Digital Markets, Competition and Consumers Bill

Baroness Harding of Winscombe Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[Baroness Harding of Winscombe (Con)]

My Lords, it is a privilege to follow the noble Lord, Lord Vaux, and his really detailed and insightful analysis of my old industry—telecoms—among other things. I am sure my noble friend the Minister will be pleased that I rise, as the last Back-Bench speaker, to support the Bill.

I should declare my interest. I am never quite sure when I should and should not declare my relationship with my husband in the other place, but as he was so fully quoted in the Lords briefing, I feel I should reference that my husband tends to lead on competition issues in our family and I lead on digital things, so this Bill brings us together.

I strongly support the Bill. As many noble Lords have said, it has the potential to really drive innovation and investment, and to bring immediate consumer benefits. We should all warmly support it. I am also pleased to see it finally here.

I will speak primarily and very briefly on Part 1 and the competition elements. Large companies the world over try to persuade us that investment and competition are a trade-off. Time and again we have seen that that is not the case. I come to this with experience of running a challenger telco in an ex ante competition regime. Large incumbents rarely create real innovation. They spend a huge amount of money on it, and they are very proud of telling us how much they spend, but big leaps of innovation rarely come from the incumbents. That is the first thing that is true of nearly all these markets.

The second is that they spend even more money protecting their oligopoly or monopoly. I think it was Niklas Zennström, one of the founders of Skype, who originally said something like, “The thing about monopolies is that they’re like children. If you don’t have any you don’t really understand what the fuss is all about, but once you have one you will do everything in your power to protect them”. We should have no illusions: that is what big tech is doing during the passage of this Bill. It is not wicked and evil; it is entirely rational. If you have an oligopoly or a monopoly, you will protect it to the end.

Digital is no different from every other market where these forces are at play. We have exactly these two forces. Innovation is not coming from the incumbents. OpenAI is not an incumbent. Many noble Lords referenced Google, the original innovator, against the incumbent, Microsoft. We should not allow ourselves to be deceived by the big sums of money that incumbents spend on innovation to believe that the digital innovation will come from them. Equally, we should recognise how much power they will bring to bear to try to protect their existing monopolies. The noble Lords, Lord Fox and Lord Knight, gave such erudite descriptions of the theory and practice of what is happening that I will not repeat them, except to say that it is a pleasure to be back working with them together, as we all did on the Online Safety Act.

Digital is different, though, in a couple of ways. First, it tends to network monopolies in an extraordinary way, partly because the companies in it that succeed make so much money. The leveraging principle is alive and well as they acquire every little start-up around them to leverage the monopoly they already have. The second thing that is very different from other markets with network monopolies is the speed at which these things happen. The third is how interconnected and complex the digital architecture is.

All this means that it is really important that we understand how the package of measures in this Bill will work. We will have to descend into the fine, technical detail if we are to ensure we really do balance these forces that are against real innovation and real competition. As my noble friend Lady Stowell said, I feel that the Government got the balance right in the original Bill—that was the Goldilocks spot. I am sad that virtually every speaker has said the same thing: that we have moved slightly off the Goldilocks spot, and that every one of the changes brought in on Report in the other place moved the Bill towards the power of big tech and made it just a little harder for the regulator to do its job.

I fear I will list the same concerns as many other noble Lords: the full merits appeal, the move for fines, the Secretary of State’s approval of all guidance, the removal of “indispensable” from Clause 29(2)(c), the leveraging principles, the benefits for consumers, the wording in Clause 19, and the lack of third-party consultation rights, which means that the little guy does not get a fair shout in a JR process. We will have to look at all those in considerable detail as we go through Committee.

I shall briefly speak on the first one, the full merits appeal for fines. I have run a little business in a full judicial review world, in a judicial review-plus world, and in a full merits world. In fact, I had a great row with my regulatory director at TalkTalk when Ofcom was consulting on moving away from full merits to the JR standard. The regulatory team at TalkTalk thought that it might win a full merits appeal, because it had in the past won one in five years, so it did not like the idea of giving that up. My chairman at the time and I had to overrule them and say, “We might be able to fight one of those battles in the next five years, but BT will fight every single one—maybe 20 a year. Our pockets aren’t deep enough; we just don’t have the money”.

