Digital Markets, Competition and Consumers Bill

Lord Ashton of Hyde Excerpts

Committee stage
Wednesday 31st January 2024 Grand Committee

[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.