Digital Markets, Competition and Consumers Bill

Baroness Winterton of Doncaster Excerpts

Report stage
Monday 20th November 2023 Commons Chamber

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Saqib Bhatti)]

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Dame Rosie Winterton)]

With this it will be convenient to discuss:

Government new clause 6.

New clause 23—Digital Markets Unit and CMA: annual statement to House of Commons—

“(1) The Secretary of State must, once a year, make a written statement to the House of Commons giving the Secretary of State’s assessment of the conduct and operation of—

(a) the Digital Markets Unit, and

(b) the CMA as a whole.

(2) The first statement must be made by 1 February 2024.

(3) A further statement must be made by 1 February each subsequent year.”

This new clause would require the Secretary of State to make a written statement about the conduct and operation of the DMU and CMA.

New clause 27—Appointment of senior director of the DMU—

“The senior director of the Digital Markets Unit must be appointed by the Secretary of State.”

This new clause provides that the senior director of the DMU must be appointed by the Secretary of State.

New clause 28—Duty of the CMA: Citizens interest provisions—

“(1) The Enterprise and Regulatory Reform Act 2013 is amended as follows.

(2) After section 25(3) insert—

“(3A) When carrying out its functions in relation to the regulation of competition in digital markets under Part 1 of the Digital Markets, Competition and Consumers Act 2024, the CMA must seek to promote competition, both within and outside the United Kingdom, for the benefit of consumers and citizens.””

This new clause would give the CMA a duty to further the interests of citizens – as well as consumers – when carrying out its digital markets functions under Part 1 of the Bill.

Amendment 176, in clause 2, page 2, leave out lines 20 and 21 and insert—

“(b) distinctive digital characteristics giving rise to competition law concerns such that the undertaking has a position of strategic significance (see section 6).”

This amendment is linked to Amendment 182.

Amendment 206, page 2, line 25, after “Chapter” insert “, taking account of analysis undertaken by the CMA on similar issues that have been the subject of public consultation.”

This amendment aims to ensure that the CMA are able to draw on previous analysis on issues relevant to the regulatory regime.

Amendment 177, page 2, line 25, at end insert—

“(5) The CMA must publish terms of reference setting out a summary of the evidence base for making a finding of substantial and entrenched market power or of a position of strategic significance.

(6) The terms of reference must include a detailed statement of the competition law concerns arising from these characteristics and the relationship between the designated digital activity and other activities.

(7) Activities with no reasonable prospect of adverse competitive effects linked to digital activity must be referred to as unrelated activities and the terms of reference must expressly state that unrelated activities are not covered by the designation.”

This amendment would require the CMA to publish terms of reference summarising the evidence base for a finding of substantial and entrenched market power or a finding of strategic significance.

Amendment 178, in clause 3, page 2, line 28, after “service” insert “predominantly”

This amendment clarifies that the provision of a service predominantly by means of the internet would be a digital activity.

Amendment 179, page 2, line 34, leave out subsection (2)

This amendment is linked to Amendment 178.

Amendment 180, in clause 5, page 3, line 28, at end insert—

“(c) are not assuaged by evidence of competition arising beyond the activities of the undertaking, and

(d) demonstrate that the perceived market power will be improved compared with the scenario in which the designation does not occur.”

This amendment makes additions to the definition of substantial and entrenched market power.

Amendment 181, in clause 6, page 3, line 31, leave out “one or more of” and insert “both”

This amendment is linked to Amendment 182.

Amendment 182, page 3, line 33, leave out paragraphs (a) to (d) and insert—

“(a) significant network effects are present;

(b) the undertaking’s position in respect of the digital activity would allow it to extend its market power.”

This amendment changes the definition of the term “position of strategic significance”.

Amendment 183, in clause 7, page 4, line 17 at end insert “arising from the designated activities”

This amendment limits the turnover condition in relation to UK turnover to turnover arising from designated activities.

Amendment 184, page 4, line 19, at end insert “to account for inflation on the CPI measure”

This amendment ensures that the sums used to determine whether the turnover condition has been met can only be amended to account for inflation on the CPI measure.

Amendment 194, in clause 11, page 6, line 36, at end insert—

“(c) give a copy of the statement to those undertakings that have not been designated as having SMS that are most directly affected.”

