Digital Markets, Competition and Consumers Bill

Baroness Stowell of Beeston Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[Baroness Stowell of Beeston (Con)]

My Lords, it is a pleasure to follow the noble Lord, Lord Tyrie, and I will come to his theme of accountability later in my remarks, but I am very grateful to my noble friend the Minister for setting out in his introductory speech just how successful the UK’s tech sector is to date, because it really is a huge success. I was delighted to learn that Nottingham, my home city, is one of only a small number with two unicorns—billion-dollar tech start-ups. I did not know that, so that was good to hear.

Although we have been successful so far in the tech sector in this country, we have the talent and the potential to do so much more. But we have a problem, as we have already heard, which is that our digital markets are not working properly. The financial clout and sheer computing power of the US tech giants are creating significant, often insurmountable barriers to entry for alternative providers. I want to be clear that the Bill should not be about bashing big tech. We should not penalise these businesses because of their size. Their success and innovation also create other business opportunities, providing products and services that millions of people use and love. But that does not mean they should control the way markets develop and who else gets the chance to succeed. Like most, if not all, of my noble friends on the Conservative Benches and my erstwhile noble friend Lord Tyrie, I believe that free markets drive growth when they allow for effective competition. When markets are not creating that competitive landscape on their own, Governments should step in—hence the Bill before us.

Noble Lords have already heard that the Communications and Digital Select Committee, which I am privileged to chair, has started to call for legislation to empower the CMA with a new ex ante regime under the chairmanship of my predecessor and noble friend Lord Gilbert of Panteg. Through several committee inquiries, we have heard evidence of many things— we have heard about some of them today—including: unfair dominance and control of the immensely powerful and increasingly important digital advertising market; non-negotiable fees and terms applied by Apple and Google on thousands of businesses that rely on app stores, even though the terms of trade prevent some of those businesses providing a more streamlined experience and cheaper prices for their customers; and big players using their dominance in one part of the digital market, such as search, to damage the prospects of a potential competitor in another, such as online shopping or travel bookings. In our committee, we also continue to learn more about the failing of our digital markets as more firms, previously reluctant, are now willing to speak publicly about their experiences. So, as much as I would rather that the Bill was not necessary, the case for it is clear.

Once the Bill had been published and introduced to the Commons in the summer, my committee held hearings on Parts 1 and 2. I shall speak on only those parts today, but I have been interested to hear noble Lords cover other issues, to which we will no doubt return in Committee. I am grateful for all the briefings that I have received on all parts of the Bill.

I come back to the focus of my remarks. Overall, we as a committee found the Bill’s objectives and principles to be sound and a good basis for regulation. In our subsequent formal letter to the Secretary of State, we highlighted three important measures that we considered proportionate. My noble friend the Minister acknowledged that that is what we said, but he has not acknowledged something else we said: that these measures should not be diluted during the passage of the Bill. The three measures that we highlighted were the appeals process, the countervailing benefits exemption and the leveraging principle.

We knew from our evidence sessions that the big tech firms would lobby hard for changes in these areas. When all is said and done, they are successful businesses that will understandably fight hard to retain their positions. So, in the face of considerable pressure from them over the past few months, there was some relief when the government amendments tabled on Report in the Commons were less extensive than many had feared—but they are changes none the less.

Not only would any further dilution to these measures be unacceptable; the government amendments that have been made deserve proper scrutiny and debate to resolve the uncertainty that they have created. What I mean by that is that, in two or three years’ time, when the Competition Appeal Tribunal is considering an appeal, we need to be sure that judges will be in no doubt as to what the Government and Parliament intended by this legislation. We must avoid delays and outcomes that undermine the purpose of this Bill.

In his opening remarks, my noble friend the Minister anticipated some of my remarks. As he said today, and as the Government have shown in other ways, the Government have been at pains to stress that none of these changes affect the substance of the legislation. I am grateful for the reassurances that my noble friend has been able to offer. However, the fear is that these changes create loopholes for those with the deepest pockets to protract and extend a legal claim. We may require the publication of some new Explanatory Notes to provide that clarity and certainty. From noble Lords’ comments in today’s debate, I feel that we may need to table some amendments to at least probe and get firmly on the record the clarity that we need.

I will explain what I am talking about, which has already been highlighted by others. It is good that judicial review remains the procedure for any appeals against CMA decisions. But can we be sure that the new merits procedure for large firms to appeal against financial penalties will not lead to the CMA’s findings on conduct being reopened? My noble friend Lord Vaizey raised that question.

Indeed, why has the requirement for the CMA to ensure that its decisions are “proportionate” been spelled out in the Bill, when it is already a fundamental requirement of it as a regulator? Why has the decision been made to swap the word “indispensable” for a new form of words in the context of countervailing benefits? As we have heard, “indispensable” has precedent in case law and is well understood by the courts.

The Government have also added a new requirement that any guidance produced by the CMA in relation to Part 1 of the Bill should be subject to Secretary of State approval. I understand why the Government want to ensure sufficient oversight of the CMA, given the very substantial additional powers provided by this legislation, but my main concern with this change is that it will give the big tech firms another chance to lobby and delay. If this new requirement is to stay, we should at the very least include a short deadline in the Bill for the Secretary of State to grant her approval.

There are two other important principles for us to keep in mind here. First, the UK’s new digital competition regime is considered better than Europe’s because it is more flexible, but it will work only if the most dominant players participate in the process from the start to help the CMA decide best how strategic markets should work so that, in the end, all players get fair terms. The word “participatory” has been coined to describe this approach; “co-operative” would have done just as well. The point is that we must avoid deterring the kind of behaviour from big tech that is critical to the regime’s success.

The second principle—this is where I come to some of the comments that were made by my erstwhile noble friend Lord Tyrie—is accountability to Parliament. When it comes to the strategic oversight of the CMA and the work of its Digital Markets Unit, parliamentarians have an important role. Some noble Lords may recall that I raised the importance of accountability and parliamentary oversight during the passage of the Online Safety Bill. My committee, and the Online Safety Bill’s pre-legislative committee, both recommended a Joint Committee of both Houses be established to oversee digital regulation, because of the increasing power and remit we are giving to regulators. The Government, though, did not respond with any enthusiasm. We must return to this, and I thought that other speakers today might raise similar points.

This House passed a Motion only yesterday to establish a new committee of your Lordships’ House to oversee financial regulators. This was news to me yesterday, but I understand that it came about because of a government amendment to the Financial Services and Markets Bill. My noble friend Lord Tyrie suggested something different from what I have in mind, but the creation of this new committee sets a precedent, which is worth further consideration and study.

I support the Bill. It allows the big firms to continue to operate and innovate while ensuring that they do not use unfair tactics to suppress competition and stifle new challengers before they have had a chance to get going. In other words, it creates the level playing field that is critical to effective and fair competition. Ultimately, that is good for the UK economy, businesses of all kinds and sizes, and British consumers. I hope the Bill will pass swiftly because, as others have said, it is long overdue.