Office and the Office of Communications—Ofcom. The FCA subsequently joined as a full member the following year. As mentioned by the noble Lord, Lord Clement-Jones, the purpose of the DRCF is to ensure coherent, informed and responsive regulation of the UK digital economy. When this is achieved, we can serve citizens and consumers better, reduce regulatory burdens for industry where appropriate and enhance the global impact and position of the UK.
The noble Baroness, Lady Kidron, and my noble friend Lord Knight have said that workers are really important in the competition space. The noble Baroness reminded us that workers are also users and citizens; they should be involved in any regulation. Having conversations with them would make a better competitive environment.
The noble Baroness, Lady Harding, and the noble Lord, Lord Ranger of Northwood, cautioned us that we should not allow regulators to stifle innovation. We really need to let innovators do their thing and the old saying “Do not kill the goose that laid the golden egg” is so true in this respect. We need to ensure that the right framework is in place so that the regulators are not overburdened with too much regulation that would stifle innovation, so we really support Amendment 73A. It would empower the CMA to co-operate with other government bodies which may have the power to obtain information relevant to its regulatory functions.
I refer now to Amendment 93A, tabled by the former chair of the CMA, the noble Lord, Lord Tyrie, who has a deep understanding of the relevant issues in this area. Whistleblowers with insider knowledge who provide assistance to the CMA can be a powerful tool in helping to uncover cartels and other anticompetitive practices more swiftly than might otherwise be possible. Since cartels often operate in secrecy, individuals or companies with insider or market knowledge can play a crucial role. They can bring issues to the CMA’s attention or gather information that will allow it to start an investigation.
The primary legal protection for whistleblowers in such situations comes from the Public Interest Disclosure Act—PIDA—which won praise when it was first introduced in 1999. More recently, it has been criticised for not protecting the majority of whistleblowers from suffering retaliation with little or no legal recourse. In January 2023, the Minister for Security said that
“what the country needs is an office for whistleblowers, and what we need to do is ensure that we have the updates to the legislation”.—[Official Report, Commons, 25/1/23; col. 1094.]
Can the Minister update your Lordships’ House on whether any primary legislation to that effect is forthcoming?
Lord Offord of Garvel (Con)
Amendment 73A, tabled by the noble Lord, Lord Knight of Weymouth, would require the CMA to co-operate with regulators and bodies with responsibility for matters relating to employment and working conditions. I thank the noble Lord for his amendment, for raising the importance of regulatory co-ordination, and for once again highlighting the direct and indirect impacts of digital activities and competition policy on workers.
On the first day of Committee, a number of noble Lords argued that the CMA should take a wider view in considering impacts on work and work environments in its regulatory functions. The CMA can already consider these issues where they relate to competition. Indeed, although competition authorities in the past focused primarily on competition in product markets, we are seeing them take an increased and welcome interest in labour markets. The CMA’s annual plan sets out how it will prioritise investigating businesses engaging in anti-competitive labour market practices. It is already using its powers to take enforcement action against firms that break the law by fixing wages.
However, the amendment would go beyond the scope of the competition remit of the CMA, potentially creating new burdens and additional complexities. It would therefore detract from the aims of the UK competition regime, and it would be inappropriate for the CMA to assess impacts unrelated to competition, which is its area of expertise and jurisdiction.
The noble Lord, Lord Knight, mentioned the director of labour market enforcement, who is an independent public appointee with a statutory responsibility to prepare an annual strategy for Home Office and DBT Ministers, setting out their assessment of the scale and nature of non-compliance in the labour market. In this way, there is already an independent assessment of the labour market and enforcement, so this amendment could infringe or duplicate the director of labour market enforcement’s remit.
The noble Lord, Lord Clement-Jones, mentioned the report by the Competition and Market Authority’s microeconomics unit. This takes a deep dive into the trends in the UK labour market, focusing on the impact of competition and employer market power. Where labour market issues are relevant to competition, the CMA already looks at this.
On co-operation between regulators, I agree with the noble Lords, Lord Knight and Lord Leong, and the noble Baroness, Lady Kidron, that this is essential. Part 9 of the Enterprise Act facilitates exactly that. The CMA works closely with bodies, regulatory and otherwise, both when delivering its own regulatory functions and when supporting others in theirs.
I agree with my noble friend Lady Harding that we should not provide the CMA with additional roles and duties that risk undermining the careful balance between effective enforcement and preventing overenforcement and overregulation, which risk stifling innovation. It would further confuse the regulatory landscape to require the CMA to consider labour market issues in this way, beyond its remit and expertise. Nothing in legislation prevents the CMA and other regulators from co-operating on these important issues, subject to necessary information-sharing safeguards. We do not need to legislate to achieve this.
The DMU specifically will be required to consult the regulators whose remits have the most interaction with the digital markets regime. It can, and will, engage with other authorities, including labour market regulators, where appropriate.
I will touch briefly on regulatory functions analysis. While the CMA works closely with other regulators and authorities, it would not be appropriate for it to conduct an analysis of other regulators’ functions as a regulator itself. For these reasons, I hope the noble Lord will withdraw his amendment.
Lord Tyrie (Non-Afl)
On this point, can the Minister say whether he supports the cross-subsidy that currently exists? Given the fact that a lot of mergers of a very large size will be coming through, as he has pointed out, does he think that a logical way of dealing with the problem to which he has alluded—that of the small dynamic mergers that do not want to be discouraged by excusive scrutiny costs—would be to extend that cross-subsidy?
Lord Offord of Garvel (Con)
The noble Lord will know that, on the current pie chart of activity undertaken by the CMA, 80% is for mergers with companies with a turnover north of £100 million, while 20% of it is for companies with turnovers below that. The 80:20 rule always works in life, so there is obviously scope to charge the larger companies more if that is the decision taken. I refer to the reassurance given that this can be amended in secondary legislation if that is deemed appropriate.
Let me move on to media merger public interest interventions. Amendment 93 in the name of the noble Lord, Lord Clement-Jones, would expand the list of public interest grounds for the Secretary of State to intervene in a merger case to include the need for free expression of opinion and plurality of ownership of media enterprises in user-to-user and search services. I am grateful to the noble Lord for raising this issue. Media mergers are particularly sensitive, as they could have an impact on how the UK public access and consume information.
The Government are currently reviewing the recommendations on changes to the media public interest test in Ofcom’s 2021 statement on media plurality. Ofcom did not recommend that online intermediaries or video and audio on-demand services should fall within the scope of the media mergers regime, which this amendment would provide for. We are considering Ofcom’s recommendations carefully and, as we do that, we will look closely at the wider implications on the industry. The Government have not proposed pursuing substantive changes to the grounds for public interest interventions in mergers in this Bill. The changes recommended in Ofcom’s review can be addressed directly via secondary legislation under the made affirmative procedure, if appropriate.
For these reasons, I hope that the noble Lord opposite will not press this amendment.
Lord Clement-Jones (LD)
What is the timescale within which all this will be decided?
Lord Offord of Garvel (Con)
I do not have a detailed timetable. I understand this is being looked at currently. I am happy to confirm in writing when we have a detailed timetable.
I move now to Amendment 93A and protection for whistleblowers. I again thank the noble Lord, Lord Tyrie, for his informed contribution to the scrutiny of this Bill. I also thank the noble Lords, Lord Clement-Jones and Lord Leong, for their contributions on this topic. Amendment 93A would introduce a new requirement for the CMA to carry out a review of protections and support available for whistleblowers under the UK’s competition and consumer law.
The noble Lord will know that the Government consulted on the important issue of incentives and protections for whistleblowers in the competition regime. However, no clear evidence or support was put forward by respondents that would support making changes to the existing framework. Therefore, the Government do not propose to introduce reforms to whistleblowing protections. In taking this decision, we also considered that the courts can already give due weight to the importance of anonymous whistleblowing in competition law enforcement. This could, for example, justify a court restricting how the identity of a whistleblower is disclosed depending on the circumstances of the case.
As the noble Lord mentioned, in 2023 the CMA increased the compensation cap for informants in cartel cases from £100,000 to £250,000. This will support the CMA to investigate effectively and, where appropriate, enforce against criminal cartels, which can cause serious harm to consumers and businesses within the UK.
Any whistleblower worker who faces victimisation in the UK can also seek additional compensation from their employer in an employment rights tribunal. This compensation can be awarded uncapped and can reflect the costs of some whistleblowers being unable to work in their chosen profession again.
The Government, therefore, have not proposed reforms to the compensation for whistleblowers in the Bill. However, I stress that we recognise the importance of whistleblowing in uncovering wrongdoing and will continue to ensure whistleblowers are not discouraged from coming forward under the current framework.
At this time, we do not think that a review in the form that the noble Lord’s amendment calls for would be merited, nor that it would be appropriate to place a new and binding obligation on the CMA requiring it to conduct such a review within a specific timeframe. For these reasons, I hope that the noble Lord does not push this amendment.
Lord Leong (Lab)
Can the Minister share whether there is any update on the office for whistleblowers, as mentioned by the Secretary of State?
Lord Offord of Garvel (Con)
I need to write to the noble Lord on that.
I now speak briefly to the government amendments in this group, all of which are minor and technical in nature. First, Amendments 90, 91 and 92 ensure that extensions to the statutory deadlines for phase 2 merger investigations under the new fast track procedure for mergers operate correctly within the existing legal framework for deadline extensions under the Enterprise Act 2002.
Secondly, government Amendments 94, 95, 97, 98, 99, 100 and 102, will clarify that, in the civil penalty provisions introduced and amended by Schedules 9 and 10 to the Bill, references to maximum amounts of daily penalties are maximums per day and not in total.
Thirdly, Amendments 96 and 101 update cross-references in Section 120 of the Enterprise Act 2002, so that decisions made under the civil penalty provisions in Part 3 of that Act, as amended by the Bill, are carved out from that provision. Section 120 allows persons to seek a review of a CMA decision in the CAT on judicial review principles. Such a review is not required because penalty decisions are appealable on a merits basis.
Fourthly, Amendment 103 makes the equivalent amendment to Section 179 in relation to civil penalty decisions made under Part 4 of the Enterprise Act.
Finally, Amendments 104 and 105 have been introduced to take account of an amendment made by the Energy Act 2023 to Section 124(5) of the Enterprise Act 2002, which is also amended by the Bill.
I hope noble Lords will support these government amendments.
Lord Knight of Weymouth (Lab)
My Lords, we have had a useful debate. I was very much persuaded by the noble Lord, Lord Tyrie—far more so than the Minister was—and I thought that the noble Lord, Lord Clement-Jones, made some useful points around asymmetry in respect of search and media.
I am very grateful to all noble Lords who responded to my amendments. I kind of feel that my friend, the noble Baroness, Lady Harding, and the noble Lord, Lord Ranger, were in many ways responding to last week’s debate—I think as the noble Baroness admitted. It is perfectly possible to argue that it is an encumbrance to extend the remit as we were arguing last week; that is a perfectly reasonable position. Indeed, just yesterday in the Observer, I read Torsten Bell from the Resolution Foundation responding to the CMA chief executive’s speech around the labour market and competition, saying that this is not a case for minimum labour standards nor a case for extending regulatory reach. They have friends in all sorts of places.
The EU announced a fine of £27 million against Amazon for oversurveillance of workers. These are real problems, and there is a regulatory gap that would be best addressed, I am sure, by having a single powerful labour market regulator. At the moment, we have a multiplicity of relatively weak regulators. That might solve some of the regulatory gap problem.
The debate this week was much more about collaboration between regulators. I feel that the Minister failed to really address and respond to the point. He might want to follow up by having a meeting just to sort out whether, in essence, Margaret Beels, the director of labour market enforcement, is wrong. In her letter to the BEIS Select Committee on 6 April 2023, under the bullet point on regulation, she said that:
“There is a need for cross-cutting collaboration with regulation in this space to bring different aspects together both within the UK and across the international playing field. There is also a need to learn from each other. There is no vehicle or champion for doing this”.
If the Minister had been listening, I said that earlier. He performs his notes brilliantly, but one of these regulators is saying that there is “no vehicle or champion” for regulatory co-operation in respect of AI. We need to fill that regulatory gap, and this Bill is an opportunity for us to do so. It is urgent because of the exploitation of some workers. We need to get on with it and I hope that, as this Bill proceeds, we find an opportunity to do so. I would be delighted to do so in collaboration and co-operation with the Government Front Bench.
On that basis, I beg leave to withdraw my amendment.
Lord Offord of Garvel
Member's explanatory statement
This amendment clarifies that the levy rules must include provision about how the levy is to be paid.
Lord Bassam of Brighton (Lab)
My Lords, this is the beginning of an important couple of debates about accountability. The breadth and the import of what noble Lords have said so far underlines how much we value that. We on the Labour Benches are co-signatories to both amendments in this group—the first, Amendment 76 in the name of the noble Viscount, Lord Colville, and the second, led by the noble Baroness, Lady Stowell.
Put simply, if the CMA is to be a regulator genuinely independent of government and accountable to Parliament, these amendments should stand. As it is, the legislation seems to suggest that, before the CMA can take any initiative on guidance, it first has to receive the approval of the Secretary of State. This is surely not only a time-consuming process but a wholly inefficient way of conducting business. I can well understand and appreciate why the Government desire to understand how the CMA intends to implement its regulatory policy, but do they really require such a firm and strong hand in the process? As it is, the CMA will be in constant consultation, discussion and interaction with government Ministers, and I do not see why, in the final analysis, approval has to come from the Secretary of State.
Can the Minister tell us how the regulatory regime compares with others? Do regulators like the Charity Commission, Ofcom, Ofwat, the Electoral Commission et cetera all require approval from the Secretary of State before issuing guidance? How does this process contrast with these other regulators? Is there a standard practice, or does it vary across regulatory frameworks? We need something that will work for this particular part of our economy, and it has to be built on trust and understanding and not reliant on the heavy hand of the centre of government coming in and ruling things in or out of guidance which the experts, in the form of the CMA and the DMU, have reflected and consulted on.
We obviously support the amendment of the noble Baroness, Lady Stowell, which, as I said, we co-signed. Consulting the relevant parliamentary committees seems a wholly sensible solution and step. These committees are powerful entities, as we know, full of expertise and insight, and they provide a layer of accountability that Parliament rightly expects. After all, the CMA is a creature of Parliament and of legislation that we will put through this House.
I am sure there are plenty of examples of where legislation, particularly secondary legislation, has benefited from the input and oversight of Select Committees and other committees of both Houses. The points made about lobbying the Secretary of State were important and powerful. We need maximum transparency, and we need openness in this process; otherwise, suspicion will abound, and we will always have cynics who say that Secretaries of State are very much in the pockets of business and commercial interests. We do not want that in this legislation; we want something that works for the market, for the competitive interests in the digital world, and particularly for consumers.
Ministers would do well to listen carefully to what the noble Baroness, Lady Stowell, said. She is an experienced parliamentarian, but, more than that, she was the chair of a regulator, so she understands exactly the import of the pressure that can come from central government and how it can best be managed.
These amendments are important for us in order to secure accountability in this market and in the way in which the various institutions work and operate together. I happily lend my support to both of them.
Viscount Camrose (Con)
I start by thanking my noble friends Lord Black, Lady Harding and Lady Stowell, the noble Viscount, Lord Colville, the noble Baroness, Lady Kidron, and the noble Lords, Lord Clement-Jones and Lord Bassam, for their thoughtful and valuable contributions. I absolutely recognise the seriousness of this part of the debate and look forward to setting out the Government’s position on it. I will address each amendment in turn.
I thank the noble Viscount, Lord Colville, and my noble friend Lady Stowell of Beeston for highlighting the subject of accountability to government and Parliament. As I said, I am aware of the importance of the topic, and I welcome the chance to speak to it now. Amendment 76, from the noble Viscount, Lord Colville, would remove the requirement that the Secretary of State must approve guidance produced by the CMA in relation to the digital markets regime. Amendment 77, from my noble friend Lady Stowell of Beeston, would also have this effect. Additionally, Amendment 77 would add a requirement for the CMA to consult certain parliamentary committees about proposed guidance and publish responses to any committee recommendations.
Lord Clement-Jones (LD)
I am sorry to interrupt the Minister, but, if the logic were being followed for what he said, there would be—at the very least—some form of affirmative resolution for the guidance, as with all the other powers in the Bill.
Viscount Camrose (Con)
I am happy to look into that as a mechanism, but, as currently set out in the Bill, the logic is that the Secretary of State can approve the guidance.
The Government will continue to work closely with the CMA, as they have throughout the drafting of the Bill, to ensure that the timely publication of guidance is not disrupted by this measure. Published guidance is required for the regime to be active, and the Government are committed to ensuring that this happens as soon as possible. Guidance will be published in good time before the regime goes live, to allow affected stakeholders to prepare. The Government hope that, subject to parliamentary time and receipt of Royal Assent, the regime will be in force for the common commencement date in October this year.
In response to my noble friend Lord Black’s question about guidance and purdah, the essential business of government can continue during purdah. The CMA’s guidance relates to the CMA’s intentions towards the operation of the regime, rather than to a highly political matter. However, the position would need to be confirmed with the propriety and ethics team in the Cabinet Office at the appropriate time, should the situation arise that we were in a pre-election period.
I thank the noble Viscount, Lord Colville, and my noble friend Lady Stowell for their amendments, and I hope that this will go some way towards reassuring them that the Government’s role in the production of guidance is proportionate and appropriate. As I said, I recognise the grave seriousness of the powerful arguments being raised, and I look forward to continuing to speak with them.
Viscount Colville of Culross (CB)
I thank noble Lords for their contributions and ask the Minister to listen to the concerns Members have expressed today. The clause gives extraordinary power to the Secretary of State, and I ask the Minister to listen to his noble friends, the noble Baronesses, Lady Stowell and Lady Harding, who called the power dangerous. In particular, the noble Baroness, Lady Harding, said that it was so dangerous and such a big power that it must be a distraction.
The noble Lord, Lord Black, said that the concern about having this power is that it would create a delay, and that that would especially be a concern over the period of the election, both before and after. He called for draft guidance to be approved within 31 days, which is certainly something that could be considered; after all, no one wants ping-pong to go back and forth do they? They want the CMA’s guidance to be put into action and this process to start as soon as possible.
The noble Baroness, Lady Kidron, said that the asymmetric power between the regulators and the tech companies means that there will be a drum beat of what she called “participative arrangements”. That is quite a complex thought, but the idea behind it—that the CMA must not be stopped from using its power to deal with some of the most powerful companies in the world—is very important.
The noble Baroness, Lady Stowell, is a former regulator and called for Parliament to have a role in overseeing this. We were reminded by both the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Kidron, that we had a discussion on Secretary of State powers in the debate on the Online Safety Act, much of which was about whether a joint digital committee could oversee digital regulation. I suspect that that will be discussed in the next group. We have given enormous powers to Ofcom with the Online Safety Act, we are giving big powers to the CMA and I imagine that we are giving big powers to the ICO in the Data Protection Act, so Parliament should have a powerful standing role in dealing with that.
The Minister called for robust oversight of the CMA and said that it must be accountable before Parliament. Already, Parliament looks at its review and annual reporting. I come back to the concern that the Secretary of State still has powers that are far too great over the implementation of this guidance, and that the CMA’s independence will be impinged on. I repeat what I and other noble Lords said on the concern about Clause 114: it stands to reduce the CMA’s independence. I ask the Minister to consider very seriously what we have been saying.
The Minister’s suggestion that he will look at the affirmative resolution for Secretary of State approval of guidance is something that we should certainly push further—at least that is some step towards reducing Secretary of State powers. With that, I beg leave to withdraw my amendment.
Lord Offord of Garvel
“Restriction on disclosure orders(1) This section applies for the purposes of—(a) digital markets proceedings, or(b) competition proceedings.(2) A court or the Tribunal must not make a disclosure order requiring the CMA to disclose or produce information where the court or the Tribunal is satisfied that another person would be reasonably able to provide the information.(3) A court or the Tribunal must not make a disclosure order requiring the CMA to disclose or produce digital markets investigation information before the CMA gives notice of the closure or outcome of each investigation to which the information relates.(4) In this section—“competition proceedings” has the meaning given by paragraph 2(4) of Schedule 8A to the Competition Act 1998 (further provision about claims in respect of loss or damage before a court or the Tribunal);“digital markets investigation information” means information—(a) prepared by a person other than the CMA for the purpose of a digital markets investigation;(b) sent by the CMA in connection with such an investigation to a person that is the subject of the investigation;“digital markets proceedings” means proceedings under section 101 (rights to enforce requirements of Part 1 of that Act) or proceedings on appeal from such proceedings.(5) Paragraphs 7 and 27 of Schedule 8A to the Competition Act 1998 (other definitions; disclosure orders) apply for the purposes of this section as they apply for the purposes of Part 6 of that Schedule.(6) In Schedule 8A to the Competition Act 1998—(a) in paragraph 7 (other definitions), after sub-paragraph (2) insert—“(2A) “Digital markets proceedings” means proceedings under section 101 of the Digital Markets, Competition and Consumer Act 2024 (rights to enforce requirements of this Part).”;(b) in paragraph 28, after “competition proceedings” insert “or digital markets proceedings”;(c) in paragraph 29, after “competition proceedings” insert “or digital markets proceedings”;(d) in paragraph 30(1), after “competition proceedings” insert “or digital markets proceedings”.”Member’s explanatory statement
This amendment would prevent a court or the Tribunal from making a disclosure order in respect of certain material held by the CMA.
Lord Clement-Jones (LD)
My Lords, I am going to be extremely brief as the hour marches on: yes to Amendments 79 and 83. Most of the debate has been around Amendment 81 but I want to mention my noble friend’s Amendment 82 because the concept of lock-in is absolutely crucial. I am a big fan, particularly in the AI field, of trying to get common standards, whether it is NIST, IEEE or a number of them. The CMA’s role could be extremely helpful.
Of course, many other regulators are involved. That brings us into the landscape about which the noble Baroness, Lady Stowell, has—quite rightly—been so persistent over the course of the then Online Safety Bill and this Bill. She is pursuing something that quite a number of Select Committees, particularly her one, have been involved in: espousing the cause of a Joint Committee, as our Joint Committee previously did. It is going to be very interesting. I am a member of the Industry and Regulators Committee, which has been looking at the regulatory landscape.
These accountability, independence, resourcing and skills issues in the digital space are crucial, particularly for those of us in this Committee. For instance, the role of the DRCF and its accountability, which were raised by the noble Baroness, Lady Kidron, are extremely important. I very much liked what the noble Baroness, Lady Harding, said about us having talked about Ofcom before but that we are now talking about the CMA and will talk about the ICO very shortly; for me, AI brings a lot of that together, as it does for her.
So what is not to like about what I think is a rather cunning amendment? The noble Baroness gets more cunning through every Bill we get on to. The amendment is shaped in a way that is more parliamentary and gets through more eyes of needles than previously. I strongly commend it.
Viscount Camrose (Con)
My Lords, I shall be as brief as I can possibly be, I promise.
I thank all noble Lords for their brilliant and stimulating contributions. Amendment 79 in the name of the noble Baroness, Lady Jones of Whitchurch, would require the Government to undertake an annual assessment of the operation of the CMA, to include the DMU specifically. The CMA is already required to present and lay its annual report in Parliament. This covers the operation and effectiveness of the CMA, including a review of its performance, governance and finances. The CMA recently published a road map setting out how it will report on the digital markets regime in its annual report. Although I of course appreciate the intent behind the noble Baroness’s amendment, adopting it would run the risk of being duplicative of the CMA’s assessment of its activities, which could lead to concerns regarding its operational independence. The Government set out their priorities for the CMA in their strategic steer and the CMA reports publicly on how it meets these priorities. The Government will also carry out a post-implementation review of the regime to assess how it is delivering on its aims.
Amendment 81 from my noble friend Lady Stowell of Beeston would require additional reporting by the CMA, the Financial Conduct Authority, the Information Commissioner’s Office and Ofcom. It would require these regulators to publish annual reports on the impact of the digital markets regime on their activity and its effectiveness in supporting them in regulating digital markets. The Government agree that it is vital that regulators are held to account for their activities. Each of these regulators already produces annual reports that are laid in Parliament covering their operations and effectiveness. An additional report by each of the sector regulators would again run the risk of being duplicative and creating an unnecessary additional administrative burden. Additionally, the Digital Regulation Cooperation Forum was established in 2020 to support the co-ordinated regulation of digital markets and includes the regulators named in this amendment; the DRCF also publishes an annual report on its activities and priorities.
In response to my noble friend Lady Stowell’s important point regarding a committee on digital regulation, I agree with her that parliamentary accountability is crucial and thank her for engaging so clearly with me and my noble friend Lord Offord earlier on this topic. I absolutely recognise the problem. Perhaps I can offer to continue to engage with her on how to drive this forward. At the risk of disappointing the noble Lord, Lord Tyrie, we have a concern that the formation of parliamentary committees is a matter for Parliament, not the Government, but I welcome ongoing work to determine how best to ensure that committee structures can scrutinise the important issue of digital regulation.
Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
Read Full debateWednesday 31st January 2024
(9 months, 3 weeks ago)
Grand CommitteeDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: HL Bill 12-IV(b) Amendments for Grand Committee (Supplementary to the Fourth Marshalled List) - (31 Jan 2024)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
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Lord Clement-Jones (LD)
My Lords, I strongly support Amendment 80 in the name of the noble Baroness, Lady Jones, which I have signed. She spoke powerfully about the power of big tech and its impact on democracy. My concerns, and those of many news organisations such as the Public Interest News Foundation, the News Media Association and the Professional Publishers Association, are consistent with that: we are all concerned to ensure the plurality of media as far as possible, as the noble Baroness, Lady Kidron, mentioned. She also helpfully reminded us of the duty of Ofcom, in Section 3 of the Communications Act, to
“further the interests of citizens”.
It seems to me that the CMA should be subject to exactly the same duty.
Local, specialist and national publishers are an essential part of the fabric of our society. On these Benches, we may have arguments, post Leveson, with some of the mainstream media about the appropriate legislation that should impact on it, but the media play a key role in promoting democracy, by scrutinising the Government with public interest journalism. Additionally, publishers provide vital support to industries, which often rely on the trade press to inform sectoral decision-making and provide what are described as workflow tools. A duty to further the interests of citizens as well as consumers would allow the CMA much better to prioritise media sustainability and more explicitly target anticompetitive conduct that harms media plurality.
It could be argued—I expect that the Minister is going to marshal his arguments—that the current pure consumer focus still allows the CMA to implement solutions that will help to level the playing field between platforms and publishers, but the concern of many of us is that the absence of an interest-of-citizens duty may mean that the remedies that could support a sustainable and plural media and in turn our democracy will be used less effectively than they could be, or not used at all. The argument is powerfully made that we need to include that duty. We have a precedent and there is absolutely no reason why we should not include that in the duties of the CMA.
Turning to the amendment of the noble Lord, Lord Tyrie, Amendment 83A, I feel that this is perhaps something that he expresses throughout the Bill: he has the scars on his back of being the chair of a regulator. It is a surprising omission that these principles are not included. The noble Baroness, Lady Kidron, like the noble Lord, Lord Tyrie, has done her homework and found that the CMA is exceptional in this respect. They both made an extremely good case.
Beyond those principles, how do the Government impose such things as the Better Regulation Framework on the CMA? After all, that is part of the operational standards, if you like, that are expected of a regulator such as the CMA. Not only do I support what the noble Lord, Lord Tyrie, is putting forward, but I also ask how we make sure that the regulator performs its duties in line with what is a relatively new piece of guidance, the Better Regulation Framework, going forward.
The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
As ever, let me start by thanking the noble Baroness, Lady Jones, and the noble Lord, Lord Tyrie, for drawing attention to and initiating this fascinating debate on the objectives of the digital markets regime with these amendments. Most speakers have anticipated many of my arguments in advance, but I hope none the less to persuade noble Lords of their value.
Clear objectives shape the work of the CMA, ensuring that its focus is on promoting competitive markets that drive better services, greater choice and lower prices for individuals and businesses. It is essential, in the Government’s view, that the objectives of the new regime are equally clear and support a coherent and effective regime. Amendment 80 proposes a duty for the CMA to further the interests of citizens, as well as consumers, in its digital markets work. As the UK’s competition regulator, the CMA’s existing statutory duty is to promote competition for the benefit of consumers. Consumer benefits are broad, as has been observed; they can include economic growth, innovation, media plurality and data privacy. An additional citizens’ duty that goes beyond the scope of the tools and the remit of the digital markets regime would reduce the clarity of the CMA’s role, create inconsistency with the CMA’s wider competition and consumer functions and overlap with the remit of other regulators. It is essential that the duties of the regime match the scope of its tools.
Noble Lords can all agree with the noble Baroness, Lady Kidron, and the noble Lord, Lord Clement-Jones, on the absolute, non-negotiable importance of supporting the sustainability of the press in the UK. There can be no doubt about the vital contribution of independent journalism to producing informed citizens and, therefore, democracy in this country. However, it would further confuse the regulatory landscape to require the CMA to consider issues already overseen by other expert regulators, such as online safety and data protection. Instead, the CMA will have a duty to consult other key regulators of digital markets, such as Ofcom and the FCA, where proposed interventions in digital markets impact their regulatory interests. This will ensure that the regime forms part of a coherent regulatory landscape that considers broader policy and societal concerns across digital markets.
I want to reassure noble Lords that the Government considered the advice of the CMA’s Digital Markets Taskforce and its recommendation for a citizens’ objective extensively, before consulting on it in 2021. Those we consulted were generally opposed to a role for the CMA that looks beyond its tried and tested duty to promote competition for the benefit of consumers, since this provides the greatest clarity for the digital markets regime. The CMA has testified in front of the House that it benefits from having a single, clear statutory duty. I again thank the noble Baroness for her amendment and for highlighting these important issues. However, for the reasons that I have set out, I hope that she will feel reassured and comfortable in withdrawing it.
I now turn to Amendment 83A from the noble Lord, Lord Tyrie. It would create a new requirement for the CMA to have regard to the principles of best regulatory practice when carrying out its digital markets functions under Part 1 of the Bill. Let me say at the outset that the Government agree with the spirit of the noble Lord’s amendment. Our 2021 consultation on this regime set out the Government’s principles for the pro-competition regulation of digital markets: that it should be transparent, accountable, targeted and coherent. These principles have informed how the regime is designed in legislation, from the high thresholds that we establish for SMS designation to the targeted and iterative nature of conduct requirements and pro-competition measures. Indeed, we have discussed previously in Committee the wide range of accountability mechanisms for the regime.
Earlier this month, the CMA set out its provisional approach to implementing the new digital markets regime, which aligns with our policy intent. The publication committed to the new regime being targeted, proportionate and transparent. It also included a set of operating principles that reflect the noble Lord’s concerns.
The Government’s strategic steer to the CMA sets out our expectation that the CMA should take a proportionate approach to interventions and minimise burden through transparent engagement with businesses. The CMA explains how it has taken the steer into account in its reporting to Parliament. The CMA’s prioritisation principles and annual plan set out that the CMA will target its work to that which provides the most impact for business and consumers. The proportionality amendments that the Government introduced at Commons Report stage are statutory duties narrowly targeted at conduct requirements and PCIs as the decisions that have the greatest impact on SMS firms. This amendment would introduce a very broad duty for the CMA to have regard to the principles of regulatory best practice for all its digital markets functions. An explicit requirement for the CMA to follow best regulatory practice when carrying out its digital market functions is not necessary.
Viscount Camrose (Con)
Indeed. While the noble Lord was speaking, I was trying to look for a counter- example but I have yet to find one. I will look for examples of regimes where this does not apply and communicate that to the noble Lord.
Lord Tyrie (Non-Afl)
I am sorry to intervene a second time. When the Minister is looking for counter- examples, I would be grateful if he kept to the major sector regulators, which are the direct comparator. There are more than 500 significant quangos, and I am sure I would be able to find a few quite quickly.
Baroness Kidron (CB)
Before the Minister stands up, may I ask him whether, if he cannot find a counterexample, this amendment may find some favour with the Government?
Viscount Camrose (Con)
I will actively seek a counterexample and consider the implications of my results.
The CMA has a strong track record of following best regulatory practice across all its functions as an experienced regulator. The Government’s view is therefore that it makes sense to legislate only when it is necessary to do so, and that here there does not appear to be a problem that requires a legislative solution. For these reasons, I hope the noble Baroness feels able to withdraw her amendment.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken in support of my amendment. I am very grateful. A number of passionate contributions were made. Once again, I was impressed by the knowledge of the noble Lord, Lord Tyrie, and his doggedness in pursuing and getting to the heart of some of these issues. We always appreciate his contributions and the learning we get from them. We have described a couple of his previous contributions as a bit of a curate’s egg, but not this one. I agreed with every word he said and I thank him for that. He made his point extremely well.
Having listened to the noble Lord, it is hard not to agree that the CMA should have the responsibility to have regard to the principles of best regulatory practice. We were just debating why the CMA has to be an outlier, given that other regulators already have this duty. The Minister said that he will try to find a counterexample. The challenge to the Minister is, if he cannot find one among the 500 or so that could be there, will he agree to take this away again and have another look at the Government’s position on this? I was certainly persuaded by the noble Lord, Lord Tyrie, and I think other noble Lords were as well.
I thank the noble Baroness, Lady Kidron, who made a very thoughtful speech. She has been in this field a lot longer than me. As she said, consumers and citizens are two sides of the same coin and, unlike consumers, citizens have a long-term interest. That is the big difference. We need to take that long-term view. She also rightly asked who is defending the interests of future consumers—that is, children. I am not sure that the Minister addressed that issue. I hope that the CMA would have a responsibility to do that. Both she and the noble Lord, Lord Clement-Jones, made the point that Ofcom already has a duty to further the interests of citizens, so I hope that the Minister bears that precedent in mind.
I listened to the Minister and we agree that the CMA needs clear objectives—it has been a theme running through all our earlier debates—but then we get to how to distinguish between the interests of consumers and citizens. In the digital world, in particular, they run into each other. It is not a simple buyer-and-seller market, but a lot more complicated, as a number of noble Lords have said. It is not clear who are consumers, rather than citizens, and what impact the CMA’s decision is having on them. We argue that we need to revisit this issue in the digital world.
I tried to head off the Minister before he spoke about the problem of regulators’ overlap. The fact is that a lot of the business that we are dealing with is not traditionally covered by other regulators, so there is a regulatory gap and it needs to be addressed.
I can see that I have not persuaded the Minister, but I have not given up. I think we are right and that we will probably carry on pursuing the issue but, as I said at the outset, I am not sure I got the wording of my amendment right. We will reflect on what the Minister said and may come back to this later but, meanwhile, I beg leave to withdraw my amendment.
Lord Offord of Garvel
“(c) references to the supply, provision, acquisition or use of goods or services include the supply, provision, acquisition or use of digital content.”Member's explanatory statement
This amendment confirms that references to the supply, provision, acquisition or use of goods or services include the supply, provision, acquisition or use of digital content.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken in this debate. I have added my name to Amendment 85 in the name of the noble Lord, Lord Clement-Jones. He raised an important point about the loss of exemplary damages which could otherwise be awarded for those involved in collective proceedings. In the cases that will be considered under these regulations there may be thousands of small businesses harmed, but only those which prove that harm was done and losses were incurred would be compensated, as the Bill stands. However, it may well be that smaller players cannot afford to take a case, so there needs to be an overarching remedy to ensure compliance with the law, otherwise the defendant may profit from their own wrongdoing. The noble Lord gave some powerful examples to illustrate that. An amendment along these lines should be considered to incentivise the defendants to uphold the rule of law.
The amendment in the name of the noble Lord, Lord Holmes, raises an interesting challenge about the oversight of claims. We agree that it is important that the regulators continue to have a say on the merits of private cases that go to court. They can already intervene in private actions by submitting written observations to the tribunal. The tribunal itself has a role in which it grants a collective proceedings order before a case can go ahead. However, in recent years there has been an increase in the number of private actions brought to court, often by litigation funding firms. These tend to focus on cases where the funders anticipate the largest returns.
In the meantime, the CMA is still trying to focus its public enforcement on cases that will generate the greatest strategic significance and the widest benefit, but its resources are being stretched as the scope of its enforcement power widens. We have to find the right balance between public and private actions to achieve the widest public benefit. We need to take into account the capacity of the Competition Appeal Tribunal to deal with the increased burden of cases. The noble Baroness, Lady Stowell, pointed out that there is a solution to this: the model that Ofcom already uses, which could be used in this case. There may be other solutions, but we need to find a way forward to get this balance right.
At a recent conference Sarah Cardell, the CEO of the CMA, said that the CMA sees public and private enforcement as two complementary parts of a single overall regime. We agree with this approach and, while we are sympathetic to the proposal of the noble Lord, Lord Holmes, we would like to consider the wider functioning of the CAT first.
This leads to the amendments of the noble Lord, Lord Tyrie, who raised significant issues about the workings of the Competition Appeal Tribunal. He obviously has first-hand knowledge of this issue, and I listened carefully to what he said. He shared with us a very deep understanding of the workings of the CAT and the challenges that it faces but, the more that I listened to him, the more that I felt that trying to resolve this with two amendments to this Bill did not seem the right way forward. It felt that this was a bigger issue for another day. Just as the noble Baroness, Lady Stowell, made a fantastic exposition about the issues at stake, I did not want to put my name to those amendments, as I felt that they were too superficial to address the issues that the noble Lord, Lord Tyrie, raised.
Having said that, it might be that a fundamental review of the CAT is necessary or that another way could be found to address this in the Bill. I hope that the Minister listened carefully to the noble Lord’s concern and can offer a way to progress the issues raised by him and others in the debate to ensure that they are addressed. I therefore look forward to the Minister’s response.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
I thank noble Lords for their thoughtful amendments and considered remarks during this debate. I start by speaking to Amendments 85, 86 and 87 tabled by the noble Lord, Lord Clement-Jones, which would enable the CAT to award exemplary damages in collective proceedings.
Clause 125 amends the Competition Act 1998 to allow the courts and the Competition Appeal Tribunal to award exemplary damages in private competition claims involving individual claimants, but not in collective proceedings before it. The competition collective proceedings regime was introduced in 2015. This is an important mechanism allowing redress to be sought on behalf of large groups of customers. The bar on the availability of exemplary damages in collective actions was one of the many safeguards put in place when the Consumer Rights Act 2015 was enacted, to ensure a balanced system of collective actions before the CAT which will not lead to a culture of undue litigation and US-style class actions. These safeguards ensure that defendants are protected by avoiding vexatious and unmeritorious claims—or fishing expeditions—while allowing legitimate claims for redress to proceed, without defendants feeling pressurised to settle, despite the likelihood of a strong defence.
While Clause 125 reverses the complete ban on exemplary damages introduced by an EU directive in 2017, keeping the bar in place for collective proceedings before the Competition Appeal Tribunal remains appropriate for the same reasons that it was put in place when the regime was introduced in 2015. I thank the noble Lord and the noble Baroness, Lady Jones, for Amendment 85 and I hope that he feels reassured and comfortable in withdrawing it.
I turn to Amendment 106 on private enforcement, tabled by my noble friend Lord Holmes of Richmond. I thank him and my noble friend Lady Stowell for their contributions. This amendment would require complainants in private enforcement claims to obtain prior approval from the CMA to bring their cases in front of the CAT or High Court.
The ability to bring private enforcement claims through the CAT is an important mechanism for consumers to seek redress. This amendment would add an extra hurdle for claimants and might therefore reduce their ability to access redress and potentially limit their access to justice. Adopting an Ofcom-style approach would provide a very broad power to the CMA, which would unnecessarily add to the existing range of functions that it currently discharges. While this approach may exist in other jurisdictions, the complexity and size of competition private actions and the well-established jurisprudence of the CAT mean that it would not be appropriate in this context.
The CAT already has a specialised, well-established legal framework through which it manages cases, including certifying collective actions. This amendment would risk overcomplicating the existing framework and unnecessarily bring the CMA into highly complex and contentious litigation. I hope that my remarks have helped to address the concerns of my noble friend Lord Holmes of Richmond and that, as a consequence, he does not press his amendment.
I move now to the review of the CAT and the two amendments put down by the noble Lord, Lord Tyrie. Amendment 107A would require the Secretary of State to conduct and publish a review of the performance, governance and operation of the CAT. I thank him for his amendment and for the expertise and wisdom he brings to our debates. The CAT plays an important role in the UK’s competition regime and in providing avenues for consumers collectively to seek redress. It is right that we consider how the CAT operates to ensure that it effectively fulfils these important roles.
The CAT is already subject to significant review and scrutiny. Under the Competition Appeal Tribunal Rules 2015, which govern proceedings in front of the tribunal, the Secretary of State has a duty to review the CAT rules, including making an assessment of how the rules meet the objectives they are intended to achieve. Indeed, the Competition Appeal Tribunal Rules 2015 are currently under review following a post-implementation review in 2021. This process will ensure that the CAT continues to deliver first-class justice expeditiously.
The CAT is also in scope for the public bodies review programme, which assesses the governance, accountability, efficacy and efficiency of arm’s-length bodies. Moreover, the CAT is already subject to a variety of forms of scrutiny by Parliament and the Government. This includes laying its annual report and accounts before Parliament, ministerial appointments to the Competition Service board and regular ministerial oversight as part of departmental sponsorship arrangements.
Given the crucial role it plays in the competition system, it is right that the CAT is sponsored by the Department for Business and Trade. However, the DBT recognises the important commonalities with tribunals under the purview of the Ministry of Justice, and the CAT president and chairman are appointed by the Lord Chancellor through the judicial appointments process. We also continue to encourage the CAT to engage with its counterparts in other tribunals to continue to develop best operational practice. The scrutiny currently in place ensures that it continues to function effectively and deliver a world-class competition regime. For these reasons, I hope that the noble Lord will not move this amendment.
The noble Lord’s second amendment, Amendment 128ZA, concerns
“Economic interests of consumers duty”.
It would place a new duty on the CMA and the CAT when carrying out their functions to ensure that the economic interests of consumers and their protection from detriment are paramount. This amendment also places a duty of expedition on the CAT. The Government considered this issue when the noble Lord, Lord Tyrie, proposed such a duty in his recommendations to the BEIS Secretary of State in 2019 and concluded that this would not lead to improved consumer outcomes. There was no compelling evidence that an overarching consumer duty would allow the CMA to do anything it could not already achieve within its existing remit or that it would increase enforcement levels.
I thank the noble Lord for raising this important issue. We are in full agreement on the importance of protecting consumers, and the Bill stands testament to the Government’s commitment. The Bill will support consumers through new and improved rights, as well as enhanced powers for the CMA and the civil courts to enforce these rights. New measures will protect consumers’ hard-earned cash, boosting consumers’ rights so they have confidence in businesses and markets. However, we do not believe that placing a further statutory duty on the CMA is the right approach.
The CMA’s existing primary duty is to promote competition for the benefit of consumers. This places a clear, unambiguous and paramount duty on the CMA to deliver with consumer benefit as the end goal. We can see the impact of this work: in the three years to 2021-22, the CMA’s competition work delivered £2.1 billion in average annual consumer savings. This is important to the Government, and we have given the CMA a strategic steer to prioritise action in its discretionary activities that addresses cost of living challenges to deliver better value for businesses and individual consumers.
Lord Offord of Garvel (Con)
I turn first to litigation funding and Amendments 88 and 89. I thank my noble friend Lord Sandhurst and the noble and learned Lord, Lord Thomas of Cwmgiedd, for their passionate and eloquent contributions on this important issue, both in this Room and outside.
On Amendments 88 and 89, tabled by my noble friend Lord Sandhurst, I thank him for tabling these two amendments and for giving Members the opportunity to discuss this important issue. It has offered the unique opportunity to hear from a number of noble Lords with unparalleled expertise on the UK’s legal system. As my noble friend outlined, these amendments would reverse the effect of the Supreme Court judgment in PACCAR for competition and consumer claims. This would remove the requirement for litigation finance agreements in these cases to comply with the damages-based agreements regulations.
To be clear, it is government policy to return to the pre-PACCAR position at the earliest legislative opportunity. We are committed to delivering that reversal for all the reasons that noble Lords rightly highlighted, there perhaps being no better example of the benefit of litigation funding than the case of the postmasters impacted by the Horizon scandal. That is why the Government acted within weeks of the Supreme Court’s judgment to mitigate its impact on live collective actions before the CAT.
I and my ministerial colleagues at the Ministry of Justice have been pleased to receive my noble friend’s representations regarding his amendments and the Government’s position on PACCAR. I recognise the efforts that he and colleagues have made, working within the scope of the Bill, to return proceedings in front of the CAT to their pre-PACCAR condition. However, any action taken through the Bill must be aligned with the Government’s intention to return to the pre-PACCAR position across the whole of the justice system, as publicly set out by the Lord Chancellor. I assure noble Lords that we and our colleagues in the Ministry of Justice are examining this matter urgently and considering the best possible way to achieve this objective. In the meantime, I ask my noble friend not to press his amendments, with the assurance that the Government will continue to work closely with him, ahead of Report, to identify opportunities to address his laudable concerns, within the scope of the Bill or elsewhere.
I turn to Amendment 89A on a review of the litigation funding industry, I thank my noble friend Lord Hodgson of Astley Abbotts for tabling this amendment and for his contribution to the debate in this Committee on this important issue. My noble friend raises some important considerations about the litigation funding sector. Ensuring that access to justice is maintained and properly managed is a critical issue, and I welcome this debate.
As my noble friend outlined, this amendment would require the Secretary of State to conduct a review of the application of litigation funding arrangements to competition and consumer law matters. My noble friend’s amendment sets out the factors that he believes such a review should consider. To be clear, although there has been much debate about litigation funding during the passage of the Bill, responsibility for litigation funding remains a matter for the Ministry of Justice. Although I appreciate the limited remit of this amendment, it is right that any review considers the application of litigation funding across the entire justice system.
On competition matters, I note that the CAT rules and guide to proceedings provide for significant scrutiny of funding agreements in collective proceedings, which are looked at as part of the tribunal’s consideration of whether it is just and reasonable for a person to act as a class representative. The CAT has also extensively considered the application of these rules, including in the light of the PACCAR ruling. Although this is not a matter for my department, I assure my noble friend that the Government are already considering options for a wider review of the litigation funding market and its regulation. The Civil Justice Council may be asked to undertake such a review, given the need to ensure access to justice and the attractiveness of the jurisdiction. Given its independence, it may be unhelpful to specify the scope and timing of such a review at this stage. However, I expect colleagues from the justice department to update this House once that review is agreed. To that end, I thank my noble friend Lord Hodgson and hope that he is sufficiently reassured not to move the amendment.
Lord Sandhurst (Con)
My Lords, I am very grateful for the words of my noble friend the Minister. I should perhaps say this in respect of what my noble friend Lord Hodgson had to say: I accepted at the beginning that it is time now for regulation. Funding has been around since at least 2003 and I know, because I acted as leading counsel—I have no interest now—for funders in the case of Arkin. It was, in effect, a failed competition case, and the question was whether it was lawful and so on. To cut a long story short, the Court of Appeal said that the agreement was perfectly lawful; the case having been lost, it ordered the funders to pay the defendant’s costs up to but not exceeding the amount that they had underwritten—a cap, known as the Arkin cap. It is not always followed, but that is the general rule. It may well be that it is time for a review.
I remind the Committee of something that I drew attention to in my Second Reading speech, namely the statement by the then Parliamentary Under-Secretary of State, my noble friend Lady Neville-Rolfe, in Committee on the Consumer Rights Bill on 3 November 2014. In respect of legal litigation funding agreements, as opposed to damages-based agreements, she said that
“there is a need for claimants to have the option of accessing third-party funding so as to allow those who do not have a large reserve of funds or those who cannot persuade a law firm to act pro bono to be able to bring a collective action case in order to ensure redress for consumers. Blocking access to such funding would result in a collective actions regime that is less effective … Restricting finance could also create a regime which was only accessible to large businesses. This would weaken private enforcement in competition law, which is of course not the Government’s wish or intention”.—[Official Report, 3/11/14; col. GC 583.]
I think that is enough said, in the light of my noble friend the Minister’s observations about my noble friend’s Amendment 89A. I am very grateful for what has been said by the Minister about my amendments. I say only this: something will have to be delivered by the time we get to Report, or it will be a very interesting day out in the main Chamber. I beg leave to withdraw my amendment.
