Grand Committee
(9 months, 3 weeks ago)
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The Deputy Chairman of Committees (Lord Ashton of Hyde) (Con)
My Lords, I do not expect it but, if there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Digital Markets, Competition and Consumers Bill
Wednesday 31st January 2024
(9 months, 3 weeks ago)
Grand CommitteeRead Full debate Digital Markets, Competition and Consumers Act 2024 View all Digital Markets, Competition and Consumers Act 2024 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 12-IV(b) Amendments for Grand Committee (Supplementary to the Fourth Marshalled List) - (31 Jan 2024)
“Duty of the CMA: Citizens interest provisions(1) The Enterprise and Regulatory Reform Act 2013 is amended as follows.(2) After section 25(3) insert—“(3A) When carrying out its functions in relation to the regulation of competition in digital markets under Part 1 of the Digital Markets, Competition and Consumers Act 2024, the CMA must seek to promote competition, both within and outside the United Kingdom, for the benefit of consumers and citizens.””Member’s explanatory statement
This new Clause would give the CMA a duty to further the interests of citizens—as well as consumers—when carrying out its digital markets functions under Part 1 of the Bill.
Baroness Jones of Whitchurch (Lab)
My Lords, Amendment 80 raises the particular issue that was raised at Second Reading: whose interest is the CMA defending? Is it just the users of the product or service, or is there a wider citizens’ interest that needs to be taken into account? I am grateful to the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Kidron, for adding their names to this amendment and I look forward to hearing from the noble Lord, Lord Tyrie, on his amendment.
Part 1 has a specific focus on identifying the big tech companies that are so large and powerful that they can be categorised as having “strategic market status”. From the CMA’s operational plan, we know that it aims to identify three or four of these companies, in the first instance, for deep scrutiny about their behaviours and anti-competitive practices. We have a good idea which companies are likely to be in the frame for all this. They are increasingly fundamental to our lives: they help to run our public services, they store our personal data, they shape our purchase choices and social activities, they underpin our research and innovation, and they help to determine the health of our economy. Their wealth is bigger than that of many of the UK’s trading partners and, if they took their business elsewhere, our economy would certainly suffer.
When Part 1 talks about the CMA having regard
“in particular to the benefits for consumers”
that its conduct requirements will bring, you begin to wonder how it will identify the consumer interest, because, in this context, we are all consumers. We argue that this is no longer a transactional process where an individual consumer buys a product or service from one of these companies. Whether we like it or not, the behaviour of these companies influences all our lives, even if, as individuals, we do not engage in the digital world. Of course, this impact will be magnified as the AI applications speed up across our lives and as public services become digitalised.
Our amendment poses the challenge of why the CMA is acting only for consumers when it should be acting in the interests of all our citizens to ensure protection of the greater good. We raised this issue with Ministers when we met them recently and they helpfully sent a follow-up letter, conceding that the DMU taskforce had recommended that the DMU’s overarching statutory duty should be
“to further the interests of consumers and citizens in digital markets”.
It was recognised that competition in digital markets had deep interactions with a range of other issues, such as data privacy and media plurality.
However, the Government rejected the citizens’ interest proposal on the basis that it created some unhelpful overlaps with other regulators. We accept that there is some overlap with the other regulators, particularly Ofcom, but we argue that there are also large swathes of digital competition that do not easily fit under the remits of other regulators. As such, in many digital activities, no one is protecting the interests of citizens as a whole. Also, there is already a requirement for the DMU to consult key regulators before it makes an intervention, which would enable any overlap to be addressed at that point. While the Government are concerned not to make the remit of the DMU too broad, we counterargue that they risk making it too narrow if they do not add in a citizens’ interest provision.
This is clearly a probing amendment and we may well not have found the right wording, but I would be interested to hear the views of other noble Lords about whether these definitions should be broadened to encompass the interests of all citizens in the deliberation of the CMA. I beg to move.
Lord Tyrie (Non-Afl)
My Lords, as well as speaking to Amendment 80, I will say a few words about Amendment 83A in my name, which is in some ways related.
The point just made was extremely important and correct: in whose interests are these bodies acting? The answer should always be people—all of us. Commissioner Vestager, responsible for competition in Brussels, made exactly this point in evidence on several occasions and in a couple of major speeches. She is a far-sighted and bold competition Commissioner. In practice, we are all consumers, so the word “consumer” should probably catch it, but it may not convey quite as much to the public as we would like.
My amendment was triggered by an exchange that I had with the noble Lord, Lord Vaizey, earlier in the scrutiny of the Bill. In response to a question of his to the Minister, I suggested that the CMA always operates under a duty to be proportionate. When I said that, I had in mind not so much the implications of the Human Rights Act for its effect on proportionality but a more general duty to respect best regulatory practice, under which specialist regulators operate, as far as I know. Usually, this is understood to mean transparency, accountability, proportionality, consistency and, where relevant, action targeted only at cases that really require it. Some people talk about efficiency and economy in the same breath. Although I have not found that in any statute, I expect that it is to be found in various statutes.
I have subsequently checked some of this out with the House of Commons Library and others. First, a duty such as I describe is written into the Water Act, the Gas Act, the Electricity Act and the Communications Act, among others, with very similar wording to that which I have just cited. In other words, Ofwat, Ofgem and Ofcom are all subject to such a duty. I have also checked that these duties are justiciable.
Secondly, I made another, unexpected, discovery. As a result of this legislation, the CMA will become an outlier among these specialist regulators. By this legislation, we are giving the CMA specific specialist responsibilities for the digital sector. In other words, it becomes a sector regulator. But, unlike with the other specialist regulators that I have just listed, no such statutory duty to adhere to the principles of best regulatory practice will be required of it. My amendment would correct that omission.
Late last week I discovered that the City of London Law Society had made roughly the same point in its submission on the Bill. The wording in my amendment is pretty much taken from that submission. At the time I tabled it, I had not discussed it with the City of London Law Society and, since then, I have had time only for a couple of minutes with it on the phone. I cannot think of a good reason for not applying this duty to the CMA, but I can think of plenty of reasons why it should be applied.
These duties on public bodies can appear to be little more than motherhood and apple pie but, as I have discovered over the years, they can influence behaviour in powerful public bodies in quite a big way, and usually for the better. I will illustrate that. Take an accounting officer who comes under pressure to do something that he or she considers inappropriate. That happens not infrequently, as those of us who have been on the inside, or on both sides, of the public body fence will know. With a statutory duty in place, the accounting officer is much better protected and placed to be able to say, “I’m not going to go ahead with that”. That is no doubt one of several reasons why these specialist regulators have these duties imposed on them: they serve as a reminder, a backstop, for securing good conduct from those at the top of organisations, particularly those with a high degree of statutory independence.
Now, the Government—on advice, no doubt—will point in response, probably in just a moment, to codes of conduct, guidelines and other documents that already require good regulatory practice. I can see the Minister smiling. I know most of these documents quite well—as a matter of fact, I contemplated reading them out myself, but I will spare the Committee that pain and leave it to him to take the flak. The department’s impact assessments should work, in principle, to provide some of the heavy lifting as well, and they are audited by the NAO. I have seen that scrutiny in action, and it does far less to improve behaviour than a statutory obligation. It is the latter that really concentrates the mind.
More and more as we examine the Bill, the absence of a general duty on the CMA seems to be of a piece with the approach taken right across the draft legislation. We are creating a body with unprecedented powers and unprecedentedly feeble avenues for the securing of accountability. We are creating ideal conditions for executive overreach. All the necessary ingredients are being put in place as we legislate here.
First, there is the long history of patchy to poor scrutiny by Parliament, particularly by the Commons, of the CMA. As I may have pointed out on more than one occasion, I was its very first chairman ever to appear before the BEIS Select Committee, and I secured my audience by request—I said that I really would like to come along—which gives you an idea of the distance between the committee and the activities of the CMA. Of course—and I do not mean this disparagingly to anybody in this House—it is the Commons Select Committee that really counts when it comes to delivering punchy cross-examination and accountability, or at least counts most.
Parliament could do a better job, which I think was the point that the noble Baroness, Lady Stowell, made on Monday, but it would be a profound mistake, even if we got the improvements that she is proposing, to rely exclusively on Parliament to do the heavy lifting.
The first reason why we need this amendment is that we do not have much parliamentary scrutiny. Secondly, we have a body with a historically weak board, with most of the important decisions already delegated to the most senior executives, mixed-quality governance at best and a history of patchy to poor non-executive challenge of executive decisions. I realise that it is concerning that an ex-chairman should feel the need to put that on record, but it is necessary. Thirdly, as things stand, we are protecting the CMA from any substantive review at all of decisions on digital, which is a discussion we had earlier with respect to JR.
A fourth reason why this amendment is needed is that it now seems that the body is to be exempted from the core duties to conform to best regulatory practice which have been considered essential for all other sector regulators that I have checked out. My amendment would rectify that problem at least. I hope that the Minister will look favourably on the suggestion.
Baroness Kidron (CB)
My Lords, I support Amendment 80, to which I added my name. I will also say a few words about Amendment 83A in the name of the noble Lord, Lord Tyrie.
I fear that the word “citizens” might meet the same fate as the word “workers”. The argument will be made that it extends the CMA’s remit in ways that might overburden, create a lack of focus or overlap. However, the digital world has several characteristics that support the amendment in the name of the noble Baroness, Lady Jones, which would add “citizens” to “consumers”.
Lord Clement-Jones (LD)
My Lords, I strongly support Amendment 80 in the name of the noble Baroness, Lady Jones, which I have signed. She spoke powerfully about the power of big tech and its impact on democracy. My concerns, and those of many news organisations such as the Public Interest News Foundation, the News Media Association and the Professional Publishers Association, are consistent with that: we are all concerned to ensure the plurality of media as far as possible, as the noble Baroness, Lady Kidron, mentioned. She also helpfully reminded us of the duty of Ofcom, in Section 3 of the Communications Act, to
“further the interests of citizens”.
It seems to me that the CMA should be subject to exactly the same duty.
Local, specialist and national publishers are an essential part of the fabric of our society. On these Benches, we may have arguments, post Leveson, with some of the mainstream media about the appropriate legislation that should impact on it, but the media play a key role in promoting democracy, by scrutinising the Government with public interest journalism. Additionally, publishers provide vital support to industries, which often rely on the trade press to inform sectoral decision-making and provide what are described as workflow tools. A duty to further the interests of citizens as well as consumers would allow the CMA much better to prioritise media sustainability and more explicitly target anticompetitive conduct that harms media plurality.
It could be argued—I expect that the Minister is going to marshal his arguments—that the current pure consumer focus still allows the CMA to implement solutions that will help to level the playing field between platforms and publishers, but the concern of many of us is that the absence of an interest-of-citizens duty may mean that the remedies that could support a sustainable and plural media and in turn our democracy will be used less effectively than they could be, or not used at all. The argument is powerfully made that we need to include that duty. We have a precedent and there is absolutely no reason why we should not include that in the duties of the CMA.
Turning to the amendment of the noble Lord, Lord Tyrie, Amendment 83A, I feel that this is perhaps something that he expresses throughout the Bill: he has the scars on his back of being the chair of a regulator. It is a surprising omission that these principles are not included. The noble Baroness, Lady Kidron, like the noble Lord, Lord Tyrie, has done her homework and found that the CMA is exceptional in this respect. They both made an extremely good case.
Beyond those principles, how do the Government impose such things as the Better Regulation Framework on the CMA? After all, that is part of the operational standards, if you like, that are expected of a regulator such as the CMA. Not only do I support what the noble Lord, Lord Tyrie, is putting forward, but I also ask how we make sure that the regulator performs its duties in line with what is a relatively new piece of guidance, the Better Regulation Framework, going forward.
The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
As ever, let me start by thanking the noble Baroness, Lady Jones, and the noble Lord, Lord Tyrie, for drawing attention to and initiating this fascinating debate on the objectives of the digital markets regime with these amendments. Most speakers have anticipated many of my arguments in advance, but I hope none the less to persuade noble Lords of their value.
Clear objectives shape the work of the CMA, ensuring that its focus is on promoting competitive markets that drive better services, greater choice and lower prices for individuals and businesses. It is essential, in the Government’s view, that the objectives of the new regime are equally clear and support a coherent and effective regime. Amendment 80 proposes a duty for the CMA to further the interests of citizens, as well as consumers, in its digital markets work. As the UK’s competition regulator, the CMA’s existing statutory duty is to promote competition for the benefit of consumers. Consumer benefits are broad, as has been observed; they can include economic growth, innovation, media plurality and data privacy. An additional citizens’ duty that goes beyond the scope of the tools and the remit of the digital markets regime would reduce the clarity of the CMA’s role, create inconsistency with the CMA’s wider competition and consumer functions and overlap with the remit of other regulators. It is essential that the duties of the regime match the scope of its tools.
