Digital Economy Bill

Lord Morrow Excerpts

2nd reading (Hansard): House of Lords
Tuesday 13th December 2016 Lords Chamber

[Lord Morrow (DUP)]

My Lords, I welcome Part 3 of the Bill. Government data reveal that in May 2015 there were 1.4 million unique visitors under the age of 18 to pornographic sites from desktop computers. These visits equate to 20% of all under-18s and 13% of children aged between six and 14. This is deeply disturbing, especially as, according to the latest Ofcom research, most children and young people access the internet via a tablet computer or mobile phone, not a desktop computer.

The Government must be congratulated on introducing the age-verification provisions in the Bill. They must be further congratulated on responding positively to the amendments tabled in another place by Mrs Claire Perry, the honourable Member for Devizes, and Mrs Fiona Bruce, the honourable Member for Congleton.

Clause 23 gives the nominated age-verification regulator, the BBFC, much-needed leverage in relation to sites based outside the UK and in relation to those providing free pornographic material. This is vital because the vast majority of online pornography accessed in the UK comes from sites based in other countries and because a significant amount of pornography is free. Once this legislation becomes law, every pornographic website, no matter where in the world it is located, will have a real incentive to treat the UK regulator with respect because they will know that if they ignore it, they risk being blocked.

I understand, however, that although the Government have accepted the need for IP blocking, they continue to promote the alternative means of enforcement provided by the Bill and have indicated that, where possible, these will be used in the first instance. So what are those other options? On my reading, there are two, but it is unclear how one can work at all internationally and the other seems extremely weak.

First, Clause 20 provides for a fine, which can be either a maximum of £250,000 or 5% of the qualifying turnover. When the Bill went through another place, the question arose: why would any pornographic site located outside the UK listen to the UK regulator and, if it decided to ignore its directions regarding age-verification checks, what chance was there that it would then dutifully pay the UK regulator a £250,000 fine? Indeed, an amendment was actually tabled to remove from the regulator the option of issuing fines to overseas organisations. The amendment was probing and, as I understand it, the motivation of the person tabling the amendment, Mrs Claire Perry, was to say, “Let’s be honest, this enforcement mechanism will only work in dealing with sites located within the UK”.

In response, the Minister, the right honourable Matt Hancock MP, acknowledged that fines would not always work abroad but said that there were international mechanisms for enforcing them in some countries. Specifically, he said:

“We want to be able to fine non-UK residents—difficult as that is—and there are international mechanisms for doing so. They do not necessarily reach every country in the world, but they reach a large number of countries”.—[Official Report, Commons, Digital Economy Bill Committee, 20/10/16; col. 217.]

What are the “international arrangements” on which the Government are depending for enforcing the fines? Which jurisdictions in the world can be reached by these arrangements? How easy would it be in practice to use these mechanisms in relation to a site in a foreign jurisdiction to which the said international arrangements apply?

The second alternative enforcement mechanism that the Bill hints at is financial transaction blocking, although it seems to me that the provision is only half present. Although Clause 22 is lengthy, at the end of the day it gives the regulator only the option of informing financial transaction providers that a site seeking access to the UK market is operating in violation of UK law by not having age-verification checks. Clause 22 does not require the regulator to relay this information to financial transaction providers, nor does it empower the regulator to require them not to process transactions with the site nor, consequently, does it empower the regulator to follow through to ensure that the financial transaction provider has complied.

I understand that the Government have suggested that this very limited power to inform the financial transaction providers is sufficient because they are already required by their terms and conditions not to facilitate illegal transactions. This, of course, is not a new argument. It is the same one that was deployed by the Government in response to the financial transaction blocking amendment brought by the noble Baroness, Lady Howe, to the Gambling (Licensing and Advertising) Bill in 2014. The House was told that there was no need to make statutory provision because the Gambling Commission would tell financial transaction providers when a site was operating illegally without a Gambling Commission licence. My difficulty is that the process completely lacks transparency, so we do not know how effective it really is. The only information that we have after nearly three years is the answers to the Parliamentary Questions which suggest that transactions have been blocked to 11 gambling websites. That seems a very low number to me. I do not find it remotely reassuring.

The benefit associated with giving the regulator an express obligation to inform about non-compliance and an express power to require action to block transactions—similar to the requirement for action in Clause 23—is that it would underline the implicit responsibility on the financial transaction providers not to process illegal transactions. Clause 22 also applies to ancillary service providers which support websites with services such as advertising. It is not clear, however, whether the Government are relying on the good will of these organisations or whether they would argue that there is regulation that would require companies supporting websites to withdraw their services if non-compliance came to light. At the moment, the obligations of ancillary service providers are very opaque. Yet making the obligations on the regulator, payment providers and ancillary service providers explicit is really important, because research suggests that without robust enforcement there will be little incentive to comply with the age-verification requirements.

A review of age-verification systems for gambling websites by University of Oxford academics notes that where there are,

“strict audit and enforcement requirements”,

there is an incentive to invest in,

“high-assurance identity and age-verification processes”,

but,

“where enforcement is patchy and uncertain, the incentives to invest in expensive authentication systems are less clear”.

According to the review, that is,

“especially true for smaller or less well-known companies who are also less likely to receive reputational damage if any illegal selling is revealed”.

I believe that there is a very strong case for amending Clause 22 to require the age-verification regulator to tell financial transaction providers of non-compliance and to place an enforceable duty on them not to process transactions between people in the United Kingdom and sites operating in violation of the digital economy legislation. I also think that there is a very strong case to be made for an amendment giving the regulator power to require ancillary services such as advertisers not to advertise on sites operating in violation of UK law.

I very much look forward to the Minister’s response to the questions I have asked and the points I have raised about enforcement.