Online Safety Bill

Debate between Alex Davies-Jones and Paul Scully

Consideration of Lords amendments
Tuesday 12th September 2023 Commons Chamber

[Alex Davies-Jones]

On the small high-harm platforms that are now in the scope of the Bill, will the Minister join me in thanking Hope Not Hate, the Antisemitism Policy Trust and CST, which have campaigned heavily on this point? While we have been having this debate, the CST has exposed BitChute, one of those small high-harm platforms, for geoblocking some of the hate to comply with legislation but then advertising loopholes and ways to get around that on the platform. Can the Minister confirm that the regulator will be able to take action against such proceedings?

[Paul Scully]

I will certainly look at that. Our intention is that in all areas, especially relating to children and their protection, that might not fall within the user enforcement duties, we will look to make sure that the work of those organisations is reflected in what we are trying to achieve in the Bill.

We have talked about the various Ministers that have looked after the Bill during its passage, and the Secretary of State was left literally holding the baby in every sense of the word because she continued to work on it while she was on maternity leave. We can see the results of that with the engagement that we have had. I urge all Members on both sides of the House to consider carefully the amendments I have proposed today in lieu of those made in the Lords. I know every Member looks forward eagerly to a future in which parents have surety about the safety of their children online. That future is fast approaching.

I reiterate my thanks to esteemed colleagues who have engaged so passionately with the Bill. It is due to their collaborative spirit that I stand today with amendments that we believe are effective, proportionate and agreeable to all. I hope all Members will feel able to support our position.

Amendment (a) made to Lords amendment 182.

Lords amendment 182, as amended, agreed to.

Amendments (a) and (b) made to Lords amendment 349.

Lords amendment 349, as amended, agreed to.

Amendment (a) made to Lords amendment 391.

Lords amendment 391, as amended, agreed to.

Government consequential amendment (a) made.

Lords amendment 17 disagreed to.

Government amendments (a) and (b) made in lieu of Lords amendment 17.

Lords amendment 20 disagreed to.

Lords amendment 22 disagreed to.

Lords amendment 81 disagreed to.

Government amendments (a) to (c) made in lieu of Lords amendment 81.

Lords amendment 148 disagreed to.

Government amendment (a) made in lieu of Lords amendment 148.

Lords amendments 1 to 16, 18, 19, 21, 23 to 80, 82 to 147, 149 to 181, 183 to 348, 350 to 390, and 392 to 424 agreed to, with Commons financial privileges waived in respect of Lords amendments 171, 180, 181, 317, 390 and 400.

Ordered, That a Committee be appointed to draw up Reasons to be assigned to the Lords for disagreeing to their amendments 20 and 22;

That Paul Scully, Steve Double, Alexander Stafford, Paul Howell, Alex Davies-Jones, Taiwo Owatemi and Kirsty Blackman be members of the Committee;

That Paul Scully be the Chair of the Committee;

That three be the quorum of the Committee.

That the Committee do withdraw immediately.—(Mike Wood.)

Committee to withdraw immediately; reasons to be reported and communicated to the Lords.

Digital Markets, Competition and Consumers Bill (Tenth sitting)

Debate between Alex Davies-Jones and Paul Scully

Committee stage
Tuesday 27th June 2023 Public Bill Committees

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

The final clauses in part 2 concern measures that cut across the Competition and Markets Authority’s competition tools. Clause 136 introduces schedules 8 to 10 to the Bill. The Competition Act 1998 and parts 3 and 4 of the Enterprise Act 2002 already allow the CMA to impose civil penalties for non-compliance with information requirements. The destruction of documents that have been required to be produced, and the provision of false or misleading information, are criminal offences, but schedule 8 introduces powers for that conduct to be subject to civil penalties. It also reforms existing civil penalties to ensure that the maximum penalties are set at an appropriate level.

Schedule 9 introduces powers enabling civil penalties to be imposed for breaches of competition remedies. Competition remedies are interim measures, commitments and directions under the Competition Act 1998 and interim measures, undertakings or orders under parts 3 and 4 of the Enterprise Act 2002. Schedules 8 and 9 also enable the Secretary of State and Ofcom to impose penalties if they are given false or misleading information in relation to their functions under the relevant regimes. They also give the Secretary of State the power to impose penalties to enforce compliance with remedies accepted or imposed in relation to mergers and markets with public interest considerations. Civil penalties will be applicable unless the party has a reasonable excuse, and that will be assessed case by case.

The maximum penalty for an undertaking or person who owns or controls an enterprise that is not complying with information requirements is 1% of the business’s worldwide turnover. Daily penalties of up to 5% of worldwide daily turnover will also be available in some cases while the non-compliance continues. For breach of remedies, the maximum penalty is set at 5% of worldwide turnover and daily penalties of up to 5% of worldwide daily turnover while the breach continues. The penalties imposed on other persons, who will generally be individuals, are capped at £30,000, or up to £15,000 daily while the breach continues. The CMA is required to produce statements of policy regarding the operation of its penalty powers. In doing so, it must consult the sector regulators and receive approval from the Secretary of State. Schedule 10 amends the legislation that gives the sector regulators their concurrent competition powers, so that they need not unnecessarily duplicate the work that they need to do to prepare statements of policy.

Clause 137 introduces schedule 11, which amends the Competition Act 1998 and parts 3 and 4 of the Enterprise Act 2002 to make express provision regarding the giving of information notices outside the United Kingdom. The schedule enables the CMA to give an information notice to a person who is the subject of a Competition Act 1998 investigation, or a person who is or has been a party to a merger review. The schedule also enables the CMA to give information notices to third parties with a defined UK connection. Compliance will be enforceable through the civil penalty regime. The schedule also amends provisions on methods of serving documents to reflect modern business practices; for example, it allows service of documents via email.

Government amendments 40 to 44 are technical drafting amendments to schedule 12. The schedule, which is introduced by clause 138, applies appropriate parliamentary procedures to new regulation-making powers created by the Bill, and makes other consequential and technical amendments. I commend the amendments to the Committee and hope that the clauses will stand part of the Bill.

[Alex Davies-Jones (Pontypridd) (Lab)]

Labour supports the intention behind the provisions in this grouping. Of course there should be provisions about the attendance of witnesses, as outlined in clause 135. The same can be said about ensuring that the Bill has sufficient legal powers on civil penalties, should the need for them arise in the regime. The provisions in clause 136 and schedules 8 to 10 are adequate, and we support them. The same can be said for clause 137 and schedule 11, which make provisions regarding the service of documents and the extraterrestrial—sorry, extraterritorial; I know we are talking about digital markets, but we have not reached that far yet—application of notices under part 1 of the Competition Act 1998 and parts 3 and 4 of the Enterprise Act 2002. Of course those laws must work in alignment with the intentions of the Bill. Clause 138, Government amendments 40 to 44 and schedule 12 are all sensible, and part of a rigorous procedure, so we do not oppose them.

Question put and agreed to.

Clause 136 accordingly ordered to stand part of the Bill.

Schedules 8 to 10 agreed to.

Clause 137 ordered to stand part of the Bill.

Schedule 11 agreed to.

Clause 138 ordered to stand part of the Bill.

Schedule 12

Orders and regulations under CA 1998 and EA 2002

Amendments made: 40, in schedule 12, page 284, line 5, at end insert—

“(1A) In subsection (4) omit ‘, 94A(6)’.”

This amendment removes a reference in section 124(4) of the Enterprise Act 2002 to section 94A(6) of that Act, which is being repealed by paragraph 11 of Schedule 9 to the Bill.

Amendment 41, in schedule 12, page 284, line 7, at end insert—

“(aa) omit ‘, 94A(3) or (6)’;”.

This amendment removes a reference in section 124(5) of the Enterprise Act 2002 to section 94A(3) and (6) of that Act, which are being repealed by paragraph 11 of Schedule 9 to the Bill.

Amendment 42, in schedule 12, page 284, line 12, after “section” insert “94AB(9) or”.

This amendment corrects a drafting omission by providing that regulations under section 94AB(9) of the Enterprise Act 2002 (inserted by paragraph 11 of Schedule 9 to the Bill) are subject to annulment in pursuance of a resolution of either House of Parliament.

Amendment 43, in schedule 12, page 285, line 10, after “section” insert “167B(9) or”.

This amendment corrects a drafting omission by providing that regulations under section 167B(9) of the Enterprise Act 2002 (inserted by paragraph 17 of Schedule 9 to the Bill) are subject to annulment in pursuance of a resolution of either House of Parliament.

Amendment 44, in schedule 12, page 285, line 23, at end insert—

“(8A) In subsection (10), for ‘174D’ substitute ‘174A(10)’.”—(Paul Scully.)

Paragraph 26 of Schedule 8 to the Bill inserts a new subsection (10) into section 174A of the Enterprise Act 2002 which replaces the existing provision made by section 174D(10) of that Act (which is being repealed by paragraph 28(12) of that Schedule). This amendment amends the Enterprise Act 2002 to replace a reference in section 181(10) of that Act to the latter provision with a reference to the former.

Schedule 12, as amended, agreed to.

Clause 139

Overview

Question proposed, That the clause stand part of the Bill.

Digital Markets, Competition and Consumers Bill (Ninth sitting)

Debate between Alex Davies-Jones and Paul Scully

Committee stage
Tuesday 27th June 2023 Public Bill Committees

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

Let me cover the criminal offences in the regime, which largely mirror existing powers that the Competition and Markets Authority has in the Competition Act 1998. Criminal liability is important for deterring serious acts of misconduct in the context of information gathering and compliance monitoring, and will help to ensure that the digital markets unit can access relevant information.

Clause 91 makes it a criminal offence for an individual or firm to intentionally or recklessly destroy information, conceal information, provide false information, or cause or permit any of those actions. Those offences apply in relation to any of the powers provided for in chapter 6, which concerns information gathering and compliance reports.

Clause 92 makes it a criminal offence for a person to knowingly or recklessly give false or misleading information to the DMU in connection with any of its digital markets functions. It is also an offence for a person to knowingly or recklessly give false or misleading information to another person, knowing that it will be used by the DMU.

Clause 93 makes it a criminal offence for an individual to intentionally obstruct an officer of the DMU when lawfully entering a premises with or without a warrant.

Government amendment 34 seeks to clarify that named senior managers for information requests and nominated officers cannot be held criminally liable for not fulfilling their duties in those roles. As drafted, clause 94(2) broadens the definition of an officer of a body corporate. That would mean that individuals assigned to those roles could risk facing criminal proceedings on the basis of their assignment to the role. It has always been the policy intention that a named senior manager or nominated officer should face a civil penalty only where a firm with strategic market status has failed to comply with a relevant information request or compliance report and where the named individual failed, without reasonable excuse, to prevent that failure from occurring. The amendment would not prevent a senior manager or a nominated officer from facing criminal proceedings if they happen to also qualify as an officer of a body corporate under clause 94. I therefore hope that the Committee will support the amendment.

Clause 94 sets out that, in certain circumstances, where a body corporate commits a criminal offence, an officer of the body corporate can also be held criminally responsible. An officer of a body corporate can be, but is not limited to, a director, manager or secretary. An officer can be held criminally liable where the body corporate commits a criminal offence and the offence is attributable to that officer’s consent, connivance or neglect on their part. That will help to encourage officers in firms to take personal responsibility for their actions and will ensure that they are held accountable for any serious information offences.

Clause 95 limits the extraterritorial application of certain offences in the Bill, and I will set out our wider approach to extraterritoriality when we debate clause 110. Specifically, clause 95 states that a person cannot commit any of the part 1 criminal offences unless they have a UK connection, which is established when the person is a UK national, is habitually resident in the UK, or is a body incorporated under UK law. We have carefully considered the options and implications of restricting the extraterritorial application of criminal offences in this way. Although it is crucial that the CMA may apply its powers extraterritorially, they must be used only when strictly necessary and when a sufficient connection exists with the UK. In circumstances in which the person does not have a sufficient connection with the UK for the purpose of committing an offence, the CMA will still be able to enforce breaches of information requirements using civil penalties. That approach will ensure that, in exercising its powers, the CMA is respectful of the territorial jurisdiction of other nations.

Finally, clause 96 sets out the punishments that can be imposed by the relevant courts on conviction of a criminal offence under clauses 91 to 93. Any person found guilty of one of those offences is liable on summary conviction to a fine. In England and Wales, that will be of an unlimited amount, and in Scotland or Northern Ireland it will be up to the statutory maximum. On conviction on indictment, a person is liable to imprisonment for up to two years, a fine or both.

[Alex Davies-Jones (Pontypridd) (Lab)]

I welcome the clauses in this grouping that outline the criminal offences, as the Minister has explained. We welcome their inclusion for clarity, and we are also grateful that they broaden the scope of the Bill to include specific provisions, particularly in clause 94.

We support the clarity and intention of Government amendment 34. It is important that the term “officer” has its usual meaning in relation to offences committed by officers as well as bodies corporate. This is an important clarification and we are grateful to the Minister for tabling the amendment.

Question put and agreed to.

Clause 91 accordingly ordered to stand part of the Bill.

Clauses 92 and 93 ordered to stand part of the Bill.

Clause 94

Offences by officers of a body corporate etc

Amendment made: 34, in clause 94, page 56, line 14, leave out subsection (2).—(Paul Scully.)

This amendment removes a gloss on the definition of “officer” of a body corporate so that the term has its usual meaning in relation to offences committed by officers as well as bodies corporate.

Clause 94, as amended, ordered to stand part of the Bill.

Clauses 95 and 96 ordered to stand part of the Bill.

Clause 97

Director disqualification

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Government amendments 35 and 36.

Clauses 98 to 101 stand part.

[Paul Scully]

I will now cover the remaining enforcement measures in the regime, and the appeals process. Clause 97 gives power to the DMU to apply to the court to disqualify a director of a UK-registered company that forms part of a firm with strategic market status, where that firm has breached the digital markets regime. That will allow the DMU to use the Company Directors Disqualification Act 1986, as the CMA does currently under the Competition Act 1998, when an SMS firm infringes the regime and the director’s conduct makes them unfit to be involved in the management of a company. That helps to protect UK businesses and the public from individuals who abuse their role and status as directors.

Government amendment 35 clarifies that costs relating to a court order under clause 98 can be made against any person that has breached the relevant requirement, whether or not they are an undertaking. The amendment changes the wording in subsection (3) to reflect the rest of the clause, which applies to persons—in practice, meaning a legal entity forming part of an SMS firm. I hope the Committee supports the amendment.

Government amendment 36 seeks to clarify in clause 98 that where a firm is responsible for the failure to comply with a relevant requirement, a costs order can be made against any officer of the relevant firm.

Clause 98 allows the DMU to apply for a court order where an SMS firm fails to comply with a regulatory requirement and, where relevant, a subsequent order or commitment intended to bring them back into compliance. A breach of a court order is a serious offence that can eventually lead to an unlimited fine and/or imprisonment for officers of the undertaking in question if it is not complied with. The threat of a court order is a key backstop for ensuring SMS firms comply with the regime.

Clause 99 makes explicit provision to allow parties to seek redress privately if they suffer harm or loss when an SMS firm breaches a requirement imposed by the DMU. Redress will be available when an SMS firm breaches a conduct requirement, pro-competition intervention or commitment to the DMU.

Clause 100 sets out that the CMA’s final breach decisions are binding on the courts and the Competition Appeal Tribunal to which redress claims can be made. The court or tribunal will only consider what a suitable remedy would be. That will encourage harmed parties to assist the DMU during investigations into suspected breaches of the regime.

Clauses 99 and 100 strike the right balance of ensuring there is a clear and effective route to redress, while ensuring that the regime’s focus is on public enforcement.

Clause 101 provides that decisions of the DMU, made in connection with its digital markets functions, can be appealed to the Competition Appeal Tribunal. When deciding these challenges, the CAT will apply judicial review principles. Valid grounds for appealing decisions of the DMU could include challenging whether it acted lawfully and within its powers, applied proper reasoning or followed due process, as well as, in some circumstances, whether the DMU’s decision was proportionate. That is with the exception of decisions relating to mergers, which will be brought under the existing process for merger appeals set out in the Enterprise Act 2002. That will ensure that there is a consistent appeals regime for all merger decisions.

Judicial review will allow for appropriate scrutiny of the DMU’s decisions in the digital markets regime, ensuring that the DMU is accountable for those decisions, that they are fairly and lawfully taken, and that the rights of businesses are protected. I am sure we all remember the oral evidence: the majority of people in front of us were clear that this was the right approach, and was proportionate.

[Alex Davies-Jones]

Clause 97 is important in that, as the Minister said, it enables the disqualification of a person from being a director as a consequence of their involvement in an infringement of a requirement relating to conduct requirements or pro-competition interventions. Labour sees that as an important step in ensuring that individuals who have not abided by the terms of this regime are not able to continue in their role. The clause specifically inserts new text into the Company Directors Disqualification Act which allows for these provisions. We welcome that this disqualification can be for up to 15 years—a significant yet fair period—and support the Government’s approach. We therefore support clause 97 in its entirety and think that it should stand part of the Bill. I am pleased to confirm that we also support Government amendments 35 and 36.

I will now move on to clauses 98 to 101. On clause 98, we particularly agree with the logical step set out in subsection (1). Its clarification means that, in the event of any initial breach of a conduct requirement that occurs before an enforcement order has been put in place or a commitment has been accepted, it cannot be enforced with a court order. We also agree with the intentions of subsection (3). Again, these are sensible approaches which we support. On the whole, we believe clause 98 to be an important step in establishing and rooting the CMA’s powers on a statutory footing. For that reason, we are happy to support it standing part of the Bill.

A fair regulatory regime must include provisions around seeking compensation, so we welcome clause 99. We particularly welcome subsection (2). We further welcome the clarity that subsection (4) affords. Again, these are simple clauses that we see as logical and sensible. We are happy to see their inclusion.

I now come to the most important clause in the Bill: clause 101. The Minister will be pleased to know that I have plenty to say on it. Subsections (8) to (10) provide that decisions of the CAT may be appealed to the appellate court for that jurisdiction. That is an incredibly important point and one which the Government must maintain. The DMU will ultimately have the power to make pro-competitive interventions to reduce SMS firms’ market power and to review more of their mergers. That means that they will be able to make significant changes to SMS firms’ business models with the objective of opening up their ecosystems and levelling the playing field for other businesses. The benefits of doing so are significant, and I am sure we will touch on them in sessions to come.

In the current version of this Bill, the standard of review that applies to DMU decisions is the judicial review standard generally used for authorities that make forward-looking assessments, rather than the “merits” standard used for certain competition law enforcement decisions by the CMA. That means that parties will be able to apply to the Competition Appeal Tribunal to review the legality of the DMU’s decisions, focusing on the principles of irrationality, illegality and procedural impropriety. That is an extremely important point and is consistent with other regimes, so the Government must not bow down to pressure here and adopt a “merits” appeals approach. As the Minister quite rightly said, we heard from countless witnesses during our oral evidence sessions who said the same.

We know that judicial review appeals are more streamlined than merits appeals and they can last a matter of days, rather than weeks, years or even decades. Under this Government, our courts are already facing significant backlogs—perhaps the less said about that the better—but there is no reason why we should subject this regime and the appeals principle to even further delay. We recognise the pressure that the Government are under here; clearly, potential SMS firms and their advocates oppose the adoption of the JR standard. It is obvious that a company that may be negatively impacted by this new regime would seek to obstruct or delay it by arguing for an appeals process that incorporates a consideration of the merits of the case.

However, Labour strongly believes that the current drafting is fair and well aligned with other regulatory regimes. For far too long, big tech has had the ear of this Government and has been able to force the hand of many of the Minister’s colleagues when it comes to online safety provisions. The Minister must reassure us that that will not be the case. I look forward to his confirmation.

[Paul Scully]

I appreciate the hon. Lady’s approach to the appeals standard, which she has taken in regard to the measures throughout the Bill. The Government speak to larger companies and smaller challenger companies, because it is really important that we get this right. I can assure the hon. Lady that there is no way we are going to weaken the appeals structure. We will always make sure that we listen and do things fairly. In no way will the structure be watered down such that challenger tech cannot come through. It is important we ensure that the Bill in its final form is the best it can be and is fair and proportionate.

Question put and agreed to.

Clause 97 accordingly ordered to stand part of the Bill.

Clause 98

Enforcement of requirements

Amendments made: 35, in clause 98, page 58, line 23, leave out “undertaking” and insert “person”.

The requirements to which clause 98 relates can apply to persons other than undertakings. This amendment clarifies that a costs order under this clause can be made against any person, whether or not they are an undertaking, who fails to comply with a requirement.

Amendment 36, in clause 98, page 58, line 25, leave out paragraph (b) and insert—

“(b) where the person responsible for the failure is an undertaking, any officer of a body corporate that is or is comprised in that undertaking.”—(Paul Scully.)

This amendment clarifies the circumstances in which a costs order under this clause can be made against an officer of a body corporate.

Clause 98, as amended, ordered to stand part of the Bill.

Clauses 99 to 101 ordered to stand part of the Bill.

Clause 102

Extension etc of periods

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Alex Davies-Jones]

Clause 102 is incredibly important if the CMA and, subsequently, the DMU are to be able to be an accountable body that consumers and businesses—and parliamentarians—have confidence in. This clause allows the CMA to extend various deadlines in part 1 of the Bill by up to three months where there are “special reasons” to do so. Those may include, for example, illness in the CMA investigation team. These are important provisions to ensure that the CMA is able to extend relevant investigations by up to three months.

We think it reasonable that the clause does not define the exact parameters of “special reasons”. We support a common-sense approach and therefore anticipate that those would include matters such as the illness or incapacity of members of an investigation team that has seriously impeded their work, and an unexpected event such as a merger of competitors. We further support the need for the CMA to publish a notice to trigger an extension under this clause. However, the Minister knows how important it is that these notices are made public, so I hope that he can clarify that that will be the case here.

It is right and proper that subsection (7) outlines the interaction between SMS investigations and active SMS designations. If the CMA is carrying out a further SMS investigation for a designated undertaking and needs to extend it, that investigation may not conclude until the original designation has expired, meaning the undertaking would fall outside the regime before the need for continued SMS designation is confirmed. The clause enables the SMS designation to be extended to match the length of the SMS investigation period and is a sensible approach that Labour supports.

We also welcome the provisions around clause 103, allowing the CMA to extend an SMS designation by up to three months. That speaks to the nature of an agile and flexible regime, which we ultimately all want and support. Government amendment 37 prevents decisions about whether and how to exercise the power in clause 17 being delegated to a member of the CMA’s board or a member of staff of the CMA. We consider that to be an appropriate response.

Clause 104 is crucial all round because it explains how decisions will be made under the digital markets regime and has practical applications in establishing exactly how the functions within the CMA will be able to operate when implementing the legislation. Notably, subsections (1) to (5) provide the CMA with the ability to create groups. The CMA must state the function for which such a group is established and the group will be required to fulfil that function. Can the Minister confirm where that information will be reported? Again, it will be helpful for us all to understand how that will work in practice.

We also value the clarifications outlined in the clause, which establish that to be eligible to carry out the functions under subsection (2A), a committee must include at least two CMA board members, which can include the chair. Furthermore, a majority of the committee’s membership must be non-staff or CMA panel members. We welcome the clarification that any changes of this nature would need to be laid before and approved by each House of Parliament before being enacted. Can the Minister confirm whether the Secretary of State will be required to be consulted under the provisions? That aside, we support the clause and believe it should stand part of the Bill.

We support clause 105 and welcome the clarification that a notice may be given to the particular individuals specified in subsections (3) to (5). This is an important clause that will allow the CMA to fulfil its obligations as the regulator. We also welcome clause 106, which outlines the requirements that will ensure the CMA has to consult specific named regulators, and welcome the clarity that those five regulators are the Bank of England, the Financial Conduct Authority, the Information Commissioner, the Prudential Regulation Authority and Ofcom. It is positive that they are outlined in the Bill. They are all established and relevant regulators that are subject to their own vast regulatory regimes, so Labour supports their involvement in assisting the CMA to regulate the regime proposed in the Bill. Again, we feel that subsection (6) is fair and reasonable. We particularly approve the fact that it is proportionate and we are happy to support it.

If clause 106 forces the CMA to consult the specific named regulators, it is only right that clause 107 sets out the formal mechanisms to be exercised under their regulatory digital markets function and that they are in the Bill too. We welcome the clarification on the timeframes, particularly around the fact that the CMA must respond to each relevant regulator within 90 days, setting out what action, if any, it has taken or will take and the reasons for that decision. It is important that those time periods are established in the Bill so as not to delay the CMA in taking action on a firm that is not operating in alignment with the regime.

For transparency purposes, we are also pleased to see the summaries of the CMA’s responses and that they must be published online. I am sure the Minister is pleased that that is included. We will come on to that matter as we address further clauses, particularly clause 112.

We welcome clause 108, which we see as a procedural clause that additionally extends current provisions to enable information sharing between the CMA and the Information Commissioner’s Office where that facilitates the exercising of one of their respective statutory functions, and we support the clause’s intentions. Information sharing must be encouraged between the agencies to allow for a regulatory regime to work in practice and be robust. It is right that the clause makes amendments to the Communications Act 2003 and the Enterprise Act 2002, which we see as vital for the regime to work in practice. We therefore support the clauses and believe they should stand part of the Bill as fully drafted.

Labour fully supports the provisions in the Bill to ensure the CMA has sufficient power to collect a levy from designated undertakings to recoup the costs associated with delivering the digital markets regime. We see that as a positive and effective way of encouraging compliance, but also an important way of generating funds to ensure the sustainability of the digital markets regime more widely. The polluter pays model is commonplace in a wide range of policy areas and it can be immensely effective. We therefore welcome the provisions in full. I do not need to address each subsection individually because the overall message is the same. SMS firms should absolutely pay a levy. For far too long they have got away with having considerable power and profit, and the time for them to have a statutory obligation to support measures such as those outlined in the Bill is well overdue.

We support the provisions in Government amendment 38, which we hope will go some way to assist should penalties have to be invoked by the CMA. The amendment permits notices to be served on people outside the UK if the CMA is considering imposing a penalty. Again, that is appropriate, and the Minister can be assured of our support. We feel that the provisions in clause 110 are fair and in alignment with similar regimes already in place, so we are happy to support it too. This is all becoming very collegiate.

Clause 111 protects the CMA against legal action for defamation as a result of its exercise of functions under the digital markets provisions in this part, and we support it entirely.