It is hugely tempting to believe that you will get to a better answer by full merits, but I fear my experience is that you do not. You tie everything up, so whoever benefits from things going slowly wins, whoever has the deepest pockets wins, and whoever is willing to take the risk to keep appealing again and again wins. That shifts the regulator’s risk appetite, because it does not have unlimited pockets, it does not have unlimited time and it cannot afford to keep losing. That means that the decisions it takes and the actions it chooses even to begin are reduced, simply because of the scale of the appeals risk. I really do not understand why tech companies, alone among network monopoly owners, are at risk of having their fines calculated incorrectly, in comparison with telcos, water companies and electricity businesses, all of which live in an ex ante regulatory regime with a JR standard for fines. I would be really keen to understand why we think tech exceptionalism needs to be added back into the Bill.

I am conscious of the time and will not take much longer. I pull us right back to look at the competition elements of the Bill in the round, because they are really important. There is a temptation this evening, for the small number of us who appear for all these debates on digital: as the noble Baroness, Lady Kidron, again said so eloquently, the danger is that people do not realise how important this is. This Bill could be every bit as important as the original anti-trust legislation in the US as the 19th century turned into the 20th. It is that important that we get this right.

I think we are quite well suited to going through the detail. Rather than ask my noble friend to respond on specifics today, I just ask him to reassure us that he will enter Committee in the same spirit in which many of us worked together on the Online Safety Act: recognising that we are trying to find that Goldilocks spot, and that this will require us to understand not just each individual issue but how the issues interrelate. The danger is that the pressures on large tech companies to influence and weaken the regime will enable them to play the game against us rather too well. They just chip away on one or two issues and, before you know it, you do not have a landmark piece of competition regulation; you have something that none of us can remember from the 19th century, when monopolists were doing rather well, before anti-trust legislation came in.

That is why I think this really matters, and very briefly I just add my words to the concerns about the subscription clauses. As the noble Lord, Lord Vaux, said, it is important that we protect consumers in this space. It looks like we have got something wrong on gift aid, judging by the number of people who have been emailing all of us. I think we have also got something wrong in the way that app developers work with the app stores. The app stores control subscriptions, and there is a real risk that once again we are putting the responsibility on the app developers, not recognising that the consumer needs to be able to cancel the actual subscription that Apple controls. We will need to look at those in considerable detail, otherwise we will have all these brilliant intentions but the legislation will not deliver what people need.

Digital Markets, Competition and Consumers Bill

Baroness Harding of Winscombe Excerpts

Committee stage
Monday 22nd January 2024 Grand Committee

It must be the role of Parliament to ensure that this legislation does not give overmighty powers to Ministers and the Government over the SMS and conduct requirement processes. They would be susceptible to the massive lobbying that I have just described. I hope that noble Lords agree that the ability of companies to apply massive pressure on our own politicians should be thwarted wherever possible. These companies are in this position because of their massive power of persuasion. I am sure that many other noble Lords do not want the Part 1 processes to be undermined. If the Minister could come up with a suggestion for how to stop these criteria being taken out of the Bill at a future date, I would feel much happier and secure in the prospect of this Bill succeeding in its much-needed goals.

[Baroness Harding of Winscombe (Con)]

My Lords, as we start this phase of the Bill, I declare my interests, in particular my husband’s close involvement with the Bill in the other place as the Member of Parliament for Weston-super-Mare. We rarely get involved in the same issues at the same time, but in this case we are.

Like other noble Lords, I am keen to see this Bill reach the statute book, but also keen to ensure that we minimise the degree of legal ambiguity. I thank the many companies that have given us briefings in advance of Committee, but note how many of them have felt incredibly uncomfortable in doing so and have sworn us all to secrecy about having even been talking to us in private, for fear that their commercial relationships will be prejudiced. We must recognise the enormous commercial power that the companies that this Bill aims to regulate already exert. Making sure that the Bill is clear, and that we are not inadvertently creating legal loopholes, is probably the most important thing that we will do in this House as we give it the degree of scrutiny that we like to give here.

Loopholes do not need to be permanent. If you have already got large market power, loopholes just need to slow the process down. When I ran a challenger business competing against a very large incumbent in telecoms, BT, we used to say all the time that BT’s regulatory strategy was to walk backwards slowly—I think that was even said in public, about 20 years ago. That was its strategy.

