Wednesday 17th May 2023
(1 year, 6 months ago)
Commons ChamberDigital Markets, Competition and Consumers Act 2024 View all Digital Markets, Competition and Consumers Act 2024 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
I beg to move, That the Bill be now read a Second time.
Digital technologies are a 21st-century miracle. They bring us closer together and connect us to the world. Today it is difficult to remember a time without answers at our fingertips, or the ability to buy goods and services from across the globe in just a few clicks. Technology has hugely increased our choices of goods and services and how they are delivered to us. It allows us to work in entirely new ways when we are on the move or in far-flung places abroad.
Just as digital technologies have profoundly altered our lives, they have also transformed the UK economy. We now have more tech unicorns than any other country in Europe: indeed, we have more than France and Germany combined. Eight cities in the UK are home to at least one unicorn, and this success continues. Last year, our tech start-ups and scale-ups also attracted more investment than those of France and Germany combined, creating jobs and opportunities throughout the United Kingdom. It is clear that tech will be key to achieving the Prime Minister’s priority of driving economic growth across the UK. Our figures forecast that the digital sector could expand by an additional £41 billion by 2025. However, the UK’s continued tech success depends on markets that are fiercely competitive, where the best companies can thrive and create innovations that spur growth.
Over the last decade, the UK’s digital markets have developed at an exponential rate, but our competition framework has failed to keep up. Its last legislative overhaul took place nearly a quarter of a century ago, when the internet was in its infancy and smartphones had not yet been invented. Since then competition across the broader economy has declined, and in the tech sector a small number of firms exert immense control across strategically critical services with practices such as self-preferencing, restricting operability, and exclusivity requirements.
Competitive markets are, of course, the best way to provide the best outcomes for consumers, and Governments and regulators should step in only when we see market failure or excessive market power. The International Monetary Fund has found that market power in the tech industry increased significantly between 1995 and 2016, which included increases of more than 30% in mark-ups and more than 10% in concentration globally. The Competition and Markets Authority estimates that in 2021 alone, Google and Apple made excess profits of more than £4 billion in the UK. Apple and Google determine which apps are in the App Store, how they are ranked and how they are discovered. They often charge significant levels of commission, up to 30% of revenue, and require all transactions to be made through in-app systems—which, as we all know, means that at the end of the day, all charges, commissions and taxes are paid for by consumers.
Dominance of display ads for Facebook and Google cost UK consumers about £2.4 billion a year. Between 2009 and 2019, GAFAM—Google, Apple, Facebook, Amazon and Microsoft—made more than 400 acquisitions without any regulatory intervention or referral through the voluntary mechanisms. This is why in recent years there has been an increasing acceptance of the need for new legislation that is fit for these dynamic and rapidly evolving markets. The Digital Competition Expert Panel, led by Harvard’s Professor Jason Furman, and the Digital Markets Taskforce have conducted independent assessments of how digital markets operate, noting that they have specific features which can allow them to tip in favour of one particular firm.
Colleagues on both sides of the House, including my hon. Friend the Member for Weston-super-Mare (John Penrose) and the hon. Member for Bristol North West (Darren Jones), have called for more to be done to allow consumers to benefit from greater competition in these markets. However, there is also a growing consensus that in a market which functions well, competition must work hand in hand with consumer protections. People must know that they can spend their money with confidence, safe in the knowledge that they have the right information and support if something goes wrong. That is critical, because when consumers feel that they risk losing their hard-earned cash, they also risk losing trust in markets as a whole. The Bill seeks to achieve all these goals and unleash the full opportunities of digital markets for the UK, so that every part of the country can reap the rewards. All told, under these measures we expect consumers to benefit to the tune of almost £10 billion over the next 10 years.
My right hon. Friend the Chancellor of the Exchequer recognises this legislation’s significance to the UK economy and its importance to consumers, particularly during a cost of living crisis, which is why he announced the earlier introduction of the Bill in his autumn statement. I should remind the House, however, that the majority of the Bill’s measures have been thoroughly scrutinised and analysed by experts and businesses over a number of years. This included a consultation in 2021 and a careful consideration of the responses.
I will now speak to the Bill’s measures in greater depth. Part 1 sets up a new pro-competition regime for digital markets, which will be overseen and enforced by the Competition and Markets Authority’s Digital Markets Unit. This legislation gives the DMU the ability to tackle the causes and consequences of market power, ensuring that people and businesses large and small are treated fairly by the most powerful tech firms. By encouraging greater competition, this work will lead to lower prices for everyday online goods and services and give consumers more choice and control.
The measures in part 2 will refine the CMA’s competition enforcement work so that it is better targeted, faster and more effective, allowing the free market to operate more efficiently.
Damian Collins (Folkestone and Hythe) (Con)
My hon. Friend got through part 1 a bit quicker than I thought he would—I have a question relating to part 1. Clause 38 creates a final offer mechanism for dispute resolution. The news media industry has been waiting for this legislation for a long time but it is not expressly referenced in the Bill. Can he confirm that the news industry and other industries could benefit from this final offer mechanism?
Kevin Hollinrake
My hon. Friend makes a good point. I wish him the best of luck in the election this afternoon. It is for a very important Committee that will scrutinise this legislation. The final offer mechanism is innovative and represents a positive way forward, in that it will bring parties to the table and they will both have to make sensible offers relating to how they see a fair resolution. This will avoid them putting unrealistic claims on the table, and it could well help the news industry and many other sectors.
John Penrose (Weston-super-Mare) (Con)
Like my hon. Friend the Member for Folkestone and Hythe (Damian Collins), I was concerned that the Minister might be moving on from part 1 a fraction early. This is a welcome Bill that will do an enormous amount of good, and it has allowed me to tick off a large number of the recommendations that I made in my report, which he referenced earlier. The concern about the Digital Markets Unit’s powers is not that they are not good enough; it is that they might over time add more and more of a regulatory burden as ex ante powers build up over the years. Does he have thoughts on how he can ensure that, after those ex ante powers have been in place for a couple of years as regulations, the CMA can analyse whether they could perhaps be replaced by pro-market reforms?
Kevin Hollinrake
I am grateful to my hon. Friend for his engagement on this. We have discussed this at length many times, both in my role as a Minister and in my previous role as a Back Bencher, when we looked at the best form of regulation. I think we both agree that ex post regulation is preferable to ex ante regulation, as is a pro-competitive environment, as I said earlier. We should step in only when there is market failure. Of course we should look at the powers and ensure that they are being used wisely, and I have confidence that the CMA will do that. There are a number of checks and balances on the CMA and the DMU, not least through the competition appeal tribunal and the courts, which ensure that decisions are valid and worthwhile, but we should also have a good debate on how we scrutinise the DMU and CMA generally. Obviously they report to Parliament every year, and the Select Committee work is also important. I think that my hon. Friend and I would agree that the best way to regulate markets is through competitive environments, and that is what we should always favour in this discussion.
Andy Carter (Warrington South) (Con)
I echo the comments of my colleagues who have welcomed the Bill. The Minister will know that the DMU will be regulating a highly specialised area and that detailed knowledge of the sector will be critically important. Can he assure me that the DMU will have sufficient powers to recruit people who really understand the sector? Will it be able to pay accordingly in order to recruit those people, and not be bound by civil service contracts and pay bands that might limit its ability to recruit very experienced people?
Kevin Hollinrake
My hon. Friend makes an important point. The tech industry is clearly very powerful in terms of its resources and its ability to recruit the best people. My experience of the CMA is that there are good people within it, and I expect that to be reflected in the DMU as well. People who have been connected to the CMA, including former chairs, have spoken highly of its abilities, but my hon. Friend makes the important point that we need to have the best people so that we can hold those powerful entities to account.
The legislation will be delivered through making market inquiries more efficient, focused and proportionate, updating the merger regime and amending existing legislation concerning anti-competitive conduct and abuse of a dominant position. The measures in parts 3 and 4 make important updates and improvements to consumer law. The UK is currently the only G7 country without civil penalties for common breaches of consumer protection such as unfair trading. Part 3 creates a new model that will allow the CMA to act faster, tackle more cases and protect consumers’ interests while creating a level playing field for businesses.
Part 4 tackles the subscription traps that cost consumers £1.6 billion a year. We expect there to be a £400 million saving for consumers as a result of the measures we have proposed. I am sure that many Members know constituents—
Kevin Hollinrake
I think I am going to hear about one in a moment. Many Members will know constituents who have received shock charges for a subscription or faced difficulties when trying to cancel one. The Bill contains new rights to subscription reminders and easier cancellations, so that those who want out can get out.
Craig Whittaker
The Minister is not going to hear about a constituent, but I would like to point out that charities’ lotteries, which are great fundraisers for great causes that put so much back into all our communities, are already heavily regulated by the Gambling Commission. Will my hon. Friend look at schedule 19 to see whether subscription-based charity lotteries can be excluded?
Kevin Hollinrake
That is an interesting point and I would be happy to look at the matter in detail. It is not something that I have considered thus far but perhaps we can have a discussion about it at a later stage. We will certainly pick it up if we can and make sure that it does not cut us across anything that my hon. Friend is concerned about.
This legislation includes other measures to help consumers to keep more of their hard-earned cash, including a power to add to the list of banned practices. We intend to use this power first to tackle the wild west of fake reviews, which can dupe customers into buying shoddy goods and services. There are also new protections for consumer prepayments to consumer saving schemes, so that devastating cases such as the collapse of the Farepak Christmas savings club, which left vulnerable consumers out of pocket, can never be repeated. Together, these measures deliver on our manifesto commitment to tackle consumer rip-offs and bad business practices, demonstrating that this is a Government who back consumers.
Alun Cairns (Vale of Glamorgan) (Con)
I recognise that the Bill would introduce enhanced competition and protect significant areas of consumer policy, but it would also extend the powers of the CMA significantly. May I draw my hon. Friend’s attention to the regulatory reform group that my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami) and other hon. and right hon. Members have sat on, which is seeking a cultural change among regulators to ensure that they have an interest in the wider industry as well as in consumers? For business and industry to be sustainable, the CMA must be able to respond in a proactive, business-friendly way.
Kevin Hollinrake
My right hon. Friend makes a strong point, and it is one reason why we are reviewing the economic regulators. The work has been ongoing for 18 months, and we are due to produce our thoughts this spring. It is important that regulators focus on consumer outcomes and, as others have said, a more competitive environment produces the best outcomes, so he is right to draw attention to that issue.
John Redwood (Wokingham) (Con)
Briefly, what will be the direct impact of the Bill on the cost to the state and to business?
Kevin Hollinrake
The annual cost to business is £178 million, which we must consider carefully when we bring forward new regulatory burdens, but most people will think that the measures are needed because there is a huge consumer benefit of roughly £1 billion a year over 10 years, so it is important that we strike that balance. I am not aware that the cost to the state has been calculated, but my right hon. Friend and I are probably most concerned about the cost to business.
John Penrose
I thank the Minister for his generosity in giving way again.
The Minister’s response to the question about regulatory burden mentioned the welcome, necessary and important review of economic regulators. However, he will understand that enormous regulatory burden is created by other regulators. There are only eight economic regulators, but there are dozens of other regulators, many of which create vastly more regulatory burden than the economic regulators, although the economic regulators are not exempt. What plans does he have to address those regulatory burdens, which are much broader and cover much more of the economy?
Kevin Hollinrake
My hon. Friend makes a very good point, and it is why only a few days ago we published a framework for better regulation to look at these things in the round and to make sure we have regulators that serve the public, rather than the interests of the regulator. We do not want to see regulatory creep for any purpose other than consumer benefit, and he and I will continue to have significant dialogue on those issues.
Some Members will argue that we should legislate more like the EU’s Digital Markets Act, by using this Bill to create sweeping, one-size-fits-all measures. However, our Brexit freedoms mean we can draft legislation that drives innovation without placing blanket obligations on firms or creating unnecessary regulatory burdens. Some will respond to the Bill by saying that we should go harder against big tech, but I remind them that the Bill’s primary purpose is to reduce economic harms, to boost competition, to create a fair and level playing field, and to give consumers greater choice and better prices.
We need to act, but we must act proportionally because tech firms make a valuable contribution to the economy and our lives. Big does not equal bad. A war on tech will not create growth. It has already been argued in this debate that the CMA has enough power, and my response is that technology is changing rapidly and our watchdogs need to be equipped to fully support businesses and consumers in this competitive world.
I look forward to engaging with colleagues as the Bill makes its way through the House, and I hope Members will give it their backing so that the Government can continue our work of protecting consumers, increasing competition in all markets and growing the UK economy.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
It is a pleasure to speak on the Second Reading of this important Bill on behalf of His Majesty’s Opposition. The world has changed enormously, as has technology. I thank my hon. Friend the Member for Bristol North West (Darren Jones), the hon. Member for Weston-super-Mare (John Penrose) and other colleagues for their important and influential work in the development of this Bill, which Labour welcomes, having led the way in calling for large tech companies to be properly regulated to ensure competition in digital markets. We have long called for measures to protect consumers, enhance innovation and promote competition in digital markets, to unlock growth and level the playing field for innovative smaller businesses.
In the midst of a cost of living crisis, the Bill could not be more important. As the Minister alluded to, fairer markets will save billions of pounds for consumers. This important Bill updates the UK’s competition and consumer rules, in line with a changing economy and changing consumer behaviours, through three main areas of reform.
First, it creates a new pro-competition regime for digital markets by putting the Digital Markets Unit on a statutory footing and establishing a process for designating the “strategic market status” of firms that meet specific criteria in relation to certain specific digital activities. These firms will be subject to regulated behaviour regarding such digital activities, in the form of conduct requirements to help ensure fair competition.
Secondly, the Competition and Markets Authority will have new powers on market investigations, enforcement of existing competition rules and enhanced mergers and anti-trust activity. Thirdly, there are updates to consumer law, reforming consumer policy to increase consumer protection.
As long ago as 1950, the Labour manifesto written by Michael Young promised:
“An independent Consumer Advice Centre will be set up to test and report on the various consumer goods on the market. Good manufacturers will be protected and unscrupulous advertising exposed.”
Since then, Labour has certainly been the champion of consumers. Consumer rights are a proud part of the Labour and Co-operative tradition and values.
The Government needlessly delayed this Bill as a result of infighting and the changing of Ministers and Secretaries of State. Since the Bill was announced a year ago we have had three Prime Ministers, four Business Secretaries and four small business Ministers. I congratulate the Under-Secretary of State for Science, Innovation and Technology, the hon. Member for Sutton and Cheam (Paul Scully), who has done a full circle. He was the first Minister I shadowed in my role, and he will be winding up this debate.
