Digital Markets, Competition and Consumers Bill

Baroness Kramer Excerpts

Report stage
Monday 11th March 2024 Lords Chamber

The noble Baroness, Lady Kramer, has been arguing vigorously for years that we need to go much further, that we need an office for whistleblowers—a fully independent oversight regime with a remit well beyond the competition field. I have hesitated before supporting such a proposal but, given where we are now, perhaps she is right. At the very least, we need an immediate review to find out whether she is.

[Baroness Kramer (LD)]

My Lords—

[Lord Kamall (Con)]

My Lords—

[Baroness Kramer (LD)]

Please.

[Lord Kamall (Con)]

I thank the noble Baroness. I am afraid that was the opposite of chivalry.

I want to speak to Amendment 153, tabled by the noble Lord, Lord Tyrie. He and I have had a number of conversations about this. I refer noble Lords to my interests as set out in the register. Having written about competition law at EU level and taken part in debates on competition issues in the European Parliament during my many years there, I was very torn between the merits appeal and the judicial review. I was tempted by the idea from my friend in the other place, the right honourable Robert Buckland, of possibly a time-limited merits appeal.

Many of us fell down on the side of judicial review because the small firms, the challenger firms, were asking for it. They believed that it was quicker and more effective. We hope that it will be. That is why many of us have supported this. But we have to ask: what if we are wrong? We do not have perfect information. What if judicial review takes longer than envisaged? Some noble Lords have said to me that the Joint Committee of Parliament that the noble Baroness, Lady Stowell, proposed would be much more effective in holding the CMA to account and ensuring that there is not a repetition of cases being restarted because they lost at JR. That argument has some merit.

However, we must take a step back and realise that, given that none of us has perfect information, we should be aware of the notion of unintended consequences. I have written about this a number of times over the years for think tanks. Often a well-intentioned government intervention that is supposed to make things better, which many people support at the time and that makes sense and looks like it will work does not turn out how it is supposed to but makes things worse.

In that spirit, I have been thinking about how we make better laws. How do we ensure that there are safeguards in place for unintended negative consequences? How do we make some redress to ensure that we change course, having thought that we were on the right course but having made things worse by not recognising the unintended consequences? In Committee, I said that I had considered tabling an amendment for a review after three or five years, or whatever. However, I am concerned that this would be seen as a loophole by the big companies, which would then hold off in order to show that JR was not working so that they could go back to merits appeal.

The noble Lord, Lord Tyrie, has solved that problem in many ways with Amendment 153. It is right that we have a review of all legislation to ensure that it has worked out as was intended and so that where there are unintended, unforeseen consequences, when it did not work as we had envisaged, we have those safeguards. A good way of doing that would be to have reviews of legislation such as the one that the noble Lord proposes here, to ensure that we could change course if it did not turn out how we intended.

I hope it will do. I hope judicial review will work. I hope it will be much quicker and we will have a much more competitive market. I hope the challengers will grow stronger, we will have more competition and see creative disruption and new challengers at every stage and consumers benefiting. Amendment 153 says, “Let’s make sure that we take stock to see whether legislation—particularly a Bill as important as this—works out as we want it to”. That is why I support Amendment 153.

--- Later in debate ---

Litigation funding raises issues that are worldwide. They are very similar, whether in continental Europe, the United States, Singapore or Australia, by way of illustration. These are covered in the report. I very much hope that the Ministry of Justice will find it useful and think of a way to tap into all the knowledge that the group has. What the answer is, what the principles are, I will not take your Lordships’ time up with, except to say that it may not be regulation. Regulation is not a universal success. There are other ways of doing things—maybe codes of conduct, maybe voluntary agreements. It is quite clear that this gives England and Wales, and the UK, an opportunity to show what we have always had: leadership in the law. We are known throughout the world for this. I very much welcome what the Lord Chancellor has done because it shows what a real leader he is.

[Baroness Kramer (LD)]

My Lords, I very much support Amendment 61 moved by my noble friend and colleague Lord Clement-Jones. I am very much a believer in equality of arms. The issue of exemplary damages speaks exactly to that. I hope very much that the Government will take that on board, because it is a fundamental principle that makes a great deal of practical difference as well when wrong has happened and when people seek redress.

I support the two amendments tabled by the noble Lord, Lord Tyrie. Briefly, on Amendment 153, regarding the five-year review, I had the privilege of serving under the noble Lord’s chairmanship on the Parliamentary Commission on Banking Standards. In many ways that was similar to this Bill, but our proposals were exceedingly radical. They required very substantial change by the financial services industry. We very much wanted them to be reviewed after a period of time. We did not manage to trap that into legislation; it did not happen. Instead, when issues became evident where we had made changes—for example, on presumptions of guilt and in areas where there was intense lobbying on ring-fencing and whatever else—changes happened but not in a coherent and sensible way that benefited from that overarching focus that we had had during the original review. That has been a real weakness. We finally have a new committee in this House, the Financial Services Regulation Committee, providing some accountability to regulators, but that is an issue that we would have picked up on much earlier had we been in the process of doing a comprehensive review. That underscores many of the points that have been made about this issue.

We live in changing times. The idea that things stand still and you can do everything piecemeal is really not appropriate. However, I will speak most on the issue of whistleblowing. I have not otherwise participated on the Bill but, when I see the word “whistleblowing”, I am afraid that I suddenly find myself lured on to the Benches.