This is exactly what the big technology companies are doing worldwide. They know that regulation is coming to this sector but are walking backwards as slowly as they can. We see this very clearly with the EU’s Digital Markets Act where, so far, every potential SMS-equivalent firm has challenged its designation through every stage of the courts that it can. We should go into this Committee with our eyes wide open that that is exactly what will happen with this legislation as well. Giving clarity wherever possible will therefore be essential.

With that in mind, I support Amendments 1, 3, 4, 5 and 6 in their endeavour to give clarity on two important issues: first, whether the CMA can use work that it has already done; and, secondly, that it is impossible to have clarity about what will happen in technology markets over the next five years. Does my noble friend the Minister agree that it is important that the Bill gives clarity on those two issues? If the amendments as currently drafted do not achieve that, what can we do to ensure that we do not look with horror in a few years’ time when each SMS designation is in a JR, with technology companies challenging the CMA’s ability to use historic work or its lack of crystal ball-gazing, which will inevitably have come about?

I also have considerable sympathy with Amendment 7 from the noble Viscount, Lord Colville. We will come to the question of the Secretary of State’s powers in a number of parts of this Bill. In this case, I can see why we should be worried about the ability of individual companies—this is only from the media—with regulatory lobbying budgets of at least $1 billion to influence a single person because, however moral and upstanding they are, it is likely to be quite great. I have some sympathy with the amendment, but the requirement for a Secretary of State decision via the affirmative process is the strongest parliamentary scrutiny available to us. Does my noble friend acknowledge that this is a potential risk? If it is, what additional safeguards would he suggest if he does not like the removal of this power? I recognise that it is possible that we have not captured all the reasons why you might not want to designate a firm as having strategic market status.

We will come back to these issues again and again in our many days together in this Room, because this is really about giving clarity of intent. Will my noble friend confirm that he shares the intent of these amendments?

[The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)]

My Lords, I am pleased to speak on this first day of Committee and thank all noble Lords for their continued and valued engagement on the DMCC Bill, which, as many noble Lords have observed, will drive innovation, grow the economy and deliver better outcomes for consumers. I am grateful for noble Lords’ continued scrutiny and am confident that we will enjoy a productive debate.

I start by briefly speaking to government Amendments 11 and 12, which I hope noble Lords will support. They make the strategic market status notice provisions consistent by obliging the Competition and Markets Authority to provide reasons for its decision not to designate a firm following an initial SMS investigation.

I turn to Amendment 1, tabled by the noble Baroness, Lady Jones of Whitchurch. The amendment seeks to ensure that the CMA will be able to use, in its SMS investigations, previous analysis undertaken in related contexts. I agree entirely that the CMA should not have to repeat work that it has already done and should be able to draw on insights from previous analysis when carrying out an SMS investigation, when it is appropriate and lawful to do so.

I offer some reassurance to the noble Baroness that the Bill as drafted permits the CMA to rely on evidence that it has gathered in the past, so long as it is appropriate and lawful to do so. As she highlighted, a strength of the regime is the flexibility for the CMA to consider different harms in digital markets. I suspect that this is a theme that we will return to often in our deliberations, but being prescriptive about what information the CMA can rely on risks constraining the broad discretion that we have built into the legislation.

Amendments 3, 4, 5 and 6, tabled by the noble Lord, Lord Clement-Jones, would make it explicit that the CMA must consider currently available evidence of expected or foreseeable developments when assessing whether a firm holds substantial and entrenched market power in a digital activity. Amendment 3 would remove the duty for the CMA to consider such developments over a five-year period. The regime will apply regulation to firms for a five-year period; it is therefore appropriate that the CMA takes a forward look over that period to assess whether a firm’s market power is substantial and entrenched, taking account of expected or foreseeable developments that might naturally reduce the firm’s market power, if it were not designated.

Without an appropriate forward look, there is a risk that designation results in firms facing disproportionate or unnecessary regulation that harms innovation and consumers. However, the CMA will not be required to prove that a firm will definitely have substantial and entrenched market powers for the next five years—indeed, that would be impossible. The CMA will have to give reasons for its decisions to designate firms and support any determination with evidence. As a public body, it will also be subject to public law principles, which require it to act reasonably and take into account relevant considerations. Therefore, in our view, these amendments are not necessary.