Noble Lords can all agree with the noble Baroness, Lady Kidron, and the noble Lord, Lord Clement-Jones, on the absolute, non-negotiable importance of supporting the sustainability of the press in the UK. There can be no doubt about the vital contribution of independent journalism to producing informed citizens and, therefore, democracy in this country. However, it would further confuse the regulatory landscape to require the CMA to consider issues already overseen by other expert regulators, such as online safety and data protection. Instead, the CMA will have a duty to consult other key regulators of digital markets, such as Ofcom and the FCA, where proposed interventions in digital markets impact their regulatory interests. This will ensure that the regime forms part of a coherent regulatory landscape that considers broader policy and societal concerns across digital markets.
I want to reassure noble Lords that the Government considered the advice of the CMA’s Digital Markets Taskforce and its recommendation for a citizens’ objective extensively, before consulting on it in 2021. Those we consulted were generally opposed to a role for the CMA that looks beyond its tried and tested duty to promote competition for the benefit of consumers, since this provides the greatest clarity for the digital markets regime. The CMA has testified in front of the House that it benefits from having a single, clear statutory duty. I again thank the noble Baroness for her amendment and for highlighting these important issues. However, for the reasons that I have set out, I hope that she will feel reassured and comfortable in withdrawing it.
I now turn to Amendment 83A from the noble Lord, Lord Tyrie. It would create a new requirement for the CMA to have regard to the principles of best regulatory practice when carrying out its digital markets functions under Part 1 of the Bill. Let me say at the outset that the Government agree with the spirit of the noble Lord’s amendment. Our 2021 consultation on this regime set out the Government’s principles for the pro-competition regulation of digital markets: that it should be transparent, accountable, targeted and coherent. These principles have informed how the regime is designed in legislation, from the high thresholds that we establish for SMS designation to the targeted and iterative nature of conduct requirements and pro-competition measures. Indeed, we have discussed previously in Committee the wide range of accountability mechanisms for the regime.
Earlier this month, the CMA set out its provisional approach to implementing the new digital markets regime, which aligns with our policy intent. The publication committed to the new regime being targeted, proportionate and transparent. It also included a set of operating principles that reflect the noble Lord’s concerns.
The Government’s strategic steer to the CMA sets out our expectation that the CMA should take a proportionate approach to interventions and minimise burden through transparent engagement with businesses. The CMA explains how it has taken the steer into account in its reporting to Parliament. The CMA’s prioritisation principles and annual plan set out that the CMA will target its work to that which provides the most impact for business and consumers. The proportionality amendments that the Government introduced at Commons Report stage are statutory duties narrowly targeted at conduct requirements and PCIs as the decisions that have the greatest impact on SMS firms. This amendment would introduce a very broad duty for the CMA to have regard to the principles of regulatory best practice for all its digital markets functions. An explicit requirement for the CMA to follow best regulatory practice when carrying out its digital market functions is not necessary.
Lord Tyrie (Non-Afl)
Will the Minister explain why what has been considered necessary for, as far as we know, all the other major sector regulators is not considered necessary for the CMA?
Viscount Camrose (Con)
Indeed. While the noble Lord was speaking, I was trying to look for a counter- example but I have yet to find one. I will look for examples of regimes where this does not apply and communicate that to the noble Lord.
Lord Tyrie (Non-Afl)
I am sorry to intervene a second time. When the Minister is looking for counter- examples, I would be grateful if he kept to the major sector regulators, which are the direct comparator. There are more than 500 significant quangos, and I am sure I would be able to find a few quite quickly.
Baroness Kidron (CB)
Before the Minister stands up, may I ask him whether, if he cannot find a counterexample, this amendment may find some favour with the Government?
Viscount Camrose (Con)
I will actively seek a counterexample and consider the implications of my results.
The CMA has a strong track record of following best regulatory practice across all its functions as an experienced regulator. The Government’s view is therefore that it makes sense to legislate only when it is necessary to do so, and that here there does not appear to be a problem that requires a legislative solution. For these reasons, I hope the noble Baroness feels able to withdraw her amendment.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken in support of my amendment. I am very grateful. A number of passionate contributions were made. Once again, I was impressed by the knowledge of the noble Lord, Lord Tyrie, and his doggedness in pursuing and getting to the heart of some of these issues. We always appreciate his contributions and the learning we get from them. We have described a couple of his previous contributions as a bit of a curate’s egg, but not this one. I agreed with every word he said and I thank him for that. He made his point extremely well.
Having listened to the noble Lord, it is hard not to agree that the CMA should have the responsibility to have regard to the principles of best regulatory practice. We were just debating why the CMA has to be an outlier, given that other regulators already have this duty. The Minister said that he will try to find a counterexample. The challenge to the Minister is, if he cannot find one among the 500 or so that could be there, will he agree to take this away again and have another look at the Government’s position on this? I was certainly persuaded by the noble Lord, Lord Tyrie, and I think other noble Lords were as well.
I thank the noble Baroness, Lady Kidron, who made a very thoughtful speech. She has been in this field a lot longer than me. As she said, consumers and citizens are two sides of the same coin and, unlike consumers, citizens have a long-term interest. That is the big difference. We need to take that long-term view. She also rightly asked who is defending the interests of future consumers—that is, children. I am not sure that the Minister addressed that issue. I hope that the CMA would have a responsibility to do that. Both she and the noble Lord, Lord Clement-Jones, made the point that Ofcom already has a duty to further the interests of citizens, so I hope that the Minister bears that precedent in mind.
I listened to the Minister and we agree that the CMA needs clear objectives—it has been a theme running through all our earlier debates—but then we get to how to distinguish between the interests of consumers and citizens. In the digital world, in particular, they run into each other. It is not a simple buyer-and-seller market, but a lot more complicated, as a number of noble Lords have said. It is not clear who are consumers, rather than citizens, and what impact the CMA’s decision is having on them. We argue that we need to revisit this issue in the digital world.
I tried to head off the Minister before he spoke about the problem of regulators’ overlap. The fact is that a lot of the business that we are dealing with is not traditionally covered by other regulators, so there is a regulatory gap and it needs to be addressed.
I can see that I have not persuaded the Minister, but I have not given up. I think we are right and that we will probably carry on pursuing the issue but, as I said at the outset, I am not sure I got the wording of my amendment right. We will reflect on what the Minister said and may come back to this later but, meanwhile, I beg leave to withdraw my amendment.
Lord Offord of Garvel
“(c) references to the supply, provision, acquisition or use of goods or services include the supply, provision, acquisition or use of digital content.”Member's explanatory statement
This amendment confirms that references to the supply, provision, acquisition or use of goods or services include the supply, provision, acquisition or use of digital content.
Lord Clement-Jones
Member's explanatory statement
This amendment would restore exemplary damages for collective proceedings, which subsection (1) seeks to remove.
Lord Clement-Jones (LD)
My Lords, I feel that the first cracks in government certainty are beginning to appear. We live in hope that they will increase as time goes on, with the strength of the amendments being put forward today. I will move Amendment 85 and speak to Amendments 86 and 87. I thank the noble Baroness, Lady Jones, for her support for my Amendment 85.
Clause 125 provides for exemplary damages, but explicitly states that they are not to be available for collective proceedings. The usual category of damages for competition law is breach of statutory duty and compensation for harm done and loss incurred. Where, for instance, a platform illegally harms 1,000 businesses, it harms competition but pays out only to those that plead, prove that their harm was caused by the action of the platform and prove their losses in each case. Abuse of dominance by digital platforms affects thousands of businesses; while platforms make multiple billions in profits, abuse may be identified and fines imposed, but competitive markets are damaged and those harmed are often not compensated. This makes the incentive to breach very high and the incentive for compliance very low.
The purpose of exemplary damages, which strip the wrongdoer of their gains, is to incentivise compliance with the law. They are available only where deliberate breach of the law can be proved. This is more likely where breaking the law makes economic sense for the defendants, such as where it has a major impact on a lot of small players that cannot each afford to take a case. Where many are harmed by deliberate illegal action, there is in fact an even greater case for exemplary damages being available. Government recognition that they should be available should be extended to all cases, including collective proceedings.
Exemplary damages are awarded where the defendant will have known in advance that their actions are likely to break the law but decides to go ahead anyway, as they will make more money from breach of the law than from compliance. This is often the case where a calculation is made about the income generated from many and the risk of claim from only a few. The famous Ford Pinto case, where exemplary damages were awarded, was such a case. Ford’s Pinto had a petrol tank that was prone to catching fire when in a crash. Ford calculated the personal injury costs and claims and, rather than recalling the cars and fixing the problem—which would have cost a lot—decided to leave the car in circulation. The risk of claims and payout was calculated to be less than the cost of fixing it. Ford did a cost-benefit analysis and carried on with production. The US courts awarded exemplary damages to ensure that the law was observed. The idea of the right of a court to award exemplary damages is to prevent the defendant profiting from its own wrongdoing. As such, it strips the wrongdoer of the profits gained from the breach and incentivises the defendant to comply and uphold the rule of law.
Failure to be available in collective proceedings looks to be inconsistent with the principle of incentivising defendants to comply and promote the rule of law. Where exemplary damages are claimed in the case, the claimant can seek disclosure of relevant documents from the defendant. As such, the availability of the prospect of exemplary damages will help to uncover deliberate breach. Any proceeding—including collective proceedings—is equally likely to uncover deliberate breaches. The only difference between collective and other proceedings is that collective proceedings affect a category of claimants.
These amendments would ensure that these damages are available in collective proceedings, which are much more likely to uncover deliberate breaches affecting many people. I look forward to hearing what the Minister has to say, but it seems extraordinary that they have been excluded by Clause 125.
I will not steal any of the thunder of the noble Lord, Lord Tyrie, as regards Amendment 128ZA, but I have a terrible feeling that this is another of his Trojan horses being wheeled into proceedings. I very much look forward to what he has to say and thank him in advance for the copy of his letter to the Prime Minister, which rather gives the game away as regards the consumer duty. I beg to move.
The Deputy Chairman of Committees (Lord Ashton of Hyde) (Con)
My Lords, I must inform the Committee that if Amendment 85 is agreed to, I will not be able to call Amendments 86 and 87 by reason of pre-emption.
Lord Tyrie (Non-Afl)
My Lords, I have a couple of amendments in the group on which I would like to speak. They are only dimly related, although I have started to think about ways of connecting them for the purposes of making things vaguely interesting and coherent to the Committee. It is a fairly hotchpotch grouping on that account.
The first amendment I will speak to is on the review of the CAT that I propose. The Competition Appeal Tribunal is a crucial part of the UK’s competition machinery. Its legal work is highly respected and adds credibility to the framework of law in the area as a whole. High-quality legal scrutiny gives firms confidence that they will be treated fairly. From an international perspective, fairness before the law is arguably the UK’s biggest single asset, well ahead of several others often discussed, such as the nexus of high-quality consultancies, top-flight accounting, the attraction of London as a location, time zones, language and even golf courses, which sometimes get a mention.
Baroness Stowell of Beeston (Con)
I am sorry to interrupt my noble friend—if he will allow me to call him that—who is making some incredibly important points. I know that he is a stickler for these things, but this was just about how much time we have and length of speeches. That is all. I am sure that he does not want to underplay the power of his argument.
Lord Tyrie (Non-Afl)
I have to ask the noble Baroness to bear with me for just a short while. I am being asked to speak to two amendments simultaneously, both of which are quite important, particularly the one that we are on now.
I said a moment ago that I would address some of the objections that Ministers may have heard from the department. One will have been that the CMA’s mission statement and underlying purpose implant a focus on consumers into its bloodstream. It is true that the consumer interest forms part of the CMA’s mission statement—it was found on the walls of its offices when I joined—but it is certainly not in its bloodstream. Few organisations with a responsibility to protect consumers have ever been more remote from consumers than the CMA. The intellectual framework behind the statute that it is trying to enforce is similarly abstract and technical. A consumer duty will put the consumers’ interests firmly into the CMA’s bloodstream.
A second argument against the duty that I think the Ministers will have heard will no doubt be that if the CMA takes action on competition, the consumer will always pick up the benefit. In its pure form, this is straight back to the Chicago school justification for competition policy—the approach rolled out across the world 25 years ago. A heap of academic work has now cast doubt on it. In any case, we do not need the academics, as the evidence is all around us that acting on competition alone has not been enough to stop a growth of consumer detriment and a rise in concentration ratios.
A third argument that no doubt will have been put to Ministers is that a consumer duty will get in the way of the Government’s growth objective, but that is based on the mistaken assumption that there is a trade-off between consumer protection and growth—between a healthy, functioning market with caveat emptor and a nanny state. One might characterise this as the free marketeer case against the consumer duty. I am a free marketeer. Many of our markets are not free at the moment; that is the problem. We have a massive and growing asymmetric power in many markets. Nudge, sludge, drip pricing, loyalty penalties and other rip-offs are on the rise everywhere. It is true that we can reduce these abuses by bringing more competition to these markets and that action is overdue, but it has not been strong enough so far to quell the detriment. On the contrary, abuses of market power, both digital and otherwise, have been growing.
The arguments for some form of consumer duty have been set out over the years by those at the sharp end of dealing with detriment for a very long time, not least the consumer groups. I recognise—this will be a relief to the noble Baroness—that the case I have put has touched on only a very small proportion of the arguments that they have developed in great detail over the years. I am strongly tempted, now I have been provoked, to supply her orally with a few of these, but I will resist the temptation. In any case, I have set out a summary of those arguments in numerous forms in writing in 2019-20, and then again just over two years ago. Not much has changed since then, so I will not rehearse those arguments, but I will end by summarising them.