This amendment ensures that challenger firms are able to access information about the regulatory framework on an equal basis to designated firms.

Amendment 195, in clause 12, page 7, line 9, at end insert—

“(5) As soon as reasonably practicable after giving a notice under subsection (2), the CMA must give a copy of the notice to those undertakings that have not been designated as having SMS that are most directly affected.”

See the explanatory statement to Amendment 194.

Amendment 196, in clause 14, page 7, line 36, at end insert—

“(5A) As soon as reasonably practicable after giving an SMS decision notice, the CMA must give a copy of the notice to those undertakings that have not been designated as having SMS that are most directly affected.”

See the explanatory statement to Amendment 194.

Government amendments 2 and 3.

Amendment 197, in clause 15, page 8, line 41, at end insert—

“(6) As soon as reasonably practicable after giving a revised SMS decision notice, the CMA must give a copy of the revised notice to those undertakings that have not been designated as having SMS that are most directly affected.”

See the explanatory statement to Amendment 194.

Government amendments 4 to 7.

Amendment 193, in clause 19, page 11, line 15, at end insert—

“(9A) A conduct requirement must be imposed within 3 months of an undertaking being designated as having SMS under section 2.”

This amendment ensures that a time frame of three months is imposed for the CMA to enforce conduct requirements on designated SMS firms.

Government amendment 8.

Amendment 190, in clause 20, page 12, line 9, after “to”, insert “harm competition in the relevant digital activity or the other activity,”

This amendment would ensure that the CMA can tackle anti-competitive conduct in a non-designated activity, provided that the anti-competitive conduct is related to a designated activity.

Amendment 191, page 12, line 11, after “activity”, insert “, provided that the conduct is related to the relevant digital activity”

See the explanatory statement to Amendment 190.

Government amendments 9 and 10.

Amendment 192, in clause 25, page 14, line 7, at end insert—

“(e) whether to take action in accordance with Chapter 4 (Pro-competitive interventions) in respect of the extent to which it is complying with each conduct requirement to which it is subject and the effectiveness of each conduct requirement to which it is subject.”

This amendment would ensure that the CMA considers the efficacy of existing Conduct Requirements when considering whether to make Pro-Competitive Interventions.

Government amendments 11 and 12.

Amendment 198, in clause 26, page 15, line 3, at end insert—

“(7) As soon as reasonably practicable after giving a conduct investigation notice, the CMA must give a copy of the conduct investigation notice to those undertakings that have not been designated as having SMS that are most directly affected.”

See the explanatory statement to Amendment 194.

Amendment 187, in clause 27, page 15, line 8, at end insert—

“(2) The CMA may have regard to any significant benefits to users or potential users that the CMA considers have resulted, or may be expected to result, from a factor or combination of factors resulting from a breach of a conduct requirement.”

This amendment would ensure that the CMA considers any significant benefits to users resulting from the breach of a Conduct Requirement when it is considering representations from designated undertakings as part of a Conduct Investigation.

Amendment 199, in clause 28, page 15, line 20, at end insert—

“(5) As soon as reasonably practicable after giving a notice under subsection (2), the CMA must give a copy of the notice to those undertakings that have not been designated as having SMS that are most directly affected.”

See the explanatory statement to Amendment 194.

Amendment 188, page 15, line 21, leave out Clause 29.

This Amendment is consequential to Amendment 187.

Government amendment 13.

Amendment 186, in clause 29, page 15, line 31, leave out subsection (c) and insert—

“(c) the conduct is necessary for the realisation of those benefits based on the best available evidence reasonably obtainable, and”

This amendment would change the circumstances in which the countervailing benefits exemption would apply.

Government amendment 14.

Amendment 209, page 15, line 37, at end insert—

“(4) The CMA may only consider that the countervailing benefits exemption applies if it has reached such a consideration within six months of the day on which the conduct investigation notice is given to the undertaking.

(5) In subsection (2), a “benefit” means any benefit of a type set out in regulations made by the Secretary of State in accordance with the procedure under subsections (6) to (9).

(6) The Secretary of State must, within six months of this section coming into force, lay before Parliament draft regulations setting out the types of benefit that apply for purposes of subsection (2).

(7) A Minister of the Crown must make a motion in each House of Parliament to approve the draft regulations within 14 days of the date on which they were laid.

