Digital Markets, Competition and Consumers Bill

Debate between Lord Tyrie and Lord Ranger of Northwood

Committee stage
Monday 29th January 2024 Grand Committee

[Lord Ranger of Northwood (Con)]

My Lords, I rise with an equal amount of trepidation to the noble Baroness, Lady Harding. I am a new Peer in the House with a background in the technology industry and the delivery of digital services. Although we are talking about market competition, we are straying into a complex conversation around labour markets and digital skills—the fundamental, No. 1 topic that drives a lot of thinking in digital organisations. I refer noble Lords to my register of interests.

The complex nature of a global digital skills market is the one thing that is challenging all digital businesses at this point in their ability to deliver and drive innovation. It is so competitive; in fact, the hyper-competitiveness is driving the inability to deliver. People are cannibalising other organisations. The agility and speed at which the market is moving, the hyperinflation in pricing, the investments that people are trying to make—indeed, that international businesses are trying to make globally—and the length and longevity of those investments’ value are becoming increasingly challenging. Therefore, the CMA intervening and having some influence will be challenging. We will have to think hard about how to enable understanding; about the speed at which the market is moving; about where this kind of activity would take place; and about how it would operate, understanding the global size and scale of this challenge.

I view this market with some concern but also with some excitement because of its ongoing development. One thing that I have seen is the move from triage, where outsourcing and moving to international markets for labour skills in digital was a trend, to the emerging nearshore and onshore trend of looking at bringing more skills into local geographies. Why do I say that? I say it because of the speed of the change in the market. If we try to regulate and legislate for that speed, it will be extremely challenging.

Humbly, that is the point I wanted to make at this stage of the debate.

[Lord Tyrie (Non-Afl)]

I have tabled a couple of amendments in this group. One concerns cost recovery for mergers while the other is about the need to review whistleblowing. This group is a proper mixed bag; it has all sorts of things in it.

Let me just say that I agree with what the noble Baroness, Lady Harding, said. We are at risk of “take note” and “have regard” confetti with respect to a number of our regulators. The problem is that they deflect attention away from their central function and make it much more difficult to hold regulators to account adequately; in fact, they make it virtually impossible for Select Committees to do their already difficult job. We will come on to discuss this later, but those two issues are more closely related than they might initially appear.

On cost recovery for mergers, it is important that we all know what is going on at the moment. When the CMA examines a merger, for example the Microsoft-Activision deal or the Sainsbury’s-Asda merger, the taxpayer subsidises a considerable part of the costs incurred by the regulator for that investigation. I cannot think of a good reason why the scrutiny and approval of big-ticket mergers should be subsidised. However, there is—it is important for me to say this—a wide divergence of view and practice on this, both domestically and internationally. I discussed this issue over many years with a number of my counterparts when I was the chairman of the CMA, as well as internally within the CMA and with what I suppose one might call the competition community of lawyers, which is pretty large.

Some jurisdictions argue that merger control is an imposition on firms by government and that, therefore, the public sector should pay for all of it—at least, that is their starting position. Germany takes this position; it has something to do with its long history in the treatment of cartels and the creation of the Bundeskartellamt, but we do not need to go into that. The fact is that it is in its bloodstream to pay for this from general taxation. Others argue, like me—it varies from regime to regime—that this public service is a perfectly reasonable, chargeable event. After all, anti-competitive practices, which many mergers might facilitate, are a cost to the economy and welfare.

In 2011, the Government looked at all this in the White Paper that led to the creation of the CMA, when they put together the Competition Commission and OFT. As a result of that White Paper, the Government compromised between the wide variety of views and increased cost recovery for mergers as a whole—that is, the whole task of scrutinising mergers—from 50% to 60%. It is important to bear in mind that, in deciding what to do on merger fees, firms seeking approval for their mergers pay consultants huge sums and that the cost of the CMA scrutinising it is a residual in their calculations. Indeed, it would be a residual of a residual, because these numbers are so very large.