Digital Markets, Competition and Consumers Bill

Lord Bassam of Brighton Excerpts

Committee stage
Wednesday 24th January 2024 Grand Committee

[Lord Clement-Jones (LD)]

My Lords, this has been a really interesting and helpful debate, with a number of noble Lords answering other noble Lords’ questions, which is always pretty useful when you are summing up at the end. One thing absolutely ties every speaker together: agreement with the letter to the Prime Minister from the noble Baroness, Lady Stowell, on behalf of her committee, about the need to retain the JR principle throughout the Bill. That is what we are striving to do.

It was extremely interesting to hear what the noble Lord, Lord Lansley, had to say. He answered the second half of the speech by the noble Lord, Lord Tyrie. I did not agree with the first half but the second was pretty good. The “whiff” that the noble Lord, Lord Tyrie, talked about was answered extremely well by the noble Lord, Lord Lansley. It was a direct hit.

The interesting aspect of all this is that the new better regulation framework that I heard the noble Lord, Lord Johnson, extolling from the heights in the Cholmondeley Room this afternoon includes a number of regulatory principles, including proportionality, but why not throw the whole kitchen sink at the Bill? Why is there proportionality in this respect? It was also really interesting to hear from the noble Lord, Lord Faulks, who unpacked very effectively the use of the proportionality principle. It looks as though there is an attempt to expand the way the principle is prayed in aid during a JR case. That seems fairly fundamental.

I hope that the Minister can give us assurance. We have a pincer movement here: there are a number of different ways of dealing with this, in amendments from the noble Lords, Lord Holmes and Lord Faulks, and the noble Baroness, Lady Stowell, but we are all aiming for the same end result. However we get there, we are all pretty determined to make sure that the word “proportionate” does not appear in the wrong place. In all the outside briefings we have had, from the Open Markets Institute, Foxglove and Which?, the language is all about unintended consequences and widening the scope of big tech firms to challenge. What the noble Lord, Lord Vaizey, had to say about stray words was pretty instructive. We do not want language in here which opens up these doors to further litigation. The debate on penalties is coming, but let us hold fast on this part of the Bill as much as we possibly can.

[Lord Bassam of Brighton (Lab)]

My Lords, I thank the noble Lord, Lord Faulks, for his neat and precise analysis of the position in which we find ourselves in the discussion on this group of amendments. This debate is a prequel to that which will follow on penalties, and we should see it in that light; the two things are very much connected, as the noble Lord, Lord Clement-Jones, made clear. Like him, I completely agreed with the noble Lord, Lord Vaizey, when he warned about using stray words. Proportionality is probably one of the most contested terms in law, and in all the 25 years or so that I have been in this House, I must have heard it in all the legal debates we have come across.

These are the first amendments seeking to restore some of the Bill’s original wording, which, as we have heard, was changed late in the day in the Commons. We are yet to receive a full explanation from the Minister of the reasons for that. The noble Lord, Lord Faulks, asked why, and we on these Benches pose the same question. Were Ministers lobbied into this and, if so, why? We support Amendments 16 and 53 in the name of the noble Lord, Lord Faulks, which, as he outlined, seek to restore the original wording of the Bill, taking out the word “proportionate”, removing proportionality as the determining factor behind a CMA pro-competition intervention and reinserting the word “appropriate”.

We have two, possibly three, sets of solutions to the problem that the Government have set. However, we also have added our names to Amendments 17 and 54, in the names of the noble Baronesses, Lady Stowell and Lady Harding, and the noble Lord, Lord Clement-Jones, with the intent of ensuring that clarifying that the condition for conduct requirements imposed by the CMA to be proportionate does not create that novel legal standard for appeals of decisions and the confusion that will flow from that. In our view, as the noble Baroness, Lady Harding, says, the original wording strikes the right balance, roughly speaking, whereas the Government’s version would weaken the intent of this part of the Bill.

The formulation of the noble Baroness, Lady Stowell, relies on prevailing public law standards—in other words, standards that are commonly understood. We take the view that we all need to know what rules we are working to, and if the Bill introduces or creates a new standard then that certainty is removed. Of course, when it comes to the issue of pre-emption, we will need to resolve the best way forward on this issue at the next stage of the Bill. For my part, I think that reversion might be the best route, but no doubt by negotiating round the Committee we can come up with a workable solution.

The amendments of the noble Lord, Lord Holmes, particularly Amendments 220 and 222, offer another way through it. However, on the face of it, for us they are useful in the context of reminding our Committee that guidance will need to be produced on the operation of this regime as it covers financial penalties and the countervailing benefits exemptions.

We have heard a lot about the new regime being flexible and participatory as a framework for regulation, and we agree with that principle. However, we think that, with this particular change, the Government strike at the heart of that and bring in a measure of uncertainty that is unwise, frankly, in this particular process. The intervention of the noble Lord, Lord Lansley, was very telling. What he told the Committee was extremely important and we should listen very carefully to what was said in that exchange of correspondence. He rather shot the Government’s fox.

In conclusion, the Minister has a bit of a difficult job on his hands here. He may feel the weight of the Committee against him. I rather hope that he can offer us a measure of reassurance and perhaps help us come to a point where the whole Committee can agree a sensible reversion or an amendment that makes the Bill as workable as it seemed when it was first drafted.

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

I thank the noble Lord, Lord Faulks, for raising the topic of proportionality in the digital markets regime and for doing so with such a clear and compelling analysis, which I think all of us, myself included, found deeply helpful. This is of course the requirement for the CMA to impose conduct requirements and pro-competition interventions on firms only where it is proportionate to do so.