It has been a year since this Bill was promised and five years since the Government established their digital competition expert panel. With these delays, we have fallen behind our European neighbours in this vital policy area, so this is an important Bill and we will support its Second Reading.
I thank the Under-Secretary of State for Business and Trade, the hon. Member for Thirsk and Malton (Kevin Hollinrake), and his officials for their meetings with me and my hon. Friend the Member for Pontypridd (Alex Davies-Jones). I hope this is the spirit in which the Bill will be considered in Committee and in which we constructively debate the gaps we believe there to be in the Bill, which I will highlight today. I also thank those who have been involved in the development of this important policy and legislation, from the CMA, Which?, UKHospitality, the Chartered Trading Standards Institute, Citizens Advice, techUK and smaller enterprises.
In digital markets, a small number of large technology companies have an ever-increasing dominance. The subsequent lack of competition and regulation has acted as a barrier to entry and expansion in digital markets, preventing new entrants from bringing innovation and choice to the market. The seriousness of this for our economy and consumers has become apparent in the billions of pounds in penalties levied for anti-trust violations.
Legislators around the world are catching up with the challenges we face in relation to this abuse of dominance in digital markets. Indeed, the OECD’s global forum on competition highlighted this five years ago, outlining how many digital markets
“exhibit certain characteristics, such as low variable costs, high fixed costs and strong network effects, that result in high market shares for a small number of firms… Firms in these concentrated markets may possess market power, the ability to unilaterally and profitably raise prices or reduce quality beyond the level that would prevail under competition.”
In the UK, the Furman report concluded in 2019 that competition in digital markets needed a “new approach,” and in December 2020 the CMA convened a taskforce that recommended the creation of the Digital Markets Unit with a new regime for regulating digital firms with strategic market status.
The Office for National Statistics reports that, between 2008 and 2020, the percentage of adults reporting having shopped online in the previous 12 months increased from 53% to 87%. This ongoing trend has increased consumer exposure to the harms associated with the digital economy, including the use of consumer data, harmful online choice architecture and misleading information.
Those are reasons why the Bill needs to deliver on being a pro-competition, pro-consumer and pro-growth Bill. We welcome steps to address consumer harm resulting from monopolisation of our increasingly digital economy, while making sure that innovation is not stifled and that we are realising the benefits of new technology for social and economic progress. The interests and rights of consumers, and the enforcement of those rights through effective competition in this new, complex and evolving digital marketplace, need to be at the core of this legislation, which is vital for all of our constituents.
The challenge now is to get the legislation right. It is important that the new powers given to the CMA to ensure competition in digital markets are not watered down as the Bill progresses. Powers are needed to crack down on unfair practices. That means there must be clarity on how the new powers will be used, along with the right scrutiny, transparency and accountability, both of the CMA and of the Government to Parliament. In addition, there must be clarity on thresholds and the process of appeals. I am sure we will discuss the checks and balances in detail in Committee, not least because 35 new Henry VIII powers are in the Bill, as listed in the delegated powers memorandum. The November 2021 House of Lords Delegated Powers and Regulatory Reform Committee report noted:
“Henry VIII powers are controversial and for good reason. Every such power; and its scope, must always be fully justified.”
Let me say a few further words about what we welcome in this Bill. We support the approach taken to the legislation, which seeks to be targeted to specific anti-competitive digital activities and is arguably more flexible than the reforms brought about in the EU. If that allows a more proportionate and targeted set of interventions, that is welcome. Legislators across the world are all learning, and we all want to see this be an effective regulatory framework that helps innovation, rather than hinders it, and protects consumers.
An example of how this is beginning to work is how the CMA has worked with Google on its digital Sandbox. An issue relating to third-party cookies emerged during the CMA’s digital advertising market study and a Competition Act 1998 case was then opened. Google’s proposed changes could have had privacy benefits, but they could also have given Google an anti-competitive advantage, strengthening even further its position in digital advertising markets. The CMA reached legally binding commitments with Google to address these concerns. It is important to say that both sides continue to work together and with the Information Commissioner’s Office. This is about working in partnership with business, and in the public interest, and this Bill represents a pragmatic step towards achieving that. We also welcome the inclusion of proposals such as monetary penalties for failures to comply and making undertakings directly enforceable, which were raised at the consultation. We welcome the strengthening of the alternative dispute resolution provisions, although we believe they could be strengthened further.
However, there are notable gaps that we are concerned about—areas where we are surprised and concerned the Bill does not go further. Such areas include subscription traps, tackling fake reviews and other consumer harms. First, on subscription traps, it is always to be welcomed when the Government decide to adopt a Labour party policy, which seems to be happening increasingly often. In April, we announced Labour’s plans to crack down on rip-off subscription traps, which trap people into subscriptions they no longer want. We want to legislate to ensure that customers must opt in to, rather than opt out of, subscriptions that automatically renew. That will end automatic renewal as the default option, ensuring that consumers are offered an alternative. Instead, businesses would have to offer customers a default option without automatic renewal, with the option for customers to seek automatic renewal if they prefer. At present, consumers only need to be informed about their continued subscription, not given a genuine choice. That means they can end up trapped into contracts they no longer want or use. Citizens Advice estimates that £306 million per year is spent in the UK on unwanted subscriptions.
This Bill goes part of the way to addressing that by introducing new requirements to remind customers at the end of a trial and the beginning of an auto-renewed subscription charge. But it does not go far enough in tackling these traps and adopting Labour’s full proposals, which stakeholders also support. We will be seeking to strengthen the legislation in this area to make subscription auto-renewals opt-in, rather than opt-out.
Secondly, the Government, with much fanfare, announced that this Bill would introduce provisions outlawing fake reviews. News headlines last month trumpeted the Government’s briefing, saying:
“Buying, selling or hosting fake reviews will become illegal as part of changes planned in new laws.”
Fake reviews cause huge damage, both by encouraging consumers to buy unsafe or poor-quality products, and by ruining the reputation of hospitality venues in the UK. Such reviews are utterly unfair for honest businesses, which have no means of redress, but banning fake reviews is not mentioned in this legislation once. What has been lauded as a huge step in banning fake reviews appears to be a clause allowing the Secretary of State to add to the list of unfair trading practices in schedule 18. This is quite vague and so it could be very weak. I would therefore welcome clarification from the Minister on why this has been left out, and whether he is able to expand on what banning fake reviews will look like in practice?
On broader consumer harms, the Bill represents an opportunity to take action on a number of issues affecting consumers in the digital economy. That includes taking action against drip-pricing and misleading green claims, and requiring online marketplaces and social media platforms to make buyers aware of the status of a seller, none of which are dealt with in this Bill. Do we need stronger statutory consumer advocates? I ask the Minister: why does the legislation stop where it does? Should it not go further in addressing further consumer harms in the digital economy?
Finally, on delay, it has been a year since this legislation was promised in Parliament. The Government’s own impact assessment acknowledges:
“The Bill’s impacts are expected to begin in 2025 once the package of Bill measures has been implemented”.
That is the earliest it could be, but action is needed now. We are prepared to work with the Government not only to ensure effective scrutiny of the Bill, but to get it on to the statute book as soon as possible. That includes ensuring speed on guidance and codes of practice, and sufficiency of resources. There should be no more delays.
This legislation is welcomed by the Opposition but it is well overdue. It is a welcome step in creating a new competition and digital markets regime that will enable the competition authorities to work closely and fairly with business to ensure fair competition, and promote growth and innovation. Labour welcomes competition, consumer choice and protection as signs of a healthy, functioning market economy. We are committed to making the UK the best place in the world to start and grow a business. We believe there is a pro-business, pro-worker, pro-society agenda to be built for Britain, and that consumer and competition law play an essential part in that. I look forward to the Minister’s response.
John Redwood (Wokingham) (Con)
Competition is by far and away the best regulator, and I pay tribute to all those in the House, including my hon. Friend the Member for Weston-super-Mare (John Penrose), who have pointed that out; I am delighted there is cross-party agreement. The point he made needs stressing: we are dealing with a limited number of regulators here today, but there are many other regulators and much of their task could be better done by following competition as the prime means of enforcing choice. I should say that I have declared my business interests in the register and none of my comments relate to financial services as a result.
The regulators would be well advised to heed that advice and, instead of intervening in detail and trying to make very difficult distinctions and definitions that affect a complex marketplace, with the interplay of so many different consumers and suppliers, just stress that if there is effective choice and challenge in the market, normally there can be no harm.
Labour has said that it could be that an online supplier of goods and services was not offering a good deal, but I am less worried about that if there are shops in my local high street, because I do not have to use the offer by the online provider. The online provider themselves will anyway be subject to the challenge of other online providers. One advantage that the online retailer has is that the cost of entry is so much less than that required by those who wish to set up a formal shop with a property. If an online retailer, however large they might become, starts to offer very poor deals or offers, there will be plenty of challenge to that emerging in the marketplace.
In a fast-changing world where the market is extremely good at challenging, developing and changing offers overnight, we need to be careful about becoming too prescriptive. We may come up with a perfect solution to perceived problems of some suppliers at the moment only to find that, tomorrow, there are very different problems from different suppliers and that much of it can be taken care of by that pursuit of competition.
My main concern about all of this for our country is that competition only works, in the benign way that we know it can, if we have sufficient capacity. There is a danger, encouraged by the Opposition and pursued by the Government, that today we are so keen to regulate, to intervene and to tax anybody who makes a good profit; to provide a subsidy to anybody who has a failing business; and to decide that the Government know best about what consumers ought to buy and ought to want, that we end up with too little capacity in a number of crucial areas. That means that, instead of helping the consumer, we hinder them. Instead of having moderate prices with few rises, we have even higher price rises because there is insufficient capacity to meet the market demand. Instead of providing that perfect background for entrepreneurial businesses, which Labour and Conservatives are united in wanting, we send a hostile message to businesses. Those businesses then find other places with greater freedoms and lower taxes as the ideal place in which to experiment, to set up and to seek to export from, rather than from the United Kingdom.
Bim Afolami (Hitchin and Harpenden) (Con)
I thank my right hon. Friend for giving way. In relation to his very good point about capacity, what is his view about the need to ensure that we remain open for business internationally and remain an attractive place? Moreover, what is his view about the role of the regulators in that context, particularly the CMA, because of course capacity can come from other countries into our own market?
John Redwood
Indeed. I do not wish to go into the details of a recent case, because I have not studied all the documents, which would be necessary to do justice to both sides of the argument. Thinking back to when I was competition Minister—a good while ago now—when I was acting for the then Secretary of State, there was a difficult issue that arose over media challenge to the then existing limited number of media players where two of the new services wanted to merge together. I recommended, and we decided, that the two should be allowed to merge because they made a more effective competitor to what was already there, rather than taking the narrow pro-competition view that we needed to have two new challengers. The danger was that they would both fight each other to the death and leave the main media institutions—ITV and the BBC—unchallenged by alternative services.
The regulator has to understand that competition is not always furthered by blocking something; sometimes it can actually be furthered by encouraging the new. The main issue in competition law is often the definition of what is the market. I have already mentioned retail. If the market is online retail, we might want to stop a successful online retailer growing by acquisition, but if the market is retail, we might want a strong online competitor in order to challenge the previously dominant shop retailers. However, it is now coming to the point where it may be the other way around—where we need to be worried about the adequacy of the conventional retailer response.
Let me illustrate the importance of the central issue of capacity to the debate. One thing that has been extremely scarce—this has been blamed by many for the worst part of the inflation we have been experiencing—is energy. If the United Kingdom persists in saying that we do not want to get our own gas out of the North sea, we will not automatically transfer to green electricity; we will import gas from somewhere else. By doing so, not only will we damage our economy, as we forgo the jobs in the North sea and the cheaper gas, because the imported gas will be dearer; it will also be much worse for the environment, because by delaying or blocking the gas that we could get out, we will automatically import more liquefied natural gas. LNG generates at least twice as much CO2 as burning our own gas down a pipe because of all the energy entailed in compressing a gas, liquefying it, transporting it and then converting it back to the gas that we need to use. It is therefore a doubly foolish policy.
We need to expand our capacity in energy where it is available and we need to understand that there are huge economic gains to producing our own. We also need to be worried about national resilience. If we wish to say that we can defend our country and its allies, it is terribly important that we produce enough for ourselves. Having energy self-sufficiency is always critical to having a country with resilience and strong defences.
The electrical revolution seems to be popular in most parts of the House of Commons, with people urging the Government to achieve a faster electrical revolution, switching more and more people from being predominantly users of fossil fuel—most of us predominantly use fossil fuel with a petrol or diesel car and a gas boiler—to using electrical means for our main energy uses. If we are to pursue that electrical revolution, there needs to be a massive expansion in grid capacity and in cable capacity into everybody’s homes, offices and shops. It is simply not possible at the moment to generate the competition that we want for electricity against fossil fuels, and within electricity for renewables against more traditional ways of producing electricity, because the new renewable ways are so grid intensive and need so much more grid and cable capacity—we have to time shift them because they are often not available—that we are not going to get very far.
Already, I have helped with a major investment in my constituency, which was very welcome. One possible stumbling block was that the electricity companies could not offer enough power for the particular business development. There had to be an agreement over how much power the development could have available, because there was not limitless power for it to buy. The issue was to do with grid capacity. We will find that that becomes more and more common if we do not get on with dealing with this particular issue.
A very topical issue today is capacity in motor vehicles. If we are to have a full range of choice and enough domestic production, it is not a good idea to ban the sale and therefore the manufacture of petrol and diesel cars as early as 2030, when no other major country in the world is doing so and when there will still be quite a lot of buyers who want petrol and diesel cars. I urge the Government to understand what competition choice means. It means that people will buy electric cars when they want to buy them. They will buy electric cars when they are cheaper and better, and when they believe that the range is right and that the necessary back-up facilities are in place. I have no doubt that electric vehicle sales will grow, but it would be quite wrong to have an artificial injection of policy to ban older cars and prevent capacity and choice.
If the UK does not have battery production capacity, all we will do by banning petrol and diesel cars is destroy the successful industry that we have, which makes extremely good petrol and diesel cars, without having the replacement industry in place. It is not a simple matter of switching the production line from a diesel car one day to an electric car the next; it is a totally different product, built in a totally different way. An electric car needs a battery, which may be 40% of its value, and currently we cannot produce those batteries in any numbers to replace the capacity that we wish to cancel. I urge the Government to think again about consumer choice, competition and investment flows, because there is no way that people will want to invest serious money in the UK motor industry if its regulatory environment is more hostile than those elsewhere.