First, a duty will greatly bolster and increase the effectiveness of the duty of expedition and the scope for interim measures that other parts of the Bill will give the CMA. The effect of all three acting together will be much greater than the sum of the parts. Secondly, it will facilitate a change of mindset that is essential for many of our competition regulators, including the CMA. The mindset of the last quarter of a century—that the CMA should restrict itself to acting directly only on competition—was a lot better than nothing, but it has also caused a lot of problems and been partly responsible for the rise in detriment that we can now see around us. Thirdly, a consumer duty will force the courts, particularly the CAT, to give the CMA more scope to act quickly and directly in the consumer interest. Fourthly, unlike most of what we are doing here, it would give us a better prospect of enabling the Government, of whatever political complexion, to have an opportunity to send a clear message to the public that they can expect powerful, independent bodies such as the CMA to act on their behalf.
Lord Holmes of Richmond (Con)
My Lord, it is a pleasure to follow the noble Lord, Lord Tyrie. The Committee certainly benefits from his expertise and experience and he is certainly never hypertrophic.
I shall speak briefly to my Amendment 106, which proposes a new clause entitled: “CMA permission for private enforcement claims”. It is a fairly simple and straightforward amendment and does exactly what the title says. Claimants have to seek permission from the CMA to bring private enforcement claims to the CAT or the High Court. The reason is clear. It is so that when we get to the end of our deliberations the operation of which forum, at what time and by whom is clear and does exactly what Parliament intended. Without this amendment there is potential to bring actions in various fora with different approaches at the same time, potentially muddying the waters and steaming up the windows and not bringing the clarity of procedure which we are seeking to achieve with the Bill.
It is a very clear amendment to have clarity and certainty about which forum at which time and to give the CMA the right to ensure that there is not muddying within the procedure, which is completely avoidable at this stage. I look forward to the Minister’s response.
Baroness Stowell of Beeston (Con)
I shall speak to Amendment 106 in the name of my noble friend Lord Holmes. Before I do, I should just reinforce my sincerity in saying that I think the noble Lord, Lord Tyrie, is making some really important points in his amendments. My concern was only to make sure that he did not lose us in his exposition, which was brilliant. I felt that some noble Lords were starting to drift away, and I did not think that was doing him any service. I want him to know that I am very interested and was tuned in the whole way through.
The reason I want to speak on Amendment 106 is that last week I raised the issue of private litigation and asked why the so-called Ofcom model had not been adopted for the Bill. Just to recap, I point out that the Ofcom model is a measure in the Communications Act which requires private litigants to seek Ofcom’s permission before making a claim to the courts or a tribunal. Its purpose is to avoid the regulator and the courts considering the same issues simultaneously and reaching conflicting findings, as my noble friend Lord Holmes has just colourfully described.
Since I raised this last week, I am very grateful for the Minister’s letter, which has been circulated to all Peers and is now in the Library, which outlined the Government’s reasoning for not adopting the measure in this digital markets regime for the CMA. As noble Lords will have seen from that letter, the Government argue that it would risk politicising the CMA because decisions about whether to approve someone taking a case to the tribunal or the courts would be appealable through judicial review, in the Government’s mind reducing certainty and clarity for stakeholders. They also argue that these issues are less prevalent for breaches of requirements imposed by Ofcom, as the primary route for redress is through the Communications Ombudsman and there is no equivalent function in the digital regime.
The Minister may make the same arguments in response to my noble friend Lord Holmes’s Amendment 106. The reason why I want to raise this again and am taking the opportunity today of doing so is because, even after getting his letter and having further conversations, I remain concerned that leaving the Bill as it stands threatens the participatory approach of the firms designated SMS, because it would disincentivise them to co-operate with the CMA. That participatory approach is critical to the success of the new regime and one of the ways in which it is considered better than the European model. It is also worth knowing that the Digital Markets Act—in other words, the European Commission’s version of this regime—includes a provision to avoid conflict between national courts and Commission rulings.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords who have spoken in this debate. I have added my name to Amendment 85 in the name of the noble Lord, Lord Clement-Jones. He raised an important point about the loss of exemplary damages which could otherwise be awarded for those involved in collective proceedings. In the cases that will be considered under these regulations there may be thousands of small businesses harmed, but only those which prove that harm was done and losses were incurred would be compensated, as the Bill stands. However, it may well be that smaller players cannot afford to take a case, so there needs to be an overarching remedy to ensure compliance with the law, otherwise the defendant may profit from their own wrongdoing. The noble Lord gave some powerful examples to illustrate that. An amendment along these lines should be considered to incentivise the defendants to uphold the rule of law.
The amendment in the name of the noble Lord, Lord Holmes, raises an interesting challenge about the oversight of claims. We agree that it is important that the regulators continue to have a say on the merits of private cases that go to court. They can already intervene in private actions by submitting written observations to the tribunal. The tribunal itself has a role in which it grants a collective proceedings order before a case can go ahead. However, in recent years there has been an increase in the number of private actions brought to court, often by litigation funding firms. These tend to focus on cases where the funders anticipate the largest returns.
In the meantime, the CMA is still trying to focus its public enforcement on cases that will generate the greatest strategic significance and the widest benefit, but its resources are being stretched as the scope of its enforcement power widens. We have to find the right balance between public and private actions to achieve the widest public benefit. We need to take into account the capacity of the Competition Appeal Tribunal to deal with the increased burden of cases. The noble Baroness, Lady Stowell, pointed out that there is a solution to this: the model that Ofcom already uses, which could be used in this case. There may be other solutions, but we need to find a way forward to get this balance right.
At a recent conference Sarah Cardell, the CEO of the CMA, said that the CMA sees public and private enforcement as two complementary parts of a single overall regime. We agree with this approach and, while we are sympathetic to the proposal of the noble Lord, Lord Holmes, we would like to consider the wider functioning of the CAT first.
This leads to the amendments of the noble Lord, Lord Tyrie, who raised significant issues about the workings of the Competition Appeal Tribunal. He obviously has first-hand knowledge of this issue, and I listened carefully to what he said. He shared with us a very deep understanding of the workings of the CAT and the challenges that it faces but, the more that I listened to him, the more that I felt that trying to resolve this with two amendments to this Bill did not seem the right way forward. It felt that this was a bigger issue for another day. Just as the noble Baroness, Lady Stowell, made a fantastic exposition about the issues at stake, I did not want to put my name to those amendments, as I felt that they were too superficial to address the issues that the noble Lord, Lord Tyrie, raised.
Having said that, it might be that a fundamental review of the CAT is necessary or that another way could be found to address this in the Bill. I hope that the Minister listened carefully to the noble Lord’s concern and can offer a way to progress the issues raised by him and others in the debate to ensure that they are addressed. I therefore look forward to the Minister’s response.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
I thank noble Lords for their thoughtful amendments and considered remarks during this debate. I start by speaking to Amendments 85, 86 and 87 tabled by the noble Lord, Lord Clement-Jones, which would enable the CAT to award exemplary damages in collective proceedings.
Clause 125 amends the Competition Act 1998 to allow the courts and the Competition Appeal Tribunal to award exemplary damages in private competition claims involving individual claimants, but not in collective proceedings before it. The competition collective proceedings regime was introduced in 2015. This is an important mechanism allowing redress to be sought on behalf of large groups of customers. The bar on the availability of exemplary damages in collective actions was one of the many safeguards put in place when the Consumer Rights Act 2015 was enacted, to ensure a balanced system of collective actions before the CAT which will not lead to a culture of undue litigation and US-style class actions. These safeguards ensure that defendants are protected by avoiding vexatious and unmeritorious claims—or fishing expeditions—while allowing legitimate claims for redress to proceed, without defendants feeling pressurised to settle, despite the likelihood of a strong defence.
While Clause 125 reverses the complete ban on exemplary damages introduced by an EU directive in 2017, keeping the bar in place for collective proceedings before the Competition Appeal Tribunal remains appropriate for the same reasons that it was put in place when the regime was introduced in 2015. I thank the noble Lord and the noble Baroness, Lady Jones, for Amendment 85 and I hope that he feels reassured and comfortable in withdrawing it.
I turn to Amendment 106 on private enforcement, tabled by my noble friend Lord Holmes of Richmond. I thank him and my noble friend Lady Stowell for their contributions. This amendment would require complainants in private enforcement claims to obtain prior approval from the CMA to bring their cases in front of the CAT or High Court.
The ability to bring private enforcement claims through the CAT is an important mechanism for consumers to seek redress. This amendment would add an extra hurdle for claimants and might therefore reduce their ability to access redress and potentially limit their access to justice. Adopting an Ofcom-style approach would provide a very broad power to the CMA, which would unnecessarily add to the existing range of functions that it currently discharges. While this approach may exist in other jurisdictions, the complexity and size of competition private actions and the well-established jurisprudence of the CAT mean that it would not be appropriate in this context.
The CAT already has a specialised, well-established legal framework through which it manages cases, including certifying collective actions. This amendment would risk overcomplicating the existing framework and unnecessarily bring the CMA into highly complex and contentious litigation. I hope that my remarks have helped to address the concerns of my noble friend Lord Holmes of Richmond and that, as a consequence, he does not press his amendment.
I move now to the review of the CAT and the two amendments put down by the noble Lord, Lord Tyrie. Amendment 107A would require the Secretary of State to conduct and publish a review of the performance, governance and operation of the CAT. I thank him for his amendment and for the expertise and wisdom he brings to our debates. The CAT plays an important role in the UK’s competition regime and in providing avenues for consumers collectively to seek redress. It is right that we consider how the CAT operates to ensure that it effectively fulfils these important roles.
The CAT is already subject to significant review and scrutiny. Under the Competition Appeal Tribunal Rules 2015, which govern proceedings in front of the tribunal, the Secretary of State has a duty to review the CAT rules, including making an assessment of how the rules meet the objectives they are intended to achieve. Indeed, the Competition Appeal Tribunal Rules 2015 are currently under review following a post-implementation review in 2021. This process will ensure that the CAT continues to deliver first-class justice expeditiously.
The CAT is also in scope for the public bodies review programme, which assesses the governance, accountability, efficacy and efficiency of arm’s-length bodies. Moreover, the CAT is already subject to a variety of forms of scrutiny by Parliament and the Government. This includes laying its annual report and accounts before Parliament, ministerial appointments to the Competition Service board and regular ministerial oversight as part of departmental sponsorship arrangements.
Given the crucial role it plays in the competition system, it is right that the CAT is sponsored by the Department for Business and Trade. However, the DBT recognises the important commonalities with tribunals under the purview of the Ministry of Justice, and the CAT president and chairman are appointed by the Lord Chancellor through the judicial appointments process. We also continue to encourage the CAT to engage with its counterparts in other tribunals to continue to develop best operational practice. The scrutiny currently in place ensures that it continues to function effectively and deliver a world-class competition regime. For these reasons, I hope that the noble Lord will not move this amendment.
The noble Lord’s second amendment, Amendment 128ZA, concerns
“Economic interests of consumers duty”.
It would place a new duty on the CMA and the CAT when carrying out their functions to ensure that the economic interests of consumers and their protection from detriment are paramount. This amendment also places a duty of expedition on the CAT. The Government considered this issue when the noble Lord, Lord Tyrie, proposed such a duty in his recommendations to the BEIS Secretary of State in 2019 and concluded that this would not lead to improved consumer outcomes. There was no compelling evidence that an overarching consumer duty would allow the CMA to do anything it could not already achieve within its existing remit or that it would increase enforcement levels.
I thank the noble Lord for raising this important issue. We are in full agreement on the importance of protecting consumers, and the Bill stands testament to the Government’s commitment. The Bill will support consumers through new and improved rights, as well as enhanced powers for the CMA and the civil courts to enforce these rights. New measures will protect consumers’ hard-earned cash, boosting consumers’ rights so they have confidence in businesses and markets. However, we do not believe that placing a further statutory duty on the CMA is the right approach.
The CMA’s existing primary duty is to promote competition for the benefit of consumers. This places a clear, unambiguous and paramount duty on the CMA to deliver with consumer benefit as the end goal. We can see the impact of this work: in the three years to 2021-22, the CMA’s competition work delivered £2.1 billion in average annual consumer savings. This is important to the Government, and we have given the CMA a strategic steer to prioritise action in its discretionary activities that addresses cost of living challenges to deliver better value for businesses and individual consumers.
Lord Clement-Jones (LD)
My Lords, I thank the Minister for his comprehensive reply. Nevertheless, I found it extremely disappointing in respect of my Amendments 85, 86 and 87. There was clearly a period between 2015 and 2017 when exemplary damages were available in collective proceedings. He did not adduce any evidence that an undue litigation culture, as he described it, suddenly arose in that two-year period. His use of pejorative language about an undue litigation culture is pretty unhelpful when we are talking about groups of consumers. Other than saying that this would all lead to an undue litigation culture, he really did not deal with the substance of the reasons for having exemplary damages in these cases: to disincentivise the big tech companies simply carrying on, knowing that they were in breach, with impunity. He did not address that at all.