We welcome the provisions outlined in clause 112, which confirms the CMA’s duties to consult and publish statements online. As the Minister will be aware, any measures around transparency must factor in an element of consultation and transparency, so we welcome the clarifications that clause 112 affords. Colleagues will note that subsection (1) makes provision for when the CMA consults and publishes a statement. We think that it makes perfect sense. We are happy to support it, and wish to see that transparency echoed throughout the Bill.

Clause 113 is again welcome because it sets out the CMA’s obligation to publish guidance. It is important to have confirmation that the CMA will be able to revise or replace any guidance that it publishes, but must publish the revised or replacement guidance. While we recognise that that could include industry associations with a particular interest in the specific guidance in question, I would be grateful if the Minister would clarify whether others may be consulted in the instance of revised guidance being published? That aside, we support the intention behind clause 113 and believe that it should stand part of the Bill.

Clause 114 is particularly important. In the case of a large corporate group whereby a designated undertaking may be part of a wider body, it is important that that is defined within the Bill and interpreted when used throughout the Bill. Turning to Government amendment 39, we of course support the need to ensure that the definition of

“relevant service or digital content”

is consistent with the definition of “digital activity”, so we will support the amendment. We welcome clause 115 and do not disagree with any of the definitions outlined therein. We see them as fairly standard, as long as they are applied with common sense. We therefore fully support the clause.

Lastly, turning to new clause 4, we have already touched on this to some extent in previous debates. The aim of the new clause is clear: we want there to be more transparency over the function of the CMA’s regime. Particularly when it is in its infancy, the information will be extremely useful to businesses, civil society, academics and parliamentarians alike. It will also be important for other jurisdictions to have a meaningful way of understanding the regime, particularly if we want it to be world leading, when considering options for their own legislation.

I hear the Minister’s comments regarding replication of work and the need for the independence of the CMA, but it is right that Parliament has that scrutiny and overview. I would welcome his commitment to ensure that Parliament will have a mechanism by which to review the activity of the CMA via a regular report. If he could commit to me that that will be the case, we will not need to press the new clause to a vote.

[Paul Scully]

I thank the hon. Lady for her approach. Let me answer some of her questions. Notices will be made public, and information about the groups will be reported online. Under clause 104, the Secretary of State would not need to be consulted because, again, it is an independent regulator, so mandatory consultation with the Secretary of State is not necessarily appropriate. On clause 113 and who will be consulted on the revised guidance beyond industry, it will be relevant stakeholders, such as SMS firms themselves, other regulators such as Ofcom and the ICO, businesses likely to be affected by the decisions, and consumer groups. A wide-ranging consultation will be required to ensure that the regime works properly.

I think I can give the hon. Lady the assurance that she is looking for on new clause 4. It is really important that Parliament continues to be able to scrutinise the regime effectively. I do not think that it is appropriate to take the approach that the Secretary of State needs to do another form. It is less to do with duplication; it is more to do with the fact that if the Secretary of State is putting forward his or her own report, that might undermine the report that the CMA is doing. The CMA has an annual report, which it will publish at the end of each financial year. It will include a survey of developments relating to its functions, assessments of its performance against its objectives and enforcement activity, and a summary of key decisions and financial expenditure. That should be enough for Parliament to scrutinise that report and the work of the CMA and the DMU. I am happy to give that assurance that Parliament has that scrutiny and oversight.

--- Later in debate ---

[Paul Scully]

I hope my voice will stand up to this level of scrutiny. Part 2 of the Bill focuses on the UK’s existing competition regime. First, I will explain that while the CMA is the principal regulator responsible for the public enforcement of the prohibitions in part 1 of the Competition Act 1998, its functions are also exercisable concurrently by sector regulators, such as Ofgem and Ofcom, among others. The measures in clauses 116 to 120 and clause 135, and when we reach them clauses 136 and 137 and schedules 8, 9 and 11, affect the CMA and sector regulators. For the sake of brevity, I will just refer to the CMA.

Clause 116 extends the territorial reach of the chapter 1 prohibition in the Competition Act 1998. The prohibition relates to anti-competitive agreements, decisions by associations of undertakings or concerted practices, hereafter simply referred to as agreements. The chapter 1 prohibition captures agreements that have as their object or effect the prevention, restriction or distortion of competition within the UK, and which may affect trade within the UK. Currently, it is limited to agreements that are, or are intended to be, implemented within the UK. The extension in reach of the chapter 1 prohibition means that agreements implemented, or intended to be implemented, outside the UK are also captured, but only where they would be likely to have immediate, substantial and foreseeable effects on trade within the UK.

Clause 117 introduces a new duty to preserve documents on persons who know or suspect that an investigation is being, or is likely to be, carried out under the Competition Act 1998. The duty will apply from when a person knows or suspects that an investigation by the CMA is under way or likely to occur. Where a person has a reasonable excuse for not complying with the duty, no liability for a penalty will arise. A reasonable excuse could include something out of an individual’s control, such as an IT failure.

Clause 118 strengthens the CMA’s powers to require the production of electronic information stored remotely—for example, in the cloud—when executing warrants to enter business or domestic premises. Under this reform, the CMA will be able to require the production of information for the purposes of its investigation without needing to demonstrate when making the request the specific relevance of the particular dataset to be produced. It will then be able to take copies or extracts only of information that is relevant to the investigation. The CMA will also be able to operate equipment to produce remotely stored information itself. Clause 134 makes similar amendments to the CMA’s power to require the production of electronic information when executing a warrant during an investigation into a suspected criminal cartel offence under part 6 of the Enterprise Act 2002.

Clause 119 amends part 1 of schedule 1 to the Criminal Justice and Police Act 2001, to include the power of the CMA to undertake an inspection of domestic premises, under section 28A of the Competition Act 1998. That means that when the CMA undertakes an inspection of domestic premises, it will have access to the same seize and sift powers as are already available to it when it inspects business premises under a warrant.

Clause 135 also concerns the CMA’s investigative powers. First, it expands the CMA’s power to require persons to answer questions for the purposes of a Competition Act 1998 investigation, so that it applies regardless of whether the person has a connection to a business under investigation. The CMA will be able to require individuals to answer questions only where they have information that is relevant to an investigation. Secondly, the clause amends the CMA’s powers to require individuals to answer questions across its Enterprise Act 2002 markets and mergers and Competition Act 1998 functions, so that it can specify that interviews for those purposes should take place remotely.

Clause 120 amends the standard of review applied by the Competition Appeal Tribunal in appeals against interim measure decisions from full merits to judicial review. Interim measures are temporary directions that the CMA has the power to give during an investigation under the Competition Act 1998. To be an effective tool in fast-moving modern markets, it is essential that interim measures can be implemented efficiently. Judicial review will provide a flexible and proportionate standard of review, ensuring the CMA is held accountable appropriately for its decisions.

Clause 121 introduces schedule 3 to the Bill, which amends the Competition Act 1998 to empower the Competition Appeal Tribunal to grant declaratory relief in private actions claims under the Competition Act 1998. Declaratory relief is a remedy that involves a court making a legally binding statement on the application of the law to a set of facts.

Clause 122 gives the Competition Appeal Tribunal, the High Court of England and Wales, the Court of Session and sheriff courts in Scotland and the High Court in Northern Ireland the ability to award exemplary damages in private competition claims. This will help deter and punish particularly egregious conduct and ensure that those impacted by the most reckless breaches of competition law can be awarded additional damages.

Clause 123 amends section 71 of the Serious Organised Crime and Police Act 2005 to designate the CMA as a specified prosecutor. This designation will allow the CMA to enter into formal agreements with an offender who has assisted or offered to assist its criminal cartel offence investigations. For example, if it considered it appropriate, the CMA could agree not to use specified information against them in any criminal proceedings. Agreements to provide assistance can also be taken into account by the courts when sentencing an offender, or their sentence could be referred back to the court for review. These measures do not enable the CMA to offer immunity from prosecution.

[Alex Davies-Jones]

Part 2 focuses on the competition elements of the Bill. I am pleased to see clause 116, which expands the territorial reach of parts of the Competition Act 1998. Labour recognises the importance of ensuring that legislation already on the statute book is aligned with the intentions behind the Bill, because we understand that regulation of our digital markets will draw on existing competition law. We therefore welcome the clause, which will expand chapter 1 of the 1998 Act. The chapter 1 of the 1998 Act considers only undertakings and decisions that might affect trade within the UK, and which have as their object or effect the prevention, restriction or distortion of competition. At the moment, those behaviours are prohibited only where they are, or are intended to be, implemented in the United Kingdom, but we need to consider the impact of agreements, decisions and practices that might affect trade within the United Kingdom. Subsection (2) of the clause will replace the existing section of the 1998 Act to ensure that a consideration of the effect on trade will be considered. That is particularly important in the context of digital markets because they operate on a global level.

The clause goes some way to address the lack of futureproofing in the Bill more widely. The Minister knows my thoughts on that, and knows the Bill should go further in that regard. That aside, we welcome subsection (3), which will repeal the existing equivalent in the 1998 Act. The introduction of the qualified test will ensure that UK trade and businesses and consumers based in the United Kingdom, are protected from any detrimental effects of anti-competitive conduct, regardless of where that conduct takes place. That is welcome, and we consider the measure to strike a positive balance.

We welcome the clarity and the changes to the 1998 Act that will bring important provisions of the Bill into line with existing legislation. We have therefore not sought to amend the Bill, and we support those measures being part of it.

Clause 117 is important in that, once again, it will amend part 1 of the 1998 Act. We know that big companies can often be smart in concealing, or even overloading, information relevant to regulatory regimes, and we have seen that happen time and again when it comes to online safety. Labour does not want the same detrimental behaviours to be allowed to continue within this regime. We therefore welcome the provisions in the clause, particularly proposed new section 25B, which sets it out that the duty applies where

“a person knows or suspects that an investigation by the CMA… is… or is likely to be carried out.”

The inclusion of a person “suspecting” is important, and, in theory, it will push companies to abide by their duties. Recently, we have seen those at the heart of Government in the news owing to their failure to produce vital documents in investigations of the covid-19 pandemic, so it is very welcome indeed that the Government appear to have learned their lessons and worked to ensure that designated companies will not be able to circumvent the regime, as a former Prime Minister has attempted to do.

Let me get back to the Bill and the matters at hand. In practice, those duties will arise where a business receives a case initiation letter from the CMA, so it will be perfectly aware that its conduct is under investigation. Such duties might further arise when, for example, an individual working for a business is aware that a customer has reported their suspicions of price fixing, and that the customer has been interviewed by the CMA, or members of an anti-competitive agreement have been “tipped off” that a member of the agreement has blown the whistle to the CMA. Those are important clarifications, which we welcome. We therefore support their inclusion in the Bill.

We support clause 118, which specifically amends sections 28 and 28A of the 1998 Act, and we support the clarity with respect to the execution of such warrants—for example, a named CMA officer has the power to require the production of information that is held electronically and is accessible from the premises. It is a positive step to have these amendments to the 1998 Act, which will expand the powers of the court or the CAT to grant a warrant to the CMA based on the fact that there are reasonable grounds to suspect that there are documents relating to an investigation that are accessible from the premises, when the other criteria set out in the section are met. Those powers will apply to any information stored electronically, and we hope and expect that the provisions of the clause will rarely be used. Despite that, we fully support their inclusion. It is right and appropriate that businesses and other jurisdictions looking closely at the Bill have a sense of the process that will result in the event of the CMA being forced to act on a warrant. The clause and others in this part of the Bill are an important part of ensuring compliance, and we therefore welcome the provisions in full.

Clause 119 is, once again, an important clause that will amend existing legislation. The powers of seizure conferred by section 28 of the 1998 Act are already specified for the purposes of section 50 of the Criminal Justice and Police Act 2001, so the amendment will align the powers available to the CMA whether it is inspecting business or domestic premises under a warrant, and it will make consequential changes in the light of those made by clause 118. These practical clauses will make important changes to legislation to bring other provisions in line with the Bill.

--- Later in debate ---

[Alex Davies-Jones]

Labour welcomes the provisions in the clause which establish that transactions within jurisdiction can be reviewed by the CMA, although no obligations or requirements are imposed on businesses by being in scope. Schedule 4 introduces the new acquirer-focused threshold, as well as introducing a small merger safe harbour that is primarily targeted at reducing the regulatory burden faced by small and micro businesses—the burden that we heard about in our evidence sessions. We support the clause standing part.

Schedule 4 makes several changes to the thresholds, which determine what transactions are within the jurisdiction of UK merger control. As I have noted already, the UK’s merger control regime is voluntary, meaning that there is never on obligation to notify a transaction to the CMA. However, when the existing jurisdictional thresholds in the Enterprise Act 2002 are met, the CMA may review a transaction even if it is not notified. The CMA has such jurisdiction if: the target’s UK turnover in its most recently completed financial year exceeded £70 million; or the parties have a combined share of supply of 25% or more in relation to any product or service in the UK or a substantial part of the UK. This schedule will clarify some significant changes to those thresholds, which Labour welcomes.

Schedule 4 introduces a new threshold that will grant the CMA jurisdiction to review transactions where one party has a UK share supply of at least 33% and UK turnover exceeding £350 million. We see the new threshold as largely capturing killer acquisitions, in which a larger firm acquires a smaller and possibly innovative firm, potentially with a view to eliminating the threat of future competition. The CMA’s existing 25% share-of-supply threshold has already shown itself to be flexible in capturing many such transactions, but it is estimated that the new threshold will lead to an increase of between two and five phase 1 cases per year. That is to be applauded.

The new £350 million threshold is aimed at expanding the CMA’s jurisdiction, but other sections of schedule 4 seek to reduce the burden on merging companies by removing certain transactions from the CMA’s jurisdiction. By increasing the target turnover threshold from £70 million to £100 million, it is estimated that the changes to the turnover test will lead to a reduction of two or three phase 1 cases per year. In addition, the Government have proposed an interesting solution with the introduction of a safe harbour threshold to the existing share-of-supply test where, even if the 25% share of supply threshold is met, the CMA would not have jurisdiction if no party to the transaction had more than £10 million of UK turnover.

Labour recognises that it would be inappropriate to burden the CMA unnecessarily, but we are keen to have an understanding of how schedule 4 will operate in practice. Has the Minister considered introducing an annual reporting mechanism that would allow for more transparency on whether the approach is working? That aside, we certainly and carefully support the intentions of this schedule.

We welcome the provisions of clause 125 and are pleased to see that particular attention has been given to merger situations. Labour recognises that designated companies often buy other companies or merge with them, so it is only right that the CMA is empowered with the appropriate tools to investigate in such circumstances, where necessary. As we know, at present the UK’s merger control regime is voluntary, meaning that there is never an obligation to notify the CMA of a transaction. However, as I have said, when the thresholds in the Enterprise Act are met, the CMA may review a transaction despite not having being notified of it.

Clause 125 is relevant because it amends part 3 of the Enterprise Act to enable the CMA to fast-track a merger to an in-depth phase 2 investigation if it receives a request from the parties involved to do so. That is an important step in streamlining merger review procedures and timelines by removing certain statutory duties on the CMA that currently limit the benefits and use of the existing, non-statutory fast-track procedures. This fast-track process gives the CMA more flexibility to deliver quicker and more efficient merger investigations without prejudicing the quality of the review. We welcome the clarifications in clause 125 and support its standing part of the Bill.

We welcome schedule 5, which amends the Enterprise Act to enable the CMA to fast-track these mergers. In particular, we support the clarification that the CMA may launch a phase 2 investigation only if it believes that a completed or anticipated merger has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom. We also support the clarification of the circumstances in which the CMA can accept a fast-track reference request.

When making these decisions, the CMA must have regard to whether the merger could raise public interest issues or whether a special public interest intervention has been launched under provisions in the Enterprise Act, to ensure that no case is unduly fast-tracked. Schedule 5 is important and will be central to ensuring the CMA can work at pace in the case of any merger requiring investigation. We welcome and support it.

Labour fully supports the intentions of clause 126. The timetable for phase 2 investigations is important for the timely resolution of merger investigations, and we believe the approach outlined to be sensible. As it stands, section 39 of the Enterprise Act, which outlines time limits, requires the CMA to publish its report on a merger reference within 24 weeks of the date of the reference. Clause 126(2) amends that provision to give the CMA the power to extend the period if necessary. We welcome the clarity that the length of an extension has to be agreed between the CMA and parties involved in the potential merger.

We also acknowledge that, while the Bill does not specify circumstances in which the CMA and the parties involved in a merger can agree an extension, an extension is most likely to be helpful in support of early consideration of remedies or in multi-jurisdictional mergers that are being reviewed in other countries in parallel to the UK. We welcome that distinction. Labour has consistently said that for the regime to work in practice it must be flexible. We see clause 126 as an important step towards that aim and are therefore happy to support its inclusion in the Bill.

As I said with respect to clause 126, Labour supports flexibility to extend time limits, and we feel that is particularly important where there is a public interest to do so. That is why we support clause 127. The clause amends chapter 2 of part 3 of the Enterprise Act, which sets out that the Secretary of State may intervene in the consideration of a merger where the Secretary of State believes it raises a public interest consideration that needs to be taken into account. We feel that this is an appropriate and proportionate way of ensuring accountability for public interest interventions, and that the Secretary of State should be empowered to do so. We therefore support the intentions of clause 127 and, again, believe that it should stand part of the Bill.

Finally, clause 128 replaces the obligation on the CMA in section 96(5) of the Enterprise Act to publish the latest form of the merger notice

“in the London, Edinburgh and Belfast Gazettes”

with an obligation to publish it online. We welcome that transparency. The Minister knows my views on transparency with respect to the Bill more widely. I wish that provision about online publication was replicated elsewhere in the Bill, so that information is available to anyone who wishes to see it. We welcome clause 128 and hope to see it replicated.

[Paul Scully]

Indeed, a lot of the publication is done online, as we have discussed, even if that is not stated specifically in the Bill. I hope the hon. Lady takes heart in that.

The hon. Lady asked specifically about schedule 4 and safe harbours. Clearly, we would expect the CMA and the Government to review the merger review thresholds regularly, and there are powers to amend the thresholds if and when it is considered appropriate to reflect economic developments or, indeed, because of the experience of enforcing the thresholds, as she rightly said. The CMA board is accountable to Parliament, as we have described. We expect that, through its annual plan and performance reports, Parliament will be able to scrutinise the decisions that have been taken.

Question put and agreed to.

Clause 124 accordingly ordered to stand part of the Bill.

Schedule 4 agreed to.

Clause 125 ordered to stand part of the Bill.

Schedule 5 agreed to.

Clauses 126 to 128 ordered to stand part of the Bill.

Clause 129

Market studies: removal of time-limit on pre-reference consultation

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Paul Scully]

The UK’s markets regime is the CMA’s most powerful tool for promoting competition in UK markets. Clauses 129 to 133 reform the markets regime, ensuring that it is effective, focused and proportionate.

Clause 129 reforms the market study process. Currently, the CMA or sector regulator must start a consultation on making a market investigation reference, or decide not to make a reference, within six months of the start of a market study. That timeframe is unduly restrictive. The clause removes the six-month time limit, giving flexibility for the consultation to start at the most appropriate point. It allows extra time to gather evidence, ensuring that information that comes to light later on can be considered.

Clause 130 makes amendments so that references can be targeted appropriately, to better define the scope of the investigation required. It further narrows the questions that the CMA group must consider, reflecting the scope set out in the reference. This will allow the CMA to ensure that its work is targeted effectively, which will benefit businesses and investors.

Clause 131 introduces schedule 6, which expands the use of voluntary undertakings that remedy competition harms. The clause allows the CMA to accept such undertakings at any stage in the market inquiries process. This includes the acceptance of partial undertakings that address some features causing concerns in a market, but not all. The flexibility to take issues “off the table” by accepting such undertakings, alongside the amendments made by clause 132 regarding narrowing the scope of investigations, will help to provide greater flexibility in the regime. We recognise that voluntary undertakings will not be appropriate in every case. Where they are appropriate, they will drive efficiencies and enable faster results. They will also help to tackle competition problems and any resulting consumer harm as quickly as possible.

Clause 132 introduces schedule 7, which gives new powers to the CMA to conduct trials of certain types of remedies at the conclusion of a market investigation where an adverse effect on competition has been identified. That will help to ensure that any final remedy is suitable and effective. For now, the power to trial remedies will be limited to solutions that relate to the provision or publication of information to consumers. That is the area where trials are most likely to be useful and enables a proportionate approach to introducing this new power. The Secretary of State will be able to expand the scope of remedies to trial in future, subject to the draft affirmative procedure.

Clause 133 gives the CMA new powers to amend ineffective remedies where less than 10 years has passed since the original market investigation. Where the CMA decides that remedies have been ineffective and should be varied, it will be required to consult with affected businesses before reaching a final decision on whether to vary a remedy, and to conclude the variation within six months. In cases where the Secretary of State has accepted or imposed remedies, the CMA will provide advice to the Secretary of State. This new power will be constrained by a mandatory two-year cooling-off period, beginning at the end of a remedy review.

[Alex Davies-Jones]

I will speak briefly to clause 129 before addressing our thoughts on the rest of the group. Labour supports the intentions of the measures in the group, and we have not sought to amend them at this stage.

The removal of the time restriction outlined in clause 129 gives the CMA flexibility and more time to gather evidence to determine when the consultation process should commence. That is something I think we can all get behind and fully support.

Schedule 6 outlines the process by which the CMA will be able to accept voluntary commitments during all stages of a market study and a market investigation. It allows the CMA to accept partial undertakings, to narrow the issues that require further investigation. We see these features as central to a flexible regime that firms want to easily engage with. That must be at the heart of any fully functioning and appropriate regime.

Clause 132 and schedule 7, which are incredibly welcome, provide that the CMA may be required by the Secretary of State to conduct trials of remedies before setting a final remedy package. We recognise that since this is a new regime, the regulator may benefit from such trial remedies, and it is important that the CMA has the legislative teeth and support to do so.

We therefore support the measures in the group. We have not sought to amend them, and we believe that they should stand part of the Bill.

Question put and agreed to.

Clause 129 accordingly ordered to stand part of the Bill.

Clauses 130 and 131 ordered to stand part of the Bill.

Schedule 6 agreed to.

Clause 132 ordered to stand part of the Bill.

Schedule 7 agreed to.

Clauses 133 to 135 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mike Wood.)

Digital Markets, Competition and Consumers Bill (Seventh sitting)

Debate between Alex Davies-Jones and Paul Scully

Committee stage
Thursday 22nd June 2023 Public Bill Committees

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

To create self-sustaining and dynamic competition in UK digital markets, we must address the sources of SMS—strategic market status— firms’ substantial and entrenched power in digital markets. Clause 44 gives the digital markets unit the power to address competition problems in digital markets through pro-competition interventions, which the DMU can make where factors relating to a digital activity undertaken by a SMS firm prevent, restrict or distort competition in that digital activity. That is known as an adverse effect on competition. The concept is already used for market investigations under the Competition and Markets Authority’s existing markets regime. Government amendment 12 is a technical amendment relating to PCI investigations.

Turning to clauses 45 to 54, PCIs are fundamental to the new digital markets regime. They will address the root causes of market power that can lead to one or two large firms dominating, to the detriment of consumers and businesses in the UK. Clause 45 empowers the DMU to open a PCI investigation into suspected competition problems related to designated digital activities.

Clause 46 describes the process relating to PCI investigations. Under clause 47, the DMU will be required to carry out a public consultation on a proposed PCI decision before concluding its investigation and giving notice of final PCI decisions. Clause 48 provides the procedure for the DMU to give notice of its decision when concluding a PCI investigation. When the DMU decides to make a PCI, it must do so within four months of the PCI decision.

Pro-competition orders, set out in clause 49, are the means by which the DMU can require a firm to take, or refrain from taking, specific actions. That includes orders on a trial basis. They are vital in converting the DMU’s PCI decision, from clause 48, into an operationable remedy.

To effectively address the sources of competition problems in digital markets, PCIs should be iterative and targeted, so the DMU will be able to replace pro-competition orders. That is provided for in clause 50, which will allow the DMU to initially apply lighter touch remedies and then assess their effectiveness before introducing stronger measures if necessary.

Clause 51 gives the DMU the power to revoke a pro-competition order where it deems it inappropriate to vary the order through replacement, or where the order has addressed the competition problem and is no longer required. That ensures that PCIs remain effective and proportionate and can respond to changes in the market.

Clause 52 provides that before making or revoking a pro-competition order, the DMU must carry out a public consultation. The DMU will be under both a general and specific duty to monitor and review pro-competition orders provided for in clause 53.

Finally, SMS firms should be able to offer commitments to the DMU to propose a solution to a competition problem. That supports a participative approach to regulation, which is set out in clause 54.

[Alex Davies-Jones (Pontypridd) (Lab)]

We will of course look properly at the issue of consumer protections later in the Bill, and my hon. Friend the Member for Feltham and Heston has a number of contributions to add on that topic.

Clause 44 is important in putting consumer rights at the heart of the Bill, as it enables the CMA to remedy competition problems by making direct interventions. In contrast to conduct requirements, PCIs are interventions by the CMA to remedy an adverse effect on competition by addressing the root causes of an undertaking’s entrenched market power. The CMA will need to take into account the benefits that UK users may get from the factors having an adverse effect on competition.

We note that there is no defined list of PCI remedies, but that they may include behavioural and structural remedies. Will the Minister update us on his assessment of the value of adding a list of potential remedies to the Bill? Some companies we have spoken to feel that that would be helpful to understand just how these interventions will work in practice. However, we believe that the PCI is an exceptionally useful tool and a big advantage over the EU Digital Markets Act, as it will be able to go further than the conduct requirements and address the root causes of entrenched market power.

As it stands, the Bill outlines that the CMA may make a PCI where it considers that a factor or combination of factors relating to a relevant digital activity is having an adverse effect on competition, also known as the AEC test. The AEC test is in line with the legal test in the existing market investigation regime; by contrast, the digital markets taskforce recommended an AECC test—an adverse effect on competition or consumers test—enabling the CMA to address consumer harm without always needing to show that competition has been undermined. Similar to a supplementary duty to have regard for the interests of citizens, that would give the DMU broader scope to intervene beyond its traditional focus on competition. Can the Minister outline exactly why the AEC test was chosen over the AECC test?

Labour supports the intention behind Government amendment 12, which confirms that the CMA will be able to begin a PCI investigation into a designated firm, even when it has previously made a decision not to do so. We see that as integral to the CMA’s powers, and we will support the amendment.