I was pleased to see my right hon. Friend the Prime Minister take a great personal interest in food production. I believe he held a very successful seminar yesterday and asked the Secretary of State for Environment, Food and Rural Affairs to go away and work up a series of measures. I do not doubt the enthusiasm of my right hon. Friend the Secretary of State, which I fully share and have often promoted, for us to grow much more of our own food in this country and to offer that much more choice to people in our supermarkets. However, when I look at the package of measures the Department has brought forward, there is hardly anything in it that would carry that ambition through.
The Department still intends to spend most of its subsidy money, most of its exhortation and a great deal of its regulation on encouraging farmers not to produce food, to wild their land and to achieve great things on managing the landscape for us all. That is all very nice, but it is possible to have perfectly attractive fields growing food, and that is clearly what we need rather more of.
We need to back the new robotics, artificial intelligence and electromechanical technologies that could transform the production of fruit and vegetables and other market garden products, as they used to be called, where we have allowed our market share to fall dramatically in the last 30 or 40 years. We are now reliant on imports, which limits choice, drives up prices and puts our national food resilience more in doubt because, were there to be problems with the supply from our normal suppliers abroad, I am sure we would be towards the back of the queue when it came to getting to what we needed.
I am conscious that others wish to speak in the debate, so I will not go into every sector, but the Government need to review sector by sector what they are doing that could help to increase capacity. Can they not reposition their subsidies, grants and direct investments, which they are making around the place on a pretty colossal scale, in a way that promotes that capacity and thus eases the position for competition? There is a particularly worrying trend at the moment—one that is bad for public spending and bad for business—that we make so many confused interventions that we need another intervention to deal with the previous intervention.
I will finish on the issue of high energy usage industries—steel, ceramics and other similar industries—which are gravely at risk. We have lost colossal capacity and market share under Governments of all parties since I have been around watching such things. The danger is that that loss will accelerate from here because we decide to impose the highest carbon taxes of any advanced-world country, as far as I can see—another major problem for the cost base of industries that are struggling to compete—and we then draw back in horror when we see that there could be closures and job losses, so the Government put some subsidies back in and we have a subsidy trying to countervail the tax. However, the subsidy is usually not as much as all the taxes combined, because when we add the 31% corporation tax—should there be any profits, and unfortunately there often are not—on top of the windfall taxes on the energy companies and on top of the carbon taxes on the steel and ceramics businesses, the tax burden is colossal and would be punitive were businesses to succeed and start making money. The demand for subsidy then becomes greater.
To have a competitive market would be extremely welcome. We have a market that is not nearly competitive enough. I ask the Government to look at what they are doing, because I think they are in danger of doing counterproductive and contradictory things: taxing too much, subsidising not quite enough and then inventing rules that stop people doing business.
Richard Thomson (Gordon) (SNP)
The SNP welcomes very much the aims and objectives of the Bill, which broadly speaking fit well with the enhanced protections we have been calling for in the online space for some years.
For markets to be effective, they need a number of things, chief among them good market information for those participating, low barriers to entry, trust, the rule of law and a means of enforcing contracts where they are made. As the Minister alluded to, when the online marketplace emerged, there was always a risk—especially as it deals with entities that span several jurisdictions—that, for all its opportunities, it would become if not exactly a dystopian wild west, then certainly a less well-regulated space than physical trading spaces, which are more visible and more easily influenced by existing regulations. Given all the leaps and bounds that there have been in e-commerce, there is a need for the regulation of that marketplace to catch up and to rebalance it in the interest of consumers.
The Minister was correct to say that big does not always equal bad, but it is past time that we recognised that large digital entities with a significant public affairs presence can go around and say the right things, and even if their practices are not at variance with that, they can appear to be beyond the reach of and unbound by the obligations placed on other smaller market actors outside the digital space. That has long been an issue of concern, and anything that helps to rebalance that situation is a good thing.
We believe that conferring powers and duties on the Competition and Markets Authority to regulate that competition responsibly; updating powers to investigate and enforce both competition law and consumer protection law, where needed, and to resolve disputes; and enhancing protections in respect of unfair practices such as subscription traps and prepayment savings schemes, are good things in and of themselves and we welcome them.
To set out the scope of why those powers are necessary, recent figures from Action Fraud estimate that elderly people lose £1 million a day in the UK through online scams. The consumer organisation Which? estimates that one third of people in the UK experience at least one problem with a product or service each year, at an estimated cost of £54 billion, which is a tremendous drag on the economy. It prevents that money from being spent more productively in the economy, it reduces confidence and in many ways it reduces the competition that we would all like to see.
It is important to ensure that when people engage in the online market space they can do so with confidence, and we must recognise the role that the state has to play in that. No amount of competition can ever replicate what the state can do to act as the referee where necessary in this space, using a light touch. We very much welcome what the Government are setting out, particularly in defining organisations that have strategic market status and the additional responsibilities that will accompany that status.
The Bill goes a considerable distance to achieving those things but, given the scale of scams and unfair practices that, sadly, we witness on a daily basis, we think more needs to be done and that the Bill needs to go further in some respects. Like those on the Labour Front Bench, we believe that there are other areas where the Bill needs to go further.
At the risk of being criticised for making an unfavourable comparison with the Beelzebubs at the European Commission, there are many provisions in this Bill regarding firms with strategic market status that are broadly similar to those in the EU’s Digital Markets Act. The Bill falls short in that it does not explicitly include an equivalent to the EU’s right to redress, which would allow consumers to be paid with damages where they are misled by traders. Although the Bill gives the Secretary of State the power to do that in future through secondary legislation, it leaves a gap now, and there is the risk that that right will, over time, be watered down or removed entirely because there is no commitment to introducing it. If the ministerial team offer me some assurance about that, we can maybe explore it further in Committee, but that matter threatens to leave UK consumers behind.
The dangers there ought to be clear. Just last month, it was revealed that thousands of people from the UK who found themselves stranded in Dover following delays in coach trips faced losing their entitlement to compensation amid what was being billed as the “bonfire” of EU regulations. Rocio Concha, the director of policy and advocacy at Which?, noted that it is clear—or it was at that point, at any rate—
“that the government does not…have a firm enough grip on the extent of legislation which is at risk of simply slipping off the statute books by mistake.”
I welcome the Government’s change in tone last week, but right to redress is nevertheless an important consumer protection, and we certainly do not want to be in a position where our consumers have less leverage in that sense than their counterparts elsewhere in Europe.
Another area in which we believe the Bill should be getting its feet wet is greenwashing. It is not just in financial losses or deficient goods and services that consumers can be badly let down; it is also in goods marketed under misleading pretences, particularly when it comes to their environmental credentials. The Bill does not set out standards and practices that should be adhered to when making environmental claims. To give an example, in February, the Corporate Climate Responsibility Monitor found that many companies were involved in making misleading claims about their plans to tackle global warming and climate change. Sustainability is increasingly important for consumers choosing where to spend their money—particularly younger consumers—so it is vital that measures are put in place to ensure that people can have confidence in the claims being made for products, rather than being misled, wittingly or otherwise.
In terms of how the European Union is tackling that, around 230 separate sustainability labels and 100 green energy labels are commonly used across the EU, each with vastly different levels of transparency. Half of them offer weak or non-existent verification and 40% have no supporting evidence at all. The situation in the UK will be similar. Ensuring that labels and claims can be treated as credible and trustworthy would allow consumers to make better-informed purchasing decisions and boost the competitiveness of businesses that want to play a responsible role in the marketplace in terms of driving up standards to meet consumer demand. I urge Ministers to look at what the Commission is doing in that respect because this is a sufficient deficiency and a missed opportunity to make the Bill better than it already is.
The next point that I wish to endorse is one that was made by the right hon. Member for Calder Valley (Craig Whittaker) about charity lotteries. They do an awful lot of good, they give people an awful lot of enjoyment and they raise an awful lot of money for good causes. They are already in a very highly regulated marketplace, but we are concerned that the legislation could, in its present form, have a detrimental impact on their ability to raise funding and to give money to good causes. That concern applies in particular to clauses 148 to 253, which would—at least in my reading of them—introduce a significant number of new requirements on subscription products and pre-contract information. Schedule 19 already rightly contains a number of operators in the economy that are deemed sufficiently well regulated to be exempt from the requirements that the Bill would place upon them. I suggest that charity lotteries also fall into that category, and I urge Ministers to give that due consideration and make the necessary changes to schedule 19 to make it crystal clear that charity lotteries are exempt.
Another missed opportunity is on drip pricing, whereby companies add additional fees and costs that were not clearly stated at the beginning of a transaction. That tactic is commonly used by some airlines: the price given at the start bears little resemblance to the price that appears at the end, once the consumer has paid for everything that they assumed would come automatically with stepping on an airliner. The US is planning a crackdown on that through the Junk Fee Prevention Act. It would be a missed opportunity if the UK Government did not follow suit in the legislation before us.
I welcome the commitment to tackling fake reviews, which can cause a great deal of distress and harm. Many can be absolutely malicious—not on a personal level but in trying to discredit competitors and therefore reduce competition. That practice certainly requires a different approach in legislation, but it is unclear at this stage how the Bill would seek to deter it. If any ban is to work, it will have to be enforceable, it will need to have teeth and there will need to be appropriate redress.
John Redwood
I think we are all united in wanting to stop fake and damaging reviews, which are so unfair, but has the hon. Gentleman thought about how we would actually do it? Defining them, and deciding who judges that they are such, is not easy.
Richard Thomson
The right hon. Member is absolutely right that it is not easy, but that does not mean it is something that we should avoid trying to tackle, or that we should not try to come up with a way of improving the competitive environment. I am certainly more than happy to engage on an open and constructive basis with anyone about how we might do so.
Kevin Hollinrake
Will the hon. Gentleman therefore support our approach, which is to consult in parallel with the passage of the Bill through both Houses about things like drip pricing and fake reviews, so that we can have that open dialogue and make sure that we get the answers right, including to the questions posed by my right hon. Friend the Member for Wokingham (John Redwood)?
Richard Thomson
I thank the Minister for his intervention. Indeed, I would be quite happy to see what comes back from that consultation, because there are areas of real concern. If we can find consensus on how those matters can best be tackled—we might not be able to please everybody, but we can address them as best we can—that would be a welcome step forward.
In closing, the Bill is important for growth and competition, but also for consumer protection. The exchange that we collectively had just now on those matters was encouraging, and I would certainly like that spirit to continue in Committee. I do not think I have ever managed to successfully get something passed in Committee; I look forward to that changing.
Richard Thomson
I hear the hon. Member for Pontypridd say “Good luck”, but we will see how it goes. The Bill certainly does much that it needs to, but there are quite a few things that it misses; let us see what we can make it hit over the period ahead. As the Bill progresses, I look forward to working with others where it is possible to do so, in order to do precisely that.
Damian Collins (Folkestone and Hythe) (Con)
I rise, as other Members have done, in support of the Bill. It is a very important piece of legislation that has been long discussed and much looked forward to. It is now safely on the Floor of the House and we wish it a safe passage as it goes through Parliament. The debate we are having is not dissimilar to debates being held in Parliaments around the world. In the United States Congress, there are very lively debates about what it calls anti-trust legislation in the tech sector. The European Union, as has been discussed, has already created its Digital Markets Act. In Australia, there has been a lot of concern about competition within digital markets and a lot of work to improve it.
I agree with other Members who have spoken so far that competition is often the best guarantee of higher standards for the consumer, lower prices and a more vibrant market economy. The reason we are concerned with regards to digital markets is that, in many of those strategic markets, there is evidence of a lack of competition—a lack of choice—that is restricting routes to business and will increase prices for customers. In his opening speech, the Minister rightly pointed to the market impact studies that the Competition and Markets Authority has done, looking at app stores and the mobile advertising market, which show a consumer detriment of over £6 billion. Those are just two market studies that the CMA has done and it is not surprising that that should be the case.
The app store market is important because most people, including most people in this Chamber, have a smart device that runs on one of two operating systems. There are two app stores, and most of what happens on those devices—not exclusively, but most of it—is not interoperable. There have already been investigations showing inconsistent pricing in the commission taken by those operating systems from app developers who sell through their devices. In a market such as that, it is not surprising that there might be constraints or evidence of overcharging, because there is simply nowhere else to go—there is no choice. When the ad tech market is dominated by two companies, Google and Meta, it is not surprising that there may be higher pricing in that market; there is certainly a great lack of transparency. Even some of the world’s biggest advertisers, such as Procter & Gamble, have raised concerns about this issue, but none of the advertisers themselves has enough market power within that market to challenge those incumbents.
Bob Stewart (Beckenham) (Con)
Does my hon. Friend agree that we should fully support what my right hon. Friend the Member for Wokingham (John Redwood) has suggested as a model for competition? Competition itself does require to be amended.
Damian Collins
I thank my right hon. Friend for his question, and my right hon. Friend the Member for Wokingham (John Redwood) made an excellent opening speech from the Back Benches. My concern is that in digital markets we have an imperfect market. We are at a point in time where the strategic nature of digital markets has developed to such an extent that people cannot not use these systems to reach their customers. For a business looking to sell online, yes, the world is its customer base, but it is using a relatively small number of tools to try to reach those customers, and those tools are controlled by a relatively small number of people. App-based businesses are selling through one of two operating systems. Someone buying ads is doing so largely from one of two companies that dominate the global market. If people are looking for cloud storage, they are probably buying it from Amazon or Google.
Booksellers are a good example. Many book publishers will say that, when they come to their contract renewal with a company such as Amazon, they can be offered very unfavourable terms, but such is the volume of their business that they put through that one retailer that, while in theory they could go elsewhere, in practice they cannot. No shareholder would understand why a business would just walk away from that particular market. In such situations, it is right that the regulator should have the power to say, “Are companies abusing their strategic market status? Is that leading to higher prices for consumers? Is that leading to unfair competition?”
Companies have been quick already to threaten denial of access to the market to people who challenge their status. The Australians have already created their news media bargaining code for the news industry, where the big Facebook-owned and Google-owned platforms have to pay compensation to the media industry for the distribution of its articles for free across their networks. That is now negotiated—there is a negotiation mechanism to make sure it happens. In response, Facebook threatened to withdraw news from the market. During a series of bushfires in Australia, Facebook cancelled all news distribution on its platforms. Such was the popular reaction, it withdrew and has now done these deals, but they would not have been done without the requirement for final agreement and independent arbitration. A book retailer cannot not do a deal with Amazon.