Amendment 7, tabled by the noble Viscount, Lord Colville of Culross, seeks to remove the power for the Secretary of State to amend by regulations subject to the affirmative procedure the conditions to be met for the CMA to establish a position of strategic significance. I recognise, first, that Henry VIII powers should be used in legislation only when necessary. To the point raised by my noble friend Lady Harding, I also recognise the importance of limiting the scope for too much disputation around this and for too many appeals. In this case, however, the power helps to ensure that the regime can adapt to digital markets that evolve quickly and unpredictably.

Changes in digital markets can result from developments in technology, business models, or a combination of both. The rapid pace of evolution in digital markets, to which many have referred, means that the CMA’s current understanding of power in these markets has changed over the past decade. The concept of strategic significance may therefore also need to evolve in future, and the conditions to be updated quickly, so that the regime remains effective in addressing harms to competition and consumers effectively. The affirmative resolution procedure will give Parliament the opportunity to scrutinise potential changes. It will provide a parliamentary safeguard to ensure that the criteria are not watered down, and should address the noble Lord’s concerns regarding lobbying. For these reasons, I believe that it is important to retain this power.

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I end with a point that might be slightly counterintuitive but which I would like colleagues to bear in mind in looking at the Bill from all its angles. Of course, only the Minister can provide balance, and it is important to bear in mind that, looking at it from the point of view of the CMA and officials, they know that they have vastly superior technical expertise than a Minister can bring to this subject and, therefore, it is relatively straightforward for them to take a road that might lead them towards a comfort zone. We need to bear in mind that the CMA itself is a vested interest in framing this legislation. It is packed with high-quality economists and lawyers, many of whom I worked with, but it is a vested interest, and it has an interest in developing the Bill in a way which will expedite business as it sees fit, which may not always coincide with what a wider interest would perceive it to be. We can and should put checks into that risk, and I propose one such check here. Complete dependence of firms on CMA summaries is probably a small bridge too far, but it is a bridge that we need not cross.

[Baroness Harding of Winscombe (Con)]

My Lords, I support Amendments 8, 9, 10, 13, 35, 37, 42, 44, 45, 46, 57 and 58 in the name of the noble Baroness, Lady Jones of Whitchurch, to which I have added my name. I list them all because the very fact that there are so many amendments to make what is actually quite a simple point shows the scale of the inequality of arms between the potential strategic market status firms and the firms that are detrimentally affected by them.

From looking at the detail it is clear that there are opportunities in the Bill for an SMS firm to comment at the outset and throughout an SMS designation investigation, at the drafting of a conduct requirement, in a conduct investigation and in a PCI investigation. Those affected can comment only at the latter public consultation stage. There is a real risk that the CMA will take decisions without the involvement, insight and information of non-SMS firms.

Like other noble Lords, I attended the very helpful briefing with the Minister and the CMA last week. When challenged on this, the CMA representatives told us that they agreed that there was an inequality of arms, that it was really important to do everything possible to balance it, and that they, with the best intent, intended to do that. They also acknowledged some commercial issues, where there may well be information that the SMS firms share that they should not share with commercial counterparties. Essentially, the CMA leadership—I say this without any judgment on them—told us to rely on the “good chap” theory of government and to trust their best intentions. That is really quite dangerous, given the sheer gulf in that inequality of arms.

So we might not have got the right wording in this long list of amendments, but this is a really important principle. I have deep respect for all the officials in the CMA, as my noble friend Lord Tyrie has just said, but this is a very hard balancing act that we will be asking them to undertake. Having played this game on the other side, I say that we should have no illusions: all companies spend a lot of time trying to influence the regulator that regulates them. If we do not ensure that there is an equality of arms in that process, we will be setting the CMA up to fail.

[Lord Vaizey of Didcot (Con)]

My Lords, I support these amendments as well. This is a terrifying prospect; I hate taking part in Bill Committees, because it is so hard to navigate where the amendments are, but I feel more courage following my noble friend Lord Tyrie, with his practical suggestions, and my noble friend Lady Harding, with her overview and common-sense approach to these amendments. In effect, she said exactly what I want to say. Trying to amend different clauses to get the effect we want is a slightly artificial process. As we know, these amendments in Committee are, in effect, devices to get across the fundamental point.

