Comprehensive and Progressive Trans-Pacific Partnership (IAC Report)

Lord Vaizey of Didcot Excerpts

Tuesday 19th March 2024 Lords Chamber

[Lord Marland (Con)]

My Lords, I declare an interest as a member of the International Agreements Committee, chaired magnificently by the noble and learned Lord, Lord Goldsmith. I like to big him up because it is good to be kind to the headmaster. You never know, you might catch the selector’s eye every now and then. I am grateful to the noble Baroness, Lady Hayter of Kentish Town, for—

[Lord Vaizey of Didcot (Con)]

She is terrific.

[Lord Marland (Con)]

—giving us the opportunity to have this debate. Yes, she is absolutely marvellous. This could be a Morecambe and Wise show in a minute if my noble friend Lord Vaizey does not shut up—and I know who is wise.

I was interested that the noble Lord, Lord Gardiner, said to us earlier that brevity is to everyone’s advantage. Therefore, I shall try to be brief and let the report itself do the talking. It has been incredibly well constructed by the team and has had a lot of the committee’s time. I am delighted to see so many members and former members here.

I congratulate the Government on this treaty—it is a good step forward. I pay tribute particularly, if he is listening, to the Minister, the noble Lord, Lord Johnson, who travels the world with huge energy. I often find myself following in his wake as I go round in my role as chairman of the Commonwealth Enterprise and Investment Council. I pay tribute to him because he has been the driving force behind this great treaty.

However, let us not kid ourselves—this is not the greatest agreement that has ever been signed. The noble Baroness made the remark that it is a very small amount of balance of trades to affect the United Kingdom. Therefore, we should not get too overexcited. But it is a starting place, and the real prize is, of course, services and financial services, as the noble Lord, Lord Anderson, mentioned. This is the key to the prosperity of this country and will be the real prize for businesses in this country. I want to know what steps the Minister will take to opening up those doors, because that becomes transformative.

It is also a great treaty because there is no doubt that the alignment of free trading nations is incredibly good for diplomatic relations and cordial relationships, and therefore a terrific building block.

There is always some embarrassment for the UK Government about taking the lead on things, but this is a golden opportunity to take a lead and become a key member of this trans-Pacific partnership. I am clear that that is what the other countries want—in the UK being embraced into this arrangement, their desire is to have the UK taking a forefront lead. This will be important, as was referenced earlier, with the inclusion of potential new members, and with the desire of China to become a member—which will have to be scrutinised incredibly carefully. I therefore urge the Government and my noble friend the Minister to tell us in what way the UK Government are going to take the lead. This is an opportunity, a post-Brexit opportunity bar none, if we can take it.

Finally, noble Lords would not expect me to not mention the Commonwealth. Two-thirds of the countries that have signed up to this agreement are Commonwealth countries. Why has the Foreign and Commonwealth Office not taken the initiative and used this as a spring- board for a Commonwealth trade arrangement? That is the second prize that this Government, in a post-Brexit era, should take.

I thank the Minister for everything he has done in achieving what we have done so far.

Regulator of Community Interest Companies

Lord Vaizey of Didcot Excerpts

Monday 11th March 2024 Lords Chamber

[Lord Johnson of Lainston (Con)]

I thank the noble Lord for those comments. Of course, I wholeheartedly agree that it is very important that CICs have the confidence of the public. People are going to invest in them and they are expected to operate at the highest possible level of probity and integrity. That does not mean to say that all of them will be a success, but the principles of combining philanthropy with private enterprise, with the outcomes that that has achieved in a very easy to operate and low-cost format, seems to have been enormously successful. It is something that we want to continue, but I am very aware of the comments made to me today and I will make sure that they are passed on to the relevant authorities.

[Lord Vaizey of Didcot (Con)]

My Lords, my noble friend the Minister mentioned the importance of philanthropy. Echoing the spirit of these questions, I congratulate him wholeheartedly on a recent advertisement I spotted inviting appointments to an office of philanthropy for inward investment. It is a very perceptive move for the Government to have a strategy to contact foundations around the world to encourage them to invest in the UK’s cutting-edge science, for which we are justly world renowned.

[Lord Johnson of Lainston (Con)]

My noble friend, as always, says wise words in a passionate manner and I congratulate him on them. I appreciate the salience of raising the Office for Investment’s philanthropic division in this House. It is important that we are able to project the extraordinary opportunities for venture philanthropists in the United Kingdom and I call on Members on all sides of the House to assist me in projecting our incredible philanthropy opportunities to the rest of the world.

Digital Markets, Competition and Consumers Bill

Lord Vaizey of Didcot Excerpts

Committee stage
Wednesday 7th February 2024 Grand Committee

[Lord Vaizey of Didcot (Con)]

I will briefly speak to my noble friend’s amendments. I declare an interest as a broadcaster on Times Radio, which is owned by News UK. The point is clear: the Government’s intentions are perfectly honourable. They seek to protect consumers and give them a simpler way to enter into a subscription contract and to cancel one.

However, as I hope my noble friend has made clear in his excellent and detailed speech, things are never quite that simple. From the 2013 consumer contracts regulations, it is clear that, 10 years ago, the Government recognised the changing nature of the services, particularly digital ones, that consumers are now using. It is also clear that the savvy consumer, dare I put it that way, will potentially be intelligent enough to work out that they could take out a contract with a subscription service —it could be a video service through which they want to watch a particular series, or a content service such as the Times if they want to read a particular article—take advantage of the cooling-off period and not pay for that content.