I do not need to tackle the other amendments as we probably need to move on fairly swiftly, but the Minister was more on point when he talked about Amendment 106, because there is a difficulty with it. We should be more sympathetic to Amendment 107A from the noble Lord, Lord Tyrie, but I agree with him that it concerns a big issue. It would be extremely helpful not just to read Hansard but to bring together some of the information about the reviews of the CAT that have been conducted. I am afraid that one of the phrases we have to take away from today is “the CAT has strayed” —any innocent observer passing by would not know what the hell we were talking about; indeed, I think the other phrase was “hypertrophic”. Anyway, we live and learn throughout this but we need reassurance about the fact that the CAT is under review, that its rules are being changed and that it is fit for purpose. The noble Lord brought that up exactly.
I was also not entirely convinced about where the accountabilities are between the Lord Chancellor, the Ministry of Justice and the Department for Business and Trade. There is more to be discussed there.
Finally, I know that the noble Lord, Lord Tyrie, is a big fan of consistency, but I am in favour of the status quo here: I do not agree with his amendment. I liked the Minister’s “unintended consequences” phrase because, if we took this seriously, in terms of paramount interests of consumers, we could be talking about short-term interests of consumers; that could be used by those who want to predatory price—to offer low prices for a while and eliminate competition, only to raise the prices later. We have seen behaviour like that. It is a favourite game of, especially, the big players, to exclude competitors only to re-emerge and raise prices. There are dangers in this “paramount” language, but the Minister has answered that question. In the meantime, I beg leave to withdraw my amendment.
Lord Sandhurst
“(1A) In section 47C of the Competition Act 1998 (collective proceedings: damages and costs), after subsection (5) insert—“(5A) An agreement under which—(a) the funder agrees to provide financial services or assistance in relation to—(i) the provision of advocacy services or litigation services, or(ii) costs that the funded party is ordered by a court or tribunal or in arbitration proceedings, or is otherwise legally obliged, to pay to any other party in relation to litigation; and(b) the recipient of financial services or assistance agrees to make a payment to the funder in specified circumstancesis not a damages-based agreement.”(1B) Where, before the passing of this Act, a person has entered into an agreement covered by section 47C(5A) of the Competition Act (inserted by this subsection (1A)), that agreement is not rendered unenforceable (or deemed to have been rendered unenforceable) by virtue of section 58AA(2) of the Courts and Legal Services Act 1990 and the amendment made by subsection (3) of that section is treated as having always had effect.”Member's explanatory statement
In response to the decision of the Supreme Court judgment in R (PACCAR Inc) v Competition Tribunal [2023] UKSC to ensure that third party litigation funding agreements in respect of proceedings in the Competition Tribunal will (with retrospective effect) not be unenforceable in competition and consumer law, so such agreements will be treated as never having been subject to restriction.
Lord Sandhurst (Con)
My Lords, my Amendments 88 and 89 are of real practical importance to injured citizens, to consumers and to businesses which have to fight large entities to recover just compensation. Clause 126 was introduced at a relatively late stage in the other place to overturn, with retrospective effect, at least some, albeit only a small part, of the damage done by a decision of the Supreme Court in July of last year in cartel litigation known colloquially as PACCAR. Clause 126 is inadequate: it does nothing like enough to overturn the damage which has been done. That decision rendered unenforceable third-party litigation funding agreements entered into by claimants with third-party funders who underwrite litigation. It did so in a way that surprised most who practise in this area, including many judges, including in the Court of Appeal.
The Supreme Court in PACCAR held—this is the important point—that if a litigation funding agreement is to be enforceable by the funder, it must, in terms, comply with the damages-based agreement regulations. Those regulations were not designed for and do not fit litigation funding agreements. There are no, or few, litigation funding agreements drafted to meet the regulations, so they are not valid, and it is difficult to draft one that would be valid. That has serious ramifications for existing and future claims, because there is no civil legal aid. The court’s decision means—this is very apposite—that the Horizon sub-postmasters would not have obtained funding: it would have been unlawful.
There are other examples: equal pay cases, including a current third-party funded case seeking to enforce the equal pay rights of over 100,000 women; SMEs, such as those affected by unlawful interchange fees imposed by Visa and Mastercard; the PACCAR case, which, I understand, involves 17,000 often small hauliers seeking compensation in truck cartel litigation for over- charging—excessive pricing—by the truck manufacturers; the Volkswagen NOx emissions group litigation, which secured nearly €200 million compensation for United Kingdom consumers and which began outside the CAT; sports injury claims, such as those in the High Court by 300 rugby players seeking compensation for the impact of head trauma; and financial mis-selling claims, such as mortgage and personal pension mis-selling or pension transfer claims and secret commissions claims. All these are now without funding.
I think we all believe that our citizens having access to justice is an essential component of a democratic society. It is important to get redress for injury and to believe that you at least have a chance of going to court to seek redress. You may lose, in which case you pay the costs. In the case of funders, they have to pay the costs for the cases they underwrite which fail. An essential element of encouraging competition and a free market is to ensure that consumers and SMEs have effective access to challenge and obtain redress from cartels and others that abuse dominant positions. Both require access to justice, which must be effective—particularly, but not always, in the CAT.
There are two types of representative action with the CAT: so-called opt-out and opt-in. Opt-out cases account for the vast majority and include high-profile examples such as the MasterCard and PlayStation cases. I understand that there is one example of an opt-in case currently in the CAT, which is the PACCAR litigation involving the hauliers. Although the current Clause 126 will put matters right for opt-out cases only, it will not help the opt-in cases in the CAT, nor will it address conventional bi-party litigation in the CAT, where a small company has to go to a funder to get support to bring action for redress against abuse by a large multinational. Worse still, as I outlined earlier, outside the CAT—that is, in the High Court—the current Clause 126 will be of no effect: it will do nothing at all, so many claimants will have no effective access to litigation funding. Group litigation is their only practicable means. I respectfully suggest that this is not an undue litigation culture, and I hope we will not hear that terminology in this context. The key issue is that the PACCAR ruling affects litigation funding in all courts, not just the CAT, and it is claimants’ only means of bringing such cases.
My Amendment 88 would restore legitimacy in the CAT to funding arrangements in opt-in proceedings and two-party actions, and Amendment 89 would restore legitimacy for consumer and competition cases outside the CAT, but only in those categories. It will not do anything, for example, for the sub-postmasters, rugby players, equal pay cases and many other types of legitimate group action. There will be no access to justice for them as matters stand. They remain in the cold because my much wider original amendment was ruled out of scope—I do not criticise the clerks. I anticipate that the noble and learned Lord, Lord Thomas of Cwmgiedd, will address noble Lords on that.
Finally, Amendment 89A by the noble Lord, Lord Hodgson, is sensible—I see no problem with regulation—but there is not much to regulate at the moment. We have to go further down the road and start with getting funding arrangements back on track. Regulation can follow swiftly. People have looked at this; I think a working party is looking at it at the moment.
I understand that the noble Lord, Lord Arbuthnot, who is here, supports my amendments but will not waste our time, if that is the right word—I mean no disrespect—by repeating what I have had to say. I beg to move.
Lord Thomas of Cwmgiedd (CB)
I will follow what the noble Lord, Lord Sandhurst, said and not waste any time repeating the arguments he so eloquently put. I agree completely with his analysis of the mistaken decision of the Supreme Court in PACCAR, and with his explanation of why it is so disastrous for access to justice. I also agree with his analysis of why it is necessary to put forward the two amendments in his name, which I have had the privilege to co-sign, but I will go further and deal with the cases that cannot be covered.
I will underline the Horizon litigation. I do not think an awful lot of people really appreciate that the Horizon scandal, and the miscarriage of justice that occurred, would never have been uncovered if there had not been litigation funding to support Mr Bates and others when they brought their complicated action against a very wealthy body. In Mr Bates’s recent article in the Financial Times, noble Lords will see, from the perspective of someone seeking access to justice, why litigation funding is important. In it, he said:
“Combined with the strength and stubborn defiance of my colleagues, such financing allowed us to take our case from Fenny Compton Village Hall to the High Court, securing justice, exposing the truth and clearing our names and reputations”.
It is essential that we put ourselves in a position where, for the future, someone in his position—as well as, as the noble Lord, Lord Sandhurst, said, infected blood claims, the equal pay claims and all claims by SMEs and others, such as rugby players—falls not within the scope of these amendments but rather outside it.
We sought to put forward another amendment to amend Section 58AA(3)(a) of the Courts and Legal Services Act 1990, on “Damages-based agreements”. We wanted to add a paragraph that would have read:
“An agreement under which … the funder agrees to provide financial services or assistance in relation to … the provision of advocacy services or litigation services, or … costs that the funded party is ordered by a court or tribunal or in arbitration proceedings, or is otherwise legally obliged, to pay to any other party in relation to litigation; and … the recipient of financial services or assistance agrees to make a payment to the funder in specified circumstances is not a damages-based agreement”.
This would have contained a further provision dealing with the position that that was to be treated as “always having had effect”. As the noble Lord, Lord Sandhurst, said, this was ruled out of scope. I have written to say that, if this matter cannot be resolved, I intend presently to have recourse to the procedure set out in paragraph 8.67 of the Companion to the Standing Orders and ask the House to consider the issue of scope. I gather that this is a rare procedure—with my inexperience, I have never come across it—so why am I prepared to take us down this road? There are a number of reasons, but I will give three.
First, access to justice is a fundamental right, and although I would love us all to have legal aid and bring back the position that used to exist, the pockets of the Ministry of Justice are somewhat empty and it does not have the funds with which to restore that, nor can I see any incoming Government of whatever complexion having that funding either. Secondly, it simply cannot be right, because Magna Carta says we should give justice to all people, to say, “We will provide access to justice to those who fall within the definition of consumer or who can bring their claims before the CAT, but the rest of you, no”. Thirdly, there is an international aspect and, in touching on this, it may be helpful to the amendment put forward by the noble Lord, Lord Hodgson.
I declare an interest in that I sit on the advisory board to a group at the European Law Institute which is looking at the whole question of third-party funding. It is looking at it simply because this is a worldwide issue. It is a worldwide market. The concern I had in relation to making this change broader than in the current amendments is that I want our citizens to be able to benefit from that market and not to be excluded. It is quite clear that the market is enormous. The working group of the European Law Institute, which is chaired, coincidentally, by Mrs Justice Cockerill, who was Judge in Charge of the Commercial Court until last year, contains a number of academics and practitioners drawn from across the world, including America, where this is a problem, and a judge from Australia. It is being taken forward because there is felt to be a need to have a clear statement of principles because this is now such a large industry. It is really a matter for the noble Lord, Lord Hodgson, to consider further, but the kind of work being done—it is anticipated that this body will report towards the end of this year or the beginning of next—may provide principles that either can be used on a voluntary self-regulating basis or will enable regulators or legislators to put in place principles that should apply. This is a worldwide industry and I do not wish people in this country to be excluded from it.
Although I do not wish to invoke this procedure today, I very much hope that the department, together with the Ministry of Justice, will look at this issue and see how we can bring about access to justice for everyone, not just a few, because a technical point of this kind is totally beyond the comprehension of any member of the British public. In this House we should not act in such a way as not to give equal justice and access to that justice to all people.
Lord Hodgson of Astley Abbotts (Con)
My Lords, I have Amendment 89A in this group. It is self-explanatory, in that it would require the Government to undertake a review of the operations of the third-party litigation funding industry along the lines that the noble and learned Lord, Lord Thomas, has just mentioned. I am afraid that at present it is a rather confused, not to say murky, area of activity in many aspects.
I shall come to that amendment in a moment, but before doing so I shall say a few tentative words about my noble friend Lord Sandhurst’s Amendments 88 and 89. I emphasise “tentative” because I am not a lawyer and this is clearly a highly technical legal area. I stand second to nobody in wishing to see access to justice for people, but I therefore want to proceed with caution, in particular having seen the legal and parliamentary talent who have put their names to these two amendments.
I mentioned my concerns to my noble friend Lord Sandhurst, and I mentioned them to the noble and learned Lord, Lord Thomas, en route to the Division Lobby the other night. I do not oppose the amendments outright because I support increased access to justice, but I am not yet sure that we would be wise to bring amendments in quickly without further consultation. Much more importantly, we should think carefully about widening class actions in an industry that is already pretty uncontrolled, totally unregulated and unaccountable. My concerns about Amendments 88 and 89 are about not so much access to justice but the sort of justice we may be accessing. We would need to consider those issues further.
I will leave those amendments there and turn to my Amendment 89A, which concerns an area that I have been following for some time, notably in a debate in your Lordships’ House on 2 March 2017, when I was grateful to have the support of my noble friend Lord Faulks and, indeed, of the noble Lord, Lord Stevenson of Balmacara, who spoke for Her Majesty’s loyal Opposition, as they then were. To make the record clear, I had to declare an interest in that debate that I was chairman of a company that provided data to companies engaged in third-party litigation funding. It provided data but did not undertake the actions. My term of office has now come to an end so I no longer have an interest to declare. That is shown on the register but I want to get it on the record.
