Digital Markets, Competition and Consumers Bill

Debate between Viscount Colville of Culross and Lord Clement-Jones

Committee stage
Monday 22nd January 2024 Grand Committee

[Lord Clement-Jones (LD)]

My Lords, at the opening of this Committee stage, I want to repeat, rather in the same way as the noble Baroness, Lady, Jones, what I said on Second Reading: we broadly welcome this Bill. In fact, since the Furman report was set up five years ago, we have been rather impatient for competition law in the digital space to be reformed and for the DMU to be created.

At the outset, I also want to thank a number of organisations—largely because I cannot reference them every time I quote them—for their help in preparing for the digital markets aspects of the Bill: the Coalition for App Fairness, the Public Interest News Foundation, Which?, Preiskel & Co, Foxglove, the Open Markets Institute and the News Media Association. They have all inputted helpfully into the consideration of the Bill.

The ability to impose conduct requirements and pro-competition interventions on undertakings designated as having strategic market status is just about the most powerful feature of the Bill. One of the Bill’s main strengths is its flexible approach, whereby once a platform is designated as having SMS, the CMA is able to tailor regulatory measures to its individual business model in the form of conduct requirements and pro-competition interventions, including through remedies not exhaustively defined in the Bill.

However, a forward-looking assessment of strategic market status makes the process vulnerable to being gamed by dominant platforms. The current five-year period does not account for dynamic digital markets that will not have evidence of the position in the market in five years’ time. It enables challengers to rebut the enforcer’s claim that they enjoy substantial and entrenched market power, even where their dominance has yet to be meaningfully threatened. Clause 5 of the Bill needs to be amended so that substantial and entrenched market power is based on past data rather than a forward-looking assessment. There should also be greater rights to consultation of businesses that are not of SMS under the Bill. As the noble Baroness, Lady Jones, said, this will be discussed later, under another group of amendments.

The provisions of Clause 5, as it is currently worded, risk causing problems for the CMA in practice. Part of the problem is the need for evidence to support a decision by the CMA of a market position over the entire five-year period. The five-year period requires current evidence of the position in the market in five years’ time. In dynamic digital markets such as these, no such evidence is likely to exist today. The CMA needs evidence to underpin its administrative findings. Where no such evidence exists, it cannot designate an SMS firm.

The CMA will have evidence that exists up to the date of the decision—evidence of the current entrenched position, market shares, barriers to entry, intellectual property rights and so on. In that respect, we support the noble Baroness, Lady Jones, with her Amendment 1, because it should of course include earlier investigations by the CMA. All that evidence exists today in 2024, but what the position will be in 2028 will need to be found and it has to be credible evidence to support a CMA decision under Clause 5. Particularly in fast-moving technology markets, the prediction of future trends is not a simple matter, so lack of sufficient evidence of the entrenched nature of a player at year 5 or over the entire period would prevent a rational decision-maker from being able to make a decision that the player will have SMS over the five-year period, as demanded by the Bill. Every designation and subsequent requirement or investigation imposed on the designated undertaking risks being subject to challenge on the basis of insufficient evidence.

As the Open Markets Institute says,

“the inevitably speculative nature of a forward-looking assessment makes the process vulnerable to being gamed by dominant platforms. For example, such firms may use the emergence—and even hypothetical emergence—of potential challengers to rebut the enforcer’s claim that they enjoy substantial and entrenched market power, even where their dominance has yet to be meaningfully threatened by those challengers”.

It gives the example of the rise of TikTok, which Meta has used in arguments to push back against anti-trust scrutiny:

“Yet while experiencing rapid growth in terms of user numbers, TikTok has so far failed to seriously challenge the economic dominance of Meta in online advertising (the basis of Meta’s market power), generating less”


than

“a tenth of the latter’s global revenues. Dominant platforms will also use emerging technologies—such as generative AI—to claim that their dominance is transitory, claims that will be difficult for the CMA to rebut given future uncertainty”.


Our Amendments 3, 4, 5 and 6—here I thank the noble Lord, Lord Vaux, for his support for them, and sympathise with him because I gather that his presence here today has been delayed by Storm Isha—suggest that the number of years should be removed and the provision clarified so that the assessment is made based on current evidence and facts. If the market position changes, the CMA has the power to revoke such designation in any event, on application from the SMS business, as provided for by Clause 16.

That is the argument for Amendments 3, 4, 5 and 6 in Clause 5. I look forward to hearing what the noble Viscount, Lord Colville, has to say on Amendment 7, which we very much support as well.