For service contracts such as these, it is important that Parliament support both sides of the equation. We do not take the contribution that content services make to our economy nearly seriously enough, and we still live in a climate where too many people believe that content should be free. As content providers have struggled with how to cope with delivering digital content, moving from free ad-supported models to subscription models, it is important that the Government take into account the pressures they face and reach a reasonable compromise in order to do so.

I fully support the arguments put forward by my noble friend Lord Black. They have been well rehearsed by a coalition of people, ranging from the video games trade body to the technology trade body, the news trade body, the film trade body, the commercial broadcasters’ trade body and even the online dating app trade body, which has got in on the act as well. They are all perfectly reputable organisations whose case deserves to be heard by the Government. It is my understanding that the Government recognise the problem, and we hope that the Minister will come back on Report, as he was so co-operative in our last Committee, with a genuine solution to this conundrum.

[Lord Bassam of Brighton (Lab)]

My Lords, this is the starter before the main course on subscription contracts, but it is important none the less. I can reveal to the Committee that our Amendments 169 and 193 are mere probing amendments designed to test whether the Government have confidence in the Bill’s subscription provisions providing sufficient protection for digital platforms that host copyrighted content, mainly on-demand videos. A number of companies have raised this issue with us, arguing that they will be seriously out of pocket if they have fully to reimburse those who have accessed paid-for content during a cooling-off period. It is our feeling, and a view widely shared, that, although the Bill restates a lot of current consumer law on subscriptions, it does not restate many of the obvious and probably necessary exemptions that the noble Lord, Lord Black, clearly identified. We need to cover those.

At present, if I sign up to a streaming service, it is made apparent that, the moment I consume content, my statutory rights change. The Bill appears to restate some principles but not others, and it creates a lack of certainty for both sides. Some of the companies argue that they will have to pay out refunds in cases where they would not under current law. This runs the risk of creating unrealistic expectations for consumers.

The amendments in the name of the noble Lord, Lord Lucas, ask similar questions of the Minister and seek to explore how the subscription contract is paid for if it is used during the cooling-off period and then cancelled. They also seek to understand what information a trader must publish in those circumstances. The noble Lord made a good point about charging.

Turning to the amendments in the name of the noble Lord, Lord Black, he skilfully highlighted for the Committee the problems that will be caused by the way the legislation is phrased. Having heard the noble Lord, I am more on his side than I was at the outset. I am not a regular Daily Telegraph reader, nor a great fan, and this is the second time in a week I have had to plead on its behalf—this is becoming rather strange politically. I am a Guardian person, and I can see the problem replicated across the whole news world. I do not think the onerousness of the burden is justified in this case. It could be an endemic problem.

I want to hear what the Minister has to say because we need some light and dark, some nuanced thinking, about the way subscriptions work. This is not the way to bear down on the subscription trap, which I think we are all keen to deal with. This does not help us at all in that regard.

I was originally going to say of the last two amendments in the name of the noble Lord, Lord Black, which seek to create a two-year implementation period, that I was not particularly convinced, but having heard the argument, I have reversed my view. If we do not have a solution, I suspect those two amendments could be very helpful in trying to resolve some of the problems this is creating. There is merit in those amendments.

We need to approach this issue in more forensic detail. I want to hear what the Minister has to say, because I do not want us to further undermine the news market. We live in a time when there is less ability and facility to report than we are used to. Moving from broadsheets to online content is changing the way in which the news world operates. My son works in the news world, and he understands these things far better than I do. We need solutions, and the way the legislation is currently phrased does not provide us with one that protects the value and importance of news in an open democracy such as ours.

--- Later in debate ---

[Baroness Stowell of Beeston (Con)]

I have not been involved in Part 4 of the Bill and the Communications and Digital Select Committee did not include it in the work that we did to study the Bill last year, so I must say from the outset that I am speaking in a personal capacity.

Like other noble Lords who spoke on the previous group, I have received a lot of correspondence from various media and tech firms that rely on subscriptions as part of their business model. I am concerned on their behalf to guard against overly prescriptive measures which could threaten their sustainability, especially in such a competitive arena, which is why I have sought to familiarise myself with the Bill and have listened to what has been put forward. I should also declare that I am a vice-chair of the All-Party Parliamentary Group on Customer Service and take a keen interest in the frustrations people experience at the hands of service providers, especially when they feel that the channels of communication available to them for queries and complaints, or to cancel, are designed for the benefit of businesses, not their fee-paying customers on whom businesses rely for their income and survival.

In his response to the first group, my noble friend the Minister referred as an example to consumers who take out limited-time free or discounted subscriptions online and then get caught in full subscriptions which they cannot cancel unless they telephone a number that they have probably struggled to find online. Then, when they get through, they enter into a battle of wills with a telephone handler who just will not let them go. I have sympathy with that experience, having endured it, but if I do not want to stay, I make sure that I do not continue to subscribe. I also recognise that it is important for consumers to have a place to go to negotiate when they feel that they could get a better deal, as my noble friends Lord Black and Lord Vaizey identified. I will come back to that in a moment.

Having listened and looked at the Bill so far, my conclusion is that, concerned as I am to make sure that we get the right outcomes for consumers, I am not convinced by some of the solutions in the Bill. My noble friend Lord Black’s argument in favour of secondary legislation to address some of these issues has merit, as there appears to be significant and understandable concern from a range of subscription businesses about changes to the cooling-off period. There seem to me to be conflicting shifts in different directions—of both vague and detailed new methods for cancellation at the same time—in the Bill, so I think that more time to get this right could be justified.

I was struggling to follow what my noble friend the Minister said about consultations in response to the last group, but what is proposed does not seem that convincing to me when we are writing things into the Bill before completing the consultations necessary to get it right. What I do not want, as a result of the Bill becoming an Act, is consumers being irritated because of the frequency with which they start receiving computer- generated messages asking if they want to renew a contract or, perhaps worse, because they are no longer able to telephone a firm to threaten to cancel in order to negotiate better terms, if they no longer have that facility because of something else that has been offered to them.

