Online Platforms and the Digital Single Market (EUC Report)

Baroness Donaghy Excerpts

Wednesday 9th November 2016 Grand Committee

[Baroness Donaghy (Lab)]

My Lords, I am grateful for the opportunity to contribute to the consideration of this report, which was published seven months ago. It is fair to say that the committee was aware that it was taking on a huge task. For me, at least, it was a very steep learning curve. My noble friend Lord Whitty steered us through the depths and shallows of multisided platforms and the internet of things. He deserves credit for the quality and balance of the report. We were privileged to have an excellent secretariat in Alicia Cunningham and Kilian Bourke—I still do not know how they managed to crystallise the definitions and analyse the benefits and challenges of the digital economy in the way they did. I mention also those who gave confidential or publicly available evidence in writing or as witnesses. The submissions were from tiny organisations and global ones; I thank them for contributing to a weighty and important subject and helping us to build this foundation of knowledge.

My comments on the report and the Government’s response are personal and an attempt to be forward-looking and positive. First, it is clear that the UK is ahead of the pack in relation to other European countries. We identify more easily with the dynamism and creativity of the American market, and less so with protectionist approaches.

We need to do two things to maintain and accelerate our progress. We need to invest in the industries and to solve the conundrum that the minute a UK company develops an idea, brand or new area, it is immediately snapped up by the American giants. Our report states:

“In 2010 early stage investment in the US was valued at $20 billion, whereas Europe in the same period saw investment of approximately €3.8 billion”.

United States venture capital funds were behind more than 50% of London start-ups; 70% of global venture capital heads to the United States. Our report drew attention to the lack of investment being,

“a major obstacle to generating economic growth across the Union”.

We urged the Government to look at the United States’ Jumpstart Our Business Startups Act, or JOBS Act, as an example of scaling up. I have to say that the Government’s response was disappointing. On that recommendation, they recognised the value of learning from best practice, which,

“cannot necessarily be imported wholesale into the UK”.

That is going through the motions, and gives no reassurance that active consideration is being given or that action will be taken—and I ask the Minister whether the Government have updated the consideration since their letter of 20 July.

Again going back to the letter of 20 July, on investment, the Government were,

“helping facilitate and build a market”,

for equity finance, and mentioned the figure of £219 million to be contributed to,

“UK high growth SMEs at the end of December 2015”.

High-growth SMEs presumably cover a wide range of companies and skills, and we must assume that the share of the £219 million for UK digital start-ups is much smaller. This is simply not good enough and shows that the Government are relying on individual initiative to build a digital economy. The danger is that this will enrich the individual and the United States of America, but not the UK. Lack of start-up investment opportunities and ongoing support may well explain the pattern of selling UK talent to USA global companies. The Government must scale up their scale-up.

One feature that we encountered was how fast-moving this area is, where last year’s winner can quickly become this year’s nobody. The Competition and Markets Authority called it a “disruptive cycle of innovation”. As a former trade unionist, to me the word “disruptive” meant either a go-slow or a strike, so I found it quite a re-education to be involved in this report, because to be disruptive in this sense was used by a lot of witnesses as an entirely positive thing. So re-education has taken place.

Professor David Evans reminded us that only eight years ago,

“MySpace was the dominant social network; it was not Facebook at all”.

Trying to cope with that fast-changing scene made it extremely difficult to deal with subjects such a monopoly and regulation, which I believe our report dealt with very well.

One slight niggle is that the CMA—and this applied to all the equivalent European competition bodies that we met—was of the view that any inquiry on allegations of abuse of power would take as long as it takes. So it recognises disruptive cycles of innovation but seems not to have any sense of urgency about dealing with allegations of abuse. I think that that leaves consumers in a vulnerable position, and I ask the Minister whether he agrees.

The report makes an important contribution to such areas as transparency, restrictive pricing practices and bargaining power, but data protection is a subject where consumers are potentially most vulnerable. As our report says, the complex ways in which online platforms collect and use personal data mean that the full extent is not sufficiently understood by consumers. We pointed out the lack of trust in how online platforms collect and use consumers’ data. Trust was worryingly low, which is a barrier to future growth.

As the noble Lord, Lord Aberdare, said, the irony is that that lack of trust goes side by side with many consumers sharing more personal data with online platforms than they share with their own spouse. The majority of consumers have no idea of the value of their personal data—how they are and will be used in future. It is vitally important that the Government ensure that data protection is as strong as reasonably practical, public awareness is raised and we aim to have the same or higher standards as the rest of Europe, particularly after we leave the EU.

Finally, as a former chair of ACAS, it is not surprising that I should mention the issue of dispute resolution. The report refers to the Commission’s launch three years ago of a dispute resolution platform to enable consumers and traders to settle disputes over both domestic and cross-border online purchases. It was hailed as easy, fast and inexpensive. The concern is that it has not been properly implemented, which makes the prospect of a business-to-business dispute resolution platform appear a long way off. I identify strongly with the report’s recommendation that the Commission’s first priority should be to ensure the effective implementation of the online dispute resolution in its current form.

This is an exhilarating field that offers our economy huge benefits and the consumer great potential. It is our job to ensure that, alongside that, there are the protections and transparency that the individual deserves.