Lord Offord of Garvel
“(4) In subsection (7), after “(3)” insert “, (3A)”.8A (1) Section 40 (section 39: supplementary) is amended as follows.(2) In subsection (4), after “section 39(3)” insert “or (3A)”.(3) In subsection (5), before “or (4)” insert “, (3A)”.”Member's explanatory statement
This amendment would amend sections 39 and 40 of the Enterprise Act 2002 so that extensions under the new subsection (3A) of section 39 (inserted by paragraph 8(3) of Schedule 5 to the Bill) are treated in the same way as extensions under subsection (3) of that section.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would make it clear that a period extended under any subsection of section 39 of the Enterprise Act 2002 can also be extended under any other subsection of that section (rather than just specified subsections).
Lord Offord of Garvel
Member’s explanatory statement
This amendment is for consistency with my amendment to Clause 130.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would clarify that references in 40A of the Competition Act 1998, as amended by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would clarify that references in new section 35B of the Competition Act 1998, inserted by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
Lord Offord of Garvel
“(za) omit “Regulations made by the Secretary of State under section 68A or”;”Member’s explanatory statement
This amendment, and my other amendment to this Schedule, are to take account of an amendment made by the Energy Act 2023 to section 124(5) of the Enterprise Act 2002 (which this Schedule also amends).
Lord Offord of Garvel (Con)
My Lords, this group of amendments concerns package travel. I will address Amendment 108, along with Amendments 129, 136, 139, 141, 145 and 146. I thank the noble Lord, Lord Clement-Jones, for tabling them and the noble Lord, Lord Fox, for speaking to them so eloquently. These amendments cover the same theme: the use of third parties in contracts between consumers and traders.
I reassure the noble Lord that the protections sought in these amendments are mostly provided for in other parts of consumer law, which I will detail. For example, Clauses 224 and 226 prohibit traders using misleading information or aggressive practices. This prohibition would already cover situations involving a consumer’s decision on whether to use a third-party agent. Similarly, Amendments 145 and 146 seek to make clear in the legislation that a consumer enjoys consumer rights, whether they purchase from a trader directly or via a third-party agent. However, in either situation the contract is between the trader and the consumer, and therefore the consumer benefits from the relevant consumer rights. Amendment 146 focuses on the transactional decisions related to purchases from a trader. Whether the decision is carried out by the consumer themselves or a third party is not relevant. The consumer that the contract is with will receive the relevant consumer rights. The practical effect of Amendments 145 and 146 is already achieved through consumer law.
I shall record two instances in which these amendments would have an adverse and unintended effect and thus why the existing wording of consumer law is set out the way it is. Consumer protection requires a consumer-to-trader relationship for consumer rights to apply. If, as suggested in Amendments 108 and 129, the definition of a consumer were changed to include third-party agents, they would in effect also become consumers in the eyes of the law. That means that the consumer’s relationship with the agent would be classed as a consumer-to-consumer relationship instead. Should there be an issue between the consumer and the third-party agent, the consumer would then no longer benefit from the same consumer rights as ordinarily apply. The amendment suggested by the noble Lord would broaden a very established principle of consumer law with this unintended effect.
I shall conclude my response—including the matters raised by Amendment 136—with reference to travel agents and the sale of package travel holidays, as I believe that may have inspired some of the noble Lord’s amendments. This is a sector in which it is common for consumers to use agents on their behalf. I am aware that issues have arisen between online agents and flight operators. Ministers in my department were pleased to meet representatives from an online travel agent and an airline recently to understand the issues from all perspectives.
Through our markets regime, the Government have ensured that the CMA has significant powers to investigate and act if it finds that businesses are behaving anti- competitively in a market. It is right that those matters are for the CMA to determine itself.
Separately, the Department for Business and Trade carried out a call for evidence on the Package Travel and Linked Travel Arrangements Regulations 2018 during September-December 2023. Those rules set the consumer protection framework for package holidays. It is vital that consumer protections for package holidays, as a key consumer leisure activity and expense, provide strong protections and that regulations support consumers to access choice and a competitive market. I am pleased to confirm that we are now analysing a substantial volume of responses, including from consumer groups, package organisers and suppliers, such as airlines. The operation of airlines and travel agents is governed by PTRs and ATOL. Those are being reviewed. That is the appropriate way to consider these issues.
Given the noble Lord’s interest, once further analysis has been undertaken, I will be eager to share with him the Government’s response to that consultation. I hope that, in light of what I have set out, he will be comfortable to withdraw his amendments.
Lord Fox (LD)
I thank the Minister for his response and for his offer to look through the data, which we will be happy to pick up. I thank the noble Baroness, Lady Jones, for her support and for enlightening me on the intricacies of airline ticketing. I suggest that there may well be a new class Z, which she and I will get, where our luggage gets lost as a result of what we have been saying here today.
Central to the Minister’s response is that all this exists already in some form or other, or the words have not been quite crafted correctly. Saying that the existing protections are there belies the fact that there are problems today. If those existing protections were 100% where they should be, doing what they should, the noble Baroness and I would not be able to stand up and list the problems that exist. It behoves us and the Minister to talk between Committee and Report, including my noble friend Lord Clement-Jones, to set out where there are clear issues at the moment and where there could be changes, even if we did not use the words contained in these amendments.
There are problems, and it would help if the Minister acknowledged that. The existing wording and the use and interpretation of those laws is not solving those problems, so there is something to sort out here, one way or another. With that said, I beg leave to withdraw the amendment.
Lord Offord of Garvel (Con)
My Lords, on this group of amendments on net zero and the collective interests of consumers, I thank the noble Baronesses, Lady Jones and Lady Bennett, for their Amendment 109, which would explicitly provide that consumers’ collective interests include avoiding any detrimental effects that they may incur by not reaching net-zero carbon emissions by 2050. I am grateful to the noble Baronesses for raising the important issue of protecting consumers during the transition to net zero. At present, where environmental issues arise, the court or enforcers already have the requisite powers to take action, including by tackling misleading green claims which affect consumers’ purchasing decisions. In addition, in its annual plan, the CMA listed
“helping to accelerate the UK’s transition to a net zero economy”
as one of its priorities.
We are already making strong progress towards net zero by 2050. The UK has reduced its emissions further and faster than any other major economy. To that end, we feel that there are sufficient measures already in place to protect consumers during the transition to net zero. I hope that the noble Baroness, Lady Jones, will feel sufficiently reassured to withdraw her amendment.
On the right to repair, I thank my noble friend Lord Holmes and the noble Baroness, Lady Hayman, for their Amendments 128A, 145A and 201 and, in the latter case, for our recent discussion on the issue, where we had much of a meeting of minds.
The Consumer Protection from Unfair Trading Regulations 2008 are being restated in the Bill and prohibit unfair commercial practices. These include misleading actions which are likely to affect a consumer’s decision-making, so consumers are already protected from misleading statements made by traders on the availability of spare parts. Furthermore, there is a range of activity across government presently which support the aims of the proposed amendments, which in summary focus on sustainability and ensuring that products are repaired, where feasible.
The Department for Energy Security and Net Zero’s eco-design initiative aims to encourage the uptake of products which use less energy, resources and materials through product-specific regulations. The Department for Environment, Food and Rural Affairs is responsible for waste and resources policies, including preventing waste occurring in the first place. Both departments work with the DBT to ensure that, over their lifetime, products use less energy. This ultimately saves carbon, reduces waste and helps households and businesses to reduce their energy bills.
New and updated eco-design measures introduced in summer 2021 have, for the first time, included requirements for manufacturers to make spare parts available and replaceable with commonly available tools, as well as to provide information to professional repairers to assist with repairs. These new requirements cover dishwashers, washing machines and washer-dryers, refrigeration appliances, televisions and other electronic displays. The measures will help to establish a “right to repair” for consumers, as part of a more resource-efficient economy. Defra has recently set out aims in its new waste prevention programme to move to a circular economy by keeping goods in circulation for as long as possible and at their highest value. This includes increasing the reuse, repair and remanufacture of goods. We are consulting now on reforms to the Waste Electrical and Electronic Equipment Regulations and will consult later this year on reforms to the batteries regulations. We have also launched a separate call for evidence on reforms to the WEEE regulations to seek views on how they can further support the circular economy by incentivising more sustainable product design and higher levels of reuse of electrical products.
Further, from 29 April 2024, the new product security regulatory regime will require manufacturers to publish information on the minimum length of time that security updates will be provided for consumer connectable products. However, mandating a minimum security update period before the impact of these measures is known could run the risk of imposing obligations on businesses disproportionate to a product’s lifespan and any associated security benefits. The Government have committed to a post-implementation review of these new measures to understand their impact before any further action is considered.
Similarly, adding rights to repairability to consumer law now will oblige retailers to pre-emptively seek information from the manufacturers of products that they sell. More work is required before this is suitable for the Government to ask. In the meantime, it would mean greater costs and a reduction in choice for consumers. It may also have implications for our WTO and international treaty compliance, as it would constitute a new technical barrier to trade about which we would need first to notify and consult partners.
Lord Fox (LD)
I welcome what the Minister says, in some respects. Will the issue of updating electrical and electronic products be part of that review, too? In other Bills, we have discussed who has the obligation to maintain software updates for equipment from the perspective of safety as well as longevity. I hope that the review takes that into consideration, too.
Lord Offord of Garvel (Con)
I thank the noble Lord, Lord Fox, for that. There is a lot of information, and it is reasonable that I write to the noble Lord about the gamut of the consultation that is going on. As I said in response to the noble Baroness, Lady Hayman, a lot of consultation work is going on in the two main departments—business and Defra. It is therefore only fair that we spell that out, and we are happy to do so.
To finish what I was saying, I hope, on the basis of what I have said and those assurances, that noble Lords will not press their amendments.
I turn now to Amendment 134, on greenwashing, for which I am grateful to the noble Baronesses, Lady Jones of Whitchurch, Lady Kidron and Lady Bennett of Manor Castle, and the noble Lord, Lord Clement-Jones. The amendment would add specific greenwashing claims to the list of banned practices in Schedule 19. Misleading consumers about the environmental qualities or impact of goods and services so that it leads them to take a different purchasing decision is already against the law. Further, initiatives are under way, including the CMA’s draft guidance on sustainability agreements between businesses, which are aimed at helping to achieve environmental goals. The CMA has also published guidance on environmental claims on goods and services to help businesses understand how to communicate their green credentials without misleading consumers.
Part 3 of the Bill will strengthen consumer protection enforcement by allowing public enforcers to make applications to the court, which will not only stop the infringing conduct but allow the imposition of financial penalties. In addition, the Bill introduces new powers for the CMA to take action more quickly against bad business practices, without needing lengthy court action, and to give penalties of up to 10% of turnover for those breaking consumer law.
In summary, given that greenwashing is already prevented in law, our priority is to keep these existing interventions under review to observe their impact before rushing into further legislative action. For these reasons, I hope that noble Lords will feel comfortable not to press this amendment.
Baroness Bennett of Manor Castle (GP)
My Lords, before the Minister sits down, I come back to his response to Amendment 109 about not meeting our net-zero targets. I can probably paraphrase what he said as, “It’s all fine here and everything’s on track”. How would he align that with the statement from the Committee on Climate Change yesterday that there are significant delivery gaps for our NDCs for 2030?
Lord Offord of Garvel (Con)
I thank the noble Baroness for that. This is not a perfect science. We are on a journey to net zero and will get there by 2050. We have been very clear on the milestones that we need to hit along the way. As far as the UK is concerned, there is absolutely no going back on our commitment to hit that target, but it is a transition, and it will take a generation. I am very clear that we will get there.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords for their support for my amendments on achieving net zero, tackling those who get in the way of it and tackling greenwashing. I must say that the noble Baroness, Lady Bennett, had a wider interpretation of my Amendment 109 than I had intended. As I said at the outset, it was only a probing amendment, and she has given me good cause to go away and look at the wording of all that again, because it certainly was not going that far. It has provoked a good debate, and we had some genuine issues out on the table on it.
I also thank the noble Baroness, Lady Hayman, the noble Lord, Lord Holmes, and others for making the case so eloquently on the right of repair. We have had a really good debate on this, and I cannot possibly hope to acknowledge all the important points that noble Lords made. Those who know me will know that I have long been an advocate for the circular economy and for the right of repair as an essential part of that strategy, but it feels that action is painfully slow: it is estimated that there are enough unused cables in UK households to go around the world five times, along with 20 unused or redundant electronic items in each. But, instead of having a policy to repair and reuse, electronics manufacturers continue to use up the earth’s scarce resources producing new products, the latest models, which often replace perfectly functioning earlier models.
We cannot go on consuming at this level, as we will run out of the materials needed to produce the goods in the first place, so we need to go back to the design phase and product manufacturing, tackle the scourge of built-in obsolescence, and make spare parts and repair services the norm rather than the exception. The Government’s latest eco-design standards are a step forward, but they deal with only one part of the market. That is why a more comprehensive action plan is needed.
On this issue and others, the Minister said not to worry as they are already covered by current legislation. But it is obvious to all of us that, whatever the wording in the legislation, this is not working in practice. He gave the example of Defra having a policy on, or aiming for, the circular economy, but it has been aiming for this for a long time now. What it needs is action to ban the practice of firms deliberately preventing repair. Consultation, which is what is being proposed, is really not enough. I hope that the Minister can understand our frustration on this. These issues have been around for a long time. They are not new, and it does not feel that sufficient action is being taken.
The Minister said that this is a burden on business, but I do not think it is. It is an opportunity for innovation and new jobs, and an opportunity to save materials and money. We need to ensure that we do not have more waste and that we use the resources we have to best effect. A lot of businesses understand that but not all, and that is the problem.
I also thank the Minister for his response to my amendments. I genuinely believe that he understands and supports the environmental challenge but, again, that is not enough: we need to address the regulatory failings that are allowing greenwashing and global warming to continue. Whatever the current regulations and laws, it is quite clear that those regimes are not properly addressing their responsibility in these areas. Again, we need to look further at that. There is huge frustration that policies are not being translated into action and leading to enforcement. Where are the examples of these policies being enforced?
Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
Read Full debateMonday 5th February 2024
(9 months, 2 weeks ago)
Grand CommitteeDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: HL Bill 12-VI Sixth marshalled list for Grand Committee - (5 Feb 2024)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
Lord Bassam of Brighton (Lab)
My Lords, I was initially going to say that this is a disparate group of amendments but, as I have heard the arguments adduced, I have realised that it has more coherence to it.
The Committee should pass a vote of thanks to the noble Baroness, Lady Morgan, for tabling her amendment. This is an incredibly sensitive issue and one that in spirit we completely support—why wouldn’t you? If I were in the noble Baroness’s position, having dealt with cases of the sort that she has, I, too, would probably be mounting a campaign on this. We should be grateful to the Mental Health Foundation for the support that it has given. It cannot be right that usually harmless algorithms are used for another purpose like this and it would be helpful if we could get some clarity to the law.
This issue raises highly sensitive issues about online purchases. It is hard to envisage that any commercial undertaking, whether online or trading on our high streets, would deliberately market a product knowing that it was likely to be used for acts of self-harm and far worse. I will listen carefully to what the Minister has to say on this. If there is something that can usefully be done in legislation and there is an opportunity to do it here, we should take that opportunity.
I turn to the amendment tabled by the noble Lord, Lord Lucas, which initially I thought put the cart before the horse, but I do not think so any more. It is a neat amendment that is usefully placed. The noble Lord is looking at how the effectiveness of trading standards is measured and looking at their resource and support.
About 20 or 30 years ago, I was a trading standards national officer. I was not a trading standards officer, but I used to lobby government for resources on behalf of trading standards, which always used to say they did not have enough resource. The answer from the Government at the time was pretty much the same as I am expecting the answer to be this afternoon: that the Government are resourcing trading standards well and that they do a very good job. However, there is a good case for reviewing their effectiveness, particularly in the light of the other amendments in this group.
I will come back to Amendment 111 in a moment, but Amendments 112 to 120 relate very neatly to the scope and jurisdiction of weights and measures—ie, trading standards. They would significantly broaden the responsibilities of trading standards officers, who presumably would take on investigatory and enforcement responsibilities on a shared basis with the CMA. We have sympathy with these amendments because there is a strong case for local enforcement. I understand that people living in a locality might want to go to their local authority trading standards officers for advice, support and encouragement in seeking enforcement against rogue online traders. If we embark on this route there will need to be protocols in place so that duplication does not occur and so that there is good advice and information from officers locally working in tandem with CMA officials, and of course there would be a question of resource and support for local trading standards officers. Ministers and the Government may think that this is a valuable route, but the relationship between central and local enforcement needs to be explored. These amendments valuably focus light on that, because people in any community anywhere in the country will want to know how they can access their rights as consumers dealing as much online as in the high street and offline. We have a lot of sympathy for the amendments in the name of my noble friend Lady Crawley, the noble Earl, Lord Lindsay, and the noble Baroness, Lady Bakewell.
I will go back to Amendment 111. As the noble Lord, Lord Clement-Jones, argued, it is really about the detail of the enforcement of penalties and their range and scope. In general terms, we support the notion that penalties should take account of the profitability of the company which is in breach of enforcement orders—breaking the law. Again, it will be interesting to hear the Minister set out the Government’s policy in this field and explain to us how it is going to work. I look forward to the Minister’s response.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
My Lords, I am extremely grateful to noble Lords for their amendments in this group and for their valuable contributions on these important issues. I will start by discussing Amendment 110. moved by my noble friend Lady Morgan, whose continued leadership on this very serious and hugely important topic is commendable. Amendment 110 would make the marketing of products intended to be used to take one’s own life a specified prohibition, which would therefore be enforceable under Part 3. Like everyone who spoke, I—and the Government—recognise the tragic consequences of suicide and how so many lives and families have been devastated by it. The Government do not underestimate the gravity of this issue, and that is reflected by the measures already in place around suicide prevention and, indeed, the steps we have taken to clamp down on the advertising and supply of pro-suicide materials.
First, we have strong, well-defined laws in relation to complicity in another person’s suicide, such as the Suicide Act 1961. Building on that, where content on the internet reaches the threshold for a criminal offence under the Suicide Act 1961, the Online Safety Act will place new duties on all in-scope user-to-user services proactively to tackle it.
Under the Online Safety Act, search services have targeted duties that focus on minimising the presentation of illegal search results to users, and protecting children from such search content. These duties will play a key role in reducing traffic directed to websites with content that encourages or assists suicide, reducing the likelihood of users encountering this content. The Act also places duties on providers to protect children from harmful content that encourages, promotes or provides instructions for suicide but that does not meet the criminal threshold. Separately, the independent Advertising Standards Authority bans adverts that may cause harm or serious or widespread offence, including adverts containing references to suicide.
These approaches are supported by the Government’s suicide prevention strategy for England. As part of that, the Department of Health and Social Care leads a cross-government and cross-sector group established to rapidly identify and proactively tackle emerging methods of suicide. Through this group’s close working, there are currently over 30 live actions and interventions to reduce public access to, and limit awareness of, emerging methods, with further commitments made in the strategy. These include seeking to tackle at source the suppliers of harmful substances for the purposes of suicide, and the development of a new national process that both captures intelligence and subsequently issues alerts to relevant parts of the health, care, education and justice systems on any emerging methods or risks to be aware of.
Amendment 110 is set against this background. Its laudable intent does not fit with the purpose of Clause 149 and, by extension, Part 3. This amendment would use Part 3, which is merely an enforcement vehicle for existing duties, prohibitions or restrictions, to define and impose on traders a substantive legal prohibition. Once again, I am extremely grateful for my noble friend’s amendment. I applaud her passionate sponsorship of this vital issue and would be delighted to meet, as requested. However, at this moment, I hope she feels reassured enough by existing measures to withdraw the amendment.
I am grateful to my noble friend Lord Lucas for Amendment 110A. The Government fully agree with him that, as with any statute, Part 3 needs to be kept under review to ensure that it achieves its intended real-world impacts. However, it is important to note that the court-based consumer enforcement regime under Chapter 3 of Part 3 is not new. In general, it updates and simplifies the current court-based enforcement regime in Part 8 of the Enterprise Act 2002. There are therefore existing mechanisms for reviewing the effectiveness of consumer enforcement, which we believe to be sufficient.
First, public designated enforcers already review and report on the enforcement interventions they undertake. For example, since 2019, the Association of Chief Trading Standards Officers has produced annual impacts and outcomes reports that show the impact of local authority trading standards services in England and Wales. Both the Chartered Trading Standards Institute and the Society of Chief Officers of Trading Standards in Scotland conduct workforce surveys and publish reports that cover issues such as staffing and enforcement actions. Regulators such as the CMA, the Financial Conduct Authority and Ofcom provide transparent statements about their enforcement work and publish annual reports that evaluate their past year’s performance. These regulators are accountable to Parliament and subject to scrutiny by parliamentary Select Committees.
This ongoing reporting is complemented by dialogue with government about enforcement priorities and capability. For example, the CMA, which has a central co-ordination role in the network of public designated enforcers, already has a statutory role to provide advice to government on matters relating to its functions, including consumer enforcement. The Government may therefore request the CMA to provide information or advice on any gaps in enforcers’ powers or capabilities. The Government have committed to respond publicly to such advice within 90 days, clearly indicating the steps we will take in response.
Lord Clement-Jones (LD)
Before the Minister moves on, would he be so kind as to point out which bit of the Long Title prevents the amendment of the noble Baroness, Lady Morgan, from being incorporated into the Bill? This is an important issue and he gave us no real comfort about what other powers might be available to remedy the kind of situation that the noble Baroness talked about. Secondly—I sound like a taxi driver—Amendment 110A talks about resources for trading standards but, as the Minister well knows, local authorities are in dire straits. It is not just a question of saying that their funding is not ring-fenced; it is also about the Government making sure that trading standards are adequately resourced for consumer protection. How are they going to ensure that?
Lord Offord of Garvel (Con)
I thank the noble Lord for his intervention. As I said on my noble friend Lady Morgan’s Amendment 110, we are dealing with a serious issue. I took great pains to run through the various layers of protection currently on the statute book and outlined why the Government believe that this is covered elsewhere and is not within the scope of the Bill. I have also said that I will meet my noble friend and look at this in more detail to see whether we need to look further at the Long Title, to which the noble Lord referred.
Lord Bassam of Brighton (Lab)
Is the noble Lord saying that it is not outside the scope of the Bill?
Lord Offord of Garvel (Con)
We are saying that there is extensive protection built up around this sensitive issue and that there should not be further legislation made within the scope of the Bill, but that, if we need to look at it further, we can do so before Report.
Every local authority always wants more money. It is a feature of UK public life and it is up to local authorities to decide how to spend their money appropriately. As we all know, some are better run than others. Funding is not ring-fenced and it is up to local authorities to make sure that standards are maintained in their area.
Amendments 111 and 122, tabled by the noble Lord, Lord Clement-Jones, pertain to profits from infringements and the calculation of penalties. They would ensure that profits made from engaging in an infringing commercial practice can be expressly reflected in the calculation of a monetary penalty imposed through an enforcement order made by the court or a final infringement notice given by the CMA. I thank the noble Lord for his amendments and I absolutely agree with the intent behind them. In fact, work is under way to produce a comprehensive set of regulations, which could be made under Clause 203, to set out the amounts that are to be treated as comprising a person’s turnover when calculating the maximum penalty that can be levied.
Our intention is that any profits accruing from the relevant infringement will be captured by this methodology, but we consider that this maximum penalty calculation will be a technical exercise that needs to be supported by robust and detailed methodology, which is therefore better suited to secondary legislation. I hope that the noble Lord is sufficiently reassured that this important issue will be addressed.
Lord Clement-Jones (LD)
My Lords, I am sorry to keep interrupting the Minister, but this is quite an important factor. Is he saying that secondary legislation can expand the way that the primary legislation is interpreted? I was talking in my amendment about trying to get hold of the profits of abuse, so that the penalties should include a profit-based penalty, but the Minister seems to be saying, “Yes, we can do that with secondary legislation”. Is that really what he is saying?
Lord Offord of Garvel (Con)
Yes, that is exactly what I am saying. In order to get a profit, one has to start with turnover. A detailed mechanism is required to look at how these P&Ls work and, rather than being in the Bill, this needs to be examined as a technical exercise. There needs to be a methodology put together for it; we will therefore do that in secondary legislation.
Amendments 112 to 120 relate to online content take-down powers and were tabled by my noble friend Lord Lindsay but presented by the noble Lord, Lord Clement-Jones. These amendments would give trading standards departments in Great Britain the power to apply to a court for online interface orders and interim online interface orders to modify, restrict or take down illegal content displayed online.
We welcome the spirit of my noble friend’s amendments. Indeed, the Government have published their consultation response on proposals to empower additional enforcers, besides the CMA, to apply to a court for online interface orders. We have committed to give this additional power to public designated enforcers. These enforcers include, but go beyond, trading standards departments—for example, sector regulators such as Ofcom, which already have consumer enforcement powers under Part 3 of the Bill. We would be pleased to discuss with noble Lords how best to enact these important changes to ensure that the use of this power is governed by adequate procedures.
Lord Bassam of Brighton (Lab)
Is it therefore envisaged that the Government will give extra support to local trading standards officers, so that they will have these take-down powers? That seems to be the implication of what the Minister is saying—that it is not just Ofcom or the CMA but that there will be local enforcement as well, so there will be that combination.
Lord Clement-Jones (LD)
Just to add to that question, is the Minister saying, “It’s going to happen but we just need to get the procedures right and add them”? Is that really all we are waiting for?
Lord Offord of Garvel (Con)
I thank the noble Lords. That is indeed the spirit of what we are saying. We are, in the Bill, giving a power to the courts that will contain the online interface orders. The Government have published a consultation to enable additional enforcers, including the CMA, to apply to a court for these online orders. We are saying that, within the current architecture, we believe that we have the power to do what is required, but that we can make changes after the fact to ensure that the power is governed by adequate procedures.
Lord Clement-Jones (LD)
My Lords, that is slightly eliding the situation. The Minister was talking about the CMA but, earlier, I understood him to be talking about trading standards. Are trading standards going to get those powers and is it just a question of ensuring that we get the procedures sorted out?
Lord Offord of Garvel (Con)
I thank the noble Lord. There is obviously a little confusion about this, so we will need to set it out, which we will do between Committee and Report, to ensure that we know precisely the order of events here.
Lord Bassam of Brighton (Lab)
That is important, because the Minister was talking about the actions in the court while the noble Lord, Lord Clement-Jones, and I were concerned not just with that but with where the enforcement law is going to come from. In the Minister’s letter to us, it would be most helpful if he could set out who will have those enforcement powers and how the mechanisms will work, given the interface between the different enforcing agencies. That would give consumers a degree of comfort.
Lord Offord of Garvel (Con)
I am happy to do that. We will look at that in a bit more detail and write accordingly.
We come to some minor technical government amendments, Amendments 121, 123, 124 and 128, which in the main are minor and consequential. They are intended to provide clarity on how the relevant provisions function and on continuity between the current consumer enforcement regime and the reformed regime under Part 3. I hope these government amendments will be supported. I thank noble Lords once again for their amendments and for their considered remarks on this group.
Lord Clement-Jones (LD)
My Lords, before the Minister sits down, I wonder if he will take another look at Clause 157(5) regarding the amount of monetary penalty that can be imposed. The limitations seem to be there in black and white, yet the Minister is saying that secondary legislation can change that subsection in due course. If he cannot give me an answer now, would he be able to write to all of us? This is an important point.
Baroness Morgan of Cotes (Con)
My Lords, I am grateful to my noble friend the Minister for his response, which I will come back to in a moment.
I thank the noble Lords, Lord Clement-Jones and Lord Bassam, for their support for my amendment. It is small but, I hope, would be highly effective if it were accepted. The noble Lord, Lord Clement-Jones, and I spent a long time debating the Online Safety Act last year. It is clear that online marketplaces are not covered. My noble friend the Minister mentioned user-to-user sites and search engines. They are obviously online marketplaces and highly significant businesses—I have mentioned Amazon but there are others—and I do not think the Department for Business and Trade should be agnostic about harmful materials sold on these sites.
I thank the noble Lords who have spoken on Amendment 110 for the sensitivity that they have shown on this difficult topic. I am grateful to my noble friend for the offer of a meeting to look at the scope of the Bill before Report. I will of course withdraw Amendment 110 at this stage, but I look forward to that meeting and further discussions on this important topic.
Lord Offord of Garvel
Member's explanatory statement
This amendment would clarify that references in this Clause to maximum amounts of daily penalties are maximums per day, not in total.
Lord Offord of Garvel
Member's explanatory statement
This amendment would clarify that references in this Clause to maximum amounts of daily penalties are maximums per day, not in total.
Lord Offord of Garvel
Member's explanatory statement
This amendment would clarify that references in this Clause to maximum amounts of daily penalties are maximums per day, not in total.
Lord Leong (Lab)
My Lords, I thank all noble Lords who have spoken. We are grateful to the noble Lord, Lord Lucas, the noble Earl, Lord Lindsay, the noble Baroness, Lady Bakewell, and my noble friend Lady Crawley for bringing forward this group of amendments relating to Schedule 16, which is introduced by Chapter 6, Clause 207. They seek to amend Schedule 5 to the Consumer Rights Act 2015.
Amendments 124A and 124B appear to add clarity without altering the intention of the Bill as written. Having said that, we would be interested to hear from the Minister whether there is any reason these changes should not be enacted.
Amendment 124C would make a more substantial change to financial penalties. The current level 3 is no deterrent or obstruction. A mere £1,000 is just petty cash for most businesses, whereas level 5, which is an unlimited fine, would serve as a deterrent and perhaps support some co-operation in investigation. We would like to hear from the Minister whether there has been any assessment of the suitability of obstruction being a level 3 fine since the Consumer Rights Act came into law in 2015. We also seek clarification on whether this is the right place to make such a change, given that its impact would be much wider.
Amendments 125, 126 and 127, tabled by the noble Earl, Lord Lindsay, with the support of my noble friend Lady Crawley and the noble Baroness, Lady Bakewell, make a lot of sense in pursuing investigations in all parts of the United Kingdom, not just England and Wales. That was succinctly explained by the noble Lord, Lord Clement-Jones, so I shall not repeat the point. This would obviously be a matter for the Scottish Government. If the Government agree on the merits, is this something they have discussed with their Scottish counterparts?
The amendments in this group are sensible and designed to be helpful. They should be supported. We look forward to the Minister’s response.
Lord Offord of Garvel (Con)
My Lords, I thank noble Lords for their amendments and their considered contributions regarding Schedule 5 to the Consumer Rights Act 2015, which details the investigatory powers available to consumer law enforcers. As many noble Lords have noted, building a case against rogue traders and rectifying bad business practices not only starts with but depends on enforcers having the right powers to investigate suspected breaches. This is important for all enforcers, but especially so for local authority trading standards departments that typically exercise the full range of Schedule 5 powers. The Government are committed to ensuring that trading standards and other consumer enforcers have the requisite powers to carry out their important work, so we value the perspectives shared by noble Lords today.
Amendment 124A, moved by my noble friend Lord Lucas, would allow “articles” that fall outside the definition of “goods” to be seized and detained by enforcers when exercising their seizure power under paragraph 28 of Schedule 5. I thank my noble friend for this amendment and hasten to reassure him that its intent is, in our view, comprehensively achieved by the statute as it stands. The definition of “goods” under Schedule 5 already encompasses any tangible moveable items. It is not restricted to the goods sold by the trader to consumers. Further, other provisions in Schedule 5, such as the power under paragraph 29 to seize documents where an enforcer reasonably suspects they may be required as evidence in proceedings, can be relied on should there be any doubt as to whether such items are seizable. For these reasons, I hope my noble friend will agree to withdraw his amendment.
On Amendment 124B, on breaking open a vehicle, I again thank my noble friend Lord Lucas for tabling it. This relates to the power under paragraph 31 that allows enforcers either to require a person to break open a container or to open a container themselves in order to seize and detain goods, among other things. It is indeed important that investigators are not frustrated by arguments about what constitutes a “container” and therefore the current definition is broad and means anything in which goods may be stored. Therefore, the definition is capable of including a vehicle that is storing, or may be being used to store, goods which may disclose a breach of legislation.
However, enforcers must consider what exercise of investigatory powers is appropriate in the circumstances. For example, an enforcer may inspect products under paragraph 25 of Schedule 5 for the purposes of checking the compliance of those products with relevant legislation. If the product in question is a vehicle, an enforcer cannot break open the vehicle as that is allowed only for certain purposes, which do not include product inspection. Therefore, I hope my noble friend is reassured that the statute is already sufficiently permissive in the appropriate circumstances and will not press his amendment.
Lord Clement-Jones (LD)
My Lords, the Minister seems to have said two directly conflicting things—that you cannot do something, but that he hopes that his noble friend is convinced that the powers are wide enough. Did we mishear him?
Lord Offord of Garvel (Con)
I hope that the noble Lord did not misunderstand me. I think we said that this is already covered in legislation. The definition is capable of including a vehicle that is or may be being used to store goods that may disclose a breach of legislation. We are being clear that the definition of “goods” is sufficiently broad to include goods or vehicles. I was coming on to say that an enforcer may inspect products under paragraph 25 of Schedule 5 for the purposes of checking the compliance of those products with relevant legislation, so we are tying this back to the relevant legislation. We believe that the definitions are already sufficiently wide and therefore there is no need to further legislate.
Lord Fox (LD)
That is beginning to be helpful, but the Minister will be aware that different local authorities are receiving different legal advice. Some are comfortable with the definition that he has given and others are uncomfortable with it. At some point, possibly during Report, a Pepper v Hart definition that solidly allows legal officers in local authorities to make the decision that a car is a container in particular circumstances would, at the very least, be helpful. Perhaps adopting the amendment of the noble Lord, Lord Lucas, would be even more so.
Lord Offord of Garvel (Con)
I was not aware that there are different definitions in different local authorities. That seems a valid point to address, so we will look at it before Report.
Amendment 124C is on fines for obstructing enforcement officers, for which I again thank my noble friend Lord Lucas. This addresses the question of the appropriate level of fines for the offence of obstructing an enforcement officer, under paragraph 36 of Schedule 5. Currently, the fine must not exceed level 3 on the standard scale, which is £1,000. Amendment 124C would increase that to level 5—an unlimited amount. I fully agree with my noble friend that any sort of obstruction, whether intentionally failing to comply with instructions or knowingly giving misleading information, is a serious matter that must be subject to criminal enforcement.
The current level of the fines was subject to previous government consultation ahead of the introduction of the Consumer Rights Act 2015. It was set to reflect the deterrent purpose of the offence, proportionately and consistently with comparable criminal offences. For example, the penalty for obstructing a police officer or an officer of His Majesty’s Revenue and Customs is set at a maximum of £1,000, which is level 3. We consider that the current level of these fines continues to be proportionate to the offence, consistent with comparable regimes. I once again thank my noble friend for his consideration of this issue and hope that my explanation persuades him not to press his amendment.
I thank my noble friend Lord Lindsay and the noble Baronesses, Lady Bakewell and Lady Crawley, for tabling Amendment 125, which was presented by the noble Lord, Lord Clement-Jones. It would end the prohibition on enforcers to use information provided by a person in response to a written information notice in criminal proceedings against that person. Prohibitions of this sort apply throughout the UK legal system and serve to help protect a person from self-incrimination when enforcement authorities are given broad powers to send information notices to compel the production of information.
The Government have listened carefully to trading standards departments, which consider that removing this prohibition would enable them to gather evidence needed for consumer prosecutions more easily. We have been told that using other information-gathering powers comes with operational challenges, such as having to resource travel outside the local area to carry out investigations. We are keen to work with enforcers to address these challenges. However, this prohibition is an important protection. It safeguards a right that is recognised under English common law and the Human Rights Act.
In summary, Amendment 125 stems from an operational issue that does not justify rolling back well-established legal protections. I therefore hope the noble Lord will feel able not to move this amendment.
Lord Clement-Jones (LD)
Are the Government really saying, more or less, that they do not recognise that the world has gone digital? Will the Minister spell out the principles of common law that prohibit them from allowing trading standards officers to do what we set out in the amendments?
Lord Offord of Garvel (Con)
This says that the Government have the overarching legislative position, but the trading standards departments operate locally, and it is important that central government listens to local government. That consultation listened carefully to the trading standards departments and has come back saying that they believe that removing this prohibition would enable them to gather evidence better and more easily for consumer protection. We follow the local authorities in their requirements.
I turn to the use of investigatory powers across the UK. Amendments 126 and 127, again tabled by my noble friend Lord Lindsay and presented by the noble Lord, Lord Clement-Jones, would permit any trading standards department based anywhere in Great Britain to carry out investigations anywhere in the UK. Current law already allows English and Welsh trading standards departments to use their investigatory powers in parts of England and Wales outside that department’s local area. The same is true for trading standards departments in Scotland, which can already use their investigatory powers anywhere in Scotland.
Extending the powers to investigate across the UK fails to recognise that Scotland has its own legal jurisdiction separate from the single legal jurisdiction of England and Wales. I draw noble Lords’ attention to the fact that consumer protection is a transferred matter in Northern Ireland, where trading standards are a central government function, in contrast to Great Britain’s local authority model. These differences across the UK’s nations provide examples that I hope will persuade the noble Lord not to move Amendments 126 and 127.
Lord Bassam of Brighton (Lab)
I want to tempt the noble Lord to give us a bit more explanation on this. If I understood what he said rightly, it is quite in order for trading standards officers to begin an investigation in their local authority areas and, because it is clearly a broader issue and a company they are looking at operates nationally, it is okay for them to go after it elsewhere. But, when an English trading standards authority wishes to pursue someone in Scotland, is the Minister really saying that, because the Scottish law is different and so on, they could not mount an investigation that had to take place partly in Scotland because that is where the company is operating or trading from? That seems a bit of a gap in provision if it is the case and, if it is not, I would have thought that there needs to be some form of understanding and set of protocols between and across the authorities operating on each side of the border. I am thinking particularly of border authorities in Northumbria and Cumbria working with trading standards authorities in the lowlands. This must be an issue there quite regularly.
Lord Offord of Garvel (Con)
What we are referring to here is that, within these legal jurisdictions, there are differences, not least of all the way prosecutions are conducted in England and Wales versus Scotland and Northern Ireland. Each of those jurisdictions can operate holistically within these jurisdictions. I will write to clarify, but I am pretty sure that the UK remains a united kingdom and, if there is a requirement for someone in England to speak to someone in Scotland, that can still happen. I will find out exactly how it does.
Lord Bassam of Brighton (Lab)
The noble Lord is such a strong unionist that I would be surprised if that were not the case.
Lord Fox (LD)
When the Minister writes that letter, perhaps he could extend it to include the United Kingdom Internal Market Act because that seems not to have been taken into consideration. Some of us here today—at least two of us—participated in the lengthy discussions about differing standards across borders and how they might be enforced, and this seems to fall well into that territory. What consideration has been made of that Act in drawing up the terms of the Bill? It would be helpful if the letter set out the various positions within the internal market Act and how they have been represented in the Bill.
Lord Offord of Garvel (Con)
I thank the noble Lord. I share his interest in this matter, and that was exactly what I was intending to examine. The United Kingdom Internal Market Act is a fundamental new piece of architecture that, on us exiting the EU, allows us to trade as one single nation, and I will always be promoting that.
Lord Lucas (Con)
My Lords, I am grateful to my noble friend for his answers to my amendments, particularly for his offer of a continuing dialogue between Committee and Report. It seems clear to me that there is some different understanding out there regarding the ambit of the powers. I am content with the answers that he has given but would like to make sure that not only is that understood but that that understanding can have effect without something being added to the Bill. However, that is a conversation that we can conveniently have not now, so I beg leave to withdraw the amendment.
Lord Offord of Garvel
“Estate Agents Act 1979
A1 In section 3 of the Estate Agents Act 1979 (orders prohibiting unfit persons from doing estate agency work), in subsection (1)—(a) in paragraph (ba) for “section 217, 218 or 219 of the Enterprise Act 2002” substitute “section 155, 158 or 162 of the Digital Markets, Competition and Consumers Act 2024”; (b) in paragraph (bb) for “section 217 of the Enterprise Act 2002” substitute “section 155 of the Digital Markets, Competition and Consumers Act 2024”.”Member's explanatory statement
This amendment makes a consequential amendment to the Estate Agents Act 1979 as a result of the repeal by the Bill of Part 8 of the Enterprise Act 2002.
Lord Offord of Garvel (Con)
I thank noble Lords for the amendments in this third group, concerning banned practices. I will take them not necessarily in numerical order.
I start with Amendment 132, tabled by the noble Baroness, Lady Jones of Whitchurch. It would ban in all circumstances the marketing of counterfeit and dangerous products online. Misleading claims in marketing are already offences under consumer protection law and, for unsafe products, product safety law. The Bill makes it clear that online marketplaces, which can facilitate the sale of these products, must act with professional diligence. This can include taking appropriate steps to ensure that counterfeit and dangerous products are not sold or promoted in a marketplace.
The Government recently consulted on strengthening the public understanding of those duties. Our response to that consultation committed us to undertake further work with stakeholders, including platforms, other business stakeholders and consumer groups, in order to identify the scope and content of further guidance in this area and how that work should best be communicated and set out; I would welcome the noble Baroness’s input into that work. Further, the product safety review includes proposals specifically aimed at tackling the sale of unsafe goods online. The Government will publish a response to that consultation in due course; again, I look forward to being able to share that with the noble Baroness and to discussing next steps.
Ultimately, online platforms have brought huge consumer benefits, including by vastly increasing the range of products available to consumers. The Government are committed to ensuring that platforms bear appropriate responsibility for ensuring that unsafe or counterfeit products do not reach consumers, but we seek to do so thoughtfully and in consultation with the public and industry to ensure that any new regulation does not jeopardise those consumer benefits or harm economic growth. I hope that the noble Baroness, having heard this, will feel able not to move her amendment.
Amendment 144, also in the name of the noble Baroness, Lady Jones, would give public enforcers a tailored power to require that the marketing of fake or counterfeit products was removed from the internet. The Government consultation response that I just mentioned also includes a commitment to empower additional enforcers to apply to court for interim and final online interface orders under Chapter 3 of Part 3 of the Bill. These orders facilitate the removal of online content that breaches consumer law. In that context, I assure the noble Baroness that we welcome and intend to honour the spirit of the amendment. I look forward to further discussion on this matter with noble Lords. I hope that, with this reassurance, the noble Baroness will not move Amendment -144.
I thank my noble friend Lord Lindsay for Amendment 135 and his input on this matter of fake reviews. Amendment 135 would add commercial practices related to fake reviews to the list of banned practices in Schedule 19. The Government agree that the law against fake reviews should be strengthened. Following our recent consultation on proposals to tackle fake reviews, and recognising the strong parliamentary interest in this issue, the Government have set out in their response our intention to add the relevant practices to Schedule 19 to the Bill.
It is important to get the details right. I would like to work with your Lordships to ensure that the new rules meet our shared aims of reducing the number of fake reviews that customers encounter online and being clear to businesses on what their duties are when publishing reviews. I would be delighted if noble Lords would meet me to discuss this further. I hope that what I have just set out will mean that my noble friend Lord Lindsay feels comfortable not to move his amendment.
I thank the noble Baroness, Lady Jones, for Amendment 133. It would add drip pricing to the list of banned practices in Schedule 19 to prevent traders adding mandatory fees to the price of a product during the purchasing process. Likewise, the Government agree that the law should be strengthened to protect consumers from hidden fees that can cause them to pay more than they have been led to expect. As we set out in our response to the consultation on improving price transparency, published on 24 January, it is the Government’s intention expressly to prohibit the drip pricing of mandatory fees in this Bill. I would be delighted to discuss this with noble Lords. I hope this means that the noble Baroness will feel comfortable not to move her amendment.
Baroness Jones of Whitchurch (Lab)
My Lords, all these messages about being prepared to talk further are very welcome; I am sure that we will take the Minister up on them.
Part of the issue about drip pricing and the Government’s response to it is the distinction that they have now made between mandatory extra charges and optional ones. I have a horrible feeling that most of the examples we can think of, such as the airline example, will be classified as optional extra charges, which will not be covered by Schedule 19. Can the Minister say more about that?
I think we are all on the same page but a lot of optional charges are misleading in the sense that they are really charges; the noble Baroness, Lady Bennett of Manor Castle, talked about families sitting together or your luggage going on a long-haul flight. I am sorry that we keep quoting flights, because there are many other areas where this applies, but it seems to me that the Government have made a false distinction here between things that you have to pay, which are mandatory and which the Minister is saying will go under Schedule 19, and the rest, which are most people’s experience of drip pricing; as the Minister was explaining, that will not be covered—but I might have misunderstood what he was saying.
Lord Offord of Garvel (Con)
I thank the noble Baroness for that. A distinction has been made as per that wording. As the consultation has come back, there has been a view on the distinction between those two areas, but the whole point of consulting noble Lords between Committee and Report is to allow further investigation, discussion and/or justification of that.
Lord Bassam of Brighton (Lab)
I want to persist a bit more on that. We are now almost at the end of Committee, and Report is probably two or three weeks away. That is not a lengthy period in which to get the drafting right and for us to have that discussion, so I ask that we get a really early draft of these amendments. The wording is important and that will help my noble friend Lady Jones to form a view about whether it covers what we are after here.
Baroness Bennett of Manor Castle (GP)
This is of great concern to many consumer groups, so it is important to publish and make it publicly available so that people are able to examine, think about and get legal advice on it. It is not just the people in this Committee but broader society that really needs to have the chance to input into this crucial issue.
Lord Offord of Garvel (Con)
I thank both noble Lords for those interventions. I am happy to get this to noble Lords as quickly as possible. The whole point of the consultation is to allow consumer groups, which are very vocal on this issue, to be heard, and they have already fed into the process, but I take the point about expedition.
I thank the noble Lord, Lord Clement-Jones, for his Amendment 130 on product packaging. It seeks to legislate against traders potentially copying packaging or other reference material in order to mislead consumers into thinking that the product in question is from the original manufacturer or mislead them about the specifications or characteristics of the product. I thank the noble Lord for giving us a number of examples, which we can all recognise. I agree with him about the importance of ensuring that consumers are not misled.
However, we believe the concerns underpinning this amendment are already addressed through the prohibition on misleading actions in Clause 224 and the banned practice in paragraph 14 of Schedule 19 to the Bill. These prohibit promotions that mislead consumers into thinking that they are purchasing a product or service from a particular manufacturer when they are not. The provision in Schedule 19 achieves what this amendment seeks to do and applies equally to all products and services. Should a trader try to copy another well-known product’s packaging, this would be deliberately misleading to the consumer looking to purchase a product, as currently set out in the banned practice in paragraph 14 of the Schedule and Clause 224.
The noble Lord, Lord Clement-Jones, referred to previous CMA work on this issue. I am pleased to say that there is currently an in-depth CMA study of the grocery section, which has already spurred government action on price labelling rules. The study continues and I would expect it to pick up poor practices of the sort he highlighted. The noble Lord also made an important point about the importance of effectiveness. The additional powers given to the CMA and the courts under Part 3 aim to achieve just that. I hope he will feel comfortable in withdrawing his amendment.
I thank my noble friend Lord Lucas for his Amendment 131, which seeks to exclude universities from the currently banned practice of advertising that includes a direct appeal to children to buy products or to persuade their parents or other adults to buy products for them. This schedule replicates the banned practice in paragraph 28 of Schedule 1 to the Consumer Protection from Unfair Trading Regulations 2008.
There is no evidence that these regulations, which have stood since then, have prevented universities or similar institutions from providing information on themselves or the courses they offer. The banned practice in question is unlikely to stop universities or other providers advertising their courses. However, to ensure that there is no misunderstanding, further information on application can be clarified in a non-statutory way, such as through the guidance that will be issued for the Bill. The noble Lord, Lord Bassam, also pointed out the importance of universities providing accurate information. This is an area where there has previously been enforcement action, which highlights the importance of it being within the scope of consumer law. I hope that my noble friend Lord Lucas will feel comfortable not moving his amendment.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken in this debate. I am pleased to have added my name to Amendment 137 in the name of the noble Lord, Lord Clement-Jones, which deals with the issue of submitting or creating fake reviews by adding it to the list in Schedule 19 of commercial practices which would always be considered unfair. This is the issue that we touched on in the earlier debate. I am pleased that we have the chance to raise this today because it has been an issue of concern for some time. It is good to get the chance to debate and pursue this, and it is good to hear that the Government are also keen to do that.