We see clause 45 as fleshing out the legal powers that the CMA will need to draw on in the event of a formal investigation. We welcome clarification that the CMA will form its initial view of the competition problem on the basis of available evidence, such as that arising from complaints submitted by third parties, from the CMA’s market studies or from referrals of information from other regulators. Labour has heard from some tech companies that although pro-competition interventions are viewed as a major advantage of the UK’s regime, companies are concerned about the broader effects they could have on markets, and urge for thorough consultation and for a graduated approach to the potential severity of the intervention. I am therefore keen to hear the Minister’s thoughts about this issue, as it is important for all concerned that we get some clarity.

Clause 46 is an important clause for designated undertakings that may find themselves subject to a PCI investigation. We welcome provisions that ensure the CMA will be under a duty to publish a summary of the PCI notice as soon as it is able to do so. The Minister will not be surprised that we are keen to understand more about that and what it will look like in practice. Where exactly will the summary be published? Will it be made available to others who wish to view it? We welcome subsection (2), because it is important that the CMA has the power to update a PCI investigation notice when it needs to do so. That is outlined in subsection (3), which is an important point to note.

Lastly, clause 46(4) places a duty on the CMA to publish a notice of investigation as soon as practicable. Again, can the Minister confirm whether that will be public? There is a theme in my questions to the Minister about the public transparency of such documents. Naturally, we understand that some information will obviously need to be redacted, but there is plenty of value in improving transparency.

We welcome the principles in clause 47, which we have long called for, because the regime will be effective only if consultation is truly at its heart. However, we have concerns about how the conduct requirements and PCIs will run alongside one another. In the Bill’s current drafting, it is unclear by what metrics the CMA will determine whether a CR or PCI is appropriate, and it will have discretion to choose. We could very well find ourselves in a position whereby the CMA will generally implement a CR first and see whether it is having an impact, before beginning a PCI investigation. If the CMA chooses to focus on CRs initially, it could allow SMS firms to maintain much of their entrenched market power before taking action. To improve the effectiveness of the regime, one potential option that has been raised with us is for the CMA to be required to consider whether a PCI investigation and PCI remedy may be more effective early on, or complementary to a CR, when constructing a CR. I would be grateful if the Minister could give us some thoughts on that and explain whether he will be able to instruct the CMA on which one would be best to carry out first.

Other issues that have been raised with us relate to clarity on a number of points, and I hope the Minister can provide that clarity. First, can PCIs be introduced only after conduct requirements have been imposed, rather than the alternative that is alongside them? Secondly, what is the exact purpose of the revocation process? Does it mean that PCIs cannot be adapted while they are in effect, as indicated in the Government’s consultation process, and that the CMA would have to restart the process—meaning there would be an investigation, a consultation, a decision and then an order—before introducing a new PCI? It feels like that could cause delay and uncertainty in the regime, which could ultimately impact its effectiveness. I look forward to hearing the Minister’s thoughts on those specific points.

Labour sees clause 48 as fairly standard in outlining the procedure for concluding a PCI investigation. It is important that the process is outlined on the face of the Bill, and we welcome confirmation of the length and period of investigation, and of the period in which the CMA has to consult and issue a pro-competition order where required. Those are important timeframes, which Labour supports.

We note clause 48(7), which states:

“As soon as reasonably practicable after giving a notice under subsection (1) or (6), the CMA must publish a copy of the notice.”

Again, that is a key point that I want to prod the Minister on. What is his assessment of

“as soon as reasonably practicable”?

What will that be and who will the CMA be publishing the statement for?

We welcome clause 49, which outlines the way in which pro-competition orders will work in practice. In relation to clause 50, I would be grateful if the Minister could confirm whether the replacement of a PCI as outlined in the clause will require revocation, as set out in clause 51, and a fresh process involving an investigation, consultation, decision and order? Alternatively, will the process be to revise an existing PCI and will that be sped up? We do not want any delay in that happening. That is the point I am trying to make, so will the Minister elaborate on what evidence is needed to justify a revocation of that kind?

I hope the Minister will respond to my points. We support the broad intentions of the remaining clauses in this group and are therefore happy to support their full inclusion in the Bill.

[Paul Scully]

rose—

--- Later in debate ---

[Paul Scully]

These clauses comprise chapter 5, “Mergers”, and schedule 2 provides further detail needed for chapter 5 to function smoothly.

Clause 55 establishes a requirement for SMS firms to report possible mergers involving them that have the potential to harm competition in the UK to the CMA before they can be completed. Unlike most merger regimes, at the moment there is no obligation in the UK to notify mergers to the CMA, but firms may choose to voluntarily notify the CMA of a merger in order to receive a binding decision from the CMA on it. In digital markets, this is a very different thing, because of the speed with which it can happen and the entrenchment of power, which we have discussed at length. That is why it is important that the CMA has the opportunity to review potentially harmful mergers involving SMS firms before it is too late. This light-touch reporting requirement is designed to focus on only those possible SMS firm mergers with the potential to give rise to competition concerns.

The mergers will need to be reported only if three conditions are met, such as when the SMS firms will obtain qualifying status through holding shares or voting rights in a target firm that is a UK-connected body corporate. I will set out further detail on the former when I explain clause 56. The latter means any body corporate that carries on activities in the UK or supplies goods or services to the UK, or which has a subsidiary that does so. The consideration provided by the SMS firm for the holding of shares or voting rights must also be at least £25 million. Similar conditions will also apply for the reporting of possible mergers involving an SMS firm participating in a joint venture. When an SMS firm is part of a larger corporate group, the requirement to report will instead apply to all the bodies corporate that make up the group. In those situations, the question will generally be whether the group as a whole will meet the conditions I have set out. When I say “an SMS firm” in debates on this chapter in part 1 of the Bill, it means an SMS firm or any larger corporate group it is part of.

The reporting process should take a maximum of 10 working days. Once a report has been submitted, the CMA will have up to five working days to determine whether the report is sufficient and must therefore be accepted. Following acceptance, the CMA will have a further five working days to review the information in the report before the possible merger can be completed. If the CMA identifies a reported merger as potentially problematic, it can use its powers under the general merger regime to investigate the merger as it would any other type of merger.

Clause 56 defines qualifying status. Under the merger regime, control over a target firm or joint venture vehicle must be acquired or increased for a merger to take place. That is for the CMA to determine on a case-by-case basis. One of the ways control can be exercised is through a shareholding or through voting rights. In order to capture acquisitions of control over target firms based on shares or voting rights, clause 56 provides that SMS firms will acquire qualifying status in a target firm when the percentage of the shares or voting rights they hold in the firm crosses any of the thresholds in subsection (1)—that is, when the percentage moves from less than 15% to 15% or more; from 25% or less to more than 25%; or from 50% or less to more than 50%. These thresholds have been chosen specifically to capture circumstances in which different levels of control recognised under the merger regime are likely to be acquired by an SMS firm.

Clause 57 sets out what is meant by the “value of consideration”, which is necessary to determine whether a possible merger meets the £25 million threshold for reporting set out in clause 55. Clause 58 places several requirements on the CMA with regard to the notice it is required to make, setting out the parameters of the report that SMS firms will be required to provide to the CMA about a possible merger. The clause requires the CMA—to pre-empt a possible question—to publish online a notice setting out what information must be included in a report and what form a report must take. We decided, in subsection (2), to limit what the CMA may require in the report to only that information considered necessary to decide whether to initiate a merger investigation or make a hold separate order under the general merger regime while an investigation is ongoing.

Clause 59 sets out further detail of when and how reporting requirements will apply. Schedule 2 provides further detail as to when interests like shareholdings and rights, such as voting rights, are treated as held in a target firm or joint venture vehicle for the purposes of the duty to report a possible merger in clause 55. Clause 60 places time limits and procedural requirements on the CMA once it has received a report. Clause 61 makes it clear that a reportable event must not take place until the reporting requirements set out in the chapter are met. Clause 62 clarifies when a possible merger is considered as taking place for the purposes of the reporting requirements. Clause 63 permits SMS firms to authorise third parties to act on their behalf—specifically, to give a report to the CMA about a possible merger and to receive the notice of acceptance or rejection from the CMA. In general, those third parties are likely to be legal representatives.

Clause 64 sets out the review process for non-penalty decisions made by the CMA in connection with the chapter. We will talk about appeals and the wider area later on, but if a person is aggrieved by the decision made by the CMA in connection with a reporting requirement that is not a penalty decision, they can apply to the Competition Appeal Tribunal for a review of that decision. The Competition Appeal Tribunal will apply the same principles as would be applied by a court on an application for judicial review. A full merits appeal process will apply to penalty decisions made by the CMA in connection with this chapter, as it does to penalty decisions under the wider merger regime.

Clause 65 provides the Secretary of State with powers to make regulations in relation to the duty to report. It also sets out which procedure-specific regulations are subject to that. It is appropriate that the Secretary of State has the power to make regulations on the duty to report. Operational experience may reveal that the criteria needs to be changed for the reporting process to continue to function effectively. Clause 66 places a duty on the CMA to monitor and enforce the merger reporting requirements. It goes no further than requiring the CMA to consider exercising its investigative and enforcement powers where it is aware of a basis for doing so.

[Alex Davies-Jones]

I am grateful to the Minister for outlining chapter 5 and we welcome the provisions. None of us want to see potential loopholes or designated undertakings being able to avoid their responsibilities thanks to a merger, so we see clause 55 and many of the clauses that follow in this chapter as being eminently important. More specifically, the clause sets out the circumstances in which designated undertakings or, where designated undertakings are part of a group, group members—see clause 114—will have a duty to report a possible merger involving a reportable event to the CMA before it takes place.

We welcome the clarification that there will be two categories. The first is concerned with designated undertakings or groups reaching certain percentage thresholds of the shares or voting rights held in certain bodies corporate with links to the United Kingdom. The second is concerned with designated undertakings or group members forming certain joint venture vehicles that are intended or expected to have links to the United Kingdom. We recognise the role of a minimum value requirement, which will also apply in relation to the consideration provided for the relevant shares or voting rights, or in relation to the formation of the joint venture vehicle.

We see the clause as important in clarifying where the line will be drawn for possible mergers in relation to this regime, and agree with the drafting, which sets the value of the merger as being at least £25 million. We feel that is a fair value, so we support the clause and have not sought to amend it at this stage. The same can be said for clauses 56 to 59. As we know, one of the strategic recommendations of the Digital Competition Expert Panel’s Furman report suggested that legislation adapting the merger control rules—so that the CMA could more effectively challenge mergers that could be detrimental to consumer welfare—was required. So we see clause 56, which sets out the circumstances in which a designated undertaking or group will have qualifying status in relation to a UK-connected body corporate or joint venture vehicle, as being vital to ensuring that mergers are covered by this legislation more widely.

--- Later in debate ---

[Paul Scully]

Clearly the DMU needs to have access to the correct information to ensure its work is evidence-based. Clause 67 allows the DMU to request information it needs to either exercise, or decide whether to exercise, any of its digital markets functions. That includes information in any form, such as data, internal documents and forecasts. The clause also includes new powers to investigate the outputs of algorithms by requiring SMS firms to generate information and to carry out tests and demonstrations of technical processes.

Clause 68 allows the DMU to require that an SMS firm names a senior manager to be responsible for ensuring that the firm complies with a specific information request. The DMU will be able to impose a penalty on the named senior manager where they have failed, without reasonable excuse, to prevent the SMS firm from failing to comply with the request for information. Personal liability will help to embed a culture of compliance within strategic market status firms.

[Alex Davies-Jones]

Clause 67 is an important starting point as it gives the CMA powers to require the provision of information from designated undertakings and any other person believed to hold material needed for it to operate the regime. That includes any information in any form, which might include data, correspondence, forecasts and estimates.

We welcome the clarity that the CMA will be able to specify the format in which the information must be provided. That is a very important point that we feel will be critical to ensuring timely responses from designated undertakings. We have seen the dangers of what can happen when we allow these big firms to overwhelm with the provision of data in complex formats and in incredible quantities in legal proceedings around online safety, and we do not want to see the same negative consequences here.

We welcome subsection (4), which, importantly, includes provisions that will enable the CMA to compel evidence collection by requiring a person to collect and retain information that it may not otherwise collect and retain. In addition, subsection (7) specifies that the CMA can require the recipient of an information notice to give the CMA information, either in physical or electronic form, which is located outside the UK. That is an important point worth touching on.

We know that these SMS firms have a global reach. We do not want to be in a position whereby the CMA cannot access information just because it is held overseas. This is a sensible and crucial clause to ensure the CMA has the appropriate teeth and power to act when it needs to.

We are also pleased to see clause 68 included in the Bill, which references a point that Labour have repeatedly called for in other legislation. Without these provisions and the ability to name an individual, big companies will typically not take their responsibilities seriously. We therefore welcome confirmation that a penalty may be imposed on a named senior manager of a designated undertaking that fails to comply with an information notice—a point we will address later, when we discuss clause 85.

Ultimately, we feel that the provisions are in line with other regulated sectors, principally financial services, where regulation imposes specific duties on directors and senior management of financial institutions, and those responsible individuals face repercussions if they do not comply.

I feel we have lots to learn here from looking to other regulated industries. For example, in financial services regulation, the Financial Conduct Authority uses a range of personal accountability regimes, including the senior managers and certification regime, which is an overarching framework for all staff in financial services industries. The regime aims to

“encourage a culture of staff at all levels taking personal responsibility for their actions and make sure firms and staff clearly understand and can demonstrate where responsibility lies”.

If only we could have that approach to other legislation on online safety. We therefore support clause 68—we see it as standard—and have not sought to amend it at this stage.

Question put and agreed to.

Clause 67 accordingly ordered to stand part of the Bill.

Clause 68 ordered to stand part of the Bill.

Clause 69

Power of access

[Paul Scully]

I beg to move amendment 13, in clause 69, page 39, line 18, after “access” insert “business”.

This amendment limits the power of the CMA to require access to premises so that it may be used only in relation to business premises.

--- Later in debate ---

[Paul Scully]

Clause 69 is a backstop power enabling the Digital Markets Unit to supervise firm-led tests and demonstrations, either at a firm’s premises or remotely. It will be available only in limited cases in which an SMS firm has not complied with an information notice or a duty to assist a skilled person. It provides an efficient way for the DMU to get the information that it needs without placing an undue burden on firms.

Clause 70 allows the DMU to require an interview with any individual in the UK with information relevant to a digital markets investigation. That will enable the DMU to gather vital evidence that is held by individuals with relevant knowledge, rather than in digital or physical forms. Clause 71 protects individuals who are compelled to give testimony under clause 70 from self-incrimination. It limits the circumstances in which the DMU can use an individual’s interview statement as evidence against them in a criminal prosecution. Clause 72 allows the DMU to enter business premises without a warrant for the purposes of a breach investigation. It ensures that the DMU can collect information that is being withheld by an SMS firm that is accessible only on the premises. Without that power, there would be greater risk that a firm could destroy or interfere with material relevant to an investigation.

Clause 73 allows the DMU to enter business and domestic premises for the purposes of a breach investigation, after obtaining a warrant from the High Court, Court of Session or Competition Appeal Tribunal. The DMU must also establish that a firm has failed to comply with previous information requests, or that no other powers would secure the necessary evidence, and establish reasonable suspicion that the information is relevant to the investigation. Clause 74 contains supplementary requirements for how the DMU must exercise its power to enter premises under a warrant. It also clarifies the extraterritorial scope of that power. The DMU will not be able to enter premises outside the United Kingdom under clause 73, but it can access information regardless of where it is physically stored.

Clause 75 allows the DMU to take copies of, or extracts from, information and sift it off site when exercising its power to enter either business or domestic premises under a warrant, if it is unsure whether the information falls within the scope of the investigation. Clause 76 ensures that the DMU follows established judicial procedures when applying for a warrant to enter premises. It requires the DMU to follow the rules of the High Court, Court of Session or Competition Appeal Tribunal; that provides vital checks and balances.

These clauses are largely modelled on the CMA’s existing information-gathering powers, and they will be subject to the same robust safeguards. They also give the DMU new powers to scrutinise the output of algorithms in clause 69, and enhanced powers in clause 73 to access information that is stored on remote servers but accessible over the internet. It is important to recognise that without those powers, the DMU’s interventions would not be well evidenced or enforceable.

[Alex Davies-Jones]

I was champing at the bit to talk about these clauses. However, I will keep my comments brief because much of Labour’s thoughts align with our thoughts on previous clauses.

Clause 70 gives the CMA the power to require any individual to attend an interview and answer questions for the purposes of a digital markets investigation. That is consistent with the amendments to section 26A of the Competition Act 1998. We welcome those, so it is only right that the powers appear in this legislation, too. These are basic powers and the clause is fairly procedural. The CMA must have the power to give notice to any individual with information relevant to a digital markets investigation, requiring them to answer relevant questions at a place or in a manner specified in the notice. That is fundamental for an empowered regulator. We support the approach, so we have not sought to amend the clause at this stage. We also support the intentions of clause 71, and we believe that the approach is fair and reasonable. The clause is important for clarity. We welcome its inclusion in the Bill and we have not sought to amend it at this stage.

Turning to clause 72, it is right and proper that the CMA must have reasonable grounds to suspect that information relevant to the breach investigation can be accessed from or on the premises. We support that common- sense approach. The provisions are in line with those for other regimes, and will be important in ensuring that if the CMA is required take action for the purposes of a breach investigation, it can do so in a timely and effective manner. We support the clause and have not sought to amend it.

We also support the intentions of clause 73, which gives the CMA the power to enter business and domestic premises under a warrant, without notice and using reasonable force, for the purposes of a breach investigation. Again, the CMA has powers of entry under a warrant through sections 28 and 28A of the Competition Act 1998. It will come as no surprise, given that we support provisions for the CMA to act without a warrant, that we agree that it should be able to act with one. We value the clarification that the CMA must prove that there are reasonable grounds to act. If it has to, it can call on individuals who have expertise that is not available in the CMA but is required if the terms of the warrant are to be fully carried out. That will allow the CMA to act rapidly, which, given the level of these breaches, is vital. We therefore support this clause standing part of the Bill.

Clause 74 sets out the supplementary requirements to the CMA’s power to enter premises under a warrant. We welcome the transparency afforded by subsection (1), and the clarification that although the CMA cannot enter premises outside the United Kingdom, as outlined in subsection (6), it can access information regardless of where it is physically stored. That is an important point, given the nature of SMS firms and their global holdings. For those reasons, Labour is happy to support the clause standing part of the Bill.

Clause 75 makes necessary amendments to a range of sections of the Criminal and Justice and Police Act 2001 to enable the CMA to seize information and take copies of, or extracts from, information when exercising its power under clause 73 to enter business and domestic premises with a warrant. It is a practical clause that aligns with the CMA’s power to seize documents from business premises under section 28 of the Competition Act 1998. We therefore believe that the clause should stand part of the Bill.

Clause 76 requires the CMA to follow the rules of the High Court, the Court of Session or the CAT when making an application. We see it as a natural consequential clause and will therefore support it.

Digital Markets, Competition and Consumers Bill (Sixth sitting)

Debate between Alex Davies-Jones and Paul Scully

Committee stage
Tuesday 20th June 2023 Public Bill Committees

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

It is a pleasure to serve under your chairmanship, Mr Hollobone. Clauses 26 to 35 are about the enforcement of conduct requirements. The participative approach within the pro-competition regime means that the digital markets unit will aim to resolve issues with firms with strategic market status without the need for formal enforcement action. Where that is not possible, clause 26 will empower the DMU to investigate suspected breaches of conduct requirements by SMS firms and, where it finds a breach, consider what action can be taken. That is necessary to ensure that SMS firms comply with requirements.

Opening an investigation allows the DMU to make use of the full range of information-gathering powers set out in chapter 6. Where the DMU begins an investigation, certain information must be given via a notice to the SMS firm, and a summary of that notice must be published. Clause 27 will require that before the DMU can make a finding of the breach, it must consider any representations that an SMS firm makes in relation to the conduct investigation.

Clause 28 will allow the DMU to close a conduct investigation at any time without making a finding as to whether a breach has occurred. The DMU will need to explain why it is closing the investigation and account for its decision. That power is needed as it allows the DMU to react to changes during the investigation process. That could be, for example, needing to divert resources to an emerging high-priority competition issue elsewhere.

Clause 29 sets out the countervailing benefits exemption. The DMU’s objective is to promote competition for the benefit of consumers, and that will shape the design of its regulatory interventions, meaning that the DMU will take consumer benefits into account when designing conduct requirements in the first place. However, the inclusion of the countervailing benefits exemption provides a backstop to ensure that, if needed, consumer benefits can be explicitly considered at the enforcement stage, too.

During a conduct investigation, an SMS firm will be able to put forward evidence that its action brings about benefits for consumers that outweigh the potential harm to competition. That will reinforce that consumers are at the heart of the regime. The clause is not about pursuing textbook-perfect economic outcomes; it is about real-world outcomes for consumers.

Clause 30 will place the DMU under a duty to notify an SMS firm of the outcome of a conduct investigation within a six-month investigation period. That will ensure that investigations are executed within reasonable timeframes. That does not apply if the DMU has accepted a voluntary binding commitment from the firm relating to the conduct under investigation, or if the investigation is closed with no findings made. The duty to give a notice to an SMS firm and subsequently publish a summary online is vital to inform the firm under investigation of the outcome and keep relevant parties informed of DMU action.

Clause 31 will give power to the DMU to impose an enforcement order on an SMS firm where it has found a breach of a conduct requirement. Those orders will most often be cease-and-desist orders requiring bad behaviour to stop, but they can also require more complex behavioural changes where that is a more appropriate way to remedy a breach. When imposing or varying an enforcement order, the DMU has a power, rather than a duty, to consult those persons it considers appropriate. That will allow the DMU to consider relevant third-party and SMS representations on proposed enforcement action, while ensuring that enforcement orders requiring the SMS firm to simply stop bad behaviour are not delayed by a requirement to consult.

Clause 32 will grant a power to the DMU to introduce enforcement orders on an interim basis. The DMU needs to be able quickly to address immediate harms that may occur from suspected conduct breaches in order to prevent significant damage, prevent action that would make subsequent remedies ineffective, or protect the public interest. The clause will enable intervention before irreversible change occurs and will ensure that options to restore competition are maintained.

Clause 33 makes provision for the duration of enforcement orders and interim enforcement orders, and for the circumstances in which they cease to have effect. Clause 34 will establish the DMU’s power to revoke an enforcement order, ensuring that the enforcement orders in place remain targeted and proportionate. The DMU needs the flexibility to remove enforcement orders where they are no longer appropriate, so that SMS firms are not subject to unnecessary or inappropriate rules.

Finally, to ensure that enforcement orders are effective, targeted and proportionate, it is important that the DMU considers how they function and whether changes are necessary. Clause 35 will require that the DMU monitors the effectiveness of the enforcement orders in place. That includes assessing whether SMS firms are complying with existing enforcement orders, whether variation of an order is required and whether further enforcement action is needed.

In conclusion, clauses 26 to 35 set out robust enforcement provisions to make sure that the impacts of conduct requirements are realised.

[Alex Davies-Jones (Pontypridd) (Lab)]

It is an honour to serve under your chairship this afternoon, Mr Hollobone. With your permission, I will make some brief comments on the clauses, in response to the Minister.

Clause 26 is very welcome. It is an important clause that outlines the circumstances in which the CMA will be able to begin an investigation into a suspected breach of a conduct requirement, more formally referred to in the Bill as a conduct investigation. It is an important and positive addition. For too long, the CMA has not had the legislative teeth to make positive change in our digital markets. Ensuring that it has reasonable and sufficient powers such as those outlined in the clause is central.

Labour particularly welcomes the provisions and thresholds outlined in subsection (1), which make it clear that the decision to begin a conduct investigation will be grounded in empirical evidence, whether from complaints submitted by third parties or from the CMA’s own market studies. None of us wants to see overregulation or businesses stifled, but it is important that when the CMA has reasonable grounds to carry out a breach of conduct requirement, it has the tools available to act swiftly.

We note that subsections (3) and (4) outline the requirement for the CMA to give a notice to the undertaking about the investigation and set out the content required for that notice. We welcome the provisions entirely, as we do the clarification on the period in which a statutory investigation can take place. We think six months is reasonable, and we are pleased to see clarity on when the timeframe can be extended—a matter we will come to later when we address clause 102.

The current wording of subsection (6) states:

“As soon as reasonably practicable after giving a conduct investigation notice, the CMA must publish a statement summarising the contents of the conduct investigation notice.”

Could the Minister clarify exactly where, and to whom, that notice will be published? As I have previously stated in reference to other parts of the Bill, there are some grounds for making that information public, at least to those who request it. We appreciate the market sensitivities, but ultimately it is businesses that will be facing regulation over their digital practices, broadly for the first time, and they deserve access to that information. It will be a valuable tool for learning and best practice.

I will keep my comments on clause 27 brief because I think, or at least hope, that we all agree that it is an important clause that makes sure that the CMA is required to consider representations from the undertaking being investigated before making a decision on whether the undertaking has breached conduct requirements. I am keen to hear from the Minister exactly what sort of information he believes will be appropriate for the CMA to consider. A balanced approach to the regime is critical, but we do not want the CMA’s investigatory powers delayed by big firms who may choose to delay or overwhelm the process in any way. That aside, we support the clause and have not sought to amend it at this stage. Sincere apologies to Committee members for my repetition, but this is a far more collegiate Committee than others I have sat on.

We support clause 28 and its intentions. As we know, the clause provides that the CMA can choose to close a conduct investigation without making a decision about a breach, and sets out the process and timing for giving a notice to the undertaking about the closure and publishing a summary of the notice. We welcome provisions and clarity over this process. The CMA could summarise the contents of the notice provided to the relevant designated undertaking, while allowing it to redact some information for confidentiality purposes. However, we feel that there is a strong argument, once again, for making that information public to anyone who wishes to request a copy.

Labour welcomes the intentions of clause 29, which outlines the procedure that the CMA must follow where a breach of a firm’s conduct requirement results in net benefits for consumers. This is an important clause, and it is vital that we have such an exemption to ensure that the regime does not inadvertently harmfully impact consumers. However, the countervailing benefits exemption must not be drawn too broadly. If the exemption is too broad, SMS firms will be able regularly to avoid conduct requirement compliance by citing security and privacy claims, as well as spamming the CMA with numerous studies, thus diverting its resources, which, as we have discussed, are very precious. This would undermine the entire regime by severely limiting the efficacy and efficiency of the conduct requirements. I therefore wonder whether the Minister has considered including in the Bill an exhaustive or non-exhaustive list of acceptable grounds for exemption.