What were we concerned about those seven years ago? The first question was: how are the funders rewarded? What is the waterfall, as it is known in the trade? For example, can the funders be reimbursed for all their expenses before the claimants receive a penny, or are 100% of expenses deducted from the sum awarded before arriving at the way that sum is split? For example, if there was a 75:25 split, with the claimants receiving 75% and the funders 25%, you might say that is okay, but if the costs of the case are 40%—they are often high—then they actually get 75% of 60%, so 45% not 75%. Those sorts of things are not made clear. We have referred to the Post Office computer system and the scandal about it. It is alleged that, of the first £58 million awarded, £46 million of that went to the funders—80%. I am not saying that is wrong—it is access to justice and people got £30 million that they would not have got—but I am not sure that would have received great public approval outside in the wider world.
Secondly, who controls the case? A lot of these cases are put into a pool and a lump of money is raised from them—£200 million to £500 million, and more. The people who run the funds like to be able to present the whole thing finished as quickly as possible. Let us suppose I am running a fund with 10 cases in it. Nine have finished and I have a pretty good record. I will press to get the 10th finished quickly because I can then turn to my investors and say, “I’ve got the whole thing wrapped up and you’ve got this return. Let’s do it again for a bigger sum of money”. Who is watching to ensure that the plaintiffs in that case are being looked after and are not being rushed to settle because the funder says, “I’m going to settle, whatever the rights and wrongs of the likely payout may be”?
Thirdly, there is the question of exposure to costs. If a case is unsuccessful, can there ever be a situation where plaintiffs could be exposed to costs in the event of the funders walking away? I think my noble friend Lord Sandhurst said that could not happen. He is a lawyer and I am not, but there is a concern that the plaintiffs could be left holding a baby without knowing they are holding a baby—without knowing how much.
Things have grown at scale. We now have a situation in which the number of cases has grown from about 46 million in 2016 to 340 million today. That means that every Member of your Lordships’ House will, knowingly or unknowingly, be part of an average five different class actions today.
Lord Fox (LD)
My Lords, I know the Minister is a big fan of innovation, so the introduction of some innovative procedure by the noble and learned Lord, Lord Thomas, will no doubt have filled him with delight. We all look forward to seeing how that wheels out.
It is a pleasure to follow the noble Lord, Lord Hodgson, who seemed, if he does not mind me saying so, to list second-order problems. How much split of the award you get depends on whether you can bring the case in the first place. If there is no case, there is no 50:50 or 75:25. Earlier, as memory serves, we talked about individual litigants and their ability to form groups, and the Government were set against that process. Here, we are again talking about a system that avoids or stops people getting together to fight the fight. We should remember clearly the power balance that we are talking about here. In the digital field, I used the example of the top five platforms. Their revenue is on the level of that of nation states. In order to fight battles with people, companies and organisations such as that, there needs to be some ability to come together and find the funding.
I am not a lawyer, but I am persuaded by the arguments advanced by the noble Lord, Lord Sandhurst, and the noble and learned Lord, Lord Thomas. When it comes to what the noble Lord, Lord Hodgson, said, there are of course code of conduct issues; generally speaking, when I have been involved in legislation, things such as codes of conduct arrive in secondary legislation, not as part of the primary legislation. I hope that he can join in debating the principle. He is right that the details of the principle are important, but I suggest that they are a second-order issue. With that in mind, what the noble Lord, Lord Hodgson, said, combined with his amendment, looks a little like long grass—
“Make me pure, Lord, but not yet”.
We need to have the debate that will be initiated by the noble and learned Lord, and others, before we start worrying about the industry code of conduct that comes behind it.
Lord Bassam of Brighton (Lab)
My Lords, the Committee should be enormously grateful to the noble Lords, Lord Sandhurst, Lord Arbuthnot and Lord Carlile, and to the noble and learned Lord, Lord Thomas, for bringing forward this group of amendments dealing with litigation costs in group actions. There is real and practical importance for those who will potentially benefit from this when seeking redress. The noble Lords have persuasively argued the case for the amendments in their names. Indeed, the noble Lord, Lord Sandhurst, gave notice that he would bring forward such an amendment with others at Second Reading. He has been good to his word.
At the time, the Minister, the noble Viscount, Lord Camrose, argued that the Government had,
“urgently addressed the potential implications of the judgment”,—[Official Report, 5/12/23; col. GC 1452.]
in the PACCAR case, which had then recently been decided by the Supreme Court. However, the Government’s solution to the problem is, as we have heard from noble Lords this evening, limited to addressing the issue for some claims in the Competition Appeal Tribunal, leaving a big problem for litigation funding agreements—LFAs—used in other proceedings. We note the Government’s view that the Bill is not the right place to deal with the wider issues, but, as currently drafted, this will create a two-tier system in the UK, whereby claimants would have different rights and different access to financial backing, and therefore different legal support, depending on the court in which they pursued their claims. Having listened to noble Lords, that cannot be right if we are to ensure equal access to justice. As the noble and learned Lord, Lord Thomas, argued, the proposed amendment to Clause 126 goes some way to addressing the issue, by widening the scope of agreements that will be placed in the pre-PACCAR position, but it does not solve the problem for cases outside the CAT.
Of course, back in early December, few of us understood the true import of LFAs, but that was before the TV drama, “Mr Bates vs The Post Office”. Now, of course, we are far more conversant with them, and so are the public. Without such arrangements, the sub-postmasters and sub-postmistresses would not have been able to challenge the Post Office in the courts, and that cannot be right.
Currently, for an LFA to be enforceable by the funder for opt-in and opt-out cases, it must comply with the Damages-Based Agreements Regulations 2013. Those regulations were introduced to deal with contingent fee agreements between claimants and lawyers, not funding arrangements with third-party funders. As I have already said, Clause 126 deals with only CAT opt- out cases. I am persuaded that we need a comprehensive solution to the problem.
We understand, as the noble and learned Lord, Lord Thomas, explained, that the noble Lords who have tabled these amendments were unable to bring forward a more comprehensive solution to the PACCAR ruling at this stage of the Bill. I was very interested in what he said because he referenced the Standing Orders of the House and the ability of your Lordships’ House to determine a Bill’s scope. It is, as he said, done rarely but we certainly did it once or possibly twice in my time as Opposition Chief Whip, to the benefit of the House. On those occasions, we sought counsel’s legal opinion, which we posted in the Library of the House. I do not think that we need counsel’s opinion on this case, having a former Lord Chief Justice and other eminent lawyers making the argument.
Assuming that the Minister is unable to offer a solution today, I assure the noble Lords behind this amendment that we will willingly support amendments brought forward to resolve the issue. Since the “Mr Bates vs The Post Office” drama, government Ministers have suddenly woken up to the salience of the issue. There is surely enough goodwill in the political system for colleagues to agree a way forward on this. Legislative time is at a premium, as the Minister will no doubt tell us, and we see this as an opportunity not to be missed and to be used.
I turn to the amendment in the name of the noble Lord, Lord Hodgson, on which he gave a very brilliant exposition. I tried to follow most of it, but I can see the force of his argument. His amendment is eminently supportable. As the noble Lord, Lord Fox, points out, it has the upside for the Government of kicking the issue into the long grass, but there is clearly a need for some review at some stage. However, I hope that the amendment in the name of the noble Lord, Lord Hodgson, becomes otiose if we can see a way forward with the route that has been pointed out by the noble Lord, Lord Sandhurst, and the noble and learned Lord, Lord Thomas, this afternoon. We should be very grateful for those noble Lords, and it is nice to know that, in the noble Lord, Lord Arbuthnot, we have a star of the silver screen in our midst. I am sorry that he is not here to hear the arguments put to his benefit. With that, I look forward to the Minister’s response.
Lord Offord of Garvel (Con)
I turn first to litigation funding and Amendments 88 and 89. I thank my noble friend Lord Sandhurst and the noble and learned Lord, Lord Thomas of Cwmgiedd, for their passionate and eloquent contributions on this important issue, both in this Room and outside.
On Amendments 88 and 89, tabled by my noble friend Lord Sandhurst, I thank him for tabling these two amendments and for giving Members the opportunity to discuss this important issue. It has offered the unique opportunity to hear from a number of noble Lords with unparalleled expertise on the UK’s legal system. As my noble friend outlined, these amendments would reverse the effect of the Supreme Court judgment in PACCAR for competition and consumer claims. This would remove the requirement for litigation finance agreements in these cases to comply with the damages-based agreements regulations.
To be clear, it is government policy to return to the pre-PACCAR position at the earliest legislative opportunity. We are committed to delivering that reversal for all the reasons that noble Lords rightly highlighted, there perhaps being no better example of the benefit of litigation funding than the case of the postmasters impacted by the Horizon scandal. That is why the Government acted within weeks of the Supreme Court’s judgment to mitigate its impact on live collective actions before the CAT.
I and my ministerial colleagues at the Ministry of Justice have been pleased to receive my noble friend’s representations regarding his amendments and the Government’s position on PACCAR. I recognise the efforts that he and colleagues have made, working within the scope of the Bill, to return proceedings in front of the CAT to their pre-PACCAR condition. However, any action taken through the Bill must be aligned with the Government’s intention to return to the pre-PACCAR position across the whole of the justice system, as publicly set out by the Lord Chancellor. I assure noble Lords that we and our colleagues in the Ministry of Justice are examining this matter urgently and considering the best possible way to achieve this objective. In the meantime, I ask my noble friend not to press his amendments, with the assurance that the Government will continue to work closely with him, ahead of Report, to identify opportunities to address his laudable concerns, within the scope of the Bill or elsewhere.
I turn to Amendment 89A on a review of the litigation funding industry, I thank my noble friend Lord Hodgson of Astley Abbotts for tabling this amendment and for his contribution to the debate in this Committee on this important issue. My noble friend raises some important considerations about the litigation funding sector. Ensuring that access to justice is maintained and properly managed is a critical issue, and I welcome this debate.
As my noble friend outlined, this amendment would require the Secretary of State to conduct a review of the application of litigation funding arrangements to competition and consumer law matters. My noble friend’s amendment sets out the factors that he believes such a review should consider. To be clear, although there has been much debate about litigation funding during the passage of the Bill, responsibility for litigation funding remains a matter for the Ministry of Justice. Although I appreciate the limited remit of this amendment, it is right that any review considers the application of litigation funding across the entire justice system.
On competition matters, I note that the CAT rules and guide to proceedings provide for significant scrutiny of funding agreements in collective proceedings, which are looked at as part of the tribunal’s consideration of whether it is just and reasonable for a person to act as a class representative. The CAT has also extensively considered the application of these rules, including in the light of the PACCAR ruling. Although this is not a matter for my department, I assure my noble friend that the Government are already considering options for a wider review of the litigation funding market and its regulation. The Civil Justice Council may be asked to undertake such a review, given the need to ensure access to justice and the attractiveness of the jurisdiction. Given its independence, it may be unhelpful to specify the scope and timing of such a review at this stage. However, I expect colleagues from the justice department to update this House once that review is agreed. To that end, I thank my noble friend Lord Hodgson and hope that he is sufficiently reassured not to move the amendment.
Lord Sandhurst (Con)
My Lords, I am very grateful for the words of my noble friend the Minister. I should perhaps say this in respect of what my noble friend Lord Hodgson had to say: I accepted at the beginning that it is time now for regulation. Funding has been around since at least 2003 and I know, because I acted as leading counsel—I have no interest now—for funders in the case of Arkin. It was, in effect, a failed competition case, and the question was whether it was lawful and so on. To cut a long story short, the Court of Appeal said that the agreement was perfectly lawful; the case having been lost, it ordered the funders to pay the defendant’s costs up to but not exceeding the amount that they had underwritten—a cap, known as the Arkin cap. It is not always followed, but that is the general rule. It may well be that it is time for a review.
I remind the Committee of something that I drew attention to in my Second Reading speech, namely the statement by the then Parliamentary Under-Secretary of State, my noble friend Lady Neville-Rolfe, in Committee on the Consumer Rights Bill on 3 November 2014. In respect of legal litigation funding agreements, as opposed to damages-based agreements, she said that
“there is a need for claimants to have the option of accessing third-party funding so as to allow those who do not have a large reserve of funds or those who cannot persuade a law firm to act pro bono to be able to bring a collective action case in order to ensure redress for consumers. Blocking access to such funding would result in a collective actions regime that is less effective … Restricting finance could also create a regime which was only accessible to large businesses. This would weaken private enforcement in competition law, which is of course not the Government’s wish or intention”.—[Official Report, 3/11/14; col. GC 583.]
I think that is enough said, in the light of my noble friend the Minister’s observations about my noble friend’s Amendment 89A. I am very grateful for what has been said by the Minister about my amendments. I say only this: something will have to be delivered by the time we get to Report, or it will be a very interesting day out in the main Chamber. I beg leave to withdraw my amendment.
