Digital Markets, Competition and Consumers Bill

Viscount Colville of Culross Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[Viscount Colville of Culross (CB)]

My Lords, I declare an interest as a television producer. I too welcome this Bill, which has been a long time coming.

Five and a half years ago, I had the honour to be a member of the Communications and Digital Committee inquiry into digital advertising in the UK. We heard how the two big tech companies, Facebook and Google, used the combination of their massive databases and near-total control of the supply, intermediary and purchase sides of the digital advertising market to take a more than 80% share. Our inquiry recommended that the CMA conduct a market study as quickly as possible into the digital ad market. Two years later, that market study confirmed the tech companies’ near-complete domination of the market. It concluded that the lack of competition harmed consumers by excessive exploitation of their data and lower quality of service to them and to advertisers.

However, the tech companies’ dominant position in the market has also had a deleterious effect on media advertisers. Publishers of news in particular have suffered from the massive reduction in advertising revenue. In the first half of 2020, while tech platforms’ ad revenue grew, digital advertising fell by 8% for national news brands, by 10.5% for online magazines and by 10% for online regional titles. It is expensive to create original news and, especially, to launch investigative journalism, which is essential to holding those in power to account.

It was therefore not surprising that the Communications and Digital Committee launched an inquiry into the future of journalism in the digital age. Journalism deserves special consideration in this Bill. I say this not just because I am a career journalist but because it plays a role of public value and importance to our society and democracy. It helps people stay informed about the world beyond their personal experience—surely a prerequisite for an active citizen in a democratic society—but it is under threat, especially the provision of local news.

In the digital age, people’s consumption of news has moved dramatically online. Ofcom’s 2021 report showed that 45% of UK adults got their news through social media sites. The number must be much greater now. Much of this is posted by users and viewed on platforms without reference or redirection to the publishers’ websites. The tech companies have their own curated news sites, such as Google’s news showcase and Facebook news, which aggregate news from a wide variety of sites. An article from an extreme magazine can sit alongside FT journalism and the reader be none the wiser. All this is damaging for the brands of the legacy media. Most news publishers have moved online, but the combination of falling advertising revenue and the tech companies’ free use of their news—at best giving minimal remuneration for their provision of it—has led to considerable cost-cutting and redundancy.

There are a few glowing exceptions in America. When Mark Thompson was CEO of the New York Times he invested massively in journalism, and the company is managing to make a profit from digital subscriptions. But to compound the exploitation of media companies, artificial intelligence is also using journalistic content as a free database for training its large language models. An academic paper published recently found that the greatest source of data for OpenAI’s LLMs came from the New York Times. The BBC ranked second, with its content providing 1.6% of the total database, and the Guardian closely followed with 1.5%. This content is so valuable for AI training because the data is of high value and original. Most importantly, it is taken from the publishers by the AI firms for free.

It is not surprising that the exploitation of the media publishers by the tech companies is having a devastating effect. In the last 17 years, more than 271 print titles have gone out of business, and goodness knows how many have become freesheets, sacked their journalists, withdrawn from covering local councils and courts, and mainly publish press releases. Reach plc, one of the biggest publishers of local news, recently announced 450 redundancies, including 320 editorial roles. That was its third round of cuts in 2023 alone, bringing the total number of jobs at risk to more than 1,000. The trend is accelerating.

The power imbalance between tech companies and publishers means that the former are not prepared to move much to reduce their dominance of the digital ad market, provide proportionate remuneration for the use of journalistic content or give publishers more control over how their content is used and provenanced. So I greatly welcome the final offer mechanism and the conduct requirement process set up in the Bill. The threat of the final arbitration by the regulator of two offers of remuneration is obviously a backstop, and I know that His Majesty’s Government hope that the CMA will never have to be in a position where it can make this decision.

However, my concern, and that of many people in the media, is that this beautifully thought out and carefully crafted CR process, which gives plenty of opportunity for the designated SMS companies to abide by a code of conduct, could take a year and a half to complete, if not longer, whereas in Australia it takes six months to come to arbitration. Meanwhile, many small publishers, which are already on the edge financially, will not be able to wait that long.

My fear is that the tech companies have so much to gain from the present situation that they will act in bad faith. In Canada, the Government estimated that the value of news content to Google was 300 million Canadian dollars. However, after exhaustive negotiations it ended up paying just 76 million Canadian dollars. I too ask the Minister to consider whether Clause 38(3), when the SMS company has breached an enforcement order, could be a more effective point in the process at which to pressurise the two sides to agree fair terms.

Like the noble Lords on the Front Bench, I am worried about the introduction of the Clause 29 countervailing benefits, which were inserted at the last minute before the Bill went to the other place. I imagine it was done at the instigation of tech company lobbyists, who will use it to delay the CR process yet further. In the other place, the well-established definition of “indispensable benefit”, set out in the Competition Act 1998 and tested through the courts, has been thrown out. The Bill now has a new definition of benefit. Thresholds are set out in the clause, but the courts will still have to decide what “benefit” now means. Can the Minister explain how that will clarify and speed up the effectiveness of this Bill? The Bill is supposed to be dealing with anti-competitive practices set up by the SMS company, but surely Clause 29 creates an opportunity to give extra lobbying power to companies that already have the most effective and well-paid lobbyists in the world.

I am also worried by Clause 114, on the control that the Secretary of State has over guidance to the CMA in setting up the machinery of the CR process, and then also having power over guidance on setting up an individual SMS process. The noble Baroness, Lady Stowell, fought hard, and with some success, during the passage of the Online Safety Act to try to limit Ministers’ control over Ofcom’s work. Political independence must be the mainstay of a successful regulator. However, this clause as drafted gives the Government endless time and power to send guidance back to the regulator for revision. I am convinced that this will cause unnecessary delays and politicisation of the CR process. At the least, I would like to see a time limit introduced for the Minister to accept CMA guidance proposals.

I am also concerned about powers given to tech companies further down in the Bill, in Part 4. Clause 259 sets out the duties of a trader on the cancellation of a contract, and they focus on providing various types of notices and dealing with potential overpayments by the consumer. Although the retrieval of personal data is covered under the GDPR, there is no provision for the retrieval of non-personal data, which might have been provided to the trader during the subscription period. This could be data about household fuel consumption, cloud-based Word documents, comments on social media or videos uploaded to video-sharing platforms.

The consumer might want the legal right to retrieve their data from the service before the subscription ends. More importantly, the trader might want to keep non-personal data and make it available to other users without the consent of the consumer. In my view, this is an omission that many people would be pleased to have rectified by an amendment to the Bill.

I too share the frustration of the noble Lord, Lord Vaizey, about the difficulty of ending subscriptions. An even more popular option to the Bill would be the introduction of an end-of-contract button labelled “terminate now” on the front page of digital services websites. Often it is hard to find the unsubscribe button on a website. On occasions it has taken me some time to burrow down through the layers of a site to find the unsubscribe button hidden away in a digital corner. German law provides for a compulsory button, which allows the consumer to enter all the essential information needed to end the contract—that would be a benefit to the customer.

This is a huge and complex Bill, and it has been a long time in its gestation. I am very pleased to see our country finally confronting the anti-competitive behaviour of the big digital players and protecting consumers for the long term.