(8) Subject to subsection (9), if the draft regulations are approved by both Houses of Parliament, the Secretary of State must make them in the form of the draft which has been approved.

(9) If any amendments to the draft regulations are agreed to by both Houses of Parliament, the Secretary of State must make the regulations in the form of the draft as so amended.”

This amendment would introduce a 6 month time limit on the duration of investigations into countervailing benefits claims, and specifies that the Secretary of State shall introduce further legislation for Parliamentary debate providing an exhaustive list of the types of countervailing benefits SMS firms are able to claim.

Amendment 200, in clause 30, page 16, line 13, at end insert—

“(4A) As soon as reasonably practicable after giving the notice, the CMA must give a copy of the notice to those undertakings that have not been designated as having SMS that are most directly affected.”

See the explanatory statement to Amendment 194.

Government amendments 15 and 16.

Amendment 201, in clause 31, page 17, line 3, at end insert—

“(7A) As soon as reasonably practicable after making an enforcement order (including a revised version of an order), the CMA must give a copy of the order to those undertakings that have not been designated as having SMS that are most directly affected.”

See the explanatory statement to Amendment 194.

Amendment 202, in clause 32, page 17, line 35, at end insert—

“(6A) As soon as reasonably practicable after giving a notice under subsection (5), the CMA must give a copy of the notice to those undertakings that have not been designated as having SMS that are most directly affected.”

See the explanatory statement to Amendment 194.

Amendment 203, in clause 34, page 18, line 36, at end insert—

“(4A) As soon as reasonably practicable after revoking an enforcement order, the CMA must give a copy of the notice to those undertakings that have not been designated as having SMS that are most directly affected.”

See the explanatory statement to Amendment 194.

Government amendments 17 and 18.

Amendment 189, in clause 38, page 21, line 7, leave out “breached an enforcement order, other than an interim enforcement order” and insert “breached a conduct requirement”

This amendment would allow the CMA to initiate the Final Offer Mechanism after a Conduct Requirement of the type permitted by clause 20(2)(a) has first been breached, provided that the other conditions in clause 38 are met.

Government amendments 19 to 30.

Amendment 204, in clause 47, page 26, line 8, at end insert—

“(4A) As soon as reasonably practicable after giving a PCI investigation notice or a revised version of the PCI investigation notice, the CMA must give a copy of the notice to those undertakings that have not been designated as having SMS that are most directly affected.”

See the explanatory statement to Amendment 194.

Amendment 205, in clause 50, page 27, line 28, at end insert—

“(6A) As soon as reasonably practicable after making a pro-competition order, the CMA must give a copy of the order to those undertakings that have not been designated as having SMS that are most directly affected.”

See the explanatory statement to Amendment 194.

Government amendments 31 to 56.

Amendment 185, in clause 102, page 61, line 10, leave out subsections (6) and (7) and insert—

“(6) In determining an application under this section—

(a) for any application made within a period of three years beginning on the day on which this Act is passed, the Tribunal must determine the application on the merits by reference to the grounds set out in the application;

(b) for any application made thereafter, the Tribunal must apply the same principles as would be applied—

(i) in the case of proceedings in England and Wales and Northern Ireland, by the High Court in determining proceedings on judicial review; and

(ii) in the case of proceedings in Scotland, by the Court of Session on an application to the supervisory jurisdiction of the court.

(7) The Tribunal may—

(a) for any application made within a period of three years beginning on the day on which this Act is passed, confirm or set aside the decision which is the subject of the application, or any part of it, and may—

(i) remit the matter to the CMA,

(ii) take other such steps as the CMA could itself have given or taken, or

(iii) make any other decision which the CMA could itself have made;

(b) for any application made thereafter—

(i) dismiss the application or quash the whole or part of the decision to which it relates. and

(ii) where it quashes the whole or part of that decision, refer the matter back to the CMA with a direction to reconsider and make a new decision in accordance with a ruling of the Tribunal.”

This amendment changes for a three-year period the mechanism by which the Tribunal would determine applications for review.

Government amendments 57 to 67, 83 and 84, 106, 108, 111, 148 and 149.

[Saqib Bhatti]

I am honoured to have been appointed as the Minister with responsibility for tech and the digital economy, and as one of the Ministers with responsibility for the Digital Markets, Competition and Consumers Bill. When I was appointed last Tuesday, many helpful colleagues came up to me to say, “You have been thrown in at the deep end,” but it is a blessing to have responsibility for taking this legislation through the House.