[Viscount Colville of Culross (CB)]

My Lords, I have put down Amendment 7 to Clause 6 and, in later groups, amendments relating to Clauses 20 and 114. I will come to them later in Committee, but all of them have the aim of limiting the wide powers given to the Secretary of State in the Bill to intervene in the setting up of the processes for dealing with anti-competitive behaviour by the big tech companies. Amendment 7 would prevent the Secretary of State having broad powers in revising the criteria for establishing the designation of the SMS investigative process. My particular concern is about the power that the Minister might have to alter the criteria for the process in order to de-designate a company following heavy lobbying.

As this is my first intervention at this stage of the Bill, I join other noble Lords in saying that I too very much welcome it and the Government’s approach to dealing with anti-competitive behaviour by the big tech companies. In fact, I welcome it so much that I want to ensure that it is implemented as quickly and effectively as possible, to safeguard our digital start-ups and smaller digital companies.

The independence of the CMA is central to the effectiveness of the processes set out in Part 1. However, the huge powers given to the Minister in these chapters should worry noble Lords. They are proposing great powers of oversight and direction for the Secretary of State. I fear that these will undermine the independence of the CMA and dilute its ability to take on the monopolistic behaviour of the big tech companies. I hope that these amendments will go some way to safeguard the independence of the regulator.

I support the collaborative approach set out in the SMS and conduct requirement processes; it seems to be preferable to the EU’s Digital Markets Act, which is so much more broad-brush, with a much wider investigation into designated companies’ business activities. The Bill sets out a greater focus on a company’s particular activity and ensures that the CMA and the DMU work closely with stakeholders, including the tech companies which are going to be under investigation. However, despite this collaboration, it can only be expected that the companies involved in the process will want to give themselves the best possible chance of maintaining their monopolistic position. Clause 6 is central to the start of the process—after all, it sets out when a company can be considered to be under DMU oversight.

Designation as an SMS player means only that the company is subject to the jurisdiction or potential oversight of the DMU; it does not mean that it has done anything wrong. The deliberate aim of the Bill is to ensure that only large players are to be included in the SMS status. These criteria will not dictate how the investigation will go, so the criteria for designation as an SMS player does not need to be changed if the market changes. However, Clause 6(2) and (3) will give Ministers power to take criteria away from this section. This will mean that powerful tech players could fall outside the jurisdiction of the DMU and will not be open to SMS designation as a result. If the clause allowed only new criteria to be added, so that a wider scope of companies could be included, that would not be so bad. However, the ability to reduce the scope of the DMU’s potential designation should alarm noble Lords. These subsections give the tech companies huge powers to lobby the Secretary of State to ensure that there is not the possibility to designate them. Effectively, this would be a de-designation of these companies, which would defeat the purpose of the CR process before it has even got off the ground.

I am also concerned that the Secretary of State’s powers in this clause go against the law’s need to be normative: as a basic principle, it must apply to all the companies, without discrimination. The DMCC Bill is a law that applies only to those who qualify, but it is, in principle, generally applicable. Chapter 2 of Part 1 sets out a set of criteria that apply to all companies, but only a few will satisfy the criteria. The criteria for being an SMS requires enduring market power and a collection of other criteria. It is likely, as a result, that these will cover Microsoft, Amazon, Apple, Google and Facebook; each has enduring market power and qualifies for designation under the criteria in Clause 6. However, if that law can be varied by a Secretary of State to take away criteria, as it currently can, then the law can be made to apply to only a few companies. At the extreme, it could be altered to apply to only one or two. I am advised by lawyers that this is likely to be discriminatory.

Imagine if the law were varied so it applied only to a business that provides both a digital platform and home deliveries. This would mean it would apply only to Amazon, and the company would go to town lobbying against the change in criteria as discriminatory. Noble Lords must continually remind themselves that the Bill is taking aim at the biggest, most powerful companies in the world. I ask them to consider just how far these companies would go to put pressure on politicians and Ministers to safeguard their position, and how effective that pressure can be in changing their minds.

Online Safety Bill

Debate between Viscount Colville of Culross and Lord Clement-Jones

Committee stage
Tuesday 2nd May 2023 Lords Chamber

[Viscount Colville of Culross (CB)]

I too wish my noble friend Lady Kidron a happy birthday.

I will speak to Amendment 261. Having sat through the Communications Committee’s inquiries on regulating the internet, it seemed to me that the real problem was the algorithms and the way they operated. We have heard that again and again throughout the course of the Bill. It is no good worrying just about the content, because we do not know what new services will be created by technology. This morning we heard on the radio from the Google AI expert, who said that we have no idea where AI will go or whether it will become cleverer than us; what we need to do is to keep an eye on it. In the Bill, we need to make sure that we are looking at the way technology is being developed and the possible harms it might create. I ask the Minister to include that in his future-proofing of the Bill, because, in the end, this is a very fast-moving world and ecosystem. We all know that what is present now in the digital world might well be completely changed within a few years, and we need to remain cognisant of that.