First, I reassure my noble friend Lady Harding that this change is not about introducing a new standard or meaning of proportionality but about clarifying the scope of decisions that it applies to.

Amendments 16 and 53 from the noble Lord, Lord Faulks, seek to remove the explicit statutory requirement for PCIs and conduct requirements to be proportionate. Under these amendments, SMS firms would still be able to argue that their rights to peaceful enjoyment of property under Article 1 of the first protocol of the ECHR, or A1P1, were engaged in most cases, allowing them to appeal on the basis of proportionality. I refer noble Lords to the ECHR memorandum published by the department, which explains how the regime intersects with human rights and how this relates to property rights. A1P1 protects possessions, which can include enforceable rights such as contracts, and so regulating SMS firms under the regime would commonly affect possessions, and therefore engage A1P1.

The Government have always been clear that the CMA will need to act proportionately and comply with ECHR requirements, and that imposing obligations on SMS firms will very often engage the firm’s rights under A1P1. However, having a statutory requirement for proportionality in the Bill reinforces the Government’s expectations for how the CMA should design conduct requirements and PCIs, to place as little burden as possible on firms while still effectively addressing competition issues. This should be the case even when A1P1 property rights are not engaged, which this requirement provides for.

In particular, it is worth highlighting that A1P1 rights on their own would not amount to grounds to challenge interventions that impact a firm’s future contracts. It is right that these interventions should be proportionate. I understand the concern from many noble Lords about any extension to the grounds for appeal in the regime, but we are giving extensive new powers to the CMA to regulate digital markets.

--- Later in debate ---

[Lord Black of Brentwood (Con)]

My Lords, this is not just to prevent the Minister getting up again; it is relevant to both points that have just been made. A number of noble Lords asked whether this huge volte-face by the Government between the publication of the Bill and the amendments made very late in the other place came about as a result of pressure from the platforms. Could he tell us whether the platforms lobbied for this change and whether he discussed it with them?

[Lord Bassam of Brighton (Lab)]

My Lords, if I might help the Minister, this legislation has been knocking around for some time now, so what was it that provided that blinding flash of official or ministerial inspiration to bring this amendment about “proportionate” so late in the day in the other place that it was tabled right at the end of the Commons process? What was it that was so compelling as to make that dramatic change?

[Viscount Camrose (Con)]

If noble Lords will forgive me; that was a large variety or questions. First, I can confirm right away that I have not received any lobbying from any big tech firms on this topic—none; zero. Secondly, as with any Bill, this was part of an ongoing pattern of constantly looking for means of improving the Bill, to maximise its clarity and effectiveness. I recognise the concern voiced by the Committee about this. I am very happy to set out in detail all the arguments I have attempted to make. I hope that will go some way further towards satisfying the Committee.

--- Later in debate ---

[Baroness Harding of Winscombe (Con)]

My Lords, I associate myself with the remarks just made by the noble Lord, Lord Tyrie, about recognising how important it is that we embolden the CMA to tackle these merger issues. I do not have anything like the expertise in detailed drafting that my noble friend Lord Lansley has just demonstrated, but I encourage the Government to listen carefully to his advice and review the drafting. We should see if we cannot come together with a solution on Report that achieves what I think we are all trying to achieve here.

I would also like to briefly correct the record. On Monday, as the noble Lord, Lord Vaux, said, I said that all the companies had appealed their designation of the DMA. Much to my amusement, Google was very swift to email me on Tuesday morning to tell me no, it was very keen to collaborate, so I would hate that to become a considered fact of this Committee—I owe Google that.

I support the amendment by the noble Lord, Lord Vaux, but I point out to the Committee that it is actually a very small amendment. The CMA told us in one of its briefings last week that it could undertake only two SMS investigations at any one time. We should recognise that it is a very minor amendment meaning that, while the CMA is investigating two entities, those two entities will be required to report. We should accept that that is a very small improvement that we should encourage the Government to accept.

[Lord Bassam of Brighton (Lab)]

My Lords, I am sure the Committee will be relieved to know that we do not have a great deal to say on this, except that we see merit in the amendments from both the noble Lords, Lord Vaux and Lord Lansley.

I thought the noble Lord, Lord Vaux, made a very good point: this is very simple. It is about providing and encouraging greater transparency in the merger process. It is straightforward in ensuring that all parties are aware of the status of the undertaking involved, and it brings clarity where the SMS is concerned.

It has to be regretted that companies might want to use mergers and acquisitions as a way of delaying SMS designation. As the noble Baroness, Lady Harding, has just said, there are delays enough in the process as it is. If the CMA is going to be able to do only two of these a year, there is hardly much reason to encourage more, greater and longer delays in the process.

The noble Lord, Lord Vaux, argued that designations could take until 2025 and delays will occur. With the sheer volume of acquisitions taking place, if companies are going to use that as a means of gaming the system then that cannot be right. It cannot be in consumers’ interests either.

I turn to the elegant amendment by the noble Lord, Lord Lansley. It seeks to ensure, where a designated undertaking is involved, that there is an assessment of the impact on consumers. The Minister has argued from the Dispatch Box that the legislation is designed by the Government to place the interests of consumers at the very front of this piece of working legislation. So, if a merger is likely to lead to a loss of benefit to consumers, it must therefore be right that market intelligence is shared, and we assume from our perspective on the Labour Benches that that must be a public good to be supported.