Some kind words were used about potential SMS companies and the platforms, but we all know that what we are debating is an attempt to bring about equality in the arms race when it comes to levelling the playing field as far as competition is concerned. When my noble friend Lady Harding spoke to earlier amendments, she talked about companies being afraid to put their names to concerns. That really shone a spotlight on the situation that currently prevails, which is, in effect, a duopoly of two platforms that can decide whether start-ups and apps live or die—or, indeed, how much profit they potentially make.

I support the principle of these amendments. How one gets from A to B is potentially a very difficult route, but I hope that the Minister will say in his reply that he understands the mood of the Committee. Can we find a way to extricate ourselves from the current process whereby, understandably, the SMS company is presented with the case against it and goes off to answer it? To a certain extent, it is kept within a relatively closed circle, in a very legalistic way, when the accused is in the dock. Can one broaden that out to allow the challenger companies that may have prompted the investigation to know exactly what the CMA thinks are substantial points that it wants to take forward, which could potentially be points that they wish to take action on? That might also encourage other challenger companies that may not be aware of the investigation or, indeed, the details of the investigation to come through with their own material evidence.

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[Viscount Camrose (Con)]

I thank noble Lords for raising those points. My response to them both is that the key is that we are trying to set a balance between the workloads—the work that has to be performed by the regulator—and the benefit of that work for competition. We can certainly come up with examples. I shared the example of how many app developers there are and how many of them would have to exchange information with the regulator, but perhaps it would be more helpful to the Committee if I committed to giving a slightly deeper analysis of what the CMA estimates would be the time consumed on such activities and why we are concerned that it would have the potential to detract from the core basis of its mission.

[Baroness Harding of Winscombe (Con)]

The challenger app developers are, in essence, the customers here, so I am quite worried that I think I am hearing that the regulator cannot cope with customer feedback, whereas that is probably the most important feedback in its process. We are looking for a way of enshrining that in the legislation that does not create some overwhelming burden. To say that customers will overwhelm the regulator with feedback is back to front: they are the people that the competition regulator should most want to hear from.

[Viscount Camrose (Con)]

In that example, I would cast the app developers as participants in the ecosystem and the customers as the users of the app, but that is perhaps an ontological problem. Perhaps the most straightforward thing, to satisfy the Committee’s concerns that we are not idly throwing out the possibility of an overworked regulator, would be to provide the Committee with a greater analysis of why we believe we have to be careful with what information we ask them to exchange with interested parties to avoid the situation in which the paperwork exceeds the value work.

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[Lord Vaizey of Didcot (Con)]

On a point of order, I am incredibly embarrassed that I fail to declare my interests each time I speak because I am so nervous in this Committee. I declare my interests, particularly as a presenter of Times Radio, which links me to News UK, and as an adviser to a mobile games company, Pixel United.

[Baroness Harding of Winscombe (Con)]

My Lords, I shall also discuss the leveraging or whack-a-mole provisions. Perhaps Conservative Peers today are London buses: this is the fourth London bus to make the same point. I too would have added my name to my noble friend Lord Vaizey’s amendment had I been organised enough.

I shall make a couple of points. The noble Lord, Lord Tyrie, said earlier that we are all here on the Bill because harm has already been done. If noble Lords will forgive me, I will tell a little story. In 2012, I went on a customer trip to Mountain View, Google’s headquarters in California, as the chief executive of TalkTalk. We were in the early days of digital advertising and TalkTalk was one of its biggest customers. A whole group of customers went on what people now call a digital safari to visit California and see these tech companies in action.

I will never forget that the sales director left us for a bit for a demo from some engineers from head office in Mountain View, from Google, who demoed a new functionality they were working on to enable you to easily access price comparisons for flights. It was an interesting demo because some of the other big customers of Google search at the time were independent flight search websites, whose chief executives had been flown out by Google to see all the new innovation. The blood drained from their faces as this very well-meaning engineer described and demoed the new functionality and explained how, because Google controlled the page, it would be able to promote its flight search functionality to the top of the page and demote the companies represented in the room. When the sales director returned, it was, shall we say, quite interesting,

I tell that tale because there are many examples of these platforms leveraging the power of their platform to enter adjacent markets. As my noble friend has said, that gets to the core of the Bill and how important it is that the CMA is able to impose conduct requirements without needing to go through the whole SMS designation process all over again.