In that vein, I thank my hon. Friend the Member for Sutton and Cheam (Paul Scully) for his tireless work to get the Bill to this stage.

I am aware of the importance of this legislation and the sentiment across the House to deliver the Bill quickly. The benefits of the digital market measures in part 1 of the Bill are clear to see. They will bring about a more dynamic digital economy, which prioritises innovation, growth and the delivery of better outcomes for consumers and small businesses. The rise of digital technologies has been transformative, delivering huge value to consumers and businesses. However, a small number of firms exert immense control across strategically critical services online because the unique characteristics of digital markets, such as network effects and data consolidation, make them prone to tip in favour of a few firms. The new digital markets regime will remove obstacles to competition and drive growth in digital markets, by proactively driving more dynamic markets and by preventing harmful practices such as making it difficult to switch between operating systems.

I turn now to the Government amendments. When the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) first stood in the House, he stated that the legislation would unleash the full opportunities of digital markets for the UK. That intention has not changed, and our amendments fully support that. The Government’s amendments to part 1 will provide greater clarity to parties interacting with the regime, enhance the accountability of the regulator and make sure that the legislation is drafted effectively and meets its aims. I will address each of those themes in order.

This new regime is novel. To maximise certainty, it is critical that its parameters—the scopes of the regulator’s functions and the rights and obligations set out in the legislation—are clear. Therefore, the Government have tabled a series of amendments to further clarify how the digital markets regime will work in practice. The amendments relate to how legally binding commitments provided by firms within the scope of the regime will work in practice, the Digital Market Unit’s ability to amend certain decision notices, and how in certain circumstances the DMU may use its investigatory and enforcement powers after a firm is no longer designated.

Two important sets of clarifying amendments are worth covering in more detail. The first relates to conduct requirements. Consumer benefit is a central focus of the digital markets regime. The DMU must consider consumer benefit when shaping the design of its interventions. To reinforce that central focus, we are clarifying how the DMU will consider consumer benefits when imposing and enforcing conduct requirements. Amendment 7 requires the DMU to explain the consumer benefits that it expects to result from a conduct requirement, ensuring transparent, well-evidenced decisions. Amendments 13 and 14 simplify the wording of the countervailing benefits exemption, while critically maintaining the same high threshold.

--- Later in debate ---

I will briefly deal with the other amendments tabled in my name in this part—

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

Order. I have to get five more speakers in, plus the Minister. As the right hon. and learned Gentleman will shortly have been on his feet for nearly 25 minutes, this is just a quick reminder that he needs to give others time to speak.

[Sir Robert Buckland]

Of course. I have just cleared my throat, Madam Deputy Speaker, and by my standards this is a very short speech.

I will deal in summary with the other amendments. What I am seeking with those amendments is to ensure that, in using definitions, we do not end up creating mission creep for the DMU. I want the DMU to focus on the emerging digital economy; I do not want it to end up dealing with, for example, supermarkets such as Tesco, which will increasingly use online services to allow customers to shop. I do not think that is the intention of those proposing the Bill, but we need to make it clear in the Bill that that sort of mission creep will not be part of how the regulator develops.

I also want to make the point that, when looking at entrenched market power, focusing purely on size can sometimes be deceptive. Rather small enterprises can often have a disproportionate effect on a market. They do not necessarily need to be big. While we rightly understand that generally the bigger the entity or organisation, the bigger the impact it has, it is not always the elephant that makes a difference; it is sometimes the mouse. That is why focusing on market power rather than size is a better way of dealing with effective regulation.

In summary, I want to hear from my hon. Friends on the Front Bench a response to the challenges that I have laid out. I do not seek to press the amendments to a vote this evening, but I am sure that they will be returned to in the other place. Surely it is in the interests not only of the people we serve, but of the wider British economy that in passing such pioneering legislation, which in many ways puts Britain in a different place from other jurisdictions, we do not end up disincentivising the sort of investment that I know is part of the Prime Minister’s aspiration to make this country a world leader in artificial intelligence and machine learning safety and a place where digital businesses will want to invest. It is as simple as that. That is why it is vital that in this Bill we strike as perfect a balance as we can, because in this complex, ever-changing market it is very difficult to predict what the future will be.