Lord Offord of Garvel
“(4) In subsection (7), after “(3)” insert “, (3A)”.8A (1) Section 40 (section 39: supplementary) is amended as follows.(2) In subsection (4), after “section 39(3)” insert “or (3A)”.(3) In subsection (5), before “or (4)” insert “, (3A)”.”Member's explanatory statement
This amendment would amend sections 39 and 40 of the Enterprise Act 2002 so that extensions under the new subsection (3A) of section 39 (inserted by paragraph 8(3) of Schedule 5 to the Bill) are treated in the same way as extensions under subsection (3) of that section.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would make it clear that a period extended under any subsection of section 39 of the Enterprise Act 2002 can also be extended under any other subsection of that section (rather than just specified subsections).
Lord Offord of Garvel
Member’s explanatory statement
This amendment is for consistency with my amendment to Clause 130.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would clarify that references in 40A of the Competition Act 1998, as amended by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
Member’s explanatory statement
This amendment would clarify that references in section 111 of the Enterprise Act 2002, as amended by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
“24A In section 120 (review of decisions under Part 3), in subsection (2), in paragraph (a), for “(3)” substitute “(1A)”.”Member’s explanatory statement
This amendment would amend the reference in section 120(2)(a) of the Enterprise Act 2002 to section 110(3) of that Act so that instead refers to section 110(1A) of that Act (which this Bill is replacing it with).
Member’s explanatory statement
This amendment would clarify that references in section 174D of the Enterprise Act 2002, as amended by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
Lord Offord of Garvel
Member’s explanatory statement
This amendment would clarify that references in new section 35B of the Competition Act 1998, inserted by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
Member’s explanatory statement
This amendment would clarify that references in new section 94AB of the Enterprise Act 2002, inserted by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
Member’s explanatory statement
This amendment would clarify that references in new section 94AB of the Enterprise Act 2002, inserted by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
“12A In section 120 (review of decisions under Part 3), in subsection (2), in paragraph (a), for “94A(1)” substitute “94AA(1)”.”Member’s explanatory statement
This amendment would amend the reference in section 120(2)(a) of the Enterprise Act 2002 to section 94A(1) of that Act so that instead refers to section 94AA(1) of that Act (which this Bill is replacing it with).
Member’s explanatory statement
This amendment would clarify that references in new section 167B of the Enterprise Act 2002, inserted by this Schedule, to maximum amounts of daily penalties are maximums per day, not in total.
“18 In section 179 (review of decisions under Part 4), in subsection (2), in paragraph (a), after “section” insert “167A(1) or”.”Member’s explanatory statement
This amendment would provide that decisions under new section 167A(1) of the Enterprise Act 2002 are not “decisions” for the purposes of section 179 of that Act (because they would instead be able to be appealed under section 114 of that Act, as applied by new section 167B(6) of that Act).
Lord Offord of Garvel
“(za) omit “Regulations made by the Secretary of State under section 68A or”;”Member’s explanatory statement
This amendment, and my other amendment to this Schedule, are to take account of an amendment made by the Energy Act 2023 to section 124(5) of the Enterprise Act 2002 (which this Schedule also amends).
Member’s explanatory statement
See the explanatory statement to my other amendment to this Schedule.
““consumer” means—(a) a person (“P”) acting for purposes that are wholly or mainly outside P’s business, or(b) a person acting in the name of, or on behalf of, P in relation to P’s purposes;”Member’s explanatory statement
This amendment would expand the definition of a consumer to make it explicit that it includes third parties working on behalf of a consumer, as is the case for traders.
Lord Fox (LD)
My Lords, I congratulate the Deputy Chairman of Committees, who once again did a magnificent job. I speak on behalf of my noble friend Lord Clement-Jones to move Amendment 108 and speak to all the other amendments in this group that are in his name—seven in total. Talk has rightly centred on the CMA’s role in standing up for consumers. This whole group focuses on an important area where consumers are in danger of not getting the best possible treatment as a result of the flexing of market power. The amendments are designed to probe the competitive relationship between providers of a service and legitimate third-party agents who sell those services on.
Online intermediaries in marketplaces can serve a valuable role, helping consumers exercise choice and explore a wider range of options for their needs, ultimately supporting competition and innovation, as long as this is done in a transparent manner. Perhaps the most obvious arena for this sort of activity is the travel industry: flights and hotel bookings. There is of course a natural struggle between the provider of services—the airline, for example—online travel agencies or OTAs, and the third player, which is the platform. This is usually Google.
The question that this group poses is: what is the CMA’s role in the competition between these parts of the industry? It also asks: how is consumer choice maintained or enhanced in that activity? My noble friend’s amendments are designed either to explore the need to protect consumers who make bookings through a third-party agent, or to ban activity that could mislead consumers about the merits of booking through a third-party agent. There are of course other elements to these relationships, and I hope this debate can flesh those out as well.
There is certainly evidence that some low-cost airlines are extensively using their market power to advance their own commercial gain while potentially eroding protection and choice and inflating prices for millions of UK holidaymakers. For example, since December 2023, most OTAs have been prevented by Ryanair from booking flights on behalf of consumers. This rendered the OTAs unable to fulfil holidays that include a Ryanair flight. I understand that a consequence of this is that it is almost impossible for consumers to book an ATOL-protected package holiday that includes a Ryanair flight. I do not have full confirmation of that, but that is my belief. It is difficult not to conclude that this blocking was designed to push customers towards booking hotels as well as flights through Ryanair, rather than as part of a package holiday through an OTA. It is easy to conclude that Ryanair was able to do this because of the market power it holds over its routes.
For its part, in a regulatory announcement Ryanair welcomed the removal of its flights from OTA websites, promising lower fares “where necessary” to encourage all passengers to book directly on ryanair.com. The fact that it did not reference the fact that it had caused the removal of the OTAs in the first place, and its use of the phrase “where necessary” regarding pricing, are clear indications of its instinct in this move. I use this example to demonstrate how serious and real things are for this sector and the consumers it serves.
The question for debate here is: how could and should the CMA act to balance the relationships that surround service providers and third-party agents? The relevant provisions here are in Clause 223, on the prohibition of unfair commercial practices, and Schedule 19, on
“Commercial practices which are in all circumstances considered unfair”.
Together, these provisions set out a list of conduct to which the consumer protections in Part 4 will apply automatically in all cases.
The list in Schedule 19 is relatively granular, so it can be extended in scope easily to deal with these issues. For example, as set out in Amendment 136, Schedule 19 could include:
“Refusing to enter into (or otherwise blocking) a transaction with a consumer on the basis that the consumer is acquiring the trader’s product through a third party acting on its behalf”.
Secondly, it could include:
“Refusing (or otherwise blocking) third party agents, acting on a consumer’s behalf, the necessary means to make or manage the consumer’s purchase”,
thereby degrading the consumer experience. Thirdly, it could include:
“Making a materially inaccurate or disparaging claim about third party alternatives through which a consumer could otherwise acquire the trader’s product”.
Fourthly, it could include:
“Imposing higher prices for a consumer who chooses to acquire a trader’s product through a third party acting on its behalf than for a consumer who acquires that product directly, in particular without providing such consumer with a clear, accurate and complete explanation as to the reason for such a price increase”.
Fifthly, it could include:
“Any act or omission which deprives a consumer of sufficient freedom to make an informed choice as to whether to purchase a product directly from a trader or to engage a third party to make such purchase on their behalf”.
We then need to ensure that the protections afforded by Part 3, on enforcement of consumer protection law, and Part 4, on consumer rights and disputes, apply equally to consumers irrespective of whether, for example, they have made flight bookings through OTAs acting as consumers’ agents or they have booked directly with the airline. The relevant provisions of the Bill relating to the definition of a “consumer” are in Clause 147, on relevant infringements, and Clause 223, on the prohibition of unfair commercial practices.
In both cases, the definition of “trader” is already explicitly extended to circumstances in which a person is acting personally or through another third party on their behalf. This concept of indirect consumer-trader relationships should be extended to the definition of “consumer”. A new paragraph should be introduced in Clauses 147 and 223 to make it explicit that it is immaterial for the purposes of that definition whether a consumer chooses to engage with a trader directly or through a third party acting on the individual’s behalf as an agent. These proposed changes are set out in Amendments 108 and 129.
Other references to indirect booking need to be provided for—again, to include the provision that it is immaterial whether a consumer engages with a trader directly or through a third-party agent. The relevant clauses here are Clause 230, on rights of redress, and Clause 243, on the meaning of “transactional decision”. Amendments 145 and 146 would make it explicit that the protections in Part 4 apply to contracts entered into by the consumer with traders, both directly and indirectly.
Given the sort of behaviour already in the market, we also need to introduce the concept of misleading or aggressive commercial practices by a trader, which are designed either to deter consumers from booking through third parties—including OTAs, which book flights on consumers’ behalf as their agents—and/or to prevent such third parties from making such bookings. In other words, we need to outlaw those practices.
This time, the relevant provisions of the Bill are in Clause 224, “Misleading actions”, and Clause 226, “Aggressive practices”. These clauses deem commercial practices to be unfair if they involve misleading actions or aggressive practices that cause the average consumer to take a transactional decision they would not have taken otherwise. A new subsection should be introduced in each of Clauses 224 and 226 to make explicit that, for the purposes of Clause 224(1)(a), “misleading information” includes
“an action where the overall effect is to deter the average consumer from using third party agents to conclude transactions on their behalf, including disparagement relating to such third parties”.
For the purposes of Clause 226, in the context of determining whether a commercial practice uses harassment, coercion or undue influence, account should be taken of
“whether the practice significantly impedes the average consumer’s freedom of choice in respect of whether they choose to make a booking directly with a trader or to use a third-party agent to conclude transactions on their behalf”.
This is the effect of Amendments 139 and 141. The Minister will understand that this is an important example of the potential misuse of market power, to the detriment of consumers. We await his response.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank the noble Lord, Lord Fox, for that introduction. He made an excellent argument about why we should include third parties working on behalf of consumers in the remit of the Bill. As he described, this particularly relates to package travel firms.
Whether using a legacy airline or a low-cost carrier, all of us will have booked flights online. These days we have unprecedented freedom to fit our travel arrangements to our specific requirements and then pay for them at home, at the office or on our phones. But how many of us have had the far less welcome experience of discovering, a few minutes later, that our deal was not as good as we thought and that there were cheaper fares for the same flight? This is frustrating and unfair, and, unfortunately, it is due to deliberate anti-competitive practices, many of which the noble Lord described.
Low-cost airlines—LCAs—have transformed the aviation landscape. They have disrupted the market, offering travellers unprecedented choice and competition. Their rise in the UK has empowered consumers, democratising air travel and making it affordable for a much broader demographic than used to be the case. The greater availability and lower cost of flights to and from the United Kingdom has, in turn, led to the rise of online travel agencies and tour operators, known as OTAs. These offer travellers a wide array of pre-packaged holiday options, which include flights, accommodation and add-on activities. The convenience of being able to plan and book an entire trip from the comfort of one’s home has fuelled the popularity of online package travel. OTAs are becoming extremely popular and convenient ways for families to plan, book and pay for their holidays.
However, in recent years the low-cost airlines, themselves once the industry disruptors, have felt threatened by the newer online travel agencies. The industry is witnessing a growing trend of complex anti-competitive actions aimed at stifling competition. One such tactic is curtailing seat availability to specific destinations, which renders them inaccessible through OTAs or individual bookings unless bundled as airline packages. Another anti-competitive tactic is to introduce cumbersome verification procedures for passengers who book through OTAs rather than directly with the airlines, adversely affecting the consumer experience. Unfortunately, in this battle for market share between the LCAs and the OTAs, the consumers are often the casualties.
The situation is made still more opaque for consumers by the existence of 13 different types of airfare. I am grateful to my noble friend Lord Leong, who has looked into this. He tells me—I will mention only the most common six—that there are normal fares, point-to-point fares, excursion fares, APEX fares, PEX and super-PEX fares, and branded fares. Additionally, some come with specific restrictions, some are non-refundable, others cannot be exchanged or transferred, and none of these restrictions is immediately obvious or consistent with ticket types.
Lord Offord of Garvel (Con)
My Lords, this group of amendments concerns package travel. I will address Amendment 108, along with Amendments 129, 136, 139, 141, 145 and 146. I thank the noble Lord, Lord Clement-Jones, for tabling them and the noble Lord, Lord Fox, for speaking to them so eloquently. These amendments cover the same theme: the use of third parties in contracts between consumers and traders.
I reassure the noble Lord that the protections sought in these amendments are mostly provided for in other parts of consumer law, which I will detail. For example, Clauses 224 and 226 prohibit traders using misleading information or aggressive practices. This prohibition would already cover situations involving a consumer’s decision on whether to use a third-party agent. Similarly, Amendments 145 and 146 seek to make clear in the legislation that a consumer enjoys consumer rights, whether they purchase from a trader directly or via a third-party agent. However, in either situation the contract is between the trader and the consumer, and therefore the consumer benefits from the relevant consumer rights. Amendment 146 focuses on the transactional decisions related to purchases from a trader. Whether the decision is carried out by the consumer themselves or a third party is not relevant. The consumer that the contract is with will receive the relevant consumer rights. The practical effect of Amendments 145 and 146 is already achieved through consumer law.