I know that the tech firms’ counterargument to this is that it is important that they have the freedom to innovate, and that for a number of them this would somehow create “a regulatory requirement to seek permission to innovate”. I want to counter that: we want all companies in this space to have the freedom to innovate, but they should not have the freedom to prioritise their innovation on their monopoly platform over other people’s innovation. That is why we have to get a definition of the leveraging principle, or the whack-a-mole principle, right. As with almost all the amendments we have discussed today, I am not particularly wedded to the specific wording, but I do not think that the Bill as it is currently drafted captures this clearly enough, and Amendments 25, 26, and 27 get us much closer to where we need to be.

I, too, add my voice in support my noble friend Lord Lansley’s amendments. I must apologise for not having studied them properly in advance of today, but my noble friend introduced them so eloquently that it is very clear that we need to put data clearly in the Bill.

Finally, as a member of my noble friend’s Communications and Digital Committee, I, too, listened very carefully to the comments made by the noble Lord, Lord Clement-Jones, about copyright. I feel this is a very big issue. Whether this is the right place to address it, I do not know, but I am sure he is right that we need to address it somehow.

[Baroness Kidron (CB)]

My Lords, I am sorry to break the Conservative bus pattern but I, too, will speak to Amendments 26 and 27, to which I have added my name, and to Amendment 30. Before I do, I was very taken by the amendments spoken to by the noble Lord, Lord Lansley, and I support them. I feel somewhat sheepish that I had not seen the relationship between data and the Bill, having spent most of the past few months with my head in the data Bill. That connection is hugely important, and I am very grateful to the noble Lord for making such a clear case. In supporting Amendments 26 and 27, I recognise the value of Amendment 25, tabled by the noble Lord, Lord Vaizey, and put on record my support for the noble Lord, Lord Holmes, on Amendment 24. So much has been said that we have managed to change the name of the leveraging principle to the whack-a-mole principle and everything that has been said has been said very well.

The only point I want to make on these two amendments, apart from to echo the profound importance that other noble Lords have already spoken of, is that the ingenuity of the sector has always struck me as being equally divided between its incredible creativity in creating new products and things for us to do and services that it can provide, and an equal ingenuity in avoiding regulation of all kinds in all parts of the world. Without having not only the designated activity but the activities the sector controls that are adjacent to the activity, we do not have the core purpose of the Bill. At one point I thought it might help the Minister to see that the argument he made in relation to Clause 6(2) and (3), which was in defence of some flexibility for the Secretary of State, might equally be made on behalf of the regulator in this case.

Turning briefly to Amendment 30 in the name of the noble Lord, Lord Clement-Jones, I first have to make a slightly unusual declaration in that my husband was one of the Hollywood writers who went on strike and won a historic settlement to be a human being in charge of their AI rather than at the behest of the AI. Not only in the creative industries but in academia, I have seen first-hand the impact of scraping information. Not only is the life’s work of an academic taken without permission, but then regurgitating it as an inaccurate mere guess undermines the very purpose of academic distinctions. There is clearly a copyright issue that requires an ability both to opt out and correct, and to share in the upside, as the noble Lord pointed out.

I suggest that the LLMs and general AI firms have taken the axiom “it’s better to ask forgiveness than permission” to unbelievable new heights. Our role during the passage of this Bill may be to turn that around and say that it is better to ask permission than forgiveness.

Digital Markets, Competition and Consumers Bill

Baroness Harding of Winscombe Excerpts

Committee stage
Wednesday 24th January 2024 Grand Committee

[Baroness Stowell of Beeston (Con)]

My Lords, I am hugely grateful to my noble friend Lord Faulks, if I can still call him that—in real life, he is my friend, even if he now sits on another Bench—both for tabling his amendments and for the incredibly comprehensive and thoughtful way in which he has introduced this group. To have the noble Lord’s expertise on this topic is incredibly valuable. I have signed his Amendments 16 and 53 but have also tabled my own in this group: Amendments 17 and 54. I am grateful to the noble Lords who have signed mine.