Broadly speaking, though, Labour welcomes the Government’s approach, which has similarities with the approach taken in the Competition Act 1998. It would be remiss of me not to remind the Minister that that important Act came into being thanks to a Labour Government. The reality is that Labour has always been committed to getting this balance right. We want to support big businesses, while also protecting consumers and encouraging innovation. These principles do not have to be mutually exclusive. That is why we particularly welcome clause 29(2), which sets out the criteria for the exemption, including that the benefits need to be

“to users or potential users of the digital activity in respect of which the conduct requirement in question applies,”

and must

“outweigh any actual or likely detrimental impact on competition resulting from a breach of the conduct requirement”.

As we know, some examples of benefits may include lower prices, higher-quality goods or services, or greater innovation in relation to goods or services.

Clause 29 also makes it clear that it must not be possible to realise the benefits without the conduct, which means that the CMA must be satisfied that there is no other reasonable or practical way for the designated undertaking to achieve the same benefits with less anti-competitive effect. That is an important clarification, which is once again a sensible approach that we feel is crucial to getting the balance of this regime right.

Although I know that colleagues will be aware of the example highlighted to us all in the Bill’s explanatory notes about a default internet browser receiving security updates possibly being an exemption, I wonder whether the Minister can give us additional examples of situations in which he would see the clause coming into effect. That aside, we support the intentions of clause 29 and see it as a positive step in terms of putting consumers and common sense first.

We see clause 30 as being fairly procedural, in that it outlines the circumstances in which the CMA must give notice about the findings of a conduct investigation. We are pleased to see that a period of six months has been established; none of us wants to see this process going on unnecessarily. We note, however, that in subsection (1), and in the Bill generally, we truly believe that more transparency is required. As it stands, the Bill is missing an opportunity to afford civil society, academics, businesses and consumers alike the opportunity to learn from the regime and ultimately to improve best practice in our digital markets more widely.

We welcome clause 31. However, we note that subsection (4) specifies information that the enforcement must contain, while subsection (5) requires that the CMA

“may consult such persons as the CMA considers appropriate before making an enforcement order”,

or varying one. Again, the wording is very subtle, but I am most interested to hear from the Minister exactly why the consultation process is a “may” rather than a “must”.

Throughout the Bill in its current form, there appears to be a lack of points for stakeholders to engage with the CMA decisions through consultation. Although the CMA being able to design rules and interventions for each firm could result in more effective remedies, it also increases the risk of regulatory capture, whereby SMS firms write their own rules and get them rubber-stamped by the regulator. That makes proper consultation essential. I would appreciate clarification on that point from the Minister.

Clause 32, as its title suggests, gives the CMA the power to make enforcement orders on an interim basis. This is an important tool to allow the CMA to act rapidly where a potential breach is concerned. It is particularly welcome that subsection (1)(b) lists the circumstances under which interim enforcement orders can be made, and that these are broadly around preventing damage to a person or people, preventing conduct that could reduce the effectiveness of the CMA, or protecting the public interest. It is important for all of us with an interest in the Bill that that is clearly outlined in the Bill, so that is very welcome indeed.

Clause 33 makes provision for enforcement orders and interim enforcement orders to come into force, and outlines the circumstances in which they cease to have effect. We see this clause as, again, a fairly procedural one. We welcome the clarity of subsection (4), which will ultimately enable the CMA to take action against historic breaches. That is imperative, given the pace at which our digital markets and regulated firms can shift. We therefore support the clause and believe that it should stand part of the Bill.

On clause 34, as with previous clauses, there is no need for me to elaborate at great length. In essence, we agree with the clause.

As we know, clause 35 outlines that the CMA must keep the enforcement orders and interim enforcement orders that it has made under review, including whether to vary or revoke them, and also the extent to which undertakings are complying with them and whether further enforcement action needs to be taken. This is an incredibly important point. The CMA must review its own homework, as we expect all regulators to do. However, I wonder what assessment the Minister has made of making those reviews public. The CMA must have a degree of accountability, particularly to Parliament. We feel that that is somewhat lacking in the Bill as it stands.

More widely, that points to the lack of opportunities for stakeholders to engage with the CMA and its decisions through consultation, as I have previously said. This is a significant problem, given the nature of the regime. On the one hand, the flexibility and agency that the DMU has to tailor its regulatory approach depending on the nature of the firm should allow it to design more effective remedies. On the other, it increases the danger of regulatory capture by SMS firms. I would appreciate the Minister clarifying that point so that we get this right.

--- Later in debate ---

[Paul Scully]

I turn to the clauses on commitments related to conduct requirements. The ability of the DMU to accept commitments, which are voluntary and binding obligations, from SMS firms is important to support the participative approach to regulation that I have spoken about. That approach promotes greater efficiency and the swift resolution of investigations.

Clause 36 will allow the DMU to accept commitments from a firm during a conduct investigation. Firms will be able to offer commitments to the DMU to propose a solution to a suspected breach of conduct requirements. There will be robust safeguards in place to ensure that commitments are used appropriately. The DMU will need to publicly consult on any proposal to accept a commitment. Commitments can be varied to reflect changes in circumstances and will remain in force until either the DMU decides to release the SMS firm from the commitment or the conduct requirement to which the commitment relates comes to an end.

Clause 37 will ensure that the DMU is required to monitor the commitments that are accepted. That includes assessing the appropriateness of the commitments; whether SMS firms are complying with the commitments; and whether further enforcement actions are needed. To ensure that commitments are accepted, varied or revoked in a transparent way, schedule 1 sets out the procedures relating to commitments.

The procedures in schedule 1 also apply in relation to commitments for pro-competition interventions, but I will speak about those at a later stage. Schedule 1 ensures that the DMU publishes a notice detailing the commitment or proposed varying or revocation of the commitment and the reasons for its decision. The DMU must also consider any representations made in accordance with the notice before accepting, varying or revoking commitments. Without the ability to accept commitments, the DMU would have to use greater resources to further investigate breaches, and then develop and impose enforcement orders to fix them. The swift and effective resolution through binding commitments will be beneficial for the DMU, affected firms and ultimately consumers.

[Alex Davies-Jones]

Labour supports the intentions of clause 36, which ensures that the CMA can accept binding voluntary commitments from an undertaking during a conduct investigation to bring the investigation to an end. Once again, we feel that that is critical to a flexible and fair regulatory regime. It is only right that the CMA is empowered to continue an investigation into other behaviour and, when it can, investigate the same behaviour again. Therefore, we particularly welcome subsection (4).

That being said, there is no mention of consultation regarding the accepting of commitments from SMS firms, even though that will close a conduct requirement investigation and the commitments accepted will impact stakeholders. There is also no consultation when the CMA chooses to release an SMS firm from the commitments. Again, we feel that those points are worth clarifying. I would be grateful if the Minister could outline exactly why the Bill fails to place a duty on the CMA to consult appropriately on that important point.

Schedule 1 and its provisions relate to the commitments on firms, and it is very welcome. The schedule outlines the duty on the CMA to publish a notice, and consider any representations made in accordance with the notice that are not withdrawn. That is a logical and sensible approach. We also welcome the range of provisions in the schedule that provide extensive clarity on the CMA’s responsibilities in relation to its decision making. We have repeatedly called for more clarity with a number of amendments, so I hope the Minister will carefully consider our reasonable requests. Overall, schedule 1 is an important part of the Bill that further clarifies the CMA’s responsibilities, and we support its inclusion.

Without mirroring the comments that were made when we considered clause 25, Labour supports clause 37. It is vital for the regime to function now and into the future that the CMA has a duty to review those commitments. I am interested to know the Minister’s thoughts on how frequent the reviews should be, but ultimately this is the right approach if we are to ensure and encourage total compliance. I hope that the Minister will assure us that the Government are open to improving the Bill when it comes to transparency, including parliamentary oversight. With that in mind, we do not have any specific amendments to clause 37 at this stage, but that could change.

[Paul Scully]

To answer the hon. Lady’s point about consultation in clause 36, I will point her to schedule 1(2), which requires the DMU to consult on commitments before they are accepted or varied. Although that requirement is not in clause 36, it is in schedule 1.

Question put and agreed to.

Clause 36 accordingly ordered to stand part of the Bill.

Schedule 1 agreed to.

Clause 37 ordered to stand part of the Bill.

Clause 38

Power to adopt final offer mechanism

--- Later in debate ---

[Paul Scully]

Government amendment 4 redefines what transactions can be dealt with under the final offer mechanism. It is accompanied by several consequential amendments to clauses 38 to 41. One of the conditions for the use of the final offer mechanism as currently drafted is that it can be used only in relation to a “proposed” transaction, where an SMS firm provides goods or services to the third party, or uses or acquires goods or services from the third party.

However, for the final offer mechanism to be most effective, it is crucial that the definition of “transaction” includes the future performance of an existing transaction, as well as new transactions that will happen in the future. That will ensure that parties who are already transacting with each other but on unfair and unreasonable payment terms are not excluded by the conditions for using the final offer mechanism. These are consequential, technical amendments that have been produced alongside feedback from the CMA.

[Alex Davies-Jones]

We welcome the first group of Government amendments, which we see as important clarifications to ensure that the final offer mechanism can be applied in relation to the future performance of an ongoing transaction. We support their inclusion, as those changes should stand part of the Bill.

Amendment 1 agreed to.

Amendments made: 2, in clause 38, page 21, line 1, leave out “proposed”.

See the explanatory statement for Amendment 4.

Amendment 3, in clause 38, page 21, line 7, leave out “proposed”.

See the explanatory statement for Amendment 4.

Amendment 4, in clause 38, page 21, line 13, at end insert—

“(4A) In subsection (1), ‘transaction’ means—

(a) a future transaction, or

(b) the future performance of an ongoing transaction,

whether in accordance with a contract or otherwise.”

This amendment, together with Amendments 1, 2, 3, 6, 8, 9, 11 and 45 means that the final offer mechanism could be applied in relation to the future performance of an ongoing transaction.

Amendment 45, in clause 38, page 21, leave out line 20 and insert—

“‘the transaction’ means the transaction mentioned”—(Paul Scully.)

See the explanatory statement for Amendment 4.

Question proposed, That the clause, as amended, stand part of the Bill.

--- Later in debate ---

[Alex Davies-Jones]

As we know, there are several provisions contained in the Bill that could form the basis of new rules regulating agreements between UK news media and digital platforms, akin to the news media bargaining code in Australia. However, the formulation of those rules will be at the discretion of the DMU, and would apply on a case-by-case basis. As we have debated, the Bill currently enables the DMU to impose conduct requirements that are for the purposes of obliging undertakings to

“trade on fair and reasonable terms”.

Those undertakings could also be obliged by the DMU to not carry on activities other than their digital activities in a way that could be anti-competitive. That could be the case where carrying out that non-digital activity is likely to increase an undertaking’s market power materially or bolster the strategic significance of its position in relation to its digital activity.

The Bill also provides an arbitration process called a final offer mechanism. Under that mechanism, the DMU will invite the SMS firms and third parties to submit a payment terms offer that they regard as fair and reasonable. The DMU is then required to choose one party’s offer only, without any ability to determine alternative offers. That process has been adopted in Australia for the purpose of arbitrating bargains between digital platforms and news media providers, although it has not yet been used. While there is no provision for a media bargaining code in the Bill, the mere existence of this mechanism will hopefully drive tech platforms to negotiate sincerely with media providers in that context to reach an agreement independently, rather than risk the CMA choosing the final offer. We entirely welcome this clause, and the additional relevant ones to follow.

In the digital media sector, Google and Meta’s overwhelming market power means that publishers are not compensated fairly for the significant value that their content creates for platforms, which is estimated at about £1 billion per year here in the UK. Google Search and Meta’s Facebook rely on news publishers to attract and engage users, as professional news content is reliable and regularly updated. It is absolutely right that the CMA will be empowered to make pro-competition interventions. While the conduct reviews will hopefully prevent the worst abuses of market power, PCIs will allow the DMU to implement remedies that address the root cause of that market power. For example, a CR could prevent an SMS firm from self-preferencing its own businesses in the digital advertising market, which has negative impacts including locking businesses into products and taking an unfairly large cut of revenues, whereas a PCI could require a functional separation to remove the incentive for self-preferencing. Labour sees that as a hugely important tool. We want to see and support an empowered DMU, so we are pleased to support the clause and believe it should stand part of the Bill.

Again, we see clause 39 as important: it sets out the process that the CMA must follow if it decides to use a final offer mechanism. In theory, the DMU should support publishers, who will now be able to negotiate fair and reasonable terms for the value that news content brings to platforms. If SMS firms refuse to comply, a final offer mechanism will be available, with each party submitting bids and the fairest offer being selected. The DMU will ensure that publishers receive a fair share of revenues for the advertising that is shown around their content. Publishers will also be able to receive user data when consumers interact with their content on platform services, in a manner compliant with data protection law. In theory, unfair commissions on app store sales will be prevented, ensuring that publishers can build sustainable digital subscription businesses.

These are all very welcome developments indeed. We particularly welcome subsection (3), under which the CMA must specify if it is considering taking any other action to address the underlying cause of the breach that led to the use of the FOM—for example, a pro-competition order instructing a designated undertaking to provide access for third parties to consumer data held by that undertaking, which could rebalance bargaining power within that digital activity. It will come as no surprise that I ask the Minister, once again, to clarify whether such statements will be published in the public domain. This important point is worth clarifying, so I look forward to hearing about the adequacy of the transparency provisions in this part of the Bill.

Government amendments 7 and 10 are linked to Government new clause 1. They clarify that parties can still settle outside formal processes once the FOM stage has begun. Given that the aim of the final offer mechanism is to incentivise parties to come to a deal without direct CMA intervention, it seems right that parties are still able to come to a deal outside this formal process. This may allow for more favourable terms to be reached, as the platforms will be under pressure in the FOM process, and it will mean that publishers can avoid the uncertainty of the CMA picking one of the two offers.

There will always be a concern that the asymmetry of resources might mean that publishers compromise too far when faced with the uncertainty of an FOM decision but, ultimately, Labour supported these provisions when they appeared in clause 40, and moving them to ensure that a deal can be reached outside the FOM at any time after a final offer intention notice has been issued seems to make good sense. We therefore support the Government amendments.

Unsurprisingly, Labour also welcomes clause 40, which establishes the process that the CMA must follow with regard to the outcome of the FOM process. We need not go into much detail on this clause, as we view it as a fairly standard and effective way of ensuring that proposed transactions are fairly processed by the CMA.

At this point, I must press home the wider importance of these final offer mechanisms because, if they are implemented correctly, they could have incredibly positive benefits. Indeed, we know that Google and Meta have attempted to ward off fair negotiations in Australia and Canada by restricting, or threatening to restrict, access to domestic trusted news, which is the antidote to online disinformation. Denying citizens access to reliable information to avoid payment serves only to emphasise the primacy that these firms place on profit, rather than citizens’ interests. The Government should not give in to similar threats here in the UK, and I hope the Minister is listening.

As the EU and other jurisdictions have forged ahead with similar, but less agile and effective, digital competition regulations, there is a danger that the UK will become a rule taker, not a rule maker. Delayed or weakened legislation will leave UK businesses at a competitive disadvantage internationally, and will deny UK consumers lower prices and more innovative products. In contrast, a strong, forward-looking DMU regulation will ensure that digital markets live up to their potential, allowing consumers to enjoy the full benefits that technology can deliver. I hope that the Minister can reassure us that the Government will not bow to pressure and that the CMA will rightly be compelled to intervene where necessary.

Labour supports the intention of clause 41, which we also see as standard practice. Colleagues will note that subsection (1) provides that a final offer order must impose obligations on the designated undertaking that the CMA considers appropriate for giving effect to the final offer payment terms it has decided, and they must be included in the proposed transaction.

Again, subsection (2) sets out exactly what information the CMA must give to the parties, and we welcome the provision. I further note that subsection (3) requires the CMA to publish a statement summarising the final offer order, and this transparency is also welcome. It is unclear who will have access to these statements, so I am keen to hear the Minister’s assessment of the value of making such documents public to anyone who wishes to seek them. This aside, we support clause 41 and believe it should stand part of the Bill.

Labour supports clause 42 and particularly welcomes subsection (3). This is an important clause as it empowers the CMA to take action on both historical and live breaches. Concerns reported to us by tech companies include requiring clarity on the terms of these final offer mechanisms. It is well known that many users sign up to digital platforms, via terms and conditions, to access a service with no monetary exchange as part of the agreement. Does the Minister see this counting as a contract that is challengeable via the final offer mechanism under the DMU regime? Although the regime appears clear, the final offer mechanism relates to pricing disputes and there are concerns that it could be drawn wider. Clarity on this point is vital and is worth establishing on the record, so I am keen for the Minister to address it.

I do not have any specific comments to make on clause 43. As we have previously said, Labour believes it is important that the CMA must be legally obliged to keep these final offer orders under constant review. This is the nature of a workable, agile regime, and we therefore support the clause standing part.

We tabled new clause 3 to require the CMA to publish an annual report on the workings of the final offer mechanism. This report should be made publicly available and should be laid in both Houses so that Parliament has its say.

We recognise that the final offer mechanism is fairly unique, and it is therefore only right that the CMA is required to update the House each year, with findings on the number of SMS firms that are subject to these investigations. The Minister mentioned that the CMA will be obliged to provide an annual report to Parliament; I want it to be clear that what we have set out in new clause 1 on the final offer mechanism would be part of that report so that Parliament could scrutinise how many were made, for example. This would add to and support the other transparency measures we have pursued, so I hope the Minister not dismiss the new clause, but will consider it carefully. We feel that that is an important matter to get on record in any annual review.

[Paul Scully]

I appreciate the spirit in which the hon. Lady has engaged in our debate on these clauses. I shall try to answer her questions in turn.

Publication will be online, so people will be able to see it. It will be public. The hon. Lady’s second question was: will I listen? Absolutely yes, I will. On her third question—will I not bow? I will bow to her, but not to pressure, because I think we have largely got this right. I cannot remember her last question—

[Alex Davies-Jones]

It was about new clause 3.

[Paul Scully]

Oh yes. It is important that we examine the efficacy of the final offer mechanism, so it is appropriate that that will be covered in the CMA’s review of all its work, and that we will get to see and assess that work as well. I can stand here and tell the Committee that I think we have got it right now, but things change. Yes, it is flexible, and yes, it is proportionate, but we want to make sure that it stays world beating.

Question put and agreed to.

Clause 38 accordingly ordered to stand part of the Bill.

Clause 39

Final offer mechanism

Amendment made: 6, in clause 39, page 21, line 32, leave out “proposed”.—(Paul Scully.)

See the explanatory statement for Amendment 4.

Clause 39, as amended, ordered to stand part of the Bill.

Clause 40

Final offers: outcome

Amendments made: 7, in clause 40, page 22, line 25, leave out

“included as terms of”

and insert

“given effect for the purposes of”.

This amendment means that terms as to payment are to be given effect for the purposes of the transaction, or of any substantially similar transaction, rather than having to be “included” as terms of the transaction.

Amendment 8, in clause 40, page 22, line 26, leave out “proposed”.

See the explanatory statement for Amendment 4.

Amendment 9, in clause 40, page 22, line 28, leave out “proposed”.

See the explanatory statement for Amendment 4.

Amendment 10, in clause 40, page 22, line 36, leave out subsections (6) to (10).—(Paul Scully.)

See the explanatory statement for NC1.

Clause 40, as amended, ordered to stand part of the Bill.

Clause 41

Final offer orders: supplementary

Amendment made: 11, in clause 41, page 23, line 19, leave out “proposed”.—(Paul Scully.)

See the explanatory statement for Amendment 4.

Clause 41, as amended, ordered to stand part of the Bill.

Clauses 42 and 43 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mike Wood.)

Digital Markets, Competition and Consumers Bill (Fifth sitting)

Debate between Alex Davies-Jones and Paul Scully

Committee stage
Tuesday 20th June 2023 Public Bill Committees

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

It is a pleasure to serve under your chairmanship, Dame Maria, and to address the Committee today. I thank all its members for volunteering to serve on this Committee, and I look forward to our discussions over the coming days and weeks.

Part 1 of the Bill provides for the pro-competition regime for digital markets. This is a targeted regime that will establish new, more effective tools for the Competition and Markets Authority and, in turn, the digital markets unit. That will allow them to proactively drive more dynamic digital markets and prevent harmful practices.

Clause 1 is purely introductory and provides an overview of part 1. I hope that hon. Members agree that this clause will therefore assist readers to navigate this part. I will briefly explain some of the language I will use in this series of debates. First, the Committee will hear me referring to the digital markets unit, or the DMU, which is a new administrative unit of the Competition and Markets Authority—the CMA. While the legal functions of the regulator under part 1 of this Bill remain those of the CMA, in practice it is likely that most of the responsibilities under part 1 will be carried out by staff within the DMU. Therefore, for consistency and ease, I will be referring to the DMU throughout the debates. The exception to that is the merger functions in chapter 5 of part 1, which will generally be carried out by those staff who deal with mergers more broadly.

Secondly, I will use the words “firm” and “undertaking” interchangeably. “Undertaking” is the word used in this part of the Bill and is an economic concept that is already used in the Competition Act 1998. The concept of an undertaking covers any person engaged in economic activity, regardless of its legal status and the way in which it is financed. “Persons” may be corporate bodies, and an undertaking may encompass multiple corporate bodies when they form a single economic unit under competition law. The Government’s view is that an undertaking will often encompass the entirety of the relevant corporate group, but it may sometimes be a smaller subset of the corporate group.

I hope that that helps to clarify the language that the Committee will hear over the coming days.

[Alex Davies-Jones (Pontypridd) (Lab)]

It is a genuine privilege to serve under your chairship, Dame Maria. I look forward to the weeks ahead. I imagine that the debates will be healthy but, in a real rarity for this place, relatively collegiate too. With that in mind, I will keep my comments on this clause brief. We all agree that this is an important that we will not seek to delay. Competition is vital to encourage innovation, and consumers deserve the best possible protections and value. We all want to get this right, and the Minister knows that. I want to say clearly that the Opposition welcome the Bill in principle. However, it will come as no surprise that we have some concerns that the Bill is lacking in some areas and could go further. We will explore those concerns in the hours and weeks ahead, and I look forward to debating the Bill further.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Designation of undertaking

--- Later in debate ---

[Paul Scully]

Clause 9 relates to initial SMS investigations. It sets out the circumstances under which the DMU can start an initial SMS investigation. An initial SMS investigation is for circumstances in which a firm either is not designated at all or is designated but in a different digital activity. The DMU can open an investigation only if it has reasonable grounds for considering that the tests for designation may be met—that is to say, most importantly, the tests of substantial and entrenched market power and a position of strategic significance in respect of a digital activity. Clause 9 does not require the DMU to open an investigation as it should be able to prioritise investigations to ensure its resources are targeted at the most pressing competition issues.

Clause 10 relates to further SMS investigations—the other type of SMS investigation. A further investigation is an investigation into whether to revoke an existing designation or designate a firm again in respect of the same digital activity. A further SMS investigation may also look at whether to designate a firm in respect of a similar or connected digital activity. The investigation will consider whether to make provision about existing obligations, which I will say more about on clause 17.

It is important that a designation should not continue indefinitely. That is why the DMU must review any designation before the end of the five-year designation period. The DMU will need to open a further SMS investigation at least nine months before the end of the five-year designation period if it has not already done so. It will either revoke a designation, if the firm no longer meets the criteria, or decide to designate the firm again for another five-year period. The DMU will be able to open a further investigation at any point during an existing designation. For instance, if the DMU considers that a firm no longer has substantial and entrenched market power in the digital activity, then it is important that the designation can be reviewed and, if necessary, revoked early.

Clause 11 sets out the procedure that the DMU must follow for either an initial or a further SMS investigation. To ensure that the regime is fair and transparent, the DMU will be required to give the firm a notice when it starts an investigation, stating the purpose and scope of the investigation as well as its length. For initial SMS investigations, the notice must set out the DMU’s reasonable grounds for considering that the designation tests may be met. The DMU must also publish a statement summarising the notice in order to make the wider public aware that it is opening an investigation. That notice will trigger the start of the investigation period.

Clause 12 sets out that the DMU may close an initial SMS investigation at any point before reaching a final decision on designation. It is important that that option is available to the DMU for initial investigations as there may be situations where flexibility is needed. For instance, unexpected circumstances may arise while an investigation is ongoing. The Government believe that in order to reprioritise resources if needed, the DMU should have the discretion to close an initial SMS investigation before reaching a final decision.

Clause 13 sets out that the DMU must consult on its proposed decisions as part of an SMS investigation. It is important that the firm under investigation, as well as all relevant parties, has an opportunity to feed in views and perspectives to the DMU’s investigation process. That consultation is also important in providing for a transparent regime that builds on the best evidence available.

Clause 14 sets out what the DMU must do at the end of an SMS investigation. For a further SMS investigation, the DMU must decide whether the existing designation should be revoked or whether the firm should continue to be designated in the same activity. The DMU must also decide whether to make provision in relation to existing obligations. If relevant, the DMU must decide whether the firm should be designated in a similar or connected activity.

For an initial investigation, the DMU should also reach a decision when it has not closed the investigation early under clause 12. The DMU will need to give the firm a notice of its decision on or before the last day of the investigation period, which lasts up to nine months. It must also publish a summary statement. If for some reason the DMU does not give the decision notice to the firm by the deadline, by default the firm is not designated, or is no longer designated, in the relevant digital activity.

Clause 15 sets out the requirements for decision notices when the DMU decides to designate a firm as having SMS in respect of a digital activity. The decision notice needs to be given to the firm. Among other things, the notice should include a description of the firm, a description of the digital activity, any provision made regarding existing obligations, per clause 17, and the DMU’s reasons for its decisions.

Clause 16 sets out the requirements for decision notices when the DMU decides to revoke an existing designation following a further investigation. A designation will no longer be appropriate once a competitive environment has developed. The decision notice needs to be given to the firm, as set out in clause 14(2).

Clause 17 gives the DMU the power to apply transitional arrangements to obligations revoked as a result of the DMU’s ending an SMS firm’s designation in relation to a digital activity, but only for the purpose of managing impacts of the revocation on persons who benefited from those obligations, and only in a way that appears to the DMU to be fair and reasonable. That will help ensure a smooth transition for wider market participants.

Clause 17 also allows the DMU to continue to apply existing obligations, such as conduct requirements or pro-competition orders. That is for cases where the new designation is in respect of the same digital activity, or an activity that is similar or connected to the previous designated digital activity. The clause will ensure that existing obligations do not automatically end where they still remain appropriate following a further SMS designation. The power to continue to apply obligations will be subject to the DMU’s ongoing duty to monitor and review obligations, which means that the DMU cannot continue to apply obligations that are no longer appropriate.