Two basic things seem critical to me. The first is the guaranteed facility that if you subscribe online, you can cancel online. That is one of the most annoying things in what consumers feel at the moment. The second is that phone lines for customer service, whether the issue is a query, a complaint or somebody wanting to cancel something, have numbers that are readily available and that the lines themselves are staffed by people trained and equipped to assist individuals to the customer’s satisfaction—and for their benefit, not the benefit of the firms.

That is what we ought to be trying to achieve through this legislation and, at the moment, I am not convinced that that is where we will end up. I am not a business figure myself, but I know that the best way for any business or public service to succeed is for its customers to get the service they are paying for, to be treated with the respect they deserve and to be satisfied that they have got a fair deal as a result. I just feel that we are losing sight of this.

Perhaps I may finish with one small point about the proposed cooling-off measures. My noble friend Lord Vaizey ran through various examples of when a consumer might take out a subscription and take advantage of that subscription in a cooling-off period, without paying any fee at all. One of the examples he gave was of a consumer taking out a newspaper subscription to read just one article, or a day’s edition, for free. Clearly, that would be wrong. Journalism is expensive and the best of it cannot be done for free, but not everybody who wants to read a newspaper or an article wants to take out a subscription. To many consumers, subscriptions are another bill—and they do not want another bill. I urge all newspaper publishers to put in place, as soon as they can, a mechanism for consumers to buy just one day’s edition or 24 hours of access to the website, without them having to take out a monthly subscription.

[Lord Vaizey of Didcot (Con)]

My Lords, I support my noble friend Lord Black on his amendments and will respond to the excellent remarks made by my noble friend Lady Stowell. It is interesting how she ended her remarks, because I read in a free email newsletter this morning that, apparently, a lot of newspapers—led in fact by Will Lewis, who was obviously educated when he was at the Telegraph by my noble friend Lord Black —are looking at a mix of models now. Some people are saying that the freemium model, or free with ads, is dead but also that the subscription model may be dead, and that there will be a mix in how people can, effectively, find a way of paying for what is normally excellent content online from reputable brands. Things are developing, so perhaps my noble friend Lady Stowell is wrong to say that she does not have experience of business; clearly, she has an instinct for it. Anyway, I digress.

I must say that I have thoroughly enjoyed being in this Committee. What has emerged from the six days in Committee is that there are clear areas at which the Committee is asking the Government to look again, but not in a hostile way. This is about an element of detail, an element of getting it right and, funnily enough, an element of both the critique and the Government having exactly the same aims. As my noble friend Lady Stowell pointed out, we want to see a world where the consumer has absolutely clear rights and an easy customer experience in taking out a subscription and in cancelling it. At the same time, we do not want to burden businesses with too much bureaucracy, but to give them a chance to develop the flexibility to grow their business models in what remains a fast-changing environment. So, my noble friend Lord Black’s argument seems clear to me.

There is a paradox in my noble friend’s argument: we are asking the Government not to be prescriptive in one area while asking them to be more prescriptive in another. On the non-prescriptive part of the argument, my noble friend’s point is clear: it seems silly to put in primary legislation exactly how often a subscription business should remind a customer that their contract is coming up for renewal. The essence of customer service is for the business to get right its relationship with the customer, so long as it is under an obligation to remind the customer clearly that their contract is coming up for renewal and they are free not to renew it.

To flip the argument, on the cancellation methods, my noble friend is again right to say that the Bill words far too vaguely the way a consumer can cancel. I previously christened an amendment on appeals against decisions of the regulator the “Whac-A-Mole amendment”; I will now christen this amendment the “carrier pigeon amendment”. It is drafted in such a way that, in theory, I could cancel my subscription to the Times—which I would never do, obviously—by sending a carrier pigeon to News UK at London Bridge and say with a straight face that I had done it authentically.

There is, again, a happy medium. It should be very straightforward to cancel a subscription. Nobody wants the situation my noble friend Lady Stowell described, which does exist: having to find a telephone number—which is hidden—and contact a call centre, and then being given the runaround. I said at Second Reading that I had in fact done exactly that. I took out a subscription to a newspaper to read an article, but I could not cancel it. It was just my luck that I happened to know the chief executive of the newspaper, and I had to ring him and ask him to cancel it for me. That is obviously unacceptable. As a Conservative, I hesitate to suggest the creation of a quango, but there must be some way for a regulator to be aware of complaints and concerns about how an organisation is behaving, and to be able to intervene to make it clear that it is not operating within both the letter and the spirit of the law.

My noble friend’s amendments take account of the business needs of subscription businesses. I understand that people will fall on one side or the other of this argument. It is an interesting point that these businesses would like a way to engage with a departing customer, and they should be able to ask, “Why are you leaving? Can we tempt you to stay?” I spend quite a lot of my time unsubscribing from the endless emails and newsletters I have subscribed to, which tend to be free. Even then, particularly if you use a service such as Mailchimp, you are asked to fill in a little questionnaire on why you have decided to unsubscribe. It is not very onerous, and I understand—even though it is a slightly odd argument —why these businesses would want the opportunity to engage with a departing customer to gather information on what was wrong with their service and how they could improve it, or to provide an improved offer to tempt the customer to stay. Certainly, as we all know from having been lobbied, many of these businesses say that, often, the initial desire to cancel a subscription is based on an irritation with the service, which can be addressed once the customer gets in touch with the provider of the subscription service.