By way of some background to add to what the noble Lord has said, as I mentioned on the first day in Committee, and indeed at Second Reading, the Communications and Digital Select Committee held hearings on the Digital Markets, Competition and Consumers Bill during the summer of last year. We took evidence from the large tech firms as well as a range of challenger firms. We focused on Parts 1 and 2 of the Bill, which is what we are discussing at this time.

As my noble friend the Minister acknowledged when he spoke at Second Reading, we as a committee found that the Bill as it stood at that time—as introduced to Parliament—struck a careful balance. We felt that, overall, it was proportionate and would deliver on the outcomes that we were seeking to achieve and all felt were necessary for this legislation—namely, a level playing field for the various different businesses that now seek to operate in digital markets. We were careful to acknowledge that striking that balance was hard to achieve; it was not an easy thing. We commended the Government for that. We were also clear, however, that any further changes, particularly to some contentious areas, such as the appeals process, could cause significant problems.

As the noble Lord, Lord Faulks, said, we will come on to the question of appeals in a later group. The insertion of the word “proportionate” in the Bill, in the context of the conduct requirements that the CMA may impose, or the specific pro-competition interventions, has the potential to create a question and introduce a loophole that could be exploited during the appeals process. This is making people nervous—it is certainly making me nervous.

The noble Lord’s amendment would change the Bill back to its original wording. I have signed the amendment based on the way he, as a legal expert, has explained it, which seems to me to be the best way forward. However, my Amendments 17 and 54 try to make it clear to any tribunal hearing down the line that, by including the word “proportionate”, Parliament has not intended to create any new, novel or different opportunity for anybody to interpret what the CMA should always be doing, which is being proportionate in the way in which it goes about its duties. My amendments are, if you like, a safeguard, but I think what the noble Lord, Lord Faulks, has proposed is clearer and neater. Like him, I look forward to the Minister’s reply. This is an area which is causing quite a lot of concern and on which we need a clear response from the Government.

[Baroness Harding of Winscombe (Con)]

My Lords, it is an honour to follow such an esteemed legal brain and parliamentary brain. I am neither, but I have put my name to my noble friend Lady Stowell’s two amendments and I want to make two points in support of her arguments.

The common-law concept of proportionality is important in this legislation. I am not supporting these amendments in any spirit other than wanting to make sure that we are proportionate in the way we regulate the technology sector. After our first day in Committee, I was reflecting a little that perhaps all of us got a bit carried away—certainly I did—with some of our oratory about the importance of mitigating the downsides of the technology sector. I want to put it on the record that I recognise the upsides, too. Therefore, a proportionate path is important. I sit on the Communications and Digital Select Committee that my noble friend so ably chairs and, as she said, we felt that the Bill as introduced into the Commons got that proportional balance right.

We have been in this place before, having a very similar argument. A number of us here today are part of the Online Safety Act gang. I had a look at Hansard and on 19 July, during the last group on Report on the Online Safety Bill, I proposed a group of amendments in the name of the noble Baroness, Lady Kidron, which sought to clarify how non-content-related harms would be captured in the Bill. The argument made by the Minister, my noble friend Lord Parkinson of Whitley Bay, was that, by trying to define it in the Bill, we would create legal uncertainty because that concept was already defined. Now we find ourselves on the opposite sides of the same argument, where I think I am hearing the Government say that there is no intention to bring in any different definition of proportionality than that which already exists—that the CMA is already mandated to give significant consideration to proportionality—yet they want to put the word back in the Bill in the way that they resisted firmly in the Online Safety Bill, when a number of us were seeking a different form of clarification. I do not think that you can have it both ways quite so quickly in related legislation. Either the Government mean something different from the existing requirements of proportionality that the CMA is under, or we should simply take out this additional complexity and reduce the risk of further legal disputes once the Bill is enacted.