We argue that this is not just about the effect fake reviews have on consumers; they affect businesses as well. They damage the livelihoods of many small traders—restaurants and hotels, for example—when their business is deliberately targeted by damaging reviews, or the local competition down the road receives glowing fake reviews which take trade away from the legitimate trader, so this has a business element as well as a consumer element. At the same time, Which? reports that the proliferation of fake reviews for online product sales results in consumers being more than twice as likely to choose poor quality products. We heard a little bit about how that works in the earlier debate.
Urgent action is undoubtedly needed to bring quality standards back into online sales and marketing so that people are not duped. As we have heard, since the amendment was tabled, the Government have produced their response to the consultation on improving price transparency and product information for consumers. It proposes that the Government will add fake reviews to the list of banned practices in Schedule 19. I am grateful to the Minister for hosting a meeting last week where we had a chance to discuss this. It is good to hear that the Government have finally decided to act on it.
However, there are still some outstanding concerns. Concerns have been raised by Trustpilot and others that the fact that the proposed wording lacks clarity. The Government saying that they will work with the Office of the Parliamentary Counsel to clarify the wording is a sign that they have not yet got this quite right. Can the Minister clarify the timescale for that additional work? When will we see the outcome of it?
Concern has also been raised that the Government’s proposals do not address the role played by internet service providers and social media in promoting fake reviews. The noble Lord, Lord Clement-Jones, raised this issue. What action will we take against those who host and reproduce these fake reviews, often knowingly?
Concern has been expressed that the penalty for promoting fake reviews is subject only to civil, not criminal, enforcement. Can the Minister explain a bit more about why that decision was taken? In the meantime, we argue that our Amendment 137 addresses those concerns. We look forward to further talks along the lines that the Minister has proposed, and we hope that he will agree to work with us and the Committee to produce a government amendment that is both clear and comprehensive.
The noble Lords, Lord Lucas and Lord Holmes, helpfully sought greater clarity on consumer rights to prevent consumers being misled or manipulated. The noble Lord, Lord Clement-Jones, rightly mentioned the additional measures needed to protect us from rogue traders. I am grateful to the noble Lord, Lord Lucas, for asking a series of small but important questions around his almost probing amendments. It is important to have clarification on the record, and I hope that the Minister will be able to give it.
The noble Lord, Lord Holmes, helpfully raised the issue of good faith and asked how we can bring some standards back into trading and the exchange of information. Again, I hope that the Minister will be able to clarify that.
We have had a positive discussion on these important points. It is good to hear that there will be further discussion. In the meantime, I look forward to hearing what the Minister has to say.
Lord Offord of Garvel (Con)
My Lords, I turn now to the fourth group of amendments, which concern unfair commercial practices.
I thank the noble Lord, Lord Clement-Jones, for Amendment 137, which would add commercial practices related to fake reviews to the list of banned practices in Schedule 19. The Government agree that the law against fake reviews should be strengthened. Following our recent consultation on proposals to tackle fake reviews and recognising the parliamentary interest in this topic, the Government have set out their intention to add the relevant practices to Schedule 19. It is important that we get the details right.
The noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones, mentioned the concerns raised by Trustpilot around the hosting of fake reviews as well as the hosting and facilitation of fake review training. The Government are sympathetic to these issues. My ministerial colleagues have previously met Trustpilot to discuss such matters. I assure both noble Lords that the hosting of fake reviews is already addressed by our proposals; that said, I would be happy to meet them to discuss this topic further. For the time being, I hope that the noble Lord, Lord Clement-Jones, will feel comfortable to withdraw his amendment.
I again thank my noble friend Lord Lucas for his amendments. Amendment 138A specifically references “pricing” when considering whether a trader is misleading the average consumer. Clause 224 already states that
“an overall presentation which is likely to deceive the average consumer”
is a misleading action. Price clearly forms a part of this overall presentation. I understand the importance of the regulations being robust and clear and I greatly appreciate my noble friend’s close scrutiny of these clauses, which was very much apparent in his remarks. We believe, however, that such a point is better reflected in the accompanying guidance to the Bill. I will ensure that my noble friend’s point is reflected as such.
Amendment 138B specifically seeks to add ignoring or denying consumer rights to the definition of a misleading action. Should a trader make a false or misleading claim about the rights that the consumer has, with a view to denying, ignoring or misinforming them, the existing wording in Clause 224(1)(a), which prohibits the provision of “misleading information” on a
“matter relevant to a transactional decision”,
would apply.
Amendment 140 on misleading omissions would in effect require information that is relevant to a decision about the purchase of a good or service to be provided to the consumer. I believe that the current Clause 225 is an appropriate requirement for information that a consumer needs to be provided. As this requirement is well established in law, it gives traders and consumers certainty on what the information requirements are. The amendment could also give rise to uncertainty in the legislation, which may place additional burdens on traders, such as the potential costs of gathering such information. Although I understand and appreciate what my noble friend is trying to achieve with this amendment, I believe that the Bill as drafted strikes the right balance between consumer protection and not overburdening traders.
Amendment 142 would add examples of where a trader is not acting in good faith to the definition of professional diligence in this chapter. I am grateful to my noble friend Lord Holmes for raising these issues. Misleading consumers in any way that may cause them to take a different transactional decision is already prohibited. Furthermore, there are specific provisions that protect consumers against undue influence and prohibit exploiting vulnerabilities. Clause 226, for example, protects consumers against aggressive practices that exploit any vulnerability. Given the nature of these exploitative practices, we consider that they would be better explained in guidance accompanying the Bill. I would be happy to discuss this with my noble friend ahead of that new guidance being prepared.
I thank my noble friend Lord Lindsay for tabling Amendment 143 to change what constitutes an invitation to purchase. Actions that are considered an invitation to purchase attract specific consumer rights. For example, traders making an invitation to purchase must provide the individual with the information listed in Clause 228. The Government believe that the changes proposed by this amendment would expand the definition too far; it therefore has the possibility of bringing with it unintended consequences. We are of course committed to protecting consumers. Provisions in Chapter 1 of this part of the Bill already achieve a similar aim to this amendment, prohibiting traders from making misleading statements or omissions in respect of all commercial practices.
Amendment 145B, tabled by my noble friend Lord Lucas, seeks to extend the discovery period of an offence under Chapter 1 of Part 4 of the Bill from one year to two years. Again, I understand his rationale for this. It can often take time for trading standards to gather the evidence to pursue a prosecution against a trader who is breaking the law. However, it is also a key principle of our justice system that investigations should be carried out efficiently and in a timely manner. This is important in protecting the rights of both consumers and those accused of criminal offences. We believe that one year to bring criminal proceedings following discovery is the right balance between expedience and giving authorities the time that they need to carry out investigations.
Lord Lucas (Con)
I am grateful to my noble friend for his answers, by and large, but I do not understand how Clause 245 is supposed to work. I cannot see how, in its wording, it provides protection for vulnerable persons. I look specifically at Clause 245(2), which states:
“References … to the average consumer … are to be read as references to an average member of the group mentioned in subsection (1)”,
which refers to a vulnerable consumer. So the wording of the Bill is reducing the level of comprehension required and therefore the level of information being provided for the comprehension of that vulnerable group. It therefore makes vulnerable groups open to exploitation. What am I misunderstanding here? In what way does Clause 245 provide additional protection for vulnerable groups? How does it raise the standards that traders have to meet when they are faced with a vulnerable group?
Lord Offord of Garvel (Con)
I thank my noble friend for that question. The intention of Clause 244, combined with Clause 245, is to afford a higher level of protection in legislation to those who are vulnerable. It sets out how the “average consumer” should be interpreted regarding vulnerable persons. Therefore, if there is some confusion about their rights having been diminished in some way when in fact the Bill is intended to enhance those rights, I think we should get clarification, so I will write to my noble friend on that matter.
Lord Lucas (Con)
I shall be clearer after reading my noble friend’s remarks.
Lord Offord of Garvel
“ScheduleChapter 1 of Part 4: consequential amendmentsAdministration of Justice Act 1970 (c. 31)
1 In section 40(3A) of the Administration of Justice Act 1970 (punishment for unlawful harassment of debtors), for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.Trade Descriptions Act 1968 (c. 29)
2 In section 12(3) of the Trade Descriptions Act 1968 (false representations as to royal approval or award, etc.) for the words from “and” to “2008” substitute “has the same meaning as in Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024 and, for the purposes of this section, a commercial practice is unfair if it would be unfair for the purposes of that Chapter”.Hallmarking Act 1973 (c. 43)
3 In section 1 of the Hallmarking Act 1973 (prohibited descriptions of unhallmarked articles)—(a) in subsection (4C) for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”;(b) in subsection (4D) for the words from “satisfying” to “action)” substitute “an unfair commercial practice involving a misleading action for the purposes of that Chapter”.Prescription and Limitation (Scotland) Act 1973 (c. 52)
4 In paragraph 1 of Schedule 1 to the Prescription and Limitation (Scotland) Act 1973 for paragraph (af) substitute—“(af) to any obligation arising by virtue of rights of redress under Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024;”.Companies Act 1985 (c. 6)
5 In paragraph 17 of Schedule 15D to the Companies Act 1985 (disclosures), omit sub-paragraph (k).Copyright, Designs and Patents Act 1988 (c. 48)
6 (1) The Copyright, Designs and Patents Act 1988 is amended as follows.(2) In section 114A(2)(bb) (forfeiture of infringing copies, etc.: England and Wales or Northern Ireland) for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(3) In section 114B(15) (forfeiture of infringing copies, etc.: Scotland), in paragraph (d) in the definition of “relevant offence”, for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(4) In section 204A(2)(bb) (forfeiture of illicit recordings: England and Wales or Northern Ireland), for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(5) In section 204B(15) (forfeiture of illicit recordings: Scotland), in paragraph (d) in the definition of “relevant offence” for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(6) In section 297C(2)(bb) (forfeiture of unauthorised decoders: England and Wales or Northern Ireland) for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(7) In section 297D(15) (forfeiture of unauthorised decoders: Scotland), in paragraph (d) in the definition of “relevant offence” for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.Trade Marks Act 1994 (c. 26)
7 (1) The Trade Marks Act 1994 is amended as follows.(2) In section 91 (power of commissioners for revenue and customs to disclose information), for paragraph (d) substitute—“(d) Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024.”(3) In section 97(8)(d) (forfeiture; England and Wales or Northern Ireland) for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(4) In section 98(14) (forfeiture; Scotland), in paragraph (d) in the definition of “relevant offence” for “the Consumer Protection from Unfair Trading Regulations 2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.Enterprise Act 2002 (c. 40)
8 In EA 2002—(a) in Schedule 14 (provisions about disclosure of information) at the appropriate place insert— “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024.”;(b) in Schedule 15 (enactments conferring functions) at the appropriate place insert—“Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024.”Licensing Act 2003 (c. 17)
9 -In paragraph 23 of Schedule 4 to the Licensing Act 2003 (personal licence: relevant offences), for the words from “regulation” to “2008” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.Companies Act 2006 (c. 46)
11 In paragraph 25 of Schedule 2 to the Companies Act 2006 (specified persons, descriptions of disclosures etc for the purposes of section 948), omit paragraph (j).Regulatory Enforcement and Sanctions Act 2008
12 In Schedule 3 to the Regulatory Enforcement and Sanctions Act 2008, at the appropriate place insert—“Digital Markets, Competition and Consumers Act 2024, Chapter 1 of Part 4.”Consumer Rights Act 2015 (c. 15)
13 (1) Schedule 5 to the CRA 2015 (investigatory powers: enforcer’s legislation) is amended as follows.(2) In paragraph 10—(a) omit “regulation 19(1) or (1A) of the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277);”;(b) at the appropriate place insert—“section 229(1), (2) or (3) of the Digital Markets, Competition and Consumers Act 2024.”(3) In paragraph 18(b) for “the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277)” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.Online Safety Act 2023 (c. 50)
14 (1) The Online Safety Act 2023 is amended as follows.(2) In section 59(6) (“illegal content” etc) for “the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277)” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(3) In section 218(3)(b) (power to amend section 40) for “the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277)” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.(4) In section 222(6)(b) (power to amend Schedule 7) for “the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277)” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”.”Member’s explanatory statement
This Schedule makes amendments that are consequential on the revocation of the Consumer Protection from Unfair Trading Regulations 2008 and the commencement of Chapter 1 of Part 4 of the Bill.
Lord Offord of Garvel
“(2) Schedule (Chapter 1 of Part 4: consequential amendments) contains further consequential amendments relating to this Chapter.”Member’s explanatory statement
This amendment moves the consequential amendments to primary legislation that were previously in clause 249 into a new Schedule (see my amendment to insert a new Schedule after Schedule 19). The new Schedule contains the moved consequential amendments and additional ones.
Baroness Jones of Whitchurch (Lab)
My Lords, I will speak briefly on this group because I am very aware that we will have a more substantive debate on subscriptions in the coming groups, so forgive me if I am very brief on some of the issues raised.
I am very grateful to the noble Lord, Lord Lucas, for his amendment. We have consistently argued for clarity, and he is right to hold our feet to the fire over the meaning of the consumer bringing the contract to the end. I am grateful for him probing a little more on what that actually means, and I look forward to hearing the Minister’s clarification on this.
I was concerned when I first read the amendments of the noble Lord, Lord Clement-Jones, that they seemed to be an unnecessary watering down of the rights of consumers under the consumer contracts regulations and introduced some ambiguity where there had previously been clarity. He has gone some way to clarifying what he meant by this. It is very unusual for me to be at odds with him. He might know far more about the subject than I did, because I was just going on what I was reading. I would be happy to talk to him more about it.
I of course understand that some mobile devices are too small to display complex pre-contract information. I am sure that we have all been guilty of ticking the box to say that we accept the terms and conditions when we have not actually read them. However, there should be a responsibility on traders to publish the pre-contract details in a simpler form, using better digital design, rather than being given more legal flexibility about how that information is communicated, which rather lets them off the hook. Maybe this is a discussion that we could carry on outside this debate.
Meanwhile, I am grateful to the noble Lord, Lord Mott, for raising the question of microbusinesses and what conditions should apply before the subscription contract regime kicks in. He raised a very interesting question which I have some sympathy with, about very local traders in a locality such as a farmer’s vineyard. I would be interested to hear what the Minister has to say on this, because we need to protect against the unintended consequences of what he is saying. We need to double check that we are not encouraging rogue businesses to re-describe themselves to get through the loophole, but I am sure that he will address that point when he replies.
As noble Lords can see, I am sitting on the fence on most of these amendments, and I am happy to stay there for the time being. I look forward to hearing what the Minister says, which might persuade me either way.
Lord Offord of Garvel (Con)
I thank noble Lords for their contribution to the group of amendments, which is concerned with subscription contracts. I again thank my noble friend Lord Lucas for introducing this topic and for his amendment. Amendment 148 would alter the definition of a subscription contract, meaning that contracts where a consumer does not have the right to bring a contract to an end would be brought within the scope of the chapter.
If we were to expand the definition in this way, many parts of the chapter would serve no purpose. For example, if a consumer were to enter a one-year contract for a service which had fixed payments spaced throughout the year, but the contract expires automatically at the end of the year and no further payment would be taken, the consumer would not need regular reminder notices about their contract as they would not have the right to end that contract before it expires. If, however, the contract automatically renews at the end of the year, rolling over into to another year-long contract, then the consumer has an opportunity to bring a contract to an end and therefore would benefit from being reminded that they can end their contract before it auto-renews.
I will give another example, as my noble friend requested, which may illustrate the point more clearly. If a consumer were to enter a contract with a builder for house renovations and pays in instalments, the consumer would rightly not have a right to cancel the contract before the payment period ends. The provision in the Bill would therefore not apply. Of course, where contracts do not contain a right to be brought to an end, they will continue to be regulated by the existing consumer contracts regulations 2013, where applicable. I hope that my noble friend finds this explanation satisfactory, and that he will therefore feel comfortable withdrawing his amendment.
Lord Clement-Jones (LD)
I thank the Minister for the way he has set that out. Will he explain how much consultation there was and the nature of it over the introduction of Schedule 21?
Lord Offord of Garvel (Con)
I think I should write to the noble Lord to give that in detail.
I turn to the exclusion for microbusinesses. Amendments 148A and 148B, tabled by my noble friend Lord Mott, would replace the requirement for a business to be unincorporated in order to benefit from the delivery of foodstuffs exclusion, with the requirement to be a microbusiness as per Section 33 of the Small Business, Enterprise and Employment Act 2015. The purpose of the unincorporated aspect of the exclusion is to safeguard against larger businesses restructuring in such a way as to benefit from the exclusion, ensuring that only microbusinesses benefit and that there is greater consumer protection in the food subscriptions market.
My noble friend has raised an interesting point about the application of this chapter to certain incorporated microbusinesses, such as local farm shops, that I am keen to explore. However, the amendment as drafted may not work as intended. That is because Section 33 of the Small Business, Enterprise and Employment Act sets out only broad criteria by which microbusinesses should be defined and defers much of the detail to regulations that have yet to be made. With that said, I am happy to work with my noble friend further to understand his concerns and to ensure that the exclusion captures the right businesses. I therefore hope he is suitably reassured.
In her remarks, the noble Baroness, Lady Jones, raised the important point about ensuring that the exclusion for microbusinesses remains narrow and well-targeted to ensure maximum consumer protection. I wholeheartedly agree with her on this matter, and I assure her that that is the Government’s intention. I thank noble Lords once again for their amendments and for their valuable contributions to this debate.
Lord Lucas (Con)
I am grateful to my noble friend for his response to my amendment, which I will read with care when I have Hansard in front of me. For now, I beg leave to withdraw the amendment.
Lord Bassam of Brighton (Lab)
My Lords, I congratulate the noble Lord, Lord Mendoza, for scripting such a simple and clear amendment. We are acting as co-signatories, and it seeks, very simply, to exempt third sector charities from the effective limitations on subscription contracts in the Bill.
I appreciate that there have already been several attempts to find a solution to this conundrum, including amendments in the Commons. I understood that Ministers were not particularly attracted to this solution, which seeks to list charity membership subscriptions which qualify for gift aid as an excluded contract pursuant to Clause 253. We were a bit reassured by the letter that Kevin Hollinrake, the Minister in another place, wrote to the National Trust, setting out the Government’s position. He said that it was not their intention to create uncertainty about how different legislation might apply. His letter, dated 23 November, also said that cross-departmental work was being undertaken to consider whether clarification would be beneficial. Having listened to everybody this evening, it is pretty clear that it would be beneficial.
If this approach does not meet the happiness threshold for Ministers, this debate is the opportunity for the Minister to explain where the Government’s internal departmental thinking has got to and what other solutions might be available. The Minister argued in his letter to the National Trust that Chapter 3 of Part 4 is unlikely to apply because there is no contract to be deemed a subscription contract. Given the net value of gift aid to charities—for the National Trust it is £47 million, English Heritage is £100 million et cetera—we think there needs to be clarity. We cannot leave a degree of uncertainty. It certainly does not appeal to us to do that at this stage, given the law of unintended consequences. We cannot rely on an assurance that it is deemed unlikely that the legislation would have the effect that many of the charities that we have been talking to have said it would. The charities need certainty and clarity as well.
If it is not this amendment, what amendment will be brought forward? As the noble Lord, Lord Clement-Jones, said, carnage could definitely occur on Report if we do not get a ready-made solution. It needs to be put right and put right now.
Lord Offord of Garvel (Con)
I am extremely grateful to my noble friend Lord Mendoza for moving this amendment and for his compelling speech. I also thank other noble Lords who spoke so passionately on this issue.
Amendment 149 would exclude charity membership subscription contracts eligible for gift aid from the scope of the Bill’s subscription contracts chapter. Many of us have heard strong representations from stakeholders on this matter and it has been valuable to hear the contributions from noble Lords today. It is clear that a number of charitable organisations have concerns about the interaction between the Bill, the existing gift aid rules and the potential implications for their operating models.
Like everyone who spoke, I fully understand the valuable additional income that gift aid provides to charities; as my noble friend Lord Vaizey put it, we are absolutely on the same page as far as that is concerned. Moreover, I assure your Lordships that it is absolutely not the Government’s intention to undermine this critical income for charities.
Lord Bassam of Brighton (Lab)
Before the Minister replies to that point, what is it about the amendment moved by the noble Lord, Lord Mendoza, that is so objectionable? I heard the Minister say that charities are not usually excluded from the effects of legislation in the way that the amendment suggests, but I do not see why they could not be made exempt for this particular purpose.
Lord Offord of Garvel (Con)
I thank both noble Lords for their interventions. To take the latter point first, it is absolutely the case that charities are required to live within the statute book generally and are not given exclusions. To take the point made by the noble Baroness, Lady Young, I accept that there are commercial elements to these donations. That may not be the primary purpose but they are commercial none the less, and there are examples where benefits are given to donors in return for donations.
Baroness Young of Old Scone (Lab)
That is the exact opposite of what I was trying to get across, so obviously I was not being very clear. The point is that the vast majority of donors give donations to an organisation for the good work that it carries out, rather than because it is a subscription to a particular service. It is therefore not a transactional relationship. It is not, “I will pay you to get this delivered”; it is, “I will pay you because you do really good stuff and I want you to keep doing it”. It is a non-transactional relationship, while subscription contracts are a very transactional relationship. That is the point I was trying to get across.
Lord Harris of Haringey (Lab)
My Lords, the Minister said that he would come back on Report, but it would be helpful if he would come back before Report so that all noble Lords can consider how he does so and table amendments accordingly.
Lord Offord of Garvel (Con)
I thank noble Lords for their contributions. I can confirm that we will come back before Report. The objective is to get a solution for this issue and to have a satisfactory outcome, so that we avoid carnage in the other place.
Lord Mendoza (Con)
My Lords, I am so grateful for the support of noble Lords. The range of experience and advice we have had in this Room is admirable. It is incredible and so helpful that we have the chairman of the Fundraising Regulator right here. I am grateful for the comments of the noble Lord, Lord Harris, and the interjection of my noble friend Lord Vaizey. I had the same thought.
Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
Read Full debateWednesday 7th February 2024
(9 months, 2 weeks ago)
Grand CommitteeDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: HL Bill 12-VI Sixth marshalled list for Grand Committee - (5 Feb 2024)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
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Lord Clement-Jones (LD)
My Lords, this has been very interesting debate. There is a common theme—that these clauses are a very blunt instrument. At one end of the spectrum, we have the amendments in the name of the noble Baroness, Lady Jones, which attempt to get to grips with what this is all about and whether these clauses are fit for purpose; and at the other end we have had clear demonstrations that they are not. I am very grateful to the noble Lord, Lord Black, in particular, for his comprehensive and persuasive introduction. I started off fairly convinced of the case—I did not sign all his amendments, but I signed two clause stand part notices—but, like the noble Lord, Lord Bassam, I am now pretty convinced that the clauses are not quite fit for purpose. For the digital economy, we need to be much more wary about how the prescribed cooling- off period works.
I started off thinking that this is an issue that only the subscription and video-on-demand side should be concerned about, but having listened to the noble Lord, Lord Black, I realised that there is a much wider set of interests. The noble Lords, Lord Lucas, Lord Vaizey and Lord Bassam, described a much wider landscape that should be concerned.
I started by considering the disruption to subscription video-on-demand services—the so-called streamers. That is why I signed the notice from the noble Lord, Lord Black, opposing Clause 262 standing part. All the representations I received pointed out that this is really business-critical for UK operators such as Netflix and Disney+. I think the noble Lord, Lord Vaizey, used the expression binge-watch; if you can do that and get a refund, why bother keeping your subscription? We need to make sure that those services are safeguarded.
A number of noble Lords pointed out that Ministers in both the Commons and this place have expressed concern, saying that they understand the issue and are going to consult; but in the meantime, there is a huge amount of uncertainty. We potentially have it in black-letter law that the cooling-off periods are as set out in the Bill. We do not know what kind of consultation will take place, what kind of flexibility might be operated, and so on. In the meantime, we have a perfectly workable set of consumer contract regulations, which the parties would be happy to apply. That was very much the case the noble Lord, Lord Black, rightly made.
Important principles are set out in the CCRs, such as that consumers can request that the supply of digital content begins before the end of the 14-day cancellation period. So it is perfectly possible to have a provision that safeguards both the service provider and the consumer in these circumstances, but that principle is not imported into the Bill. I do not know why. On Monday, I asked the Minister what consultation had taken place. I have used the expression “blunt instrument”, but these are really important new provisions. The noble Lord, Lord Bassam, was absolutely right: they are based on the best of intentions, but they are so blunt that they will be a real problem for some of our digital services.
I hope the Minister will not regard our proposals as “not invented here”, and that the Government will not motor on with these provisions without taking a long, hard look at them. This is one of those circumstances where we would all be a lot happier if we reverted to a regulation-making power, got rid of some of these clauses and had a proper super-affirmative provision in the Bill, for example, enabling a discussion about all these aspects of subscription contracts. We heard about the absolute unhappiness with the impact on charities and gift aid when discussing the previous group; that demonstrates the total bluntness of these provisions. I do not think anybody will be very happy with them —the charities, the streaming businesses, the subscription media services or the dating services. There is a huge amount of unhappiness, which I hope the Minister will respond to.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
I thank noble Lords and noble Baronesses for their amendments and their interesting and informed contributions to the debate on this first group of amendments, on subscription contracts.
I will first address the amendments tabled by my noble friend Lord Lucas, which relate to the cooling-off period. Amendments 168 and 191 would create an additional requirement for businesses to inform consumers of the charges they may incur if they use a subscription but later cancel their contract during a cooling-off period. I agree that it is important for consumers to know what charges they could incur when they exercise a right to cancel during a cooling-off period. However, I assure my noble friend that the Bill already makes sufficient provision for this. The full pre-contract information listed in Schedule 21 provides information on the consequences of a consumer exercising their right to cancel during a cooling-off period. This includes information on any refund the consumer may be entitled to and any reason why that refund might be diminished. That information must be given or made available to consumers as close in time as is practicable to a consumer entering into the contract. Therefore, although I appreciate the intent behind my noble friend’s amendments, I hope he is reassured that sufficient provision is already made in the Bill.
Lord Clement-Jones (LD)
My Lords, I am sorry to interrupt the Minister, but it might give the Box a chance to answer the question before the end of his response. Do the current provisions in the Bill contain the principle that I mentioned, which was set out in Regulation 37 of the consumer contracts regulations, where consumers can request that the supply of digital content begins before the end of the 14-day cancellation period, acknowledging that they would then cease to have the right to cancel from that point of supply? If not, why not, as that would be the ultimate protector of these digital services?
Lord Offord of Garvel (Con)
I will come to that once I have some input from behind me. This is obviously a key part of the group.
Amendments 169 and 193, tabled by the noble Baroness, Lady Jones of Whitchurch, address the provision of information in relation to the consumption of digital content during the renewal cooling-off period. I understand that the noble Baroness wishes to ensure that the Bill provides sufficient protection for digital streaming platforms if a consumer has accessed digital content and then cancels their contract during the renewal cooling-off period. The Government will consult on the relevant return and refund rules that apply in this situation and other similar circumstances. This will ensure that rules are fair and practical for businesses and consumers. It will also enable consideration of any specific issues for particular industries or circumstances if needed—for example, digital content, perishable goods or bespoke products.
As part of that consultation, we will include a policy proposal of introducing an explicit waiver from refund rules for digital content, recognising the circumstances that the noble Baroness set out. We aim to consult before the end of the year. This is directly to avoid the scenario that these digital steaming firms fear. It is also important that those rules can be reviewed—
Lord Clement-Jones (LD)
My Lords, I apologise. If the Minister is undertaking this consultation and looking at a provision of that description, can he also describe which power, in the part of the Bill we are dealing with, will give the Secretary of State the ability to do that, as well as the process by which it would be introduced and the timing?
Lord Clement-Jones (LD)
My Lords, it could answer the Regulation 37 question.
Lord Offord of Garvel (Con)
The point is that we have to consult on this. The matter has been raised by all sides of the Committee and there are specific reasons for it. The consultation is as it says. Rather than trying to go through this line-by-line at the Dispatch Box, I will try to set it out in writing for everyone, so that we can see exactly what we mean by it. If I have any input in the meantime from behind me, I will share it with noble Lords.
I turn now to the clause stand part notices tabled by my noble friend Lord Black—that Clauses 262, 263 and 264 should not stand part of the Bill—and his consequential Amendment 194. The net effect of these changes would be to reverse the cooling-off period in the Bill to the status quo established by the 2013 consumer contracts regulations. In particular, the cooling-off period for consumers after a free trial or year-long subscription automatically renews, introduced by this Bill, would be removed. The Government’s objective is to protect consumers from the specific harms associated with subscription contracts, while also considering the needs of businesses. We believe that the Bill correctly finds that balance. The Government expect that the protections provided through the Bill will have £400 million- worth of consumer benefit per year.
This measure protects consumers who have signed up to a trial period that then rolls into a higher-cost term. It also applies when contracts automatically renew on to a period of 12 months or longer, which usually, by definition, incurs a substantial financial outlay. Indeed, our consultation showed that many people forget to end their subscriptions before they automatically renew, especially after a trial, so we view this as an important provision that must remain in the Bill.
We understand that some businesses, particularly digital streaming services, are concerned about how the cooling-off periods will work in practice. As I mentioned, noble Lords should be assured that we will publicly consult on the cancellation return and refund rules to make sure that we get this right and—to be clear—to avoid refunds being payable to consumers exploiting the cooling-off period. The Bill allows for the Secretary of State to make the necessary regulations by affirmative procedure. That will be done before the subscription rules come into operation, following the consultation. I hope that this reassures the noble Lords on these points.
I turn now to the final amendments in this group, Amendments 221 and 224, also tabled by my noble friend Lord Black. The amendments would mean that the subscription contract provisions in the Bill come into force two years after the day on which the Act receives Royal Assent. The Government fully understand that businesses need clarity about when the new rules will come into effect and that they need sufficient time to make appropriate preparations. I am pleased to assure noble Lords that the subscription regulations will commence no earlier than October 2025. In the meantime, we will continue to engage with stakeholders to understand the impact of implementing the new rules and to ensure that businesses have enough time to adapt their operations accordingly.
The detail on return and refund rules will be set out in secondary legislation and the Government have committed to consult publicly on those rules. Clause 265 gives the Secretary of State the power by regulations to make further provision in connection with the consumer’s cooling-off right. Those regulations are subject to affirmative procedure, which I hope will assure my noble friend. I am grateful for my noble friend’s amendments and I hope that he feels reassured by my remarks.
Baroness Jones of Whitchurch (Lab)
Did the noble Lord get a response from the Box?
Lord Offord of Garvel (Con)
The Box feels that the point has been covered—but I will write to noble Lords and cover it with them.
Lord Lucas (Con)
My Lords, I am grateful to my noble friend for his positive reply to my first amendment, where the use of a subscription during the cooling-off period is covered by the powers in the schedule. I was not clear about that on reading it, so it is good to know. As I understand it, nothing in the Bill would prevent a trader from saying to a person, “No, you cancelled a subscription before. I am not going to let you take out a new one.” There is no right of a person continually to enter into subscriptions with the intent to cancel. They can do it once and then they have been rumbled. That is my understanding. If I am wrong, I hope that my noble friend will correct me.
I should also be grateful if he gave me some guidance in relation to Amendment 192 on the meaning of “give” in Clause 264(1), which I do not see defined in any way. When the consumer has to be given a notice, does that imply that the consumer receives it? Email addresses go in and out of use. People change them. There can be blockages of various kinds on them, because some were paid for, or some may be limited by size. One could get into a situation where the trader may think that the person has done something and has sent out the notice but it has never got through, or it can get into someone’s spam trap or, as in this place, it can be blocked by someone else’s spam arrangements of which one would not have cognisance.
My interest in Amendment 192 is whether it would be fairer to do this by making sure that the notice had been received by having some acknowledgement from the subscriber. I cannot see, as an operator of a subscription service, that this is difficult to deal with—one just does not renew until one gets the confirmation, which is a click on the screen. That is not difficult to implement. If we just have “give” as a loose term in the clause, it will allow people to continue saying, “We told you but not in a way in which you are ever likely to notice”—as in The Hitchhiker’s Guide to the Galaxy. We should try to avoid that in the Bill, so I should like to see if it is possible to get something firmer by way of making sure that the consumer knows that they are renewing the contract. That said, I look forward to subsequent conversations with my noble friend and I beg leave to withdraw the amendment.
Lord Offord of Garvel (Con)
My Lords, we come to the second group of amendments, on subscription contracts and reminder notices. Again, I thank all noble Lords for their amendments and interventions. I appreciate that there is a lot of interest in this area of the Bill and I look forward to continuing this discussion with noble Lords between now and Report.
I will first address the amendments tabled by my noble friend Lord Black of Brentwood, for which I am most grateful. Amendments 170 and 175 to 184 relate to reminder notices. The requirement to send reminder notices is one of the targeted duties that we are placing on traders to ensure that consumers pay only for subscription contracts that they want or need. Of course, we recognise that there is a balance to be struck and we have listened to views from a range of stake- holders to ensure that we get this right. Indeed, the Government made changes to the reminder notice provisions in the other place following further consultation with industry. The Bill reflects the Government’s commitment to delivering proportionate regulation, ensuring that consumers are suitably protected from the harms of subscription traps without overburdening businesses.
I wish to reassure my noble friend that for an average monthly subscription contract, a trader will have to send only one reminder notice within a six-month period. We believe that this strikes the right balance between informing consumers about their subscriptions and not overburdening businesses.
Reducing the frequency of reminder notices, as my noble friend’s amendment seeks to do, would increase the risk that consumers end up paying for unwanted subscriptions for longer periods. To be clear, the Bill already allows for the Secretary of State to make regulations to update or modify these provisions in a number of ways, including the frequency, content and timing of reminder notices. This ensures that the Government can adapt the reminder notice requirements in future if evidence about consumer behaviour or operational practice indicates that adjustments are necessary.
Amendment 189 relates to end-of-contract notices, which a trader must send when a consumer has ended or cancelled their contract. In a similar way to my noble friend’s other amendments, Amendment 189 seeks to remove detail from the Bill. However, as with reminder notices, we think that the requirements for end-of-contract notices strike the right balance between informing consumers and not overburdening businesses.
Amendments 185 to 188, which relate to contract cancellations, were also tabled by my noble friend Lord Black. The Government are committed to the principle that consumers should be able to easily exit their subscriptions if they wish and businesses should not place undue barriers to doing so. Consumers should not, for example, be hindered when trying to leave a subscription contract or when stopping its renewal. Those are the principles behind these provisions.
However, I can assure my noble friend that we are continuing to listen to businesses and other stakeholders. We are absolutely committed to ensuring that this legislation gets the balance right between protecting consumers and supporting businesses. We of course appreciate that any communication to end a contract must be clear to a business. That is why, in the event of a dispute, the onus is on a consumer to prove that their method of ending the contract or cancelling it is sufficiently clear to the business for these purposes.
I hope that this lays to rest any concerns that your Lordships might have that a single tweet into the ether or a message via carrier pigeon, as suggested by my noble friend Lord Vaizey, could be an acceptable means of a consumer leaving a contract. We will also provide clarification through guidance for these kinds of scenarios and engage with stakeholders as we develop it. Furthermore, the Government are clear that nothing in the easy-exiting principle should prevent a trader from requesting voluntary feedback from a consumer who wants to end their subscription or from offering to give the consumer information on other products. However, these must not unduly hinder the consumer from ending their contract.
For the reasons that I have set out, including our commitment to continue to get feedback from all stakeholders on these issues, I hope that my noble friend will feel able not to press his amendments and that noble Lords who spoke to the amendments feel suitably reassured.
Amendments 173 and 174 were tabled by noble Baroness, Lady Jones of Whitchurch. Amendment 173 would impose a requirement on traders to ask their customers to agree, before entering the contract, that their subscription will renew automatically every six months or, if the period between renewal payments is longer than six months, agree each time payment is due. Amendment 174 would apply equivalent requirements but would also accommodate contracts that renew automatically after a free or low-cost trial.
I agree wholeheartedly that consumers must be protected from getting trapped in unwanted subscriptions. However, as I mentioned, the Government’s position is that the Bill currently strikes the right balance of protecting consumers without overburdening businesses and potentially reducing consumer choice. Requiring opt-ins would burden businesses and consumers with emails requiring them to confirm that the subscription can continue. Consumers who forget could inadvertently see their favourite subscriptions lapse.
I turn now to Amendment 190 in the name of the noble Viscount, Lord Colville of Culross, which would ensure that consumers can have their non-personal data returned to them after they cancel their subscription contract and would stop traders continuing to use this data. I thank the noble Baroness, Lady Jones, the noble Lord, Lord Clement-Jones, and my noble friend Lord Lucas for their contributions on this issue. I assure the noble Viscount that, where data can be used to identify a living individual, this information is already protected by the UK GDPR regime; statutory provisions therefore exist for it to be returned to a consumer. This includes data that is directly identifiable to an individual, or indirectly identifiable from that data in combination with other information.
For information that may be considered non-personal or anonymised, the Data Protection and Digital Information Bill will create a test in legislation to help organisations understand whether information is personal or anonymous. This will help bring clarity to businesses as to how to process the type of information the noble Viscount discussed. I am grateful to the noble Viscount for his amendment and hope he feels satisfied with my explanation.
Finally, I turn to the points made by my noble friend Lady Stowell. I assure her that the Government consulted on the principles of the Bill in 2021 and will publicly consult on the details of the return and refund rules. The purpose of consulting on those rules is to take account of a wide range of products, including perishable and bespoke products and services, that have been used during the cooling-off period; that is why we think it appropriate to set out this detail in secondary legislation following the consultation. I am grateful to my noble friend for her remarks and hope she feels satisfied with my explanation.
Lord Clement-Jones (LD)
Can the Minister reassure me that he will write to say how these provisions were consulted on? There is further work to be done, clearly, but it would be good to know what baseline consultation was carried out for all these extremely new, comprehensive, detailed—and sometimes vague—provisions. That is an important part of the knowledge we need to have going forward.
Lord Offord of Garvel (Con)
I thank the noble Lord and agree that it would be helpful for all of us if this were written down so we could examine it in more detail.
Lord Offord of Garvel
Member's explanatory statement
This amendment ensures that both limbs of the test of whether a trustee is independent of the trader in relation to a trust need to be satisfied.
Lord Offord of Garvel (Con)
My Lords, I am delighted to speak to this group of amendments, and I thank my noble friend Lord Holmes, the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones, for their amendments. I will first briefly address the government amendments, and the other amendments in my closing remarks.
Amendment 195 is a minor and technical amendment which aims to clarify independence requirements for trustees overseeing funds in a consumer savings scheme, strengthening safeguards against potential conflicts of interest. Trustees must have no association with the trader or interests in the trader’s assets, ensuring that funds are controlled for the benefit of savers and independently of the trader.
This measure is essential to safeguard consumer funds against insolvency and ensure that they are used for their intended purpose. I hope that noble Lords will accept this amendment. I look forward to addressing in closing any questions or points that they may have about the amendments in this group. I beg to move.
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to follow my noble friend, if not for the fact that it seems we are going backwards and forwards at the same time, which is always a good state be in. As this is the first time I have spoken on day six in Committee, I restate my technology interests, as set out in the register, as adviser to Boston Ltd.
My two amendments in this group are concerned with artificial intelligence. It is a truism, self-evident and barely in need of stating, that artificial intelligence is already impacting many aspects of our lives—as citizens, as consumers, as businesses and as a country—so it would seem timely to review all the relevant legislation to assess its competence to deal with the challenges, opportunities and risks that AI presents for us in all those roles and capacities. I shall say more on that next month.
Today, within the scope of this Bill, Amendment 199 suggests that all legislation concerned with consumer protection be reviewed to assess its competence to deal with the challenges, opportunities and risks inherent in artificial intelligence. It is clear that a number of the concepts and provisions within consumer protection legislation and regulation will be applicable and competent to deal with AI, but there is a huge gulf between what is currently set out in statute and what we require when it comes to making the best of what we could call this future now. I shall give just one example: if we consider how algorithms are set up simultaneously to push voraciously certain content while holding back other content, it is very difficult to see how consumer protection legislation is set up to deal with that challenge. That is but one specific example.
Amendment 200 goes to the question of consumer protection and the need to label all products and services where AI has been used or is built into that product or service so that the customer can know that and determine whether she or he wishes to avail herself or himself of that product or service. In no sense would this amendment require great burdens to be placed on business in bureaucracy, administration or cost. In many ways, this is yet another example of “set AI to solve an AI problem”, with human in the loop and human oversight always present.
I suggest that these two amendments, taken together, would enable the Bill to speak positively and in a timely manner on the opportunities, risks and threats to all of us, and to try to get the optimal deployment of AI in this context when it comes to consumer protection. I look forward to the Minister’s response.
Baroness Jones of Whitchurch (Lab)
Gosh—I cannot help feeling that this is the beginning of a much longer conversation. We may not want to have that conversation now, but this is an important issue; I absolutely understand why the noble Lord, Lord Clement-Jones, is raising it. We need to find a way to ensure that consumers are properly informed.
On standard-essential patents, I am grateful to the noble Lord, Lord Clement-Jones, for explaining the background to his amendment. Again, this is an issue with which I was not familiar, but the noble Lord spoke persuasively. I hope that the Minister will agree to follow up on the Intellectual Property Office’s review and provide some reassurance that the issue is in hand.
The Minister will be pleased to hear that we support his Amendment 195. With that, I look forward to hearing his response to the various issues that we raised in this group.
Lord Offord of Garvel (Con)
My Lords, I thank noble Lords for their valuable contributions on the amendments in this group. I will address each one in turn.
I thank my noble friend Lord Holmes of Richmond for his Amendments 199 and 200, relating to consumers and artificial intelligence. I also thank the noble Lord, Lord Clement-Jones, for his remarks on this matter.
Lord Clement-Jones (LD)
Can the Minister do any better than “in due course”? Perhaps he can say “shortly”.
Lord Offord of Garvel (Con)
In a matter of time. Why do we not get the Box to define “in due course”?
I therefore assure the noble Lord that the Government’s position on what interventions may be appropriate in respect of standard-essential patents, including specifically on injunctions, will be set out more clearly in the very near future. As the Government are already addressing this issue and are due to make their policy position public soon and separately, I hope the noble Lord feels able not to move his amendment.
For the reasons set out, I hope noble Lords will not move their amendments.
Lord Offord of Garvel (Con)
My Lords, I thank the noble Baroness, Lady Jones of Whitchurch, for her amendment, which the noble Lord, Lord Leong, spoke to so eloquently. I also thank the noble Lord, Lord Clement-Jones, for his amendment and my noble friend Lord Moynihan for adding his contribution on a subject he speaks about with great passion. I recognise that many noble Lords have a great interest in ticketing an on a personal level, as an avid sports fan, I share a lot of their frustration.
Buying on the secondary market is a matter of consumer choice. So long as consumer rights are complied with, the Government do not wish to prevent consumers having that choice. In recent years, the Government have further strengthened those rights with respect to secondary ticketing. In 2015, we legislated to ensure that consumers received fuller information on tickets they were buying on the secondary market. In 2016, we commissioned an independent study of consumer protection in the secondary ticketing market under an economist, Professor Waterson. He concluded that, providing they were enforced, the measures in the Consumer Rights Act 2015 should be sufficient to protect consumers. He also noted that there was more the primary market could do to help consumers get tickets there.
Since then, enforcement work undertaken by the CMA and trading standards has resulted in better information being provided by platforms, and the successful prosecution and fining of a number of ticket touts. We have also added further clarifications to the CRA and introduced legislation outlawing the use of bots to buy tickets for profit, on which I know my noble friend Lord Moynihan was very influential. I thank him for his work in this area. The current legislative framework is producing successful enforcement action. It will be strengthened further by the provisions in Part 3 of the Bill.
I turn to the amendment in the name of the noble Lord, Lord Clement-Jones, on ticket limits. In the last year, the Government have consulted further with the industry on applying limits on ticket purchases in the primary market to sales in the secondary market, in line with the commitments in the response to the CMA recommendations. However, we continue to believe that this will be difficult in practice. The Government’s approach—
Lord Clement-Jones (LD)
My Lords, I am sorry to interrupt the Minister. How often do the Government turn down very firm recommendations from a regulator that knows the market, such as those made in the secondary ticketing report? It is quite unusual and rather like they are second-guessing the regulator. The Minister said that it is impractical, but is the regulator not in the best position to decide whether that is the case and whether it can be enforced?
Lord Offord of Garvel (Con)
I thank the noble Lord. Yes, the Government absolutely expect the CMA to do its job but in the consultation which comes from that, there are other voices to be heard and other stakeholders to be listened to. As I said, in 2016 we had an independent study on the secondary ticketing market and we went to an economist, Professor Waterson, to give us his opinion on these matters. There is a balance to be struck.
Lord Clement-Jones (LD)
I am sorry, but Professor Waterson could not have been clearer in his 225 pages—and that was in 2016, so we have had quite a long time to chew over his recommendations.
Lord Offord of Garvel (Con)
I thank the noble Lord. The Government’s approach is definitely always to protect consumers, where necessary, and to ensure that business regulation is proportionate. We do not believe that the evidence to date justifies new and onerous secondary ticketing measures. Indeed, it may drive sellers to try to avoid compliance by selling on social media or platforms beyond the reach of UK enforcers, making buying riskier. Banning resales or resale for profit altogether risks reducing consumer protection. For example, Ireland has banned resales, yet Taylor Swift tickets for Dublin are on offer for similar prices to those at Wembley.
Lord Moynihan (Con)
I have listened to my noble friend’s argument, but what does he think the reasons would have been for the Government to ban the secondary ticket market for the Olympic and Paralympic Games?
Lord Offord of Garvel (Con)
My noble friend Lord Moynihan, who was intimately involved in them, will know about the specific case arising there. In general, the feeling in the department is that we wish to protect consumers by keeping this activity within a regulated environment. If we ban it outright, we fear that we will drive the secondary market underground. We see evidence of that in everyday activity, including concerts and football matches. We worry about what happens as sales move out of reach of the local regulators and on to the black market.
I appreciate the points made by my noble friend, who speaks passionately about this topic; I know that he cares deeply about it. On his points about football, for example, I point out that ticket resale is banned in the football market in England and Wales for public order reasons. That does not mean that we should extend it to other markets, for the reasons I have set out. I hope that noble Lords will not press their amendments.
Lord Leong (Lab)
My Lords, first, I thank the noble Lords, Lord Moynihan and Lord Clement-Jones, so much for their very kind words. This is really personal; I took a lot of time to look into this. I thank noble Lords and my friend Sharon Hodgson for their relentless and tireless work here and in the other place. I hope that, with this Bill, we can help to move this issue forward.
The days of ticket touts in dirty macs standing outside venues is gone—well, not quite: they have been replaced by bots. We have to address this. There are still examples of bad behaviour, as the noble Lord, Lord Clement-Jones, mentioned. If we do not do anything about it, the bad behaviour will continue. With the deepest respect, I humbly disagree with the Minister: this is not consumer choice; this is consumer exploitation against consumer protection. How many more consumers need to be fleeced before we do something about this?
Lord Offord of Garvel
Member's explanatory statement
The amendment would ensure that when an application to vary an accreditation is made, the Secretary of State can make variations that differ in any way from what is applied for, and not just variations that are less onerous.
Lord Offord of Garvel (Con)
My Lords, I will speak briefly to the government amendments in this group. I look forward to hearing from those who have other amendments in the group, which I will address in my closing remarks.
Amendments 203, 204 and 205 are minor and technical amendments to Clauses 295 and 296. They clarify that the Secretary of State has flexibility to impose suitable limitations and conditions on an ADR provider’s accreditation, including to reassess existing conditions, when an ADR provider applies to alter its accreditation or breaches its accreditation requirements.
Amendments 210 and 211 make consequential amendments to other legislation, including updating statutory provisions which extend limitation periods to facilitate ADR, to ensure that ADR does not result in consumers being timed out from taking court proceedings. I hope that noble Lords will accept these minor amendments, and I look forward to a debate today on ADR. I beg to move.