I very much ask the Government to take this issue on board, because I agree with the noble Lord, Lord Tyrie, and others: we will never get to grips with wrongdoing in any of the areas covered by the Bill, particularly with all the new complexities and the constant change within the digital and competitive arena, until we have an effective whistleblowing regime. We need a system that leads to the follow-up of valid tips from whistleblowers. Currently, looking at different regulators in many different fields is clearly completely haphazard. Some tips are followed up, some are dismissed and some are ignored. Secondly, and just as importantly, we need a proper arrangement to protect whistleblowers from retaliation, so they will not suffer detriment by coming forward.

Our current system depends on the Public Interest Disclosure Act 1998, which was a Private Member’s Bill that was brought forward then as part of employment law. It was ground-breaking at the time but has long been shown to be utterly inadequate compared with more recent schemes, particularly in the United States. Those US schemes have had an astonishing success rate in disclosing wrongdoing, leading to prosecutions, convictions and financial penalties.

I will use an example not from the anti-trust field but from a field that I know best and with which many will be familiar—the Securities and Exchange Commission. Since it brought in its whistleblowing scheme in 2011 under the then new Dodd-Frank legislation, by the end of fiscal year 2022, it had received over 83,000 tips from whistleblowers and collected in excess of $6 billion in financial penalties. In fact, there has been so much activity in the following years that those numbers would be significantly higher if we brought them up to date.

It is also fair to assume that billions of dollars of wrongdoing have been deterred by the fear of disclosure under such an effective whistleblowing regime. Not just the SEC but a number of entities use whistle- blowing legislation within the financial field; the Commodity Futures Trading Commission—CFTC—is another example that has had the same kind of success as the SEC. I find it rather disturbing that the CFTC is now doing road trips in the UK to encourage whistleblowers who are aware of financial wrongdoing with any US connection to contact it directly. In fact, something close to a quarter of the cases it is currently pursuing have a UK-based whistleblower somewhere within them, because finance is so international. Now the people at the CFTC are very careful not to criticise any UK regulators, but it is not a compliment that they feel it is necessary to be here to get their independent message across to anyone who has come across wrong-doing, with a US connection, in the financial field.

The Public Interest Disclosure Act is inadequate for at least four reasons, some of which were mentioned by the noble Lord, Lord Tyrie. It does not require any follow-up on a tip, even if it is acknowledged to be valid. It covers only employees and not the many others, such as contractors or clients—all kinds of people come forward—who blow the whistle when they see wrongdoing. They are not covered at all and have zero protection at present. All it provides is anonymity for disclosures that are made to a prescribed group of people—basically, the regulators and MPs. Most whistleblowers are not anonymous; they will have raised issues with management, companies, employers, suppliers and clients. When they see something wrong, they do not instinctively think of themselves as whistleblowers in need of protection, and when they do, their identity is then known.

No regulator in the UK has ever acted to protect a whistleblower from retaliation. That retaliation is usually years spent in an employment tribunal or in the courts. For many whistleblowers, it is a loss of career. There is a wide scheme of informal blacklisting—we know of case after case. Many whistleblowers have to use their own resources because there is no legal aid to fight this process, so they run into financial ruin. You can imagine the mental health costs and the frequency with which families break down.

However, I have spoken to pretty much every UK regulator and typically—there are a few exceptions—they regard their own monitoring and supervision as entirely sufficient, with whistleblowing a mere marginal assistance. They also believe that whistleblowers should act out of duty and altruism, and not because there is protection from retaliation available or compensation for harm.

I have talked about the SEC and the CFTC and, prior to the Dodd-Frank legislation in the United States, which put in the strict whistleblowing rules and made them mandatory, US regulators had exactly the same attitude as the current UK regulators and the same failure to create a pattern of whistleblowing and to follow up cases. The change came with legislation.

In the sectors covered by the Bill, the rewards for wrongdoing are a huge temptation and require highly sophisticated expertise and knowledge. We can see why that is tough for a regulator to manage, unless it has a really effective whistleblowing programme. In its recent directive, the EU is now catching up with the United States in recognising whistleblowing as a key tool to expose wrongdoing early and to deter wrongful behaviour. It is time that we did the same.

I hope that the Minister takes back this message to those who are working on the reform of the whistleblowing framework, as it is really important. Sometimes one hears rumours that they are looking just to tweak existing legislation, but what is needed is a radical change that meets the needs and gives us the opportunity that an active whistleblowing community can deliver. I hope the Government will take on board that message.

[Lord Bassam of Brighton (Lab)]

My Lords, I promise that I am not going to stand for too long between this session and people’s desire to have supper. I have a few words to say, but I will try to keep them as brief as I can. This group of amendments deals with the interaction of the courts with regulation and redress, and we obviously support Amendment 61, in the name of the noble Lord, Lord Clement-Jones, on exemplary damages in class action cases. We will listen to the Minister’s explanation carefully and try to understand why the Government are continuing to resist this approach.

We recognise that government Amendment 62 is part of a wider initiative to put right the fallout from the Supreme Court judgment in the PACCAR case, which acted as an inhibition to litigation fee agreements that enable collective actions such as those involving the postmasters and postmistresses. If we have learned anything from Committee, it is that Ministers should live in dread of the experience of the former Lord Chief Justice, at all times. The noble and learned Lord, Lord Thomas, offered us some wise words on that occasion and I am glad—delighted, actually—to see the Government finally acting with some speed to bring forward a Bill from the Ministry of Justice that covers a wider range of cases than the current Clause 127 achieves. If the noble Lord, Lord Clement-Jones, had not quoted Alan Bates, I would have done, because I thought it was a ringing endorsement of what was necessary.

Perhaps I could task the Minister and tire him a little to put a bit more on the record about the detail, nature and extent of the short Bill when he sums up. Can he give us a clue about its introduction date?