[Lord Clement-Jones (LD)]

My Lords, we have already had some very significant birthdays during the course of the Bill, and I suspect that, over many more Committee days, there will be many more happy birthdays to celebrate.

This has been a fascinating debate and the Committee has thrown up some important questions. On the second day, we had a very useful discussion of risk which, as the noble Lord, Lord Russell, mentioned, was prompted by my noble friend Lord Allan. In many ways, we have returned to that theme this afternoon. The noble Baroness, Lady Fox, who I do not always agree with, asked a fair question. As the noble Baroness, Lady Kidron, said, it is important to know what harms we are trying to prevent—that is how we are trying to define risk in the Bill—so that is an absolutely fair question.

The Minister has shown flexibility. Sadly, I was not able to be here for the previous debate, and it is probably because I was not that he conceded the point and agreed to put children’s harms in the Bill. That takes us a long way further, and I hope he will demonstrate that kind of flexibility as we carry on through the Bill.

The noble Lord, Lord Moylan, and I have totally different views about what risk it is appropriate for children to face. I am afraid that I absolutely cannot share his view that there is this level of risk. I do not believe it is about eliminating risk—I do not see how you can—but the Bill should be about preventing online risk to children; it is the absolute core of the Bill.

As the noble Lord, Lord Russell, said, the Joint Committee heard evidence from Frances Haugen about the business model of the social media platforms. We listened to Ian Russell, the father of Molly, talk about the impact of an unguarded internet on his daughter. It is within the power of the social media companies to do something about that; this is not unreasonable.

I was very interested in what the noble Viscount, Lord Colville, said. He is right that this is about algorithms, which, in essence, are what we are trying to get to in all the amendments in this really important group. It is quite possible to tackle algorithms if we have a requirement in the Bill to do so, and that is why I support Amendment 261, which tries to address to that.

However, a lot of the rest of the amendments are trying to do exactly the same thing. There is a focus not just on moderating harmful content but on the harmful systems that make digital services systematically unsafe for children. I listened with great interest to what the noble Lord, Lord Russell, said about the 5Rights research which he unpacked. We tend to think that media platforms such as Reddit are relatively harmless but that is clearly not the case. It is very interesting that the use of avatars is becoming quite common in the advertising industry to track where advertisements are ending up—sometimes, on pornography sites. It is really heartening that an organisation such as 5Rights has been doing that and coming up with its conclusions. It is extremely useful for us as policymakers to see the kinds of risks that our children are undertaking.

We were reminded about the origins—way back, it now seems—of the Carnegie duty of care. In a sense, we are trying to make sure that that duty of care covers the systems. We have talked about the functionality and harms in terms of risk assessment, about the child safety duties and about the codes of practice. All those need to be included within this discussion and this framework today to make sure that that duty of care really sticks.

I am not going to go through all the amendments. I support all of them: ensuring functionalities for both types of regulated service, and the duty to consider all harms and not just harmful content. It is absolutely not just about the content but making sure that regulated services have a duty to mitigate the impact of harm in general, not just harms stemming from content.

The noble Baroness, Lady Harding, made a terrific case, which I absolutely support, for making sure that the codes of practice are binding and principle based. At the end of the day, that could be the most important amendment in this group. I must admit that I was quite taken with her description of the Government’s response, which was internally contradictory. It was a very weak response to what I, as a member of the Joint Committee, thought was a very strong and clear recommendation about minimum standards.

This is a really important group of amendments and it would not be a difficult concession for the Government to make. They may wish to phrase things in a different way but we must get to the business case and the operation of the algorithms; otherwise, I do not believe this Bill is going to be effective.

I very much take on board what about the noble Viscount said about looking to the future. We do not know very much about some of these new generative AI systems. We certainly do not know a great deal about how algorithms within social media companies operate. We will come, no doubt, to later amendments on the ability to find out more for researchers and so on, but transparency was one of the things our Joint Committee was extremely keen on, and this is a start.

Coronavirus Bill

Debate between Viscount Colville of Culross and Lord Clement-Jones

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Wednesday 25th March 2020 Lords Chamber

[Lord Clement-Jones (LD)]

My Lords, my right honourable friend Ed Davey prompted an important statement from the Chief Secretary to the Treasury yesterday. In doing so, he acknowledged the way the Chancellor and the Treasury have given support to businesses and employees so far, but emphasised that this will remain incomplete and inadequate until we see proper measures for the 5 million self-employed across the country who are excluded from current financial support for businesses and employees.