It is important to probe the Minister on both these issues in order to get clarity on the Government’s position, while also looking at some amendments that could genuinely improve the Bill.

Digital Markets, Competition and Consumers Bill

Lord Vaizey of Didcot Excerpts

Committee stage
Monday 5th February 2024 Grand Committee

[Lord Harris of Haringey (Lab)]

My Lords, first, I should apologise to the Committee that this is my first involvement in the Bill. Secondly, I declare my interest as chair of the Fundraising Regulator, which overseas and regulates charitable fundraising. I want to say how important the amendment moved by the noble Lord, Lord Mendoza, is. The number of charities that are potentially affected by this is enormous.

I am quite clear that this is an accidental consequence of what the Government are trying to do in the Bill. It was never aimed at undermining the financial position of charities but the reality is that, because of the rules that exist on the way in which gift aid operates, it would have that effect. It would mean that you would be entitled, as a consumer, to change your mind suddenly. Okay, I believe that people can change their mind, but most people who enter into subscriptions do so on the basis that they have made that decision and want to give money to the charity concerned.

The problem arising is that the HMRC rules would not allow gift aid to be paid on any contribution where there was such an opportunity to return in that way. The whole purpose of a charitable donation is that you have given it to the charity concerned not because you are looking to get a series of benefits back but because you are making a donation. That is why gift aid is allowed. This was an unintentional consequence of what is otherwise a series of sensible protections for consumers. I hope that, when he responds, the Minister will make it clear either that he can accept his noble friend Lord Mendoza’s amendment or that this loophole will be closed.

[Lord Vaizey of Didcot (Con)]

My Lords, I support the amendment of the noble Lord, Lord Mendoza, as well and declare my interest as a trustee of Tate. Everything that has been said is absolutely accurate. This is one of those situations where we are all on the same page, in the sense that I think the Government recognise that this is an issue that needs some clarity. It is certainly not their intention at all to put charities in a position where they will lose access to gift aid based on subscriptions or donations that are given to them on a regular basis by the people who support them.

The noble Lord, Lord Mendoza, indicated that many charities depend on membership subscriptions; that is the vernacular used when you join an organisation such as the National Trust or take out a membership with Tate. Certainly, by my now being poacher turned gamekeeper, as it were, and being on the board of a large museum, I see at first hand just how important subscriptions are to Tate. They are a really important revenue generator; we are very successful in securing memberships. They are a way forward for a lot of our national charities to engage a wide community who may not be able physically to visit the museum or organisation. People who live abroad can also potentially become members, although I appreciate that they would not necessarily be able to give gift aid in that respect. This is a huge way forward and it would be a retrograde step if charities found themselves in a difficult situation.

I gather that the Government have made it absolutely clear that, if you take out a subscription and receive nothing in return, that will to all intents and purposes be an annual or monthly donation on which gift aid can be claimed. However, as the noble Lord, Lord Mendoza, indicated, a lot of ancillary benefits now come with membership as a way of attracting people to take it. Obviously, in the case of museums, that might be free entry to their paid exhibitions and a regular magazine. I was unaware until the noble Lord rose that silent discos are now part of the mix—although I gather that the Natural History Museum calls them dino discos, which makes them even more attractive and means that I will leave this Committee and immediately take out a subscription.

The reason that the amendment has been put forward is to provide clarity in the simplest way. Charities are exempt from VAT and can claim gift aid. This does not provide a Trojan horse, where a private company says “Okay, the way to get around the welcome consumer protections that the Government are bringing in is to claim that we are a charity”. Charities have to go through a lot of hoops to become a charity, so exempting them from Schedule 20 would provide exactly the clarity that is needed.

As I say, we are here to listen to the Government because we know that they recognise that this is—I was going to say “a problem”—an issue. The Government are therefore in a great position to tell us what their thinking is as this is a discussion between those of us who have concerns and the Government who recognise those concerns and want to allay them with either their own amendment or clarity from the Minister.

[Baroness Young of Old Scone (Lab)]

My Lords, I regret my inability to be present at Second Reading. I support Amendment 149 from the perspective of having been chief executive of two membership charities—the RSPB and Diabetes UK—and my current experience as chair of the Woodland Trust. All three of these charities, and many others about which noble Lords have heard tonight, rely significantly on membership subscriptions and the associated gift aid for their important works. There are big numbers of people involved. As noble Lords heard, the RSPB has more than 1 million members and the Woodland Trust is hotly pursuing it and increasing its membership.

However, I take a slightly different perspective from that of the noble Lord, Lord Mendoza, because it is important to understand that the relationship of membership charities with their members is not transactional. It is not about saying, “You give us this money and we will give you these services”. It is not like that at all. There are ancillary things that members get, but I would not have thought that there are many cases of people giving money to these charities simply in return for the services that they might receive. It is more of a relationship of trust, in which members become part of the charity’s family. The membership donation is unconditional and unrestricted. The member says, “I trust you, as an organisation, to continue to do good things with my money, as you have demonstrated in the past”.

As noble Lords have heard, eligibility for gift aid means that membership subscriptions cannot be cancelled, although they might not be renewed if members fall out with the organisation. The risk is that that very different non-transactional relationship is swept up with the idea of subscription contracts and that, somewhere along the line, these charities lose their valuable gift aid. I am sure that the Minister will assure the Committee that that is not intended but, as much as I trust his assurances, it would be safer if Amendment 149 were agreed and added to Schedule 20 to the Bill.