Lord Etherton (CB)
My Lords, I draw attention to my Amendment 209 in this group. It would require the Secretary of State, within 12 months of the commencement of Chapter 4 of Part 4, to complete a review of the provision of alternative dispute resolution—ADR—in relation to consumer contract disputes in each relevant sector. It would also require the Secretary of State to publish a report on the steps the Government intend to take to ensure the provision in each sector of accessible and affordable ADR for the resolution of consumer contract disputes.
Chapter 4 of Part 4 addresses the issue of ADR, subject to the government amendments currently being proposed. Essentially, these provisions are concerned with the terms of accreditation of ADR providers. What is lacking is any provision for making ADR schemes more available and accessible for the resolution of disputes, or even any provision for a review of potential ADR arrangements for inexpensive, speedy and efficient disposal of consumer disputes.
The noble Baroness, Lady Jones of Whitchurch, has two amendments in this group that would improve the position. One relates to a money award under ADR that is enforceable in the ordinary courts and the other seeks a review of ADR in the aviation sector. I support both those amendments, but my provision is much wider; it calls for a more general review, by the Government, of appropriate arrangements for ADR across the various economic sectors.
Earlier in Committee, I tabled my amendment on the introduction of class actions for consumer disputes, under Chapter 7 of Part 1. The Minister, the noble Viscount, Lord Camrose, said that the Government opposed anything that would provide complexity of litigation at this stage. ADR is at the other end: it provides a very accessible, simple and straightforward means to resolve consumer disputes that should be relatively inexpensive. Resorting to court proceedings is always expensive and time-consuming. They can also be intimidating for consumers. The current delays in the delivery of civil justice are well known.
It is significant that the Government are well aware of the desirability of ADR in other areas that may, in policy terms, be broadly described as those that concern consumers. In the Renters (Reform) Bill, currently in the other place, there are provisions for landlord redress schemes in the private rental sector. It is likely that all private landlords will be required by regulations to join such schemes, which will, in effect, provide an ombudsman service for tenants in the private rental sector. These schemes will provide a swift, inexpensive and accessible means to resolve disputes and pay compensation to tenants who have suffered from landlords’ wrongful action. Joined-up government policy strongly supports the extension of that kind of redress mechanism to consumer disputes generally.
For those reasons, I suggest that the Bill should provide for a government review of ADR for consumer disputes to make it more readily available as a means of accessible, inclusive, swift and appropriate resolution of consumer disputes that is appropriate for the needs of all consumers, regardless of age, income, educational level and vulnerabilities.
Lord Offord of Garvel (Con)
I thank the noble and learned Lord, Lord Etherton, and the noble Baroness, Lady Jones, for their amendments and the discussion. I also thank the noble Lord, Lord Clement-Jones, for his remarks.
Amendment 208A from the noble Baroness, Lady Jones, seeks to enhance the visibility and specificity of ADR information provided by traders. I understand her concerns, and I am glad to hear that she welcomes the provisions currently in the Bill. The Government believe that, for traders in regulated sectors, specific information requirements should be left to sectoral redress schemes. Many already make such requirements. For traders who voluntarily sign up for ADR, requirements as detailed as those suggested by this amendment would not be in keeping with the spirit of that good practice. For many businesses that voluntarily participate in ADR, doing so is a USP to their consumers.
On the proactive duty suggested by noble Baroness’s amendment, we think it important that traders and consumers have the opportunity to resolve differences through the traders’ complaints process before proceeding to ADR. Once concluded, a trader required to participate in ADR must inform the consumer about that. We consider that Clause 306, as it stands, is proportionate. It is designed to ensure the effective and useful provision of information to consumers. I therefore hope the noble Baroness will not move her amendment.
Amendment 209, tabled by the noble and learned Lord, Lord Etherton, requires the review of ADR in each economic sector within 12 months of commencement of the Bill, followed by the publication of a report. The provisions on ADR information in Clauses 301 to 304 facilitate ongoing monitoring of consumer ADR, including its accessibility and affordability. This includes the monitoring of accredited ADR providers, ensuring that consumers consistently receive fair and effective ADR services. It also facilitates the provision of information by exempt ADR providers and regulators, facilitating the oversight of redress schemes in regulated sectors.
In terms of affordability, Clause 292 ensures accredited ADR providers cannot charge consumers unless their fees are approved by the Secretary of State and are published. Nothing in the Bill prevents future mandates requiring businesses to participate in ADR in specific sectors. Legislation already compels businesses in some sectors to participate in redress schemes. Clause 306 requires traders to draw consumers’ attention to any such scheme when responding to consumer complaints.
I also highlight the July 2023 Ministry of Justice announcement, which demonstrates that ADR continues to be a topic of live government work. The MoJ has introduced integrated mediation for claims valued up to £10,000 in county courts and expects this to come into force later this year. Under this scheme, all such defended small claims would be referred to the small claims mediation service before their claim can progress to a court hearing. For the reasons I have just set out, I hope that the noble and learned Lord will feel comfortable not moving his amendment.
I again thank the noble Baroness, Lady Jones, for her Amendment 209A. This would provide that a money award resulting from an ADR process should be enforceable as if it were payable under a court order. Many forms of ADR are not binding. Here, the amendment might be counterproductive. Non-binding ADR retains a level of flexibility and informality distinct from the rigidity of court proceedings. This flexibility is crucial, as it encourages participation from businesses that might otherwise be hesitant about entering into ADR. If the consumer is dissatisfied with the outcome of this kind of ADR, they can, of course, take the matter to court. By contrast, where settlements are reached through binding ADR, they are already enforceable, and the amendment is not needed.
More generally, I hope that the noble Baroness will be reassured that Chapter 4 of Part 4 of the Bill will enhance the quality of consumer ADR in consumer markets, in particular by making the accreditation of ADR providers mandatory, subject to appropriate exemptions, which should contribute significantly to the reliability and effectiveness of ADR outcomes for both sides. I hope that the noble Baroness agrees that the Bill provides a balanced approach that maintains the effectiveness and attractiveness of ADR. I therefore hope that she will feel satisfied in not moving her amendment.
Amendment 209B, also tabled by the noble Baroness, Lady Jones, seeks to ensure that the Government conduct a review of ADR provisions in the aviation sector. The Department for Transport conducted a consultation in January 2022—the aviation consumer policy reform consultation—which examined existing ADR provisions within the sector. The consultation sought views on whether ADR membership should be mandatory, the effectiveness of ADR compliance and enforcement mechanisms, and the merits of the current system when compared to alternatives such as a single ombudsman.
The DfT’s June 2023 consultation response included commitments to improve complaint resolution for aviation customers. The DfT will work with the industry, the CAA and complaint-handling bodies to consider best practices so that airlines can best manage their own complaints processes, thereby reducing the necessity for ADR intervention for passengers.
The DfT committed to legislate when parliamentary time allows, to mandate ADR for all airlines operating to, from and within the UK, as well as encouraging more voluntary uptake from airlines and airports. The DfT also committed to explore improvements to ADR processes, including better data collection, training and increased transparency in decision-making. There is an ongoing commitment to review the current ADR model to ensure its continued effectiveness within the aviation sector. I hope the noble Baroness, Lady Jones, will feel comfortable not moving her amendment.
Lord Offord of Garvel
Member’s explanatory statement
The amendment would ensure that the Secretary of State can alter or impose conditions whenever an accreditation is varied, and not just in cases where limitations are imposed or altered.
Lord Offord of Garvel
Member’s explanatory statement
The amendment would ensure that the Secretary of State has power under clause 296(4)(a) to vary or remove existing conditions, in addition to being able to impose new conditions on an accreditation.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would omit subsection (7) of Clause 302, which is superseded by the new Clause in my name on data protection.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would omit subsection (4) of Clause 303, which is superseded by the new Clause in my name on data protection.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would omit the definition of “data protection legislation” in Clause 304, as my amendment to Clause 328 would define that term for the purposes of the whole Bill.
Lord Offord of Garvel
“Prescription and Limitation (Scotland) Act 1973
A1 (1) Section 14 of the Prescription and Limitation (Scotland) Act 1973 (computation of prescriptive periods) is amended as follows.(2) In the following places, for “relevant consumer dispute” or “relevant dispute” substitute “consumer contract dispute”—(a) subsection (1D);(b) subsection (1F);(c) subsection (1G) (in each place where it occurs).(3) In subsection (1D)—(a) after “this Act is” (in the opening words) insert “, in a case where ADR is carried out in respect of the dispute,”;(b) in paragraph (a)—(i) for “the non-binding ADR procedure” substitute “the ADR”, and(ii) for “such a procedure” substitute “it”;(c) in each of paragraphs (b) and (c), for “a non-binding ADR procedure” substitute “the ADR”.(4) In the following places, for “the non-binding ADR procedure” substitute “the ADR”—(a) subsection (1E); (b) subsection (1G)(b) and (f);(c) subsection (2) (in the definition of “qualifying request”).(5) In subsections (1F) and (1G), for “a non-binding ADR procedure” substitute “ADR”.(6) In subsection (2)—(a) omit the following definitions—“ADR entity”;“ADR procedure”;“consumer”;“non-binding ADR procedure”;“relevant consumer dispute”;“sales contract”;“service contract”;“trader”;(b) before the definition of “holiday” insert the following definitions—““ADR” has the same meaning as in Chapter 4 of Part 4 of the Digital Markets, Competition and Consumers Act 2024;“ADR entity” means a person who carries out ADR in compliance with section 291(1) of that Act (which prohibits persons from carrying out ADR unless exempt, accredited, or acting under special ADR arrangements, in accordance with Chapter 4 of Part 4 of that Act);“consumer contract dispute” has the same meaning as in Chapter 4 of Part 4 of that Act.”Limitation Act 1980
A2 (1) Section 33B of the Limitation Act 1980 (extension of time limits because of alternative dispute resolution) is amended as follows.(2) In the heading, for “cross border or domestic contractual” substitute “consumer contract”.(3) For subsection (1) substitute—“(1) In this section—“ADR” has the same meaning as in Chapter 4 of Part 4 of the Digital Markets, Competition and Consumers Act 2024;“ADR entity” means a person who carries out ADR in compliance with section 291(1) of that Act (which prohibits persons from carrying out ADR unless exempt, accredited, or acting under special ADR arrangements, in accordance with Chapter 4 of Part 4 of that Act);“consumer contract dispute” has the same meaning as in Chapter 4 of Part 4 of that Act.”(4) In the following places, for “relevant dispute” substitute “consumer contract dispute”—(a) subsection (2)(a) and (b);(b) subsection (5);(c) subsection (6);(d) subsection (7) (in each place where it occurs);(e) subsection (9).(5) In the following places, for “a non-binding ADR procedure” substitute “ADR”—(a) subsection (2)(b);(b) subsection (6);(c) subsection (9).(6) In the following places, for “the non-binding ADR procedure” substitute “the ADR”—(a) subsection (2)(c);(b) subsection (3);(c) subsection (7) (in each place where it occurs); (d) subsection (8);(e) subsection (9).Foreign Limitation Periods Act 1984
A3 (1) Section 1B of the Foreign Limitation Periods Act 1984 (extension of limitation periods because of alternative dispute resolution) is amended as follows.(2) In the heading, for “cross border or domestic contractual” substitute “consumer contract”.(3) For subsection (1) substitute—“(1) In this section—“ADR” has the same meaning as in Chapter 4 of Part 4 of the Digital Markets, Competition and Consumers Act 2024;“ADR entity” means a person who carries out ADR in compliance with section 291(1) of that Act (which prohibits persons from carrying out ADR unless exempt, accredited, or acting under special ADR arrangements, in accordance with Chapter 4 of Part 4 of that Act);“consumer contract dispute” has the same meaning as in Chapter 4 of Part 4 of that Act.”(4) In the following places, for “relevant dispute” substitute “consumer contract dispute”—(a) subsection (2)(a) and (b);(b) subsection (5);(c) subsection (6) (in each place where it occurs);(d) subsection (8).(5) In the following places, for “a non-binding ADR procedure” substitute “ADR”—(a) subsection (2)(b);(b) subsection (5);(c) subsection (8).(6) In the following places, for “the non-binding ADR procedure” substitute “the ADR”—(a) subsection (2)(c);(b) subsection (3);(c) subsection (6) (in each place where it occurs);(d) subsection (7);(e) subsection (8).Limitation (Northern Ireland) Order 1989 (S.I. 1989/1339 (N.I. 11))
A4 (1) Article 51B of the Limitation (Northern Ireland) Order 1989 (extension of time limits: non-binding ADR procedure) is amended as follows.(2) In the heading, for “: Non-binding ADR procedure” substitute “because of alternative dispute resolution in certain consumer contract disputes”.(3) In paragraphs (1)(a) and (3), for “a non-binding ADR procedure” substitute “ADR”.(4) In the following places, for “the non-binding ADR procedure” substitute “the ADR”—(a) paragraph (1)(b) (in each place where it occurs);(b) paragraph (2);(c) paragraph (4) (in each place where it occurs).(5) In paragraph (1)(b)(i), for “that such a procedure” substitute “on which it”.(6) In the following places, for “relevant dispute” substitute “consumer contract dispute”—(a) paragraph (1)(a);(b) paragraph (3);(c) paragraph (4) (in each place where it occurs).(7) For paragraph (5) substitute—“(5) In this Article— “ADR” has the same meaning as in Chapter 4 of Part 4 of the Digital Markets, Competition and Consumers Act 2024;“ADR entity” means a person who carries out ADR in compliance with section 291(1) of that Act (which prohibits persons from carrying out ADR unless exempt, accredited, or acting under special ADR arrangements, in accordance with Chapter 4 of Part 4 of that Act);“consumer contract dispute” has the same meaning as in Chapter 4 of Part 4 of that Act;“qualifying request” is a request by a party that another (A) confirm to all parties that A is continuing with the ADR.””Member’s explanatory statement
This amendment makes consequential amendments in connection with Chapter 4 of Part 4 of the Bill (alternative dispute resolution for consumer contract disputes).
Lord Leong (Lab)
My Lords, I thank the noble Baroness, Lady Wheatcroft, for tabling Amendment 212, and I thank all noble Lords who have spoken. I will be brief.
In 2019, the European Union introduced the second shareholder rights directive, which sets out stipulations regarding the utilisation of specific shareholder privileges linked to voting shares during general meetings of companies that are headquartered in a member state and have their shares traded on a regulated market located or functioning within a member state. It was brought into UK law by secondary legislation, amending the occupational pension schemes regulations of 2005, and it has now been assimilated into UK law. As per the Explanatory Notes to the regulations, they encourage investors to be transparent about how they invest and approach their engagement as shareholders. It was a negative statutory instrument, so no debates were tabled.
The amendment of the noble Baroness, Lady Wheatcroft, carries greater weight than the shareholder rights directive. It would mandate the FCA to establish regulations necessitating investment managers and life insurers to furnish standardised reports concerning company voting activities upon request. Furthermore, it would instruct the FCA to offer guidance to firms on the specific format for such reporting.
We agree in principle with the amendment that it is right for shareholders to be more transparent. The noble Baroness, Lady Sheehan, mentioned being transparent about where investments are made, which we need to know if we are to achieve net zero. This was fully supported by the noble Lord, Lord Lucas. Fund managers need to be more transparent about informing where their funds are invested.
I ask the Minister: what impact has there been on investor transparency in the four and a half years that the SRD has been in UK law? I look forward to his response.
Lord Offord of Garvel (Con)
I thank the noble Baroness, Lady Wheatcroft, for Amendment 212, which would require the Financial Conduct Authority to make rules requiring regulated persons to give consumers certain information regarding voting rights attached to assets in which the consumer has an interest. I also thank the noble Baroness, Lady Sheehan, the noble Lords, Lord Clement-Jones and Lord Leong, and my noble friend Lord Lucas for their contributions.
I appreciate the strength of feeling on this issue. I suggest that we speak to the Treasury and write to the noble Baroness on a number of her questions, in particular to draw on the comparisons with the US, with which we are so close on so many things, to understand what its experience is and where we are in comparison.
The Government recognise that transparency is crucial to effective stewardship and corporate governance by pension and other investment funds. We also acknowledge the argument that the existing voting disclosure framework is not working as well as it could. That is why, as the noble Baroness mentioned, the FCA set up the independently chaired vote reporting group in November 2022, following recommendations made by the task force on pension scheme voting implementation to develop a standardised and decision-useful framework for voting disclosure.
It is important to take a proportionate approach in implementing changes to vote reporting. Mandatory voting disclosure would be a significant departure from the FCA’s existing rules on voting disclosure. It is important that we have a globally competitive asset management sector. This means designing and implementing regulatory change in a way that considers regulatory costs as well as benefits. That is why the Government support the FCA’s approach to work closely with industry stakeholders and build consensus.
The group has made significant progress and recently consulted on its proposals for a comprehensive and standardised vote reporting framework. The Government believe that it continues to be more appropriate to wait for the group’s final output before requiring the FCA to produce further rules and regulation. I can assure the noble Baroness, Lady Wheatcroft, that, when reviewing the group’s final proposal, the Government will carefully consider whether its recommendations go far enough to address the existing issues around transparency for consumers that the noble Baroness so eloquently described, as well as what further action may be appropriate. We therefore hope that she will feel comfortable withdrawing her amendment.
Baroness Wheatcroft (CB)
I thank the Minister for what I think was an unusually conciliatory reply. I am quite cheered by what he said. I understand that we will wait to see what the FCA comes up with. I cannot say that I am overly optimistic about the FCA being effective with anything other than mandatory reporting—that will require the Government to act—but I look forward to seeing that action before too long. I beg leave to withdraw.
Lord Offord of Garvel
“5A In Schedule 14 to EA 2002 (specified functions), at the appropriate place insert—“Chapter 2 of Part 5 of the Digital Markets, Competition and Consumers Act 2024.”5B In Schedule 15 to EA 2002 (enactments conferring functions), at the appropriate place insert—“Chapter 2 of Part 5 of the Digital Markets, Competition and Consumers Act 2024.””Member's explanatory statement
This amendment ensures that: (a) information that comes to a public authority in connection with the exercise of its functions under Chapter 2 of Part 5 of the Bill is information to which section 237 of the Enterprise Act 2002 applies (which imposes a general restriction on disclosure of certain kinds of information unless permitted under Part 9 of that Act), and (b) that information to which section 237 applies can be disclosed to a public authority for the purposes of enabling that authority to carry out its functions under Chapter 2 of Part 5.
Lord Offord of Garvel
“ScheduleMinor and consequential amendmentsPart 1Amendments to Acts of ParliamentCompetition Act 1980 (c. 21)
1 The Competition Act 1980 is amended as follows.2 In section 11B(1) (references under section 11: powers of investigation and penalties), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force and,”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.3 In section 11C(1) (references under section 11: further supplementary provisions), in the words before paragraph (a)— (a) after “shall apply” insert “, as it had effect immediately before the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force,”; and(b) for “applies” substitute “applied immediately before that date”.4 In section 11D(7) (interim orders), in paragraph (d), after “penalties)” insert “as it had effect immediately before the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force”.Telecommunications Act 1984 (c. 12)
5 In section 101 of the Telecommunications Act 1984 (general restrictions on disclosure of information), in subsection (3)—(a) omit paragraph (v);(b) after paragraph (w) insert—“(x) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Companies Act 1985 (c. 6)
6 In paragraph 17 of Schedule 15D to the Companies Act 1985 (disclosures), after sub-paragraph (m) insert—“(n) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Airports Act 1986 (c. 31)
7 In section 74 of the Airports Act 1986 (restriction on disclosure of information), in subsection (3)—(a) omit paragraph (v);(b) after paragraph (y) insert—“(z) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Gas Act 1986 (c. 44)
8 (1) Section 41EB of the Gas Act 1986 (references under section 41E: application of EA 2002) is amended as follows.(2) In subsection (1), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (4)—(a) after “shall apply” insert “, as it had effect immediately before the relevant date,”;(b) for “applies” substitute “applied immediately before that date”.(4) In subsection (5)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(5) After subsection (6) insert— “(7) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”Water Act 1989 (c. 15)
9 In section 174 of the Water Act 1989 (general restrictions on disclosure of information), in subsection (3)—(a) omit paragraph (lp);(b) after paragraph (o) insert—“(p) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Electricity Act 1989 (c. 29)
10 (1) Section 56CB of the Electricity Act 1989 (references under section 56C: application of EA 2002) is amended as follows.(2) In subsection (1), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (4)—(a) after “shall apply” insert “, as it had effect immediately before the relevant date,”;(b) for “applies” substitute “applied immediately before that date”.(4) In subsection (5)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(5) After subsection (6) insert—“(7) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”Water Industry Act 1991 (c. 56)
11 The Water Industry Act 1991 is amended as follows.12 (1) Section 14B (references under section 14: powers of investigation) is amended as follows.(2) In subsection (1), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (4)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”(b) at the end insert “as those provisions had effect immediately before that date”.(4) After subsection (5) insert—“(6) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”13 (1) Section 16B (CMA’s power of veto following report: supplementary) is amended as follows.(2) In subsection (6), in the words before paragraph (a)— (a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (9)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(4) After subsection (10) insert—“(11) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”14 (1) Section 17M (references under section 17K: powers of investigation) is amended as follows.(2) In subsection (1), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (4)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(4) After subsection (5) insert—“(6) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”15 (1) Section 17Q (section 17P: supplementary) is amended as follows.(2) In subsection (6), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (9)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(4) After subsection (10) insert—“(11) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”16 In Part 2 of Schedule 15 (enactments etc in respect of which disclosure may be made)—(a) at the end of the list insert—“The following provisions of the Digital Markets, Competition and Consumers Act 2024—(a) Part 3;(b) Chapter 1 of Part 4;(c) Chapter 2 of Part 5.”(b) omit the entry for subordinate legislation made for the purpose of securing compliance with Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market. Railways Act 1993 (c.43)
17 The Railways Act 1993 is amended as follows.18 (1) Section 13B (references under section 13: application of EA 2002) is amended as follows.(2) In subsection (1), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (4)—(a) after “shall apply” insert “, as it had effect immediately before the relevant date,”;(b) for “applies” substitute “applied immediately before that date”.(4) In subsection (5)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(5) After subsection (6) insert—“(7) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”19 (1) Section 15C (sections 15A and 15B: supplementary) is amended as follows.(2) In subsection (2D), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In subsection (2G)—(a) after “shall apply” insert “, as it had effect immediately before the relevant date,”;(b) for “applies” substitute “applied immediately before that date”.(4) In subsection (2H)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(5) After subsection (4) insert—“(5) In this section “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”20 In section 145 (general restrictions on disclosure of information), in subsection (3)—(a) omit paragraph (qu);(b) after paragraph (v) insert—“(w) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”21 Schedule 4A (review of access charges by the Office of Rail and Road) is amended as follows.22 (1) Paragraph 10A (references under paragraph 9: application of EA 2002) is amended as follows.(2) In sub-paragraph (1), in the words before paragraph (a)— (a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In sub-paragraph (4)—(a) after “shall apply” insert “, as it had effect immediately before the relevant date,”;(b) for “applies” substitute “applied immediately before that date”.(4) In sub-paragraph (5)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(5) After sub-paragraph (6) insert—“(7) In this paragraph “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”23 (1) Paragraph 15 (paragraphs 13 and 14: supplementary) is amended as follows.(2) In sub-paragraph (2D), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In sub-paragraph (2G)—(a) after “shall apply” insert “, as it had effect immediately before the relevant date,”;(b) for “applies” substitute “applied immediately before that date”.(4) In sub-paragraph (2H)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(5) After sub-paragraph (4) insert—“(5) In this paragraph “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”Coal Industry Act 1994 (c. 21)
24 In section 59 of the Coal Industry Act 1994 (information to be kept confidential by the Coal Authority), in subsection (4)—(a) omit paragraph (q);(b) after paragraph (t) insert—“(u) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Greater London Authority Act 1999 (c. 29)
25 In section 235 of the Greater London Authority Act 1999 (restrictions on disclosure of information), in subsection (3)—(a) omit paragraph (ru);(b) after paragraph (v) insert—“(w) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.” Utilities Act 2000 (c. 27)
26 In section 105 of the Utilities Act 2000 (general restrictions on disclosure of information), in subsection (6)—(a) omit paragraph (w);(b) after paragraph (z1) insert—“(z2) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Transport Act 2000 (c. 38)
27 In Schedule 9 to the Transport Act 2000 (air traffic: information), in paragraph 3(3)—(a) after paragraph (rh) insert—“(ri) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”(b) omit paragraph (sa).Communications Act 2003 (c. 21)
28 In section 393 of the Communications Act 2003 (general restrictions on disclosure of information), in subsection (5)—(a) omit paragraph (q);(b) after paragraph (s) insert—“(t) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Wireless Telegraphy Act 2006 (c. 36)
29 In section 111 of the Wireless Telegraphy Act 2006 (general restrictions), in subsection (6)—(a) omit paragraph (o);(b) after paragraph (p) insert—“(q) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Companies Act 2006 (c. 46)
30 In Part 2 of Schedule 2 to the Companies Act 2006 (specified descriptions of disclosures), in section (A) (United Kingdom), in paragraph 25, after paragraph (l) insert—“(m) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Legal Services Act 2007 (c. 29)
31 In section 60(9) of the Legal Services Act 2007 (duties of the CMA), in the words before paragraph (a)—(a) after “apply”, in the first place it occurs, insert “, as they had effect immediately before the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force,”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”. Postal Services Act 2011 (c. 5)
32 In section 60(6) of the Postal Services Act 2011 (section 59: supplementary), in paragraph (a), after “CMA),” insert “as they had effect immediately before the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force,”.Civil Aviation Act 2012 (c. 19)
33 In Schedule 6 to the Civil Aviation Act 2012 (restrictions on disclosure of information), in paragraph 4—(a) in sub-paragraph (3), in the list of relevant statutory provisions, after the entry for “Water Act 2014” insert—“the following provisions of the Digital Markets, Competition and Consumers Act 2024—(a) Part 3;(b) Chapter 1 of Part 4;(c) Chapter 2 of Part 5.”(b) in sub-paragraph (4), omit paragraph (b).Part 2Amendments to other legislationEnergy (Northern Ireland) Order 2003 (S.I. 2003/419 (N.I. 6))
34 The Energy (Northern Ireland) Order 2003 is amended as follows.35 In Article 63 (general restrictions on disclosure of information), in paragraph (6)—(a) omit sub-paragraph (w);(b) after sub-paragraph (x) insert—“(y) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”36 (1) In Schedule 2 (orders altering licensable activities), paragraph 5 (references under paragraph 3: application of EA 2002) is amended as follows.(2) In sub-paragraph (1), in the words before paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In sub-paragraph (4)—(a) after “shall apply” insert “, as it had effect immediately before the relevant date,”;(b) for “applies” substitute “applied immediately before that date”.(4) In sub-paragraph (5)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(5) After sub-paragraph (6) insert—“(7) In this paragraph “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”Water Services etc. (Scotland) Act 2005 (Consequential Provisions and Modifications) Order 2005 (S.I. 2005/3172)
37 The Water Services etc. (Scotland) Act 2005 (Consequential Provisions and Modifications) Order 2005 is amended as follows.38 (1) Article 5 (references: powers of investigation) is amended as follows. (2) In paragraph (1), in the words before sub-paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In paragraph (5)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(4) After paragraph (5) insert—“(6) In this article “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”39 (1) Article 10 (Article 9: supplementary) is amended as follows.(2) In paragraph (3), in the words before sub-paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In paragraph (7)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(4) After paragraph (7) insert—“(8) In this Article “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”Water and Sewerage Services (Northern Ireland) Order 2006 (S.I. 2006/3336 (N.I. 21))
40 The Water and Sewerage Services (Northern Ireland) Order 2006 is amended as follows.41 (1) Article 23 (references under Article 21: powers of investigation) is amended as follows.(2) In paragraph (1), in the words before sub-paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In paragraph (4)—(a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(4) After paragraph (5) insert—“(6) In this Article “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”42 (1) Article 27 (CMA’s power of veto following report: supplementary) is amended as follows.(2) In paragraph (6), in the words before sub-paragraph (a)—(a) after “shall apply,” insert “as they had effect immediately before the relevant date and”;(b) for “apply”, in the second place it occurs, substitute “applied immediately before that date”.(3) In paragraph (9)— (a) for “have”, in the first place it occurs, substitute “, immediately before the relevant date, had”;(b) at the end insert “as those provisions had effect immediately before that date”.(4) After paragraph (10) insert—“(11) In this Article “the relevant date” means the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force.”43 In Article 265 (restrictions on disclosure of information), in paragraph (5)—(a) omit sub-paragraph (s);(b) after paragraph (t) insert—“(u) the following provisions of the Digital Markets, Competition and Consumers Act 2024—(i) Part 3;(ii) Chapter 1 of Part 4;(iii) Chapter 2 of Part 5.”Postal Services (Appeals to the Competition Commission) (Investigations and Extension of Time Limits) Order 2011 (S.I. 2011/2749)
44 In Article 3 of the Postal Services (Appeals to the Competition Commission) (Investigations and Extension of Time Limits) Order 2011 (application of sections 109 to 117 of the 2002 Act), in the words before paragraph (a), after “shall apply,” insert “as they had effect immediately before the date on which section 142 of the Digital Markets, Competition and Consumers Act 2024 came into force and”.Postal Services Act 2011 (Disclosure of Information) Order 2012 (S.I. 2012/1128)
45 In Article 4 of the Postal Services Act 2011 (Disclosure of Information) Order 2012, in the list of prescribed enactments—(a) omit the entry for the Consumer Protection from Unfair Trading Regulations 2008;(b) after the entry relating to the Consumer Rights Act 2015 insert—“the following provisions of the Digital Markets, Competition and Consumers Act 2024—(a) Part 3;(b) Chapter 1 of Part 4;(c) Chapter 2 of Part 5.””Member's explanatory statement
See the explanatory statement for my amendment inserting a new Clause after Clause 330.
Lord Lucas (Con)
My Lords, I entirely agree with the noble Lord, Lord Clement-Jones, on that last point. It is really important that we keep at the question of how we tax digital businesses. One can no longer rely on the Irish national statistics because they are so distorted by profit shifting, a lot of it from this country—profit going abroad and being taxed at a very low rate in Ireland when it should be taxed here.
I know that this is an international matter, but we absolutely must keep the pressure up. We are getting more and more digital, so we need to have an international tax system where profits are taxed where they arise and not where Governments wish to shift them to. I know that this is hard, but I am unimpressed by the progress that the world has made in this direction. I really hope that the Government will get behind the continued efforts on this. We suffer a great deal from it.
At the other end of the scale, the Government could also do a lot better. I am sure that my noble friends will remember that HMRC made a horrendous mess of VAT in the Channel Islands in the early 2000s. Whole businesses grew up in the Channel Islands on the idea that you could ship records out to them, then they would come back VAT-free to the person in the UK who bought them because the consignment was under a certain value.
HMRC eventually dealt with that, but now there is monstrous and recurring fraud through the likes of Amazon and eBay, involving “Chinese” sellers—there is no reason to think that they are of that nationality in particular, but they are certainly Far Eastern—who HMRC does not pursue. HMRC does not effectively collect the tax that is due. It says, “Oh, it’s too hard. Oh, it’s in lots of little bits. Oh, these people move around with great velocity”. Yes, they do, but by not collecting it, HMRC not only does not get the tax but damages the UK businesses that should be able to compete on a level playing field with those overseas sellers. It is delinquent; it is an issue at the root of HMCR that we have never managed to deal with effectively, but we really must.
It is so important that HMRC realises that it should focus not only on operational efficiency in terms of how much it costs to do things and whether it gets the money back that it is investing in this, or a sufficient multiplier of it, but on whether it is doing its bit for the structure of the UK economy and the ability of businesses to start and flourish here. I pay great credit to Retailers Against VAT Abuse Schemes, which has been active these last 20 years. I hope that it will eventually be successful, but golly, it could do with more help.
Lord Offord of Garvel (Con)
Once again, I am grateful to the noble Baroness, Lady Jones, for raising this important issue, and for the remarks of the noble Lord, Lord Clement-Jones, and my noble friend Lord Lucas.
The Government are wholeheartedly committed to protecting the country’s high streets and town centres, and supporting them as they adapt to changing consumer demands. Indeed, the Government revalued business rates in 2023, with the retail sector being the biggest beneficiary. We have also provided long-term investment in our high streets and small businesses, including £2.35 billion-worth of town deals, the £830 million future high streets fund and the £4.8 billion levelling up fund. New legislation in the Levelling-up and Regeneration Act 2023 will play an important role in reviving our high streets by introducing high street rental auctions, which will empower places to tackle decline by bringing vacant units back into use, and seek to increase co-operation between landlords and local authorities and make town centre tenancies more accessible and affordable for tenants, especially for SMEs, local businesses and community groups.
The Government also launched the new £2.5 million high street accelerators pilot programme, which will empower and incentivise local people to work in partnership to develop ambitious plans to reinvent the high streets so that they are fit for the future. Accelerators will bring residents, businesses and community organisations together with their local authorities to develop a long-term vision for revitalising high streets. The pilot will run in 10 areas across England until March 2025.
We consulted in 2022 on an online sales tax, and after careful consideration we decided not to introduce it. That decision reflected concerns raised on the risk of creating unfair outcomes and complexities in defining the boundaries between online and in-store retail, including click-and-collect orders. The Government therefore do propose to pursue further changes to business rates or sales tax at this time. I hope that the noble Baroness will feel sufficiently reassured to withdraw her amendment.
Baroness Jones of Whitchurch (Lab)
My Lords, I realise that it is late in the day and that I am raising a fundamental issue at a late point. Perhaps it is straying a little beyond the main intent of the Bill; nevertheless, it is a fundamental issue, and it is important that we have aired it. I am grateful to the noble Lord, Lord Clement-Jones; as he said, our high streets are far too important to lose. As both he and the noble Lord, Lord Lucas, said, the digital world cannot meet all the needs of society, and high streets still have a fundamental role to play. We absolutely need to ensure that the community focus in high streets is revitalised. I am grateful that the noble Lord, Lord Lucas, said that we should look at other models of funding and taxation; it was a point well made.
I listened carefully to what the Minister said. It is easy to say that he is wholeheartedly committed to revitalising the high streets; that is great—we all are—and I have no doubt that initiatives such as levelling up and the pilots will have some impact, but none of those addresses the fundamental fact that it is the economic costs for the shops that is at heart here. You can make a high street look lovely, provide better police and tackle anti-social behaviour, but if the shops cannot afford to trade because they are being undercut by their online competitors, they will not stay around. Unless we take more fundamental actions on that basis and face up to what is happening at the moment, sadly, we will face continuing long-term decline.
I hear what the Minister says. I realise that this is a much bigger debate, but I really feel that the Government do not have a grip on this. They have had 14 years to sort it out but there has been a long decline on their watch. I am sorry to end on such a negative note. As I said, I am sure we will have a further chance to debate this, but I really think that our policy on reforming business rates will make a fundamental difference. Nevertheless, I beg move to withdraw my amendment.
Lord Offord of Garvel
““the data protection legislation” has the same meaning as in the Data Protection Act 2018 (see section 3 of that Act);”Member’s explanatory statement
This amendment would define “the data protection legislation” for the purposes of the whole Bill.
Lord Offord of Garvel
“Data protection(1) This section applies to a duty or power to process information that is imposed or conferred by or under any provision of this Act.(2) A duty or power to which this section applies does not require or authorise the processing of information which would contravene the data protection legislation (but the duty or power is to be taken into account in determining whether the processing would contravene that legislation).”Member’s explanatory statement
This amendment would make it clear that provisions in the Bill imposing or conferring duties or powers to process information do not require or authorise the processing of information which would contravene the data protection legislation.
Lord Offord of Garvel
“ConsultationA duty to consult under or by virtue of this Act may be satisfied by consultation that took place wholly or partly before the passing of this Act.”Member’s explanatory statement
This amendment clarifies that consultation required under or by virtue of the Bill may begin before the Bill is passed (so long as it is in compliance with the requirements for consultation as enacted).
Lord Offord of Garvel
“Minor and consequential amendmentsSchedule (Minor and consequential amendments) contains minor and consequential amendments.”Member's explanatory statement
This new Clause introduces a new Schedule that contains minor and consequential amendments relating to the Bill generally (there are other Schedules of consequential amendments relating to particular Parts of the Bill).
Lord Offord of Garvel
Member’s explanatory statement
This amendment provides that the new Clause and Schedule in my name making minor and consequential amendments come into force in accordance with regulations made by the Secretary of State.
Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
Read Full debateMonday 11th March 2024
(8 months, 2 weeks ago)
Lords ChamberDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Watch Debate Amendment Paper: HL Bill 47-II Second marshalled list for Report - (11 Mar 2024)
18:10 - Division on Amendment 13 - Ayes: 217 / Noes: 192 - Amendment 13 agreed.
18:23 - Division on Amendment 14 - Ayes: 199 / Noes: 199 -
18:36 - Division on Amendment 23 - Ayes: 209 / Noes: 193 - Amendment 23 agreed.
18:51 - Division on Amendment 43 - Ayes: 204 / Noes: 192 - Amendment 43 agreed.
19:05 - Division on Amendment 56 - Ayes: 202 / Noes: 187 - Amendment 56 agreed.
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
Viscount Camrose
Member's explanatory statement
This amendment would remove the power for the Secretary of State to amend the conditions in subsection (1) by statutory instrument.
The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
My Lords, I am delighted that we have made it to Report and look forward to today’s debate. Before we get under way, I express my sincere thanks to all noble Lords who took part in Committee and to those with whom I have had the pleasure of discussing a number of issues that have arisen since then. I am extremely grateful for the constructive, collaborative nature of those discussions. It is clear to me that the broad support for this Bill across the House and the desire to see it pass swiftly remain undiminished, which is great to see.
The Government have tabled a number of amendments to improve the clarity and accountability of the regime. I turn first to the amendment to the Henry VIII power in Clause 6. This clause would originally have given the Secretary of State the power to amend by regulations the position of strategic significance conditions in the Bill, to allow them to be updated to account for future changes to digital markets. The Government recognise that Henry VIII powers should be used only where absolutely necessary. I noted the strength of feeling on this issue in Committee and the concerns that the power could be used to introduce broad changes to the framework of the regime. The DPRRC also noted this point in its report on the Bill, for which my noble friend Lord Offord and I were very grateful. Reflecting that strategic significance criteria have been designed to be suitably broad and technology agnostic, we are content to remove this power. Amendment 1 will do that, so I hope that noble Lords will support it.
Amendment 42 ensures that non-commercial organisations acting in a non-commercial capacity will be subject to fines with the same fixed statutory maximum amounts and/or maximum daily amounts as individuals. We expect it to be extremely rare that the CMA would ever need to fine these organisations, but the Bill should provide for all circumstances. These organisations could be subject to financial penalties for investigative breaches—for example, providing false or misleading information to the CMA.
Amendment 40 clarifies that all individuals—including, for example, sole proprietors—will be subject to penalties with fixed statutory maximum amounts and/or maximum daily amounts. Amendment 41 removes a superfluous subsection in the same clause. I hope noble Lords will support these amendments.
Amendment 48 will ensure that private actions relating to the digital markets regime can be transferred between the Competition Appeal Tribunal and the relevant court. This will reflect current practice for competition cases. Effective co-operation and information sharing between regulators is vital to ensuring efficient and coherent interventions under the digital markets regime.
Amendments 160 and 161, under the Wireless Telegraphy Act 2006 and the Postal Services Act 2011 respectively, will allow Ofcom to share information it holds with the CMA where it is necessary for the CMA to discharge its digital markets functions. Ofcom is likely to hold relevant information under these Acts that would be valuable to support work relating to, for example, mobile ecosystems and e-commerce. The amendments will also help prevent unnecessary and duplicative information requests by the CMA. The Government have also put forward Amendments 50, 53 and 159 to improve the Bill’s clarity.
Amendment 58 will ensure that the existing provision in Clause 116—which prevents information the CMA holds as part of an investigation being subject to a disclosure order—cannot be circumvented by instead seeking disclosure from another party that holds the same information.
I hope that, for the reasons I have set out, noble Lords will support the government amendments. I beg to move.
Lord Faulks (Non-Afl)
My Lords, Amendments 13 and 35 are in my name and those of the noble Baronesses, Lady Stowell and Lady Jones of Whitchurch, and the noble Lord, Lord Clement-Jones.
The Bill has been welcomed across the House and it represents a crucial step forward in regulating the digital market. I pay tribute to the level of engagement that has taken place with Ministers and officials. We have had some excellent and well-informed debates in Grand Committee. However, good though this Bill is, it is capable of improvement. I refer to my interests in the register. I am not a competition lawyer, but I do have experience of judicial review and of the operation of the Human Rights Act. I was also chair of the Independent Review of Administrative Law, which reported a few years ago.
My Amendment 13 is concerned with the use in the Bill of the word “proportionate”. Despite some heavy lobbying of the Government by big tech, the right to appeal against an intervention by the CMA will engage the judicial review test, rather than a merits test, except as to penalty. Later amendments will probe the appeal test further.
The original adjective in the Bill was “appropriate”. The word “proportionate” replaced it at a late stage of the Bill’s progress through the Commons. Why? I am afraid I have yet to receive a satisfactory answer. In Grand Committee, the noble Lord, Lord Lansley, referred to a letter from the Minister about the change. However, it did nothing to allay concerns that the change was a response to lobbying by big tech.
According to one view, it is an innocuous change; indeed, one would expect an intervention to be proportionate. The word also has a reasonable legal pedigree: for example, you can defend yourself against attack providing your response is proportionate to the attack. Whether your response is proportionate will be a question of fact, or for a jury to decide.
Judicial review, however, is not primarily concerned with the facts of a decision but with the process whereby the decision is made. Classically, the courts got involved only if a decision was so unreasonable that no reasonable public body could have reached it. The scope of judicial review has expanded to include challenges based on, for example, irrationality or failure to take into account relevant considerations. There are other grounds, but all are concerned with how the decision is reached rather than whether the court agrees with the factual findings.
Since the enactment of the Human Rights Act, the concept of proportionality has entered the law in relation to judicial review, but only in limited circumstances. I will quote the most recent addition of De Smith’s Judicial Review, as I did in Committee, which is generally regarded as the leading textbook in this area:
“Domestic courts are required to review the proportionality of decisions and enactments in two main categories of case: cases involving prima facie infringements of Convention rights and cases involving EU law”.
There are those who think that proportionality should be the test in all cases of judicial review, but that is not the law.
I cannot immediately see why an appeal in the context of the Bill should involve a convention right, but they have a habit of appearing in all sorts of places. If convention rights are engaged, proportionality comes into the analysis anyway. I understand that the Government consider that an appeal may well involve A1P1—Article 1 of the first protocol of the ECHR—which is concerned with the arbitrary inference with property rights.
To speak of human rights in the context of enormous companies such as Google, Apple or Meta is certainly counterintuitive; I do not think that that is what the framers of the European convention had in mind after the Second World War. Last week, Apple was fined €1.8 billion under the European Union’s regulation on market abuse, and there is an appeal. That perhaps gives us an idea of the context of human rights in this area.
If—and this is a big “if”—the courts consider that the convention is engaged, there will be considerations of proportionality. Amendment 35, which I believe is consequential to Amendment 13, raises precisely the same point in a further context. In choosing to put the word “proportionality” into the legislation, a court might well conclude that Parliament had deliberately used the word to widen the scope of judicial review challenge, even when no convention right is engaged. For my part, that is a risk that I do not think should be taken. Your Lordships’ House is well aware of the expensive and time-consuming nature of appeals, which of course favour larger organisations with a large legal spend. The noble Lord, Lord Vaizey, spoke at Second Reading of long and expensive battles and death by lever arch files—although he did not quite put it that way. Large companies have the resources.
A proportionality test is far closer to an appeal on the facts than one based on conventional judicial review principles. The issue as to whether an intervention is proportionate or not gives the court much greater scope for looking at those facts at greater length and greater expense and with a more uncertain outcome. I would therefore much prefer to revert to the word “appropriate”, as was originally in the Bill, which does not carry the same legal charge and does not risk expanding the basis of appeal.
In the Media Bill, criticism has been made of the use of the word “appropriate”, but, as many judges have said before, context is everything, and here it is the right word. I look forward to hearing the Minister’s response and explanation behind the change in wording.
Viscount Camrose (Con)
As ever, I start by thanking all noble Lords who spoke so compellingly during what has been a fascinating debate.
Amendments 13 and 35, tabled by the noble Lord, Lord Faulks, seek to remove the explicit statutory requirement for conduct requirements and PCIs to be proportionate. I appreciate that this is an issue about which many noble Lords have expressed themselves strongly, and I am grateful for the thoughtful discussions I have had with noble Lords about this, both in Committee and since. I thank my noble friends Lord Black, Lord Wolfson and Lady Stowell for their comments on this today.
We are, as has been observed, giving extensive new powers to the CMA. It is important therefore that we also include safeguards around those new powers. A proportionate approach to regulation supports a pro-innovation regulatory environment and investor confidence. That is why we have decided to make the requirement to act proportionately explicit in the Bill. This requirement reinforces the Government’s expectations on the CMA to design conduct requirements and PCIs to place as little burden as possible on firms while still effectively addressing competition issues. The Government’s view is that, for the vast majority of interventions, the DMU would have needed to ensure that they were proportionate even without this explicit provision, as Article 1 of Protocol 1 to the European Convention on Human Rights will apply to interventions that affect property rights of SMS firms, regardless of their size.
The proportionality provisions both make this explicit and ensure that it will apply in all cases, not just those where A1P1 applies, such as when future contracts are affected. The Government have considered case law about the standard of review when proportionality is under consideration by the CAT in competition cases. We do not share the view that the inclusion of these two requirements will raise the standard of review in a way that makes it materially easier for SMS firms to successfully challenge CMA decisions.
As my department has shared with the noble Lord, Lord Faulks, the CAT has held, in BAA v Competition Commission, that it must show particular restraint in second-guessing the CMA’s judgment, and also give a wide margin of appreciation to the CMA. The Supreme Court has also stressed the caution that appellate courts must take before overturning the expert economic judgments of the CMA. We remain of the view that the courts will accord respect to expert judgments of the competition regulator in relation to economic matters and will not seek to overturn DMU judgments lightly.
I hope and believe that all of us, regardless of which Benches we sit on, agree that the UK being a place of proportionate regulation, where it is attractive to start and grow businesses, should be an aim of the Bill. I hope the noble Lord and my noble friend agree and will not press their amendments.
Amendments 43, 44, 46, 52 and 51 from the noble Baroness, Lady Jones, seek to revert the appeals standard of digital markets penalties back to judicial review principles. As I outlined in Committee, the Government believe it is important that the CAT can consider the value of a fine and change it if necessary, as the penalties that the CMA can impose are likely to be significant. Parties should be able to have penalty decisions reviewed to ensure that they are fair and properly applied. Additionally, only the requirement to pay a penalty is automatically suspended on an appeal. Any other remedies put in place by the CMA would remain in place, addressing the competition harm right away. An SMS firm would be expected to comply with them regardless of the outcome of the penalty appeal.
Amendment 45 from my noble friend Lady Stowell seeks to clarify that only penalties, not the decision to impose the competition requirement or the decision that a breach has been made, would be heard on their merits. I appreciate that the intent of this amendment is to improve clarity, but we feel that its drafting does not currently address what I understand my noble friend seeks to achieve. It would currently address only breaches of conduct requirements and not PCIs or enforcement orders. Amendment 55, also from my noble friend—
Baroness Stowell of Beeston (Con)
I am grateful to my noble friend for giving way—I hope he will forgive me for interrupting him at a critical moment as he was about to say something about another of my amendments. He said that my Amendment 45 was inadequate because it did not cover sufficient bases. Would the Government consider it as a way forward if they were to expand it in a way that did cover all the bases?
Viscount Camrose (Con)
Yes, we very much understand the spirit and intent of the amendment, so I would be very happy to consider that if we could expand it to cover the bases, as my noble friend sets out.