In terms of big app developers, there was a company called Vine. Many Members may be old enough to remember that app. Vine was a popular short-form video app, largely built on the back of the Facebook operating system and the Facebook Graph API. Facebook decided arbitrarily that Vine was requiring too much Facebook user data, and therefore might be a threat to Facebook itself, so it claimed Vine was in breach of its data policies and just kicked it off the platform. It did that for competitive reasons. In these digital markets, we see companies following an aggressive strategy. Where they see competitors, they look either to acquire them or to deny them access to the market and close them down. This is not unlike the debate that was had more than a century ago, particularly in America around the railways.
There was the big test case that President Theodore Roosevelt had against JP Morgan over his railway monopoly. We can imagine lobbyists for Morgan saying, “We may have a monopoly in the rail market, but the price is quite cheap. People do not spend very long on the trains, and you can always walk or use a horse and cart. It doesn’t really matter that we have this monopoly, because people can choose to travel in other ways.” Of course, Morgan’s railway monopoly gave him massive powers of self-preferencing when it came to moving coal and steel around and denying others access to the market. It gave him massive market power and the monopoly was broken up for that reason.
We should be concerned that, if we allow the major tech platforms to control access to the market and people’s ability to trade, that will lead to a constrained market and higher prices. The tech sector is looking to develop more all-encompassing systems, such as the metaverse for Meta, where people will have a VR experience where they can buy and sell and do everything, and we see smart devices now playing an increasingly central part in almost every service that we access. The amount we are charged to access those services and the ability to access that market are extremely important for having competitive markets in the future. That is why I think these elements are important.
In finishing, I will talk a bit about the news industry. We see how these new marketplaces are changing the distribution of traditional products so much that their business model may completely collapse. The collapse of regional journalism is because of the massive disruption of the localised ad market. It has taken advertising out of those products. It is not just transferred online; it is transferred to completely different methods of distribution.
Now, that is market economics. That is changing consumer behaviour and businesses must adapt to that. If a news publisher is being told, “Your product can be distributed for free through our systems,” but you get more ad money in the long run if you do not. The distributor collects the advertising revenue and the data, and the publisher benefits little. If the product is being used to attract users to the platform, but the platform monetises it and the publisher does not, that is an unfair and unbalanced level of competition that could have significant detriment in other areas. If journalism is hollowed out because it cannot access the market fairly for its products and services, journalism will die, and democracy and society will be the loser as a consequence.
We want competition to flourish. We want competition to be the best guarantee of high standards and lower prices, but we must recognise that digital markets involve a series of markets in which companies are not really competing against each other, because they create controlled monopolies or business environments with very limited access to competition. If we allow that to continue unchecked, it will be to the detriment of us all in the long run. That is why I welcome the Bill.
Several hon. Members rose—
Mr Deputy Speaker (Mr Nigel Evans)
Order. I will now announce the result of the ballot earlier today for the Chair of the Select Committee on Culture, Media and Sport. A total of 384 votes were cast, one of which was invalid. There was a single round of counting. With 383 valid votes, the quota to be reached was therefore 192 votes. Dame Caroline Dinenage was elected Chair with 198 votes. She will take up her post immediately, and I congratulate her on her election. The results of the count under the alternative vote system will be made as soon as possible in the Vote Office and published on the internet.
I call the Chair of the Business and Trade Committee.
Darren Jones (Bristol North West) (Lab)
I declare my interest as set out on the Register of Members’ Financial Interests. I am grateful to the Government for having reflected in the Bill so many of the recommendations in my Committee’s report on post-Brexit competition and consumer law policy. Although I am grateful to the Minister and shadow Minister, my hon. Friend the Member for Feltham and Heston (Seema Malhotra), for thanking me for my work, I should humbly put it on record that there would be no report were it not for my colleagues on the Committee, my Clerks, and the witnesses who gave evidence.
I will not test the patience of the House by listing all the Committee’s achievements in this respect, but I will focus on one area that our report talked about—oversight of the Competition and Markets Authority and other regulators that operate in the digital market space—where provisions are missing from the Bill. The CMA is an independent regulator, but it is directly accountable to Parliament for the performance of its functions and duties. Only yesterday, we welcomed its chair and chief executive officer to the Business and Trade Committee to answer questions on topical cases, its annual plan, the draft strategic steer from the Department and, indeed, this Bill.
In practice, Committees such as mine only really scrutinise regulators, agencies and arm’s-length bodies on their day-to-day performance perhaps on an annual basis at best, or once there has been a failure. We recognised that ourselves in respect of issues at the energy regulator, Ofgem, which we only uncovered once there had been a multibillion-pound failure in the market. We gave ourselves an action in that report, as well as in our post-Brexit competition and consumer law report, to enhance our oversight of the CMA and other regulators to avoid this happening again.
It is not a new problem. As many Members will know, the noble Lord Tyrie, who chaired the Treasury Committee during the banking crisis, has written and spoken extensively about this issue. It is a challenge for most Committees. Gov.uk helpfully lists the number of agencies and public bodies sponsored by each Department, and that of my Committee has 21, including the Competition and Markets Authority, the Land Registry, Companies House, the Insolvency Service, ACAS, the Financial Reporting Council, the Trade Remedies Authority, and the Pubs Code and Groceries Code Adjudicators. That does not even include the Post Office or the British Business Bank.
Bim Afolami
I agree with everything the hon. Member has said so far. Does he agree with the proposal of the Regulatory Reform Group, which I chair, that there should be a specialist Committee to look at the regulators on an ongoing basis, in addition to the work that his and other Select Committees do in this House?
Darren Jones
If I answered shortly with the word “Yes” it would ruin the rest of my speech, so I am going to keep reading through my notes. However, the hon. Member, having asked that question, will understand the direction of travel.
The Minister was pointing at himself, I think noting for the House that he of course has responsibility for all those organisations. He will know, from our Committee perspective and the role that Parliament has in the oversight and scrutiny of the Minister’s performance and that of his Department, that we can have capacity challenges. Other Committees have the same problem: the Culture, Media and Sport Committee covers 42 agencies and public bodies, while the Environment, Food and Rural Affairs Committee covers 33, and so on. The Bill before the House, which I welcome, is a great example of an agency being given new powers, a wider remit, more work to do and the job of taking ever more wide-ranging decisions, but there is nothing in the Bill about enhanced accountability and oversight of the CMA. The challenge there is that we have to get the balance right.
Parliament will want the CMA to be effective in its core duty of promoting and delivering competition. In our evidence session yesterday, there was an interesting tension about whether we deliver effective competition by regulation and intervention, or by deregulation and getting out of the way. I think that illustrated the interesting tension between oversight of the Competition and Markets Authority and its independence. While the regulator must take clear decisions based on its legal duties and the required technical assessments, what will Parliament think if, over time, a number of interventions taken together paint a picture of the UK as not being a good place to start, scale up or exit a business? How will we know in this House if that is the case, and how can regulators be held to account for the impact of their decisions over time?
This friction came up again only today. We took evidence yesterday on the Microsoft and Activision case, which is a major intervention by the Competition and Markets Authority, and I understand the Chancellor has said this afternoon, about the Competition and Markets Authority, that
“I do think it’s important all our regulators understand their wider responsibilities for economic growth.”
If the regulator does not already understand that and if the Chancellor does not have confidence in the regulator, we have a problem. What view should Parliament therefore take in the context of this Bill going through the House?
Clearly, independent regulators should not be interfered with by Parliament in making their day-to-day decisions. Parliament should be crystal clear that it is not our job to take those decisions. Expert regulators should not be told what they should do or think by, with the greatest respect to many colleagues in the House, generalist Members of the House of Commons. However, with increased powers and responsibilities—not least following our exit from the European Union, where there was inbuilt enhanced scrutiny in the European Parliament of these decisions—it is crucial that this Parliament steps up to provide the enhanced accountability required.
In short, the right to exercise independence and the requirement to be accountable are not mutually exclusive. As we have heard, there is a certain cross-party support for this position and an increased demand for reform, but there is not much in the Bill or from the Government that I have heard to facilitate that. There have been suggestions, which I generally support, that either we have enhanced capacity and resources for existing Select Committees to do more work in holding regulators and arm’s length bodies to account for their day-to-day work, or that we set up a new specialist Select Committee that takes on the job of having oversight of regulators across Whitehall. Some people will be concerned by the suggestion of additional Committees, either because of the perceived need for regulators to have to engage, inform and appease parliamentarians on a day-to-day basis and the amount of time that may take, or because of the influence that lobbyists may have on a fixed number of parliamentarians on the Committee tasked with oversight of the regulator.
John Redwood
Is there not a clear distinction? We and the Government should not intervene in individual decisions that under the law are in the regulators’ remit, but Parliament and Ministers should take a timely and regular interest in the overall achievement—the cost, whether they need more resource or less resource, and whether we need to change the legal framework under which they operate—which should be a regular review item.
Darren Jones
I find myself in the unusual situation of being in complete agreement with the right hon. Gentleman, and perhaps that shows the cross-party support for the points I am making about the Bill.
John Penrose
I echo the points about the need for a careful balance between not interfering from this place, while also ensuring accountability. I believe—parliamentary historians will put me right if I am wrong—that about a decade ago there used to be a Regulatory Reform Committee in this place. It was rarely attended and was basically dropped because it failed to command much interest—let me put it that way. May I caution the hon. Gentleman that more committees might not always be the right answer? Perhaps tightening up some of the statutory duties that we apply to economic and non-economic regulators could be a way to ensure that the powers we are handing over, which as he rightly points out can mushroom, are properly applied. That would give Parliament a clear a brief to say “We want you to use these powers in this way,” and Select Committees would have a clear way to gauge whether such powers were being used in the way that Parliament has set.
Darren Jones
I do not claim to be a parliamentary historian, but the Regulatory Reform Committee is very modern history. About two years ago I got a call from the Government Chief Whip, telling me that the Government were collapsing the Regulatory Reform Committee and merging it with mine, but that I should not ask for any additional resource. The Business and Trade Committee now holds, by legacy, responsibility to scrutinise good regulation across the whole of Government. That is the problem. We do not have capacity to do that effectively beyond the remit of our own Department for Business and Trade. The hon. Gentleman is right that if we were to end up with a new Select Committee, being clear about what good outcomes or performance means, how that should be measured, and how regulators should be held to account against those measures, is an important conversation for us to have. If there were to be a new committee, there should be a requirement for it to meet and do that work, and it should be clear about how it was performing those duties.
The concerns that some have expressed about additional Committee oversight, administrative demand on regulators, or the influence of lobbyists, can be anticipated and mitigated. As we have discussed, the House is perfectly capable of drafting Standing Orders that make clear the powers and remits of a Select Committee, and the Committee would not be able to change or interfere with decisions of the Competition and Markets Authority. That clarity would, in turn, reduce the impact of lobbying that some people might be concerned about, and Members would need to declare their interests in the normal way. Even if a Joint Committee of both Houses—I will come to that in a second—were tasked with the oversight of regulators and other agencies across Whitehall, its capacity would be limited to a certain extent because of how many bodies and agencies it would need to look at. The amount of inevitable workload for an individual organisation would be fairly self-contained.
If there were to be a new Committee, I would have the normal expectation of collaboration and co-operation between Committees. Departmental Select Committees would still be able to call and engage with regulators when looking at particular issues, but we would be able to work with it to extend the scope of day-to-day co-operation. I am therefore most worried about whether the House, and by extension the Government, would support establishing such oversight and giving it sufficient resource to do the job properly. We would need additional budgets for additional staff and specialists to do that work; some have suggested that a smaller version of the National Audit Office could be one solution.
It is not only the Competition and Markets Authority that operates as a regulator in the digital market space. That is why a number of regulators have created the digital regulation cooperation forum, which is a welcome intervention and allows for co-ordination between digital regulators. Some have called for that to be on a statutory footing, but my Committee thought that was not necessary. Which Committee of this House is the DRCF directly accountable to? I do not think there is a clear answer. What is the cumulative impact of regulatory interventions in digital markets across digital regulators who are collaborating on their interventions? When I served on the pre-legislative scrutiny Committee for the Online Safety Bill, we recommended that the House should consider a Joint Committee of both Houses. A number of noble Lords in the other place have great interest in this topic, and that could provide a space to consider such issues.
As I have mentioned on a number of occasions, any such enhanced scrutiny to assist Parliament in understanding the consequences of broader remits and decision-making regulators would require the support of Government, because we would need additional capacity to do so. I hope that when he sums up the debate, the Minister might be able to share the Government’s view in that regard.
While I have said that there is insufficient capacity and I have called for additional capacity, of course my Committee and I take our work on behalf of the House seriously. To mark our own performance, in recent years we have taken evidence from 11 of the current 21 and three of the previous additional 14 agencies and public bodies within our remit. I hope that hon. Members concur with my conclusions and that we can persuade the Government to take further action in this space.
Matt Warman (Boston and Skegness) (Con)
I enjoyed the Minister’s opening gambit about how much the internet has changed our lives over many years. He is right, but the House has now been regulating the internet and its effects for many years as well, and this is in some ways a long-overdue Bill. When I was the Minister, my great fear was that Back Benchers would treat it like a Christmas tree and try to add many great ideas of their own. Now that I am on the Back Benches, that is precisely the approach that I intend to take.
I hope that the Minister—and you, Mr Deputy Speaker—will indulge me on a few issues that are somewhat in the weeds of the Bill as well as on two broader points. This is fundamentally a welcome Bill. It is hugely consequential in the effects that it will have on the digital landscape and Britain’s ability to regulate in a new and different, fundamentally pro-competition way in an age that will be affected by markets that operate very differently online from those that we have been used to regulating.
There are a couple of relatively small issues. First, on subscription traps, we have heard a little from other hon. Members about auto-renewal. I think that it should simply not be the default. That is worth looking at. The Minister may take the view that it is for the CMA or the DMU to look at that rather than for the Government to take a view, but that fundamentally could protect consumers.
Secondly, the Minister has made really welcome moves on protecting consumers from online scams. Such scams operate fundamentally differently from the scams of the past, so his new approach is welcome. There is, however, a key interaction in scams and unsafe goods. People who knowingly sell unsafe goods online are surely, by some definition, scammers, yet the Bill does not appear to do quite the whole job. He may be able to offer reassurance on that.
Kevin Hollinrake
My hon. Friend raised a fair point. A fair and level playing field is important for our wider economy and opportunity. Alongside the Bill, we are keen to bring forward the product safety review, which looks at online marketplaces and how they sell and distribute products compared with our normal high-street locations, which have far more stringent product safety requirements. So a body of work is going on alongside this one.
Matt Warman
I welcome that. The Minister will know that that body of work has been going on in parallel with this one for some time. It is welcome, and I hope that its results will be presented relatively quickly.