--- Later in debate ---

[Lord Vaizey of Didcot (Con)]

On that point, if the Minister is saying that charities should not be exempt from the law, of course we all agree. If an employee of a charity is treated badly, they are perfectly entitled to take the charity to court and get compensation. The key point here is that membership subscriptions have been able to have gift aid claimed on them and HMRC has made it clear that gift aid is claimable. Now that charity subscriptions are being brought actively within the scope of the Bill by not being exempted, gift aid will be removed by HMRC as a result.

It would be different if we were starting from a position where charities had never been able to claim gift aid and had, in effect, been offering commercial subscriptions. In the same way, when you go into a shop at Tate and buy something that is defective, you have all the consumer protections available to you. You are not giving a gift aid donation when you buy a mug at Tate; you are buying a mug and if it falls on your cat’s head when you get home, you will be able to sue Tate. That is fine, but subscriptions are clearly gift-aidable donations which are now being actively brought within the scope of this Bill.

[Lord Harris of Haringey (Lab)]

My Lords, the Minister said that he would come back on Report, but it would be helpful if he would come back before Report so that all noble Lords can consider how he does so and table amendments accordingly.

[Lord Mendoza (Con)]

My Lords, I am so grateful for the support of noble Lords. The range of experience and advice we have had in this Room is admirable. It is incredible and so helpful that we have the chairman of the Fundraising Regulator right here. I am grateful for the comments of the noble Lord, Lord Harris, and the interjection of my noble friend Lord Vaizey. I had the same thought.

[Lord Vaizey of Didcot (Con)]

On a point of information, every time I make a speech where I am sycophantic about noble Lords, I end up in Private Eye. I hope my noble friend is aware of that.

[Lord Mendoza (Con)]

I hope that results. I am grateful to the noble Baroness, Lady Young, for her intervention. Of course, she is right: people contribute to charities because they care deeply about the charity’s mission. Although, as she said, there is no transactional element, if you go on the website of the Natural History Museum or the Tate and to “Buy a membership”, they will clearly list all the benefits that you get, so there is an element of transaction to it. I wanted to bring that out, so that it is clear to the Treasury and HMRC when they concoct whatever regulations they are concocting that we make sure that gift aid is still claimable and that these membership subscriptions still count as a donation to support the charity’s mission. It may be that some charities describe their membership differently from others. I have not checked the Woodland Trust’s website; it may well be completely different from that of a museum or the National Trust.

I am grateful for the support of my noble friend Lady Harding, who could not have been clearer in her request to my noble friend the Minister. I am also grateful to the noble Lord, Lord Clement-Jones, for supporting this amendment and contributing his remarks.

To add to the last point that was made about the simplicity of our amendment, we are trying to exclude charities not completely but just from this narrow point of gift aid, which was carefully defined at great length in the Income Tax Act 2007. We are trying to exclude just this one thing. Perhaps my noble friend the Minister will be able to go back to HMRC or the Treasury to see whether they can find some way of supporting this amendment. It seems clear and simple, without introducing a whole set of other complexities.

I am grateful to my noble friend the Minister for giving me the opportunity to talk with the Secretary of State today. I certainly received reassurances from her and, as I say, that should bring some comfort to the Room. I am grateful to noble Lords for this debate. I beg leave to withdraw the amendment.

Digital Markets, Competition and Consumers Bill

Lord Vaizey of Didcot Excerpts

Committee stage
Monday 29th January 2024 Grand Committee

[Lord Faulks (Non-Afl)]

My Lords, may I crave the indulgence of the Committee? Unfortunately, I missed the first minute of the speech made by the noble Baroness, Lady Jones, as I was trying to comply with etiquette and remain in the Chamber until the conclusion of the opening speeches on the Rwanda Bill. If the Committee permits, the points I was going to make have largely been made by others, so I can be particularly brief.

At the heart of this legislation is the decision: do we want the regulation to be done by the DMU or, de facto, by the courts? This is, effectively, a twin attack. First, there is the proportionality provision inserted into the statute, and now we have the change in the test of appeals on sentences. The combination of those two seems inevitably to lead to further court involvement, and it is not the intention that courts should be the regulator. The courts are there, as the noble Lord said, to stop executive overreach or some illegality in the approach based on usual JR principles. They are not there to second-guess what the DMU has done.

If the amendments, or something like them, are not accepted, I fear that an appeal of the merits will involve going into everything, as other noble Lords have said. We would have the war of the lever arch files, so eloquently described by the noble Lord, Lord Vaizey, at Second Reading. Lawyers will act, and continue to act, and it will frustrate what we are trying to achieve.

[Lord Vaizey of Didcot (Con)]

My Lords, as I have been cited by the noble Lord, Lord Faulks, it is incumbent on me to speak on the same principles as him. Everything that I want to say has already been said, but that will not stop me putting in my two pennies’ worth. This is the stuck-record part of the debate, where I repeat what I said at Second Reading and simply put on record my support for all these amendments.

I will pick up on what some noble Lords said in their comments. I wholeheartedly endorse what my noble friend Lady Stowell said. In the real world, if you have an appeal on the merits of a fine, it seems almost impossible to see how you stop leakage into an appeal on the merits of the case. So you are, in effect, back to square one and, as the noble Lord, Lord Faulks, put it, the war of the lever arch file.

The speech by the noble Lord, Lord Tyrie, was fascinating and a master class on the different aspects of judicial review: an appeal on the merits, an appeal on JR-plus, or an appeal on JR. When I was a Minister, I dealt with this debate with Ofcom, when it started the process of wanting to move from appeals on the merits to appeals on JR. To the layman, an appeal on the merits is in effect a full rehearing of the case: you go back to square one and simply have the trial all over again. An appeal on JR means that you at least have to identify a flaw in the reasoning of the regulator when it comes to a judgment. If, in effect—here, I bow to the expertise of the noble Lord, Lord Tyrie—settled law informed by European directives means that some element of the merits of the case are taken into account in a JR appeal of a regulator, so be it. It may be the difference between a passive and an active decision, as it were.