[Madam Deputy Speaker]

I call the SNP spokesperson.

[Richard Thomson (Gordon) (SNP)]

My party broadly welcomed the Bill at its introduction and through Committee, and broadly speaking we still do. However, for our liking there remain too many gaps in consumer protection. The Bill does not include an equivalent to the EU’s consumer rights to redress when consumers are misled, and it does not baseline the protections that we had previously, which we think is a serious omission. Many consumers found that to their cost when their travel arrangements went haywire through chaos at the channel ports over the summer.

The Bill does not do enough to tackle greenwashing. As we have heard, there is a systemic failure to tackle drip pricing and subscription traps. We are also still unclear about how the Government intend to tackle the scourge of fake reviews; although secondary legislation could be introduced, the scope of the sanctions that could be brought to bear against the perpetrators would inevitably be restricted.

Rather to my surprise, we have 175 Government amendments to the Bill. That seems rather a lot to be bringing in. It can be gently elided over that this is a Government who have been listening carefully to all the arguments put, but, to be perfectly honest, I think it shows that this has become something of a Christmas tree Bill. It would have been better to have had much more parliamentary scrutiny in Committee of some of the things we now find coming in, no matter how well-intentioned they are.

A number of amendments to the Bill do cause me concern, including the series of amendments that changes the mechanism for appealing the Competition and Markets Authority’s decisions. In our view, Government amendments 6, 7, 10 and 30 will water down the Bill’s effectiveness, allowing tech companies described under the Bill as the most powerful firms and dynamic digital markets to be able to challenge the CMA’s decisions if they do not believe that they are proportionate.

Government amendments 51 to 53, 55 and 56 also have that effect, since they will prevent certain appeals by big-tech firms of decisions made by the CMA from being held to the judicial review standard. I am unpersuaded by the arguments that we have heard so far about that. We fear that, in practice, when a decision is taken that is not, for whatever reason, to the liking of big-tech companies with rather large budgets—to take one entirely at random, we have Apple, which makes profits and turnover yields that are bigger than most countries’ GDPs—they will inevitably be able to tie those decisions up in the courts for quite some time, all the while being able to secure whatever advantage they had which the CMA had judged they got unfairly. The CMA has warned that changing the appeal mechanism could lead to such a set of drawn-out legal battles and quite an adversarial relationship with the firms that it seeks to regulate, which I would venture is far removed from the Bill’s original intention.

It is unusual that I should ever pray in aid the other place in a political argument, but last month the House of Lords Communications and Digital Committee called on the Government to maintain the JR standard for all appeals. It is therefore worrying, if not entirely surprising, that the extensive lobbying that some of the bigger tech companies have subjected us to seems to have found the ear of the Government.

If the UK Government’s amendments 6, 7, 10 and 30, which seek to allow firms with strategic market status to appeal against CMA decisions, are accepted, that will essentially undermine the CMA’s job and ability to protect consumers. Those amendments would allow big tech firms to appeal against decisions taken by the regulators on significant issues such as blocking mergers and issuing fines simply on the basis of their feeling that they may not be proportionate. As I say, they can certainly afford to spend huge amounts of money on legal representations to quibble with these decisions, particularly if the fines or deprivation of the opportunity to make lots of money mean that they feel it is worth spending that money whatever the eventual chances of success are.

This is in addition to the letter that Baroness Stowell wrote to the PM last month warning that the UK Government must not “undermine” the Competition and Markets Authority, noting that these amendments would

“favour those with an interest in delaying regulatory intervention”

and give greater power to avoid scrutiny to the tech firms

“with the greatest resources”.

The UK Government should not be ignoring these warnings, and we believe that this is a detrimental addition to the Bill. This position was also backed up by Which? in April last year. In our view, these amendments show that the Government have done the exact opposite of sticking to their guns on this.

I am mindful of the time—as are you, Madam Deputy Speaker—so I shall come to the amendments that I believe we will be voting on later. Labour amendments 187 and 188 would enable the Competition and Markets Authority to consider any significant benefits, due to a combination of factors, that might result from a breach of the conduct requirement. We think that strikes a reasonable and fair balance on where we would like the outcomes to be, and should the amendments be pressed to a vote, the SNP will be supporting them.