That is the motive behind this amendment, which seeks to replicate the Government’s support scheme for those in employment, both in the 80% of gross monthly earnings and in reference to their average earnings over the past three years, with a cap of £2,500. As my old friend Munira Wilson said when introducing a similar amendment in the Commons,

“5 million self-employed and freelancers feel that they have been completely overlooked.”—[Official Report, Commons, 23/3/20; col. 145.]

They are under real stress as a result of the coronavirus crisis. Freelancers and the self-employed are deeply worried, and the rather confused messages coming out of government about when they should go to work do not help.

In his response to my right honourable friend Ed Davey’s Question, the Chief Secretary to the Treasury, Stephen Barclay, used the phrase “further help is coming”. But while we all understand that there are complications, the Government must move as fast as possible to meet these people’s concerns, because in many cases they are simply running out of money. As my right honourable friend said,

“80% of the 5 million self-employed are sole traders. They are our neighbours, our friends, our family. The vast majority are not wealthy people. They are cleaners, taxi drivers, plumbers, hairdressers; they are musicians, tutors, journalists; and they are builders, electricians and child minders.”—[Official Report, Commons, 24/3/20; col. 208.]

Most of the self-employed have very modest incomes and are not well off. The majority have taxable incomes of less than £10,000 a year, compared with just 15% of employees on incomes that low. Without help, they will not be able to pay their mortgages, rent and bills, and will face financial ruin.

As the Minister may know, I have a particularly strong connection with the creative sector. Freelance work and self-employment is the predominant pattern in the sector. For instance, 73% of those working in the music industry are freelance. A Creative Industries Federation survey last week revealed that 60% of creative freelancers estimate that their income will more than halve in 2020 due to the coronavirus outbreak and that almost 50% of freelancers who responded to the poll had already had 100% of their work cancelled. They, along with 50 creative bodies, Equity, the MU and the Writers’ Guild, have called for an emergency fund that gives a time-limited and carefully targeted cash grant to the self-employed workers and freelancers who need it most.

Other European countries have put in place similar schemes; Norway, for example, has guaranteed temporary income protection for 80% of average self-employed earnings from the past three years, with an annual cap of the equivalent of £45,000. So have France, Belgium and Denmark. An urgent package of help is needed now, which needs to be at least the equivalent of that which has been offered to employees. As I said yesterday in relation to journalists, but it applies across the board for the self-employed and freelancers, they may be forced to ignore government guidance to stay home and plough on with what work is available or face real hardship.

In closing, I was surprised, when I asked the Labour Front Bench to support and sign this amendment yesterday, to be told that it was not a priority in light of the time available for discussion on the Bill. I am glad that they have now changed their tune, especially given the helpful statements of the Mayor of London and John McDonnell yesterday. I urge the Government to be generous and conscious of the necessary urgency in their response. I beg to move.

[Viscount Colville of Culross (CB)]

My Lords, I put my name to this amendment, because I too am about the need for economic support for the self-employed, freelancers and workers on zero-hour contracts. Yesterday, the noble Earl, Lord Courtown, told the House that compensation for these people must be part of a package that is comprehensive, co-ordinated and coherent. However, he was not prepared to put a timetable to that announcement.

As the noble Lord, Lord Clement-Jones, just said, this amendment will give support straightaway to the 5 million self-employed workers, four-fifths of whom fall below the £2,500 a month threshold suggested in subsection (4)(b) of the proposed new clause, which is about the medium wage. It would be in line with the job retention package for employees announced last Friday.

However, I cannot emphasise enough that the scheme needs to be enacted very quickly. Failure to do so is threatening the lives of workers and those they serve. The great fear is that many self-employed workers have to decide between self-isolating and having no money coming into the house. That is particularly so in the care sector. I talked to a support worker on a zero-hours contract at a private residential home in Somerset run by a charitable trust. At best, she works two 15-hour night shifts a week for minimum wage. Together with her husband’s state pension, it is hardly enough to cover her rent and food bills as it is. Her husband is in bad health and vulnerable to the virus. Eventually, after some soul-searching, she decided that in the present crisis she could not threaten his health by continuing to go to work and has gone into self-isolation.

That support worker has done the right thing, even though she will now start running up debts that could take a long time to pay off. But this is a very real dilemma for many lowly paid self-employed people and workers on zero-hours contracts. There are real fears in the care industry that some workers who look after some of the most vulnerable people in this country will ignore any symptoms of the virus and continue going to work because they cannot afford not to. As a country, we cannot take that risk. I urge the Minister to accept the amendment. If he is not prepared to do so, at least will he tell the House when the Chancellor will come forward with a package of help for the self-employed, freelancers and workers on zero-hours contracts? Time is of the essence.