The new judicial review standards for CMA and DMU decisions have been welcomed by the Coalition for App Fairness, which is a good and credible group. But, simultaneously, this is a big shift and we need to be confident that it will genuinely protect both larger operators in the right way and smaller operators. I think we will hear more about that from hon. Members in this place as well as in the House of Lords.
I have two larger points. First, it is DMU mission creep, which we heard about briefly from my hon. Friend the Member for Weston-super-Mare (John Penrose), that we should fundamentally be most nervous about. It was certainly my concern a little while ago that the Bill gives the regulator the flexibility it needs to deal with the modern world in the right way. That is absolutely the right approach and I am pleased that it has persisted, but it is important that it is appropriately regulated—if I can use that word about a regulator—so that it does not end up potentially going further than any Minister or Government might wish. It is important that the CMA and the DMU operate in the way that this House intends, with all the independence that this House also intends.
My final broader point is that the Bill does some excellent work on interoperability of software. What it does not do, at least on the face of the Bill, is consider that interoperable software is fundamentally linked to interoperable harm. If I can try to turn that into real terms, it is obviously great that operators such as Apple are able to build their own superb and unique ecosystems. The same goes for Android and so on—there are other equivalent versions. What would be useful to try to guard against, probably via the DMU rather than directly via Government, is the current situation whereby, to take one example, the way we use iMessage or video calls is fundamentally limited if we seek to do it on a different platform. We have all seen the different blue and green bubbles on Apple iMessage. That is partly because of the interoperability of hardware and software. I am somewhat conflicted about whether that should be a point of differentiation for Apple, Android, WhatsApp or other operators, or whether we see it as part of a problem within emerging monopolies. I therefore suggest it is exactly the sort of thing that an independent regulator might wish to take a view on.
We heard, furthermore, about the metaverse. What we do not want, surely, is a series of emerging and conflicting metaverses—if that were to be the case—that fundamentally embed monopolistic behaviour, because they will be some of the largest economies of the future. Again, it is potentially hugely beneficial to have a unique and brilliant metaverse under the personal command of Mark Zuckerberg and one under the personal command of Tim Cook, as a competitor. However, a regulator may take a different view and it is important that we think through these emerging opportunities. The Bill is a place where we may start some of that work. It is right that it seeks to be future-proofed against some of those interesting challenges, but at the moment there are a small number of potential opportunities that the Minister may yet seek to seize—shall we put it like that?—rather than allow them to pass by and have to address them later on.
Fundamentally, I welcome the Bill. It already embodies some huge opportunities to make real progress and there are some more that we may be able to take forward. I look forward to supporting its passage through the House.
Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)
As co-chair of the all-party parliamentary group on ticket abuse, I believe the Digital Markets, Competition and Consumers Bill has real potential to overhaul the secondary ticketing market, which is rife with fraud and scamming, affecting consumers every day.
The Minister will be aware of the issues in the ticketing market. They are far from being rectified by current legislation, with tickets being obtained in large quantities from the primary market using specialised software and fraudulent means, and regular consumers missing out before then being fleeced on the secondary market. That is why I was concerned last week to read that the Department for Business and Trade had, after sitting on it for 19 months, decided not to implement the proposals from the CMA’s 2021 report, which would have improved its capacity to enforce legislation and made life much harder for professional touts, and made the CMA’s consumer enforcement powers sufficiently strong enough to tackle illegal bulk-buying and speculative selling. But instead, sadly, the Government effectively gave the bad actors a free pass, ignoring the overwhelming evidence of the uncontrolled black market, with unlawful practices still rife on websites such as Viagogo and StubHub.
There is enough available evidence to indicate that consumers are still being ripped off and harmed as a result, and still will be, sadly, after this Bill becomes law in its current form. For example, three particular Viagogo sellers attempting to speculatively sell thousands of festival tickets that they had not bought; or the Golden Circle, an online rent-a-bot group illegally buying masses of tickets for Eurovision, Beyoncé and others, resulting in less availability at face value for genuine fans, who are then priced out when the touts put these ill-gotten tickets for sale on the secondary platforms—blatant profiteering.
The Government’s recent approach, ignoring the recommendations of the CMA, seems to rely on the conviction of just two touts some three years ago as a deterrent. This conviction—important and groundbreaking though it was—actually relied upon the Companies Act 2006 and the Fraud Act 2006, not the purpose-built Consumer Rights Act 2015 that I was involved in, or the Digital Economy Act 2017. That suggests that the actual enforcement of legislation is insufficient—something that this Bill must surely look to fix. I will say more about that later in my remarks.
Even in a negative outlook whereby we might believe that ticket touting will never be completely eradicated, the fact that artists and fans are equally appalled by how touting goes unchecked must surely put fire behind the need for policymakers to take further action. Otherwise, we should assume that the Government want to control the loopholes, corruption and profiteering that is rife within this marketplace.
The Government are failing consumers, as bad-faith actors and harmful practices continue to harm them with industrial-scale touting. I worry that this is because of a widespread lack of knowledge of the industrial scale of touts and the bad-faith actors engaged in the practice. The fact is that between 1,200 and as many as 1,600 professional touts still operate, committing the exact same offences that those two were convicted for. That is an appalling track record, and not at all evidence that the current laws or law enforcement in this area are working, regardless of what the Minister would have us believe.
Consumers face an unfair market in primary sale, before then being ripped off in the secondary market. Most of us in this House will know the injustice that fans feel. At times, we are those fans who miss out when we try to get tickets. As MPs, we see the often heartbreaking letters from constituents who have been ripped off. This is genuine consumer detriment—exactly what this Bill is supposed to try and fix. It is detriment and harm that this Bill will not help or bring to an end in its current form, as the Government have refused to implement the small but much-needed proposals requested by the CMA in this area.
It is important to point out that these activities also pejoratively affect the live music industry and the value chain, with knock-ons for not only consumers but that vital part of the UK economy. Touting is not limited to live music or theatres; it affects sporting events too. Take football, for example, where touting is already supposed to be illegal. There are, on average, 20 to 30 active touts selling tickets for premier league fixtures with impunity. This is illegal. Let us bear in mind that the inconspicuous nature of touting means that this number is likely to be a large underestimation. According to Home Office figures, yearly arrests of football ticket touts have been decreasing, dropping from 107 arrests in 2011-12 to only 28 in the 2019-20 season.
What real assessment would the Government make of the capacity of enforcement agencies, such as National Trading Standards, Action Fraud or even the police, to clamp down on this malpractice? Two prosecuted touts is hardly the bragging rights that the Minister thinks.
Kevin Hollinrake
I certainly do not ask for any bragging rights. May I thank the hon. Lady for the work she does on the all-party parliamentary group on ticket abuse? On the case she refers to, she is right to say that it is three years since the conviction took place, but the confiscation order, which was for £6.1 million, took place only in December last year. Does she think that sends a strong message to the cohort of people she refers to that there are strict and strong penalties for people who engage in that kind of activity?
Mrs Hodgson
We would all like to think that it would with right-minded people, but I do not think professional touts think like the Minister or any of us in this House, so they probably have not seen it as a deterrent. From what I am hearing from the experts I work with, it is still going on—it is business as usual for the touts. We really need more enforcement in this area. More laws are good, but laws without enforcement just do not work.
The UK is rightly proud of its live event industry, but do the Government really know what the consumer experience often is? I would be interested to learn which experts, campaigners or live music representatives the Government worked with or consulted when they rejected the CMA’s advice so firmly. I have written to the Minister to ask him that, so he can respond in writing if he does not have that information to hand or in his memory from those meetings.
The Minister rejected the advice on this area, saying that resale sites like Viagogo may
“still provide a service of value to some consumers”.
The many tens of thousands of victims of Viagogo may disagree. That misses the point entirely. Resale sites allow touts to commit fraud every single day and permit them to charge inexplicably high prices for such tickets. Illegal activity is happening on those sites right now, as we sit here discussing the issue. Such sites are profiting from that, and the CMA has no power to do anything about it, which is why the Bill needs additional measures. I hope the Department for Science, Innovation and Technology will take a different approach to its forerunner Department, because the Bill is a perfect and timely opportunity to rectify the situation.
If, as the Minister has said, broader changes to consumer law are the priority, I look forward to learning what changes to the proposed legislation his Government will allow. At present, despite the enhanced consumer protection in the Bill, which he spoke of in his opening remarks, it will not be able to tackle all the problems in the online secondary ticketing market, as the enforcement is just not there. Speak to any National Trading Standards officer: they want to go after the touts, but their budget of circa £16 million is for everything they need to do and is not sufficient. I am sure they could spend that on enforcement against illegal ticket touting alone.
The Bill looks to provide the CMA with stronger tools to investigate competition problems and take faster, more effective action, including where companies collude to bump up prices at the expense of UK consumers. Is that not exactly the case in the secondary ticketing market, where sites like Viagogo allow individuals, as well as themselves, to profiteer from a manner of resale that contradicts legislation? As part of the Bill, will the Government take the necessary steps to make sure that laws, including those in the Bill, are upheld and enforced properly?
I look forward to hearing the Minister’s response on this matter. Our cross-party group, the all-party parliamentary group on ticket abuse, would be delighted to work with him and his Department to strengthen the legislation and to protect consumers from the abomination of ticket abuse.
Andy Carter (Warrington South) (Con)
It is a pleasure to be called to speak on Second Reading of this important and much anticipated piece of legislation.
I will start by making one or two comments from a consumer perspective. I particularly welcome the steps to address rip-off scams and rogue traders. For too long, they have been allowed, and in some cases encouraged, by platforms that have not always policed this area in a proactive manner. They have been able to post fake reviews online and to tie people into subscription contracts when they simply did not know that they had signed up. Every Member will have received correspondence from constituents who have been caught in such traps, and I welcome the steps that the Bill takes to address this issue.
I am keen for us to improve consumer rights and, at the same time, the enforcement of those rights, which I hope will drive competition and spur growth. I see the Bill as a welcome addition that will facilitate the right market conditions to encourage innovation, while protecting consumers from modern harms. This morning, I met representatives of Amazon here in Parliament, and I was struck by the fact that although it has been in the UK for only 25 years, over that period it has transformed retailing in the digital space and people’s engagement with media on digital platforms. However, its impact on global dominance has consequences, and it is therefore right that we introduce legislation to respond to that changed market.
As chair of the all-party parliamentary media group, I want to say a little about how the Bill addresses issues in the media publishing industry. I was very struck by the comments of my hon. Friend the Member for Folkestone and Hythe (Damian Collins), but I do not intend to repeat them because he made them incredibly well, and that will allow me to shorten my speech somewhat. The media publishing sector has for some time considered the need for legislation, and I have chaired a number of sessions examining the Digital Markets Unit and the impact that it can have within the sector.
I should make it clear that I welcome much of what is in the Bill. I want it to be passed without delay and, crucially, without any watering down of its provisions. It is needed to ensure that British businesses and consumers do not remain at the mercy of super-companies which, while providing services for consumers, can stifle growth and innovation in the UK economy. The Competition and Markets Authority estimates that Google and Meta together made excess profits of about £4 billion in 2021 alone, and I am sure that the figure for 2022 will be even higher. Big tech platforms extract these excess profits not by being the best businesses on the basis of free-market competition, but by leveraging their market power.
Digital markets are particularly susceptible to tipping, whereby one firm becomes dominant and entrenched with little prospective challenge. I am therefore pleased that the Bill allows the Digital Markets Unit to designate the very largest digital firms with substantial and entrenched market power as having strategic market status. The DMU will be able to enforce conduct requirements tailored to the business models of those strategic market firms, which will ensure that big tech firms act in a way that ensures fair dealing, trust and transparency in their interactions with smaller businesses and individual consumers who rely on their services.
It would be helpful if the Minister could provide further clarity on a couple of specific points. I am keen to explore the interaction between news publishers and organisations such as Google. As my hon. Friend the Member for Folkestone and Hythe pointed out, local newspapers are particularly challenged. The final offer mechanism will allow the DMU to select bids from a strategic market firm and a publisher for the value of news content. That will be a very protracted process. Will the Minister consider introducing interim measures to avoid the risk of local newspapers going bust before some form of resolution is agreed? Will he also consider a requirement to ensure that the final offer mechanism is initiated and completed at an early stage?
I urge the Government to look at ways of expediting the processes, which would enable the DMU to prioritise platform-publisher disputes in the interests of ensuring a sustainable news media industry. In other jurisdictions, platforms have either restricted or threatened to restrict news content to avoid payments, and there is evidence that Google has reduced the share of domestic news sources on its platforms, particularly when the content can be replaced with English language alternatives, as is the case with international news. Will the Minister provide an assurance that the fair dealing objective and the conduct requirements that allow the DMU to prevent a service from being withdrawn in a discriminatory way could be used to prevent Google or Meta from withdrawing or reducing the volume of UK news to reduce the value of deals with news publishers?
Getting really into the weeds, it is important that the countervailing benefits exemption in clause 29 should not be drawn too broadly. The exemption allows designated SMS firms to continue conduct that contravenes the conduct requirements if they can prove that it has an overriding public benefit. I gently suggest to the Minister that if the exemption is too broad, SMS firms will be able to regularly avoid complying with conduct requirements by citing things such as security and privacy claims, as well as, frankly, by spamming the CMA with numerous studies, thus diverting resources to addressing those studies rather than tackling the issues at hand. This would undermine the entire regime by severely limiting the efficacy of the conduct requirements.
I am keen to ask the Minister if he would be willing to consider placing a non-exhaustive list of acceptable grounds for exemptions in the Bill. While the great advantage of the Digital Markets Unit is its agency and ability to write tailored conduct requirements for SMS firms, that leaves it open to regulatory capture. Can the Minister can give me an assurance that there are adequate provisions requiring the DMU to consult third parties so that SMS firms are not able to write their own conduct requirements or construct their own remedies in cases of conduct requirement breaches?
I welcome the measures the Government have brought forward in the Bill. This is strong, forward-looking digital market regulation and it will ensure that digital markets can live up to their potential, allowing consumers to enjoy the full benefits that technology can deliver. It is also important that we look at this Bill alongside the media Bill, because so many of the issues that are addressed across the wider digital industry are covered in the two Bills and it is good that this legislation is coming through hand in hand with that Bill. By giving the Digital Markets Unit new powers to tackle the dominance of monopolistic big tech platforms, we will be able to unlock the growth and innovation that have been stifled by a severe lack of competition, which will hopefully give start-ups and smaller firms proper access to markets and consumers.