Finally, clause 18 sets out that a firm will be designated as having SMS in respect of a digital activity for five years, beginning with the day after the day on which the SMS decision notice is given. We believe that five years strikes the right balance between giving enough time for the regulatory interventions to have an impact on the one hand, and making sure the obligations on the firm do not last longer than necessary on the other.

[Alex Davies-Jones]

Labour broadly welcomes this grouping. I will make some brief comments about clauses 9, 10 and 11 before addressing my amendments, and will then come on to clauses 12 to 18.

As we know, and as the Minister has outlined, clause 9 concerns initial SMS investigations. We see the clause as an important start point that will allow the CMA to have clarity over exactly how it will begin the designation process for the regulatory regime. Subsection (1) sets out that the CMA may begin an initial SMS investigation where it has reasonable grounds to consider that it may be able to designate an undertaking in accordance with clause 2. We believe that that is vital and that the CMA is given the statutory powers to investigate fully. We agree that “reasonable grounds” are an important way to capture the beginnings of the process.

It is clear that the regime will apply only to firms with significant market dominance, as we have already discussed, but it is right that the CMA should use a logical approach to establish SMS firms from the outset. We also agree that it is right that where the CMA considers that the digital activity is similar or connected to a digital activity in respect of which the undertaking is already designated, it may instead begin a further SMS investigation.

Similarly, we agree with the wording of subsection (3), which clarifies that the CMA has the power to open a designation investigation in respect of a digital activity even if it has previously decided not to designate the undertaking as having SMS in respect of that digital activity. That would include circumstances where a previous designation had ended or where a previous decision had been taken not to designate the undertaking in respect of that digital activity. It is incredibly important that the CMA should not be restricted in terms of its designations, so this clarity is welcome.

--- Later in debate ---

[Alex Davies-Jones]

Yes, Dame Maria.

I turn to clause 11. We see the clause as important in establishing exactly how the CMA should carry out an SMS investigation. It is important for all involved—from the CMA to regulated firms—that there should be some transparency over exactly how the CMA will begin an SMS investigation, and under what circumstances. We particularly welcome provisions for investigation notices; it is important that all parties are given adequate time and notice in order for this regime to fully succeed.

As I have already noted, we particularly welcome subsection (5), which sets out that as soon as reasonably practicable after giving an SMS investigation notice, or a revised version of the notice, the CMA must publish a statement summarising the contents of the notice and give a copy of the statement to the Financial Conduct Authority, the Office of Communications, the Information Commissioner, the Bank of England and the Prudential Regulation Authority. That is an important point for transparency—a common theme, I am afraid, to which I will continue to return as the Bill progresses through Committee.

As we all know, there are certain aspects of digital markets that make them prone to creating tipping points, where very large online platforms have huge and entrenched market power. The lack of transparency is a particularly problematic issue, and one that the Bill must seek to address. For example, in online advertising a complicated bidding process may take place very quickly—advertisers may not able to scrutinise decisions about where their ads are placed and how much they cost. That has a knock-on impact by exacerbating other competition problems, as people and businesses are unable to make informed choices.

We see the transparency and publication of these investigation notices as an important part of the package around getting the regime right. We welcome the fact that the Financial Conduct Authority, Ofcom, the Information Commissioner, the Bank of England and the Prudential Regulation Authority will all have sight of such notices, but what assessment has the Minister made of making these notices public? Of course, Labour recognises that there is a difficult line to toe here in terms of publishing information that could impact markets and potentially cause detriment to companies’ market share or worth. However, could a sensible middle ground be reached?

I move on to clause 12. Labour welcomes clause 12, which outlines the circumstances in which an initial SMS investigation may be closed without a decision. We recognise that giving the CMA that flexibility is important. None of us wants undue time limits to be placed on its decision-making and designation process. Central to the success of the regime is that the CMA should be empowered to take decisions within its remit. We all recognise that the CMA is a proactive regulator that currently seeks to use its soft power alongside its formal powers, but it is currently being hampered by its existing legal powers. That is causing a disparity between its ability to enforce competition and consumer law—a significant issue that stakeholders, including Which?, Citizens Advice and others, have repeatedly raised, including during our evidence sessions.

We see clause 12 as an important clause that gives the CMA the ability to work in an agile manner, according to workload and priorities. As with previous clauses, we particularly welcome subsections (2) to (4), which set out that if the CMA decides to close an initial SMS investigation, it must give the undertaking under investigation notice of the closure, including the reasons, and publish a statement summarising the contents of the notice. Labour supports the clause, and we have not sought to amend it at this stage.

Clause 13 requires the CMA to consult on any decision that it is considering making as a result of an SMS investigation. Subsection (1) requires the CMA to carry out a public consultation and bring it to the attention of such persons as it considers appropriate. Of course, there is a balance to strike here: public consultation is an important part of any regulatory regime, but none of us wants to see the CMA bound by delays and, as a consequence, unable to regulate effectively. I would be grateful for some clarity from the Minister on his understanding of the “appropriate” person, as outlined in subsection (1), which reads:

“The CMA must—

(a) carry out a public consultation on any decision that it is considering making as a result of an SMS investigation (see section 14(1)), and

(b) bring the public consultation to the attention of such persons as it considers appropriate.”

I imagine the Secretary of State will be one such person, but will the Minister clarify who else he envisions will be privy to the public consultations? In addition, I would be grateful if the Minister again confirmed whether the public consultations will be published. Consultation is an important part of any regulatory regime, particularly this one, which aims to do a colossal thing in regulating our digital markets and, ultimately, to encourage competition. Labour recognises the extent of the challenge, and there is a fine balance to be struck between consultation and stifling action. We do not want to see consultations get in the way of the regime more widely. We have had enough delay as it is, and I am sure the Minister will not mind my highlighting just how many consultations the Bill has endured on its journey so far.

In 2018, the Government established a digital competition expert panel to examine competition in digital markets. In 2021, the DMU was set up within the CMA to oversee competition in the digital markets sector. Between July and October of that year, the Government ran a consultation on plans for a new regime. Almost a year on, in May 2022, the Government responded to the consultation, setting out the final position on a new regime. There has already been significant delay to getting the Bill to this stage, and we already know from its impact assessment that the regime is unlikely to be fully operational until 2025, so I would be grateful if the Minister could reassure us all that the CMA will not be delayed by consultations, as the Government seemingly have been. That point aside, we understand the value of the clause and will support it.

Clause 14 sets out what the CMA must do at the end of an SMS investigation. It broadly clarifies the actions and decisions that the CMA must take in deciding whether an undertaking will be designated as SMS in respect of its digital activity. Again, we welcome subsection (2). We also support subsection (5), which sets out that the CMA must publish a statement summarising its contents as soon as reasonably practicable after giving an SMS decision notice. This is an important clause, which we see as a practical outline of how the CMA will be empowered to act on concluding its initial SMS investigations.

Clause 15 sets out a requirement for SMS decision notices where the CMA decides to designate an undertaking as having SMS in respect of a digital activity. We welcome the clarity afforded in subsection (2), which outlines on the face of the Bill the exact contents that the SMS decision notice must include. This ranges from a description of the designated undertaking to a statement outlining the designation period and the circumstances in which the designation could be extended.

It is also worth referring specifically to subsection (4), which clarifies that giving a revised SMS decision notice to provide for the designation of an undertaking does not change the day on which the designation period in relation to that designation begins. That is a welcome clarification, which I know will be useful for undertakings and civil society to understand as we seek to establish the regime in full.

Although Labour supports the clause, I am interested to know the Minister’s thoughts on subsection (5), which states:

“As soon as reasonably practicable after giving a revised SMS decision notice, the CMA must publish a statement summarising the contents of the revised notice.”

Again, that is rather vague, so will the Minister clarify what he considers to be “reasonably practicable”? Ultimately, companies and consumers alike would benefit from a timely and transparent approach to the regulation. Although I am reassured by the CMA’s ability, we and many others have slight concerns about its capacity and resource, as I have previously outlined, so I would be grateful for the Minister’s assurances on that issue.

Clause 16 sets out the requirements for SMS decision notices where the CMA decides to revoke an existing designation as a result of a further SMS investigation. There is no need for me to repeat myself. We support the clause, and it is important for the CMA to be empowered to act flexibly, particularly given the ever-changing nature of digital markets. Again, we welcome clarification that the CMA will provide for the revocation to have effect from an earlier date—for example, where the undertaking has already ceased to engage in the relevant digital activity. None of us wants to see overregulation, so we support the clause and have not sought to amend it. While I am all for a collegiate approach to legislating, I assure the Minister and my Whip that we do not agree with the Bill in full, as can be seen from the amendment paper. However, on the points covering designation, we welcome the progress and clarity of the clauses, which we see as fundamental to the regime’s wider success.

Labour supports clause 17, which aims to define the nature of an existing obligation, which is any conduct requirement, enforcement order, final offer order or pro-competition order applying when a designation is revoked or another one is made after a further SMS investigation. We particularly welcome subsections (3) and (4), which set out that the CMA may apply any existing obligation in respect of a new designation, may modify that obligation in respect of a new designated activity, and may make transitional, transitory or saving provision in respect of that obligation. Again, we see that as standard procedure to allow the regime to operate in full and have not sought to amend the clause.

Finally—colleagues will be pleased to hear that—clause 18 establishes that where the CMA decides to designate an undertaking as having SMS in a digital activity, the designation period is five years, beginning the day after the day on which the SMS decision notice is given. We welcome other provisions later in the Bill on the circumstances in which the designation period may be extended or revoked. Labour recognises that assessing the regulatory regime in digital markets will take some time, so we believe a designation period of five years is a sensible approach. Given certain undertakings’ market dominance, we think five years is a reasonable timeframe to allow pro-competition mechanisms to take effect and consumers to see that reflected in the options and prices afforded to them. We therefore support the clause and have not sought to amend it.

[Paul Scully]

On the two questions of what is reasonably practical and practicable in terms of time, we do not want to set an artificial deadline but want to make sure that the DMU can act as quickly as possible. As the hon. Member for Pontypridd rightly says, and we have said all the way through, technology and digital markets move really quickly. That is why we want to make sure that decisions are out of the door as quickly as possible, so that people can see what is happening as soon as possible. The decisions will go to the appropriate persons as described, which are relevant third parties and the SMS firms themselves. It is for the CMA to determine who is a relevant third party, but that will clearly include any challenger tech companies that may be affected by the initial SMS designation.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

Clause 10 ordered to stand part of the Bill.

[Alex Davies-Jones]

I beg to move amendment 46, in clause 11, page 6, line 36, at end insert—

‘(6) The CMA must provide a copy of the SMS investigation notice to any person who requests a copy.’

This amendment and Amendments 47 to 52 aim to ensure access to information relevant to the regime is available publicly.

[Alex Davies-Jones]

These important amendments to clause 11 that we have tabled are designed to encourage a more transparent approach to SMS investigations. As repeatedly stated, transparency, openness and accountability have to be central to the Bill working in practice and in reality. The Minister will note that this is a simple set of amendments, which will broaden the regime’s openness. Labour firmly believes that a transparent approach where possible and where the impact on markets is limited will be vital to its success. Will the Minister share his thoughts on our amendments? They seek to make the Bill more transparent for everyone and I look forward to some clarity.

[Paul Scully]

Amendments 46 to 52 would require that the notices the DMU must provide to an SMS firm in respect of an SMS designation, conduct requirements and PCIs should be made available on request to third parties. We agree with the hon. Member for Pontypridd that transparency and accountability are essential to the new regime, and we will always look for ways to make sure that it is open and at the core of what we do.

The Bill already provides that the DMU will be required to publish online a statement summarising the contents of those notices whenever they are provided to a firm. That is, it will need to set out required elements of the notice, such as describing its decisions and the reasoning behind them, in a shortened form. In the statements, the DMU will provide the key information from the notice about its decisions to other businesses, consumers and the wider public, in line with public law principles. The DMU may redact commercially sensitive information.

For example, the summary notice for a conduct investigation must give details about the conduct requirement and the behaviour suspected of breaching that requirement, and it must provide information about the investigation period and the timeframe for making representations for third parties.

--- Later in debate ---

[Paul Scully]

Third parties can clearly get involved and approach the DMU, which I will cover in a minute, so we do not necessarily need to get to court stage. I have talked about some of the specifics that will be in the summary notices, which will have quite a considerable amount of detail anyway. We do not want to add extra resource requirements that take away from the core tasks of the DMU.

The summary statements are just one of the ways in which the DMU will inform and involve stakeholders in its decision making. The DMU will be required to publicly consult before making major decisions, which include designating a firm with strategic market status in a digital activity, making pro-competition orders, and imposing conduct requirements. It will also be required to publish guidance on how it will take those decisions.

Should a third party be unsatisfied with the DMU’s summary statement, they can request the full notice through a freedom of information request. As a public authority, the CMA is required under the Freedom of Information Act 2000 to provide the public with information it holds when requested to do so, subject to the relevant exemptions, which include a requirement to protect commercially sensitive information. We agree that public transparency for the new digital markets regime is vital. The drafting ensures that the right information will be made publicly available. I hope I have set out our position to hon. Members and that they feel able to withdraw their amendments.

[Alex Davies-Jones]

I have listened to the Minister carefully outline the Government’s position. I do recognise that a balance needs to be struck, yet we feel that our amendments would seek to increase transparency, openness and accountability. For that reason, we will press them to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Paul Scully]

I totally agree. That is exactly the point. Let us make it quickly, but we do not want an arbitrary timescale so that we rush and get the decision wrong. It is more important to get the answer right. For those reasons, I hope that the hon. Member for Pontypridd will withdraw her amendment.

[Alex Davies-Jones]

I have listened to the robust debate we have had. I still feel that having a timeline on the face of the Bill would provide transparency, clarity and certainty. Therefore, we will press the amendment to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Alex Davies-Jones]

I beg to move amendment 53, in clause 20, page 12, line 11, at end insert—

“(ca) carrying on activities in an area of its business other than the relevant digital activity, which if they were done in relation to the relevant digital activity would be prevented under the provisions of this section.”

This amendment prevents a designated undertaking from carrying on activities that would be prevented by the provisions of section 20 from being done in a different area of its business.

Amendment 53 aims to prevent a designated undertaking from carrying on activities that would be prevented by the provisions of section 20 from being done in a different area of its business. We feel that the amendment gets to the heart of the issues at hand, and we urge the Minister to consider it carefully. It will prevent a Whac-A-Mole situation in which the regulator is always having to define new activities to catch up, and we see it as an essential part of the Bill.

[Paul Scully]

I am trying to work out the intention of the amendment. It seems that it would add a permitted type of conduct requirement in order to expand the ability of the DMU to intervene outside the designated digital activity; I am not sure that I understand whether my understanding of that is clear.

The regime is explicitly designed to address competition issues in activities when a firm has strategic market status—that is, when it holds substantial and entrenched market power and a position of strategic significance. In some circumstances, SMS firms may use other, non-designated activities to further entrench their market power in the designated activity. Clause 20(3)(c) allows the DMU to create conduct requirements to address that; however, it is important that the DMU does not intervene in non-designated activities beyond that.

SMS firms are likely to be active in a large range of activities, and in many of them will face healthy competition from other firms. The amendment would allow the DMU to intervene outside the designated digital activity, without any requirement to show that there is a link to the firm’s market power in any given activity. That could be harmful to competition, consumers and innovation.

We are worried about whether the regime can tackle retaliatory conduct. It is important that that ability is built in, because a retaliatory action is likely to be captured under conduct requirement categories to ensure fair dealing, such as those that prevent discriminatory treatment or unfair terms and conditions. We want the DMU to be able to take firm action against retaliatory conduct, whether or not that is within the scope of designation, but only if it can prove the link between the two. It is really important that that step happens first.

[Alex Davies-Jones]

I appreciate the Minister’s comments, although I disagree with him on the reasoning. We see the leveraging principle as critical to the success of the pro-competition regime. It is important to clause 20, which is a mammoth clause. Our amendment would prevent a designated undertaking from carrying on activities that would be prevented by the provisions in the clause. It is really important that the amendment is included so we will press it to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Alex Davies-Jones]

The amendment would allow a conduct requirement to be used to stop a designated undertaking withholding news from a recognised news publisher from its platform. None of us want to see in the UK situations like those occurring elsewhere across the globe. Colleagues will be aware that Google and Meta have attempted to ward off fair negotiations in Australia and Canada by restricting or threatening to restrict access to domestic trusted news that is the antidote to online disinformation. Denying citizens access to reliable information to avoid payment serves only to emphasise the primacy that such firms place on profits, rather than citizens’ interests. The Government must absolutely not give in to similar threats in the UK.

As the EU and other jurisdictions have forged ahead with similar but ultimately less agile and effective digital competition regulation, there is a danger that the UK will become a rule taker and not a rule maker. I urge the Minister to consider carefully the principles of the amendment and new clause 2, which further outlines a favourable definition of a recognised publisher that Labour supports. I look forward to hearing the Minister’s comments, but if we are not reassured, we will press the amendment to a vote.

[Paul Scully]

As we have heard, amendment 58 and new clause 2 are intended to strengthen the regime’s protections for news publishers by defining “recognised news publisher” and introducing a specific power to protect them from discrimination. I understand and appreciate the sentiment behind the amendment and what the hon. Member for Pontypridd is striving to do. It is important that news publishers can benefit from the robust protections offered by the new regime. I am confident that the Bill, as drafted, will make an important contribution to the sustainability of the press. I hope the hon. Lady will understand when I expand on that, because the DMU’s tools, including all permitted types of conduct requirement, are designed to rebalance the relationship between SMS firms and those who rely on them, including firms and sectors across the economy. They are drafted in a sector-neutral way for that reason.

--- Later in debate ---

[Alex Davies-Jones]

Is the Minister reassured that the Bill will not allow the emergence of a situation like those in Australia and Canada, where online disinformation is pumped around constantly because of the lack of clarity on platforms highlighting recognised news publishers?

[Paul Scully]

Yes.

--- Later in debate ---

[Paul Scully]

At the end of the day, this is an interpretation of the Bill. The amendment names a number of specific news publishers; our approach is sector-unspecific. All those will come within the regime of the Bill, but specifying just one sector would risk skewing the conduct of the regime and the way it works towards that sector. I think the question that was asked was whether those news publishers and the kind of behaviour that has been described come under the regime of the Bill, as drafted. We believe they absolutely do.

[Alex Davies-Jones]

I appreciate the Minister’s rationale, but leaving the interpretation of the Bill so ambiguous could mean certain platforms allowing news publishers that are not relevant news publishers to cause harm and damage to society and the public, as we have seen elsewhere in the world. It is imperative on us as legislators to get it right, and we have that opportunity in the Bill.

We have always said that we want this law to be world-leading. We wanted to be able to do things differently from the EU. This amendment gives us the flexibility to make that change and do things differently, which is why we will press it to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Paul Scully]

The DMU will be able to use conduct requirements to address and prevent practices that exploit consumers and businesses or exclude innovative competitors. Clause 20 sets out an exhaustive list of permitted types of conduct requirement that the DMU can impose in order to address and prevent harm to businesses and consumers in digital markets. It ensures that the regime can adapt to future challenges by empowering the Secretary of State to amend this list, subject to parliamentary approval.

The list reflects insights drawn from the CMA’s market studies and regulatory expertise. It captures 13 well-evidenced types of anti-competitive behaviours including self-preferencing, tying and bundling, and the unfair use of data. Conduct requirements could be used to ensure that SMS firms interact with users of all kinds on fair and reasonable terms; that consumers are not discriminated against; or that competitors do not lose out because an SMS firm has used data unfairly. The list of permitted types of requirement reflects the competition issues we see in digital markets today, but these markets are fast-moving.

It is vital that the Secretary of State is able to amend the list in future, with Parliament’s approval, to ensure that consumers are protected from whatever new challenges arise. Setting out the types of permitted requirement in the legislation, rather than specifying the requirements themselves, means that the regime will be flexible and responsive. It will make it possible to impose targeted and tailored interventions that address harms to consumers, while avoiding unnecessary burdens and unintended consequences for SMS firms.

[Alex Davies-Jones]

Clause 20 is a mammoth clause that sets out an exhaustive list of permitted types of conduct requirement. Labour welcomes the clarity in the clause—as, I am sure, will the CMA and firms likely to be designated. Ultimately, pro-competitive interventions will tackle the causes of market power and are a necessary step to addressing the characteristics of these markets, such as network effects and economies of scale that tip some digital markets towards a single firm. Those interventions could also include mandating that consumers have greater choice over the collection and use of their personal data. They could even look at ownership separation. However, some digital markets cannot be made competitive, and in such cases the effects of market power must be managed. To do this, the DMU needs sufficient powers. We see the clause as central to getting that balance right.

Clause 20 states that conduct requirements may prevent the SMS firm from

“carrying on activities other than the relevant digital activity in a way that is likely to increase the undertaking’s market power materially, or bolster the strategic significance of its position, in relation to the relevant digital activity”.

The leveraging principle is critical to the success of the pro-competition regime. Without it, the DMU will find itself unable to address harmful conduct and will meet arguments about where—meaning in which activity—a piece of conduct occurs, because the DMU will be unable to touch conduct that occurs outside the SMS activity even if it is closely related to the SMS activity.

A stronger leveraging principle would prevent designated firms from simply moving their service fees from one location in the ecosystem to another, such as from app store service fees to an operating system licence—the stealth tax that we heard about during our evidence sessions. It would prevent a whack-a-mole situation in which the regulator always has to define new activities to catch up.

We have already debated our amendment, with which we were seeking a stronger principle. Sadly, it was not accepted by the Government, but we will push this further as the Bill progresses.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Clause 21

Content of notice imposing a conduct requirement

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 22 to 25 stand part.

[Paul Scully]

Clauses 21 to 25 set out the procedural aspects in relation to conduct requirements, because it is really important that SMS firms, and the people and businesses who rely on them, understand what obligations are being imposed and why. The DMU is required to give notice to the SMS firm and then publish the notice online as soon as is reasonably practicable. Clause 21 sets out the information that must appear in the notice.

Given the rapid pace of change across businesses and digital markets, it is important that the DMU can adapt conduct requirements to ensure that they remain targeted and proportionate, so clause 22 will establish the DMU’s power to revoke a conduct requirement, helping to ensure that conduct requirements remain targeted and proportionate as markets and firms change.

Clause 23 will allow the DMU to facilitate the smooth transition into or out of a conduct requirement. Without the clause, there is a risk of disruption or harm to businesses and consumers where a conduct requirement comes into force or ceases to have effect without a sufficient transition period.

The conduct requirements in clause 24 will impose tailored, enforceable obligations on SMS firms. It is only right that consumers and businesses, including the SMS firms themselves, have a chance to share their perspective on those obligations, so clause 24 requires the DMU to carry out a public consultation on its proposed decision before it can impose, vary or revoke a conduct requirement.

Clause 25 requires the DMU to keep conduct requirements under review, ensuring that requirements remain effective, targeted and proportionate. It also ensures that the DMU monitors where breaches may have taken place.

[Alex Davies-Jones]

Clause 21 sets out the information that the CMA is required to publish as part of the notice imposing or varying a conduct requirement. Labour supports the clause, which we feel is important for clarifying the details around the content of potential conduct requirements. Again, I am keen to understand exactly who will have access to such information. As ever, I would appreciate the Minister’s thoughts on that point. That aside, we see the clause as integral to the Bill, so we have not sought to amend it at this stage.

As with clause 21, we support clause 22 and its intentions in full. The only point that I feel is worth raising with the Minister is the slight ambiguity around the timeframes. It will be helpful for all involved if the regime is not only flexible, but rapid and able to evolve for changing markets. Can the Minister assure us that the clause will support this in practice?

Clause 23 is important and serves a vital function in establishing the transitional provisions related to conduct requirements. An example would be if a conduct requirement were imposed from a particular date, but some allowances were made in relation to certain aspects of that conduct requirement so that they had effect from a later date to smooth the transition for the benefit of a designated undertaking. That speaks to the nature of the regime: we all want to see it as flexible and fair, but it is therefore only right that the CMA be given appropriate statutory powers to vary its conduct requirements where required. We also welcome subsection (2), the details of which will enable and empower the CMA to investigate and enforce against historical breaches. That is vital, as we seek to establish a regime that will be sufficiently agile for breaches both past and present.

Clause 24 is also incredibly welcome. It imposes a duty on the CMA to consult publicly before imposing, varying or revoking a conduct requirement. The consultation must be brought to the attention of such persons as the CMA considers appropriate. We have already discussed who is an appropriate person, but sadly the transparency and commitment to consultation is not mirrored elsewhere in the Bill, which is frustrating. Given the broadly collegiate nature of our debate thus far, I hope that the Minister can consider some adjustments, and I look forward to hearing from him shortly. By and large, though, Labour welcomes the provisions in subsection (3), which provide that the CMA will be allowed to carry out a consultation on proposed conduct requirements before making a decision on designation. As we know, that makes it possible for the CMA to impose conduct requirements at the same time as issuing a decision on designation, or very shortly afterwards. We consider that to be a sensible approach, and we therefore support the clause.

Again, there is no need to repeat myself. Labour supports clause 25, which places a duty on the CMA to consider, on an ongoing basis, the effectiveness of any conduct requirements in place and how far the designated undertaking is complying with them. The CMA will also need to consider, on an ongoing basis, whether to impose, vary or revoke a conduct requirement, and whether it would be appropriate to take action against a breach of any conduct requirement. It would be helpful for us all to have an idea of how regularly the reviews will happen. It cannot and should not be the case that one SMS firm has its conduct requirements reviewed more regularly than any other, so I am keen to hear the Minister’s assessment of how that will work fairly and equitably in practice.

Question put and agreed to.

Clause 21 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mike Wood.)

Electronic Trade Documents Bill [ Lords ] (First sitting)

Debate between Alex Davies-Jones and Paul Scully

Committee stage
Monday 19th June 2023 Public Bill Committees

[Paul Scully]

This clause provides that a person may possess, and part with possession of, an electronic trade document. It removes the legal blocker that prevents trade documents in electronic form from being possessed, and therefore from having the same legal status as paper trade documents. The clause is fundamental to ensuring that there is equivalence between the two, which is needed if we are to meet our policy aims.

[Alex Davies-Jones (Pontypridd) (Lab)]

I rise briefly to endorse what the Minister says about the Bill. It is incredibly important, particularly post Brexit, when red tape has significant consequences for our ability to trade with the rest of the world. We welcome the Bill.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clause 4

Change of form

Question proposed, That the clause stand part of the Bill.