In this Committee, we understand how you can judicially review a decision by a government department. When a regulator is making an active decision to bring a prosecution, and it then finds guilty the company that it is prosecuting, some element of the merits may well be taken into account. It seems to me that how it is drafted may well be important, but the clear intent should be that any appeal, whether on the actual decision or the level of the fine, should be an appeal based on JR, when it comes to how a judicial review is understood when appealing a decision by a regulator.

I finish with the simple point—this is the stuck-record part—that it clearly is the settled will of this Committee, and I suspect it will be the will of the House when this comes to Report, to constantly guard against giving the SMS companies too much opportunity to wriggle out of decisions made by the regulator.

I should add that a lot of the tone of my remarks at Second Reading and in Committee might make it seem that I am in the pocket of the regulator. I am certainly not. I have lots of concerns that, at other times, would make me say that I think the regulator often strays too far and interferes in far too many cases. I am not resiling from the fact that there clearly should be an opportunity to appeal its decisions. Often, it backs away before it gets to a decision, but its interference in mergers and takeovers sometimes leaves me slightly baffled, particularly when it involves companies that have very little presence in the UK market. I am not saying, by any stretch of the imagination, that the regulator is perfect, but I know that any procedure it undertakes, as it will do when this law is passed, will be long and expensive, so we must guard against making it even longer and even more expensive.

[Baroness Harding of Winscombe (Con)]

My Lords, I seem to have found my space in this Committee following my noble friend Lord Vaizey again. I have put my name to Amendments 65, 67, 71 and 72 in the name of the noble Baroness, Lady Jones.

I would like to add a possible new element to the discussion, as I am conscious that otherwise we are all just literally repeating each other’s words. My noble friend Lady Stowell talked about the practicalities of a full merits appeal for fines and her concerns. We should also think about the incentives on the designated firms and on the CMA.

Much of what we are debating in this Committee is about how we balance the inequality of arms between companies with enormous resources, and the concern that independent regulators, given a large amount of power, can occasionally make mistakes. That is the essence of this debate. The noble Lord, Lord Tyrie, spoke eloquently about the risk of regulators making mistakes. I wish to add to the discussion some facts about the sheer scale of the inequality of arms.

According to a number of different sources, the best public assessment we can get of Apple’s legal budget is that it is north of $100 billion a year. Bruce Sewell, who stepped down in 2017 after eight years as Apple’s general counsel, gave an interview to a student at Columbia Law School in 2019 in which he set out how he thinks about the legal department and the legal budget in a technology company. He said that, rather than take clearly safe actions, the job of the general counsel is to

“steer the ship as close to that line as you can, because that’s where the competitive advantage lies … you want to get to the point where you can use risk as a competitive advantage”.

So, when you have a $1 billion legal budget, you can afford to play the risk card on every review. You can afford to fully resource every full merits review, whereas when you are the regulator, with a substantially smaller legal budget, you cannot risk every single one of your decisions going to a full merits review.

The incentives are equally divergent. The incentive on the regulator is to be really risk-averse; to not risk being challenged. That means that you will not bring the case in the first place. As the noble Lord, Lord Tyrie, said last week, we know that we need to embolden our competition regulator. One of the big opportunities on leaving the EU is to have a much stronger competition regime because we know that that will drive stronger economic growth. But a full merits regime, in any part of the process, will make the regulator more risk-averse and will drive the incentive to sail closer to the wind, as Bruce Sewell said. Sailing closer to the wind means less collaboration with the regulator, because you are much better off playing your legal cards in the courts. In both those cases, that is not the regime that we are trying to design. We need to recognise that it is not just about practicalities; incentives are really hard to avoid if you have a full merits appeal process at any stage.

I am therefore left asking why the Government are proposing to do this for fines. The argument we have heard up to now is that the reason for doing so is to align with the Enterprise Act. However, as the noble Lord, Lord Tyrie, beautifully set out, they are not really aligning with anything in this regime, so that argument does not wash. It is not the same as the regulatory regime for appeals in the sector I come from, telecoms. As I said at Second Reading—I apologise for repeating it—I do not really understand why small telecoms companies, tiny in comparison with these tech giants, are fine to cope with a JR on fines decisions, but the large tech giants need the extra protection of a full merits review, in case they are fined too much money. It sounds like the worst form of tech exceptionalism. Looking at digital regulation in this House in the last couple of years, we have learned that the era of tech exceptionalism should be over and that technology companies are just the same as other companies. They are not wicked and evil but driven by incentives to do a good job for their stakeholders, and if we define the rules of the game to encourage them to use their legal budgets to challenge the regulator, that is what they will do.

Therefore, I am left to believe, as the noble Lord, Lord Tyrie, said, that the only reason for the change made on Report in the House of Commons was that it was part of some form of explicit or implicit deal to open a back door that will weaken the Bill, which will therefore not achieve what we want. I strongly support the amendments in the name of the noble Baroness, Lady Jones. Later we will come to how, if we accept them, we will ensure strong parliamentary scrutiny. I hope very much that we do not think we trade one for the other.

--- Later in debate ---

[Lord Clement-Jones (LD)]

My Lords, it is lovely to be reminded of previous remarks but, of course, that was then and this is now. We were talking about the standard for Ofcom then; today, we are talking about the CMA standard. The noble Lord would need to produce evidence that that standard did not in fact have a really poor outcome as a result of the power of big tech not being as limited as it could have been. He talked about us needing to recognise the power of big tech, but that is exactly what adopting the JR standard—the Wednesbury “unreasonable” standard that the noble Lord, Lord Faulks, talked about last week, and which all of us are content to stick with—would do.