Rebecca Long Bailey (Salford and Eccles) (Lab)
I want to limit my comments on the Bill to how it affects journalism. The National Union of Journalists has long called for the enforcement of levies on tech giants that unfairly consume editorial content without contributing to its production. That point was highlighted in the Cairncross review:
“Publishers frequently complain that the relationship is excessively weighted in favour of the online platforms. In most cases, the latter do not directly remunerate news publishers for placing their content on their platforms, although there are some exceptions.”
The review went on to state:
“Platforms are not subject to the same press rules of accuracy and fairness as news publishers are. And in all these ways, argue publishers, the increasing grip of certain platforms over news distribution channels is threatening the future of high-quality news.”
Without adequate regulation of news provision beyond the regulated news titles or compensation for publishers whose content is used, we risk a wild west of news provision that is chopped, coiffured or skewed without a publisher’s consent and outside the scope of normal news regulation. That should worry us all, because journalism is critical to upholding democracy, to holding local and national politicians like myself to account, and to holding Government and local government to account.
None the less, the Bill’s provisions that will provide a mechanism for payments to publishers from tech giants are welcome. They have been called for by the NUJ, including in its news recovery plan. I also welcome the Bill’s efforts to provide publishers with data that allows for a better understanding of how content performs on platforms. I stress that these provisions must be implemented without any further delay or weakening of conditions, but I fear that the Government will already be under pressure. Indeed, Google and Meta have attempted to ward off similar negotiations in Australia and Canada by restricting or threatening to restrict access to trusted domestic news.
The News Media Association has said:
“Denying citizens access to reliable information to avoid payment serves only to emphasise the primacy that these firms place on profits rather than citizens’ interests. The government should not give in to similar threats in the UK.”
I stress that the Government must not bow to pressure to water down these provisions—in fact, quite the opposite. There are a number of areas where they could strengthen the Bill or provide much-needed clarity. The hon. Member for Warrington South (Andy Carter) highlighted a few areas where we are on the same page, so there is clearly cross-party support.
First, there appears to be a protracted process to reach the final offer mechanism in the Bill that allows the Digital Markets Unit to select bids from a strategic market status firm and a publisher for the value of a news contract. That means that, even if an SMS firm has no intention of complying with a conduct requirement to negotiate with a news publisher, it could take years from the issuing of such a conduct requirement for the final offer process to be initiated and completed. What will the Government do to expedite this process?
Secondly, as I have already mentioned, in other jurisdictions, platforms have restricted or threatened to restrict national news content to avoid payments. What assurances can the Minister give today that the fair dealing objective and the conduct requirement that allows the Digital Markets Unit to prevent a service from being withdrawn in a discriminatory way, could be used to prevent a platform from withdrawing or reducing the volume of UK news sources to reduce the value of payments to UK publishers?
Thirdly, the hon. Gentleman gently suggested it, but I am strongly suggesting that clause 29 is not satisfactorily drafted. It allows for a firm with significant market status to continue conduct that contravenes a conduct requirement if it can prove the conduct has an overriding public benefit, but that overriding public benefit is not defined in the Bill. This presents a glaring loophole that could be significantly abused. I hope this is just an oversight on the Minister’s part, and that the clause is not deliberately drafted in that way, but will he clarify this by adding a clear list of acceptable grounds for exemption?
Finally, as we have heard, there is a concern that, although the DMU is able to write tailored conduct requirements for firms with significant market status, not consulting a wider stakeholder base risks leaving it open to regulatory capture. Like the hon. Member for Warrington South, I would be grateful if the Minister considered adding provisions to the Bill to require the DMU to consult third parties to avoid such risks.
The Bill will go some way towards rectifying a murky quagmire, but there is much more beyond the scope of this Bill that needs to be addressed. Members will no doubt be aware that BBC members of the National Union of Journalists will walk out on strike on 7 and 8 June over plans to cut local radio provision. Cuts to local news provision matter because local journalism is vital to democracy by enabling people to hold local government and public services to account at a time when national news outlets primarily focus their attention on the latest Westminster scandal. Local journalism matters because it helps to build strong, happy communities by allowing local people to hear about the things that matter in their area and by giving them a voice to raise things about which they are unhappy. Local journalism matters because it supports local economic activity by celebrating local businesses and giving young journalists a chance to cut their teeth and gain the skills they need for a career in broadcasting.
Sadly, we know what happens when local news services are eroded. We have watched as the local, community-driven newspaper sector has collapsed over the past 10 years. In my constituency, we no longer have a dedicated Salford newspaper, and when publicly funded news providers such as the BBC also start to curtail their local offering, there is a risk of there being no democratic scrutiny or local news coverage at all. So the Government must recognise that, although the Bill is a welcome step forward, they must urgently turn the tide and act upon the local journalism sustainability recommendations made this year by the Digital, Culture, Media and Sport Committee. If they do not do so, we risk continuing centralisation of news coverage and erosion of democratic scrutiny, where only the most sensational—
Rebecca Long Bailey
I am coming to the end of my comments—I do apologise. Where only the most sensational news stories that drive the most clicks make it to our computer screens.
Bim Afolami (Hitchin and Harpenden) (Con)
It is an honour to follow the hon. Member for Salford and Eccles (Rebecca Long Bailey) and I cannot think of a subject that would generate more clicks than digital markets and the CMA. With that in mind, I mention that David Lloyd George, a long-serving and respected Member of this place, was known to remark to young Members who asked him in his later years how they should get on, make a speech and behave, that he had one main rule: Cabinet Ministers can make three points in a speech, junior Ministers can make two and Back Benchers can make one. So I shall try to make one fundamental point in my speech, which is about the accountability of the CMA.
Many Members, on both sides of the House, including the Chair of the Select Committee, have said—there was a session for Members of Parliament earlier this week at which I made similar points to the Ministers on the Treasury Bench—that, when we give power to an arm’s length body, we have to very careful about the use of that power. Members of Parliament, and the Government, must make sure it is exercised in the right way, as intended by primary legislation and by the policies of the Government of the day, in broad strategic terms. I do not mean we should do that day-by-day, decision-by-decision, where we second-guess our regulators. If we were to do that, we would get the worst of all worlds. Nobody sensible thinks that that is a good idea.
I chair the Regulatory Reform Group and I refer to my entry in the Register of Members’ Financial Interests. In recent weeks and months, my colleagues on that group and I have been thinking seriously about the broader regulatory system and how it can be improved to get the best outcome for our economy, and for individuals and businesses in this country. This is a good Bill. It does important things. I welcome the more flexible, less dogmatic, less box-ticky approach embodied in the Digital Markets Unit. That is a good thing. The Government are right to have taken into account a lot of work and thinking that has been done by many different people, both in this House and outside, over the past 18 months or so, and they should be commended for that.
However, I am worried about giving a lot more power to the CMA, if it is not checked. If it is not held to account more by this House and by the Government, we could inadvertently—the CMA has brilliant people who are trying to do their best job for the country—create an image of this country, or indeed of digital markets or any other market, that is not to the overall benefit of this country in comparison with our competitors.
In particular, I am thinking of the appeals mechanism. The Bill contains an appeals mechanism that is given a judicial review standard. That will mean—I can see two former Lord Chancellors next to me, who will correct me if this is wrong—that any appeal has to be broadly on judicial review grounds, which are on process, illegality and various other aspects that do not relate per se to the merits of the decision. In effect, if the Competition and Markets Authority has made a decision, having followed the correct process, not been irrational or done something illegal, and a party or parties do not agree with that decision, that decision cannot be challenged on its merits.
This suggestion has been pushed back in previous Bills that have come to this House when there has been discussion about whether the appeal standard should be a judicial review or a merit standard. In previous iterations, the House has always decided to take a merit standard. In this instance, we have taken a judicial review standard. That sends a subtle, but very important, signal to companies and investors outside of this country. They will say, “If something goes awry with the regulator in Britain, what is our appeal right?” They may feel that that appeal right is not sufficient compared with, say, the European Union, Singapore, the United States or wherever it is they are also thinking of investing. If they compare the two and we come off unfavourably, that will have a damaging impact on this country. That particular aspect of the Bill—the accountability—is very important.
Sir Robert Buckland (South Swindon) (Con)
I apologise, Mr Deputy Speaker, for not being able to join the debate until now.
Does my hon. Friend agree that one problem is that there seems to be a bit of a misreading from Ofcom to this appeals mechanism? The Government will have to look again at merit-based appeals, because judicial review principles are just too narrow, in order to deal with the potentially powerful and wide remit of the CMA. On the point about undertakings and breaches of undertakings, it seems that, on the current reading of the Bill, this will have a retrospective effect on undertakings prior to this legislation coming into force. I support the legislation, but does he agree that this needs very careful reading to make sure that we do not have either unintended consequences, or too big a reach for what will be a very important process?
Bim Afolami
I thank my right hon. and learned Friend for those points, which he made incredibly well. Retrospective decision making is worrying—reaching back to decisions that have already been made, notwithstanding whatever the future holds. That, again, goes to my central point about the impact of the Bill and the impression of this country as somewhere to invest and to do business in areas where the CMA will have considerable power.
To go back to the Lloyd George maxim and the one point that I want to make in this speech on accountability, a key part of the work of the Regulatory Reform Group, to which the Chair of the Select Committee referred, is to point out that this Parliament—both Houses—needs to have an enhanced view in looking at our regulators. We need to consider, on a day-by-day basis, how the regulator is performing. Is it applying the strategic policy statement that the Government have given it? Is it doing things in the right way? How is it dealing with stakeholders? We should not just have what happens currently: a Select Committee gets involved and calls the big boss—the chief executive officer, or the chair—when there is a big mistake, a mess-up, and it is in the newspapers. That is not sufficient. We need to enhance that. Both Houses should be involved. We have made some detailed proposals as to how to do that in our first report and we will continue to do that.
This point of accountability may seem academic, it may seem legal, and it may even seem political at times, but it is fundamentally about the economy and the competitiveness of this country. If we can have greater accountability, our excellent regulators’ authority will be enhanced because they will know, business will know, people will know and consumers will know that we have a better functioning system. In that context, with those changes, I strongly support the Bill.
Sarah Olney (Richmond Park) (LD)
The Liberal Democrats warmly welcome the measures in this Bill that will enable the Competition and Markets Authority to counter the dominance of big tech firms and encourage real competition and dynamism across the sector. It is a real pleasure to speak in such a good debate on well-drafted legislation that has broad support from across the House. Credit is due not only to the hon. Member for Weston-super-Mare (John Penrose) and the hon. Member for Bristol North West (Darren Jones), who are not in their places but who have worked very hard on this Bill, but to the Competition and Markets Authority for all its work throughout the consultation stages and in designing this pro-competition regime.
I am pleased the Government have acted on the CMA’s recommendations and are introducing this Bill to the House. The Liberal Democrats want to see a thriving British tech sector, where start-ups can innovate, create good jobs and launch new products that will benefit consumers, and a strong competition framework that pushes back on the dominance of the tech giants is essential for that.
For too long, smaller, dynamic start-up companies have been driven out of the market or swallowed up by big tech firms that see the existence of other players in the market as a potential threat. We are therefore pleased to see greater powers awarded to the CMA to investigate the takeover of small but promising start-ups that do not meet the usual merger control thresholds, as well as the other key pro-competition interventions. The update to the competition framework provided for in the Bill is also particularly important for growth industries such as artificial intelligence and virtual reality, which are in their infancy but have great potential both for positive contributions to our economy and for competition disadvantage.
Consumer protections form another part of the Bill; the new rules and powers awarded to the CMA to protect consumers in parts 3 and 4 of the Bill are well overdue and will benefit many of our constituents. In particular, like many hon. Members who have spoken already, the Liberal Democrats are pleased to see the measures designed to tackle subscription traps by increasing transparency, making it easier for consumers to end those sorts of contracts and clamping down on fake reviews.
While we are glad that most of the CMA’s recommendations are included in the Bill, we have concerns over certain aspects that would benefit from further consideration and clarification. I think I join with the hon. Members for Warrington South (Andy Carter) and for Salford and Eccles (Rebecca Long Bailey) —we have proper cross-party agreement here—when I say that I am very concerned about the Bill’s countervailing benefits exemption. It might allow some large tech firms to get away with anti-competitive practices and to evade conduct requirements by arguing that the benefits to users outweigh the negative consequences for competition. The broad nature of the exemption risks significantly undermining the entire regime by limiting the efficacy of the conduct requirements. We will therefore seek to tighten the definition of what benefits are valid as the Bill progresses through the House.
The Liberal Democrats are also concerned that the Digital Markets Unit will designate firms as having strategic market status based on an assessment of their entrenched market dominance five years into the future. Future dominance is hard to predict and we have seen rapid change in the tech sector over the past 20 years. We would never have imagined in the late ’80s or early ’90s the dominance that firms such as Google and Apple would have in the market at the turn of the century.
We are concerned that that ambiguity could allow firms wide scope to challenge their SMS designation and fall outside the Digital Markets Unit’s regulatory framework. Above all, we urge the Government to resist pressure to water down the measures in the Bill, which could allow tech giants to continue anti-competitive behaviour. In other countries such as Canada and Australia, we have seen how firms such as Google have responded to tougher regulation of big tech by restricting access to domestic news on their platforms. It is imperative that the UK Government do not bend to any such pressure and reject attempts to water down legislation or weaken it through loopholes.
As the Bill progresses, we must also ensure that there is no ambiguity in its drafting that could be open to exploitation. It is important to remember that it is not only tech companies that require a level playing field to operate in the digital economy; small businesses across the country are increasingly moving their operations online, and many now rely on digital platforms such as online marketplaces, yet current unfair market practices mean that many find themselves vulnerable to exploitation, causing economic harm and stifling innovation. Unlike larger firms, many small and microbusinesses do not have the resources to take action when they are treated badly, and Trading Standards is powerless to act on their behalf due to a significant lack of resource and an outdated operating model still based on local authorities.
One key concern of small businesses operating online, and the best example of that power imbalance, is infringement of intellectual property rights. Intellectual property rights are absolutely central to the success of small businesses and individual creators, protecting the integrity of original work and ensuring that individuals are fairly compensated. However, IP theft is all too common in the digital environment, which causes significant economic harm.
Yasemin Guzeler, a constituent of mine, has been a victim of such infringement and has allowed me to share her story. Yasemin owns her own small business, Blooms of London, which sells bespoke umbrellas featuring trademarked designs. Around October last year, Yasemin noticed that the manufacturer of her products, based in China, had copied her designs and was selling the items directly via online platforms at half the price of the original items. Yasemin has since faced a momentous battle with online platforms such as Amazon to try to remove counterfeit links. After months of emails, complaints, referrals and untold financial and emotional distress, there remain almost 40 counterfeit links on Amazon. Yasemin’s business is now facing bankruptcy, and there is seemingly nowhere else she can turn for help and no mechanism through which she can effectively enforce her rights against Amazon.