Amendment 55, also from my noble friend, would remove the role of the Secretary of State in approving the CMA’s guidance on the regime and replace it with consultation with certain parliamentary committees. I agree with her that oversight of regulators by both government and Parliament is vital, but the Government have responsibility for the effectiveness of regulators and the policy framework that they operate in. As such, it is appropriate that the Secretary of State approves the guidance under which the CMA will deliver the regime. The CMA must already consult during the production of guidance and parliamentarians can respond to these consultations as they see fit. The Government therefore believe that this amendment is not necessary to permit parliamentary engagement with the drafting of guidance.
My noble friend Lady Stowell’s Amendment 57, also discussed in Committee, requires additional reporting from a number of regulators, including the CMA, on the impact of the digital markets regime on their activities. As each of these regulators already provides annual reporting to Parliament detailing its operations and effectiveness, we feel that additional reporting would be duplicative and create unnecessary administrative burden for regulators. The named regulators also participate in the Digital Regulation Cooperation Forum, which also produces reporting on digital regulatory issues.
Amendment 56 from my noble friend Lord Lansley would add a statutory timeframe to the approval of guidance by the Secretary of State, requiring a response within 40 days. I thank the noble Viscount, Lord Colville, the noble Baroness, Lady Kidron, and my noble friend Lord Black for their remarks and our conversations on this issue. While the Government agree that it is important that the approval of guidance takes place in a timely manner and are committed to the prompt implementation of the regime, we do not think it is necessary to amend the Bill to achieve this outcome. The Government are committed to the prompt implementation of the regime. The introduction of a deadline for the approval of guidance, while supporting this objective, could cut short productive discussion and reduce its quality.
Amendment 59, tabled by the noble Baroness, Lady Jones, introduces a duty on the CMA to further the interests of citizens as well as consumers when carrying out digital markets functions. I thank the noble Baroness, Lady Kidron, for her remarks on this. As I outlined in Committee, the Government believe that the CMA’s existing statutory duty provides the greatest clarity for the regime, people, businesses and the wider economy. The CMA already manages the interactions between competition in digital markets and wider policy on societal issues under its existing duty and through its work with the Digital Regulation Cooperation Forum.
For example, the CMA’s market study into online platforms and digital advertising considered press sustainability and media plurality among the broader social harms to consumers. The CMA and Ofcom have also published joint advice on how the new regime could govern the relationship between online platforms and news publishers.
The Bill incentivises close co-operation with key digital regulators through the explicit regulatory co-ordination provisions. The CMA will have a duty to consult Ofcom on any proposed interventions that might affect Ofcom’s competition functions for the sectors for which it has responsibility, such as broadcasting and telecoms. It would allow Ofcom to raise wider implications for media plurality.
The CMA has a clear mandate to act for the benefit of consumers in the broadest sense. The meaning of citizens in this context is unclear and risks reducing the clarity of the CMA’s core competition remit and its role in the wider regulatory landscape.
Amendment 49, in the name of the noble and learned Lord, Lord Etherton, would enable private actions relating to breaches of the digital markets regime to be brought on a collective basis. It would also require the Secretary of State to produce a report on other types of claims which might be brought on a collective basis. We commit to reviewing the provision of collective claims in a post-implementation review. It is likely they will play an important role in protecting individuals and incentivising compliance in time.
I agree that, in time, collective actions would also help increase access to redress, recognising the significant legal resources SMS firms will have at their disposal and the costs involved in bringing private actions. However, our view is that making further procedural provision for claims will not bring the best outcomes for consumers and businesses while the regime is bedding in. Consumers and small businesses will benefit most from a public-led enforcement approach.
Under the digital markets regime, the CMA—
Lord Etherton (CB)
Does the Minister accept what I said? In the Bill, currently there is no provision under the regulatory regime for the regulator to award damages for losses suffered by individual consumers.
Viscount Camrose (Con)
Yes, I believe that is the case and I accept that. But, as I said, I will commit to carrying out a review in the future to understand how best to implement a collective action basis.
Under the digital markets regime, the CMA will be—
Lord Tyrie (Non-Afl)
Can the Minister tell us when he intends that review to take place?
Viscount Camrose (Con)
I intend for it to be part of the post-implementation review of the Bill.
Under the digital markets regime, the CMA will be devising novel requirements designed to address the particular circumstances of individual firms and market conditions. The DMU will need time to establish a broad set of precedents on the new rules and their enforcement. Introducing collective actions after the regime has bedded in would mirror the approach taken to the wider competition regime, which similarly had limited provision for redress when it was first established. Collective claims would also reduce incentives for firms to engage co-operatively if there is increased concern around litigation.
Amendment 47, in the name of my noble friend Lady Harding, and spoken to by my noble friend Lady Stowell, would prevent relevant courts or the CAT issuing any judgment or remedy that would conflict with a CMA decision. It would also require any private action to be stayed for CMA investigations into the same or similar breaches. The CMA is already permitted to provide evidence and opinions to the courts in competition cases through provisions in the Civil Procedure Rules and the CAT rules. I agree that the CMA may need a greater role in providing evidence and expertise to the courts in cases relating to the digital markets regime.
The Government intend to look at the issue in more detail, as we propose updates to the Civil Procedure Rules and the CAT rules. We will consider whether the courts’ case management powers and other provisions are sufficient to ensure that the CMA can make representations to the courts.
Viscount Camrose
Member's explanatory statement
This amendment would require the CMA to publish an SMS investigation notice rather than a summary of the notice.
Viscount Camrose (Con)
My Lords, the Government fundamentally believe that public transparency is vital for the new digital markets regime. We noted the strength of feeling on this issue from noble Lords in Committee, which is why the Government have tabled amendments to enhance the transparency of the regime. The amendments will require the Digital Markets Unit to publish the full notices relating to SMS designation, conduct requirements and PCIs, so that all interested parties can access them. Amendment 54 makes it explicit that the DMU may make redactions for confidentiality purposes when publishing notices or other documents.
Finally, as a consequence of the other amendments in this group, Amendment 3 will require the DMU to send other regulators a full copy of an SMS investigation notice provided to the firm under investigation, rather than a summary. I hope that noble Lords will support these amendments, which address concerns raised in Committee on the transparency of DMU decisions. I beg to move.
Lord Bassam of Brighton (Lab)
My Lords, as the Minister described, this group has government amendments, from Amendment 2 to Amendment 38, which add greater transparency to the process adopted by the CMA in disclosing information about cases involving SMS status firms where the challenger companies have an interest. We are pleased with the Minister’s amendments and, broadly speaking, happy to give them our support, as they respond to points that a number of noble Lords made at earlier stages of the Bill about the need for greater transparency and openness.
The SMS companies are in a position of significant market strength vis-à-vis the challenger firms and have a clear interest in seeing the bigger picture when disclosure is made of information that is of material interest. By obliging the publication of the notices and orders, rather than summaries of the documents, we feel that challenger companies will have greater access to key information that may impact on their market performance. Our amendments, from Amendment 4 to Amendment 39, attempt to achieve a similar result; I suspect that Ministers will argue that their amendments have greater elegance and a similar effect.
I turn to government Amendment 54 and our own Amendment 5. We are clearly of a similar mind and share concerns about commercial confidentiality so that, where reasonable, the redaction of documents can take place. We differ in our approach simply by suggesting that there should be a system for registering the documents that are relevant; the Minister might like to think about that at a later date. In essence, this is an operational issue so, to satisfy our concerns, perhaps he can put on record that there will be an effective system for the registration of documents and a notification process that enables the challenger firms to understand better what information has been disclosed to the CMA in the course of its inquiries. On that basis, we will be content not to move our amendments, and we thank the Government for responding to the concerns behind them.
Lord Clement-Jones (LD)
My Lords, this is a very straightforward group, and I congratulate the noble Baroness, Lady Jones, and the noble Lord, Lord Bassam, on having persuaded the Government to move further on the transparency agenda. I like the description given by the noble Lord, Lord Bassam, of the government amendment being more elegant. It is nice to think of amendments being elegant; it is not often that we think in those terms. We very much support the new amendments with some of the caveats that he made.
Viscount Camrose (Con)
I thank both noble Lords for speaking so eloquently—indeed, so briefly and elegantly—and the noble Baroness, Lady Jones, for tabling her amendments, which would require the DMU to establish a process for non-SMS firms to register themselves with the DMU as an interested party. The DMU would then be required to send certain notices to these challenger firms.
The Government agree that it is important that affected parties should have access to appropriate information related to DMU investigations. That is why the Government amendments go further, we feel. They will ensure that, subject to confidentiality, the DMU is required to publish all its SMS conduct requirements and PCI notices online, where they are accessible to everyone and not just specific firms that have registered their interest, or those who might not be considered challenger firms. The noble Lord, Lord Bassam, made a point about being informed of these things: while we would prefer not to put any such mechanism in the Bill, it is straightforward to imagine mechanisms that the DMU could employ to automate that.
The CMA has already been updating its approach to identifying and seeking input from third parties, including outside of formal consultations—making calls for evidence when launching investigations, web submission portals, and information requests for businesses, among others It will be able to use these approaches to inform decisions under the new regime.
I agree very much with the spirit of the noble Baroness’s amendments, which is why these government amendments will go further, to promote transparency across the regime. I therefore welcome the statement of the noble Lord, Lord Bassam, that he feels sufficiently reassured to not press the opposition amendments at this time.
Viscount Camrose
Member's explanatory statement
This amendment would require the CMA to give a copy of an SMS investigation notice, rather than a summary of the notice, to the FCA, OFCOM, the ICO, the Bank of England and the PRA.
Viscount Camrose
Member's explanatory statement
This amendment would require the CMA to publish a notice under clause 12(2) rather than a summary of the notice.
Viscount Camrose
Member's explanatory statement
This amendment would require the CMA to publish an SMS decision notice rather than a summary of the notice.
Viscount Camrose
Member's explanatory statement
This amendment would require the CMA to publish a revised SMS decision notice rather than a summary of the notice.
Viscount Camrose (Con)
As ever, I start by thanking all noble Lords who have spoken so well and clearly in this very interesting debate. I will start with Amendment 12 from the noble Lord, Lord Clement-Jones, and Amendments 14 and 15 from the noble Baroness, Lady Jones of Whitchurch, which would expand the ability of the CMA to intervene outside the designated digital activity.
As outlined in Committee, this regime is specifically designed to address competition concerns in digital activities in respect of which firms have been designated as SMS. I agree with noble Lords that the CMA must be able to deal with anti-competitive behaviour outside the designated activity where appropriate, to prevent firms leveraging power unfairly or seeking to circumvent and undermine regulation. Under current drafting, the CMA will already have broad powers to prevent and address issues of an SMS firm seeking to avoid or circumvent the regime or unfairly leverage its market power.
I hope I can reassure the noble Lord, Lord Leong, by listing these. First, there are three types of conduct requirement that can address different types of leveraging. In addition to the leveraging principle in Clause 20(3)(c), the CMA can prevent leveraging by imposing requirements to address self-preferencing under Clause 20(3)(b) and tying and bundling under Clause 20(3)(d). Additionally, PCIs can be imposed anywhere in an SMS firm’s business to address an adverse effect on competition related to a designated activity, such as a firm seeking to circumvent regulation.
Finally, the CMA will have discretion to set the parameters of an SMS designation and to define a digital activity in a broad way. This will limit the risk of harmful activity falling outside the scope of a designation in the first place. This regime has been designed to give the CMA powerful tools to address competition issues. I hope noble Lords feel reassured that, where the CMA should be able to intervene, the powers already in the Bill allow it to do so.
Amendment 60, tabled by the noble Lord, Lord Fox, would require the DMU to consider interoperability and global web standards when carrying out its duty to promote competition under the digital markets regime and to liaise with international authorities when doing so.
The CMA engages already with global digital standards where it is appropriate to do so; for example, with the World Wide Web Consortium, or W3C, the web standards development organisation. We expect that the DMU will also pay due regard to global technical standards, along with other relevant considerations, when operating the digital markets regime. As outlined in Committee, a lack of interoperability in digital markets can reinforce entrenched market positions and harm competition.
SMS designation is the gateway into the regime. The Bill allows the DMU to define digital activity for designation purposes. In defining the digital activity, the DMU will be able to capture the various ways in which the firm provides digital content or internet services as part of that. The DMU would have discretion to impose obligations on that firm, including for interoperability in relation to that digital activity.
The Bill gives the DMU comprehensive and flexible powers relating to interoperability to promote competition in digital markets, including conduct requirements that can be tailored to a firm’s specific business model and behaviour. So I would like to reassure the noble Lord that the regime’s tools can apply to both interoperability between platforms and between and among apps and platforms and other digital services.
Depending on the scope of the designation, the DMU can set conduct requirements under Clause 20(3)(e) to promote interoperability, not only with a platform but in a range of contexts, including web browsers, apps, operating systems and websites.
Other types of conduct requirement can also be used to ensure interoperability, such as requirements for
“trade on fair and reasonable terms”
under Clause 20(2)(a) or requirements to prevent restrictions on the use of other products under Clause 20(3)(h). The Government agree that promoting interoperability and having regard to global standards can be important for promoting competition in digital markets.
Amendments 16 and 17 from my noble friend Lord Lansley would add two additional permitted types of conduct requirement to tackle specific types of behaviour by SMS firms. Amendment 16 seeks to prevent SMS firms charging fees which are unjustified or could restrict access to the relevant digital activity. Under the current framework, the CMA will be able to effectively tackle this issue. The CMA could likely use its powers under Clause 20(2)(a)—the requirement to trade on fair and reasonable terms—and subsections (3)(a), (b), (c) and (d) prohibiting discriminatory treatment, self-preferencing, leveraging, and tying and bundling.
Amendment 17 would add a new permitted type of conduct requirement to deal with SMS firms attempting to stop third parties raising possible non-compliance with the CMA. Again, I can reassure my noble friend that Clause 20(3)(a) permits a conduct requirement that could prohibit an SMS firm imposing discriminatory terms. This could address retaliation by an SMS firm, including where an SMS firm has singled out a user for adverse treatment in retaliation.
I will now address the amendments relating to the countervailing benefits exemption. As set out in Committee,
“the exemption will not act as a loophole for firms to avoid conduct requirements”.—[Official Report, 24/1/24; col. GC 231.]
It is an important safeguard that reflects similar practice in the competition landscape. Under Amendments 25 and 20, my noble friend Lord Lansley proposes to remove the clause and replace it with a discretionary power to consider consumer benefits under Clause 27.
My noble friend is right to say the CMA should be able to consider consumer benefits identified by representations. Regarding the sequencing of these clauses, I reassure him that any representations that the countervailing benefits exemption should apply to would be considered among the representations under Clause 27. Clause 29 does not therefore constitute an additional step; rather, it explains how the CMA must act in relation to a specific type of representation. It would not delay or extend the conduct requirement breach investigation process. Making it discretionary for the CMA to act on a demonstrable instance of consumer benefits outweighing the harm to competition, while removing the criteria in Clause 29, would create uncertainty for both SMS firms and for third parties as to how the CMA will conduct its processes.
Lord Lansley (Con)
I am very grateful to my noble friend. Could he say therefore whether a designated undertaking that feels it can demonstrate countervailing benefits must have presented those to the CMA before the CMA concludes its findings under Clause 30—or can it do so afterwards?
Viscount Camrose (Con)
It can make a representation to the effect of countervailing benefits as part of a breach investigation, which can of course happen at any time during the life of a conduct requirement. We would expect it to make those representations at the start of or during the initial investigation. When these representations are made as part of a breach requirement, the Bill sets out the high standards required in order to accept that argument.
Lord Lansley (Con)
Sorry, may I just press my noble friend? Can he therefore say that the presentation of a countervailing benefits exemption after the CMA has made findings under Clause 30 would be void?
Viscount Camrose (Con)
A representation to the effect that there are countervailing benefits would take place as part of a breach investigation. Of course, once the investigation is complete, there is no further opportunity to do so. Have I answered the question?
Viscount Camrose (Con)
To address the concerns of the noble Lord, Lord Leong, that the current wording deviates from legal precedent, I note that, since this is a new regime, existing exemptions in different competition regimes would not be directly applicable. It is highly likely that the application of the exemption will be tested, no matter the wording.
Finally, Amendment 34, tabled by my noble friend Lord Black of Brentwood, would allow the final offer mechanism to be used after the breach of a conduct requirement, rather than after a breach of an enforcement order. This novel tool has been designed as a backstop to normal enforcement processes. It is a last resort to incentivise sincere negotiations concerning fair and reasonable payment terms between the SMS firm and third parties. I wholeheartedly agree with my noble friend that these incentives must be both compelling and credible. It is clearly preferable for parties to reach a privately agreed settlement rather than one chosen by the regulator. That is why we must ensure due consideration of less interventionist options before turning to the final offer mechanism.
However, if SMS firms try to frustrate the process or drag it out to the detriment of third parties, I agree that the DMU should be able to accelerate stages before the final offer mechanism is invoked. That is why we have ensured that the DMU will be able to set urgent deadlines for compliance with enforcement orders, supported by significant penalties where appropriate, in cases of non-compliance.
I can robustly reassure my noble friend that the CMA can, via conduct requirements and enforcement orders as well as the final offer mechanism, gather and share key information with third parties.
Finally, to his comment on the forced withdrawal of content, the Bill is able where appropriate to tackle this issue. A conduct requirement could, for example, prevent an SMS firm withdrawing a service in a discriminatory way or treating users more favourably if they purchase the SMS firm’s other products.
The Government have worked hard to strike a balanced approach to intervention. This includes ensuring that firms cannot undermine regulation, and prioritising benefits to consumers at the heart of the regime. I believe the tools, as drafted, achieve these goals, so I hope that noble Lords will not press their amendments.
Lord Clement-Jones (LD)
My Lords, I thank the Minister for his response to the various amendments. I will be extremely brief; there will probably be quite a few votes now. I thank him for a full reassurance on Amendment 60, tabled by my noble friend, on standards and interoperability. I was looking closely at the noble Lord, Lord Black, when the Minister talked about Amendment 34, and I think there was a half-reassurance there—so that is one and a half so far.
It is clear to me, having discussed countervailing benefits further on Report, that this is, if anything, more dangerous than it appeared in Committee. I am sure that the noble Baroness, Lady Jones, will have noted the mood of the House as we discussed that.
On leveraging, the Minister made a valiant attempt to go through some points where the CMA might take more into account in terms of non-designated activities and so on. But the Minister sent through the technical note, and I am afraid that, if you look at it with care, it makes quite clear the circumscribed nature of the CMA’s powers under the Bill as currently drafted. It will be very important that we take a view on that. I am sure the noble Baroness, Lady Jones, has been alert to that as well. I withdraw my Amendment 12.
The Deputy Speaker (Baroness Finlay of Llandaff) (CB)
My Lords, there being an equality of votes, in accordance with Standing Order 55, which provides that no proposal to amend a Bill in the form which it is before the House shall be agreed to, unless there is a majority in favour of such an amendment, I declare the amendment disagreed to.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish a conduct investigation notice in full rather than a summary of the notice.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish a statement under clause 28(2) in full rather than a summary of the notice.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish a statement under clause 30(1) in full rather than a summary of the notice.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish an enforcement order in full rather than a summary of the order.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish a notice under clause 32(5) in full rather than a summary of the notice.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish a notice under clause 34(1) in full rather than a summary of the notice.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish a PCI investigation notice or a revised version of the PCI investigation notice rather than a summary.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would require the CMA to publish a pro-competition order rather than a summary of the order.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would ensure that a penalty imposed on undertaking that is not an individual is calculated by reference to the undertaking’s turnover.
Lord Offord of Garvel
“(4A) Rules of court and Tribunal rules may make provision about the transfer from the Tribunal to the appropriate court or from the appropriate court to the Tribunal of all or any part of a claim made in proceedings under subsection (2).”Member’s explanatory statement
This amendment would permit rules of court and Tribunal rules to make provision about the transfer of claims between the appropriate court and the Tribunal.
Lord Offord of Garvel
“(2) A CMA breach decision becomes final—(a) when the time for applying for a review of that decision has passed without an application being made, or(b) where an application has been made, when the application has been finally determined or has otherwise ended. (2A) For the purposes of subsection (2)(b), an application is not finally determined until any appeal relating to it has been determined (ignoring any possibility of an appeal out of time with permission).”Member’s explanatory statement
This amendment confirms the circumstances in which a CMA breach decision becomes final.
Lord Offord of Garvel
Member’s explanatory statement
This amendment removes an amendment to section 393 of the Communications Act 2003 as this will now be addressed by the same amendment to that section contained in Schedule 29 to the Bill (see my amendment to that Schedule at page 407 at line 23).
Lord Offord of Garvel
“(4) In order to give effect to any need to keep information confidential, the CMA may publish the notice or other document in a redacted form.”Member’s explanatory statement
This amendment would ensure that the CMA may redact documents which it is required by this Part to publish in order to give effect to any need to keep information confidential.
Lord Offord of Garvel
Member's explanatory statement
This amendment would prevent a court or the Tribunal from making a disclosure order requiring the disclosure or production of digital markets investigation information while the investigation to which the information relates is ongoing, regardless of who holds the information.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
I thank all noble Lords who have contributed to the final group this evening, group 4.
Amendment 61 tabled by the noble Lord, Lord Clement-Jones, would enable the Competition Appeal Tribunal to award exemplary damages in collective proceedings. He is familiar with the Government’s position on this matter. I have been pleased to have the opportunity to discuss it with him further since Committee, and have written.
The Government consulted before introducing the collective action regime in 2015. The great majority of respondents said that exemplary damages should not be available in collective actions to ensure that firms were not unduly pressured to settle claims due to just the risk of punitive damages. Introducing exemplary damages in collective actions could also act as a disincentive to leniency applications—these are critical to the detection and enforcement of infringements by public regulatory authorities. Without effective leniency programmes and public enforcement, it could be far more difficult for private parties to pursue redress.
This view was shared by both businesses and consumer groups, including the consumer group Which?, which did not consider extending exemplary damages to collective actions to be necessary. I am sure that this will be of particular interest to the noble Lord, Lord Clement-Jones, given his commendable focus on ensuring consumers are at the centre of our thinking. The Government believe the current provisions in the Bill reflect the right approach on this matter.
Government Amendments 62 and 157 relate to litigation funding. The Government have recognised the challenge posed by the PACCAR judgment and the impact on access to justice. Furthermore, it has always been the Government’s intention to address the impact of the PACCAR judgment in full at the earliest opportunity. Since Committee, the Government have announced that it will quickly bring forward a separate Bill to enable this. I am sure that noble Lords across the House will welcome this news.
Clause 127 was introduced previously to mitigate the impact of PACCAR by enabling PACCAR-compliant funding agreements to be applied to opt-out collective actions. This clause will no longer be required, and these amendments effect its removal. I hope that noble Lords will support these amendments, along with government Amendment 66, which is a tidying-up amendment to remove a redundant cross-reference in Schedule 13.
Lord Clement-Jones (LD)
My Lords, I am sorry to interrupt the Minister but the noble Lord, Lord Bassam, and I would be keen—despite the dinner hour approaching—to know a bit more about the Minister’s plans as regards the short Bill. We want a bit more specific information about timing and what is happening. Is there a period of consultation, or can we go straight to legislation. What is the plan? With the best will in the world, we are delighted to hear what the Minister has to say, but can we have some specifics?
Lord Clement-Jones (LD)
My Lords, that is rather better than the ministerial “in due course”. That is all I can say.
Lord Offord of Garvel (Con)
I thought the noble Lord would appreciate that clarity.
Amendment 63 was tabled by my noble friend Lord Hodgson and I thank him and the noble and learned Lord, Lord Thomas, for their contributions to the debate. While the Government recognise the important role that litigation funding can play in facilitating access to justice, we are not blind to some of the challenges and opportunities to reform and improve the funding system. That is why, in recent days, the Lord Chancellor has written to the Civil Justice Council, inviting it to undertake a review of the sector. This work will ensure that claimants can get the best deal and it will expressly consider the need for further regulation or safeguards. Its terms of reference will be announced in the coming days.
Lord Clement-Jones (LD)
I am sorry my Lords; I regret to keep interrogating the Minister, but there is a clear separation, I assume, between a review as to whether or not regulation is required, in the form that the noble Lord, Lord Hodgson, talked about, and re-establishing the basis for litigation funding following the PACCAR case. I assume there is a clear distinction between the two activities.
Lord Offord of Garvel (Con)
That is correct.
Colleagues from the Ministry of Justice will be following this debate closely and will have heard the points made by my noble friend Lord Hodgson regarding the need for momentum for this review. Therefore, it would not be right to have a statutory review that would duplicate this work.
Amendment 65, tabled by the noble Lord, Lord Tyrie, is about whistleblowing. I thank the noble Lord and the noble Baroness, Lady Kramer, for their passionate contributions on this topic this evening. As I made clear in Committee, the Government recognise how important it is that whistleblowers are supported to shine a light on wrongdoing and believe that they should be able to do so without fear of recriminations. In 2023, the CMA increased the cap on rewards for illegal cartel whistleblowers from £100,000 to £250,000 to strengthen its enforcement work. Additionally, the Government are undertaking a wider review of the effectiveness of the whistleblowing framework in meeting its original objectives to facilitate whistleblowing, protect whistleblowers against detriment and dismissal, and to facilitate wider cultural change around whistleblowing.
My colleague the Minister for Enterprise, Markets and Small Business has recently mentioned in the other place that the research for the review is near completion. The Government intend to provide an update on this shortly.
Lord Clement-Jones (LD)
Before the Minister stands up, I will add to that. The Minister used the word “research”, which I thought was extraordinary. “Research” is a flabby kind of expression in these circumstances. Do the Government intend to review the current state of whistleblowing with a view to ensuring there is a more comprehensive approach to it, or is this just some nice-to-have academic exercise?
Lord Offord of Garvel (Con)
I thank both noble Lords for that. The update will be provided shortly. I agree with the noble Lord, Lord Clement-Jones, on the beauty of the wording that the “research” for the review is near completion. It does perhaps need some clarification, so let us get the timetable and I will provide that as soon as possible.
The noble Lord’s continued engagement is greatly welcomed as we undertake this important work. However, we do not think it appropriate to place a new and binding obligation for a further review to be conducted within a specific timeframe. I will come back to him with exactly what the timeframe is.
Amendment 153 from the noble Lord, Lord Tyrie, would require the measures in the Bill to be reviewed at five-year intervals by an individual appointed with the consent of the relevant parliamentary Select Committee. I thank the noble Lords, Lord Tyrie and Lord Kamall, and the noble Baroness, Lady Kramer, for their contributions to the debate on this amendment. I commend its intent. However, the Government have already committed to carrying out an evidence-led post-implementation review to assess how the Bill is delivering on its aims. The CMA has also engaged constructively with parliamentary committees to support their scrutiny of its activities. This will continue in the future. Noble Lords will be aware that the CMA is also required to present and lay its annual report in Parliament, covering its operation and effectiveness.
I thank the noble Lords, Lord Clement-Jones and Lord Tyrie, and my noble friend Lord Hodgson for their amendments. I hope that they are sufficiently reassured by what I have said and do not feel the need to press them.
Lord Clement-Jones (LD)
My Lords, I thank the Minister for that response. Even on an empty stomach, there are things to be taken away from what the Minister said. I score him two and a half out of four as far as this is concerned. What he said on exemplary damages was disappointing. I cannot see why the Government do not understand that using a review that took place in 2013 as a stick to beat us with by saying that we cannot have exemplary damages for collective proceedings seems a bit perverse. Time has moved on. The whistleblowing side is the half—so nul points for exemplary damages and half a point for whistleblowing, but if there had been more than just research it might have been full marks. As regards the other two points, the fact that there will be a post-implementation review is sensible. The Minister did not say much more about the post-PACCAR pledge, but we take a little bit on trust, particularly at this time of day. In the meantime, I beg leave to withdraw Amendment 61.
Lord Offord of Garvel
Member’s explanatory statement
This clause would leave out Clause 127 of the Bill (use of damages-based agreements in opt-out collective proceedings), which addresses the Supreme Court judgment in R (PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28 in respect of certain proceedings, because the Government intends to bring forward a separate Bill addressing that judgment in respect of all proceedings.
Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
Read Full debateWednesday 13th March 2024
(8 months, 1 week ago)
Lords ChamberDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Watch Debate Amendment Paper: HL Bill 47-II Second marshalled list for Report - (11 Mar 2024)
19:30 - Division on Amendment 150 - Ayes: 165 / Noes: 154 - Amendment 150 agreed.
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
Lord Bassam of Brighton (Lab)
My Lords, we are very grateful—we are always very grateful, actually—to the noble Lord, Lord Clement-Jones, for tabling this amendment, which raises a valid concern around the suitability of the current provisions in Section 58 of the Enterprise Act.
We take the view that the world has changed significantly since that legislation was put on the statute book. It was changed as a result of the passage of the National Security and Investment Act, but not in a way that addressed the points that have been properly raised by the noble Lord. Some aspects of this debate featured during the passage of the Online Safety Bill, and I strongly suspect we will revisit this on other occasions in the future, as the noble Lord, Lord Lansley, has invited us to with the Media Bill.
The noble Lord, Lord Clement-Jones, described this as a “brazen attempt” on his part. Well, I hope the Government will be open-minded about looking at whether and how the public interest notice regime could be revised in the future, to take account of different types of media provider. However, because I know that noble Lords would like to progress on to another interesting group on a similar topic, I will hand the Floor to the Minister.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
I thank the noble Lord, Lord Clement-Jones, for Amendment 64. It would expand the list of media merger public interest considerations to include:
“The need for free expression of opinion and plurality of ownership of media enterprises in user-to-user and search services”.
I previously addressed this issue in Committee, when I referred to the Government’s ongoing consideration of Ofcom’s recommendations. As suggested by the noble Lord, ensuring that our regime is updated to reflect current market conditions remains important.
My noble friend Lady Stowell of Beeston has been engaging extensively with government on changes to the wider media merger regime, and I understand that discussions have been constructive. My noble friend Lord Parkinson of Whitley Bay, who is in his place, is the Lords Minister responsible for media mergers. To avoid repetition, I will not speak to the detail of these discussions now but will leave it to my noble friend, who will return to the substance of this in the next debate. I hope the noble Lord will be able to withdraw his amendment and allow us to discuss this further when the next group is debated.
Lord Offord of Garvel
Member’s explanatory statement
This amendment, which would amend section 124 of the Enterprise Act 2002 (orders and regulations), is consequential on paragraph 17(6) and (9) of Schedule 9 to the Bill which omits order making powers in section 111(4) and (6) of that Act.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord Parkinson of Whitley Bay) (Con)
My Lords, it is a pleasure to speak on this Bill for the first time, even if it is some 43 minute later than advertised by some of our free media outlets. It touches on debates we have already had in connection with the Media Bill.
His Majesty’s Government firmly believe in a free media and a free press. It is the bedrock of our democracy and an essential safeguard which ensures accountability and effective government. I know that noble Lords share that firm belief. We heard it strongly again today, not least from my noble friend Lady Stowell of Beeston, whom I thank for her work in reflecting these important principles through her scrutiny of this Bill, the Media Bill and others.
Media freedom depends on having a plurality of media through which the public can access a wide range of accurate, high-quality news, views and information. My right honourable friend the Secretary of State has championed press and media freedom from her very first moment at the Department for Culture, Media and Sport. She has been clear about its importance and has made it a personal priority.
Lord Bassam of Brighton (Lab)
My Lords, in order to help, can we be absolutely clear that this covers minority ownership and control? We need clarity on that. The noble Lord, Lord Moore, made that point. It would help the House for the avoidance of doubt.
Lord Parkinson of Whitley Bay (Con)
The noble Lords have intervened at a helpful point, because I was about to outline that we want to ensure that the new measures do not have undesired effects on wider foreign business investment in the UK media, or on purely passive investments made by established investment funds.
In the amendment we will bring forward at Third Reading, it will be necessary to take a power to make secondary legislation to set out two points clearly: first, what limited types of established investment funds we mean, which could be split out of the general prohibition on foreign state ownership provided for by this regime; secondly, the very low threshold up to which they may be permitted to invest, which we intend to be considerably lower than the current thresholds for material influence in the Enterprise Act.
As we bring this forward ahead of Third Reading, we would be very happy to discuss the drafting with noble Lords before it is tabled so that we can discuss the detail. We will set that out in the provisions at Third Reading.
Lord Lansley (Con)
I am sorry to interrupt my noble friend but, as he knows, I am interested in the question of media enterprises more generally. Is he intending that the amendment to be brought forward will relate only to newspapers, and therefore will not touch upon broadcasters, as they will be excluded? I am not sure I understand why the presentation of news by broadcasters is to be treated differently from the presentation of news by newspapers.
Lord Parkinson of Whitley Bay (Con)
The provisions we will bring forward at Third Reading will relate to newspapers and periodical news magazines, as I have set out. It will not cover television and radio broadcasters at this time, but that is something we will continue to consider. We have already been considering it as part of our broader work on the media mergers regime. That work will continue. I am happy to speak with my noble friend Lord Lansley and others about it.
Lord Clement-Jones (LD)
Could the noble Lord go through again what will happen to an existing merger, which is subject to existing procedure? He seemed to be saying that, as soon the new provision comes in when the Bill passes, it will be subject to the new procedure as well as the old. Is that what he was saying, and how will that work?
Lord Parkinson of Whitley Bay (Con)
That is what I was saying, but it depends on when the Bill gets Royal Assent. That is in the hands of noble Lords and not just the Government. If any live case is still ongoing at the time of Royal Assent—we intend for the new provisions to come into effect at Royal Assent—then the Secretary of State will obviously follow the provisions as set out in other Acts of Parliament as decided by Parliament previously, and follow the law as enacted after Royal Assent.
Lord Clement-Jones (LD)
I have a second question. I am assuming that internet digital news media—not a newspaper—will not be covered by these provisions.
Lord Parkinson of Whitley Bay (Con)
No. I am grateful that we have separated the debate on the noble Lord’s previous amendment from this so that I can respond directly to the amendment brought by my noble friend Lady Stowell. I am grateful for his understanding of that.
The Government are focused on the reforms to media ownership rules, which were suggested in Ofcom’s 2021 review. It did not recommend that online inter- mediaries, including social media platforms, search and video/audio-on-demand services should fall in scope of that. I heard what the noble Lord said about having this debate in the Media Bill, and I look forward to doing so.
The secondary legislation provisions that I have outlined will be subject to the affirmative procedure in Parliament. Until such time as those regulations are laid and approved by Parliament, the whole regime applies to everybody caught by the general foreign state prohibition.
We have always believed that the trustworthiness of our news and the lack of government interference in it, whether domestic or foreign, is of paramount importance, which is why we are setting out today our plan to make that more explicit in the regulatory regime that exists. As my noble friend Lady Stowell is aware, work is already under way to update the media mergers regime more broadly, and I touched on that in my responses to noble Lords. We will continue to take that work forward. I hope that, on that basis, my noble friend is able to withdraw her amendment today. With renewed thanks to her and a renewed commitment to work with those who have supported her, I am grateful for the opportunity to speak today.
Baroness O'Neill of Bengarve (CB)
My Lords, for the avoidance of doubt, could the Minister clarify whether the proposed restrictions apply not only to print and broadcast media but to digital media?
Lord Parkinson of Whitley Bay (Con)
No, it is just to newspapers and periodical news magazines.
Baroness Stowell of Beeston (Con)
My Lords, I am very grateful to all noble Lords who have spoken for their support and for the powerful speeches that they have given, and I am very grateful to my noble friend for his clear and comprehensive explanation of the Government’s position, and their firm intention to bring back an amendment at Third Reading to address that simple objective that I outlined at the start of this debate.
Because my noble friend covered such a lot of ground and this is quite complex stuff, for the benefit of other noble Lords and anyone else following this debate, I shall play it back at him a little bit, perhaps in plainer English, if I may—although noble Lords must forgive me if some of it is not as plain as it would be if I was speaking outside the House.
What we have heard is that the Government will bring forward an amendment at Third Reading that will expand the definition of foreign power beyond that in the National Security Act to include individuals who might not otherwise be adequately captured. That is something that has been of particular interest and concern to some of the legal noble Lords who have been following and commenting on my amendment. The amendment will expand the definition of “newspaper” in the Enterprise Act to include news magazines explicitly. The amendment will give the Secretary of State a new power to issue a foreign state intervention notice if she is notified or becomes aware at any time of possible foreign state involvement to own, control or influence a newspaper or news magazine. Once her order is issued, the CMA must investigate and, if it establishes that it is a foreign state, as newly defined, any investment or takeover will be blocked—or, if the investment has already happened, the Secretary of State will have the power to unwind that investment. All that will come into force once the Bill gets Royal Assent, and it will apply to any live regulatory case alongside the existing procedure that the Secretary of State is following.
In addition, at Third Reading, the Government will bring forward an amendment to create secondary legislation, which will be subject to the affirmative procedure. Those regulations will define what kind of indirect foreign state entity might be allowed to make a passive investment, such as a sovereign wealth fund of a democratic state, and include a very low threshold below which such an entity could invest. The purpose of those regulations will be to preserve the opportunity of legitimate foreign investment in news media. For example—and I think that it helps to get an example to understand what we are talking about here—it has been pointed out to me that the Norwegian state investment fund has single digit investments in News Corp, Reach, which is also known as the Mirror Group, Paramount Global, which owns Channel 5, and Comcast, which owns Sky.
To me, what my noble friend has outlined today, on my simple interpretation of it, makes sense. I am very grateful to the Minister for emphasising the very low-level investment that the Government are considering for the secondary legislation that will come forward, but the precise percentage will matter. I know that he will not be able to commit now to bringing forward the regulations in draft at Third Reading, because there is a lot of work for officials to do between now and then, but I hope that he can commit to doing as much as he can at Third Reading to provide the detail that we will need to be properly satisfied that what then follows will meet all our concerns.
Lord Offord of Garvel (Con)
I thank noble Lords for their amendments, contributions and questions. I turn first to Amendment 68, proposed by the noble Baroness, Lady Bennett of Manor Castle. This amendment would provide that consumers’ collective interests included avoiding any detrimental effects resulting from the advertising of high-carbon products and services. The Bill already protects consumers during the transition to net zero. Enforcers can take action to tackle misleading green claims. Moreover, helping to accelerate the UK’s transition to net zero is one of the priorities in the CMA’s new annual plan. I hope that this reassures the noble Baroness.
Amendment 69, from the noble Lord, Lord Clement-Jones, would prohibit the use of packaging that is similar to that of other products. The promotion of imitation packaging is already a banned commercial practice, as listed in Schedule 19. Part 3 strengthens the civil enforcement regime, ensuring that enforcers can tackle misleading replica goods. I hope the noble Lord will therefore not press his amendment.
Lord Clement-Jones (LD)
My Lords, that is a bit terse, even by the Minister’s standards. I think we need to hear a little more about the form of enforcement, because the amendment is about the unsatisfactory nature of current enforcement. I referred to there having been only one enforcement since 2008, despite the fact that it was successful. What guarantee do the welcome recipients of the provisions in paragraph 14 of Schedule 19 have that there will be an effective enforcement regime?
Lord Offord of Garvel (Con)
The view of the Government in this legislation is that the banned commercial practice is banned already, as set out in Schedule 19, and that a strict civil enforcement regime is already in place, strengthened by Part 3. It is down to enforcers to tackle these misleading replica goods; our view is that it is up to the enforcement regimes to enforce under the current law.
Lord Clement-Jones (LD)
My Lords, I am not sure that the Minister has a full brief about the nature of the available enforcement. Will he write to me to provide a few more particulars and give more assurance in this respect?
Lord Stevenson of Balmacara (Lab)
My Lords, it is important that we unpick the point made by the noble Lord, Lord Clement-Jones, which I think was touched on but not addressed by the Minister. If we rely on civil remedies, we are not really addressing the problem that there is, in effect, an opportunity, for those who wish to, to exercise criminality; this surely cannot be left to the civil courts.
Lord Offord of Garvel (Con)
As some clarification is required, I am happy to write further on the matter.
Amendments 70, 71 and 93 to 98 are technical government amendments. The Bill empowers the courts to impose monetary penalties for a breach of consumer law and procedures. To accommodate the different processes by which court orders are served or enforced in Scotland and Northern Ireland, the amendments provide that prescribed penalty information may accompany an order in a separate notice, as well as being contained within it.
On government Amendments 72 to 90, on online interface and the powers of consumer law enforcers to tackle illegal content, I thank noble Lords who have contributed on this important issue. I am pleased to bring forward government Amendments 72 to 90 to give all public designated enforcers take-down powers to tackle infringing online content. The amendments enact the commitment made by the Government in their recent consultation response.
I thank the noble Lord, Lord Clement-Jones, for Amendments 91 and 92. Amendment 91 would require the CMA to provide advice on a business’s compliance with consumer law on request. It would also prevent enforcement action by any enforcer if the advice were complied with. The CMA already provides general guidance and advice on compliance. It is businesses’ responsibility to comply with the law, referring to guidance and seeking independent legal advice where necessary. It would not be appropriate to transform the CMA into a bespoke legal advice service. The amendment would also drain CMA resources from much-needed enforcement activity. Moreover, Amendment 92 compels the CMA to accept primary authority advice received by a business where that advice has been complied with. It is common practice for the CMA to consult the primary authority before taking action; this strikes the right balance and avoids binding the CMA to such advice, thus inappropriately neutering its discretion. I hope the noble Lord will agree that the purpose of a direct enforcement regime is for the CMA to enforce faster and more frequently; these amendments would diminish this objective and remove the deterrent effects of the regime.
Lord Clement-Jones (LD)
My Lords, does the noble Lord understand the need for certainty of advice when it is given by a primary authority and that the primary authority must feel, when it gives that advice, that it has the full backing of the CMA? There seems to be no assurance that this is under consideration or even a matter of concern.
Lord Offord of Garvel (Con)
We are clear that the CMA provides general guidance and advice, but it is the responsibility of businesses to comply with the law. If the CMA is transformed into a bespoke legal advice service, it will not be doing the work it is meant to do, which is focusing on enforcement. Therefore, we believe the balance is right in the mechanism put forward.
Turning to trading standards and Amendments 99, 100 and 101, I am grateful to my noble friend Lord Lindsay and the noble Baronesses, Lady Bakewell and Lady Crawley, for their continued advocacy for trading standards departments and for meeting with me on these issues. I very much enjoyed meeting the case officers in this place. Amendment 101 would end the prohibition on enforcers using information that a person has been compelled to provide under broad information notice powers in criminal proceedings against that person. This prohibition safeguards a person’s right not to self-incriminate—a long-established right protected by the common law and the Human Rights Act. The courts have held that material which exists independently of the will of the suspect, such as pre-existing data obtained during a search of the suspect’s premises, may be admissible in a criminal trial against them. By contrast, to comply with an information notice, a person will likely be required to generate documents. Legislation already permits trading standards departments to exercise their investigatory powers outside their local authority boundaries, including by carrying out in-person inspections of business premises. We have been informed that trading standards departments have used these on-site powers to secure documents from traders suspected of an offence and then relied successfully upon such documents in prosecutions against them.
Amendments 99 and 100 would permit any trading standards department based in Great Britain to carry out investigations across national borders. As I committed to my noble friends in writing, I have asked government officials to work further with trading standards to identify practical measures supporting greater cross-border co-ordination. To clarify, if an infringer is based in Scotland and the offence has caused harm in England, the English enforcer can pursue a prosecution through the English courts and vice versa—the procurator fiscal can prosecute a case where a trader is based in England but the infringement was committed in Scotland. All court orders in respect of consumer protection breaches have effect in all parts of the United Kingdom, regardless of where they have been made. We are open to exploring a variety of options, for example, exploring how best to facilitate local authorities across the country to exercise investigatory powers on behalf of each other. I have asked them to consult with trading standards when developing guidance on this legislation to ensure clarity on what it provides for. Once again, I thank my noble friend and the noble Baronesses for their engagement on this issue.
Government Amendments 102 and 103 make further consequential amendments to the Estate Agents Act 1979. They achieve consistency in how the Act applies to non-compliance with obligations under the court-based and the CMA direct enforcement regime.
Turning to standard essential patents, raised by the noble Lord, Lord Clement-Jones, through Amendment 152, I can confirm that the Government have now published their key objectives on SEPs and a forward look at work to be conducted in 2024. This follows input received in 2023 from key stakeholders from industry. The Government will first take forward non-regulatory interventions where action can be taken now. Later in 2024, the Government will launch a technical consultation on other potential interventions. On the question of injunctions, the Government believe that other measures, such as guidance, information on SEP licensing and how to respond to SEP disputes, is a proportionate government response at this stage. A resource hub will provide guidance that will enable businesses to better understand the SEP licensing system and the UK courts’ approach to the remedies available for patent infringement and existing services available for dispute resolution. The IPO will also continue engagement with relevant industry and institutions to continue to inform our ongoing policy development and interventions. My noble friend Lord Camrose has confirmed that his department will be making steps in what the noble Lord, Lord Stevenson, has described as a very complicated area.
I hope that this will—
Lord Clement-Jones (LD)
I am sorry to intervene again. The Minister is really confirming what the IPO has advised in its forward look. The Minister is saying, “Yes, this is important, but we are not going to do anything about injunctions”. Does he recognise the asymmetry in all this? This is why SMEs need enforcement to be looked at much more carefully in terms of the amendment that I have tabled. What is the essential objection to going forward with some kind of change, given that the rest of the proposals from the IPO seem to be pretty satisfactory?
Lord Offord of Garvel (Con)
On the basis that my noble friend Lord Camrose has responsibility for the IPO, he has kindly offered to write to the noble Lord on this matter and give further clarification.
This has been a varied and valuable debate. I thank noble Lords again for their engagement. I hope the assurances that I have provided will therefore give noble Lords confidence not to press their amendments.
Baroness Bennett of Manor Castle (GP)
My Lords, I thank the Minister for his response, though I am not sure “confidence” is quite the right word for the emotion I am feeling at the moment.
I said that I would comment only on my Amendment 68, but I must make brief reference to commend the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Crawley, for doing what many think your Lordships’ House should be restricted to—providing modest improvements and ways to help the Government make the system work better. I do not think it should be restricted to that, but it is certainly important that it does it. Reflecting on the trading standards issues, it was not mentioned but is worth noting that the Chartered Trading Standards Institute noted last year that, in the last decade, the number of trading standards officers in local authorities has halved, so they need anything that makes their work easier. The Government would, I am sure, say that they believe in efficiency and government productivity, and the suggestion from the noble Baroness seemed to be designed for that purpose. None the less, those are very technical areas, so I will park them there, as I will park the government amendments.
Regarding my Amendment 68, we will be watching closely what the CMA does in terms of action on green- washing. There is a general belief that the Bill simply does not have the teeth, or strength, that it needs. The overall issue—that we are way beyond our current targets on climate emissions—was not addressed by the Minister. I thank the noble Lord, Lord Stevenson of Balmacara, for the comments and strength he brought to the intention to see more action in this area. In the meantime, I beg leave to withdraw the amendment.
Lord Offord of Garvel
Member's explanatory statement
This amendment provides that, where an order is made requiring payment of a monetary penalty, the requirement to provide monetary penalty information (see clause 203) within the order may instead be met by providing the information in a separate document. This will ensure that if any such information is not known at the time of making the order it can be included instead in that document.
Lord Offord of Garvel
Member's explanatory statement
This is amendment is consequential on my amendments to clause 158.
Lord Offord of Garvel
Member's explanatory statement
This amendment provides that orders under the Estate Agents Act 1979 prohibiting unfit persons from doing estate agency work can be made in cases where a person has failed to comply with an undertaking given to the CMA under clause 185 of the Bill.
Lord Leong (Lab)
My Lords, I thank all noble Lords who have spoken in this debate. Once again, I have been extremely impressed by the range of expertise and the depth of insight. Conscious of the time we have all been here, I will address some of the key amendments as briefly as I can.
Amendments 104 and 118, in the names of the noble Baronesses, Lady Hayman, Lady Bakewell, Lady Ritchie and Lady Harding, would require the Secretary of State to publish a strategy conferring the right to access repair. They would also ban practices which prevent repair or prematurely terminate software support. The right to repair is an essential part of the circular economy. Many businesses understand that this is an opportunity for innovation, creating new jobs, saving money, reducing waste and saving scarce resources.