[Paul Scully]

The clause provides the change of medium or form of a trade document—that is, it allows for the conversion of a paper trade document to an electronic one, or vice versa.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5

Exceptions

--- Later in debate ---

[Paul Scully]

Clause 5 contains an opt-out provision that allows industry participants to design their documents so that they are not caught by the Bill and are not possessable if they prefer to do business using other contractual arrangements or legal mechanisms. An express opt-out provision is not required and it will be enough if it can reasonably be inferred that it is not the intention that possession should apply. We have drafted the provision carefully to be limited to documents used in trade to which possession is relevant, allowing an opt-out where it is clear from the document or practices around its use that possession is irrelevant.

The Bill includes a delegated power in clause 5(2)(b) that will enable the Secretary of State to specify further types of documents or instruments that are outside the scope of its substantive provisions, in addition to uncertificated securities already cited in clause 5(2)(a). There is a further delegated power in clause 5(3) that enables the Secretary of State to amend or remove the exception in clause 5(2)(a). In acknowledgement of the Bill’s potential to spur further digitalisation of documents and related practises, the power may need to be exercised in circumstances where it is determined that a type of document or instrument that falls within the scope of the Bill requires more bespoke provisions to allow for its digitalisation, or where a type of document or instrument should not be capable of being used in electronic form.

On the amendments, the Government’s intention has always been that the Bill should apply UK-wide, and we have already agreed with our colleagues in Northern Ireland that the Bill does not require their consent, given that it deals with a reserved matter. The Welsh devolution settlement restricts Senedd Cymru from making changes to private property law, and we have agreed that legislative consent is not necessary in this case.

In the case of Scotland, private property law is a devolved matter and we have requested a legislative consent motion from the Scottish Parliament. We have worked with officials, and I know that Scottish Government Ministers have been advised to support that. I hope that we will continue to work to ensure that that happens. We want to consider the matter further and to have belt and braces, so we also consider it prudent to confer the power in clause 5(2)(b) on Scottish Ministers, both to exercise the power alone within areas of devolved competence and to act jointly with the Secretary of State. By including the option for Scottish Ministers to act alone and jointly, the delegated powers can be exercised in a flexible manner that best suits the prevailing need for secondary legislation. Moreover, it prevents any future uncertainty as to whether matters are within the devolved competence of Scottish Ministers, particularly if they cut across devolved and reserved matters.

The requirement in clause 5(4) for the Secretary of State to consult Scottish Ministers before exercising the power in clause 5(2)(b) will be disapplied in circumstances when the Secretary of State and Scottish Ministers act jointly to make regulations. As noted earlier, although the need for amendments to the Bill in the future is unlikely, we believe that such changes are best delivered through concurrent delegated powers that will allow both the Secretary of State and Scottish Ministers to make those changes. The proposed amendments will therefore enable Scottish Ministers to make such regulations when all the provision is within Scottish devolved competence and to act jointly with or be consulted by the Secretary of State in other cases.

The delegated powers previously afforded to the Secretary of State by the Bill are not substantively affected by the amendment, so we have tabled new clause 1 to provide for regulations under clause 5 to be subject to the affirmative resolution procedure at Westminster and in the Scottish Parliament. In addition to those two substantive amendments, we have had to include four consequential amendments to update and correct cross-references. I hope that colleagues will acknowledge the requirement for amendment 1 to change the appropriate authority, and the consequential amendments that allow that amendment to be inserted into the Bill.

[Alex Davies-Jones]

I have just a brief question for the Minister. In the Second Reading Committee, I pressed him on where the responsibility for the Bill would sit. I would appreciate it if he would put on the record exactly which Secretary of State will have responsibility for and oversight of the Bill.

Digital Markets, Competition and Consumers Bill (Third sitting)

Debate between Alex Davies-Jones and Paul Scully

Committee stage
Thursday 15th June 2023 Public Bill Committees

[Alex Davies-Jones]

Q I have a question to you, Mark, from Match Group. A lot of your products and offerings were traditionally on desktop providers, rather than apps. How can we ensure that the Bill is adequately future-proofed to ensure that that does not happen and it will not hinder businesses like yours?

Mark Buse: We believe the Bill has the flexibility to be future-proofed. When we look at how our users access our services, it is almost exclusively via an app. Desktop has no role. You can use our products, such as Tinder, cheaper if you go to the website and download it, but nobody does. The user behaviour is that they all use apps. Our fastest growing brand in the UK is called Hinge; Hinge does not even have a website. It was not worth the time or money to build one, because nobody uses it.

When I say nobody, I mean that less than 1% of Tinder’s users go to the website. That is also partially because Apple and Google have restrictions that they impose on us contractually. They do not allow us to tell our users that they can subscribe cheaper if they go to the website. In an ideal world—we think the Bill will go a long way in creating an open market—somebody who wants to subscribe to our product will have those options right there in front of them. They will be able to subscribe using our service, PayPal, or whatever else is available, and get it cheaper.

Apple, Google or big tech say, “This is all a myth. You are not going to have cheaper products”. Match has stated emphatically and publicly that we will drop our prices if we do not have to pay an artificially imposed 30%, which is what occurs today. We will drop our prices. We have also pledged that we will put more money into research and development, the hiring of employees and online safety, which we believe is crucial. By the way, the monopoly power that both Apple and Google exert over the store hinders online safety. That also has a negative pejorative impact on consumers today.

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

Q Thank you for those really powerful testimonies. Before I come to Tom, could I ask you, Mark, to elaborate on the online safety that you just talked about?

Mark Buse: Sure. There are a couple of issues when we look at safety. One is keeping bad actors off our platforms—for example, entities or individuals who intend to do harm. Another is under-age users; they do not intend any harm, but our platform is limited to 18 and over only. We do not allow people under the age of 18. We do not want them there and our users do not want them there. In both cases, we have a limited pot of data to try to assess whether somebody is a bad actor or under age. There is a lot of data that exists that could inform us about that. I am going to use this little device—my phone—when I fly home on Saturday as my boarding pass. I am going to pay my bills on it. I am incentivised to put truthful information into my phone, which is the most powerful computer that most people own. I use it for a multitude of services.

For us, 98% of our revenue is from subscriptions; ads have virtually no impact. When you look at our companies, when somebody subscribes to Tinder, we do not know who they are, because they do not actually have a subscription with us. That also has a pejorative consumer impact. Consumers cancel their subscriptions for perfectly good reasons, such as, “I have a three-month Tinder subscription and I met the love of my life. Neither of us want me on Tinder any more, so I am cancelling my subscription”.

As the consumer, I go to Tinder and say, “I have a Tinder subscription that I want to cancel. Tinder, cancel it”. We have to inform them, “You don’t actually have a subscription with us. You have a subscription with Apple or Google”, who artificially put themselves in the middle of this situation because they can—because they have a monopoly and they can demand and force it. As a result, they know who I am. They have my credit card and real address—all those identifiers that we could use at Match to keep a bad actor off our platform.

This Bill would change all that dynamic. The positive impacts, as I say, go much further than just increased competition; they go directly to lower prices and increased online safety.

Digital Markets, Competition and Consumers Bill (First sitting)

Debate between Alex Davies-Jones and Paul Scully

Committee stage
Tuesday 13th June 2023 Public Bill Committees

[Paul Scully]

Q So you believe this is the right balance between being robust enough for those with strategic market status and being speedy enough for remediation for challenger tech.

Sarah Cardell: Absolutely.

[Alex Davies-Jones (Pontypridd) (Lab)]

Q Good morning. We have talked a lot this morning about accountability to Parliament. That was highlighted quite heavily on Second Reading by Members from across the House. One of the other things that we have already discussed is the need for the CMA’s strategic priorities to be directed and advised by Parliament. Could you expand on your thoughts on that point? Also, where do you see the priorities for the Digital Markets Bill? That is not intended to be a loaded question.

Sarah Cardell: I will give a high-level response, and Will might come in on some of the specific priorities for the DMU. It is really important to highlight the difference between accountability and independence. The CMA is independent when we take our individual decisions, but, as you say, it is absolutely accountable for those decisions, both to Parliament and to the courts. That is accountability for the choices that we make about where we set our priorities, accountability for the decisions that we take when we are exercising our functions, and accountability for the way that we go about doing that work. I think it is important to have accountability across all three areas.

On the strategic priorities, since I came into the role as chief executive and our new chair, Marcus Bokkerink, came into post, we have put a lot of focus on really setting out very clearly what our strategic priorities are, looking at impact and beneficial outcomes for people, businesses and the economy as a whole. We see those as a trio of objectives that are fundamentally reinforcing, rather than in tension with one another.

We also take account of the Government’s strategic steer. That is in draft at the moment. You can see that there is a lot of commonality between our own strategic priorities that we set out in our annual plan and in the Government’s strategic steer. That sets a very clear framework for our prioritisation.

Will might want to come in on how we will set the priorities for the DMU.

Will Hayter: We are obviously thinking very carefully about where to prioritise action under the strategic market status regime. We cannot jump too far ahead with that, because Parliament is going through this process now and we have to see where the Bill comes out, but, as Sarah says, we will be targeting our effort very firmly at those areas where the biggest problems and the biggest current harmful impacts on people, businesses and the economy are likely to be.

You can get a bit of a sense of what those areas might be from the areas we have looked at already, particularly the digital advertising market, search, social media, interactions between the platforms and news publishers, and also mobile ecosystems. We did a big study there, where we see a range of problems stemming from the market power of the two big operating systems.

We will continue to update our thinking as we go through the next year-plus, building on our horizon-scanning work and understanding of how developments in the markets are shaping up and what that might mean for where the problems are.

Online Safety Bill

Debate between Alex Davies-Jones and Paul Scully

Report stage
Tuesday 17th January 2023 Commons Chamber

[Paul Scully]

I do not have time, but I thank all Members who contributed to today’s debate. I pay tribute to my officials and to all the Ministers who have worked on this Bill over such a long time.

[Alex Davies-Jones]

I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

ONLINE SAFETY BILL (Third sitting)

Debate between Alex Davies-Jones and Paul Scully

Committee stage (re-committed clauses and schedules)
Thursday 15th December 2022 Public Bill Committees

[Paul Scully]

These Government amendments confer a duty on Ofcom to create and publish a list of companies that are approaching the category 1 threshold to ensure that it proactively identifies emerging high-reach, high-influence companies and is ready to add them to the category 1 register without delay. That is being done in recognition of the rapid pace of change in the tech industry, in which companies can grow quickly. The changes mean that Ofcom can designate companies as category 1 at pace. That responds to concerns that platforms could be unexpectedly popular and quickly grow in size, and that there could be delays in capturing them as category 1 platforms. Amendments 48 and 49 are consequential on new clause 7, which confers a duty on Ofcom to create and publish a list of companies that are approaching the category 1 threshold. For those reasons, I recommend that the amendments be accepted.

[Alex Davies-Jones (Pontypridd) (Lab)]

It will come as no surprise to Members to hear that we have serious concerns about the system of categorisation and the threshold conditions for platforms and service providers, given our long-standing view that the approach taken is far too inflexible.

In previous sittings, we raised the concern that the Government have not provided enough clarity about what will happen if a service is required to shift from one category to another, and how long that will take. We remain unclear about that, about how shifting categories will work in practice, and about how long Ofcom will have to preside over such changes and decisions.

I have been following this Bill closely for just over a year, and I recognise that the online space is constantly changing and evolving. New technologies are popping up that will make this categorisation process even more difficult. The Government must know that their approach does not capture smaller, high-harm platforms, which we know—we have debated this several times—can be at the root of some of the most dangerous and harmful content out there. Will the Minister clarify whether the Government amendments will allow Ofcom to consider adding such small, high-harm platforms to category 1, given the risk of harm?

More broadly, we are pleased that the Government tabled new clause 7, which will require Ofcom to prepare and update a list of regulated user-to-user services that have 75% of the number of users of a category 1 service, and at least one functionality of a category 1 service, or one required combination of a functionality and another characteristic or factor of a category 1 service. It is absolutely vital that Ofcom, as the regulator, is sufficiently prepared, and that there is monitoring of regulated user-to-user services so that this regime is as flexible as possible and able to cope with the rapid changes in the online space. That is why the Opposition support new clause 7 and have not sought to amend it. Moreover, we also support Government amendments 48 and 49, which are technical amendments to ensure that new clause 7 references user-to-user services and assessments of those services appropriately. I want to press the Minister on how he thinks these categories will work, and on Ofcom’s role in that.

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[Paul Scully]

My hon. Friend is absolutely right. All companies will still have to tackle the risk assessment, and will have to remove illegal content. We are talking about the extra bits that could take a disproportionate amount of resource from core functions that we all want to see around child protection.

[Alex Davies-Jones]

I would push the Minister further. He mentioned that there will not be an onus on companies to tackle the “legal but harmful” duty now that it has been stripped from the Bill, but we know that disinformation, particularly around elections in this country, is widespread on these high-harm platforms, and they will not be in scope of category 2. We have debated that at length. We have debated the time it could take Ofcom to act and put those platforms into category 1. Given the potential risk of harm to our democracy as a result, will the Minister press Ofcom to act swiftly in that regard? We cannot put that in the Bill now, but time is of the essence.

[Paul Scully]

Absolutely. The Department has techniques for dealing with misinformation and disinformation as well, but we will absolutely push Ofcom to work as quickly as possible. As my right hon. and learned Friend the Member for Kenilworth and Southam (Sir Jeremy Wright), the former Secretary of State, has said, once an election is done, it is done and it cannot be undone.

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[Paul Scully]

These Government amendments seek to change the approach to category 1 designation, following the removal from the Bill of the adult safety duties and the concept of “legal but harmful” content. Through the proposed new duties on category 1 services, we aim to hold companies accountable to their terms of service, as we have said. I seek to remove all requirements on category 1 services relating to harmful content, so it is no longer appropriate to designate them with reference to harm. Consequently, the amendments in this group change the approach to designating category 1 services, to ensure that only the largest companies with the greatest influence over public discourse are designated as category 1 services.

Specifically, these amendments will ensure that category 1 services are so designated where they have functionalities that enable easy, quick and wide dissemination of user-generated content, and the requirement of category 1 services to meet a number of users threshold remains unchanged.

The amendments also give the Secretary of State the flexibility to consider other characteristics of services, as well as other relevant factors. Those characteristics might include a service’s functionalities, the user base, the business model, governance, and other systems and processes. That gives the designation process greater flexibility to ensure that services are designated category 1 services only when they have significant influence over public discourse.

The amendments also seek to remove the use of criteria for content that is harmful to adults from category 2B, and we have made a series of consequential amendments to the designation process for categories 2A and 2B to ensure consistency.

[Alex Davies-Jones]

I have commented extensively on the flaws in the categorisation process in this and previous Committees, so I will not retread old ground. I accept the amendments in this grouping. They show that the Government are prepared to broaden the criteria for selecting which companies are likely to be in category 1. That is a very welcome, if not subtle, shift in the right direction.

The amendments bring the characteristics of a company’s service into consideration, which will be a slight improvement on the previous focus on size and functionality, so we welcome them. The distinction is important, because size and functionality alone are obviously very vague indicators of harm, or the threat of harm.

We are pleased to see that the Government have allowed for a list to be drawn up of companies that are close to the margins of category 1, or that are emerging as category 1 companies. This is a positive step for regulatory certainty, and I hope that the Minister will elaborate on exactly how the assessment will be made.

However, I draw the Minister’s attention to Labour’s long-held concern about the Bill’s over-reliance on powers afforded to the Secretary of State of the day. We debated this concern in a previous sitting. I press the Minister again on why these amendments, and the regulations around the threshold conditions, are ultimately only for the Secretary of State to consider, depending on characteristics or factors that only he or she, whoever they may be, deems relevant.

We appreciate that the regulations need some flexibility, but we have genuine concerns—indeed, colleagues from all parties have expressed such concerns—that the Bill will give the Secretary of State far too much power to determine how the entire online safety regime is imposed. I ask the Minister to give the Committee an example of a situation in which it would be appropriate for the Secretary of State to make such changes without any consultation with stakeholders or the House.

It is absolutely key for all of us that transparency should lie at the heart of the Bill. Once again, we fear that the amendments are a subtle attempt by the Government to impose on what is supposed to be an independent regulatory process the whim of one person. I would appreciate assurance on that point. The Minister knows that these concerns have long been held by me and colleagues from all parties, and we are not alone in those concerns. Civil society groups are also calling for clarity on exactly how decisions will be made, and particularly on what information will be used to determine a threshold. For example, do the Government plan on quantifying a user base, and will the Minister explain how the regime would work in practice, when we know that a platform’s user base can fluctuate rapidly? We have seen that already with Mastodon; the latter’s users have increased incredibly as a result of Elon Musk’s takeover of Twitter. I hope that the Minister can reassure me about those concerns. He will know that this is a point of contention for colleagues from across the House, and we want to get the Bill right before we progress to Report.

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[Alex Davies-Jones]

Thank you, Dame Angela—take 2.

Clause 115 focuses on the enforcement action that may be taken and will be triggered if a platform fails to comply. Given that the enforceable requirements may include, for example, duties to carry out and report on risk assessments and general safety duties, it is a shame that the Government have not seen the merits of going further with these provisions. I point the Minister to the previous Public Bill Committee, where Labour made some sensible suggestions for how to remedy the situation. Throughout the passage of the Bill, we have made it abundantly clear that more access to, and availability of, data and information about systems and processes would improve understanding of the online environment.

We cannot and should not rely solely on Ofcom to act as problems arise when they could be spotted earlier by experts somewhere else. We have already heard the Minister outline the immense task that Ofcom has ahead of it to monitor risk assessments and platforms, ensuring that platforms comply and taking action where there is illegal content and a risk to children. It is important that Ofcom has at its disposal all the help it needs.

It would be helpful if there were more transparency about how the enforcement provisions work in practice. We have repeatedly heard that without independent researchers accessing data on relevant harm, platforms will have no real accountability for how they tackle online harm. I hope that the Minister can clarify why, once again, the Government have not seen the merit of encouraging transparency in their approach. It would be extremely valuable and helpful to both the online safety regime and the regulator as a whole, and it would add merit to the clause.

[Paul Scully]

We have talked about the fact that Ofcom will have robust enforcement powers. It can direct companies to take specific steps to come into compliance or to remedy failure to comply, as well as issue fines and apply to the courts for business disruption measures. Indeed, Ofcom can institute criminal proceedings against senior managers who are responsible for compliance with an information notice, when they have failed to take all reasonable steps to ensure the company’s compliance with that notice. That criminal offence will commence two months after Royal Assent.

Ofcom will be required to produce enforcement guidelines, as it does in other areas that it regulates, explaining how it proposes to use its enforcement powers. It is important that Ofcom is open and transparent, and that companies and people using the services understand exactly how to comply. Ofcom will provide those guidelines. People will be able to see who are the users of the services. The pre-emptive work will come from the risk assessments that platforms themselves will need to produce.

We will take a phased approach to bringing the duties under the Bill into effect. Ofcom’s initial focus will be on illegal content, so that the most serious harms can be addressed as soon as possible. When those codes of practice and guidelines come into effect, the hon. Member for Pontypridd will see some of the transparency and openness that she is looking for.

Question put and agreed to.

Clause 115, as amended, accordingly ordered to stand part of the Bill.

Clause 55

Review

Amendment made: 56, in clause 155, page 133, line 27, after “Chapter 1” insert “or 2A”.—(Paul Scully.)

Clause 155 is about a review by the Secretary of State of the regulatory framework established by this Bill. This amendment inserts a reference to Chapter 2A, which is the new Chapter expected to be formed by NC3 to NC6.

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[Paul Scully]

My hon. Friend is absolutely right. The report as is obviously has to be laid before Parliament and will form part of the package of parliamentary scrutiny. But, yes, we will consider how we can utilise the expertise of both Houses in post-legislative scrutiny. We will come back on that.

Question put and agreed to.

Clause 155, as amended, accordingly ordered to stand part of the Bill.

Clause 169

Individuals providing regulated services: liability

Amendment made: 57, in clause 169, page 143, line 15, at end insert—

“(fa) Chapter 2A of Part 4 (terms of service: transparency, accountability and freedom of expression);”.—(Paul Scully.)

Clause 169 is about liability of providers who are individuals. This amendment inserts a reference to Chapter 2A, which is the new Chapter expected to be formed by NC3 to NC6, so that individuals may be jointly and severally liable for the duties imposed by that Chapter.

Clause 169, as amended, ordered to stand part of the Bill.

Clause 183 ordered to stand part of the Bill.

Schedule 17

Video-sharing platform services: transitional provision etc

Amendments made: 94, in schedule 17, page 235, line 43, leave out paragraph (c).

This amendment is consequential on Amendment 6 (removal of clause 12).

Amendment 95, in schedule 17, page 236, line 27, at end insert—

“(da) the duties set out in sections (Duty not to act against users except in accordance with terms of service) and (Further duties about terms of service) (terms of service);”.—(Paul Scully.)

This amendment ensures that services already regulated under Part 4B of the Communications Act 2003 (video-sharing platform services) are not required to comply with the new duties imposed by NC3 and NC4 during the transitional period.

Question proposed, That the schedule, as amended, be the Seventeenth schedule to the Bill.

[Alex Davies-Jones]

Labour welcomes schedule 17, which the Government introduced on Report. We see this schedule as clarifying exactly how the existing video-sharing platform regime will be repealed and the transitional provisions that will apply to those providers as they transition to the online safety framework. The schedule is fundamentally important for both providers and users, as it establishes the formal requirements of these platforms as we move the requirement to this new legislation.

We welcome the clarification in paragraph 1(1) of the definition of a qualifying video-sharing service. On that point, I would be grateful if the Minister clarified the situation around livestreaming video platforms and whether this schedule would also apply to them. Throughout this Bill Committee, we have heard just how dangerous and harmful live video-sharing platforms can be, so this is an important point to clarify.

I have spoken at length about the importance of capturing the harms on these platforms, particularly in the context of child sexual exploitation being livestreamed online, which, thanks to the brilliant work of International Justice Mission, we know is a significant and widespread issue. I must make reference to the IJM’s findings from its recent White Paper, which highlighted the extent of the issue in the Philippines, which is widely recognised as a source country for livestreamed sexual exploitation of children. It found that traffickers often use cheap Android smartphones with pre-paid cellular data services to communicate with customers and produce and distribute explicit material. To reach the largest possible customer base, they often connect with sexually motivated offenders through everyday technology—the same platforms that the rest of us use to communicate with friends, family and co-workers.

One key issue in assessing the extent of online sexual exploitation of children is that we are entirely dependent on the detection of the crime, but the reality is that most current technologies that are widely used to detect various forms of online sexual exploitation of children are not designed to recognise livestreaming video services. This is an important and prolific issue, so I hope the Minister can assure me that the provisions in the schedule will apply to those platforms too.

[Paul Scully]

We are setting out in schedule 17 how the existing video-sharing platform regime will be repealed in the transitional provisions that apply to these providers as they transition to the online safety framework. My understanding is that it does include livestreaming, but I will obviously write to the hon. Lady if I have got that wrong. I am not sure there is a significant legal effect here. To protect children and treat services fairly while avoiding unnecessary burdens on business, we are maintaining the current user protections in the VSP regime while the online safety framework is being implemented. That approach to transition avoids the duplication of regulation.

Question put and agreed to.

Schedule 17, as amended, accordingly agreed to.

Clause 203

Interpretation: general

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[Paul Scully]

It is the functionalities around it that enable the voice conversation to happen.

Question put and agreed to.

Clause 203, as amended, accordingly ordered to stand part of the Bill.

Clause 206

Extent

Question proposed, That the clause stand part of the Bill.

[Alex Davies-Jones]

I would like to welcome the Government’s clarification, particularly as an MP representing a devolved nation within the UK. It is important to clarify the distinction between the jurisdictions, and I welcome that this clause does that.

Question put and agreed to.

Clause 206 accordingly ordered to stand part of the Bill.

Clause 207

Commencement and transitional provision

Amendment made: 60, in clause 207, page 173, line 15, leave out “to” and insert “and”.—(Paul Scully.)

This amendment is consequential on amendment 41 (removal of clause 55).

Question proposed, That the clause, as amended, stand part of the Bill.

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[Alex Davies-Jones]

Exactly. My hon. Friend makes an incredibly important point that goes to the heart of why we are here in the first place. If the platforms were not motivated by commercial interest and we could trust them to do the right thing on keeping children safe and reducing harm on their platforms, we would not require this legislation in the first place. But sadly, we are where we are, which is why it is even more imperative that we get on with the job, that Ofcom is given the tools to act swiftly and tries to reduce the limit of when they come into effect and that this legislation is enacted so that it actually makes a lasting difference.

Ofcom has already been responsible for regulating video-sharing platforms for two years, yet still, despite being in year 3, it is only asking websites to provide a plan as to how they will be compliant. That means the reality is that we can expect little on child protection before 2027-28, which creates a massive gap compared with public expectations of when the Bill will be passed. We raised these concerns last time, and I felt little assurance from the Minister in post last time, so I am wondering whether the current Minister can improve on his predecessor by ensuring a short timeline for when exactly the Bill can be implemented and Ofcom can act.

We all understand the need for the Bill, which my hon. Friend the Member for Warrington North just pointed out. That is why we have been supportive in Committee and throughout the passage of the Bill. But the measures that the Bill introduces must come into force as soon as is reasonably possible. Put simply, the industry is ready and users want to be protected online and are ready too. It is just the Government, sadly, and the regulator that would be potentially holding up implementation of the legislation.

The Minister has failed to concede on any of the issues that we have raised in Committee, despite being sympathetic and supportive. His predecessor was also incredibly supportive and sympathetic on everything we raised in Committee, yet failed to take into account a single amendment or issue that we raised. I therefore make a plea to this Minister to at least see the need to press matters and the timescale that is needed here. We have not sought to formally amend this clause, so I seek the Minister’s assurance that this legislation will be dealt with swiftly. I urge him to work with Labour, SNP colleagues and colleagues across the House to ensure that the legislation and the provisions in it are enacted and that there are no further unnecessary delays.

[Paul Scully]

Our intention is absolutely to get this regime operational as soon as possible after Royal Assent. We have to get to Royal Assent first, so I am looking forward to working with all parties in the other House to get the legislation to that point. After that, we have to ensure that the necessary preparations are completed effectively and that service providers understand exactly what is expected of them. To answer the point made by the hon. Member for Warrington North about service providers, the key difference from what happened in the years that led to this legislation being necessary is that they now will know exactly what is expected of them—and it is literally being expected of them, with legislation and with penalties coming down the line. They should not be needing to wait for the day one switch-on. They can be testing and working through things to ensure that the system does work on day one, but they can do that months earlier.