I am therefore pleased to see
“effective processes for handling complaints and disputes with users”
listed under
“Permitted types of conduct requirements”
for SMS firms, but much more must be done to protect our small businesses and individual creators and uphold their intellectual property rights when they engage in digital activity. I would like an explicit reference to “intellectual property theft” in the Bill, and for reducing economic harm on their service to be included in the list of permitted types of conduct requirements for SMS firms in clause 20. I would also welcome further comment from, and engagement with, the Minister on how we can best protect small business owners such as Yasemin when they operate online. It is essential that we get this right to support our entrepreneurs and small businesses, and allow them to remain competitive in the digital economy.
The Liberal Democrats are pleased that the Government are finally acting on the CMA’s recommendation and bringing forward measures that will allow the regulator to prevent tech giants from putting our digital sector in a stranglehold. We hope that the Government will be robust in their defence of the Bill against lobbying by tech giants, and we hope to see the Bill progress through the House without being watered down or weakened through the addition of loopholes that might be ripe for exploitation. I hope that the Minister will also reflect on my comments about the additional measures needed to support small businesses online. I would welcome further opportunity to engage with the Government on that. Although competition is crucial for Britain’s tech sector, we hope that the Government will move to tackle the fundamental issues that are holding it back, such as the skills gap, a shortage of skilled workers and weak investment.
James Wild (North West Norfolk) (Con)
I am pleased to have the opportunity to talk about the Bill, which will drive innovation, growth and productivity by reforming digital market regulation, the competition regime and consumer protection.
Let me begin with the digital market elements. Technology permeates every aspect of our lives. The businesses that develop and apply new technologies—be they social media platforms, online marketplaces or innovation-driven firms—create huge benefits for consumers and make a major economic contribution. As the Chancellor frequently reminds us, the UK is the only country outside the US and China to have a tech sector with companies valued at more than £1 trillion—companies that have developed their businesses and attracted customers.
We must always be mindful that regulation and intervention in markets come at a cost. My starting point is to trust the invisible hand of the market as much as possible to drive competition, but markets require rules, and where those rules exist, they need to be enforced. We must be careful in how we approach regulation, and not penalise firms for being successful.
As has been said, digital markets have features, including the importance of data and network effects, that tend towards a few large players. It is certainly not the case, however, that having a small number of players with large market power is in itself a bad thing—it can represent the reward for innovation and investment. However, the CMA concluded in its review of online advertising that Facebook and Google’s market position meant that consumers and businesses faced increased costs, there was less innovation, and consumers had unfavourable terms imposed on them owing to competition.
The Bill will give the CMA the tools to designate firms with that strategic market status and apply conduct requirements for fair dealing, open choices and trust, which all sounds reasonable—for example, ensuring that there is a clear appeal process if a user’s marketplace access is terminated, or giving consumers choices and the ability to easily switch between services. However, it could easily become a burdensome requirement, so we must ensure that the regime is proportionate and that the cumulative impact of such requirements is regularly reviewed. Perhaps the Bill could be further improved by including something on its face to require the CMA to do so.
As a member of the Regulatory Reform Group, ably chaired by my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami), I share his concern about the accountability of regulators and the systematic underperformance that we see. Given the significant power that regulators wield and the impact of their decisions on the lives of our constituents, they must be accountable for those decisions. My hon. Friend set out very clearly and powerfully the case for our first report’s recommendations to promote greater accountability, as well as introducing standardised metrics so that we can judge regulators’ performance. I hope those recommendations will be taken forward.
I will briefly focus on the consumer regulation part of the Bill. Where companies breach consumer protection rules, there should be swift and proportionate action, but currently that does not happen, as the CMA lacks the powers to rapidly act: it has to go to court when it considers there has been a breach of consumer law. Which? has pointed out that a lack of powers meant that it took nearly six years to get the online secondary ticketing market to change its practices, although as we have heard from the hon. Member for Washington and Sunderland West (Mrs Hodgson), there are still problems in that sector. That is why the new powers in the Bill are to be welcomed: there will be a direct enforcement regime, so that the CMA can investigate suspected breaches and issue enforcement notices and fines. That brings us into line with other major jurisdictions.
Others have referred to subscription services. About £30 billion is spent annually on those services, and consumer groups have identified that as another area of potential abuse. We will all have had different experiences: in some cases, it has been simple to unsubscribe from a service, and in others, it has been far more difficult—perhaps deliberately so, to make customers stick. Sky has raised concerns about the level of prescriptiveness on the face of the Bill regarding this issue, and has pointed out that in some cases, the requirements are more onerous than those that apply in regulated sectors. I hope the Minister will carefully consider those concerns, while ensuring that it is simple for customers to unsubscribe from services they no longer wish to pay for.
The final element I will focus on is that of fake reviews, and the detriment they cause to consumers and businesses. According to research by Which?, fake reviews make consumers more than twice as likely to choose poor-quality products, and people can be put off from making choices, whether about restaurants or about somewhere to stay. That is a particular issue for my constituency of North West Norfolk, which has a vibrant tourism and hospitality sector. UKHospitality welcomed the Bill’s helping to deliver fairness for hospitality venues and customers in that area, so I would be grateful if the Minister confirmed when the consultation he has referred to, which will get into the detail of how we tackle fake reviews, will be published so that we can act rapidly to close down those unfair practices.
To conclude, I support the intention of the Bill: to give the CMA powers to act rapidly against breaches of consumer law, to strengthen competition, and to crack down on abuses.
John McDonnell (Hayes and Harlington) (Lab)
Thank you, Mr Deputy Speaker; I will be relatively brief. Like my hon. Friend the Member for Salford and Eccles (Rebecca Long Bailey), I am a member of the National Union of Journalists’ parliamentary group—in fact, I am its secretary. It is really pleasing that there have been so many references to the issues around journalism and publishing from the hon. Members for Warrington South (Andy Carter), for Folkestone and Hythe (Damian Collins) and for Richmond Park (Sarah Olney), as well as my hon. Friend the Member for Salford and Eccles.
The NUJ welcomes the Bill wholeheartedly; Members who may not have been interested in the journalistic or publishing side of this issue will want to understand why. My hon. Friend the Member for Salford and Eccles has described the way in which there has been erosion of local media and local press, as well as national cutbacks. While journalists have been losing their jobs, what has infuriated them is that where they are producing work—quality, reliable, regular news—that news is then being effectively ripped off on to other platforms and used to attract customers to advertising, and they get no recompense whatever. Members can understand why there is a depth of anger that has built up, and why the NUJ welcomes the Bill. We have been working with the News Media Association as well, which also welcomes it, because we see it as restoring some elements of the balance of power between the big tech giants and the journalists and publishers themselves.
To a certain extent, I agree with the hon. Member for Hitchin and Harpenden (Bim Afolami) about the importance of the accountability of regulators and ensuring that they can play their role effectively. Part of the problem on regulation at the moment is the forest of regulators that we have and their accountability. About five years ago, my hon. Friend the Member for Salford and Eccles and I commissioned a report from Lord Prem Sikka. I will send the hon. Member for Hitchin and Harpenden a copy, because it identified something like 50 different regulators in the finance sector stumbling over each other, not being held particularly to account by this place. I see the solution as being more about shifting the balance of power not to regulators, although they should be held accountable, but to the journalists and publishers themselves. That is why part 3 of the Bill is key for us. It demonstrates a firmness of purpose by the Government in ensuring proper regulation and the restoration of the balance of power, but the devil will be in the detail of the implementation of these regulations and clauses in particular.
I am anxious, like others, about clause 29. It just looks like a gaping loophole that could emerge in the coming period. The NUJ stands ready to engage in any discussions and consultations on the implementation of all the clauses in part 3, particularly in regard to guidelines, the final offer mechanism, the issues around timescales of the implementation and, if necessary, the sanctions that could be brought forward for any individual organisation that is dragging its feet and delaying an agreement on the final offer so that people are properly rewarded.
The hon. Member for Richmond Park raised the issue of intellectual property. That is an issue not only for journalists and others, but for performers. It has been raised with Equity, and Equity stands willing to engage in the discussions with the Government on these matters.
Overall, the significance of this legislation, for us and for the NUJ in particular, is that it could be another brick in the wall of restoring some of the infrastructure and architecture that we had for quality journalism in this country. In that sense, that is why we welcome it. I agree with my hon. Friend the Member for Salford and Eccles that it is one part and much more needs to be done, including investment in the BBC and elsewhere, such as local radio services. Instead, we have this dispute.
We also need to ensure proper investment in local journalism. There have been some developments under this Government to support local journalism. Money has been hived into particular support for community journalism, but there is a lot more to do, and that is why the union wishes to engage in a full consultation with the Government about the long-time future of quality journalism in this country. With those few remarks, I welcome the legislation. We will work on the detail. As I say, we and the unions stand ready to involve ourselves in the consultation on the guidelines for implementation.
Alex Davies-Jones (Pontypridd) (Lab)
As ever, it is an honour to close this debate on behalf of the Opposition. I thank colleagues from all parts of the House for their contributions in what has been a genuinely interesting and insightful debate. I thank in particular my hon. Friends the Members for Washington and Sunderland West (Mrs Hodgson), for Bristol North West (Darren Jones) and for Salford and Eccles (Rebecca Long Bailey), and my right hon. Friend the Member for Hayes and Harlington (John McDonnell), but also the hon. Members for Hitchin and Harpenden (Bim Afolami), for Boston and Skegness (Matt Warman), for Warrington South (Andy Carter) and for Folkestone and Hythe (Damian Collins) for their contributions. The strength of cross-party feeling in the House today shows that there is a lot we can do together to enhance the Bill, to make it work and to make it effective, and I look forward to pressing further in Committee many of the issues that have been raised this afternoon, with cross-party support from all Members.
We all know that there is a need for change and that regulation of the digital market is vitally needed. That is why Labour supports and welcomes this Bill in principle, delayed though it may be. Since the intentions of this Bill were first mooted in the Queen’s Speech back in May 2022, we have seen the digital world continue to change, to grow and to expand at an incredible rate. We have seen sustained growth in AI technology hitting the mainstream, and tech continues to be a central feature of our homes, workplaces and social lives. At the same time, stories depicting the dominance of social media and online platforms continue to hit headlines on what feels like a daily, if not weekly basis. This Government have failed to keep up, let alone rise and face the challenges of competition in digital markets, and consumers and businesses are left in a state of flux.
Just last year, Google was hit by the largest-ever fine by a European court for thwarting competition and pre-installing its Chrome search engine and apps on handsets as a condition for carrying its Google Play app store. The penalty was colossal, amounting to over €4 billion—the largest ever fine for an antitrust violation.
This failure to encourage more competition in our online space is having a significant impact on both businesses and in terms of stifled opportunities for innovation and consumers, who are now paying the price of online scams and fraud becoming a persistent risk. The cost of this Government’s inaction is significant. That is why Labour broadly welcomes this Bill and will support its progression. If pro-competition legislation is done correctly, the Bill could change the online space for the better, but it is crucial that we first dismantle our understanding of exactly what the digital market even is.
As we have heard this afternoon, businesses operating in digital markets range from social media platforms, such as Meta and Twitter; marketplaces, such as eBay, Tripadvisor and Amazon; and tech-driven companies, such as Google and Apple. We can all agree that we are living through a digital and tech revolution, and the digital economy is transforming how we live our lives. In fact, I am confident in saying that all of us in this place regularly interact with these companies on a daily, if not hourly, basis—it is almost impossible not to. While their business models and innovations change at pace, it is vital that our legislation keeps up too.
Make no mistake: Labour recognises that our lives are clearly enhanced in many ways through digital developments. For one, consumers can seemingly make more informed decisions with greater access to information, and businesses can easily reach mass markets at lower cost. But we are also clear that competition is vital to ensuring that companies continue to innovate, and that markets do not become saturated by monopolies. Ultimately, we all want to ensure that consumers can access legitimate information about, and fair prices for, the goods they buy online.
Businesses operating in digital markets contribute a significant amount to the UK economy each year. They are market leaders, and have more often than not been at the heart of historic innovation and modernisation. Indeed, the Government’s own impact assessment suggested that the UK’s digital sector accounted for more than 1.8 million jobs in 2021 and contributed over £150 billion to the UK economy in 2019. We also know that online platforms typically seek to attract consumers by offering their core services—whether a Google search or a profile on a social media platform—for free. Once they have attracted a significant number of users, or consumers, these businesses then seek to make money from users on another side of the platform, commonly through advertising revenues. It is here that the significant dominance and subsequent need to regulate these digital markets is most obvious.
The CMA’s own research into online platforms and digital advertising from 2020 found that around £14 billion is spent on digital advertising each year in the UK. In the search advertising market, which encompasses search services such as Google and Microsoft’s Bing, Google enjoys more than 90% of the £7.3 billion UK market. It is a similar picture across the display advertising market, where Facebook has more than 50% of the £5.5 billion market. Those incredibly high figures present a clear picture when it comes to the significant market dominance that a few companies have and maintain in the digital space, yet these are relatively unsurprising truths.
I see from my own behaviour, and from talking with colleagues and constituents, that all of us are spending more and more time online and that includes our shopping habits, such as buying tickets. I pay tribute here to my hon. Friend the Member for Washington and Sunderland West for all the work on fair ticketing that her all-party parliamentary group on ticket abuse has done. I look forward to pressing the Government further on some of her points, because there is a definite need to act in this space.
The Under-Secretary of State for Science, Innovation and Technology, the hon. Member for Sutton and Cheam (Paul Scully), will know that I have a lot to say when it comes to the Government’s failures to keep us all safe online, but perhaps I will keep those comments for another day when the Online Safety Bill finally returns to this House. Unfortunately for him, much of Labour’s frustration with this digital markets Bill are similar to those that we have with this Government’s approach to regulating the online space more widely. Change and regulation of digital markets is much needed, because the current model, which sees tech giants able to dominate across multiple fields, is entirely unsustainable. I urge the Minister to consider what message this Government are sending to start-ups that are struggling to break through in the market. In fact, I do not need him to consider it, because I can tell him directly now.
As I have grappled with this overly complex Bill over the past few weeks and months, I have, like the Minister, met with a huge range of stakeholders. A common theme is that many of the small and medium-sized enterprises that currently have no option other than to rely on the market opportunities afforded to them by the likes of Amazon and Google fear negative consequences if they are seen to be speaking out against them. That is an incredibly unique situation, but ultimately it points to the real dominance that certain companies have over a huge range of sectors. From Amazon’s power in the book, e-book and audiobook market, to Apple’s stronghold on gaming and app development, we certainly do not have to look far to see examples of exactly how dominant a few of the big giants truly are.