We are sympathetic to the noble Baroness’s amendment. The noble Baroness, Lady Hayman, has made strong arguments for her amendment, and she has a lot of support around this House for action to be taken on this issue. We are, in principle, supportive of the right to repair and its contribution to the circular economy, although we recognise that the impact on the sector will be significant. We would, therefore, encourage the Minister, if he cannot accept this amendment today, to make a firm commitment at the Dispatch Box that the Government will work with the noble Baroness, across departments, to ensure that real progress will be made on this issue in the near future.
We support Amendments 105 and 106 from the noble Lord, Lord Clement-Jones. These would make selling goods online, when they do not meet specified safety requirements, constitute an unfair commercial practice. Additionally, we are broadly sympathetic to Amendment 108 in the name of the noble Lord, Lord Clement-Jones, which lists five new unfair commercial practices. However, we would welcome proposals for further discussion.
Moving on to fake reviews, Amendment 109, in the names of the noble Earl, Lord Lindsay, and the noble Baroness, Lady Crawley, would insert provisions around fake reviews of products into Schedule 19. We welcome government Amendment 107, which adds various activities relating to fake reviews directed at consumers to the list of unfair practices in Schedule 19 to the Bill.
However, we would encourage the Government to adopt Amendments 107A and 107B from the noble Lord, Lord Clement-Jones. These propose small improvements to address the role played by internet service providers and social media in promoting fake reviews. If the Minister does not accept these amendments, can he explain why ISPs and social media are not specifically covered within the government amendments?
We must not forget the real-life consequences of the issues at stake among all the technical details. We all remember the awful tragedy of the Grenfell Tower fire in June 2017, which killed 72 people and injured 70 more. The source of this blaze was recently identified as a faulty fridge-freezer. Even one more preventable death from recalled products, where there are known risks to consumers, would be one too many. We urgently need to act to do whatever we can to prevent further tragedy.
The following amendments address this issue directly. Amendment 110, again in the name of the remarkably industrious noble Lord, Lord Clement-Jones, would make it a misleading action to sell goods online without taking reasonable steps to ensure that they have not been subject to a product recall. Amendment 111 would require the Secretary of State to make regulations to define the “reasonable steps” set out in Amendment 110. Amendment 120, in the noble Lord’s name, defines the terms “online marketplace” and “safety requirements”, which we support.
The Government set up the Working Group on Product Recalls and Safety to bring together experts from fire services, trading standards, consumer groups and industry. They were tasked with identifying the causes of fire from white goods—everyday items such as dishwashers, washing machines, tumble dryers and fridge-freezers—and the actions needed to reduce them. Experts suspect that selling recalled and faulty goods via online stores and social media platforms is common practice. I ask the Minister: when did this working group last meet? Are there are plans for consultations to explore this dangerous behaviour?
Moving on to drip pricing, we thank the Government for listening to our concerns in this area and bringing forward Amendments 112, 113 and 114. We ask the Government specifically to keep the definition of mandatory fees under review.
Amendment 115, in the name of the noble Earl, Lord Lindsay, is a sensible one, proposing that price should be removed from any invitation to purchase so that it is not an inducement to buy.
The following government amendments are technical, clarificatory and consequential and we are broadly in agreement: Amendments 116, 117, 119, 121, and 141 to 149.
In Committee, I spoke about the UK’s secondary ticketing market. It is estimated to be worth £1 billion annually. The industry model is to purchase tickets for sporting and cultural events in bulk, and then resell them at inflated prices, as referred to by the noble Lord, Lord Moynihan. Such practices exclude people who cannot afford artificially high prices and exploit the people who can. Several renowned artists, through their management firms, are implementing measures to ensure that genuine fans secure tickets initially, and to identify and nullify tickets resold for profit.
I am pleased to speak to Amendment 150 in the name of the noble Lord, Lord Moynihan, supported by the noble Lord, Lord Clement-Jones, and my noble friend—and good friend—Lady Jones of Whitchurch. Not only would it prevent bulk-buying of tickets, it would end the fraudulent practice of speculative selling. This is where touts list and sell seats they do not have, bank the proceeds and then hope to secure a ticket later to fulfil an order. This is despicable. I respectfully remind the Minister that these practices most certainly are not good examples of competitive markets, nor do they give consumers genuine choice and flexibility.
Online ticket touts create nothing except misery for fans. They exploit the market and distort it, purely for their own profit. The voices of the creatives, the ones both we and their fans want to support, are calling for the Government to act. We on this side will support the noble Lord, Lord Moynihan, if he seeks to test the opinion of the House on Amendment 150. Of course, we will consider and vote for it in its place on the list.
Finally, we support Amendment 151, which addresses a very specific situation. When a trustee of a charity receives tickets in respect of their role, they must not resell them on a secondary ticketing site for more than face value plus a handling charge.
I hope the Minister has been persuaded by my whistle-stop summary, and as I catch my breath, I will listen with interest to his response.
Lord Offord of Garvel (Con)
As ever, I start by thanking noble Lords for their amendments and all who spoke for their important and considered contributions. On Amendment 104 on right to repair, tabled by the noble Baroness, Lady Hayman, it has been a great pleasure to discuss this with her during this process and, indeed, since Committee. I also thank the noble Lord, Lord Leong, and the noble Baronesses, Lady Bakewell and Lady Bennett, for their impassioned contributions on this issue.
Noble Lords may recall from Committee that there is much excellent work under way in this area across government, involving in my department, Defra, the Department for Energy Security and Net Zero and the Department for Science, Innovation and Technology. Waste prevention and eco-design are two key strands of this work. As well as this cross-government work, Defra, which published Maximising Resources, Minimising Waste last year, is currently setting up the necessary programme management and governance functions around that work, and will work closely with other government departments, including those with a consumer perspective, to achieve these goals. I appreciate the point that there is a lot to co-ordinate here, and I hope that this governance will reassure noble Lords that the problem is being gripped. The Government will also set out in a future publication how each scheme interacts and adds up into a coherent whole.
I appreciate the point that the noble Baroness made about Northern Ireland, and we will of course consider carefully the implications of new EU regulations in Northern Ireland. Naturally, we will adopt an approach that best suits the UK circumstances when designing our own regulations; we are always open to allowing for more or less any objective that would even improve on the EU’s regime.
While I am sympathetic to the intent of these amendments, the Government’s view is that there is already a strategic framework in place for supporting right to repair. I greatly appreciate all the work that the noble Baroness, Lady Hayman, is doing in this space. Of course, her continued input would be greatly welcomed as this work progresses. I have said to her before that we are violently agreeing on the need for this to happen, and I am very happy to work with her to move forward.
I turn to Amendment 108, tabled by the noble Lord, Lord Clement-Jones, relating to third-party agents. I would like once again to reassure him that the protections sought in these amendments are mostly provided for elsewhere in consumer law. Clauses 225 and 227 prohibit traders using misleading actions or aggressive practices, including influencing a consumer’s decision on whether to use a third party. A particular dispute between an airline and an online travel agent has often been raised, including in Committee, when discussing this issue.
The CMA has significant powers to investigate and act if it finds that businesses are behaving anti-competitively in a particular market. It is right that those matters be determined by the CMA as it sees fit, which means that I cannot comment on its work—but I can assure the noble Lord that it is alive to this issue. More broadly, we have recently consulted on the package travel regulations that govern many of these sectors, and I look forward to sharing the response to the call for evidence.
I turn to the issue of invitation to purchase, and thank my noble friend Lord Lindsay for his Amendment 115, as well as the noble Baroness, Lady Bakewell, for her contribution on this issue. The amendment would remove the requirement that a price is provided before an action is considered an invitation to purchase. Actions that are considered an invitation to purchase attract specific consumer rights. The Government believe that the changes proposed by this amendment would expand the definition too far, rendering the invitation to purchase provisions unworkable in practice. The Government are confident that sufficient legal protection is already in place for circumstances in which vulnerable customers engage rogue traders to undertake services on their behalf. In the Consumer Rights Act 2015 there are pre-contract information obligations on traders to provide identity and contact details. Nevertheless, I draw your Lordships’ attention to my commitment for officials to continue to work with noble Lords to identify practical measures to support trading standards officers.
The noble Baroness, Lady Bakewell, raised an important point about VAT. I can provide an assurance that pricing information must already include any relevant taxes, including VAT, and VAT and pricing information is also subject to the Price Marking Order that the Government consulted on last year. We will introduce secondary legislation to improve transparency, including on all taxes.
Lord Offord of Garvel
“12A “(1) Submitting, or commissioning another person to submit or write—(a) a fake consumer review, or(b) a consumer review that conceals the fact it has been incentivised.(2) Publishing consumer reviews, or consumer review information, in a misleading way.(3) Publishing consumer reviews, or consumer review information, without taking such reasonable and proportionate steps as are necessary for the purposes of—(a) preventing the publication of—(i) fake consumer reviews,(ii) consumer reviews that conceal the fact they have been incentivised, or(iii) consumer review information that is false or misleading, and(b) removing any such reviews or information from publication.(4) Offering services to traders—(a) for the doing of anything covered by sub-paragraph (1) or (2);(b) for the facilitating of anything covered by sub- paragraph (1) or (2) to be done.(5) For the purposes of this paragraph—(a) “consumer review” means a review of a product, a trader or any other matter relevant to a transactional decision;(b) “fake consumer review” means a consumer review that purports to be, but is not, based on a person’s genuine experience;(c) a consumer review conceals the fact it has been incentivised if—(i) a person has been commissioned to submit or write the review, and(ii) that fact is not made apparent (whether through the contents of the review or otherwise);(d) “consumer review information” means information that is derived from, or is influenced by, consumer reviews;(e) a person “submits” a review or information if they supply it with a view to publication;(f) “writing” includes creating by any means; (g) “commissioning” includes incentivising by any means (and “commissioned” is to be read accordingly);(h) “publishing” includes disseminating, or otherwise making available, by any means;(i) publishing in a “misleading way” includes (for example)—(i) failing to publish, or removing from publication, negative consumer reviews whilst publishing positive ones (or vice versa);(ii) giving greater prominence to positive consumer reviews over negative ones (or vice versa);(iii) omitting information that is relevant to the circumstances in which a consumer review has been written (including that a person has been commissioned to write the review).”Member’s explanatory statement
This amendment adds various activities relating to fake reviews directed at consumers to the list of unfair commercial practices in Schedule 19 to the Bill.
Lord Offord of Garvel
“(b) the total price of the product (so far as paragraph (ba) does not apply);(ba) if, owing to the nature of the product, the whole or any part of the total price cannot reasonably be calculated in advance, how the price (or that part of it) will be calculated;”Member’s explanatory statement
This amendment, along with my amendment to insert new subsections (3A) and (3B) into clause 229, requires a trader to set out in an invitation to purchase the total price of a product including any mandatory fees, taxes and charges that apply to the purchase of a product rather than “drip-feeding” such amounts during the transaction process.
Lord Offord of Garvel
Member’s explanatory statement
This amendment, and my other amendment to clause 232, changes the parliamentary procedure for regulations under clause 232 so that any regulations made under the clause (not just the first) are subject to the affirmative procedure.
Lord Offord of Garvel
“(aa) the descriptions of practices mentioned in paragraph 12A of that Schedule;”Member’s explanatory statement
This amendment provides that the new unfair commercial practice relating to fake reviews provided for by my amendment to Schedule 19 will be an excluded description of practice for the purposes of clause 236(7) (and accordingly will not be subject to criminal liability).
Lord Offord of Garvel
“(2A) In section 74(3) (interpretation of Chapter)—(a) in paragraph (b) for “the Consumer Protection from Unfair Trading Regulations 2008 (S.I. 2008/1277)” substitute “Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2024”; (b) in paragraph (c) for “those Regulations (see regulation 19 of those Regulations)” substitute “that Chapter (see section 230 of that Act).”Member’s explanatory statement
This amendment makes a further amendment to the Online Safety Act 2023 that is consequential on the revocation of the Consumer Protection from Unfair Trading Regulations 2008 and the commencement of Chapter 1 of Part 4 of the Bill.
Lord Offord of Garvel
“(5) See section 274(4) to (8) for how this Chapter applies in relation to a contract that—(a) was an excluded contract at the time it was entered into, and(b) on subsequently ceasing to be an excluded contract, becomes a subscription contract.”Member’s explanatory statement
This amendment is consequential on my second amendment to clause 274.
Lord Offord of Garvel (Con)
My Lords, I am delighted to speak to this group of amendments, and I thank the noble Lord, Lord Clement-Jones, and my noble friends Lord Lucas and Lord Mendoza for their amendments. I will first address the government amendments.
Amendments 122 to 125, 138 and 139 aim to address the concerns raised by my noble friend Lord Mott about certain microbusinesses, such as small local farm shops, being unintentionally captured by the new subscriptions rules simply because they are incorporated. Together, these amendments alter the requirement for a business to be unincorporated in order to benefit from the exclusion. Instead, a business will benefit from this exclusion so long as it meets the “micro-entity” thresholds in the Companies Act 2006. The other requirements of the exclusion, which require a business to deliver foodstuffs to the home or workplace without the use of couriers, remain unchanged. This ensures that the exclusion remains well targeted and captures only the smallest of businesses. I am grateful to my noble friend for highlighting this issue, and I hope he is reassured by these amendments.
Lord Offord of Garvel (Con)
Once again, I thank all noble Lords for their passionate and eloquent speeches. I turn to Amendments 126A, 126B and 127A in the name of the noble Lord, Lord Clement-Jones, and Amendment 127 in the name of the noble Lord, Lord Lucas, relating to reminder notices.
The purpose of these notices is to give consumers essential information about their next renewal payment, and how to end their subscription if they no longer want it. That is why they are only required ahead of certain payments being taken, where the consumer could alternatively avoid paying by exercising their right to end the contract. We believe reminder notices are particularly important for 12-month contracts that automatically renew, given that a consumer may commit to another full year of payments if they miss the opportunity to end their contract.
For such contracts, businesses will only need to send two reminder notices per year, with one other reminder required if the contract starts with a free trial. We believe this is reasonable and strikes the right balance between ensuring consumers are prompted to consider their ongoing subscription and ensuring businesses are not overburdened.
I turn now to Amendment 127, tabled by my noble friend Lord Lucas, and I thank my noble friend Lord Black for his contribution, also relating to reminder notices. I am grateful to my noble friend for his amendment and I agree with him that businesses must be able to provide other information in these notices, such as promotional or advertising material. It is, after all, a key means of engaging with customers. However, as drafted, this amendment would mean that, while the reminder notice must be clearly given, the essential information that must be contained in the notice could get lost in marketing material. Therefore, while the Government cannot accept the amendment in its current form, I commit to bringing forward government amendments at Third Reading which will seek to strike the right balance on this topic.
Our amendments will allow businesses to provide other material—as they choose—in a reminder notice, but they will also ensure that the required information remains the most prominent information in the notice. This approach will ensure consumers receive clear and timely information about their current subscription, while allowing businesses the opportunity to provide promotional offers or other information in a reminder notice.
I turn to Amendments 131, 133 and 134, tabled by the noble Lord, Lord Clement-Jones, on cooling-off periods. I share the noble Lord’s intent to ensure the cooling-off rules work for digital content providers. As I explained in my earlier remarks, before introducing the relevant secondary legislation for how refunds work during cooling-off periods, the Government will consult on a “use it and lose it” proposal. It is essential that we consult on this proposal, as the proposal, or a version of it, may well apply to other services or products, such as personalised goods.
We have focused mostly on the digital sector today, but many other sectors, with different circumstances, may also be relevant. In light of this, we do not agree that detailed arrangements just for digital content should be in the Bill. The full range of sectors should be considered in consultation, and such detail is better suited to secondary legislation, which can be updated when required. That is why we have made it very clear, through our Amendments 136 and 137, that secondary legislation can take account of different products and circumstances. That is also why the noble Lord’s Amendment 135 is not necessary. Its objective is already achieved with the existing drafting and has been explicitly clarified through the Government’s own amendments.
I now turn to Amendments 126 and 140 on gift aid, tabled by my noble friend Lord Mendoza and the noble Lord, Lord Clement-Jones, respectively. I also thank the noble Baroness, Lady Jones of Whitchurch, for her contribution on this topic. For the reasons set out earlier, we do not consider excluding memberships which qualify for gift aid to be the best way to address this issue. Instead, the Treasury will amend the gift aid regime to ensure that it is compatible with the subscriptions chapter. As I have already said, the Treasury has shown its firm intention to lay the necessary legislation with the statement recently made in last week’s Budget.
On the points raised by the noble Lord, Lord Clement- Jones, we do not consider placing such conditions for the commencement of the chapter as the best way to achieve these aims. Noble Lords rightly point out that charities will need clarity on how consumer and gift aid regimes work together. I assure your Lordships that we will work closely with the Treasury, HMRC and the charity sector to provide guidance where needed before the regime commences.
For the reasons stated earlier, we do not consider that there should be specific detail about the cooling-off period in the Bill for particular products or services. However, we will consult before the end of the year and will be sure to engage closely with the charitable sector to understand issues specific to it.
As I emphasised earlier, the purpose of consultation is to develop rules which are fair and workable for traders and consumers and take account of circumstances such as those set out by the noble Lord. This will inform the secondary legislation that will be needed for the regime to be operable, and therefore we do not think a specific requirement that the regime cannot commence without it is necessary. As I mentioned before, the law is clear that, where a consumer donates regularly to a charity without receiving goods, services or digital content in return, this will not meet the definition of a subscription contract. Such donations are therefore out of scope of the chapter.
I hope this reassures noble Lords of the Government’s intent and that therefore they will not feel the need to press their amendments.
Lord Offord of Garvel
Member's explanatory statement
This amendment, along with my other amendments to Schedule 21, provides that a contract for the supply of foodstuffs etc delivered to the consumer’s home is excluded from the subscription contracts regime if the trader’s business is a “micro-entity”, which is assessed on the basis of the business’ turnover, balance sheet and number of staff, regardless of whether the business is incorporated or not.
Lord Offord of Garvel
“(a) in a way which is straightforward, and”Member's explanatory statement
This amendment sets out the principle that must inform the way in which a trader enables a consumer to bring a subscription contract to an end.
Lord Offord of Garvel
Member's explanatory statement
This amendment enables a consumer to exercise a right to cancel a subscription contract for breach of an implied term under the Chapter by notifying the trader by any clear statement of their decision to cancel the contract. The concept of a consumer ending a contract by making a clear statement of their decision to do so is already in use in consumer law.
Lord Offord of Garvel
Member's explanatory statement
This amendment enables a consumer to exercise a right to cancel a subscription contract during a cooling-off period by notifying the trader by any clear statement of their decision to cancel the contract. The concept of a consumer ending a contract by making a clear statement of their decision to do so is already in use in consumer law.
Lord Offord of Garvel
Member's explanatory statement
This amendment makes clear that the power under clause 266(1)(a) may be exercised to provide that a consumer may lose the right to cancel during a cooling-off period if the consumer chooses to receive digital content or services during that period.
Lord Offord of Garvel
Member's explanatory statement
This amendment clarifies that the Chapter does not apply in relation to any contract that was entered into before clause 253 comes into force. This is to ensure that it does not apply to a contract that was not a subscription contract when it was entered into before that clause comes into force (e.g. because it was an excluded contract) but then becomes a subscription contract after that clause comes into force.
Lord Offord of Garvel
“(a) a bankruptcy order having been made in relation to the trader (or, in Scotland, the trader’s estate having been sequestrated),(b) a winding up order having been made in relation to the trader as a result of the trader’s insolvency,(c) an appointment of a liquidator (otherwise than following the making of a winding up order) as a result of the trader’s insolvency,(d) the trader being in administration,(e) the appointment of an administrative receiver (or, in Scotland, a receiver) in relation to the trader, or(f) in any jurisdiction, the trader being subject to an order or procedure that corresponds to any order or procedure mentioned in paragraphs (a) to (e).”Member's explanatory statement
This amendment broadens the definition of insolvency for the purposes of the Chapter.
Lord Offord of Garvel
“(4A) In subsection (4)(a)(i) the reference to limiting (or further limiting) the accreditation to particular descriptions of ADR or of special ADR arrangements includes, in particular, limiting it to ADR relating to consumer contract disputes that have already been referred for ADR or to special ADR arrangements that already exist (as the case may be), whether for a limited period or otherwise.”Member's explanatory statement
The amendment clarifies that the powers of the Secretary of State under clause 297 to limit or further limit the scope of an accreditation includes limiting it to finishing off subsisting referrals of disputes for ADR and/or operating existing special ADR arrangements.
Lord Offord of Garvel
Member's explanatory statement
This amendment, together with my other amendment to clause 335, ensures that the power to make regulations containing consequential amendments is conferred on the Treasury rather than the Secretary of State if the regulations only contain amendments to tax legislation, in compliance with the usual approach. This would, for example, enable the Treasury to make amendments to the Income Tax Act 2007 so as to ensure that gift aid can continue to be claimed in the case of payments made under subscription contracts between consumers and charities.
Lord Offord of Garvel
“(4A) In the case of regulations under section 335 made by the Treasury, the references in subsections (3) and (4) to each or either House of Parliament are to be read as references to the House of Commons only.”Member's explanatory statement
This amendment secures that the power to make regulations under clause 335 containing only amendments to tax legislation are subject to procedure in the House of Commons alone, in compliance with the usual approach for such powers in recognition of the financial privilege of the Commons. See also my amendments to that clause providing for the power to be exercisable by the Treasury.
Lord Offord of Garvel
Member's explanatory statement
This amendment is consequential on my amendment leaving out Clause 127.
Lord Offord of Garvel
“(ai) Part 1;”Member's explanatory statement
This amendment to section 393 of the Communications Act 2003 relocates the previous amendment to that section made by clause 109(3) (which is omitted by my other amendment to that clause).
Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 26th March 2024
(8 months ago)
Lords ChamberDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Amendment Paper: HL Bill 53-I Marshalled list for Third Reading - (25 Mar 2024)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
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The Lord Privy Seal (Lord True) (Con)
My Lords, I have it in command from His Majesty the King to acquaint the House that His Majesty, having been informed of the purport of the Digital Markets, Competition and Consumers Bill, has consented to place his interest, so far as it is affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Offord of Garvel) (Con)
My Lords, I will make a brief statement on the devolution status of the Bill. Parts 3, 4 and 5 of the Bill include provisions within the legislative competence of the Northern Ireland Assembly relating to consumer matters. The legislative consent process is not engaged in Scotland or Wales.
As noble Lords will be aware, the Executive and Assembly have only recently been restored in Northern Ireland. After the return of the Northern Ireland Assembly and Executive on 3 February, my ministerial colleague the Minister for Enterprise, Markets and Small Business wrote to his counterpart in Northern Ireland, seeking their agreement to initiate the legislative consent process and to support a legislative consent Motion in the Northern Ireland Assembly. Since then, my officials have been in regular contact with the Northern Ireland Civil Service and we are hopeful that the legislative consent process will progress swiftly over the coming weeks.
Although it has not been possible to secure consent by this time, we take great comfort from the engagement that has taken place with the Northern Ireland Civil Service throughout the passage of the Bill, including via correspondence between Permanent Secretaries. I take this opportunity to thank the officials in the Executive and express my gratitude for the close working to date. There has historically been a policy and enforcement imperative in Northern Ireland to maintain parity with Great Britain in relation to consumer protection matters. With the support of the Northern Ireland Office, my officials have liaised with the relevant Northern Ireland departments to ensure that the Bill considers and reflects the relevant aspects of devolved legislation. We remain committed to ensuring sustained engagement on the Bill with all three devolved Administrations as it progresses through Parliament.
Amendment 1
“Mergers involving newspaper enterprises and foreign powers(1) Schedule (Mergers involving newspaper enterprises and foreign powers) makes provision for the purposes of preventing foreign powers from gaining control or influence over newspaper enterprises.(2) The amendments made by that Schedule—(a) apply in relation to enterprises ceasing to be distinct on or after the effective date, but not in relation to enterprises ceasing to be distinct before the effective date;(b) apply in relation to arrangements in progress or in contemplation on or after the effective date which, if carried into effect, would result in the creation of a foreign state newspaper merger situation by virtue of enterprises ceasing to be distinct on or after the effective date.(3) In subsection (2), “the effective date” means 13 March 2024.”Member’s explanatory statement
This amendment, together with my amendment inserting a new Schedule after Schedule 6, makes provision for the purposes of preventing foreign powers from taking control of newspaper enterprises.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord Parkinson of Whitley Bay) (Con)
My Lords, I am here to speak to the amendments in this group which stand in the name of my noble friend Lord Offord of Garvel, and I am happy to update your Lordships’ House on the work that has taken place since our debates on Report to implement a regime to ban foreign state ownership of newspapers and news magazines. As I noted on Report, we have heard the strength of concerns expressed in Parliament, and from my noble friend Lady Stowell of Beeston in particular, about foreign state ownership of UK newspapers and news magazines.
His Majesty’s Government agree that the importance of these publications to our democracy cannot be overstated: newspapers have always been, and must continue to be, free to develop relationships with their readers and develop editorial lines supporting different positions. The plurality of views across different newspapers ensures that there is a wide range of views supporting a culture of argument, debate and challenge, which in turn contributes to a healthy democratic society.
His Majesty’s Government are therefore taking steps to preserve the freedom of the press, recognising the risks that foreign state ownership of, or control or influence over, the UK’s newspapers and news magazines could pose to democracy and to free speech. Foreign state ownership, if used to develop or control narratives which align with another state’s interests, may over time corrode trust in our media as a whole. That is why many countries already have laws limiting foreign state ownership, and why we are creating a new regime which will prevent foreign states having any stake in a UK newspaper or news magazine.
These amendments will amend the Enterprise Act 2002 to create a new foreign state intervention regime for newspapers and news magazines, I am delighted that my noble friend Lord Forsyth of Drumlean has put his name to Amendment 1, which leads the amendments in this group. Getting from a regret amendment on the Media Bill to joint signatures on this Bill in a matter of weeks is testament to the collaboration we have had across your Lordships’ House in our discussions, and I thank him for that.
Under the new regime, the Secretary of State will be obliged to give the Competition and Markets Authority a foreign state intervention notice where she has reasonable grounds to believe that a merger involving a UK newspaper or news magazine has given, or would give, a foreign state or a person associated with a foreign state ownership, influence or control. The CMA will be obliged to investigate and provide a report to the Secretary of State on the merger or potential merger. If it concludes that the merger has resulted or would result in a foreign state newspaper merger situation, the Secretary of State will be required by the statutory provisions to make an order to block or unwind the merger.
Our amendments expand the definition of “foreign power” to capture a wide variety of actors, including senior members of a foreign Government and officers of a governing political party acting in a private capacity. The legislation will also apply to mergers involving persons associated with a foreign power to ensure that we are capturing all possible ways in which a foreign state could seek control or influence over a UK newspaper or news magazine. Direct investment in newspapers of any size will be banned in future under this new regime.
It is, however, essential that these new measures do not have undesired effects in relation to wider business investment in UK media. We will therefore introduce an exemption for investments where the stake is below 5% of the total investment being made. This would apply to passive investments by established and pre-existing sovereign wealth funds, pension funds or similar.
We will introduce this threshold by regulations made under the affirmative procedure, giving noble Lords and Members in another place the opportunity to scrutinise the detailed proposals. We will bring these regulations forward after Royal Assent to this Bill. My colleagues and I would be very happy to engage with noble Lords as we do so.
I make it clear that the regime brought about by these amendments, and the exemption which will be provided for in secondary legislation, applies only to newspapers and news magazines in order to safeguard our free press from government involvement, whether domestic or foreign.
As I have set out before, we already have a robust media mergers regime, which enables the Secretary of State to intervene if she believes that public interest considerations are, or may be, relevant to a merger. This new foreign state ownership regime works in parallel and complements the existing regime. Our focus is not on foreign investment in the UK media sector in general but is targeted specifically —noble Lords have rightly made the distinction—at foreign state investment in newspapers and news magazines.
Of course, the Government remain committed to encouraging and supporting investment into the United Kingdom. We recognise that investors deploying capital into this country rely on the predictability and consistency of our regulatory regime. The UK remains one of the most open economies in the world, and investment is crucial to our plans for growth and jobs, and for our prosperity. The UK has the highest stock of foreign direct investment in Europe. The recent Global Investment Summit signalled investors’ confidence, with nearly £30 billion in investment commitments being made. These amendments will not change the UK’s investment potential. As I said, we are targeting foreign state investment in a narrow but important part of the UK market to safeguard the health of our democracy.
As I noted on Report,
“the Secretary of State is currently considering a live merger case under the Enterprise Act regime on which I cannot comment further today. With regard to any live case, if it is still ongoing when the changes come into effect, the Secretary of State will continue to follow the process set out in the existing regime and will also apply the new measures”.—[Official Report, 13/3/24; cols. 2042-43.]
In tandem, I can confirm to your Lordships’ House that we will be consulting on expanding the media mergers and the new media foreign state ownership regime to apply to online news websites. This will bring the regimes up to date in order to reflect modern news consumption habits and better protect the freedom of our media.
I am grateful to my noble friends Lady Stowell and Lord Forsyth, to the noble Lord, Lord Bassam, and to others opposite and from across the House for their constructive engagement and collaboration on these amendments. I hope that they will enjoy your Lordships’ support.
Finally, I will briefly mention Amendment 4, tabled by my noble friend Lord Offord, which is not related specifically to foreign state ownership of media enterprises, but which is part of this group. Amendment 4 is a minor and technical amendment relating to other amendments made by Schedule 4 to the Bill. It clarifies how certain sections of the Enterprise Act 2002 are applied for the purposes of deciding if a special merger situation has been created under the special public interest merger regime. I beg to move.
Baroness Stowell of Beeston (Con)
My Lords, I thank my noble friend and his officials for the time and attention they have given this matter since Report. I know that officials have worked very hard, including over weekends, so I am truly grateful to them. I also pay tribute to the Media Minister, Julia Lopez. When I first met her to discuss my amendment three weeks ago, she gripped the issue immediately. I believe it is because of her energy and support for the clear objective of protecting press freedom that the Government have got behind her in bringing forward amendments in such a short space of time. Julia Lopez deserves much credit.
On the Government’s amendments, for me, the best way to understand their proposed way forward is to see it in two stages. Stage 1 deals with the block to foreign powers owning, controlling or influencing UK news. Stage 2 is the exemption for investment in UK news from legitimate foreign state investment funds. Both those stages, or parts, are important to the sustainability of the UK news industry.
I support the Government’s amendments as they relate to stage 1, and noble Lords will see that I have not retabled my own amendment. I am satisfied that they are in line with the promises my noble friend made from the Dispatch Box two weeks ago. In my view, they deal with the legal uncertainty that the RedBird IMI-proposed deal to buy the Telegraph titles and the Spectator has exposed when it comes to the involvement of foreign powers in our news media. It is worth restating that, as concerning as the UAE financial backing via IMI in that case is, the issue is bigger than that one deal and is a matter of principle.
As I understand the government amendments and what my noble friend has just said, the Government have broadened the definition of “foreign power”, and any individual or entity now captured by that definition will be blocked completely from owning, controlling or influencing our newspapers or news magazines. These provisions will take effect immediately once the Bill receives Royal Assent. Once completed, stage 1, as I might describe it, protects press freedom from the control or influence of foreign powers. Stage 2, which provides the exemption for legitimate, indirect foreign state investment funds to make passive investments in our news industry, will be covered by secondary legislation to follow once the Bill is enacted.
This exemption is important for obvious reasons, as my noble friend has already said. The news industry needs investment just like any other, and we must not exclude perfectly legitimate foreign state investors such as sovereign wealth funds or state pension funds that are not directly government controlled. As I said on Report, foreign state investment funds such as the Norwegian sovereign fund already invest in some of our news organisations.
I think I heard my noble friend set out the Government’s commitment to the threshold for this category of foreign state investors in the news industry being set at 5%. It is worth reflecting on that, because, at 5%, it is still above the approach of such funds which typically invest around 1 to 2% in corporations within any sector, yet it is a lower threshold than what is permitted by the CMA to prevent material influence, reflecting the fact that we are seeking to prevent any foreign state influence in UK news. I welcome the 5% threshold.
Obviously, we have yet to see the details of the secondary legislation, and Parliament will have to scrutinise that carefully before it can be approved. I welcome my noble friend’s commitment to engage Parliament before those regulations are laid. I think I heard my noble friend correctly, but can he reassure me that my understanding is correct that any individual or entity blocked at stage 1 will not qualify for exemption at stage 2? In other words, the exemption at stage 2 is for an entirely different kind of entity from that which will be blocked at stage 1.
I am pleased that my noble friend has reminded the House that any live regulatory case will be captured by the new legislation once it is enacted, and I am also pleased that he has confirmed that foreign state ownership of online UK news websites will be dealt with swiftly, also via secondary legislation and the affirmative procedure, once the Government have completed their consultation. There remains the question of foreign state ownership of our commercial public sector broadcasters and other commercial UK news channels. That said, of course, there are some regulatory protections already in broadcasting because of the Ofcom licensing regime. It would none the less be helpful if my noble friend could say whether the department is reviewing policy in this area also.
In conclusion, I will make three simple points. First, none of these legislative changes affect general foreign investment in or ownership of UK newspapers or news magazines, which is and will remain very welcome. Secondly, the exemption for legitimate investment by foreign state investment funds is important to the financial sustainability of our news industry. Finally, just to be clear, the UK remains open for business in the same way it has always been. All that Parliament is doing by making these changes is ensuring that our fundamental principle of press freedom is not up for sale.
I look forward to my noble friend’s replies to my questions, and we will, of course, review the secondary legislation carefully once it is ready. But, overall, I commend my noble friend on the Government’s work in recent weeks and I thank him for it.
Lord Bassam of Brighton (Lab)
My Lords, this has been a fascinating and illuminating series of speeches on the potential foreign ownership of UK news titles, particularly the Telegraph and the Spectator, by RedBird IMI. I echo the words of the noble Baroness, Lady Stowell: this is a much larger issue than that newspaper group. There is a fundamental principle involved here, which is why all sides of the House wanted to rally round the issue.
We have witnessed not only the magical transformation of the noble Lord, Lord Forsyth, from agent provocateur, but the Government moving at a speed we would welcome elsewhere in public policy; it is something to behold for the future. We have come to understand better just how complicated the terms of international trade are and how careful we need to be when legislating to prevent the law of unintended circumstances kicking in.
Protecting the freedom of the press—and our politics—from foreign state interference is an important issue. That is why we supported the calls for government action, an issue I raised in January, and for decisive intervention. As I carefully explained to your Lordships’ House last week, we supported the spirit of the amendment tabled by the noble Baroness, Lady Stowell, but not its detail. We on these Benches were genuinely concerned about security and the need to have a more comprehensive solution to the difficulties the Government face in tackling this issue. We can fairly say that those concerns have been more than adequately met with 16 pages of complex legislation, drafted magically by lawyers working at great pace; I congratulate them on that, and the officials in the Box. In particular, I congratulate the noble Baroness, Lady Stowell, and the noble Lord, Lord Forsyth, on his advocacy for this issue and his intelligence; both have applied pressure to secure a desirable outcome.
Most of the questions I wanted to ask have already been put, but I do have a few concerns, some of which have already been rehearsed in part. First, does the exemption referenced in the amendment cover just passive investments, and what would that mean in this context? Secondly, does it fully cover sovereign wealth funds and pension funds held by them, and what is their relationship with banks? Will there be a capping regime, and what will its thresholds be? Thirdly, will there be a 100% block on foreign state ownership, notwithstanding the 5% threshold the noble Baroness, Lady Stowell, mentioned? What action can the Minister spell out for us on online publications such as the Independent and online-only magazine titles? I liked the suggestion from the noble Lord, Lord Faulks, that this might be picked up in the Media Bill. Whether the Media Bill will enable that, given its long title et cetera, is obviously a question for the clerks, but one that we should certainly ask.
We on these Benches have been more than happy to lend our support to this issue because of the importance in our political landscape of protecting a free and independent press that is not handcuffed by our state. On such issues, it is vital that there is cross-party unanimity. I am sure that noble Lords opposite will, in the future, want to do all they can to protect the integrity of that position, should a paper perceived to be of a different political colour come under a similar threat, whenever that might be. With that said, we await the Minister’s reply to the questions asked, which need a response. I congratulate all those concerned on bringing this difficult situation to a happy conclusion.
Lord Parkinson of Whitley Bay (Con)
My Lords, I am grateful to noble Lords for their support for these amendments and the work undertaken. I thank my noble friend Lady Stowell for commending the work of Julia Lopez, the media Minister, and indeed the department and the officials more broadly. My noble friend also acknowledged the specific quasi-judicial role of the Secretary of State in her ongoing determination of the case before her, but acknowledged that she obviously has a role in all this. On the broader question of media mergers, my right honourable friend the Secretary of State of course remains very much involved as well, but I thank my noble friend for her appreciation for both. I agree with my noble friend Lord Forsyth in his praise for the civil servants who worked thoroughly and quickly on this matter, including over Mother’s Day weekend. I am grateful for that recognition.
My noble friend Lord Forsyth rightly pointed out that he has not moved since tabling his regret amendment to the Media Bill. The Government have made explicit and put beyond doubt what was implicit and possible in the existing regime, as I set out on Report. We are very happy to take the opportunity to do that clearly, in the way that we do through these amendments, and, indeed, to set out now the new lower threshold. My noble friend Lady Stowell is right: we will set it at 5%, which is considerably lower than the existing threshold. I am glad that my noble friend welcomes that. She is right in the characterisation of what I said: anyone blocked at what she calls stage 1—the new automatic block on foreign state investment—will not be able to be exempted at what she calls stage 2. She is right, as well, to make the distinction between foreign investment and foreign state investment, and to make it clear, as I was very happy to, that the UK remains open for business. This is a discrete area and an important one in our national life, which is why we are acting in the way we have.
My noble friend Lord Faulks and the noble Lord, Lord Bassam, asked about the role of banks. We do not think that, in the ordinary course of events, debt and debt refinancing from foreign banks which have a state interest should be captured, unless the structure of the transaction gives rise to concerns about influence. We are considering precisely how debt and debt refinancing should be treated in cases where the structure of debt may give rise to concerns about foreign state investment organisations. But as I say, as we bring these provisions forward in secondary legislation, I am very happy to continue conversations with noble Lords and, indeed, to have conversations with those who will be directly affected.
My noble friend Lord Faulks invited me to set out what we are doing in consulting shortly on expanding the existing media mergers regime and the foreign state ownership provisions, to include online news websites. That will enable us to make changes that ensure that online news, whether from an established newspaper group or an online publisher, is covered by the media regime and the new measures we are introducing for foreign state media ownership.
The Secretary of State will maintain a quasi-judicial role in media mergers. The public interest regime will remain as it is, but we are adding a new parallel foreign state intervention regime. The Secretary of State will not have discretion under that; she will have to follow the report of the Competition and Markets Authority, both on whether there is a foreign state merger and an exemption. She would need to lay an order before Parliament to block a transaction, which would be under the negative procedure. We will debate what I have announced in the provisions that we will bring forward after Royal Assent, setting out an exemption for investments where the stake is below 5%, and noble Lords will have the opportunity to scrutinise that under the affirmative procedure.
I am grateful to noble Lords who have engaged with us and our officials in recent days as we work on these amendments. I am glad that they have your Lordships’ support. I beg to move.
Lord Forsyth of Drumlean (Con)
Before my noble friend sits down, when can we expect the secondary legislation to appear?
Lord Bassam of Brighton (Lab)
Can the Minister also clarify the point about online publications? Will these be included within the statutory instrument?
Lord Parkinson of Whitley Bay (Con)
We will shortly consult on expanding the existing media mergers to look at online. The new regime will not cover TV and radio broadcasts at this time, but we will continue to consider that in our broader work on the media mergers regime. As my noble friend Lord Lansley pointed out, there are specific additional protections through the regime to which they are subject under Ofcom.
My noble friend Lord Forsyth rightly asks when we will bring in the secondary legislation. We want to do it after Royal Assent of this Bill, which is in the control of Parliament, not just the Government. Officials are working on it already. I cannot commit to a date for its introduction, but I am happy to commit to continuing our conversations as we work on it and before we introduce it after Royal Assent.
Lord Faulks (Non-Afl)
I have one more question, if I may? I asked about the change in wording in the Enterprise Act from “material influence” to “influence”. I suggested that there might be a reason behind that. Can the Minister clarify the thinking behind the change?
Lord Parkinson of Whitley Bay (Con)
I will reply in writing, if my noble friend is happy with that, so that I can give him the legalese which he would want.
Lord Offord of Garvel
“(b) in such a way that the information referred to in subsection (1) is more prominent than any other information given to the consumer at the same time, and”Member's explanatory statement
This amendment removes the prohibition against a trader giving a consumer any other information at the time they give a reminder notice but requires that the information that must be contained in a reminder notice must be more prominent than any other information that is given.
Lord Offord of Garvel (Con)
My Lords, I am delighted to move Amendment 2, which mirrors the intention of the amendment tabled by my noble friend Lord Lucas on Report on reminder notices, an amendment which was also supported by my noble friend Lord Black, the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones.
Amendment 2 would remove the requirement for businesses to send reminder notices separately from all other information. Instead, other information can be given at the same time as a reminder notice, so long as the required information is the most prominent information. This amendment will ensure that the Bill strikes a better balance between ensuring that consumers are reminded about their ongoing subscription while enabling businesses to streamline their communications and provide other information which they consider to be useful to consumers in these notices.
I hope that your Lordships agree that this amendment delivers upon the undertaking I made on Report to address this issue, and therefore that noble Lords will support it. I beg to move.
Baroness Jones of Whitchurch (Lab)
My Lords, we welcome the Government’s amendment on subscription reminder notices. As has been said, the noble Lord, Lord Lucas, made a very sensible intervention when we debated this in Committee and on Report, and it provides a helpful clarification to service providers. I hope that this amendment and the other changes that we made on Report have now struck a much better balance between businesses’ needs and consumer interests.
We look forward to hearing details of the department’s further work on implementing the gift aid protections and other work on cancellation methods, but, for now, we are pleased with the progress that has been made on the Bill and we wish it a speedy onward passage.
Lord Offord of Garvel (Con)
I thank my noble friends Lord Black and Lord Lucas, and today the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones, for their continuing engagement on this topic and on the Bill more broadly. I am pleased they agree that the Government have achieved the right balance between business and consumers on reminder notices and that we have ensured that businesses’ communications with customers can be more streamlined.
Lord Offord of Garvel
“(za) section (Mergers involving newspaper enterprises and foreign powers) (and Schedule (Mergers involving newspaper enterprises and foreign powers));”Member's explanatory statement
This amendment provides for the provision inserted by my amendments relating to foreign control of newspaper enterprises to come into force on the day on which this Bill is passed.
Lord Offord of Garvel
“(3A) In subsection (5), after “deciding” insert “whether two or more enterprises have ceased to be distinct at a time or in circumstances falling within section 24,””Member's explanatory statement
This amendment clarifies that, following other amendments made by Schedule 4 to the Bill, section 59(5) to the Enterprise Act 2002, which refers to the creation of a relevant merger situation, also includes a reference to two or more enterprises ceasing to be distinct (which is a requirement for there to be a relevant merger situation).