I shall record two instances in which these amendments would have an adverse and unintended effect and thus why the existing wording of consumer law is set out the way it is. Consumer protection requires a consumer-to-trader relationship for consumer rights to apply. If, as suggested in Amendments 108 and 129, the definition of a consumer were changed to include third-party agents, they would in effect also become consumers in the eyes of the law. That means that the consumer’s relationship with the agent would be classed as a consumer-to-consumer relationship instead. Should there be an issue between the consumer and the third-party agent, the consumer would then no longer benefit from the same consumer rights as ordinarily apply. The amendment suggested by the noble Lord would broaden a very established principle of consumer law with this unintended effect.
I shall conclude my response—including the matters raised by Amendment 136—with reference to travel agents and the sale of package travel holidays, as I believe that may have inspired some of the noble Lord’s amendments. This is a sector in which it is common for consumers to use agents on their behalf. I am aware that issues have arisen between online agents and flight operators. Ministers in my department were pleased to meet representatives from an online travel agent and an airline recently to understand the issues from all perspectives.
Through our markets regime, the Government have ensured that the CMA has significant powers to investigate and act if it finds that businesses are behaving anti- competitively in a market. It is right that those matters are for the CMA to determine itself.
Separately, the Department for Business and Trade carried out a call for evidence on the Package Travel and Linked Travel Arrangements Regulations 2018 during September-December 2023. Those rules set the consumer protection framework for package holidays. It is vital that consumer protections for package holidays, as a key consumer leisure activity and expense, provide strong protections and that regulations support consumers to access choice and a competitive market. I am pleased to confirm that we are now analysing a substantial volume of responses, including from consumer groups, package organisers and suppliers, such as airlines. The operation of airlines and travel agents is governed by PTRs and ATOL. Those are being reviewed. That is the appropriate way to consider these issues.
Given the noble Lord’s interest, once further analysis has been undertaken, I will be eager to share with him the Government’s response to that consultation. I hope that, in light of what I have set out, he will be comfortable to withdraw his amendments.
Lord Fox (LD)
I thank the Minister for his response and for his offer to look through the data, which we will be happy to pick up. I thank the noble Baroness, Lady Jones, for her support and for enlightening me on the intricacies of airline ticketing. I suggest that there may well be a new class Z, which she and I will get, where our luggage gets lost as a result of what we have been saying here today.
Central to the Minister’s response is that all this exists already in some form or other, or the words have not been quite crafted correctly. Saying that the existing protections are there belies the fact that there are problems today. If those existing protections were 100% where they should be, doing what they should, the noble Baroness and I would not be able to stand up and list the problems that exist. It behoves us and the Minister to talk between Committee and Report, including my noble friend Lord Clement-Jones, to set out where there are clear issues at the moment and where there could be changes, even if we did not use the words contained in these amendments.
There are problems, and it would help if the Minister acknowledged that. The existing wording and the use and interpretation of those laws is not solving those problems, so there is something to sort out here, one way or another. With that said, I beg leave to withdraw the amendment.
“(c) the collective interests of consumers include avoiding any detriment that might be incurred by consumers if the United Kingdom does not reach a level of net zero carbon emissions by the year specified in section 1 of the Climate Change Act 2008.”Member’s explanatory statement
This amendment would mean that part of the test of whether a commercial practice had committed an infringement would be whether the commercial practice had failed to protect consumers from any detrimental effects arising from a failure to achieve net zero by the year specified in the Climate Change Act 2008 (currently 2050).
Baroness Jones of Whitchurch (Lab)
My Lords, I shall also speak to Amendment 134 in my name. I am grateful for the support from the noble Lord, Lord Clement-Jones, and the noble Baronesses, Lady Kidron and Lady Bennett, in doing so. I also support the amendments in the name of the noble Baroness, Lady Hayman, and the noble Lord, Lord Holmes, on the issue of the right to repair, and I look forward to hearing their contributions shortly.
Amendment 109 focuses on Part 3 of the Bill, which addresses the enforcement of consumer protection law. It sets out what would be a relevant infringement of the law by a commercial practice or trader. Our amendment would add a simple but important addition to that list. It says that the collective interest of consumers would be harmed by a company if by their actions they prevented the UK from reaching net zero emissions by 2050 as defined by the Climate Change Act.
We know from the latest reports of the Committee on Climate Change and the Office for Environmental Protection that the Government are missing a number of the key targets that would get us to net zero in an organised and timely manner. There are numerous missed opportunities for action, such as slowing down the rollout of electric vehicles and the failure to retrofit homes to save energy. This has not been helped by the decision to create new gas drilling licences in the North Sea.
However, it is not just a government responsibility to deliver net zero; it falls to companies to play their part. For example, every fossil fuel company that ignores its responsibility to move towards renewable energy, and every company that sells products created by the destruction of the Amazon rainforest, is contributing to consumer detriment as global warming impacts the planet. All the advertising companies that promote these products have a responsibility to protect consumer interests too.
In the UK, we are already seeing the adverse impact of global warming, as more extreme weather events become commonplace. Communities that might have been flooded once in a generation now face the heartbreak of properties being flooded every couple of years. Farm crops are being destroyed by drought or flooding, losing farmers their livelihoods. Of course, there are many other examples.
My point is that individuals and communities should have some redress under consumer law for the detriment caused by the companies and traders that deliberately delay or reverse our progress to net zero. This is what our Amendment 109 would go some way to achieve. It may be that we have not got the wording right—this is a probing amendment—but it nevertheless raises a fundamental issue about consumer rights that needs to be addressed.
Amendment 134 adds to the list in Schedule 19, which covers commercial practices which are, in all circumstances, considered to be unfair. It specifies that greenwashing actions, such as those giving the impression that a product is sustainable, is recyclable or has a low carbon footprint when these claims are not supported by evidence, should be considered unfair.
This continues to be a widespread practice. Consumers, particularly young people, want to do the right thing, but they are given no help in making informed choices. The EU has already identified around 230 separate sustainability labels and 100 green energy labels, half of which have weak or non-existent verification. The situation in the UK is no different.
Meanwhile, the Advertising Standards Authority has been slow to act and has ruled against only a tiny number of adverts. Many complaints of greenwashing are not investigated and the barrage of spurious environmental claims is falsely persuading consumers that corporations have embraced their environmental concerns. This greenwashing is all around us and we are not convinced that the existing regulators, including the Adverting Standards Authority, have the resources or the determination to hold the perpetrators to account.
When this issue was raised at Second Reading, the Minister replied:
“This is indeed an important issue, which we hope is already covered by existing regulations”.—[Official Report, 5/12/23; col. 1453.]
This is our point: if it is covered by existing regulations, they are not effective. Therefore, adding greenwashing to the list of banned practices would give consumers new opportunities to challenge the misleading product descriptions and adverts that are commonplace.
I look forward to hearing from other noble Lords who have amendments in this group but, in the meantime, I beg to move Amendment 109.
Baroness Hayman (CB)
My Lords, I declare my interest as chair of Peers for the Planet. I have Amendments 128A and 145A in this group but, before I speak to them, I will say just a couple of words about Amendments 109 and 134, on which the noble Baroness, Lady Jones of Whitchurch, just spoke. I very much support them both. I would certainly have added my name to that on greenwashing, had I not been later to the party than others. Along with the taxonomy for green investments, this is something that the Government have to take seriously if people are to be given the right choices and not deceived about the choices that they make.
My Amendments 128A and 145A cover the right to repair, an issue that Amendment 201, in the name of the noble Lord, Lord Holmes of Richmond, also addresses. They are cross-party amendments, and I am grateful to the noble Baronesses, Lady Ritchie of Downpatrick, Lady Harding of Winscombe, and Lady Bakewell of Hardington Mandeville, for their support. The intent of these amendments is to set a timetable for government to ensure that consumers can more easily and affordably repair their electrical and electronic devices by ending the practices that cause premature and planned obsolescence and ensuring that repair information and affordable spare parts are made available.
Lord Holmes of Richmond (Con)
My Lords, it is a real pleasure to follow the noble Baroness and agree with every word that she said. I particularly applaud the specificity around software and hardware becoming obsolete by software not being maintained by the manufacturers who, in effect, make obsolete well before its time the hardware that sits alongside that.
I rise to speak to my Amendment 201. In many ways, the only build I would put on what the noble Baroness has said is around expanding to broader sectors the whole concept of right to repair. Perhaps before my time, or perhaps not, there used to be a symbol, a mark of quality, on many products: “Made in Britain; built to last”. That can go well beyond these shores, but it is not a bad line to consider when we think about right to repair.
All that my Amendment 201 seeks is for products to have their proper, natural and appropriate life cycle. We are in the middle of an environmental emergency, with difficult macroeconomic headwinds and a cost of living crisis. Right to repair speaks to all these issues. In no sense is it the silver bullet, but it is an important part of what we can practically and effectively and should do. It is not increased, burdensome regulation; it is taking a very British approach to a particular problem and with very little difficulty solving it within this Bill.
Amendment 201 proposes changing the Consumer Rights Act 2015 by inserting a right to repair so that, before a purchase is made, information must be provided on the repairability of a good, including whether it has been produced with repairability in mind, whether there are spare parts and how to access them, and the likely cost involved. Similarly, in situations where repairs can be performed safely by the purchaser, the information required includes whether information exists on how to do so, and, if so, how the purchaser can get their hands on it. It is straightforward and it makes economic, environmental and social sense.
To echo what the noble Baroness said, it is—this is positive—a particularly British way of going about things. We can cut those piles of unnecessary electric waste, change how technology operates and have a positive impact across so many sectors of our economy, positively benefiting our society. I look forward to the Minister’s response; this would be a good amendment to accept.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow the noble Lord, Lord Holmes; I agree with the intent if not exactly the detail of his amendment—I will come back to that. It is also a great pleasure to take part in the debate on this group of amendments, so ably introduced by the noble Baroness, Lady Jones, and following the powerful arguments presented by the noble Baroness, Lady Hayman. As at Second Reading, much of what she said about right to repair is exactly what I would have said, so I will not say it again; I will just cross-reference her speech, as I did at Second Reading on the same subject.
I have attached my name to Amendment 109 in the name of the noble Baroness, Lady Jones, as well as her Amendment 134 on greenwashing. Had there been space, I would also have attached my name to the amendments on right to repair. The noble Baroness, Lady Hayman, and I have been having a little race in various groups.
I start with Amendment 109. It is worth reflecting for a moment on the fact that, as a country, we have legally binding climate and emissions targets. The Committee on Climate Change has been awaiting a new chair for 18 months—reports suggest that at least two Members of your Lordships’ House are in line for that and waiting to find out their fate—and its chief executive has just stood down. Despite all that, it put out a statement yesterday—handily, given the timing of today’s Committee—stressing strongly that, following COP 28,
“the obligation on every country is now to push even harder”
on climate action. It said that the UK needs
“even greater domestic climate ambition to reinforce the UK’s international standing”—
something that the Government are often concerned about. Crucially, it noted
“a significant delivery gap to the UK’s Nationally Determined Contribution (NDC) of reducing emissions by 68% by 2030”.
The independent Committee on Climate Change is saying that we are not doing enough, what we have now is not sufficient and we are not meeting the international obligations that we have signed up to. It is in that context that we need to look at Amendment 109, which could be hugely powerful. We are talking about commercial practices failing to protect consumers in the promotion and supply of goods and services by digital means. This relates to the detailed discussion we had on the previous group of amendments about flights and package holidays and the ways in which they are promoted and people are given information about their environmental impacts.
Since our conference in Brighton last autumn, the Green Party has been calling for a ban on high-carbon advertising. The noble Baroness, Lady Jones, may not entirely thank me for this, but I suggest that this amendment, in essence, implies a ban on high-carbon advertising. For the avoidance of doubt, this is a suggestion not that we should stop anyone flying or taking any action that they need to, but about whether we should allow expensive, continual bombardment—on the internet, from digital screens everywhere we go, on public transport and from every quarter—to purchase things that we might not otherwise have purchased.
Lord Lucas (Con)
My Lords, I very much like Amendment 134 and hope that the Government will find their way to supporting it. It seems to me important that, since it is well drafted, we should go down this route of making sure that claims of environmental effectiveness are real.
In that context, I was delighted by the exposition of the noble Baroness, Lady Bennett of Manor Castle, on Amendment 109, which makes it clear that it is a bit of greenwashing: a Labour Government, should we ever have one, would not put this amendment into effect because it is so broad, all-encompassing and dangerous that they would never do it. Labour is merely proposing it now so that it can seem a bit green.
I like the electrical repair direction. When I moved my daughter into her student flat, I was able to test the fire alarm by turning on the Hoover. I am cautious about amateurs repairing electrical goods and, if we did anything along that line, I would want to make sure that it was focused on professional repairs. It is iniquitous that mobile phones are being made with glued-in batteries so that you cannot renew them. Therefore, I very much support the direction that my noble friend Lord Holmes has taken, as something that is implementable now—I like its breadth too—to make sure that consumers are given the information about whether the product they are buying can be repaired and, therefore, will have a good second-hand value and a long life. As we start to focus on the iniquity of throwing stuff away, it will start to move manufacturers, because such products will become more popular.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I speak in support of the noble Baroness, Lady Hayman, on Amendments 128A and 145A—inserting a new clause on the right to repair—to which I added my name. The noble Baroness set out very clearly the arguments that support this detailed and transparent amendment. I regret that I was unable to take part at Second Reading.