In 2021, the CMA found that Apple and Google were able to earn more than £4 billion of profits that year from their mobile businesses in the UK over and above what was required to sufficiently reward investors with a fair return. That is an incredible figure and—make no mistake—it is only going to get worse as these companies seek to dominate new industries well into the future. That is why Labour welcomes this Bill, and it is good and right that it is making progress today.
However, we do have significant concerns that the legislation could be watered down later on, as has been expressed by hon. Members on all sides of this House. First, we know the dominance that big companies have in our markets and economy, but their dominance absolutely should not extend to writing our legislation. As with so many other policies announced by this Government in recent years, I have genuine concerns that this Bill will be watered down during its passage, and that small businesses and consumers will continue to pay the price because the Government are simply too scared to do the right thing.
I share the concerns of Members on both sides of the House—namely, my hon. Friend the Member for Bristol North West and the hon. Member for Hitchin and Harpenden—about parliamentary scrutiny and oversight of the regulatory body. It is absolutely vital that the CMA has a direction from this Parliament of what policies should be in its primary focus, and I am keen to explore that further in Committee. I hope the Minister can give us some reassurance on this particular point, because I know it is a concern that, as I have said, is shared by many Members.
Secondly, I am also keen to seek some reassurance from the Minister that the Digital Markets Unit will be empowered to draw on the work that has been done in the past few years, so that once this Bill is finally on the statute book, it can hit the ground running. As the shadow Minister, my hon. Friend the Member for Feltham and Heston (Seema Malhotra), stated, the Government first established a digital competition expert panel tasked with examining competition in digital markets way back in 2018, which is over five years ago. None of us wants to see any more time wasted, so I hope the Minister can assure us all that he will work hard to enable this regime to get going from day one.
Thirdly, there is some ambiguity in this Bill about how effective the appeals process is in its current form and whether it will actually force change at the heart of big tech companies. I am keen to hear why he has chosen not to place a statutory time limit on the appeals process. We know that the big tech companies are often able to buy time for themselves, so I am interested to hear why the Bill has failed to introduce a formal time constraint to ensure total compliance by those at the heart of Silicon valley.
Lastly, thanks to the Government’s delay in bringing forward this Bill, the sector is unlikely to see any real change for some time to come. Even once this is over the line having reached Royal Assent, the regime will likely take another 12 months, as a minimum, to truly start having an impact. This cannot be news to the Minister. Given how much time has passed and how much this Government have previously pandered to top bosses in Silicon valley, he must do more research and do more to reassure us that this Bill really will have the teeth to change and dismantle the digital monopolies. We recognise that this is difficult—it is a difficult balance—but a pro-competition regime is urgently needed, and that need not be mutually exclusive of an appreciation and understanding of the huge contributions that platforms such as Google and Amazon have had in our daily lives.
To conclude, as with issues related to online harm and data regulation, it is a shame it has taken so long for the Government to act on yet another issue that we all knew of many years ago. This Bill is needed, but we need to make sure that it looks to the future and is sufficiently well future-proofed and flexible to deal with the incredibly fast-paced industry that it seeks to look at. I look forward to working with colleagues to address some of these serious shortcomings in Committee, and I look forward to working with Ministers as the Bill progresses.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
It is a pleasure to follow what has been an excellent debate. We have had some great contributions from the hon. Member for Feltham and Heston (Seema Malhotra), my right hon. Friend the Member for Wokingham (John Redwood), the hon. Member for Gordon (Richard Thomson), my hon. Friend the Member for Folkestone and Hythe (Damian Collins), the hon. Member for Bristol North West (Darren Jones), my right hon. Friend the Member for Calder Valley (Craig Whittaker)—he made an important intervention, which I will come back to in a minute—my hon. Friend the Member for Boston and Skegness (Matt Warman), the hon. Member for Washington and Sunderland West (Mrs Hodgson), my hon. Friend the Member for Warrington South (Andy Carter), the hon. Member for Salford and Eccles (Rebecca Long Bailey), my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami), the hon. Member for Richmond Park (Sarah Olney), my hon. Friend the Member for North West Norfolk (James Wild), the right hon. Member for Hayes and Harlington (John McDonnell) and, of course, the hon. Member for Pontypridd (Alex Davies-Jones).
I will cover some of the issues, but I just want to say that it is great that we are holding this debate on the 100-day anniversary of the formation of the Department for Science, Innovation and Technology—and indeed on the Secretary of State’s birthday. That gives us the sharp focus we need as we bring in this important legislation, which I am glad to say has been welcomed right across the House. It is no exaggeration to say that the world is looking on at us in this forum. Yes, the European Union has the Digital Markets Act, but we have a less prescriptive, more flexible approach that other countries are looking at. If we get this right—it is important that we get it right, but also that we bring the Bill in quickly so that we get its effects quickly—hopefully there will be fewer regulatory environments around the world and we will give businesses certainty, rather than having 120 different regulatory environments, which makes it even more confusing for companies in adhering to them.
We heard Labour’s position on subscription traps, and my hon. Friend the Member for North West Norfolk gave the other side of the argument in saying that our approach to subscription traps was a little too prescriptive. The Government analysed consultation responses from last year, and we believe we are implementing measures that best balance the benefits to consumers and the associated cost to businesses. We have drawn the delegated powers as tightly as possible, and any broad or major change to the law will be subject to the draft affirmative procedure and must be laid before Parliament and approved by both Houses—we have been careful about that.
The hon. Member for Gordon raised a couple of measures including the right to redress. A range of consumer-related measures come under the scope of the Retained EU Law (Revocation and Reform) Bill, but the core protections in the Consumer Rights Act 2015 continue to apply. We have been careful and clear that we maintain measures that are necessary to fulfil our international commitments, and that will definitely apply to consumer protection. We have always set the highest standards for consumer protection.
The hon. Gentleman also talked about greenwashing and drip pricing. Under current legislation, the CMA is able to tackle those harms, and it is committed to doing so. For example, it has issued guidance to help businesses comply with their existing obligations under consumer protection law when making environmental claims, and in recent years it has acted on drip pricing, particularly in the holiday and travel sectors. The Government are undertaking research to understand the prevalence of drip pricing and its impact on UK consumers. The power to add to the list of banned commercial practices in the Bill will allow us to act swiftly to tackle specific online harms should there be sufficient evidence to warrant further action on specific practices in future.
My right hon. Friend the Member for Calder Valley, who is not in his place, intervened to ask about charity lotteries. In that instance, because a consumer donates regularly to a charity but does not have receipt of a good, a product or digital content in return, that will not meet the definition of a subscription contract. Therefore, those charitable donations do not need to be included in the exclusions set out in schedule 19, as they are not in scope in the first place.
The hon. Member for Bristol North West spoke about growth duties. Driving innovation, investment and growth should be at the heart of what our regulators do. The growth duty does not currently apply to Ofwat, Ofgem and Ofcom, which regulate sectors that account for 13% of annual private UK investment. As I announced on 10 May, in the coming months the Government intend to consult on reforms to regulation with economic regulators, and on how best to promote growth with utilities regulators. That might include consideration of a growth duty, or it may be done via other routes. The hon. Gentleman also asked about the digital regulation cooperation forum, and regulators that comprise the DRCF are already accountable to the Government and Parliament on an individual basis. We engage closely with them at every level through official channels to understand and inform its strategic priorities and identify opportunities for collaboration and knowledge sharing.
My hon. Friend the Member for Boston and Skegness spoke about the possibility for mission creep at the CMA and about interoperability. I agree that interoperability is important for making digital markets more competitive. Conduct requirements in the Bill could be used by the DMU to set clear expectations about interoperability and to prevent an SMS firm from restricting it between designated digital activities and products offered by other firms. If there is evidence of a specific competition problem, pro-competitive interventions will allow the DMU to design targeted interventions. It could, for example, require an SMS firm to allow app stores other than its own to be downloaded and used on its mobile devices.
John Redwood
Do Ministers as a matter of course invite in leading regulators for at least annual reviews of corporate plans, budgets and performance?
Paul Scully
Many of the regulators will be under the remit of the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake). Indeed, that is something that I did—
Paul Scully
I just heard the verbal nod from him to say that he continues to do that.
I will come to the CMA in a second. In answer to the hon. Member for Washington and Sunderland West, whom I congratulate for the APPG’s work, the CMA is continuing to monitor the online secondary ticketing market, including the issues that have been reported about refunds and cancellations as a result of the pandemic. The Government welcome the CMA’s report, but we believe that we have the measures in place to ensure that consumers have the information that they need to make informed decisions on ticket resales. The Bill will give the CMA significant new civil powers to tackle bad businesses ripping off consumers, so we do not see the need for additional regulatory powers. However, I agree with her that enforcing the existing regulations is key. I thank her for her work in this area.
I will briefly cover some of the other issues. On judicial review, which was raised by my hon. Friend the Member for Hitchin and Harpenden, we have heard that the entire purpose of the Bill is to ensure that we tackle an area where a small number of companies have dominance in many parts of our lives. That is not necessarily a bad thing, so this is not an attack on big tech. None the less, some of the challenger firms mentioned by the hon. Member for Pontypridd, although they may be household names, are rightly scared because of the relationship they have with big tech. We must get the balance right by ensuring that there can be an appeal on judicial review standards, but it must not be something that a company with deep pockets can extend and extend. Because the harms happen so quickly in a tech business, the remediation needs to take place as quickly as possible.
Paul Scully
I will finish the point and then I will happily give way. Judicial review will still subject decisions to careful scrutiny. The CMA will have to justify how it arrives at its decisions, and the competition appeal tribunal will be able to quash decisions if there have been flaws in the decision making or if processes have not been adhered to. There will be a participative approach to regulating the sector, with SMS firms being consulted formally and informally to help ensure that actions are reasonable and proportionate. The CMA will also be required to publish guidance on how it will take major decisions and publicly consult before making decisions such as designating a firm with SMS, making PCI orders and imposing conduct requirements. Indeed, companies will be able to make a full merits appeal should there be a penalty. Does my hon. Friend wish to intervene?
Paul Scully
The CMA remains accountable to Parliament. That will not change. The CMA already has to present its annual plan to Parliament following a consultation, and that will continue. The CMA’s board and staff may also be called to give evidence before parliamentary Select Committees. The Government will continue to appoint the CMA’s key decision makers, including its board, as well as providing the CMA with a strategic steer, highlighting key areas of focus. It will continue to be accountable for its individual decisions via appeals to the competition appeal tribunal, the specialist judicial body with existing expertise, and, in relation to its new powers to inform consumer protection laws, via appeals to the High Court. I have talked about how the CMA is operationally independent, but if the DMU is seen or felt to be going off track, the CMA’s board is accountable to Parliament, so it will be responsible for all decisions in the new regime.
Dominic Raab (Esher and Walton) (Con)
I certainly support the Bill. The Minister is talking about the importance of checks as well as agility in how the CMA operates. It is unclear, and there are different views about, whether AI will increase concentration in the digital and tech sector or increase competition. Is he confident that the CMA will have the tools to deal with whatever effect AI has on the market in five to 10 years’ time?
Paul Scully
Indeed, we have to keep this under review because AI is moving at such a pace. The AI White Paper is under consultation at the moment, and we are looking at its impact and how we will regulate it. The Bill has the flexibility to be able to cope with a number of issues, but clearly we must keep this area under review. Indeed, the DMU must be able to cope with that as well. Many people asked about that.
There are currently about 70 people working in DMU roles, with many more working on digital markets issues across the CMA. The CMA itself will continue to assess what level of staffing it will need. It has the data, technology and analytics unit, which is a world leader in technical expertise and has invested heavily in building its capability ahead of the new regime coming into force. I therefore think it has the expertise, know-how and wherewithal to be able to respond to AI and so on.
Finally, I will quickly address some of the other issues that have been raised. One question from a number of Members was whether technology giants could avoid anti-trust action if they proved that their behaviour benefits consumers and whether the DMU is being given sufficient powers. The DMU will combine a participative approach with the use of formal enforcement powers. The conduct requirements are tailored rules that govern how the most powerful tech firms designated with SMS are expected to behave. The conduct requirements will prevent practices that exploit consumers and businesses, or exclude innovative competitors. Where urgent action is needed on a suspected breach of conduct requirements, the DMU will have the power to make an interim enforcement order to protect consumers before irreversible harm occurs, so a court injunction is not always necessary. If a firm fails to comply, the DMU will be able to use a robust toolkit of financial, reputational and legal mechanisms to deter and punish non-compliance, so we do not have to stretch out the timescale right to the very maximums.
I think we have the balance right, but I look forward to working with colleagues throughout the passage of the Bill. We want to get it right, but we have to get it in place as quickly as possible so we can operationalise it and really see the benefits. There is innovation that is at risk of being lost if we do not allow, as best we can, challenger techs to have a level playing field to proceed in the years to come.
Question put and agreed to.
Bill accordingly read a Second time.
Digital Markets, Competition and Consumers Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Digital Markets, Competition and Consumers Bill:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 18 July.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Consideration and Third Reading
(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.
Other proceedings
(7) Any other proceedings on the Bill may be programmed.—(Julie Marson.)
Question agreed to.
Digital Markets, Competition and Consumers Bill (Money)
King’s recommendation signified.
Motion made, and Question put forthwith (Standing Order. No. 52(1)(a)),
That, for the purposes of any Act resulting from the Digital Markets, Competition and Consumers Bill, it is expedient to authorise the payment out of money provided by Parliament of:
(1) any expenditure incurred under or by virtue of the Act by the Secretary of State or the Competition and Markets Authority; and
(2) any increase attributable to the Act in the sums payable under or by virtue of any other Act out of money provided by Parliament.—(Julie Marson.)
Question agreed to.
Digital Markets, Competition and Consumers Bill (Ways and Means)
Motion made, and Question put forthwith (Standing Order. No. 52(1)(a)),
That, for the purposes of any Act resulting from the Digital Markets, Competition and Consumers Bill, it is expedient to authorise:
(1) the charging of a levy by the Competition and Markets Authority in connection with the regulation of competition in digital markets; and
(2) the payment of sums into the Consolidated Fund.—(Julie Marson.)
Question agreed to.
Digital Markets, Competition and Consumers Bill (Carry-over)
Motion made, and Question put forthwith (Standing Order. No. 80A(1)(a)),
That if, at the conclusion of this Session of Parliament, proceedings on the Digital Markets, Competition and Consumers Bill have not been completed, they shall be resumed in the next Session.—(Julie Marson.)
Question agreed to.