Lord Offord of Garvel
“ScheduleMergers involving newspaper enterprises and foreign powersIntroduction
1 In EA 2002, Part 3 (mergers) is amended as follows.Prohibition on newspaper enterprise mergers involving foreign powers
2 After Chapter 3 insert—“Chapter 3AMergers involving newspaper enterprises and foreign powers70A Intervention by the Secretary of State(1) The Secretary of State must give the CMA a notice (a “foreign state intervention notice”) if the Secretary of State has reasonable grounds for suspecting that it is or may be the case that—(a) a foreign state newspaper merger situation has been created, or(b) arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a foreign state newspaper merger situation.(2) A foreign state intervention notice must describe the foreign state newspaper merger situation to which it relates.(3) For the purposes of this Chapter a foreign state newspaper merger situation has been created where—(a) as a result of two or more enterprises ceasing to be distinct, a relevant merger situation would have been created by virtue of section 23(1) if the modifications in Schedule 6A had effect,(b) one of the enterprises concerned is a newspaper enterprise, and(c) as a result of the enterprises ceasing to be distinct, a foreign power is able to control or influence the policy of the person carrying on the newspaper enterprise, or is able to control or influence that policy to a greater extent.(4) Schedule 6B makes provision about the circumstances in which a foreign power is able to control or influence the policy of a person for the purposes of this section (and references to a foreign power being able to control or influence the policy of a person to a greater extent are to be interpreted accordingly).(5) A foreign state intervention notice—(a) comes into force when it is given, and(b) ceases to be in force when the matter to which it relates is finally determined under this Chapter (see section 70F).70B Investigation and report by the CMA(1) Where the Secretary of State gives the CMA a foreign state intervention notice, the CMA must, within such period as the Secretary of State may require, give the Secretary of State a report in relation to the case.(2) The report must include—(a) a summary of representations relevant to the case that have been received by the CMA, and(b) a decision as to whether the CMA believes that—(i) a foreign state newspaper merger situation has been created, or(ii) arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a foreign state newspaper merger situation. (3) The CMA must carry out such investigations as it considers appropriate for the purposes of producing a report under this section.(4) For the purposes of its investigation the CMA must invite representations from the enterprises concerned in the case.70C Intervention to prevent foreign control of a newspaper enterprise(1) Subsection (2) applies where the Secretary of State has received a report under section 70B stating that the CMA believes that—(a) a foreign state newspaper merger situation has been created, or(b) arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a foreign state newspaper merger situation.(2) The Secretary of State must make an order containing such provision as the Secretary of State considers reasonable and practicable for the purposes of reversing or preventing the creation of the foreign state newspaper merger situation identified in the report.(3) An order under subsection (2) may contain—(a) anything permitted by Schedule 8 (provision that may be contained in certain enforcement orders), and(b) such supplementary, consequential or incidental provision as the Secretary of State considers appropriate.(4) An order under subsection (2)—(a) comes into force at such time as is determined by or under the order, and(b) may be varied or revoked by another order.(5) Paragraph 2 of Schedule 7 (enforcement regime for public interest and special public interest cases: order for the purposes of preventing pre-emptive action)—(a) applies in relation to a foreign state intervention notice as it applies in relation to an intervention notice, and(b) for this purpose, is to be read as if—(i) sub-paragraph (10) were omitted;(ii) for sub-paragraph (12), there were substituted—“(12) In this paragraph “pre-emptive action” means action which might prejudice a foreign state intervention notice or a report under section 70B, or might impede the taking of any action under this Part in relation to such a notice or report”70D Other powers under this Part(1) Nothing in this Chapter limits the exercise of powers in relation to a foreign state newspaper merger situation under other provisions of this Part.(2) The powers in this Chapter may be exercised in relation to a foreign state newspaper merger situation regardless of whether any other power under this Part has been exercised in relation to the case.(3) The CMA must, in considering whether to make a reference under section 22 or 33, bring to the attention of the Secretary of State any case which it believes may be relevant to the duty in section 70A(1).70E Meaning of “foreign power”(1) In this Chapter, “foreign power” means—(a) the sovereign or other head of a foreign state in their public or private capacity,(b) a foreign government or part of a foreign government,(c) the head or senior members of a foreign government in their private capacity,(d) an agency or authority of a foreign government, or of part of a foreign government, (e) the head or senior members of an agency or authority of a foreign government, or of part of a foreign government, in their private capacity,(f) an authority responsible for administering the affairs of an area within a foreign country or territory, or persons exercising the functions of such an authority,(g) a political party which is a governing political party of a foreign government, or(h) the officers of a political party, which is a governing political party of a foreign government, in their private capacity.(2) A political party is a governing political party of a foreign government if persons holding political or official posts in the foreign government or part of the foreign government—(a) hold those posts as a result of, or in the course of, their membership of the party, or(b) in exercising the functions of those posts, are subject to the direction or control of, or significantly influenced by, the party.(3) In this section—“foreign country or territory” means a country or territory outside the United Kingdom, the Channel Islands, the Isle of Man or the British Overseas Territories;“foreign government” means the government of a foreign country or territory;a“government” includes persons exercising the functions of a government;“territory” includes the constituent territories of a federal state.70F Other interpretation(1) For the purposes of this Chapter, section 44(10) is to be read as if the definition of “newspaper” included a news publication circulating wholly or mainly in the United Kingdom or in a part of the United Kingdom on any periodic basis.(2) For the purposes of this Chapter, a matter is finally determined when the Secretary of State—(a) makes an order under section 70C(2), or(b) publishes under section 107 a report of the CMA under section 70B which the Secretary of State has received and which states that the CMA has decided that the CMA believes that—(i) no foreign state newspaper merger situation has been created, or(ii) no arrangements are in progress or in contemplation which, if carried into effect would result in the creation of a foreign state newspaper merger situation.70G Regulations(1) The Secretary of State may by regulations change the meaning of—(a) “foreign power”, or(b) “newspaper”,for the purposes of this Chapter.(2) Regulations under subsection (1)(a) may, among other things—(a) provide for a description of person to be treated as if they were not a foreign power, and(b) frame any such description by reference to—(i) the independence of persons from other descriptions of foreign power, or(ii) the interest which persons have in a newspaper enterprise.(3) The Secretary of State may by regulations apply any provision made by or under Chapter 1, with or without modifications, for the purposes of this Chapter (including by way of amendments to the modifications in Schedule 6A).(4) Regulations under this section may, among other things, make provision having effect on or after 13 March 2024.”3 After Schedule 6 insert—“Schedule 6ADetermination of when a foreign state newspaper merger situation has been createdApplication of sections 23 to 29
(1) Sections 23 to 29 apply for the purposes of Chapter 3A of Part 1, subject to the following modifications.(2) Section 23 is to be read as if—(a) in subsection (1), for the amount in paragraph (b), there were substituted “£2 million”;(b) in subsection (9), for paragraphs (a) and (b), there were substituted—“(a) in relation to the giving of a foreign state intervention notice, the time when the notice is given;(b) in relation to the giving of a report by the CMA under section 70B, the time of the giving of the report.”(3) Section 24 is to be read as if—(a) for subsection (1)(a) there were substituted—“(a) the two or more enterprises ceased to be distinct enterprises before the day on which—(i) in a case to which section 23(9)(a) applies, the foreign state intervention notice relating to them is given, or(ii) in a case to which section 23(9)(b) applies, the CMA gives its report relating to them under section 70B,and did so not more than four months before that day; or”;(b) in subsection (1)(b), after “distinct enterprises” there were inserted “, including facts about whether or the extent to which a foreign power is able to control or influence the policy of a person carrying on a newspaper enterprise as a result of the enterprises ceasing to be distinct enterprises,”;(c) the reference to the CMA in subsection (2)(a) included a reference to the Secretary of State;(d) for subsection (2)(b) there were substituted—“(b) it is given to the Secretary of State or the CMA more than four months before the day on which—(i) in a case to which section 23(9)(a) applies, the foreign state intervention notice relating to them is given, or(ii) in a case to which section 23(9)(b) applies, the CMA gives its report relating to them under section 70B; or(c) the facts are made public more than four months before the day on which—(i) in a case to which section 23(9)(a) applies, the foreign state intervention notice relating to them is given, or(ii) in a case to which section 23(9)(b) applies, the CMA gives its report relating to them under section 70B.”(4) Section 25 is to be read as if—(a) subsections (4) and (5) were omitted;(b) the powers to extend time-limits under section 25 were not exercisable by the CMA before the giving of a foreign state intervention notice by the Secretary of State.(5) Section 26 is to be read as if—(a) in subsection (3)—(i) “materially” were omitted; (ii) for “may, for the purposes of subsections (1) and (2), be treated” there were substituted “is to be treated, for the purposes of subsections (1) and (2),”;(b) for subsection (4) there were substituted—“(4) For the purposes of subsection (1), in so far as it relates to bringing two or more enterprises under common control, where a foreign power is already able to control or influence the policy of a person carrying on a newspaper enterprise to some extent, the foreign power is to be treated as bringing the newspaper enterprise under its control if anything is done which results in the foreign power being able to control or influence the policy of that person to a greater extent (whether by virtue of acquiring more shares or voting rights in the person, directly or indirectly, or otherwise).”(6) Section 27 is to be read as if—(a) references to the “decision-making authority” were to “the CMA or the Secretary of State”;(b) in subsection (5), for “a reference” there were substituted “deciding whether or when a foreign state newspaper merger situation has been created”.(7) Section 28 is to be read as if, in subsection (4), the reference to the “decision-making authority” were to “the CMA or the Secretary of State”.(8) Section 29 is to be read as if—(a) in subsection (1)—(i) the reference to the “decision-making authority” were to “the CMA or the Secretary of State”;(ii) for “a reference” there were substituted “deciding whether or when a foreign state newspaper merger situation has been created”;(b) in subsection (2)(a)(i) “materially” were omitted;(c) in subsection (2)(a)(ii), for “degree” there were substituted “extent”;(d) subsection (2)(b) and (3) were omitted.Application of the Enterprise Act 2002 (Anticipated Mergers) Order 2003 (S.I. 2003/1595)
(1) The Enterprise Act 2002 (Anticipated Mergers) Order 2003 applies for the purposes of Chapter 3A of Part 1, subject to the following modifications.(2) In Article 3, the words before paragraph (a) are to be read as if, for “in relation to references and notices”, there were substituted “for the purposes of Chapter 3A of Part 1 of the Act”.(3) Article 3(a) is to be read as if—(a) in the substituted version of section 27(5), for “a reference” there were substituted “deciding whether or when a foreign state news paper merger situation will be created”;(b) the substituted version of section 27(6)(a)(i), for “the reference” there were substituted “the foreign state intervention notice relating to the situation”.(4) Article 3(b) is to be read as if—(a) in the substituted section 29(2)(a)(i), “materially” were omitted;(b) in the substituted section 29(2)(a)(ii), for “degree” there were substituted “extent”;(c) in the substituted section 29(4), for “the reference” there were substituted “the foreign state intervention notice”.Schedule 6BControl or influence of a person by a foreign powerPart 1Conditions for control or influence(1) A foreign power is able to control or influence the policy of a person for the purposes of section 70A if one or more of the following conditions is met. (2) Condition 1 is that the foreign power holds, directly or indirectly, any of the shares in the person.(3) Condition 2 is that the foreign power holds, directly or indirectly, any of the voting rights in the person.(4) Condition 3 is that the foreign power holds the right, directly or indirectly, to appoint or remove an officer of the person.(5) Condition 4 is that the foreign power has the right or ability to direct, control or influence to any extent, the person's policy or activities (in whole or in part, and whether directly or indirectly), despite not meeting condition 1, 2 or 3.(6) Condition 5 is that—(a) the trustees of a trust, or the members of a partnership, unincorporated association or other entity, that is not a legal person under the law by which it is governed, would, if they were a foreign power, meet one or more of conditions 1 to 4 (in their capacity as such) in relation to the person, and(b) the foreign power has the right or ability to direct, control or influence to any extent the activities of that trust or entity (in whole or in part, and whether directly or indirectly), or has any other interest in, or right over or in relation to, the trust or entity, or any of the trustees of the trust or the members of the entity, whether directly or indirectly.2 In this Schedule, “officer”—(a) in relation to a body corporate, means a director, member of the committee of management, chief executive, manager, secretary or other similar officer of the body, or a person purporting to act in any such capacity;(b) in relation to a partnership, means a partner, a person purporting to act as a partner or a person concerned in the management or control of the partnership or who purports to act in the capacity of a person so concerned;(c) in relation to an unincorporated association other than a partnership, means a person who is concerned in the management or control of the association or purports to act in the capacity of a person so concerned.Part 2InterpretationInterpretation
3 This Part makes provision about the interpretation of this Schedule.Joint interests
4 If a foreign power holds a share or right jointly with another person (whether or not a foreign power), each of those persons is to be taken to hold that share or right.Joint arrangements
5 (1) If shares or rights held by a foreign power and shares or rights held by another person (whether or not a foreign power) are the subject of a joint arrangement between those persons, each of those persons is to be taken to hold the combined shares or rights of both persons.(2) A “joint arrangement” is an arrangement between the holders of shares (or rights) that they will exercise all or substantially all the rights conferred by their respective shares (or rights) jointly in a way that is pre-determined by the arrangement.(3) For the meaning of “arrangement”, see paragraph 12.Calculating shareholdings
6 (1) In relation to a person that has a share capital, a reference to holding any of the shares in that person is to holding any shares comprised in the issued share capital of that person. (2) In relation to a person that does not have a share capital, a reference to holding any of the shares in that person is to holding a right to share to any extent in the capital or, as the case may be, profits of that person.Voting rights
7 (1) A reference to the voting rights in a person is to the rights conferred on shareholders in respect of their shares (or, in the case of a person not having a share capital, on members) to vote at general meetings of the person on all or substantially all matters.(2) In relation to a person that does not have general meetings at which matters are decided by the exercise of voting rights, a reference to exercising voting rights in the person is to be read as a reference to exercising rights in relation to the person that are equivalent to those of a person entitled to exercise voting rights in a company.8 In applying this Schedule, voting rights in a person held by the person itself are to be disregarded.Shares or rights held “indirectly”
9 (1) A foreign power holds a share “indirectly” if the foreign power has any stake in a person and that person—(a) holds the share in question, or(b) is part of a chain of persons—(i) each of which (other than the last) has any stake in the person immediately below it in the chain, and(ii) the last of which holds the share.(2) A foreign power holds a right “indirectly” if the foreign power has any stake in a person and that person—(a) holds that right, or(b) is part of a chain of persons—(i) each of which (other than the last) has any stake in the person immediately below it in the chain, and(ii) the last of which holds that right.(3) For the purposes of sub-paragraphs (1) and (2), a person (“A”) has “any stake” in another person (“B”) if—(a) A holds any shares or voting rights in B,(b) A is a member of B and has the right to appoint or remove an officer of B,(c) A is a member of B and controls alone, or pursuant to an agreement with other shareholders or members, any of the voting rights in B, or(d) A has the right or ability to control or influence B to any extent, despite not being within paragraph (a), (b) or (c).Shares held by nominees
10 A share held by a person as a nominee for another is to be treated as held by the other (and not by the nominee).Rights treated as held by person who is able to control their exercise
11 (1) Where a person controls a right, the right is to be treated as held by that person (and not by the person who in fact holds the right, unless that person also controls it).(2) A person “controls” a right if, by virtue of any arrangement between that person and others, the right is exercisable only—(a) by that person,(b) in accordance with that person’s directions or instructions, or(c) with that person’s consent or concurrence. Arrangements
12 (1) For the purposes of this Schedule, “arrangement” includes—(a) any scheme, agreement or understanding, whether or not it is legally enforceable, and(b) any convention, custom or practice of any kind.(2) But something does not count as an arrangement unless there is at least some degree of stability about it (whether by its nature or terms, the time it has been in existence or otherwise).Rights exercisable only in certain circumstances etc
13 (1) Rights that are exercisable only in certain circumstances are to be taken into account only—(a) where the circumstances have arisen, and for so long as they continue to obtain, or(b) when the circumstances are within the control of the person having the rights.(2) But rights that are exercisable by an administrator or by creditors while a person is in relevant insolvency proceedings are not to be taken into account even while the person is in those proceedings.(3) “Relevant insolvency proceedings” means—(a) administration within the meaning of the Insolvency Act 1986,(b) administration within the meaning of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or(c) proceedings under the insolvency law of another country or territory during which a person’s assets and affairs are subject to the control or supervision of a third party or creditor.(4) Rights that are normally exercisable but are temporarily incapable of exercise are to continue to be taken into account.Rights attached to shares held by way of security
14 Rights attached to shares held by way of security provided by a person are to be treated for the purposes of this Schedule as held by that person—(a) where apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in accordance with that person’s instructions, and(b) where the shares are held in connection with the granting of loans as part of normal business activities and apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in that person’s interests.Part 3Power to amend circumstances in which there is control or influence15 (1) The Secretary of State may by regulations make provision—(a) to change (by increasing or decreasing) the proportion of shares or rights which a foreign power must hold in a person carrying on a newspaper enterprise, whether directly or indirectly, in order for the foreign power to be able to control or influence the policy of a person for the purposes of section 70A;(b) to change (by increasing or decreasing) the proportion of shares or rights which is to be held by persons in a chain of persons for the purposes of determining whether shares or rights are held indirectly;(c) about assumptions which are to be made when determining whether a foreign power is able to control or influence the policy of a person, including assumptions framed by reference to the ownership of shares or voting rights by any person; (d) about the extent to which a foreign power needs to be able to control or influence the policy of a person in order to control or influence that policy for the purposes of section 70A, including provision about a foreign power that is already able to control or influence the policy of a person to some extent being able to control or influence that policy to a greater extent;(e) to change or supplement Part 1 of this Schedule so as to include circumstances (for example, circumstances involving more complex structures) that give a foreign power a level of control or influence in relation to the policy of a person broadly similar to the level of control or influence given by the conditions in paragraph 1;(f) in consequence of any provision made by virtue of paragraph (e), to change or supplement Part 2 of this Schedule so that circumstances specified in that Part in which a person is to be regarded as holding an interest in another person correspond to any of the conditions in paragraph 1, or would do so but for the extent of the interest.(2) The provision that may be made under this paragraph, read with section 124(2)(a), includes—(a) different provision for different descriptions of foreign power, and(b) different provision for different persons or descriptions of person in a chain of persons.(3) Regulations under this paragraph may, among other things—(a) confer a discretion on the CMA;(b) make provision having effect on or after 13 March 2024.”Further amendments
(1) In section 86 (enforcement orders: general provisions), in subsection (6), after “section” insert “70C,”.(2) In section 88 (contents of certain enforcement orders), in subsection (1), after “section” insert “70C, ”.(3) In section 94(8) (rights to enforce certain orders)—(a) after “made by the Secretary of State under” insert “section 70C(2),”;(b) for “paragraph 2 of that Schedule” substitute “paragraph 2 of Schedule 7”.(4) In section 107 (further publicity requirements)—(a) in subsection (3), after paragraph (g) insert—“(ga) any foreign state intervention notice given by the Secretary of State;(gb) any report of the CMA under section 70B which the Secretary of State has received;”(b) after subsection (11) insert—“(12) The Secretary of State must publish any report of the CMA under section 70B which the Secretary of State has received within the period of 7 days beginning with the day on which the Secretary of State receives the report.”(5) In section 109 (attendance of witnesses and production of documents etc), in subsection (A1)(b), at the end insert “or a foreign state intervention notice under section 70A”.(6) In section 110A (restriction on powers to impose penalties under section 110), after subsection (8) insert—“(8A) Where the section 109 power is exercised for the purpose mentioned in section 109(A1)(b) in connection with a matter that is the subject of a foreign state intervention notice under section 70A, the relevant day is the day when the matter to which the notice relates is finally determined under Chapter 3A (see section 70F).” (7) In section 118 (excisions from reports), in subsection (1)—(a) omit the “or” at the end of paragraph (aa), and(b) at the end of paragraph (b) insert “, or(c) a report of the CMA under section 70B.”(8) In section 120 (review of decisions under Part 3), in subsection (1A), after paragraph (a) insert—“(aa) a decision of the CMA or the Secretary of State in connection with a foreign state newspaper merger situation;”.(9) In section 124 (orders and regulations under Part 3)—(a) in subsection (3)—(i) after “59(6A)” insert “, 70G”;(ii) after “above)” insert “, or paragraph 15 of Schedule 6B,”;(b) in subsection (5), after “65(3)),” insert “70C”;(c) after subsection (6) insert—“(6A) A statutory instrument containing regulations under section 70G or paragraph 15 of Schedule 6B may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”(d) in subsection (10), after “58(3)” insert “or 70G, or paragraph 15 of Schedule 6B”.(10) In section 127 (associated persons), in subsection (1)—(a) omit the “and” at the end of paragraph (aa), and(b) after that paragraph insert—“(ab) for the purposes of section 70A(3);”(11) In section 129 (other interpretation provisions), in subsection (1), at the appropriate place insert—““foreign state intervention notice” means a notice under section 70A(1);“foreign state newspaper merger situation” is to be interpreted in accordance with section 70A(3);”(12) In the table in section 130 (index of defined expressions), at the appropriate place insert—
“Foreign state intervention notice | Section 70A(1) |
Foreign state newspaper merger situation | Section 70A(3)” |
See my amendment inserting a new clause after clause 129.
Lord Offord of Garvel
Member's explanatory statement
This amendment is consequential on my amendment inserting a new Schedule after Schedule 6.
Lord Offord of Garvel
“(6) For subsection (6A) substitute—”Member's explanatory statement
This amendment is consequential on my amendment inserting a new Schedule after Schedule 6.
Lord Offord of Garvel (Con)
My Lords, I add my thanks to all noble Lords who have been involved in the diligent scrutiny we have given the Bill in recent months. The Digital Markets, Competition and Consumers Bill will drive innovation and deliver better outcomes for consumers by addressing barriers to competition in digital markets and tackling consumer rip-offs. I am very grateful to noble Lords for the dedication, attention and time that they have given to the Bill before your Lordships’ House.
I want to express my particular appreciation to Members on the Front Benches, including the noble Baroness, Lady Jones of Whitchurch, and the noble Lords, Lord Stevenson of Balmacara, Lord Bassam of Brighton, Lord Clement-Jones and Lord Fox, for the courteous and constructive manner in which they have engaged with me on the Bill. I wish to extend my sincere thanks to my noble friends Lady Stowell and Lady Harding of Winscombe, and to the noble Baroness, Lady Kidron, for their invaluable contributions and clarity of views both during the debate and outside it. I emphasise my gratitude to the noble Lords, Lord Faulks, Lord Tyrie, Lord Kamall, Lord Holmes of Richmond, Lord Lansley, Lord Vaizey of Didcot, and the noble Viscount, Lord Colville of Culross, for their detailed consideration of Part 1 of the Bill. I am very grateful to them all; they have asked important questions and given much time and energy to the Bill, and it is a better Bill for that.
My noble friend Lord Lindsay and the noble Baronesses, Lady Crawley, Lady Bakewell and Lady Hayman, have championed consumer issues, for which I am most grateful. I also pay tribute to the noble Baroness, Lady Bennett of Manor Castle, for raising the important issue of net zero.
On Report, the Government made a number of amendments to the Bill with regards to subscription contracts. I thank my noble friends Lord Black of Brentwood and Lord Lucas for their engagement and collaboration on these issues. I am also most grateful to my noble friend Lord Mendoza for his work in highlighting the Bill’s impact on the ability of charities to claim gift aid.
On the issue of foreign states acquiring UK news organisations, to which my noble friend Lord Parkinson has spoken, I again thank my noble friend Lady Stowell of Beeston and the noble Lords, Lord Forsyth of Drumlean and Lord Robertson of Port Ellen, who so passionately highlighted the principle of freedom of the press.
I conclude by recording my gratitude for the invaluable support and assistance of my noble friend Lord Camrose. I put on the record my thanks to the Bill team, my private office, and all the officials and lawyers in the Department for Business and Trade, the Department for Science, Innovation and Technology, and the Competition and Markets Authority, who have provided such thorough support and expertise. I beg to move that the Bill do now pass.
Baroness Stowell of Beeston (Con)
I hesitate to rise, because I realise I am probably testing the patience of the House, having already spoken in Third Reading. I just wanted to say a couple of things.
I thank my noble friends Lord Camrose and Lord Offord on the Front Bench for their work on this Bill. As they will know, this is legislation for which the Communications and Digital Committee has been calling for several years—it started under the chairmanship of my predecessor, my noble friend Lord Gilbert. It is something that I have been pleased to take a very active involvement in, and I am very pleased to support it passing.
As we think about what this Bill is trying to achieve and why, it is worth also remembering why we in the UK are forging a different path from the ones that Europe and the US are on. In the last few days, we have seen the US DoJ launch a major anti-trust lawsuit against Apple. In the EU, the Commission is taking serious measures against some of the big tech firms to make them comply with the spirit and letter of its new Digital Markets Act. Both situations have an ominous sense of being exactly the kind of lengthy legal battles that favour big tech, which we are trying to avoid.
The House has rightly voted on a number of measures to try to ensure that our regulation can work as it is meant to, in a timely, proportionate and less confrontational manner. That is what the Government are seeking to do with this legislation.
As the Bill leaves here and enters its final stage, I emphasise two measures from among the amendments passed by this House. First, the deadline for the Secretary of State to approve CMA guidance is key in keeping things on track and avoiding concerning delays. Secondly, if the Government and the Commons cannot accept the amendments to revert the appeals process on fines back to JR standard, I hope that my noble friends within government will consider putting a clarification in the Bill that the appeals process on fines cannot be changed in ways that undermine the JR standard or open up avenues for more expansive and protracted legal challenge.
That aside, I am grateful to the Government for bringing forward this important legislation. It will mark out our regulatory regime as different from those in other parts of the world that are having such a big impact—and not necessarily in good ways.
Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 30th April 2024
(6 months, 3 weeks ago)
Commons ChamberDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Watch Debate Amendment Paper: Commons Consideration of Lords Amendments as at 30 April 2024 - (30 Apr 2024)
15:59 - The House divided: - Ayes: 273 / Noes: 159 - Question accordingly agreed to.
16:13 - The House divided: - Ayes: 276 / Noes: 161 - Question accordingly agreed to.
16:26 - The House divided: - Ayes: 274 / Noes: 162 - Question accordingly agreed to.
16:39 - The House divided: - Ayes: 272 / Noes: 162 - Question accordingly agreed to.
16:52 - The House divided: - Ayes: 273 / Noes: 163 - Question accordingly agreed to.
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Minister of State, Department for Business and Trade (Kevin Hollinrake)
I beg to move, That this House disagrees with Lords amendment 9.
Mr Deputy Speaker
With this it will be convenient to discuss:
Lords amendment 12, and Government motion to disagree.
Lords amendment 13, and Government motion to disagree.
Lords amendment 19, and Government motion to disagree.
Lords amendment 26, and Government motion to disagree.
Lords amendment 27, and Government motion to disagree.
Lords amendment 28, and Government motion to disagree.
Lords amendment 31, and Government motion to disagree.
Lords amendment 32, and Government motion to disagree.
Lords amendment 38, Government motion to disagree, and Government amendment (a) in lieu.
Lords amendment 104, and Government motion to disagree.
Lords amendments 1 to 8, 10, 11, 14 to 18, 20 to 25, 29 to 30, 33 to 37, 39 to 103 and 105 to 148.
Kevin Hollinrake
It is a pleasure to bring this groundbreaking Bill back to the House. It will drive innovation and deliver better outcomes for consumers across the UK by addressing barriers to competition in digital markets and tackling consumer rip-offs. We believe it strikes the right balance, not deterring investment from big tech while encouraging investment from challenger tech. I thank Members of both Houses for their careful scrutiny and I commend the collaborative cross-party approach taken during the Bill’s passage to date.
I will start with the amendments that the Government made in the other place. They add vital new provisions to the Bill and I hope hon. Members will agree to them. Part 1 of the Bill establishes a new pro-competition regime for digital markets, which will be overseen and enforced by the Competition and Markets Authority’s digital markets unit. Following engagement with Members in the other place, we have bolstered transparency provisions to require the CMA to publish more of the notices provided to firms designated with strategic market status, or SMS.
All interested parties will now be able to access the information contained in those notices, ensuring that there is greater clarity on the DMU’s decisions relating to SMS designation, conduct requirements and pro-competition interventions. A number of hon. Members have called for provisions addressing asymmetry of information to be introduced to the Bill, so we hope this change will be welcomed.
On part 2 of the Bill, which deals with wider competition reforms, hon. Members will recall that on Report the Government added a provision on litigation funding, whose purpose was to restore the previously held understanding of the status of litigation funding agreements under the Competition Act 1998. Those provisions were important in providing a route to justice for groups with limited resources—for example, our sub-postmasters.
That step was taken in response to an earlier Supreme Court judgment that had made litigation funding agreements unenforceable. The Government have since acted by introducing the Litigation Funding Agreements (Enforceability) Bill, which will deliver on our commitment to addressing the impacts of that judgment in all types of proceedings. Consequently, the provisions in this Bill have been removed, as they are no longer required.
We also introduced new measures to part 2 to address concerns about the potential ownership of UK newspapers and news magazines by foreign states, as we heard very recently from the Secretary of State for Culture, Media and Sport. The Government know that we cannot overstate the importance of those publications to our democracy and have therefore taken decisive action to preserve the freedom of the press. By establishing a new regime within the Enterprise Act 2002, the Bill will prevent foreign states from having ownership of, or control or influence over, a UK newspaper or news magazine.
The Government are extremely grateful for the support offered by Members of both Houses in the development of these new measures. In particular, we thank Baroness Stowell of Beeston and Lord Forsyth of Drumlean for their engagement, and my hon. Friend the Member for Rutland and Melton (Alicia Kearns), who first secured a debate on the issue in January.
Parts 3 and 4 make important updates and improvements to UK consumer law. Having consulted on a series of reforms at the end of last year, the Government amended the Bill in the other place to introduce new measures that address fake reviews and drip pricing. Many hon. Members called for the Government to address those harms through the Bill, and I am pleased to say that we have been able to do so, following our public consultation.
We have also made amendments to further strengthen the ability of public bodies to enforce consumer law. We did so by extending so-called take-down powers to a wider range of enforcers. There has been a healthy debate in both Houses about the measures in the Bill aimed at tackling subscription traps. We listened carefully to the concerns expressed in the other place about the potential impact of those measures on charities and their ability to claim gift aid. In response, the Government amended the Bill to enable the Treasury to update gift aid rules. That mitigates any concerns about the Bill’s impact on charities. We are grateful to Lord Mendoza for highlighting the issue and for his engagement.
We also made a series of amendments to provide greater assurance and clarity for businesses about the new subscription measures, including addressing concerns about exiting contracts, cancellations, reminder notices and cooling-off periods. I hope that hon. Members agree that the amendments improve the Bill.
Sarah Olney (Richmond Park) (LD)
The Liberal Democrats welcome the fact that the Government are finally acting on the CMA’s recommendation, but will the Government support amendment 104, which is backed by the Liberal Democrats? It is about imposing requirements on secondary ticket sites. Often, people purchasing tickets from the sites do so at huge mark-ups on the face value of the ticket, and the ticket in question does not actually exist. The amendment would address those issues, reducing the risk of fraud by requiring proof of purchase. Does the Minister agree that we must do everything we can to ensure that this legislation is as robust as possible, to crack down on this type of fraud?
Kevin Hollinrake
I thank the hon. Lady for her intervention and for the amendment, which I will speak to in a moment. The Government have agreed to undertake a review of both primary and secondary markets, and I will deal with those issues later in my remarks. [Interruption.] I hear from the shadow Front-Bench spokespeople, but I think that is something that Labour proposed in earlier amendments, so obviously they have changed their position on that issue—not for the first time.
Finally, the Government made a number of minor amendments to the Bill in the other place. The majority are tidying-up measures, or otherwise small tweaks to the Bill, to ensure that it achieves its policy intent as effectively as possible.
I will now set out the Government’s position on the 11 non-Government amendments that were made to the Bill in the other place. The majority of the amendments seek to reverse or alter amendments made to the digital markets part of the Bill on Report in this House. There were three aims behind the Government’s package of amendments on Report in the Commons: first, to provide greater clarity to parties interacting with the regime; secondly, to strengthen the regime’s safeguards for the extensive new regulatory powers; and thirdly, to enhance the accountability of the regulator. The Government tabled the amendments following careful consideration of the views expressed by hon. Members across the House. We remain convinced that our amendments struck the right balance between the accountability of the CMA’s regulatory decisions and the flexibility to allow for targeted and proportionate action that tackles the unique competition challenges in digital markets.
Sir Robert Buckland (South Swindon) (Con)
My hon. Friend is right that the amendments that were agreed on Report in this House struck the right balance, and I am afraid that on this occasion I wholly disagree with the way their lordships characterised the matter in their debate. We are not arguing for a wholesale replication of the telecoms regime; we are simply making sure that, particularly with regard to penalties, which will be pretty onerous—and rightly so—there is proper discretion to allow a reviewing tribunal and reviewing court to consider the matter carefully, in a way that balances out the need for rigour and for temper when it comes to the power of the regulator.
Kevin Hollinrake
I thank my right hon. and learned Friend for his intervention and his earlier engagement, when he made his position on that point clear. He is right to say that penalties can be significant—up to 10% of global turnover—so it is fair that we allow organisations to challenge penalties on the merits of the case, but maintain the ability to impose pro-competition interventions and conduct requirements on platforms. The amendments made in the other place risk undermining that careful balance. For example, amendments to revert the appeals standard for fines to judicial review principles, to which my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland) referred, would remove a valuable safeguard on the significant new powers that the Bill gives the CMA, as would the removal of the requirement on the CMA to act proportionately. Meanwhile, amendments to the countervailing benefits exemption risk making the exemption less clear for stakeholders. Consequently, the Government have tabled a motion to disagree with those amendments.
Damian Collins (Folkestone and Hythe) (Con)
The point about a “proportionate” response is relevant. In the original drafting of the Bill, the word used was “appropriate.” The Government changed that to “proportionate” on Report in this House, and the Lords have sought to reverse that change. What does the Minister think was disproportionate, if you like, about the word “appropriate”? What about it struck the wrong balance? Ministers keep saying that they think things strike the right balance, but they never really explain why.
Kevin Hollinrake
We have engaged significantly, throughout the Bill’s passage and before it was introduced, with large tech and challenger tech. Our understanding is that all those cohorts are happy with where the Bill is today. Certainly, during that engagement, concerns were raised about the term “appropriate,” but the clear position that we expressed to those who raised that concern was, “Of course, there is a requirement on the CMA to act proportionately.” Putting that in the Bill does not undermine its basic principles. In fact, we understand from the situation in the European Court of Human Rights, and the property rights emanating from it, that all those things are baked in anyway, so we do not feel that the wording weakens the legislation at all, but it does strike the right balance between those two different courts.
Sir Jeremy Wright (Kenilworth and Southam) (Con)
It is clearly important that we understand what “proportionate” means in this context. Is the Government’s position that proportionality implies that there is more for the CMA to think about than just how effectively the imposition of a conduct requirement would fulfil the CMA’s requirements? If so, what can the Government do to make that clear, so that courts and tribunals that consider such cases do not fill in the gaps themselves? The words “appropriate” and “proportionate” could be interpreted quite widely if the Government are not clear about what they mean by them.
Kevin Hollinrake
My right hon. and learned Friend will know from his legal background that the term “proportionate” is well established in law. Of course, the courts play an important part here. We do not prescribe everything in our legislation; there is quite rightly the opportunity for people to challenge certain decisions by the CMA. Clearly, we are trying to reduce the ability of large tech to prevent investment from smaller tech. That is the balance that we are striking, but we do not want to discourage investment from big tech, so the requirement for the CMA to act proportionately is reasonable.
Sir John Whittingdale (Maldon) (Con)
The Minister suggested that stakeholders were now satisfied with the Bill. I can tell him that there is concern about the change from “appropriate” to “proportionate.” The fear is that it will enable the courts to look more broadly, and will allow more scope for challenge than was intended when the term “appropriate” was used. Can he confirm that that is not the Government’s intention?
Kevin Hollinrake
It is not our intention. Our intention is to strike a balance. As I have said, the courts’ approach to proportionality was set out by the Supreme Court in Bank Mellat v. Her Majesty’s Treasury (No. 2), when the Court described the elements to be considered, including, most notably,
“whether a less intrusive measure could have been used”
and whether there is a fair balance between the intended objectives of the measure and the effects on the business that the measure applies to. That is a sensible balance to strike. Of course, some stakeholders want to go further in certain directions, while others do not want us to go as far, and we are trying to strike that balance. We welcome big tech’s investment in the UK, but we also welcome investment by challenger tech, and through this groundbreaking Bill—the only one of its kind in the world—we are striking that balance.
We have listened carefully to arguments relating to the Secretary of State’s approval of CMA guidance. Lords amendment 38, which was tabled by Lord Lansley, adds a timeline for the Secretary of State approving CMA guidance relating to the new regime. In response, we have tabled amendment (a) in lieu, which would achieve a similar effect by introducing a statutory 30-working-day timeline for the Secretary of State to approve the necessary guidance. We believe that that addresses concerns about the ability of the digital markets regime to start tackling competition problems without delay. We hope that hon. Members will support amendment (a).
On secondary ticketing, a non-Government amendment —to which the hon. Member for Richmond Park (Sarah Olney) referred—was made in the other place to the consumer part of the Bill. Amendment 104, which was tabled by Lord Moynihan, seeks to introduce additional regulatory requirements on ticket resale sites. Those requirements would cover proof of purchase, ticket limits and the visibility of certain required information, such as the face value of a ticket. Both Lord Moynihan and the hon. Member for Washington and Sunderland West (Mrs Hodgson) have spoken passionately on that topic during proceedings on the Bill. We are hugely grateful for their work highlighting the malpractice in the resale market.
To be clear, the Government are absolutely committed to protecting consumers from fraudulent activity in the secondary ticketing market. However, it is our view that protections for consumers are already provided by existing consumer law. The law imposes specific information requirements in relation to secondary ticketing that go above and beyond those in general consumer law. That includes the requirement for all resellers—be they traders or consumers—and secondary ticketing platforms to inform a buyer about the face value of a ticket and the restrictions on its use. The Government’s position is therefore that the secondary ticketing market is already suitably regulated. That said, we recognise the strength of feeling on this matter, which has been expressed by Members of the other place and in certain quarters of this House, so we commit today to undertaking a review of ticketing practices and how they impact on consumers. The review will look at both primary and secondary markets—in other words, sellers and resellers. We believe it important to consider both markets together.
Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)
I am very grateful to the Minister for giving way. I know that we have debated this point before, and I will discuss it further in my contribution, but I make the point again that there may be legislation, but it is not working. There have been only two prosecutions in all the time since the Consumer Rights Act 2015 was passed. If further legislation was not needed, why did we bring in legislation to protect tickets for the Olympics?
Kevin Hollinrake
It is not right to say that there have been only two prosecutions—
Kevin Hollinrake
I will just finish this answer. There have been two sentences. Two people got a £6.1 million fine. There were four more successful prosecutions in Leeds Crown court only very recently, and sentence is due to be imposed on those individuals. The hon. Lady raises important points, and did great work on the all-party parliamentary group, and I will always listen to her. We are undertaking a review looking at primary and secondary markets, and she will have every chance to give her input to that review, just as anybody else will. I look forward to hearing her representations.
Barbara Keeley (Worsley and Eccles South) (Lab)
The Government claim that they are doing enough, but that is just not the case. Here is an example for the Minister: on secondary ticketing sites, three tickets for the Taylor Swift show on 21 June are going for £72,000. They had a face value of £170 each. How is the market working?
Kevin Hollinrake
I agree that some of the examples are shocking. The key question is what measures we will put in place to address them. Ireland, for example, completely banned secondary sales, yet the prices seen on the internet are equivalent to what the hon. Lady describes, so there is no perfect solution that has already been tried. However, we are very happy to look at the evidence, look at what might be done, and do something that is effective, rather than crowd-pleasing. That is what we are committed to doing.
The reality is that some organisers are simply much more successful than others at preventing large-scale unauthorised resales. The ticket market is clearly evolving rapidly. Our review will therefore consider evidence from businesses and platforms operating in ticketing and resale markets, as well as venues, artists, enforcers and consumers. The Government intend the review to take place over nine months, after which we will consider any appropriate further action. [Hon. Members: “You won’t be there.”] Members who are commenting from a sedentary position should beware of overconfidence.
I very much hope that hon. Members will support the Government’s position today. I especially hope that Members in both Houses will note our movement in two important areas: the Secretary of State’s approval of CMA guidance for the new digital markets regime, and secondary ticketing. These changes are considered and balanced, and I urge Members in the other place to consider their position on the other amendments that our motions today seek to reject. Throughout the Bill’s passage, the Government have listened carefully to the arguments presented, and in response, we have made a series of significant changes where we recognise that improvements could be made. It is important that we now reach full consensus on the Bill’s final form, so that it reaches the statute book without further delay.
Sir Chris Bryant (Rhondda) (Lab)
First, I pay tribute to my much-loved neighbour, my hon. Friend the Member for Pontypridd (Alex Davies-Jones), who led for Labour during the last round of proceedings on the Bill, and to my hon. Friend the Member for Feltham and Heston (Seema Malhotra), who led for us when the Bill was introduced.
Might I say a few words about the Minister? I do love the Minister. Members sitting on the Government Back Benches will not have been able to see the little wry smile playing on his face as he made his speech. Unfortunately, Hansard is not able to record that element of the way he presented his case. I will let the House into a secret: there are two versions of the Minister, or rather the Member. There is the Back-Bench Member, who I passionately agree with on nearly everything, and then there is the Government Minister, who has the Back-Bench Member sitting inside him somewhere, but has managed to lose him while taking on corporate and shared responsibility on the Government Front Benches. I bet that if he were in the Parliament that follows the next general election, and we debated these matters all over again, he would be articulating what I am about to say almost word for word, but today, he has articulated the Government position.
Sir Chris Bryant
Well, we have moved on and it is about time the Government moved on—in fact I look forward to the day when the Minister moves on from Government Benches to here on the Opposition Benches. The idea of a review at the dog end of a Parliament and at the end of the regime is absolutely pathetic, and I am glad the Minister is laughing at himself for even presenting the suggestion today.
Let me end with an area of agreement. We were glad that the Government, under pressure, tabled Lords amendment 117 on mergers involving newspaper enterprises and foreign powers along the lines of measures that we and others, including a large number of Conservative MPs and peers, had called for. Of course the UK must remain an open economy; we welcome foreign investment in many sectors in the UK. But we agree that in this limited area, the state ownership of UK newspaper and media companies must be a matter for concern, which is why we support the Lords amendment. We will need to make sure in future years that it is adequate to the situation we find, not least bearing in mind many of the comments made earlier by Members on both sides of the House regarding the rather fluid world we are moving into, where newspapers are a rather outdated concept and social media and other forms of online media are far more significant. We will keep that under review, therefore, but we welcome the amendment the Government have tabled.
This long-delayed Bill could go forward with strong, unanimous support if the Government abandoned their tilt towards the few potentially monopolistic companies and set aside their objections to the Lords amendments. Those objections are either completely otiose or they are dangerous. The Minister says they make no difference, I say they do, but on either grounds they should go, so we support their lordships in their amendments.
John Penrose (Weston-super-Mare) (Con)
May I start by saying that this was and still is a good Bill? It does an enormous number of very important things and I am glad to see that it has broad acceptance and agreement on both sides of the House, although with some minor points of disagreement. It contains many of the measures that I personally called for in my Government-commissioned review of competition policy called “Power to the people” a little while ago, and it definitely updates and makes some much-needed changes to our competition and consumer laws. However, I share some of the concerns raised today about the Government’s opposition to four of the amendments that have come back from the Lords.
I do not have worries about the Lords amendments themselves because, as we have just heard from the Opposition Front-Bench spokesperson the hon. Member for Rhondda (Sir Chris Bryant), they mainly seek to restore the effect of clauses that were in the Bill when it originally came to this House. What worries me is that the wrong people are clapping. The changes that the Government have made, in many cases by seeking to resist Lords amendments, seem to many people to be on the side of the big tech firms rather than on the side of consumers, of sharper competition, of more consumer choice and of standing up for the man and woman in the street. I therefore earnestly hope that the Minister will be able to channel his historical zeal for these things in his closing remarks and reassure me, and I am sure others as well, that that is not the Government’s intention and that they remain committed to those things—that the fire still burns brightly in his eyes to make them happen.
I start by saying that the Government have already done some of that work with amendment (a) in lieu of Lords amendment 38—they have replaced the Lansley amendment with a version of their own—dealing with the amount of time that the Secretary of State can take in dealing with guidance put forward by the CMA to make sure it is not unduly delayed. That is extremely welcome and a very good measure, and I enthusiastically support it. However, we have already heard about two other things in particular. One is the role of judicial review in dealing with penalties. I share the concern that in moving away from a judicial review standard for penalties to a full merits review we may get bleed-across—that clever lawyers working for big tech firms may effectively be able to broaden the scope through clever use of legal techniques to prolong their attempts to walk backwards slowly and prevent justice from being done. I therefore devoutly hope that my good friend the Minister will be able to clarify that he expects to be able to show to us—either from the Dispatch Box now, or in guidance or another kind of clarification in due course—that it will not be possible for bleed-across to happen and he will be able to take any steps that may be needed.
Kevin Hollinrake
I am very happy to make that commitment. We believe the Bill draws a clear distinction between infringement decisions and penalty decisions. After taking legal advice on this matter and looking at previous competition case law considering similar issues, the Government consider that neither the Competition Appeal Tribunal nor the higher courts will have any trouble making that distinction for digital markets appeals. We have clarified that in the explanatory notes, which I hope provides reassurance that there is little risk of bleed-back from the merits appeal standard for penalty appeals to appeals on other types of decisions.
John Penrose
I thank the Minister for that intervention and, emboldened by my success so far in getting him to front up, I move on to my second point, which has similar concerns around it: the issue of countervailing benefits. We have heard from the Opposition spokesman about that, so I will not go through it all again, but it would be enormously helpful if, either now in a further intervention or in his closing remarks, the Minister could be clear about the new wording, which we have already heard about in his speech. I hope he will make it clear—again, either through clarifications now or in guidance—that it is not intended to be in any way a lower standard than what we had before when this Bill first came to the House, and that it is either the same or tougher. I am pausing just briefly to see whether he wants to intervene.
Kevin Hollinrake
The revised wording did not change the effects of the clause. Strategic market status firms will still have to prove that there is no other reasonable and practicable way to achieve the same benefits for consumers with less competitive effect.
John Penrose
We are making marvellous progress and ending up with changes being confirmed on the Floor of the House in a way I do not think I have seen before, so let us keep going.
John Penrose
I am sure the Minister will grab that opportunity in his closing remarks, if he so wishes. At least he has taken the opportunity to stand up and give us public reassurances on the record about the standard that is intended. It is clear that it is no lower than it originally was, which is an important change.
Kevin Hollinrake
The shadow Minister and I are having this debate vicariously, but I just note that the wording in the explanatory notes has not changed.
John Penrose
I am on a roll here.
The final of the four issues in question is proportionality. We have had the debate already, so I do not propose to repeat the concerns, but it would be helpful if the Minister, either now or in his closing remarks, clarified that the new and amended standard that is to be applied is no lower. I think he said something to that effect earlier to the former Attorney General, my right hon. and learned Friend the Member for Kenilworth and Southam (Sir Jeremy Wright), but it would be helpful just to nail that one down and drive the nail home, if the Minister can. It is important for everybody to understand whether that new standard is any lower at all; it should be the same or higher.
John Penrose
The Minister is nodding, but I do not know whether he intends to intervene again.
John Penrose
We will have to preserve our souls in patience for the Minister’s closing remarks. I will declare victory very shortly. It has been a helpful set of interventions, and I thank him for that.
My final point is not related to these Lords amendments, but to a commitment that the Minister made at the Dispatch Box on Report in response to an amendment on better regulation that I had tabled with the support of a great number of parliamentary colleagues. He made a commitment that a set of conclusions, matching a set of standards whose wording he and I had agreed in advance, would be in place before the Bill receives Royal Assent. Clearly we are getting close to that date—I hope very close—and I understand that a Government White Paper may be in the offing, but I am not sure whether that will arrive before Royal Assent. My point is intended not to delay Royal Assent, but to bring forward the White Paper or whatever document the Government may be thinking of.
Based on conversations I have had so far, I am also concerned that not all the commitments the Minister made from the Dispatch Box may be in that White Paper. I therefore urge him to make sure that between now and Royal Assent, he works assiduously with his fellow Ministers to make sure they have got the memo that should gone round after he made those commitments.
Kevin Hollinrake
With the leave of the House, I will respond to some of the points raised in this fruitful, constructive debate. I reassure the shadow Minister that I have lost none of my mojo or ambition to ensure a fair and level playing field for businesses. That is a vital part of this legislation. At times I may smile when I am at the Dispatch Box and there are a couple of reasons for that; not only am I generally a happy guy but I am pleased to see this groundbreaking legislation being brought into effect. It is probably one of only two major pieces of legislation around the world that does what it does. We should welcome that and the fair and level playing field that will result from it.
I do not accept what the shadow Minister says about the Government having caved in and weakened some of the Bill’s provisions. It is fair to say that some of the platforms would like us to have changed the Bill radically from how it was when it was presented to Parliament. We think we have very much held the line on its provisions and how it will ensure that consumers and smaller businesses get a better deal. We do not accept that it will bring about “bleed back”, as he puts it, between the on-the-merits provisions of penalties and other regulatory decisions. We have been clear on that and our legal advice is of the same mind.
Secondary ticketing is a key part of the debate, having been raised by various Members. We absolutely see that there is good practice in some primary markets, where there is control as to resales. We should learn from best practice, such as ID requirements on the resale of tickets. That is within the gift of those in the primary markets, so we are keen to develop the review to ensure that we look at both the primary and secondary markets, as the Opposition called for in an amendment tabled earlier in the Bill’s progress.
Sir Chris Bryant
I am grateful to the Cheshire cat for giving way. Does he oppose the Lords amendment on ticket touts because of the proposed new subsection stating that there needs to be “proof of purchase” for secondary ticket marketing, or because details of the “face value” of the ticket have to be provided? It is difficult to determine why the Minister opposes the Lords amendment other than because it is an inconvenience to government.
Kevin Hollinrake
We believe that those measures, such as on the face value of the ticket, are already covered by the current legislation and enforcement. The Government have certainly gone a lot further than previous regimes have: we strengthened the terms and guidance in 2017; we banned ticketing bots—the hon. Gentleman mentioned that but did not seem to understand that it had been outlawed in 2018; and we improved enforcement action by the regulators, as we have seen six successful prosecutions under the new regime. I remind him that where other jurisdictions have supposedly gone further in banning resale, such as in Ireland, no prosecutions have taken place. We are trying to ensure that we have a balance and that our provisions work well.
Kevin Hollinrake
I will address the hon. Lady’s points in a moment, as I am keen to respond to some of them.
Sir Chris Bryant
If the Minister goes to the Viagogo website and tries to buy a ticket, he will see on the first page that it says the ticket is £420 or whatever. Can he see the original value of the ticket? No. Can he see whether it is a validly purchased ticket? No. That is the problem that the amendment would solve. It would be simple for the Government to agree to the amendment and then we can get the Bill through.
Kevin Hollinrake
We believe those provisions are already there. I have quite happily used Viagogo on many occasions, as other people have when reselling tickets. Of course we will keep looking at the primary and secondary markets, and at the interaction between the two, so that we can develop the right way to regulate the market, in a future Parliament.
Kevin Hollinrake
I will come to the hon. Lady’s points in a moment.
On the things we are doing to hold big tech to account, I can assure my hon. Friend the Member for Weston-super-Mare (John Penrose) that the fire burns brightly in me. I do not think we have moved away in any material way from ensuring that this legislation is fit for purpose and does what it sets out to do. As I said in response to his earlier intervention, we do not believe there is any bleed-across between the merits-based approach to penalties and other regulatory interventions. The revised wording about the countervailing benefits exemption did not change the effects of the clause and did not change the guidance in the explanatory notes.
As my hon. Friend is aware, we are doing a lot of work on regulation. We have engaged on regular occasions to ensure that gets to where he wants. On costs and benefits, he will have noticed we brought forward the growth duty for our economic regulators quite recently, as well as the smart data road map. I know he waits with bated breath for the White Paper that will come forward shortly.
I thank the hon. Member for Gordon (Richard Thomson) for his support for the legislation. We do not think the change from conduct is indispensable to the benefits; benefits could not be realised without the conduct materially changing the position in any way.
My hon. Friend the Member for Folkestone and Hythe (Damian Collins) said that we had moved to a different balance. I do not think I said that; I am happy to clarify my remarks about proportionality. We have provided more certainty and clarity around that position, which we always thought was part of the way the CMA would make its decisions. He made points about how the regulator would view, for example, the significant charges made across the Xbox platforms, which both charge 30% to the people who have e-commerce through those payment systems. As he said, businesses might not think that is too much, but we both know that it is not businesses that pay that ultimately, but consumers. The requirement for the CMA to make interventions for the benefit of consumers is in its very DNA, so I think it would act in those situations.