Of course, what we are trying to do, if possible—if the amendments in the name of the noble Baroness, Lady Jones, are accepted—is to revert back to a JR standard for penalties. I believe that consistency across the board is rather more important than trying to revert to a form of appeals standard that obtains in a different part of the regulatory forest. However, as the noble Lord said, the danger of executive overreach is much more easily cured by increased parliamentary scrutiny than by trying to, in a sense, muddy the waters of the test for appeals.

What the noble Baroness, Lady Harding, said about incentives was entirely right. Litigation has clearly been used and is being used by big tech for strategic business purposes. We are trying to make sure that this does not drag on for ever and that appealing against the penalties does not open up the whole caboodle as a result. The noble Lord, Lord Black, and others who talked about the change of standard for penalties infecting other aspects of a CMA decision, made very strong points.

Ultimately, the Minister has a large number of questions from noble Lords. The noble Baroness, Lady Stowell, asked what would be relevant for an appeal on penalties. What is the motivation for the Government in putting forward this new standard for penalties? What is so special about it and what evidence did they use to come to that view? Is not the danger of using a merits appeal basis that the decisions on which the penalty was based will be unpicked? The practicalities were also raised by a number of noble Lords.

[Lord Vaizey of Didcot (Con)]

I intervene on the point that the noble Lord, Lord Tyrie, made to the noble Lord, Lord Clement-Jones. There is a difference. The noble Lord was absolutely right to raise his concerns about Ofcom moving from a merits-based to JR-based appeal, in 2017. As the noble Baroness, Lady Harding, knows very well, Ofcom often makes decisions on extremely complicated pricing mechanisms. The telecoms companies had a point in saying that a merits-based appeal for Ofcom decisions is worth while, because going through the calculations again could sometimes be worth £50 million, £100 million or £200 million.

Ofcom was right in finally moving to JR for those cases when it took quite important strategic decisions about the marketplace—for example, forcing Sky Sports to offer its content wholesale to competitors. The noble Lord, Lord Clement-Jones, had a point then and he has one today.

[Lord Clement-Jones (LD)]

It is very nice and helpful to be reminded of things that I had forgotten entirely. We need to make sure that we are consistent across the board. A full merits-based standard is not, for example, used to appeal against fines issued by Ofcom under the Online Safety Act. These Benches have serious concerns regarding the insertion of two different appeal standards in the Bill, as it may decrease the deterrent effect and risk lengthier appeals, as we have heard.

If we are not successful in persuading the Government to change back to JR for penalty appeals, and a merits appeal is to be included, a number of amendments—the amendment in the name of the noble Baroness, Lady Stowell, that in the name of the noble Lord, Lord Holmes, and my amendment—are of great relevance to make sure that we do not see that drift that the noble Lord, Lord Black, talked about. A failure to do so could run the same risks as an entirely novel appeals standard. On that basis, we very much support the amendments in the names of the noble Lord, Lord Holmes, and the noble Baroness, Lady Stowell, and my own Amendment 68, which would ensure that there is no further extension of the merits appeal standards into any other part of the Bill. It is intended to have the same impact and draw a clear line in the sand beyond which no court can go.

I am sorry that we do not have the noble Lord, Lord Lansley, here to reveal perhaps another letter from a Minister. We had an interesting discussion last Wednesday, when the noble Lord, Lord Lansley, quoted the letter, sent to Damian Collins and Sir Robert Buckland, about the nature of the intention behind including “proportionate”. It said:

“In practice this means that firms will be able to challenge whether the DMU could have achieved its purpose for intervention through less onerous requirements”.


In a sense, that is a massive invitation to litigation, compared to ordinary JR. If that move is an invitation to litigation, think how much further along the road we are travelling if we go for a merits test for the fine and the penalties. I hope the Minister will therefore reverse course back to the pre-Report situation in the Commons; that would give a great deal of satisfaction around this Committee.

--- Later in debate ---

To address the points made by my noble friends Lady Stowell, Lord Vaizey and Lord Kamall, and the noble Lord, Lord Tyrie, which were echoed by other noble Lords, firms will be able to appeal penalties only on their merits. The CAT will be able to quash the penalty and change its value or the date by which it is required to be paid. Appeals against all other digital markets decisions will be under judicial review principles. Where a penalty is quashed, the underlying breach decision still stands, unless it is separately reviewed under judicial review principles. If an SMS firm breached a conduct requirement enforcement order and was fined for it, it could appeal the breach decision on JR.

[Lord Vaizey of Didcot (Con)]

I found my noble friend’s remarks very helpful, because they shone a brief light on the Government’s position. Is he saying that, by introducing an on-the-merits appeal for fines, the Government are effectively allowing the CAT to substitute its decision for that of the regulators, whereas if it were a judicial review it would simply have to send back the decision on the quantum or the timing of the fine back to regulator; in which case, he may have a point?

[Viscount Camrose (Con)]

I hope very much that I have a point. I think it would be best for me to write to my noble friend and the members of the Committee to clarify that.

Digital Markets, Competition and Consumers Bill

Lord Vaizey of Didcot Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[Lord Vaizey of Didcot (Con)]

My Lords, I am grateful for the opportunity to speak so early in this debate, ahead of many noble Lords who actually know what they are talking about and have specific expertise in this area. I begin by declaring my interests in the register, specifically my role as a trustee of Tate, adviser to Pixel United and broadcaster on Times Radio, which is owned by News UK.