I declare my interest in being married to an engineer who believes, as did my father before him, that everything should be capable of repair, and who suffers frustration and fury when he finds that a product has been designed in such a way as to deliberately prevent this from happening. “Planned obsolescence” is the phrase that manufacturers use to justify their manufacturing methods.
As a country, we are already committed to the right to repair through EU regulations of 21 June. This is limited to fridges, dishwashers, washing machines and TVs. However, this provides no consumer protections on the cost of parts, and limits consumer rights of repair to a small number of specified operations. It deprives them of the right to buy parts or even see repair manuals. There is no timeline for extending the right to other electrical or electronic products. We need a general right to repair all electronic and electrical products now. Otherwise, we will wait until 2030 just to legislate for a few consumer products at a time. Consumers are struggling to make their money go round; repair and reuse would help them now.
The evidence suggests that the UK is falling behind. The EU has legislated for access to software updates for five years, and spare parts and manuals for mobile phones and tablets for at least seven years after a product is withdrawn. It mandates repairability information for consumers at the point of sale, and it is now in trilogues on a more far-reaching right to repair, including prioritising repair over replacement inside guarantee, and the right to repair at a reasonable cost outside guarantee.
As has been said, this is not limited to the EU. Six US states have already legislated for right to repair, with 10 more considering legislation to start this year. These right-to-repair laws cover a range of products, from smartphones to farm equipment, and offer consumers access to spare parts, tools, and repair information to enable repair for minimum periods.
The Government’s argument against this amendment is that it will be burdensome for manufacturers, especially smaller manufacturers, but its effect would be to require firms to retain some spare parts and manuals, and make arrangements for paid-for repair, as they already have to for some kitchen goods and TVs for five to seven years. This is not disproportionate.
Current restrictions on the right to repair favour larger firms over smaller employers, such as independent repair companies and parts suppliers. This is why the amendment proposes banning within one year the most egregious anti-competitive and anti-consumer measures pursued by larger firms. The legislation allows five years for the Government to legislate for the right to repair in order to get the legislation right. Were the Government minded, they could exclude the smallest manufacturers to give them more time to comply.
I am at a loss to see how this might stifle innovation by industry. The amendment would put consumers in the driving seat by enabling them to choose when to switch to more innovative products when it is in their interest, rather than be forced to do so by prohibitively expensive or unavailable spare parts, or by perfectly functional products that stop working only due to software updates. Surely the Government want the consumer to be in control.
The right to repair is genuinely popular. Research by Cardiff University found that 65% of respondents are regularly frustrated by products that break before they should; 62% believe products are currently too difficult to get repaired; 75% agree that the Government should require manufacturers to make products more repairable; and 85% support expanding the right to repair to cover all consumer products. Men’s sheds and repair shops are springing up all over the place in our market towns. Repair is popular.
I know from my own experience that a quote for a repair can be eye-watering and that I can buy a cheaper model that does the same job, especially when it comes to washing machines, dishwashers, and fridge-freezers. Households on tight budgets are forced into a cycle of regularly replacing cheap machines with new cheap machines, rather than repairing existing machines to keep them in use for longer. This also leads to the cost of disposal of the redundant machine, often resulting in fly-tipping—the scourge of the countryside.
Throwaway products are fuelling climate change, growing our toxic waste mountain and ripping off the British public. People are stuck in a cycle of throwing things away and then buying costly new electronics, which is bad for their wallets and bad for the environment. Right now, the UK is the second-largest producer of electronic waste in the world per capita, as the noble Baroness, Lady Hayman, said; it is worth repeating. Too often, inefficient waste management is prioritised over waste prevention. This has to be minimised. This amendment would address these issues.
I turn to the other amendments in this group. Amendment 201 in the name of the noble Lord, Lord Holmes of Richmond, is very similar in essence to Amendments 128A and 145A. We support it as a means of ensuring that consumers are protected in terms of repair and maintenance.
Amendments 109 and 134, in the name of the noble Baroness, Lady Jones of Whitchurch, attempt to ensure that consumers are protected. They would help the country move towards net zero and would assist with climate change mitigation. Consumers are reliant on the information provided for them and this has to be accurate. Greenwashing tactics need addressing. Both the Government and the CMA must ensure greenwashing does not happen, or is at least minimised. We support all the amendments. We are all singing to the same tune; there is cross-party support across the Committee and I look forward to the Minister’s positive response.
Lord Offord of Garvel (Con)
My Lords, on this group of amendments on net zero and the collective interests of consumers, I thank the noble Baronesses, Lady Jones and Lady Bennett, for their Amendment 109, which would explicitly provide that consumers’ collective interests include avoiding any detrimental effects that they may incur by not reaching net-zero carbon emissions by 2050. I am grateful to the noble Baronesses for raising the important issue of protecting consumers during the transition to net zero. At present, where environmental issues arise, the court or enforcers already have the requisite powers to take action, including by tackling misleading green claims which affect consumers’ purchasing decisions. In addition, in its annual plan, the CMA listed
“helping to accelerate the UK’s transition to a net zero economy”
as one of its priorities.
We are already making strong progress towards net zero by 2050. The UK has reduced its emissions further and faster than any other major economy. To that end, we feel that there are sufficient measures already in place to protect consumers during the transition to net zero. I hope that the noble Baroness, Lady Jones, will feel sufficiently reassured to withdraw her amendment.
On the right to repair, I thank my noble friend Lord Holmes and the noble Baroness, Lady Hayman, for their Amendments 128A, 145A and 201 and, in the latter case, for our recent discussion on the issue, where we had much of a meeting of minds.
The Consumer Protection from Unfair Trading Regulations 2008 are being restated in the Bill and prohibit unfair commercial practices. These include misleading actions which are likely to affect a consumer’s decision-making, so consumers are already protected from misleading statements made by traders on the availability of spare parts. Furthermore, there is a range of activity across government presently which support the aims of the proposed amendments, which in summary focus on sustainability and ensuring that products are repaired, where feasible.
The Department for Energy Security and Net Zero’s eco-design initiative aims to encourage the uptake of products which use less energy, resources and materials through product-specific regulations. The Department for Environment, Food and Rural Affairs is responsible for waste and resources policies, including preventing waste occurring in the first place. Both departments work with the DBT to ensure that, over their lifetime, products use less energy. This ultimately saves carbon, reduces waste and helps households and businesses to reduce their energy bills.
New and updated eco-design measures introduced in summer 2021 have, for the first time, included requirements for manufacturers to make spare parts available and replaceable with commonly available tools, as well as to provide information to professional repairers to assist with repairs. These new requirements cover dishwashers, washing machines and washer-dryers, refrigeration appliances, televisions and other electronic displays. The measures will help to establish a “right to repair” for consumers, as part of a more resource-efficient economy. Defra has recently set out aims in its new waste prevention programme to move to a circular economy by keeping goods in circulation for as long as possible and at their highest value. This includes increasing the reuse, repair and remanufacture of goods. We are consulting now on reforms to the Waste Electrical and Electronic Equipment Regulations and will consult later this year on reforms to the batteries regulations. We have also launched a separate call for evidence on reforms to the WEEE regulations to seek views on how they can further support the circular economy by incentivising more sustainable product design and higher levels of reuse of electrical products.
Further, from 29 April 2024, the new product security regulatory regime will require manufacturers to publish information on the minimum length of time that security updates will be provided for consumer connectable products. However, mandating a minimum security update period before the impact of these measures is known could run the risk of imposing obligations on businesses disproportionate to a product’s lifespan and any associated security benefits. The Government have committed to a post-implementation review of these new measures to understand their impact before any further action is considered.
Similarly, adding rights to repairability to consumer law now will oblige retailers to pre-emptively seek information from the manufacturers of products that they sell. More work is required before this is suitable for the Government to ask. In the meantime, it would mean greater costs and a reduction in choice for consumers. It may also have implications for our WTO and international treaty compliance, as it would constitute a new technical barrier to trade about which we would need first to notify and consult partners.
Lord Fox (LD)
I welcome what the Minister says, in some respects. Will the issue of updating electrical and electronic products be part of that review, too? In other Bills, we have discussed who has the obligation to maintain software updates for equipment from the perspective of safety as well as longevity. I hope that the review takes that into consideration, too.
Lord Offord of Garvel (Con)
I thank the noble Lord, Lord Fox, for that. There is a lot of information, and it is reasonable that I write to the noble Lord about the gamut of the consultation that is going on. As I said in response to the noble Baroness, Lady Hayman, a lot of consultation work is going on in the two main departments—business and Defra. It is therefore only fair that we spell that out, and we are happy to do so.
To finish what I was saying, I hope, on the basis of what I have said and those assurances, that noble Lords will not press their amendments.
I turn now to Amendment 134, on greenwashing, for which I am grateful to the noble Baronesses, Lady Jones of Whitchurch, Lady Kidron and Lady Bennett of Manor Castle, and the noble Lord, Lord Clement-Jones. The amendment would add specific greenwashing claims to the list of banned practices in Schedule 19. Misleading consumers about the environmental qualities or impact of goods and services so that it leads them to take a different purchasing decision is already against the law. Further, initiatives are under way, including the CMA’s draft guidance on sustainability agreements between businesses, which are aimed at helping to achieve environmental goals. The CMA has also published guidance on environmental claims on goods and services to help businesses understand how to communicate their green credentials without misleading consumers.
Part 3 of the Bill will strengthen consumer protection enforcement by allowing public enforcers to make applications to the court, which will not only stop the infringing conduct but allow the imposition of financial penalties. In addition, the Bill introduces new powers for the CMA to take action more quickly against bad business practices, without needing lengthy court action, and to give penalties of up to 10% of turnover for those breaking consumer law.
In summary, given that greenwashing is already prevented in law, our priority is to keep these existing interventions under review to observe their impact before rushing into further legislative action. For these reasons, I hope that noble Lords will feel comfortable not to press this amendment.
Baroness Bennett of Manor Castle (GP)
My Lords, before the Minister sits down, I come back to his response to Amendment 109 about not meeting our net-zero targets. I can probably paraphrase what he said as, “It’s all fine here and everything’s on track”. How would he align that with the statement from the Committee on Climate Change yesterday that there are significant delivery gaps for our NDCs for 2030?
Lord Offord of Garvel (Con)
I thank the noble Baroness for that. This is not a perfect science. We are on a journey to net zero and will get there by 2050. We have been very clear on the milestones that we need to hit along the way. As far as the UK is concerned, there is absolutely no going back on our commitment to hit that target, but it is a transition, and it will take a generation. I am very clear that we will get there.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank all noble Lords for their support for my amendments on achieving net zero, tackling those who get in the way of it and tackling greenwashing. I must say that the noble Baroness, Lady Bennett, had a wider interpretation of my Amendment 109 than I had intended. As I said at the outset, it was only a probing amendment, and she has given me good cause to go away and look at the wording of all that again, because it certainly was not going that far. It has provoked a good debate, and we had some genuine issues out on the table on it.
I also thank the noble Baroness, Lady Hayman, the noble Lord, Lord Holmes, and others for making the case so eloquently on the right of repair. We have had a really good debate on this, and I cannot possibly hope to acknowledge all the important points that noble Lords made. Those who know me will know that I have long been an advocate for the circular economy and for the right of repair as an essential part of that strategy, but it feels that action is painfully slow: it is estimated that there are enough unused cables in UK households to go around the world five times, along with 20 unused or redundant electronic items in each. But, instead of having a policy to repair and reuse, electronics manufacturers continue to use up the earth’s scarce resources producing new products, the latest models, which often replace perfectly functioning earlier models.
We cannot go on consuming at this level, as we will run out of the materials needed to produce the goods in the first place, so we need to go back to the design phase and product manufacturing, tackle the scourge of built-in obsolescence, and make spare parts and repair services the norm rather than the exception. The Government’s latest eco-design standards are a step forward, but they deal with only one part of the market. That is why a more comprehensive action plan is needed.
On this issue and others, the Minister said not to worry as they are already covered by current legislation. But it is obvious to all of us that, whatever the wording in the legislation, this is not working in practice. He gave the example of Defra having a policy on, or aiming for, the circular economy, but it has been aiming for this for a long time now. What it needs is action to ban the practice of firms deliberately preventing repair. Consultation, which is what is being proposed, is really not enough. I hope that the Minister can understand our frustration on this. These issues have been around for a long time. They are not new, and it does not feel that sufficient action is being taken.
The Minister said that this is a burden on business, but I do not think it is. It is an opportunity for innovation and new jobs, and an opportunity to save materials and money. We need to ensure that we do not have more waste and that we use the resources we have to best effect. A lot of businesses understand that but not all, and that is the problem.
I also thank the Minister for his response to my amendments. I genuinely believe that he understands and supports the environmental challenge but, again, that is not enough: we need to address the regulatory failings that are allowing greenwashing and global warming to continue. Whatever the current regulations and laws, it is quite clear that those regimes are not properly addressing their responsibility in these areas. Again, we need to look further at that. There is huge frustration that policies are not being translated into action and leading to enforcement. Where are the examples of these policies being enforced?