The hon. Member for Worsley and Eccles South (Barbara Keeley) talked about the secondary ticketing position. I hear her points, and the points raised by the hon. Member for Washington and Sunderland West (Mrs Hodgson), very clearly.
Barbara Keeley
I counsel the Minister against what he is doing. As his colleague in the Department for Culture, Media and Sport team did recently at oral questions, he is repeating the arguments that the platforms use. It is sad to hear Ministers repeating the same lines that a global chief officer of Viagogo came out with when they were over here. In Ireland, fraud activity has not increased—because the legislation is working., and that is why there are no prosecutions in Ireland. We would be in that situation if we had that legislation. As my hon. Friend the Member for Washington and Sunderland West probably wants to point out, it is alright to say that the use of bots is illegal, but nobody is being prosecuted for the illegal use of bots to wholesale-buy tickets; it is happening, so I counsel the Minister and his ministerial colleagues’ against their constant repetitions, which are not plausible to anybody outside.
Kevin Hollinrake
The hon. Lady is right to say that there is a difference between legislation and enforcement. We urge the authorities that have responsibility to enforce those provisions to make use of them. In Ireland, where the resale of tickets has been banned, inflated prices are still a feature of the ticket markets. Tickets for Taylor Swift’s Dublin shows are selling well in excess of their face price on the internet in Ireland, but no prosecutions have been made.
Kevin Hollinrake
May I make it clear that I was not accusing the hon. Member for Worsley and Eccles South of crowd pleasing? As I said in my earlier remarks, and as I will say to the hon. Member for Washington and Sunderland West before she intervenes, we should not simply take measures that are crowd pleasing in the hope they will work but they are ineffective. That is not to say that we do not think further measures are required.
Mrs Hodgson
On the point about Taylor Swift and whether any of her tickets have been sold on the secondary market in Ireland, I challenge the Minister to take another look at that rather than taking the word of his officials or whoever has told him. I have been told that no Taylor Swift tickets are on sale on Viagogo in Ireland. She has stated that her tickets will not be valid if they are resold on a secondary platform, so they will not be found on a secondary platform in Ireland.
Kevin Hollinrake
Yes, I have just googled sellers of tickets in Dublin, and people can buy tickets well in excess of face value on the platform. I could not find them on Viagogo, but other platforms are selling those tickets. We are trying to do something that is effective. I am very happy to continue to engage with the hon. Lady, as she makes a very compelling case. I shall continue to look at what she says and continue to engage with her. I am very keen to ensure that we get to the right place, so that we protect consumers, but allow a fair, free market to work properly.
Andrew Gwynne
I am very grateful to the Minister for giving way. I want to take him back to his comment that what was needed was not new legislation, but better enforcement. The enforcement authorities would presumably be trading standards. What is the reason there are not the prosecutions that we would all like to see? Is it because trading standards has been run into the ground and does not have the capacity to do the job that he is expecting it to do? Is it because of the complexity of the market? And which trading standards is responsible: the one where the platforms are based, the one where the person who bought the ticked is based, or the one where the concert is being held? That makes enforcing this measure really difficult.
Kevin Hollinrake
I thank the hon. Member for his points. I said not that legislation was not needed, but that there was no point in having legislation without enforcement. There have been six successful prosecutions by trading standards, but is he saying that he wants to fund trading standards to a greater degree? I understand some of the pressures on local authorities across the country; there are pressures on the public finances generally. If he has a solution to that and can provide lots more money to local authorities, he should have a word with his Front-Bench team, because that has not been Labour’s policy.
Gen Kitchen (Wellingborough) (Lab)
Unlike with trading standards, many cash-strapped families and young people fall for online scams, because they are on the hunt for bargains on Facebook Marketplace and, to a lesser extent, on eBay and Vinted. They are often at the mercy of being ripped off with very little protection and little to no help from local trading standards because of that confusion over whether it is where the buyer is or where the seller is. In particular, that is because they are for more casual and lower-value transactions. Can the Minister confirm whether that will be in the review as well?
Kevin Hollinrake
I thank the hon. Lady for her intervention. She makes a very good point. I am happy to look at the concerns that she raises. We will look at the concerns raised by all stakeholders, Members of this House and people further afield to ensure that, when we carry out this review, we get to the right place.
The hon. Member for Pontypridd (Alex Davies-Jones) seems to think EU legislation is stronger than ours. Let me point out that appeal standards consider the merits across the piece in the European Union; they do not in the UK, as they are confined to a very small element of it.
Finally, I am pleased that the hon. Member for West Ham (Ms Brown) supports the Bill and very pleased that she supports freedom of speech. Digital inclusion is very important. The Under-Secretary of State for Science, Innovation and Technology, my hon. Friend the Member for Meriden (Saqib Bhatti) is working very hard on social inclusion and social tariffs of broadband through the cross-ministerial group. We are very keen to ensure that reminder notices for subscriptions are very clear for all our consumers.
To conclude, I urge all Members on both sides of the House to carefully consider the amendment that I have proposed in lieu of those made in the other place. I hope that all Members will feel able to support our position.
Mr Deputy Speaker (Mr Nigel Evans)
Taylor Swift seems to be everywhere, even in the House of Commons, doesn’t she?
Question put, That this House disagrees with Lords amendment 9.
Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 14th May 2024
(6 months, 1 week ago)
Lords ChamberDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Watch Debate Amendment Paper: HL Bill 75-I Marshalled list for Consideration of Commons Reasons and Amendment - (13 May 2024)
16:13 - Division on Motion C2 - Ayes: 221 / Noes: 222 - Motion C2 disagreed.
17:00 - Division on Motion E1 (as an amendment to Motion E) - Ayes: 228 / Noes: 213 - Motion E1 agreed.
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
Viscount Camrose
That this House do not insist on its Amendments 9 and 19, to which the Commons have disagreed for their Reason 19A.
The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
My Lords, I will also speak to Motions A1, B, B1, C, C1, C2 and D.
I start by thanking noble Lords for their constructive input and careful scrutiny during the passage of the Bill. We have created legislation that will drive innovation and deliver better outcomes for consumers across the UK by addressing barriers to competition in digital markets and tackling consumer rip-offs.
The Bill has been strengthened in many places in this House. However, today, I will speak to Motions A to D, which address amendments that remain to be agreed across the Bill. The Government ask that this House does not insist on the amendments rejected in the other place and that it agrees to the amendment proposed in lieu of changes proposed by noble Lords.
Lord Tyrie (Non-Afl)
Does the Minister not agree that since, with a merits appeal, a fine could be reduced to nugatory amounts, that what would be considered equivalent to a full merits review of the substantive decision?
Viscount Camrose (Con)
That would be in respect only of the fine itself. Any other element of the decision, such as the imposition of new conduct requirements or other actions taken to correct anti-competitive effects in the market, would stand and would have been standing throughout the appeal in any event.
I turn to Motion B, which addresses Amendments 12 and 13, on the countervailing benefits exemption, moved by the noble Baroness, Lady Jones of Whitchurch. The amendment looks to revert the clause back to its original wording of
“the conduct is indispensable ... to … those benefits”.
The Government’s revised wording, which replaces “indispensable”, does not change the effect of the clause. It still requires the same high threshold to be met and has the same safeguards. To qualify for the exemption, SMS firms must establish that all the criteria are met. There must be no other reasonable, practicable way to achieve the same benefits to consumers with a less anti-competitive effect. I hope that noble Lords feel reassured that the Government’s drafting maintains the same robust threshold and keeps consumers at the heart of the pro-competition regime.
Your Lordships will remember Amendment 38, tabled by my noble friend Lord Lansley, which sought to place in the Bill a 40-day timeframe for the Secretary of State’s approval of CMA guidance. The Government listened carefully to concerns led by my noble friend relating to a risk of delay in the digital markets regime. We are absolutely committed to getting this regime up and running to start fixing competition problems and deliver greater consumer benefit.
To reinforce this commitment, the Government have tabled Amendment 38A in lieu. This takes the spirit of my noble friend’s amendment and merely adjusts the time limit to working days to align with other timelines in the Bill. It also asks for reasons if guidance is not approved within the time limit. I hope that this provides reassurances to noble Lords about our commitment to the digital markets regime. I thank my noble friend for championing this matter in earlier debates and for his support for the amendment in lieu.
Once again, I thank noble Lords for their contributions during the Bill’s passage and I look forward to others during this debate. Across this House, we are all committed to making the DMCC Bill the best and most effective legislation it can be. I therefore invite noble Lords to agree the government Motions before them. I beg to move.
Motion A1 (as an amendment to Motion A)
Viscount Camrose (Con)
My Lords, I thank all noble Lords who have contributed to the debate today and, of course, throughout the development of this legislation. It has been a characteristically brilliant debate; I want to thank all noble Lords for their various and valuable views.
I turn first to the Motions tabled by the noble Lord, Lord Faulks, in relation to appeals and proportionality. I thank him for his continued engagement and constructive debate on these issues. We of course expect the CMA to behave in a proportionate manner at all times as it operates the digital market regime. However, today we are considering specifically the statutory requirement for proportionality in the Bill. We are making it clear that the DMU must design conduct requirements and PCIs to place as little burden as possible on firms, while still effectively addressing competition issues. The proposed amendments would not remove the reference to proportionality in Clause 21 and so, we feel, do not achieve their intended aim, but I shall set out the Government’s position on why proportionality is required.
On the question of the wording of “appropriate” versus “proportionate”, proportionality is a well-understood and precedented concept with a long history of case law. “Appropriate” would be a more subjective threshold, giving the CMA broader discretion. The Government’s position is that proportionality is the right threshold to be met in legislation due to the fact that it applies, in the vast majority of cases, because of ECHR considerations. It is the Government’s view that the same requirement for proportionality should apply whether or not ECHR rights are engaged.
As Article 1 of Protocol 1—A1P1—of the European Convention on Human Rights will apply to the vast majority of conduct requirements and PCIs imposed by the CMA, with the result that the courts will apply a proportionality requirement, we consider it important that it should be explicit that there is a statutory proportionality requirement for all conduct requirements and PCIs. We believe that proportionality should be considered beyond just those cases where A1P1 may apply, in particular when a conduct requirement or PCI would impact future contracts of an SMS firm.
The courts’ approach to proportionality in relation to consideration of ECHR rights has been set out by the Supreme Court, and we do not expect them to take a different approach here. Furthermore, the CAT will accord respect to the expert judgments of the regulator and will not seek to overturn its judgments lightly. I hope this answers the question put by the noble Lord, Lord Faulks.
On appeals, I thank noble Lords for their engagement on this matter, and in particular the noble Baroness, Lady Jones of Whitchurch, for setting out the rationale for her Amendments 32B and 32C, which seek to provide further clarity about where on the merits appeals apply. I want to be clear that the Government’s intention is that only penalty decisions will be appealable on the merits and that this should not extend to earlier decisions about whether an infringement occurred. I do not consider these amendments necessary, for the following reasons.
The Bill draws a clear distinction between penalty decisions and those about infringements, with these being covered by separate Clauses 89 and 103. There is a Court of Appeal precedent in BCL v BASF 2009 that, in considering a similar competition framework, draws a clear distinction between infringement decisions and penalty decisions. The Government consider that the CAT and the higher courts will have no difficulty in making this distinction for digital markets appeals to give effect to the legislation as drafted.
I now turn to the Motion tabled by the noble Lord, Lord Clement-Jones, in respect of the countervailing benefits exemption. I thank the noble Lord for his engagement with me and the Bill team on this important topic. The noble Lord has asked for clarification that the “indispensability” standard in Section 9 of the Competition Act 1998, and the wording,
“those benefits could not be realised without the conduct”,
are equivalent to each other. I want to be clear that the exemption within this regime and the exemption in Section 9 of the Competition Act 1998 are different. This is because they operate in wholly different contexts, with different criteria and processes. This would be the case however the exemption is worded in this Bill. That is why the Explanatory Notes refer to a “similar” exemption, because saying it is “equivalent” would be technically incorrect.
Having said that, the “indispensability” standard and the threshold of the Government’s wording,
“those benefits could not be realised without the conduct”,
are equally high. While the exemptions themselves are different, I hope I can reassure noble Lords that the Government’s view is that the standard—the height of the threshold—is, indeed, equivalent. The Government still believe that the clarity provided by simplifying the language provides greater certainty to all businesses, while ensuring that consumers get the best outcomes.
I thank the noble Lord, Lord Clement-Jones, for his question in relation to the Google privacy sandbox case. The CMA considers a range of consumer benefits under its existing consumer objective. This can include the privacy of consumers. It worked closely with the ICO to assess data privacy concerns in its Google privacy sandbox investigation and we expect it would take a similar approach under this regime.
I urge all noble Lords to consider carefully the Motions put forward by the Government and hope all Members will feel able—
Viscount Camrose (Con)
Indeed. In principle I am very happy to update the Explanatory Notes, but I need to engage with ministerial colleagues. However, I see no reason why that would not be possible.
Meanwhile, I hope all noble Lords will feel able to support the Government’s position.
Lord Pannick (CB)
My Lords, before the Minister sits down, may I just press him on proportionality? I understand the argument to be that a proportionality test should be applied in this context even though it is not required in all cases by the European Convention on Human Rights. I see the Minister nodding. Will that now be the general position of the Government, because it is not the law in relation to judicial review generally that there is a proportionality test? If that is to the position of the Government, it would be a very significant development which some of us would welcome and some of us would not. I declare an interest, of course, as one of those lawyers referred to by the noble Baroness, Lady Jones, as looking to take advantage on behalf of their clients. It is a very real issue; how far does this go?
Viscount Camrose (Con)
It goes only so far as its application to the Bill now. I am not aware of any further measures to take it into other Bills and would not expect to see any.
Lord Faulks (Non-Afl)
My Lords, I am grateful for the Minister’s response on that issue. I asked him the same question that I have asked throughout these proceedings—it is the same question posed by the noble Lord, Lord Pannick—and there does not seem, with great respect, to be an answer to it. The Minister has mostly allowed, to use a cricketing metaphor, the matter to go past the off stump without playing a shot. What really seems to be the position is that he says that proportionality will apply, even if the Human Rights Act or a convention right is not involved. But I think that, in answer to the noble Lord, Lord Pannick, the Minister is saying, “But only in the case of this Bill”. What that means is that big tech is getting a special privilege not afforded to any other litigant in any other context. I ask noble Lords, “Is that a good look?” I do not think that it is.
The Commons reason for preferring “proportionate” to “appropriate” reads as follows:
“Because it is appropriate for the CMA to be required to act proportionately in relation to conduct requirements and pro-competition interventions”.
I do not know whether that was supposed to be a joke, but it is profoundly unsatisfactory. The Government have missed a trick—or rather, they have succumbed to considerable pressure. I welcome the Bill because there is a great deal about it which is good. Having thought very carefully, and with considerable reluctance, I propose to withdraw my amendment.
Viscount Camrose
That this House do not insist on its Amendments 12 and 13, to which the Commons have disagreed for their Reason 13A.
Viscount Camrose (Con)
My Lords, I have already spoken to Motion B. I beg to move.
Motion B1 (as an amendment to Motion B)
Lord Clement-Jones
Tabled by
Leave out from “House” to end and insert “do not insist on its Amendment 12, to which the Commons have disagreed for their Reason 13A, and do insist on its Amendment 13.”
Viscount Camrose
That this House do not insist on its Amendments 26, 27, 28, 31 and 32, to which the Commons have disagreed for their Reason 32A.
Viscount Camrose (Con)
My Lords, I have already spoken to Motion C. I beg to move.
Viscount Camrose
That this House do not insist on its Amendment 38, and do agree with the Commons in their Amendment 38A in lieu.
“(5) When the CMA seek the approval of the Secretary of State for guidance, the Secretary of State must— (a) approve the guidance, or
(b) give reasons to the CMA for not approving it.
(6) The Secretary of State must comply with subsection (5) before the end of the 30th working day after the day on which the CMA seek the Secretary of State’s approval.”
Lord Offord of Garvel
That this House do not insist on its Amendment 104, to which the Commons have disagreed for their Reason 104A.
The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Offord of Garvel) (Con)
My Lords, I too thank noble Lords for their constructive engagement and debate during the passage of this Bill and echo the remarks of my noble friend Lord Camrose on the importance of this legislation. Since noble Lords last discussed secondary ticketing, the Government have given further thought to addressing the concerns raised in both Houses. We still do not see the merit in more or duplicative regulation at this stage. Enforcement action using the existing rules has already resulted in jail sentences for two touts as well as a confiscation order of £6.1 million. We are also awaiting sentencing on four recent prosecutions later this month.
Crucially, there have been rapid changes in the ticketing market in the last few years. Greater use of app-based verification and staggered ticket releases mean that businesses in the primary market can, if they wish, easily manage secondary ticketing. However, it is evident that good practice must go further and wider. That is why the Government are committing to carry out a review of the ticketing market as a whole, including primary sellers, so that good practice can be spread further. The most recent review by the CMA examined only the secondary market, but it is our belief that seeking to address benefits and protections purely through action in the secondary market will not deliver the best outcomes for consumers. For this reason, the review will consider issues such as why some primary sellers seem to be more successful than others at getting tickets directly into the hands of genuine fans, and what we can learn from that. The review will take place over nine months, after which the Government will consider any appropriate further action.
The Department for Business and Trade is ready to work with DCMS and start the review as soon as possible after the Bill receives Royal Assent. We will welcome input, expertise and views from this House and the other place, as well as from venues, artists, promoters, ticket sellers and resellers, enforcers and consumers. I encourage noble Lords to back the Government’s review to ensure meaningful and evidence-based recommendations following its conclusion. I invite noble Lords to agree the Motion and I beg to move.
Motion E1 (as an amendment to Motion E)
Lord Leong (Lab)
My Lords, I will speak to Motion E1 in the name of the noble Lord, Lord Moynihan. Like the noble Lord, Lord Clement-Jones, I thank him and my honourable friend the Member for Washington and Sunderland West for their relentless campaigning and enduring diligence on this issue.
The current system is not working. It is not strong enough to stop a shadowy oligopoly of parasites on talent: unscrupulous people who are profiteering from genuine fans who want to see their heroes perform live. Tickets for many high-profile events, which by their very nature are extremely limited in supply, are being resold for many times their face value. Genuine sports supporters and music fans are being ripped off.
I will give just one example. The original price of the most expensive seated tickets for Taylor Swift in Edinburgh next month was £194 each. I went online to book mine last night, dedicated Swiftie fan that I am, and the cheapest seated tickets with unrestricted views were more than £500 each for two together. The most expensive pairs were £3,646 each—more than 19 times the original price. If I were to buy them, I would wonder to whom that additional money, almost £7,000, was going. It is obviously not going to Taylor Swift—or Tay Tay, as we fans call her.
Sports clubs and artists pitch their prices at a level which they think is fair and which enables them to make a profit: a price that allows their fans to enjoy their work—often a special occasion that will be remembered for a lifetime. When they see their fans charged excessive prices, they are right to believe that their hard work, talent and reputations are being exploited. These excess profits are not going to those who have worked hard to develop sporting prowess or exceptional skills as a performer; they are going to unscrupulous organisations which are often difficult to track and prosecute and which are prepared to exploit existing loopholes and take risks by breaking the law, knowing that they are unlikely to be caught. Such organisations employ sophisticated technology to distort a necessarily restricted market. In his response on day 2 of our debate, on 13 March, the Minister argued his case for not accepting amendments on this issue. The noble Lord, Lord Moynihan, has, with characteristic persistence and diligence, convincingly rebutted those arguments and perhaps alerted the Minister, as he set out earlier, to just how easy it is to be misled, overcharged and ripped off by the various online sites which operate in the secondary market, perhaps even saving him from an expensive mistake the next time he chooses to see an international rugby or football match or even a pop concert.
The CMA made recommendations in relation to secondary ticketing that are covered by this amendment, as the noble Lord set out earlier. The first was to ensure that secondary tickets can be sold only with proof of purchase of the original ticket, to avoid speculative sales of tickets which may not have been bought and might not be provided—a recipe for rip-offs. The second was to limit the number of resales by a single reseller to the amount that can legally be purchased on the primary market. If a reseller is offering tickets in groups larger than this, that must indicate that the additional tickets have been misdescribed or misappropriated and potentially that the purchaser could unknowingly be receiving stolen goods. The amendment also requires that secondary sellers make the original face value of the ticket clearly visible to the purchaser. Subsection (3) of the new clause inserted by the amendment gives the Secretary of State powers to impose or amend conditions for resellers in response to further loopholes being found by resellers to get around these reasonable and legal restrictions, if any emerge in the future.
The second part of the amendment is equally important. It formalises the Government’s non-legislative commitment to undertake a review over the next nine months, as mentioned earlier by noble Lords. By the time that review finishes, the Consumer Rights Act 2015 will be 10 years old. It is already showing its age in the face of the rapid technological advances allowing unscrupulous companies to exploit fans and performers. The review will enable the Secretary of State to identify emerging risks—the unknown unknowns—and respond to rapidly changing technology as touts inevitably seek to exploit the loopholes of the future.
Every year, fans spend millions of pounds of their hard-earned money on these special occasions. It should not go to touts or resellers who exploit the system and play fast and loose with consumer law. The devil is in the detail here and it is also in delay. The time to act is now. The combined weight of the concerns and arguments of the noble Lord, Lord Moynihan, the CMA, the entertainment and sports industries, consumer groups and ordinary fans is difficult to resist. I am impressed by the Minister’s resolve in the face of this tsunami, but I hope that he will now support this amendment. If the noble Lord, Lord Moynihan, wishes to test the will of the House, we on this side will support him.
Lord Offord of Garvel (Con)
My Lords, I thank all noble Lords who have debated the topic of secondary ticketing today. It has been an interesting and constructive discussion on a very important topic.
Turning to Motion E1, tabled by my noble friend Lord Moynihan and regarding secondary ticketing, I thank the noble Lords, Lord Clement-Jones and Lord Leong, for their contributions. I also thank my noble friend for his thoughtful engagement on issues in the secondary ticketing market and his commitment to work with the Government on solutions. As he will know, following our meeting last week and engagement since then, we share many of these concerns—although we differ slightly in our judgment of the best means of addressing them.
This Government have already brought in extensive and successful legislative protections for consumers buying on the secondary ticketing market. These go above and beyond standard consumer rights and require both ticket resellers and platforms to provide ticket information to buyers.
It is appropriate to consider the amendment in Motion E1 in detail. Proposed new subsection (1)(a) requires that a platform seeks confirmation of proof of purchase or evidence of title before allowing a ticket to be listed. It does not set out what might satisfy such requirements, so this is likely to come down to a question of due diligence as a platform to be challenged.
Moreover, it is already a criminal offence, as unfair trading or fraud for traders, to offer for sale a product that cannot be legally sold. Recent prosecutions included breaches of the Fraud Act as part of their basis. Similarly, speculative selling is something that the CMA has sought to address through enforcement, because actions such as that mentioned in relation to the SRU—selling tickets not even issued yet—are not allowed under current law.
Proposed new subsection (1)(b) seeks to apply primary sale ticket limits to the secondary market but, having consulted primary agents, we feel that this is impractical. The number of tickets that a person can purchase depends on the event. It would be difficult for a platform to know what, if any, limits there were for each event, especially when tickets are sold through multiple primary agents.
Proposed new subsection (2) imposes requirements to make clearly visible information about the face value of the ticket, and the trader’s name and business address. Both these elements are already required by UK law; existing legislation requires this information to be “clear and comprehensible”. This is a clear general provision, its application in the circumstances being one for regulators and the courts. There is a greater risk of loopholes if certain practices are specifically provided for but others are not.
In his review, Professor Waterson recommended that enforcement action be taken to drive compliance. That has happened with CMA action, and we have seen successful prosecution of ticket touts, as evidenced by the case of R v Hunter and Smith, which resulted in prison sentences and financial confiscations. However, at that time, the CMA review did not look at the primary market.
During the passage of the Bill, we listened to arguments by noble Lords opposite about the merits of a review of the market as a whole, looking not just at what happens on the secondary market, but at how tickets flow from the primary market. We can better establish the practice and interventions that will deliver benefits and protections for consumers and support events going on in the UK.
I admire my noble friend Lord Moynihan’s dogged commitment to this issue. He wants to beef up the existing rules, but we already have extensive rules in this area. This issue will not be solved simply by adding more and more legislation; it will be solved by better implementation. We have started by radically boosting enforcement powers in Part 3; the next step is to understand how tickets move from primary sale to the secondary market, for different events, in different venues.
On that basis, I urge noble Lords to support the review that we have set out today, and to consider carefully the Motion put forward by the Government. I hope that all Members feel able to support our position.
Lord Moynihan (Con)
My Lords, I thank noble Lords from across the House. We have covered the ground extensively again. I particularly thank the Minister; I think it is the first time, in the whole process, that he has engaged in the detail of the amendment while accepting with me the need to take action. If he had done that somewhat earlier in the process, we might have made progress, but it gives me significant confidence that he has done it today. We now have the opportunity to consider improving the wording, and we can do so by passing the Motion that is in front of your Lordships’ House. We will see whether we can take practical steps, rather than make an outright rejection, and a request, as happened in the other place, for a further six-month review.
I very much welcome what the Minister said, but I was not convinced, primarily because what he said was that we needed clear and comprehensible information on the front of the tickets, yet we do not have that. They are impenetrable because they are hidden behind icons, and that is the very purpose of the key amendment. Had he therefore accepted the principle, he would have accepted the amendment.
We have made significant progress today. We can and should continue this debate, so I ask noble Lords to support consumers, sports fans, and those attending major music events, against the corruption that currently exists. I do so with a strong belief that we can get this right and put into legislation in this country the necessary steps and protections to make life a lot easier for those—not just the two cases that have come to court—who night after night, throughout the United Kingdom, are turned away from major events because of the fraudulent abuse of the secondary market. With that in mind, I would like to test the will of the House.
Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 21st May 2024
(6 months ago)
Commons ChamberDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Watch Debate Amendment Paper: Manuscript Amendment as at 21 May 2024 - (21 May 2024)
15:57 - The House divided: - Ayes: 217 / Noes: 268 - Question accordingly negatived.
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Minister of State, Department for Business and Trade (Kevin Hollinrake)
I beg to move,
That this House disagrees with the Lords in their Amendment and proposes Amendments (a) and (b) to the Bill in lieu of the Lords Amendment 104B.
The Bill will drive growth and deliver better outcomes for consumers across the UK. Both Houses have now reached agreement on digital markets measures relating to appeals, proportionality, the countervailing benefits exemption and guidance. However, the Bill returns to the House today as the need to agree on secondary ticketing remains outstanding.
Lords amendment 104B, tabled by Lord Moynihan, would introduce additional regulatory requirements on resale sites. In our view, new regulations should be considered only if they are necessary, proportionate and future-proof, and should not duplicate existing rules. Simply adding new rules and regulations that add little to what is already there is not the answer to the problems of the secondary ticketing market.
The first provision that the Lords seek to add to the Bill would require secondary ticketing platforms to obtain proof of purchase of the ticket from the reseller before listing the ticket for resale, but it is already a criminal offence—of unfair trading or fraud—for a reseller to offer for sale products that cannot be legally sold.
Alun Cairns (Vale of Glamorgan) (Con)
I pay tribute to my hon. Friend for his work, as well as to Lord Moynihan, who has doggedly pursued this matter with the Government. My hon. Friend rightly points out that making additional regulations for the sake of it is not something that we as a Government would support, but can he tell me why the Competition and Markets Authority has prosecuted so few people under the current regulatory structure over recent years?
Kevin Hollinrake
We believe that the problem is about enforcement, not regulations. The reason why the CMA has not prosecuted anybody is that it does not have the responsibility or the right to prosecute sellers on ticketing sites. It has jurisdiction over the platforms, but not the sellers. We are giving the CMA that opportunity and those powers, which we think will make a profound difference.
Secondly, the Lords amendment requires that the ticket’s face value and trader’s details be clearly visible to the consumer, but likewise, existing legislation already provides that traders must make that information clear and comprehensible. The amendment would also prevent resellers from selling more tickets than can be legally purchased from the primary market. We agree with the principle, but believe that to be unenforceable. Many sources on the primary market sell tickets, and each has their own ticket limit.
Sarah Olney (Richmond Park) (LD)
The Bill could have such a significant impact in tackling the issues associated with secondary ticket sites, and could reduce instances of fraud and online scams. I do not understand why the Minister is so reluctant to commit to the recommendations made by the CMA. That is all we want implemented through the Lords amendment.
Kevin Hollinrake
The CMA report differs from the amendment proposed by the Lords. We believe that Lord Moynihan’s requirements relating to face value and the address of the trader are already covered. What is missing from the amendment is the ability to enforce regulations. There have been prosecutions only recently, a couple of months ago; there has been a four-year sentence and a £6 million confiscation order, so we are seeing prosecutions by National Trading Standards, but we believe that the CMA will have a more profound effect if it can tackle this issue.
Angus Brendan MacNeil (Na h-Eileanan an Iar) (Ind)
My question is similar to that of the hon. Member for Richmond Park (Sarah Olney). I just do not understand why the Government do not get involved with this. From what I have read of the Lords debate and what Lord Moynihan said, that is exactly what happened for the London Olympics in 2012. Ireland has got rid of the secondary market because it thought it very corrosive indeed. I also understand that fans are frequently in tears outside venues such as the O2 because they have bought the wrong tickets from the secondary market. As the political wing of the very noble tartan army, I would not want fans to be unable to get into games at the Euros in the coming weeks because of irregularities in the secondary market. If that happens, will the Minister commit to coming back and changing tack?
Kevin Hollinrake
The hon. Gentleman raises important points. Alongside what we are doing to give the CMA more enforcement powers, which we think are needed, we are also committing to a review of the primary and secondary market over the next nine months, in order to see what else can be done to ensure that the secondary ticketing process is fairer for consumers.
Angus Brendan MacNeil
The Minister is generous in giving way, and I appreciate it. Has he spoken to his counterparts in Ireland about what they have done in this area, why they have done it, and what the effects have been? That might be instructive.
Kevin Hollinrake
Yes, we are aware of what is happening in Ireland, where there is a complete prohibition on secondary ticketing sales. Our concern about that is obvious: secondary sales are then just driven underground into a black market. That is what we have seen in Ireland. Indeed, tickets to see Taylor Swift in Dublin are available on the internet at exactly the same, or a similar, price as tickets to see her in the UK, so we do not think that is a solution. We are looking for a practical solution that works across the piece.
A person could purchase multiple tickets from different sources on the primary market and resell them on a platform. That would make it nearly impossible for either the platform or an enforcer to calculate what the total limit of tickets should be. We must avoid the trap of thinking that we are solving problems simply by adding words to legislation. We should not be tempted to devise legislation that cannot be implemented.
We believe that the solution lies not in more regulations, but in regulation—in other words, enforcement. This House has already radically strengthened the CMA’s enforcement powers in part 3 of the Bill. That strengthening applies to all consumer law, including on secondary ticketing. The CMA will have civil fining powers, and fines could total 10% of the global turnover of firms breaking consumer law. New powers will mean that the CMA can process many more cases even more quickly.
However, the Government appreciate the strength of feeling in both Houses on the issue of secondary ticketing. We have therefore tabled Government amendments to further strengthen the enforcement powers. Amendments (a) and (b) in lieu of Lords amendment 104B will give the CMA new powers, first to enforce existing rules against unfair buying-up of tickets using electronic bots, and secondly to enforce existing rules on the information that platforms and resellers must present to consumers. That is in addition to the Government’s previous commitment to review the primary and secondary ticketing markets. That review will allow us to gain a deep understanding of how tickets flow from the primary market to the secondary market. It will also include consideration of the timeliness and effectiveness of the information that must be provided to buyers, and of what reassurance is necessary for consumers to be confident that ticket offers are genuine.
Taken together, the CMA’s new enforcement powers and the upcoming Government review represent a clear strengthening of consumer protections. They will help to ensure that further steps can be taken in future, in the light of the good practice that has recently been emerging in the market.
Angus Brendan MacNeil
I am again grateful to the Minister for giving way, but like the hon. Member for Richmond Park (Sarah Olney), I am still stumped as to why the Government are not the champion of the consumer—the small person or small family who face the disappointment of financial loss. I hear what the Minister says about laws being enforced—that could apply to any law—but laws also have a deterrent effect, and it would be quite useful to have that deterrent effect.
Kevin Hollinrake
The hon. Gentleman makes a fair point. I agree with him about the deterrent effect, but to me, that deterrent effect is delivered through enforcement and prosecutions, which are making it easier to deal with the platforms. As for the Lords amendment, information such as the seller’s address is already required under schedule 2 to the 2013 consumer contracts regulations, and the face value of the ticket must be displayed under clause 90(3)(c) of the Consumer Rights Act 2015, so that is already covered. It is enforcement that we need to improve.
Sir Philip Davies (Shipley) (Con)
Does the Minister agree that the selling-on of tickets has always happened, and always will? It is important to reinforce existing safeguards, rather than making the secondary ticketing market unviable and pushing people into unregulated spaces where they get no protection at all. At the moment, they do get protection from most of the sites that sell tickets on the secondary market.
Kevin Hollinrake
I absolutely agree with my hon. Friend. The concern is that we would simply drive people into a black market; that seems to have happened in Ireland. The CMA has said that capping prices, which is what the Opposition want, would not reduce the incentive to resell, for exactly the reasons my hon. Friend has pointed out, so through the Bill, we are taking the pragmatic step of increasing the enforcement of current regulations, while also looking at the wider picture, in the review, to see whether improvements can be made. We think that is the right balance.
In conclusion, I encourage this House to agree with the Government’s position on Lords amendment 104B, and accept the Government’s proposed amendments (a) and (b) in lieu. It is imperative that Royal Assent be achieved without further delay, so that the legislation can be implemented and the Bill’s benefits realised as quickly as possible.
Sir Chris Bryant (Rhondda) (Lab)
I beg to move manuscript amendment (a), leave out from “House” and insert
“agrees with the Lords in their Amendment”.
I confess that I am completely perplexed as to why the Government have adopted the attitude that they have taken today. The Bill could have gone through both Houses quite easily and have steamed ahead to Royal Assent if they had simply agreed to these very minor recommendations from the House of Lords. We do something very similar to what the amendment suggests in relation to Olympics tickets, partly because the Olympics’ organisers insist on such legislation for any Olympics, but we also do something very similar for sporting events. The question of why we do not do exactly the same for music, comedy and other events is legitimate.
Sir Chris Bryant
The Minister has only just sat down, but now he is intervening on me.
Kevin Hollinrake
I just wanted to address one of the points that the hon. Gentleman makes. He talks about the Olympics, for which there was a complete ban on resale. Is that what he is proposing?
Sir Chris Bryant
No. If the Minister will listen for a few more minutes, I will get on to precisely what we recommend. Indeed, he may remember that in the last debate on this issue, I said very clearly that we do not intend to ban all resale. If somebody has a ticket that they bought themselves, not through a bot, but is unable to use it and wants to resell it, that should be a perfectly legitimate process, but the price should be capped at a sensible level—at something like 10% or 15% above the original cost.
Sir Chris Bryant
I rather agree with the idea that some Conservative Members actually want people to be ripped off, and maybe that is what we have seen for the last 14 years when we have seen taxes rise, but what we get for the taxes has diminished.
The Minister says that he wants to give more powers to the CMA to be able to enforce the action. The problem with that is that the CMA itself gave evidence that, when it tried to take Viagogo to court, it came up against inherent weaknesses in the existing consumer protection toolkit, and the Government are not adding anything to that consumer protection toolkit whatsoever. Indeed, they are deliberately voting down precisely what they said they wanted.
Sir Chris Bryant
No, the Minister will get to reply afterwards, I am sure. [Hon. Members: “Oh!”] So the Minister is begging. I will give way to his begging.
Kevin Hollinrake
I beg the hon. Member’s leave, but can I draw his attention to the comments of the CMA before the Bill Committee? One witness said exactly this in response to the point he has just raised:
“We think that many of the changes in the Bill will address those weaknesses directly by giving us civil fining powers for the first time.”––[Official Report, Digital Markets, Competition and Consumers Bill Public Bill Committee, 13 June 2023; c. 7, Q3.]
It is not right to say that the CMA is getting no more ability to oversee this regime.
Sir Chris Bryant
No, because I read that completely differently from the way the Minister does. If the Minister were right, why is it only at this stage that he has chosen to bring forward amendment (a) in lieu? Precisely as with every single step of the way on ticket touting that we have seen over the last 14 years, somebody moves an amendment in the House of Lords—quite often Lord Moynihan, wonderful man that he is—and the Government are dragged kicking and screaming to introduce sensible measures that have cross-party support, but that the Government object to for some bizarre ideological reasons.
Labour will strengthen the consumer rights legislation to protect fans from fraudulent ticket practices, restricting the resale of more tickets than permissible and ensuring anybody buying a ticket from the secondary market can see—clearly, easily, readily and absolutely unambiguously —what the original price of that ticket was and where it came from. All of this could have been done today if the Government had not rejected the Lords amendment, but supported Labour on the cross-party amendment from the Lords. However, they have put touts before fans, and profits before the public.
If Labour is given the chance to form a Government, we will also go further. We will restrict the resale of tickets at more than a small set percentage over the price the original purchaser paid for it. No more touts buying a £50 ticket and selling it on for £500; no more bulk buying of seats for Taylor Swift concerts that could go to a 13-year-old fan from Wigan, but instead go to a millionaire from the US. No more scalping of our creative industries and artists, who set reasonable prices for their tickets, only to find somebody else making money off their talent and hard work by reselling them at 10 times the price. Ministers say that the CMA will enforce more, but I doubt that anything will change as a result of anything the Government are intending to do with this measure.
Mrs Hodgson
That is a very good point. As much as none of us wants to see any unhappy, devastated fans at any of these venues, we will probably have to face those images, in the emails from those fans, on our television screens and maybe on the front pages of newspapers. We have to be prepared for that, and I am sure that the Minister would be sad to see it.
If the Government are truly committed to another review, I know that Lord Moynihan—as we have heard, a highly respected Conservative Lord and a former Minister—has already been recommended to them as a possible chair. [Interruption.] I hope that the hon. Member for Shipley is agreeing with me. I hope he agrees that that would be a very fair and pragmatic selection. It is one that I would wholeheartedly support.
I will conclude. On two occasions the Lords, having listened to evidence and the stated views of the CMA, have voted through these amendments, but Ministers seem hellbent on ignoring the views of the other place. The Lords have sent a clear message to the Government, asking them to look at the facts and think again. I ask the Minister once again: will he finally side with fans, artists and athletes, support Lords amendment 104B today, and not let this be another opportunity wasted by the Conservative Government? As I said in our last debate on this matter, they should either start putting fans first, or move aside so that we can.
Kevin Hollinrake
With the leave of the House, Mr Deputy Speaker, I will address the points that have been raised during the debate.
The hon. Member for Rhondda (Sir Chris Bryant) presented a cap on ticket prices as his solution to this problem, but that flies in the face of the evidence given by the CMA in its report. It said that such a measure would not significantly diminish the incentive, and the misconduct would therefore continue. However, it was good to hear the hon. Gentleman finally admit that the market is a good thing—that, coming from an Opposition Member, is a revelation.
There is a common factor between what was said by the hon. Gentleman and what was said by the other contributors to the debate. He said, for instance, that face value was not made sufficiently clear on the various secondary sites, but there is a key saying clearly what face value is on the first pages of the Viagogo and StubHub websites. All those points relate to one thing and one thing only, namely enforcement, because the requirements are there in the existing legislation. We are keen to bolster enforcement. He says that we are somehow kicking and screaming to do so with this amendment, despite the fact that this Government have unilaterally brought forward this legislation. Part 3 offers huge new powers that were not added through an amendment in the Commons or the Lords; they were on the face of the Bill from day one.
Sir Chris Bryant
The Minister knows that Taylor Swift tickets are being sold. The organisers of those concerts have said that tickets sold on unauthorised secondary ticket markets are not valid. Would he therefore encourage people to buy tickets only from authorised ticket vendors and not from those that are unauthorised, which include Viagogo?
Kevin Hollinrake
I would certainly advise any consumer to comply with the rules set out by the primary market. It is quite clear that the primary markets can do a lot more about restricting secondary sales, and we have been quoted examples of that today, including the way the Olympics was run, the way that football matches are run and the way that Glastonbury is run. All those things have very tight controls on secondary markets, which is in the gift of the primary market.
The hon. Member for Gordon (Richard Thomson) asked about resources, as did the hon. Member for Na h-Eileanan an Iar (Angus Brendan MacNeil). The CMA’s budget is £122 million, so we feel that it has the necessary resources available to it. The fines and penalties can be kept by the CMA for its enforcement activities.
The hon. Members for Worsley and Eccles South (Barbara Keeley) and for Washington and Sunderland West (Mrs Hodgson) made similar points about the inappropriate resale of tickets—for England football matches, for example—and refunds that have not been processed properly. Only six people have been prosecuted for abuse in this sector, and we want to see more. Prosecutions for the use of bots have not been brought forward, and the amendment allows the CMA to do that. All the concrete action that the hon. Member for Worsley and Eccles South calls for is about enforcement, not more regulations. I absolutely agree with that, and we want to ensure that there is more enforcement in this space.
It is of paramount importance that we get this Bill on to the statute book so that it can start delivering for businesses and consumers as soon as possible. I thank all who have helped to get to this place, including the Clerks, the officials in the Department and the Bill team. I thank them for their hard work on this legislation, and I hope that all Members will feel able to support our position.
Question put, That the amendment be made.
Digital Markets, Competition and Consumers Bill
(Limited Text - Ministerial Extracts only)
Read Full debateThursday 23rd May 2024
(6 months ago)
Lords ChamberDigital Markets, Competition and Consumers Act 2024 Read Hansard Text Watch Debate Amendment Paper: HL Bill 87-I Marshalled list for Consideration of Commons Disagreement and Amendments in Lieu - (23 May 2024)
This text is a record of ministerial contributions to a debate held as part of the Digital Markets, Competition and Consumers Act 2024 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
Lord Offord of Garvel
That this House do not insist on its Amendment 104B and do agree with the Commons in their Amendments 104C and 104D in lieu.
“Enforcement of requirements relating to secondary ticketing
(1) CRA 2015 is amended as set out in subsections (2) to (4).
(2) In section 93 (enforcement of secondary ticketing provisions in Chapter 5 of Part 3)—
(a) after subsection (2) insert—
“(2A) The Competition and Markets Authority may also enforce the provisions of this Chapter.”;
(b) in subsection (3) for “and (2)” substitute “, (2) and (2A)”.
(3) In paragraph 11 of Schedule 5 (investigatory powers etc: enforcer’s legislation), in the table, at the appropriate place insert—
“The Competition and Markets Authority | The Breaching of Limits on Ticket Sales Regulations 2018 (S.I. 2018/735)”. |
(a) in sub-paragraph (2) for “local weights and measures” substitute “enforcement”;
(b) in sub-paragraph (4) for “the Department of Enterprise, Trade and Investment” substitute “the enforcement authority which imposed the financial penalty”;
(c) in sub-paragraph (5)(a) after “Investment” insert “or by the Competition and Markets Authority”;
(d) after sub-paragraph (7) insert—
“(7A) The Competition and Markets Authority may use the proceeds of a financial penalty for the purposes of any of its functions (whether or not the function is expressed to be a function of the Authority).”
(5) In the Breaching of Limits on Ticket Sales Regulations 2018 (S.I. 2018/735), in regulation 5 (offences: prosecution and penalties), after paragraph (2) insert—
“(3) The Competition and Markets Authority may enforce these Regulations.””
“Breaching of Limits on Ticket Sales Regulations 2018 (S.I. 2018/735) | (1) The CMA” |
The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Offord of Garvel) (Con)
My Lords, it is an honour to speak for the final time on the Bill. Noble Lords will be aware that we have one issue remaining, relating to secondary ticketing.
Lords Amendment 104B tabled by my noble friend Lord Moynihan would introduce additional regulatory requirements on resale sites. The Government’s position remains that this amendment adds new regulation without a clear purpose; this is because the consumer protection it seeks is already covered by existing law. There are important consumer protection issues in the secondary ticketing market, but simply adding new rules and regulations which add little to what is already there is not the answer. This is not a problem with the rules; it is about strengthening their enforcement. Already, this House has radically strengthened the CMA’s enforcement powers through Part 3 of the Bill. The strengthening applies to all consumer law, including secondary ticketing.
However, the Government have listened to the strength of feeling in both Houses on the issue of secondary ticketing. As such, the Minister for Enterprise, Markets and Small Business tabled government Amendments 104C and 104D in another place further to strengthen these enforcement powers, first, to enforce existing rules we have against unfair buying-up of tickets with electronic bots and, secondly, to enforce existing rules on information that platforms and resellers must present to consumers. This is in addition to the Government’s previous commitment to review the primary and secondary ticketing markets. Taken together, the new enforcement powers for the CMA and the upcoming government review represent a very clear strengthening of consumer protections. I hope noble Lords appreciate the steps the Government have taken on this issue and, as such, will not insist on their amendment.
Lord Moynihan (Con)
My Lords, I thank the Minister for his work on my amendments. As he rightly pointed out, they are the last amendments outstanding on this Bill. I thank the usual channels for their assiduous consideration of whether this should go further at this stage. We have seen some concessions from the Government, which are much appreciated. There is a huge amount of additional work still to be done, and obviously I am sorry that the amendments tabled originally were not accepted in full, but I am very grateful to the Minister for taking some action in the new clause which was agreed in another place the day before yesterday.
I conclude by saying that I will do everything in my power to return to this campaign on behalf of the true fans of sport, music festivals and music events in what I hope will be just a matter of months. In the meantime, I thank the Minister and his outstanding civil servants for all the hard work they have done, not least with the CMA in recent months, and express my gratitude to the whole House for its support.
Baroness Jones of Whitchurch (Lab)
My Lords, I add my thanks, first, to the Ministers. As the noble Lord, Lord Clement-Jones, said, they have worked assiduously, and we have felt as if we were constantly in their company over the past six months or so. They have always been courteous and had a listening ear, and I thank them for that. I, too, add my thanks to the members of the Bill team for all their hard work in preparing the Bill and the quite substantial amendments on occasions that have been agreed on concession. I particularly thank the stakeholders in the wider scope of the Bill, the challenger firms and the consumers who have been so active in helping us shape what is becoming a good Bill.
I am sorry that the Government did not see the sense of what I thought was an extremely reasonable amendment from the noble Lord, Lord Moynihan. We remain hugely disappointed in Motion A for the reasons that we have ready rehearsed which I do not need to repeat. I particularly thank the noble Lord, Lord Moynihan, and Sharon Hodgson who have campaigned on this issue for many years. I hope that in due course they will get their reward.
I have to say that, if elected, a Labour Government would strengthen consumer rights legislation to protect fans from fraudulent ticket practices, to restrict the sale of more tickets than permissible and to ensure that anyone buying a ticket on the secondary market can see clearly the original price and where it comes from. We will put the interests of the fans and the public first on this. Nevertheless, we believe overall that this is a good Bill that takes the first steps to regulating the behaviour of the big tech companies, which is long overdue, giving a bit more security to challenger firms and adding protection to consumer rights. We are grateful for the concessions made along the way that have indeed improved the Bill. At this stage in the proceedings, we think it is right that the Bill do now pass and that we do not need to debate it any further.
Lord Offord of Garvel (Con)
I am very grateful to noble Lords for their contributions today and throughout the passage of the Bill. I commend especially my noble friend Lord Moynihan for his dogged determination on this issue and the sentiments that he has expressed consistently throughout the passage of the Bill. I also pay tribute to my noble friend Lord Camrose, who has done more than ride shotgun; he has done the heavy lifting on the digital markets piece of this legislation, and I thank him for that contribution. I thank the Opposition Benches led by the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones, for a consistently collaborative approach on these matters. The engagement we have had has been comprehensive.
I also thank all those who have helped us get to this place, including the clerks, officials and, of course, the Bill team led by Georgie Clarke, for their hard work on this legislation. This Bill will be vital in driving growth, innovation and productivity and in protecting consumers. I am honoured to see it through its final stage today, and I look forward to it becoming an Act of Parliament. The Bill has benefited from widespread support from across both Houses as well as detailed scrutiny from many noble Lords and Members in the other place. I thank all noble Lords for supporting our position and wishing the Bill well.
Motion A agreed.