I should say from the outset that I am a huge supporter of this Bill. As the Minister set out at the Dispatch Box, updating our competition regime—for the first time comprehensively, I think, for some 25 years —is long overdue, to take account of how the digital tech giants have changed the landscape. It is one of a number of pieces of legislation that this Government are putting through, including the Online Safety Act, the forthcoming media Bill and the data protection Bill, providing a much-needed framework for regulation of digital companies.

I shall concentrate on two issues in the Bill, but I have to say that I was extremely grateful to all the Front Benches for highlighting some of the other issues, which I was blissfully unaware of, particularly aspects such as copyright—so I may well get stuck into some other issues in Committee. But we all know what we are talking about, when we talk about giving the competition authority power: we are talking about the power to take on big tech and big platforms such as Apple and Google, which have effectively established a duopoly. They set the terms and conditions and the rents, and there is very little comeback.

It is an unusual position to be in, because as consumers we all benefit from this technology. During my speech, as it becomes duller and duller, noble Lords will whip out their iPhones and androids and have a range of apps to choose from. But this is really a Bill which puts small businesses in the place of the consumer, because small businesses are being shut out from these opportunities —and who knows what other apps noble Lords could have taken advantage of if this Bill was already law.

One key issue for me is the appeals standard, because it is vital that the regulator has the opportunity to take on big tech, reach judgments and levy fines. I know from my time as the Telecoms Minister, working closely with Ofcom, that an appeal on the merits was a gift to the big companies and a burden on the regulator. It wildly extended the time in which a proper conclusion could be reached, it cost huge amounts of money and the firepower that could be deployed against the regulator, in terms of the quantity of lever-arch files, was something to behold. So, it is quite right that we have judicial review as the appeals standard in the Bill—which I think only adds to everybody’s confusion as to why the Government appear to have muddied the waters.

The great opportunity, obviously, of a Second Reading debate is to raise these issues, to explore them in Committee and to give the Government ample time to explain why these changes have been made and why they think they are the right ones, because I obviously approach it with an open mind. For example, if there is going to be a merits appeal on fines resulting from an adjudication, that may work provided it is clearly limited, effectively, to the quantum of the fine and no more. Nevertheless, I would still like to know why this slightly confusing change has been made from a simple JR standard throughout the process. Then—and it has already been raised by both opposition Front Benches—there is the idea of proportionality in the JR appeal standard and imposing conduct requirements. Some people say that this, in effect, creates a new appeals standard of JR-plus: again, this is very confusing. It would be much better to keep it simple and straightforward, because, goodness knows, those big companies have enough resources to tie the regulator up in knots without the Government, perhaps unintentionally, giving them a helping hand.

There are numerous other, smaller points within this framework of how the investigative process works which are important to highlight. They have been highlighted, as I am sure noble Lords are aware, by a number of organisations and campaign groups that wish to bring them to our attention. These include the consultation rights for challenger tech firms to be involved from the very beginning of a CMA process to avoid the circumvention of any solutions by strengthening the leveraging principle, so that, in effect, big tech cannot extract rents by using a different method. We have already heard, as well, about the countervailing benefits exemption—the ability for companies to argue that they are benefiting the consumer; and the removal of the word “indispensable”, which I understand is a clear legal term and therefore has a slew of case law on which the regulator could rely, again causes more confusion. My overwhelming message to the Government is that they have got it absolutely right in applying the JR principle; why are they therefore setting these slightly confusing mini changes throughout the process, because they do not really add up?

I also want to talk about a separate issue. I am sure, looking around the Chamber at some of those who are due to speak, that subscriptions will come up. I hugely support the idea that it should be as easy as possible, in a digital age, to cancel a subscription. I remember well once taking out a subscription to an online publication because I wanted to read a particular article and then, when I wanted to cancel the subscription, there was literally no way of doing it—it was a US magazine. Luckily, I knew the chief executive, so I found myself ringing him and begging him to allow me to cancel it: that cannot be the right way.

We all know, with our iPhones, that it is only recently that they have changed the way we can cancel subscriptions on an iPhone. It is, I am afraid, a truism that many companies that offer subscription products have an incredible imagination when it comes to making it as difficult as possible to navigate your way out. Most people should be confident enough about their product to know that they will keep their consumers if they continue to provide a fantastic product, and they will lose them if they do not.

Let me, however, completely contradict myself by asking the Minister—he knows what is coming—to exempt charities from the rules that are coming in the Bill. The Bill treats charitable membership, as I am sure he is aware, as a commercial transaction rather than a donation. That means that memberships or subscriptions would have to be refundable, and it means that charities cannot claim gift aid on the subscription, because gift aid applies only to donations which cannot be refunded.

Numerous charities have contacted me and, I am sure, other noble Lords, including very well-known ones such as the National Trust, the Zoological Society of London and the Royal Horticultural Society—you cannot say no to the Royal Horticultural Society—and Tate finds itself in the same basket. The changes would put pressure on Tate’s budget—I will not read out the cost it has estimated—and therefore could force the Government to look at their grant in aid for not just Tate but many other museums. It would have deep implications for Tate’s ability to fulfil its public service. As well as the financial costs, there would be huge additional bureaucratic burdens.

As I am sure we are all aware, charities are calling for charitable membership organisations to be included in the list of exemptions. For example, Tate is already regulated by DCMS and there are exemptions in the Bill for suppliers of services regulated by Ofcom. In the other place, the Minister introduced an amendment excluding the lottery as having charitable ends and already being regulated elsewhere. Surely, something similar should apply to other charities too. Have the impacts on charitable memberships been considered, in particular the pressures on national museums and their grant in aid allocations? If an exemption is applicable to the lottery as being already regulated and having charitable good, why does it not apply to museums and other charitable membership organisations?