The legislation does require some activity that can be carried out only after Royal Assent, such as public consultation or laying of secondary legislation. The secondary legislation is important. We could have put more stuff in primary legislation, but that would belie the fact that we are trying to make this as flexible as possible, for the reasons that we have talked about. It is so that we do not have to keep coming back time and again for fear of this being out of date almost before we get to implementation in the first place.

However, we are doing things at the moment. Since November 2020, Ofcom has begun regulation of harmful content online through the video-sharing platform regulatory regime. In December 2020, Government published interim codes of practice on terrorist content and activity and sexual exploitation and abuse online. Those will help to bridge the gap until the regulator becomes operational. In June 2021, we published “safety by design” guidance, and information on a one-stop-shop for companies on protecting children online. In July 2021, we published the first Government online media literacy strategy. We do encourage stakeholders, users and families to engage with and help to promote that wealth of material to minimise online harms and the threat of misinformation and disinformation. But clearly, we all want this measure to be on the statute book and implemented as soon as possible. We have talked a lot about child protection, and that is the core of what we are trying to do here.   

     Question put and agreed to.

Clause 207, as amended, accordingly ordered to stand part of the Bill.

New Clause 1

OFCOM’s guidance: content that is harmful to children and user empowerment

“(1) OFCOM must produce guidance for providers of Part 3 services which contains examples of content or kinds of content that OFCOM consider to be, or consider not to be— OFCOM must produce guidance for providers of Category 1 services which contains examples of content or kinds of content that OFCOM consider to be, or consider not to be, content to which section 14(2) applies (see section 14(8A)).

(a) primary priority content that is harmful to children, or

(b) priority content that is harmful to children.

(2) Before producing any guidance under this section (including revised or replacement guidance), OFCOM must consult such persons as they consider appropriate.

(3) OFCOM must publish guidance under this section (and any revised or replacement guidance).”—(Paul Scully.)

This new clause requires OFCOM to give guidance to providers in relation to the kinds of content that OFCOM consider to be content that is harmful to children and content relevant to the duty in clause 14(2) (user empowerment).

Brought up, and read the First time.

[Paul Scully]

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

The Government are committed to empowering adults to have greater control over their online experience, and to protecting children from seeing harmful content online. New clause 1 places a new duty on Ofcom to produce and publish guidance for providers of user-to-user regulated services, in relation to the crucial aims of empowering adults and providers having effective systems and processes in place. The guidance will provide further clarity, including through

“examples of content or kinds of content that OFCOM consider to be…primary priority”

or

“priority content that is harmful to children.”

Ofcom will also have to produce guidance that sets out examples of content that it considers to be relevant to the user empowerment duties, as set out in amendment 15 to clause 14.

It is really important that expert opinion is considered in the development of this guidance, and the new clause places a duty on Ofcom to consult with relevant persons when producing sets of guidance. That will ensure that the views of subject matter experts are reflected appropriately.

[Alex Davies-Jones]

Labour is pleased to see the introduction of the new clause, which clarifies the role of Ofcom in delivering guidance to providers about their duties. Specifically, the new clause will require Ofcom to give guidance to providers on the kind of content that Ofcom considers to be harmful to children, or relevant to the user empowerment duty in clause 14. That is a very welcome addition indeed.

Labour remains concerned about exactly how these so-called user empowerment tools will work in practice—we have discussed that at length—and let us face it: we have had little assurance from the Minister on that point. We welcome the new clause, as it clarifies what guidance providers can expect to receive from Ofcom once the Bill is finally enacted. We can all recognise that Ofcom has a colossal task ahead of it—the Minister said so himself—so it is particularly welcome that the guidance will be subject to consultation with those that it deems appropriate. I can hope only that that will include the experts, and the many groups that provided expertise, support and guidance on internet regulation long before the Bill even received its First Reading, a long time ago. There are far too many of those experts and groups to list, but it is fundamental that the experts who often spot online harms before they properly emerge be consulted and included in this process if we are to truly capture the priority harms to children, as the new clause intends.

We also welcome the clarification in subsection (2) that Ofcom will be required to provide “examples of content” that would be considered to be—or not be—harmful. These examples will be key to ensuring that the platforms have nowhere to hide when it comes to deciding what is harmful; there will be no grey area. Ofcom will have the power to show them exact examples of what could be deemed harmful.

We recognise, however, that there is subjectivity to the work that Ofcom will have to do once the Bill passes. On priority content, it is most important that providers are clear about what is and is not acceptable; that is why we welcome the new clause, but we do of course wish that the Government applied the same logic to harm pertaining to adults online.

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[Alex Davies-Jones]

The hon. Member for Aberdeen North has outlined the case for the new clause eloquently and powerfully. She may not press it to a Division, if the Minister can give her assurances, but if she did, she would have the wholehearted support of the Opposition.

We see new clause 8 as complementing the child safety duties in the legislation. We fully welcome provisions that provide children with greater power and autonomy in choosing to avoid exposure to certain types of content. We have concerns about how the provisions would work in practice, but that issue has more to do with the Government’s triple-shield protections than the new clause.

The Opposition support new clause 8 because it aims to provide further protections, in addition to the child safety duties, to fully protect children from harmful content and to empower them. It would empower and enable them to filter out private messages from adults or non-verified users. We also welcome the measures in the new clause that require platforms and service providers to design accessible terms of service. That is absolutely vital to best protect children online, which is why we are all here, and what the legislation was designed for.

[Paul Scully]

The aim of the user empowerment duty is to give adults more control over certain categories of legal content that some users will welcome greater choice over. Those duties also give adult users greater control over who they interact with online, but these provisions are not appropriate for children. As the hon. Member for Aberdeen North acknowledged, there are already separate duties on services likely to be accessed by children, in scope of part 3, to undertake comprehensive risk assessments and to comply with safety duties to protect children from harm. That includes requirements to assess how many specific functionalities may facilitate the spread of harmful content, as outlined in clause 10(6)(e), and to protect children from harmful content, including content that has been designated as priority harmful content, by putting in place age-appropriate protections.

As such, children will not need to be provided with tools to control any harmful content they see, as the platform will need to put in place age-appropriate protections. We do not want to give children an option to choose to see content that is harmful to them. The Bill also outlines in clause 11(4)(f) that, where it is proportionate to do so, service providers will be required to take measures in certain areas to meet the child-safety duties. That includes functionalities allowing for control over content that is encountered. It would not be appropriate to require providers to offer children the option to verify their identity, due to the safeguarding and data protection risks that that would pose. Although we expect companies to use technologies such as age assurance to protect children on their service, they would only be used to establish age, not identity.

The new clause would create provisions to enable children to filter out private messages from adults and users who are not on an approved list, but the Bill already contains provisions that address the risks of adults contacting children. There are also requirements on service providers to consider how their service could be used for grooming or child sexual exploitation and abuse, and to apply proportionate measures to mitigate those risks. The service providers already have to assess and mitigate the risks. They have to provide the risk assessment, and within it they could choose to mitigate risk by requiring services to prevent unknown users from contacting children.

For the reasons I have set out, the Bill already provides strong protections for children on services that they are likely to access. I am therefore not able to accept the new clause, and I hope that the hon. Member for Aberdeen North will withdraw it.

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[Alex Davies-Jones]

Labour supports new clause 9, as liability is an issue that we have repeatedly raised throughout the passage of the Bill—most recently, on Report. As colleagues will be aware, the new clause would introduce criminal liabilities for directors who failed to comply with their duties. This would be an appropriate first step in ensuring a direct relationship between senior management of platforms and companies, and their responsibilities to protect children from significant harm. As we have heard, this measure would drive a more effective culture of awareness and accountability in relation to online safety at the top of and within the entire regulated firm. It would go some way towards ensuring that online safety was at the heart of the governance structures internally. The Bill must go further to actively promote cultural change and put online safety at the forefront of business models; it must ensure that these people are aware that it is about keeping people safe and that that must be at the forefront, over any profit. A robust corporate and senior management liability scheme is needed, and it needs to be one that imposes personal liability on directors when they put children at risk.

The Minister knows as well as I do that the benefits of doing so would be strong. We have only to turn to the coroner’s comments in the tragic case of Molly Russell’s death—which I know we are all mindful of as we debate this Bill—to fully understand the damaging impact of viewing harmful content online. I therefore urge the Minister to accept new clause 9, which we wholeheartedly support.

[Paul Scully]

The Government recognise that the intent behind the new clause is to create new criminal offences of non-compliance with selected duties. It would establish a framework for personal criminal offences punishable through fines or imprisonment. It would mean that providers committed a criminal offence if they did not comply with certain duties.

We all want this Bill to be effective. We want it to be on the statute book. It is a question of getting that fine balance right, so that we can properly hold companies to account for the safety of their users. The existing approach to enforcement and senior manager liability strikes the right balance between robust enforcement and deterrent, and ensuring that the UK remains an attractive place to do business. We are confident that the Bill as a whole will bring about the change necessary to ensure that users, especially younger users, are kept safe online.

This new clause tries to criminalise not complying with the Bill’s duties. Exactly what activity would be criminalised is not obvious from the new clause, so it could be difficult for individuals to foresee exactly what type of conduct would constitute an offence. That could lead to unintended consequences, with tech executives driving an over-zealous approach to content take-down for fear of imprisonment, and potentially removing large volumes of innocuous content and so affecting the ability for open debate to take place.

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[Paul Scully]

I look forward to continuing the debate on Report.

[Alex Davies-Jones]

I thank you, too, Dame Angela. I echo the Minister’s sentiments, and thank all the Clerks, the Doorkeepers, the team, and all the stakeholders who have massively contributed, with very short turnarounds, to the scrutiny of this legislation. I have so appreciated all that assistance and expertise, which has helped me, as shadow Minister, to compile our comments on the Bill following the Government’s recommittal of it to Committee, which is an unusual step. Huge thanks to my colleagues who joined us today and in previous sittings, and to colleagues from across the House, and particularly from the SNP, a number of whose amendments we have supported. We look forward to scrutinising the Bill further when it comes back to the House in the new year.

ONLINE SAFETY BILL (Second sitting)

Debate between Alex Davies-Jones and Paul Scully

Committee stage (re-committed clauses and schedules)
Tuesday 13th December 2022 Public Bill Committees

[Paul Scully]

In that case, having moved my amendment, I close my remarks.

[Alex Davies-Jones]

It is a pleasure to serve under your chairship, Dame Angela. With your permission, I will take this opportunity to make some broad reflections on the Government’s approach to the new so-called triple-shield protection that we have heard so much about, before coming on to the amendment tabled in my name in the group.

Broadly, Labour is disappointed that the system-level approach to content that is harmful to adults is being stripped from the Bill and replaced with a duty that puts the onus on the user to keep themselves safe. As the Antisemitism Policy Trust among others has argued, the two should be able to work in tandem. The clause allows a user to manage what harmful material they see by requiring the largest or most risky service providers to provide tools to allow a person in effect to reduce their likelihood of encountering, or to alert them to, certain types of material. We have concerns about the overall approach of the Government, but Labour believes that important additions can be made to the list of content where user-empowerment tools must be in place, hence our amendment (a) to Government amendment 15.

In July, in a little-noticed written ministerial statement, the Government produced a prototype list of content that would be harmful to adults. The list included priority content that category 1 services need to address in their terms and conditions; online abuse and harassment—mere disagreement with another’s point of view would not reach the threshold for harmful content, and so would not be covered; circulation of real or manufactured intimate images without the subject’s consent; content promoting self-harm; content promoting eating disorders; legal suicide content; and harmful health content that is demonstrably false, such as urging people to drink bleach to cure cancer.

We have concerns about whether listing those harms in the Bill is the most effective mechanism, mostly because we feel that the list should be more flexible and able to change according to the issues of the day, but it is clear that the Government will continue to pursue this avenue despite some very worrying gaps. With that in mind, will the Minister clarify what exactly underpins that list if there have been no risk assessments? What was the basis for drawing up that specific list? Surely the Government should be implored to publish the research that determined the list, at the very least.

I recognise that the false communications offence has remained in the Bill, but the list in Government amendment 15 is not exhaustive. Without the additions outlined in our amendment (a) to amendment 15, the list will do little to tackle some of the most pressing harm of our time, some of which we have already heard about today.

I am pleased that the list from the written ministerial statement has more or less been reproduced in amendment 15, under subsection (2), but there is a key and unexplained omission that our amendment (a) to it seeks to correct: the absence of the last point, on harmful health content. Amendment (a) seeks to reinsert such important content into the Bill directly. It seems implausible that the Government failed to consider the dangerous harm that health misinformation can have online, especially given that back in July they seemed to have a grasp of its importance by including it in the original list.

We all know that health-related misinformation and disinformation can significantly undermine public health, as we have heard. We only have to cast our minds back to the height of the coronavirus pandemic to remind ourselves of how dangerous the online space was, with anti-vax scepticism being rife. Many groups were impacted, including pregnant women, who received mixed messages about the safety of covid vaccination, causing widespread confusion, fear and inaction. By tabling amendment (a) to amendment 15, we wanted to understand why the Government have dropped that from the list and on what exact grounds.

In addition to harmful health content, our amendment (a) to amendment 15 would also add to the list content that incites hateful extremism and provides false information about climate change, as we have heard. In early written evidence from Carnegie, it outlined how serious the threat of climate change disinformation is to the UK. Malicious actors spreading false information on social media could undermine collective action to combat the threats. At present, the Online Safety Bill is not designed to tackle those threats head on.

We all recognise that social media is an important source of news and information for many people, and evidence is emerging of its role in climate change disinformation. The Centre for Countering Digital Hate published a report in 2021 called “The Toxic Ten: How ten fringe publishers fuel 69% of digital climate change denial”, which explores the issue further. Further analysis of activity on Facebook around COP26 undertaken by the Institute for Strategic Dialogue demonstrates the scale of the challenge in dealing with climate change misinformation and disinformation. The research compared the levels of engagement generated by reliable, scientific organisations and climate-sceptic actors, and found that posts from the latter frequently received more traction and reach than the former, which is shocking. For example, in the fortnight in which COP26 took place, sceptic content garnered 12 times the level of engagement that authoritative sources did on the platform, and 60% of the sceptic posts analysed could be classified as actively and explicitly attacking efforts to curb climate change, which just goes to show the importance of ensuring that climate change disinformation is also included in the list in Government amendment 15.

Our two amendments—amendment (a) to amendment 15, and amendment (a) to amendment 16 —seek to ensure that the long-standing omission from the Bill of hateful extremism is put right here as a priority. There is increasing concern about extremism leading to violence and death that does not meet the definition for terrorism. The internet and user-to-user services play a central role in the radicalisation process, yet the Online Safety Bill does not cover extremism.

Colleagues may be aware that Sara Khan, the former lead commissioner for countering extremism, provided a definition of extremism for the Government in February 2021, but there has been no response. The issue has been raised repeatedly by Members across the House, including by my hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard), following the tragic murders carried out by a radicalised incel in his constituency.

Amendment (a) to amendment 16 seeks to bring a formal definition of hateful extremism into the Bill and supports amendment (a) to amendment 15. The definition, as proposed by Sara Khan, who was appointed as Britain’s first countering extremism commissioner in 2018, is an important first step in addressing the gaps that social media platforms and providers have left open for harm and radicalisation.

Social media platforms have often been ineffective in removing other hateful extremist content. In November 2020, The Guardian reported that research from the Centre for Countering Digital Hate had uncovered how extremist merchandise had been sold on Facebook and Instagram to help fund neo-Nazi groups. That is just one of a huge number of instances, and it goes some way to suggest that a repeatedly inconsistent and ineffective approach to regulating extremist content is the one favoured by some social media platforms.

I hope that the Minister will seriously consider the amendments and will see the merits in expanding the list in Government amendment 15 to include these additional important harms.

--- Later in debate ---

[Paul Scully]

I follow, but I do not agree. The categories of content in proposed new subsections (8C) and (8D), introduced by amendment 15, underpin a lot of this. I answered the question in an earlier debate when talking about the commercial impetus. I cannot imagine many mainstream advertisers wanting to advertise with a company that removed from its terms of service the exclusion of racial abuse, misogyny and general abuse. We have seen that commercial impetus really kicking in with certain platforms. For those reasons, I am unable to accept the amendments to the amendments, and I hope that the Opposition will not press them to a vote.

[Alex Davies-Jones]

I am grateful for the opportunity to push the Minister further. I asked him whether he could outline where the list in amendment 15 came from. Will he publish the research that led him to compile that specific list of priority harms?

[Paul Scully]

The definitions that we have taken are ones that strike the right balance and have a comparatively high threshold, so that they do not capture challenging and robust discussions on controversial topics.

Amendment 8 agreed to.

Amendments made: 9, in clause 14, page 14, line 5, after “to” insert “effectively”.

This amendment strengthens the duty in this clause by requiring that the systems or processes used to deal with the kinds of content described in subsections (8B) to (8D) (see Amendment 15) should be designed to effectively increase users’ control over such content.

Amendment 10, in clause 14, page 14, line 6, leave out from “encountering” to “the” in line 7 and insert

“content to which subsection (2) applies present on”.

This amendment inserts a reference to the kinds of content now relevant for this clause, instead of referring to priority content that is harmful to adults.

Amendment 11, in clause 14, page 14, line 9, leave out from “to” to end of line 10 and insert

“content present on the service that is a particular kind of content to which subsection (2) applies”.—(Paul Scully.)

This amendment inserts a reference to the kinds of content now relevant for this clause, instead of referring to priority content that is harmful to adults.

[Alex Davies-Jones]

I beg to move amendment 102, in clause 14, page 14, line 12, leave out “made available to” and insert “in operation for”.

This amendment, and Amendment 103, relate to the tools proposed in Clause 14 which will be available for individuals to use on platforms to protect themselves from harm. This amendment specifically forces platforms to have these safety tools “on” by default.

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[Paul Scully]

In the previous debate, I talked about amendment 15, which brought in a lot of protections against content that encourages and promotes, or provides instruction for, self-harm, suicide or eating disorders, and against content that is abusive or incites hate on the base of race, religion, disability, sex, gender reassignment or sexual orientation. We have also placed a duty on the largest platforms to offer adults the option to filter out unverified users if they so wish. That is a targeted approach that reflects areas where vulnerable users in particular could benefit from having greater choice and control. I come back to the fact that that is the third shield and an extra safety net. A lot of the extremes we have heard about, which have been used as debating points, as important as they are, should very much be wrapped up by the first two shields.

We have a targeted approach, but it is based on choice. It is right that adult users have a choice about what they see online and who they interact with. It is right that this choice lies in the hands of those adults. The Government mandating that these tools be on by default goes against the central aim of users being empowered to choose for themselves whether they want to reduce their engagement with some kinds of legal content.

We have been clear right from the beginning that it is not the Government’s role to say what legal content adults should or should not view online or to incentivise the removal of legal content. That is why we removed the adult legal but harmful duties in the first place. I believe we are striking the right balance between empowering adult users online and protecting freedom of expression. For that reason, I am not able to accept the amendments from the hon. Member for Pontypridd.

[Alex Davies-Jones]

It is disappointing that the Government are refusing to back these amendments to place the toggle as “on” by default. It is something that we see as a safety net, as the Minister described. Why would someone have to choose to have the safety net there? If someone does not want it, they can easily take it away. The choice should be that way around, because it is there to protect all of us.

--- Later in debate ---

[Alex Davies-Jones]

My hon. Friend makes a very good point. It goes to show the nature of this as a protection for all of us, even MPs, from accessing content that could be harmful to our health or, indeed, profession. Given the nature of the amendment, we feel that this is a safety net that should be available to all. It should be on by default.

[Paul Scully]

I should say that in the spirit of choice, companies can also choose to default it to be switched off in the first place as well.

[Alex Davies-Jones]

The Minister makes the point that companies can choose to have it off by default, but we would not need this Bill in the first place if companies did the right thing. Let us be clear: we would not have had to be here debating this for the past five years —for me it has been 12 months—if companies were going to do the right thing and protect people from harmful content online. On that basis, I will push the amendments to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Alex Davies-Jones]

This is an extremely large grouping so, for the sake of the Committee, I will do my best to keep my comments focused and brief where possible. I begin by addressing Government new clauses 3 and 4 and the consequential amendments.

Government new clause 3 introduces new duties that aim to ensure that the largest or most risky online service providers design systems and processes that ensure they cannot take down or restrict content in a way prevents a person from seeing it without further action by the user, or ban users, except in accordance with their own terms of service, or if the content breaks the law or contravenes the Online Safety Bill regime. This duty is referred to as the duty not to act against users except in accordance with terms of service. In reality, that will mean that the focus remains far too much on the banning, taking down and restriction of content, rather than our considering the systems and processes behind the platforms that perpetuate harm.

Labour has long held the view that the Government have gone down an unhelpful cul-de-sac on free speech. Instead of focusing on defining exactly which content is or is not harmful, the Bill should be focused on the processes by which harmful content is amplified on social media. We must recognise that a person posting a racist slur online that nobody notices, shares or reads is significantly less harmful than a post that can quickly go viral, and can within hours gain millions of views or shares. We have talked a lot in this place about Kanye West and the comments he has made on Twitter in the past few weeks. It is safe to say that a comment by Joe Bloggs in Hackney that glorifies Hitler does not have the same reach or produce the same harm as Kanye West saying exactly the same thing to his 30 million Twitter followers.

Our approach has the benefit of addressing the things that social media companies can control—for example, how content spreads—rather than the things they cannot control, such as what people say online. It reduces the risk to freedom of speech because it tackles how content is shared, rather than relying entirely on taking down harmful content. Government new clause 4 aims to improve the effectiveness of platforms’ terms of service in conjunction with the Government’s new triple shield, which the Committee has heard a lot about, but the reality is they are ultimately seeking to place too much of the burden of protection on extremely flexible and changeable terms of service.

If a provider’s terms of service say that certain types of content are to be taken down or restricted, then providers must run systems and processes to ensure that that can happen. Moreover, people must be able to report breaches easily, through a complaints service that delivers appropriate action, including when the service receives complaints about the provider. This “effectiveness” duty is important but somewhat misguided.

The Government, having dropped some of the “harmful but legal” provisions, seem to expect that if large and risky services—the category 1 platforms—claim to be tackling such material, they must deliver on that promise to the customer and user. This reflects a widespread view that companies may pick and choose how to apply their terms of service, or implement them loosely and interchangeably, as we have heard. Those failings will lead to harm when people encounter things that they would not have thought would be there when they signed up. All the while, service providers that do not fall within category 1 need not enforce their terms of service, or may do so erratically or discriminatorily. That includes search engines, no matter how big.

This large bundle of amendments seems to do little to actually keep people safe online. I have already made my concerns about the Government’s so-called triple shield approach to internet safety clear, so I will not repeat myself. We fundamentally believe that the Government’s approach, which places too much of the onus on the user rather than the platform, is wrong. We therefore cannot support the approach that is taken in the amendments. That being said, the Minister can take some solace from knowing that we see the merits of Government new clause 5, which

“requires OFCOM to give guidance to providers about complying with the duties imposed by NC3 and NC4”.

If this is the avenue that the Government insist on going down, it is absolutely vital that providers are advised by Ofcom on the processes they will be required to take to comply with these new duties.

Amendment 19 agreed to.

Amendment made: 20, in clause 18, page 19, line 33, at end insert

“, and

(b) section (Further duties about terms of service)(5)(a) (reporting of content that terms of service allow to be taken down or restricted).”—(Paul Scully.)

This amendment inserts a signpost to the new provision about content reporting inserted by NC4.

Clause 18, as amended, ordered to stand part of the Bill.

Clause 19

Duties about complaints procedures

Amendment made: 21, in clause 19, page 20, line 15, leave out “, (3) or (4)” and insert “or (3)”.—(Paul Scully.)

This amendment removes a reference to clause 20(4), as that provision is moved to NC4.

[Paul Scully]

I beg to move amendment 22, in clause 19, page 20, line 27, leave out from “down” to “and” in line 28 and insert

“or access to it being restricted, or given a lower priority or otherwise becoming less likely to be encountered by other users,”.

NC2 states what is meant by restricting users’ access to content, and this amendment makes a change in line with that, to avoid any implication that downranking is a form of restriction on access to content.

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[Paul Scully]

These amendments clarify the meaning of “restricting access to content” and “access to content” for the purposes of the Bill. Restricting access to content is an expression that is used in various provisions across the Bill, such as in new clause 2, under which providers of category 1 services will have a duty to ensure that they remove or restrict access to users’ content only where that is in accordance with their terms of service or another legal obligation. There are other such references in clauses 15, 16 and 17.

The amendments make it clear that the expression

“restricting users’ access to content”

covers cases where a provider prevents a user from accessing content without that user taking a prior step, or where content is temporarily hidden from a user. They also make it clear that this expression does not cover any restrictions that the provider puts in place to enable users to apply user empowerment tools to limit the content that they encounter, or cases where access to content is controlled by another user, rather than by the provider.

The amendments are largely technical, but they do cover things such as down-ranking. Amendment 22 is necessary because the previous wording of this provision wrongly suggested that down-ranking was covered by the expression “restricting access to content”. Down-ranking is the practice of giving content a lower priority on a user’s feed. The Government intend that users should be able to complain if they feel that their content has been inappropriately down-ranked as a result of the use of proactive technology. This amendment ensures consistency.

I hope that the amendments provide clarity as to the meaning of restricting access to content for those affected by the Bill, and assist providers with complying with their duties.

[Alex Davies-Jones]

Again, I will keep my comments on clause 19 brief, as we broadly support the intentions behind the clause and the associated measures in the grouping. My hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) spoke at length about this important clause, which relates to the all-important complaints procedures available around social media platforms and companies, in the previous Bill Committee.

During the previous Committee, Labour tabled amendments that would have empowered more individuals to make a complaint about search content in the event of non-compliance. In addition, we wanted an external complaints option for individuals seeking redress. Sadly, all those amendments were voted down by the last Committee, but I must once again press the Minister on those points, particularly in the context of the new amendments that have been tabled.

Without redress for individual complaints, once internal mechanisms have been exhausted, victims of online abuse could be left with no further options. Consumer protections could be compromised and freedom of expression, with which the Government seem to be borderline obsessed, could be infringed for people who feel that their content has been unfairly removed.

Government new clause 2 deals with the meaning of references to

“restricting users’ access to content”,

in particular by excluding restrictions resulting from the use of user empowerment tools as described in clause 14. We see amendments 22 and 59 as important components of new clause 2, and are therefore more than happy to support them. However, I reiterate to the Minister and place on the record once again the importance of introducing an online safety ombudsman, which we feel is crucial to new clause 2. The Joint Committee recommended the introduction of such an ombudsman, who would consider complaints when internal routes of redress had not resulted in resolution, had failed to address risk and had led to significant and demonstrable harm. As new clause 2 relates to restricting users’ access to content, we must also ensure that there is an appropriate channel for complaints if there is an issue that users wish to take up around restrictions in accessing content.

By now, the Minister will be well versed in my thoughts on the Government’s approach, and on the reliance on the user empowerment tool approach more broadly. It is fundamentally an error to pursue a regime that is so content-focused. Despite those points, we see the merits in Government amendments 22 and 59, and in new clause 2, so have not sought to table any further amendments at this stage.

--- Later in debate ---

[Alex Davies-Jones]

I will speak broadly to clause 20, as it is an extremely important clause, before making remarks about the group of Government amendments we have just voted on.

Clause 20 is designed to provide a set of balancing provisions that will require companies to have regard to freedom of expression and privacy when they implement their safety duties. However, as Labour has repeatedly argued, it is important that companies cannot use privacy and free expression as a basis to argue that they can comply with regulations in less substantive ways. That is a genuine fear here.

We all want to see a Bill in place that protects free speech, but that cannot come at the expense of safety online. The situation with regards to content that is harmful to adults has become even murkier with the Government’s attempts to water down the Bill and remove adult risk assessments entirely.

The Minister must acknowledge that there is a balance to be achieved. We all recognise that. The truth is—and this is something that his predecessor, or should I say his predecessor’s predecessor, touched on when we considered this clause in the previous Bill Committee—that at the moment platforms are extremely inconsistent in their approach to getting the balance right. Although Labour is broadly supportive of this clause and the group of amendments, we feel that now is an appropriate time to put on record our concerns over the important balance between safety, transparency and freedom of expression.

Labour has genuine concerns over the future of platforms’ commitment to retaining that balance, particularly if the behaviours following the recent takeover of Twitter by Elon Musk are anything to go by. Since Elon Musk took over ownership of the platform, he has repeatedly used Twitter polls, posted from his personal account, as metrics to determine public opinion on platform policy. The general amnesty policy and the reinstatement of Donald Trump both emerged from such polls.

According to former employees, those polls are not only inaccurate representations of the platform’s user base, but are actually

“designed to be spammed and gamed”.

The polls are magnets for bots and other inauthentic accounts. This approach and the reliance on polls have allowed Elon Musk to enact and dictate his platform’s policy on moderation and freedom of expression. Even if he is genuinely trusting the results of these polls and not gamifying them, they do not accurately represent the user base nor the best practices for confronting disinformation and harm online.

Elon Musk uses the results to claim that “the people have spoken”, but they have not. Research from leading anti-hate organisation the Anti-Defamation League shows that far-right extremists and neo-Nazis encouraged supporters to actively re-join Twitter to vote in these polls. The impacts of platforming neo-Nazis on Twitter do not need to be stated. Such users are explicitly trying to promote violent and hateful agendas, and they were banned initially for that exact reason. The bottom line is that those people were banned in line with Twitter’s terms of service at the time, and they should not be re-platformed just because of the findings of one Twitter poll.

These issues are at the very heart of Labour’s concerns in relation to the Bill—that the duties around freedom of expression and privacy will be different for those at the top of the platforms. We support the clause and the group of amendments, but I hope the Minister will be able to address those concerns in his remarks.

[Paul Scully]

I endorse the general approach set out by the hon. Member for Pontypridd. We do not want to define freedom of speech based on a personal poll carried out on one platform. That is exactly why we are enshrining it in this ground-breaking Bill.

We want to get the balance right. I have talked about the protections for children. We also want to protect adults and give them the power to understand the platforms they are on and the risks involved, while having regard for freedom of expression and privacy. That is a wider approach than one man’s Twitter feed. These clauses are important to ensure that the service providers interpret and implement their safety duties in a proportionate way that limits negative impact on users’ rights to freedom of expression. However, they also have to have regard to the wider definition of freedom of expression, while protecting users, which the rest of the Bill covers in a proportionate way.

[Alex Davies-Jones]

This goes to the heart of more than just one person’s Twitter feed, although we could say that that person is an incredibly powerful and influential figure on the platform. In the past 24 hours, Twitter has disbanded its trust and safety council. Members of that council included expert groups working to tackle harassment and child sexual exploitation, and to promote human rights. Does the Minister not feel that the council being disbanded goes to the heart of what we have been debating? It shows how a platform can remove its terms of service or change them at whim in order to prevent harm from being perpetrated on that platform.

[Paul Scully]

I will come back to some of the earlier points. At the end of the day, when platforms change their terms and conditions, which they are free to do, they will be judged by their users and indeed the advertisers from whom they make their money. There are market forces—I will use that phrase as well as “commercial imperative”, to get that one in there—that will drive behaviour. It may be the usability of Facebook, or Twitter’s terms and conditions and the approach of its new owner, that will drive those platforms to alternative users. I am old enough to remember Myspace, CompuServe and AOL, which tried to box people into their walled gardens. What happened to them? Only yesterday, someone from Google was saying that the new artificial intelligence chatbot—ChatGPT—may well disrupt Google. These companies, as big as they are, do not have a right to exist. They have to keep innovating. If they get it wrong, then they get it wrong.

--- Later in debate ---

[Paul Scully]

Absolutely. We have captured that in other parts of the Bill, but I wanted to make that specific bit clear because I am not sure whether I understood or answered my hon. Friend’s question correctly at the time.

Question put and agreed to.

Clause 20, as amended, accordingly ordered to stand part of the Bill.

Clause 21

Record-keeping and review duties

Amendments made: 32, in clause 21, page 23, line 5, leave out “, 10 or 12” and insert “or 10”.

This amendment is consequential on Amendment 6 (removal of clause 12).

Amendment 33, in clause 21, page 23, line 45, leave out paragraph (c).

This amendment is consequential on Amendment 7 (removal of clause 13).

Amendment 34, in clause 21, page 24, line 6, leave out “section” and insert “sections”.

This amendment is consequential on Amendment 35.

Amendment 35, in clause 21, page 24, line 6, at end insert—

“, (Duty not to act against users except in accordance with terms of service) and (Further duties about terms of service) (duties about terms of service).”—(Paul Scully.)

This amendment ensures that providers have a duty to review compliance with the duties set out in NC3 and NC4 regularly, and after making any significant change to the design or operation of the service.

Question proposed, That the clause, as amended, stand part of the Bill.

[Alex Davies-Jones]

Given that there are few changes to this clause from when the Bill was amended in the previous Public Bill Committee, I will be brief. We in the Opposition are clear that record-keeping and review duties on in-scope services make up an important function of the regulatory regime and sit at the very heart of the Online Safety Bill. We must push platforms to transparently report all harms identified and the action taken in response, in line with regulation.

--- Later in debate ---

[Paul Scully]

I think we all agree that written records are hugely important. They are important as evidence in cases where Ofcom is considering enforcement action, and a company’s compliance review should be done regularly, especially before they make changes to their service.

The Bill does not intend to place excessive burdens on small and low-risk businesses. As such, clause 21 provides Ofcom with the power to exempt certain types of service from the record-keeping and review duties. However, the details of any exemptions must be published.

To half-answer the point made by the hon. Member for Aberdeen North, the measures will be brought to the Lords, but I will endeavour to keep her up to date as best we can so that we can continue the conversation. We have served together on several Bill Committees, including on technical Bills that required us to spend several days in Committee—although they did not come back for re-committal—so I will endeavour to keep her and, indeed, the hon. Member for Pontypridd, up to date with developments.

Question put and agreed to. 

Clause 21, as amended, accordingly ordered to stand part of the Bill.

Clause 30

duties about freedom of expression and privacy

Amendments made: 36, in clause 30, page 31, line 31, after “have” insert “particular”.

This amendment has the result that providers of regulated search services must have particular regard to freedom of expression when deciding on and implementing safety measures and policies.

Amendment 37, in clause 30, page 31, line 34, after “have” insert “particular”.—(Paul Scully.)

This amendment has the result that providers of regulated search services must have particular regard to users’ privacy when deciding on and implementing safety measures and policies.

Clause 30, as amended, ordered to stand part of the Bill.

Clause 46

Relationship between duties and codes of practice

Amendments made: 38, in clause 46, page 44, line 27, after “have” insert “particular”.

This amendment has the result that providers of services who take measures other than those recommended in codes of practice in order to comply with safety duties must have particular regard to freedom of expression and users’ privacy.

Amendment 39, in clause 46, page 45, line 12, leave out paragraph (c).

This amendment is consequential on Amendment 7 (removal of clause 13).

Amendment 40, in clause 46, page 45, line 31, at end insert “, or

(ii) a duty set out in section 14 (user empowerment);”.—(Paul Scully.)

This amendment has the effect that measures recommended in codes of practice to comply with the duty in clause 14 are relevant to the question of whether a provider is complying with the duties in clause 20(2) and (3) (having regard to freedom of expression and users’ privacy).

Question proposed, That the clause, as amended, stand part of the Bill.

[Alex Davies-Jones]

I do not wish to repeat myself and test the Committee’s patience, so I will keep my comments brief. As it stands, service providers would be treated as complying with their duties if they had followed the recommended measures set out in the relevant codes of practice, as set out in the Bill. However, providers could take alternative measures to comply, but as I said in previous Committee sittings, Labour remains concerned that the definition of “alternative measures” is far too broad. I would be grateful if the Minister elaborated on his assessment of the instances in which a service provider may seek to comply via alternative measures.

The codes of practice should be, for want of a better phrase, best practice. Labour is concerned that, to avoid the duties, providers may choose to take the “alternative measures” route as an easy way out. We agree that it is important to ensure that providers have a duty with regard to protecting users’ freedom of expression and personal privacy. As we have repeatedly said, the entire Online Safety Bill regime relies on that careful balance being at the forefront. We want to see safety at the forefront, but recognise the importance of freedom of expression and personal privacy, and it is right that those duties are central to the clause. For those reasons, Labour has not sought to amend this part of the Bill, but I want to press the Minister on exactly how he sees this route being used.

[Paul Scully]

It is important that service providers have flexibility, so that the Bill does not disincentivise innovation or force service providers to use measures that might not work for all business models or technological contexts. The tech sector is diverse and dynamic, and it is appropriate that companies can take innovative approaches to fulfilling their duties. In most circumstances, we expect companies to take the measures outlined in Ofcom’s code of practice as the easiest route to compliance. However, where a service provider takes alternative measures, Ofcom must consider whether those measures safeguard users’ privacy and freedom of expression appropriately. Ofcom must also consider whether they extend across all relevant areas of a service mentioned in the illegal content and children’s online safety duties, such as content moderation, staff policies and practices, design of functionalities, algorithms and other features. Ultimately, it will be for Ofcom to determine a company’s compliance with the duties, which are there to ensure users’ safety.

Question put and agreed to.

Clause 46, as amended, accordingly ordered to stand part of the Bill.

Clause 55 disagreed to.

Clause 56

Regulations under sections 54 and 55

Amendments made: 42, in clause 56, page 54, line 40, leave out subsection (3).

This amendment is consequential on Amendment 41 (removal of clause 55).

Amendment 43, in clause 56, page 54, line 46, leave out “or 55”.

This amendment is consequential on Amendment 41 (removal of clause 55).

Amendment 44, in clause 56, page 55, line 8, leave out “or 55”.

This amendment is consequential on Amendment 41 (removal of clause 55).

Amendment 45, in clause 56, page 55, line 9, leave out

“or adults are to children or adults”

and insert “are to children”.—(Paul Scully.)

This amendment is consequential on Amendment 41 (removal of clause 55).

Question proposed, That the clause, as amended, stand part of the Bill.

[Alex Davies-Jones]

As we know, the clause makes provision in relation to the making of regulations designating primary and priority content that is harmful to children, and priority content that is harmful to adults. The Secretary of State may specify a description of content in regulations only if they consider that there is a material risk of significant harm to an appreciable number of children or adults in the United Kingdom presented by user-generated or search content of that description, and must consult Ofcom before making such regulations.

In the last Bill Committee, Labour raised concerns that there were no duties that required the Secretary of State to consult others, including expert stakeholders, ahead of making these regulations. That decision cannot be for one person alone. When it comes to managing harmful content, unlike illegal content, we can all agree that it is about implementing systems that prevent people from encountering it, rather than removing it entirely.

[Alex Davies-Jones]

I completely agree: we are now on our third Secretary of State, our third Minister and our third Prime Minister since we began considering this iteration of the Bill. It is vital that this does not come down to one person’s ideological beliefs. We have spoken at length about this issue; the hon. Member for Don Valley has spoken about his concerns that Parliament should be sovereign, and should make these decisions. It should not be for one individual or one stakeholder to make these determinations.

We also have issues with the Government’s chosen toggle approach—we see that as problematic. We have debated it at length, but our concerns regarding clause 56 are about the lack of consultation that the Secretary of State of the day, whoever that may be and whatever political party they belong to, will be forced to make before making widespread changes to a regime. I am afraid that those concerns still exist, and are not just held by us, but by stakeholders and by Members of all political persuasions across the House. However, since our proposed amendment was voted down in the previous Bill Committee, nothing has changed. I will spare colleagues from once again hearing my pleas about the importance of consultation when it comes to determining all things related to online safety, but while Labour Members do not formally oppose the clause, we hope that the Minister will address our widespread concerns about the powers of the Secretary of State in his remarks.

[Paul Scully]

I appreciate the hon. Lady’s remarks. We have tried to ensure that the Bill is proportionate, inasmuch as the Secretary of State can designate content if there is material risk of significant harm to an appreciable number of children in the United Kingdom. The Bill also requires the Secretary of State to consult Ofcom before making regulations on the priority categories of harm.

--- Later in debate ---

[Alex Davies-Jones]

The Minister has just outlined exactly what our concerns are. He is unable to give an exact number, figure or issue, but that is what the Secretary of State will have to do, without having to consult any stakeholders regarding that issue. There are many eyes on us around the world, with other legislatures looking at us and following suit, so we want the Bill to be world-leading. Many Governments across the world may deem that homosexuality, for example, is of harm to children. Because this piece of legislation creates precedent, a Secretary of State in such a Government could determine that any platform in that country should take down all that content. Does the Minister not see our concerns in that scenario?

[Paul Scully]

I was about to come on to the fact that the Secretary of State would be required to consult Ofcom before making regulations on the priority categories of harm. Indeed Ofcom, just like the Secretary of State, speaks to and engages with a number of stakeholders on this issue to gain a deeper understanding. Regulations designating priority harms would be made under the draft affirmative resolution procedure, but there is also provision for the Secretary of State to use the made affirmative resolution procedure in urgent scenarios, and this would be an urgent scenario. It is about getting the balance right.

--- Later in debate ---

[Paul Scully]

The amendments to schedule 8 confirm that references to relevant content, consumer content and regulated user-generated content have the same meaning as established by other provisions of the Bill. Again, that ensures consistency, which will, in turn, support Ofcom in requiring providers of category 1 services to give details in their annual transparency reports of their compliance with the new transparency, accountability and freedom of expression duties.

[Alex Davies-Jones]

I will keep my comments on this grouping brief, because I have already raised our concerns and our overarching priority in terms of transparency reports in the previous debate, which was good one, with all Members highlighting the need for transparency and reporting in the Bill. With the Chair’s permission, I will make some brief comments on Government amendment 72 before addressing Government amendments 73 and 75.

It will come as no surprise to the Minister that amendment 72, which defines relevant content for the purposes of schedule 8, has a key omission—specifying priority content harmful to adults. For reasons we have covered at length, we think that it is a gross mistake on the Government’s side to attempt to water down the Bill in this way. If the Minister is serious about keeping adults safe online, he must reconsider this approach. However, we are happy to see amendments 73 and 75, which define consumer content and regulated user-generated content. It is important for all of us—whether we are politicians, researchers, academics, civil society, stakeholders, platforms, users or anyone else—that these definitions are in the Bill so that, when it is passed, it can be applied properly and at pace. That is why we have not sought to amend this grouping.

I must press the Minister to respond on the issues around relevant content as outlined in amendment 72. We greatly feel that more needs to be done to address this type of content and its harm to adults, so I would be grateful to hear the Minister’s assessment of how exactly these transparency reports will report back on this type of harm, given its absence in this group of amendments and the lack of a definition.

ONLINE SAFETY BILL (First sitting)

Debate between Alex Davies-Jones and Paul Scully

Committee stage (re-committed clauses and schedules)
Tuesday 13th December 2022 Public Bill Committees

[Alex Davies-Jones]

Of course, Sir Roger. Without addressing the other amendments, I would like us to move away from the overly content-focused approach that the Government seem intent on taking in the Bill more widely. I will leave my comments there on the SNP amendment, but we support our SNP colleagues on it.

[The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport (Paul Scully)]

It is a pleasure to serve under your chairmanship, Sir Roger.

Being online can be a hugely positive experience for children and young people, but we recognise the challenge of habit-forming behaviour or designed addiction to some digital services. The Bill as drafted, however, would already deliver the intent of the amendment from the hon. Member for Aberdeen North. If service providers identify in their risk assessment that habit-forming or addictive-behaviour risks cause significant harm to an appreciable number of children on a service, the Bill will require them to put in place measures to mitigate and manage that risk under clause 11(2)(a).

To meet the child safety risk assessment duties under clause 10, services must assess the risk of harm to children from the different ways in which the service is used; the impact of such use; the level of risk of harm to children; how the design and operation of the service may increase the risks identified; and the functionalities that facilitate the presence or dissemination of content of harm to children. The definition of “functionality” at clause 200 already includes an expression of a view on content, such as applying a “like” or “dislike” button, as at subsection (2)(f)(i).

--- Later in debate ---

[Paul Scully]

The Bill’s key objective, above everything else, is the safety of young people online. That is why the strongest protections in the Bill are for children. Providers of services that are likely to be accessed by children will need to provide safety measures to protect child users from harmful content, such as pornography, and from behaviour such as bullying. We expect companies to use age verification technologies to prevent children from accessing services that pose the highest risk of harm to them, and age assurance technologies and other measures to provide children with an age-appropriate experience.

The previous version of the Bill already focused on protecting children, but the Government are clear that the Bill must do more to achieve that and to ensure that the requirements on providers are as clear as possible. That is why we are strengthening the Bill and clarifying the responsibilities of providers to provide age-appropriate protections for children online. We are making it explicit that providers may need to use age assurance to identify the age of their users in order to meet the child safety duties for user-to-user services.

The Bill already set out that age assurance may be required to protect children from harmful content and activity, as part of meeting the duty in clause 11(3), but the Bill will now clarify that it may also be needed to meet the wider duty in subsection (2) to

“mitigate and manage the risks of harm to children”

and to manage

“the impact of harm to children”

on such services. That is important so that only children who are old enough are able to use functionalities on a service that poses a risk of harm to younger children. The changes will also ensure that children are signposted to support that is appropriate to their age if they have experienced harm. For those reasons, I recommend that the Committee accepts the amendments.

[Alex Davies-Jones]

I have a few questions regarding amendments 1 to 3, which as I mentioned relate to the thorny issue of age verification and age assurance, and I hope the Minister can clarify some of them.

We are unclear about why, in subsection (3)(a), the Government have retained the phrase

“for example, by using age verification, or another means of age assurance”.

Can that difference in wording be taken as confirmation that the Government want harder forms of age verification for primary priority content? The Minister will be aware that many in the sector are unclear about what that harder form of age verification may look like, so some clarity would be useful for all of us in the room and for those watching.

In addition, we would like to clarify the Minister’s understanding of the distinction between age verification and age assurance. They are very different concepts in reality, so we would appreciate it if he could be clear, particularly when we consider the different types of harm that the Bill will address and protect people from, how that will be achieved and what technology will be required for different types of platform and content. I look forward to clarity from the Minister on that point.

[Paul Scully]

That is a good point. In essence, age verification is the hard access to a service. Age assurance ensures that the person who uses the service is the same person whose age was verified. Someone could use their parent’s debit card or something like that, so it is not necessarily the same person using the service right the way through. If we are to protect children, in particular, we have to ensure that we know there is a child at the other end whom we can protect from the harm that they may see.

On the different technologies, we are clear that our approach to age assurance or verification is not technology-specific. Why? Because otherwise the Bill would be out of date within around six months. By the time the legislation was fully implemented it would clearly be out of date. That is why it is incumbent on the companies to be clear about the technology and processes they use. That information will be kept up to date, and Ofcom can then look at it.

Online Safety Bill

Debate between Alex Davies-Jones and Paul Scully

Report stage
Monday 5th December 2022 Commons Chamber

[Paul Scully]

The hon. Gentleman talks about the wider use of screens and screen time, and that is why Ofcom’s media literacy programme, and DCMS’s media literacy strategy—

[Alex Davies-Jones (Pontypridd) (Lab)]

It is not in the Bill.

[Paul Scully]

That is because we have a detailed strategy that tackles many of these issues. Again, none of this is perfect, and as I have said, the Government are working in tandem with the platforms, and with parents and education bodies, to make sure we get that bit right. The hon. Gentleman is right to highlight that as a big issue.

I talked about harmful communications, recognising that we could leave a potential gap in the criminal law. The Government have also decided not to repeal existing communications offences in the Malicious Communications Act 1988, or those under section 127(1) of the Communications Act 2003. That will ensure that victims of domestic abuse or other extremely harmful communications will still be robustly protected by the criminal law. Along with planned changes to the harmful communications offence, we are making a number of additional changes to the Bill—that will come later, Mr Speaker, and I will not tread too much into that, as it includes the removal of the adult safety duties, often referred to as the legal but harmful provision. The amended Bill offers adults a triple shield of protection that requires platforms to remove illegal content and material that violates their terms and conditions, and gives adults user controls to help them avoid seeing certain types of content.

The Bill’s key objective, above everything else, is the safety of children online, and we will be making a number of changes to strengthen the Bill’s existing protections for children. We will make sure that we expect platforms to use age assurance technology when identifying the age of their users, and we will also require platforms with minimum age restrictions to explain in their terms of service what measures they have in place to prevent access to those below their minimum age, and enforce those measures consistently. We are planning to name the Children’s Commissioner as a statutory consultee for Ofcom in its development of the codes of practice, ensuring that children’s views and needs are represented.

[Alex Davies-Jones]

Which one?

[Paul Scully]

That is the Children’s Commissioner for England, specifically because they have particular reserved duties for the whole of the UK. None the less, Ofcom must also have regard to a wider range of voices, which can easily include the other Children’s Commissioners.

Fireworks: Sale and Use

Debate between Alex Davies-Jones and Paul Scully

Monday 8th November 2021 Westminster Hall

[Paul Scully]

I want to leave my hon. Friend the Member for Carshalton and Wallington time to conclude, so I will not give way to my hon. Friend for a second time.

We have an ongoing programme of action for fireworks, responding to the key issues raised. This included commissioning the research by Ipsos MORI that provided evidence on consumer attitudes and behaviours around using fireworks in the UK. The key findings have informed our public awareness campaigns and support the need to educate consumers on use of fireworks, to commission noise research—admittedly yet to be published—to test the decibel level of commonly used fireworks, to engage with animal welfare organisations to better understand what specific issues they face, and to engage with the fireworks industry to consider what action it can take to promote consumer safety.

I draw hon. Members’ attention to one of the key commitments the Government made in response to the Petitions Committee regarding public awareness of the safe and considerate use of fireworks. We know that information and education are vital to address the key issues around fireworks. The Office for Product Safety and Standards works in partnership with animal welfare organisations, safety charities and the industry to develop an annual campaign on fireworks; the 2020 campaign was far reaching and had a potential reach of 2.6 million people on Twitter. We built and expanded on that success for the 2021 fireworks campaign, focusing on educating people on how to buy, use, store and dispose of fireworks safely; ensuring that retailers know and understand their responsibilities when selling fireworks; and promoting considerate use so that people and animals are better protected from any negative effects that may be caused by fireworks.

[Alex Davies-Jones]

Will the Minister give way?

[Paul Scully]

I will give way very quickly, but this will be the last time.

[Alex Davies-Jones]

I am grateful to the Minister for giving way, especially as he is short on time. When I met people from my local fire service this week, they mentioned the idea of a firework amnesty for people who purchase fireworks but end up not using them—perhaps because of poor weather—and have no way to safely dispose of them. They encouraged some sort of formal guidance around such an amnesty so that people could safely dispose of or hand in unused fireworks. Would the Minister support that?

[Paul Scully]

That is a really interesting idea. Any way of taking potentially dangerous things that will not be used correctly off the streets is well worth another look. More widely, we have partnered with the Royal Society for the Prevention of Accidents and other organisations, which will undoubtedly look at that as well.

In addition, this year the Government collaborated with the Association for Science Education to produce teaching materials for children in schools, to introduce messaging about safe and considerate use at an early age. I look forward to seeing the statistics from this year’s campaign, and would be more than happy to share those with hon. Members if they are interested. As I said, the Government are aware of Scotland’s new regulations and proposed new Bill, and we work closely with all the devolved Administrations. I would be really interested to see how that pans out.

I want to leave some time for my hon. Friend the Member for Carshalton and Wallington to wind up and reflect on the debate. I thank him especially, but also all the colleagues across the House who have come to show their interest in an incredibly important debate. Hon. Members should bear in mind that the Petitions Committee might want to update its report next year and take evidence before bringing a debate to Parliament. There is also the opportunity for an all-party parliamentary group, where Members can take evidence on those international comparisons, if they want to bring that kind of information to the Government and Parliament in future debates. I pay tribute to the work of the Committee.

Oral Answers to Questions

Debate between Alex Davies-Jones and Paul Scully

Tuesday 23rd March 2021 Commons Chamber

[Alex Davies-Jones (Pontypridd) (Lab)]

What recent discussions he has had with Cabinet colleagues on bringing forward legislative proposals to introduce paid neonatal leave.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

I understand how difficult it is for parents whose newborn baby needs to spend time in neonatal care, which is why last year we set out our intention to introduce a new, generous entitlement to paid leave for those parents. We remain fully committed to doing so and will legislate as part of an employment Bill as soon as parliamentary time allows.

[Alex Davies-Jones [V]]

It has now been more than a year since the Government committed to implementing paid neonatal leave to support the parents of babies born sick or prematurely, but we are still yet to see any progress. Will the Minister confirm exactly when the Government plan to bring forward the necessary legislation to ensure that the new entitlement is available in 2023, as promised in the March 2020 Budget?

[Paul Scully]

The Government remain committed to bringing forward the employment Bill as soon as parliamentary time allows. The delivery of the new entitlement to neonatal leave and pay will require changes to Her Majesty’s Revenue and Customs’ IT payment systems to allow employers to administer statutory neonatal pay on behalf of the Government, but we are working towards that goal.