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[Baroness Stowell of Beeston (Con)]

My Lords, I support Amendments 39 and 40 in the name of the noble Baroness, Lady Jones, which are about countervailing benefits. I have added my name to them. Before I make my remarks about those amendments, it is worth noting that my noble friend Lord Black gave quite a compelling argument in support of Amendment 48, describing how it would not drive a coach and horses through what the Bill is trying to introduce by virtue of the final offer mechanism but would strengthen it further. I will be interested to hear what my noble friend the Minister has to say in reply to that.

In response to the debate on a previous group of amendments, my noble friend the Minister said that, by virtue of the process of parliamentary scrutiny, or just making laws, we should improve Bills, in the sense that the way in which they are first introduced to Parliament does not mean that they cannot be changed. He is absolutely right: doing our jobs should lead to stronger, better and more effective legislation.

In the few amendments I have tabled I have tried not to unpick what has already been changed in the Commons but to add clarification where I felt that the changes were going in the wrong direction. On the topic of countervailing benefits, I added my name to Amendments 39 and 40, which revert Clause 29 back to its original wording at the point of the Bill’s introduction to Parliament, because I could not think of another way to secure the important purpose of Clause 29.

If I may, I again return to the way in which the Communications and Digital Committee scrutinised the Bill when it was first introduced. Countervailing benefits was one of the topics that we identified as an area of contention. In the course of our hearings, we heard a range of views on this clause. As other noble Lords have voiced in this debate, some wanted to see Clause 29 removed and others wanted it strengthened. The committee found that it should remain as it was; that it did not need to be changed and should remain in the Bill. We noted that the countervailing benefits exemption is

“designed as a backstop rather than an initial enforcement measure: the CMA is expected to take consumer benefit into account throughout its work”.

In conclusion, we said that the exemption

“provides a proportionate backstop as long as the threshold for using it remains high. The Government should resist any changes that would lower the threshold”.

Contrary to those who argued either to take out Clause 29 or to raise its threshold even further, my view is that, as it stood, it was fair and proportionate. Some of the big tech firms did not like it at all, but we thought none the less that it was an appropriate measure. Therefore, it would be fair to all parties for us to revert to the original text.

[Baroness Harding of Winscombe (Con)]

My Lords, I, too, wish to speak to Amendments 39 and 40, to which I have added my name. First, it is worth dwelling briefly on what the countervailing benefits exemption is: quite a “get out of jail free” card. To be clear: the company in question will have been found to have SMS, conduct requirements will have been imposed and the company will have been found to be breaching them and be on its way to jail. The countervailing benefits exemption is a “get out of jail free” card because the benefits that the new product or functionality brings are so good that it is worth breaching this set of fundamental competition principles.

That exemption is a really powerful tool that gets you completely out of jail. It can also enable you to simply slow down the process by arguing that it should be used, even if you will not succeed in getting out of jail. The process of slowing down being sent to jail is also very powerful for the big tech firms. This is a big weapon in the Bill.

However, I can also make the case, as many of the tech companies did at our Select Committee—as my noble friend Lady Stowell just said—that the exemption is an important tool to have in the Bill because we do not want to live in a world where large monopolists are not encouraged to innovate at all. There is an argument that we need to find the Goldilocks spot, if noble Lords will forgive me mixing my metaphors. I sit on my noble friend’s committee and, as she said, we have heard from the companies that would like this removed and from the companies that would like it strengthened. I share her view that the Bill as introduced to the House of Commons got that spot just about right.

Does my noble friend the Minister think that the new wording, introduced at a late stage in the Commons, of

“could not be realised without the conduct”

is the same as “indispensable”, or does it set a higher or a lower threshold to be able to use the “get out of jail free” card? I do not think he is going to argue that it sets a higher threshold; I think it is either the same as or a lower threshold. If it is a lower threshold, why do we really think that we need to make it easier for people who are on their way to jail to get out? If it is the same then we are right back to where we were two hours ago. Why do we need to define something differently that is already well enshrined in law as “indispensable”?

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[Viscount Colville of Culross (CB)]

So it is not the same?

[Baroness Harding of Winscombe (Con)]

Before my noble friend answers that, can he shed some light on which stakeholders feel that this is unclear?

[Viscount Camrose (Con)]

I cannot give a full account of the individual stakeholders right now; I am happy to ask the department to clarify further in that area. My contention is that the effect of the two sentences are the same, with the new one being clearer than the old one. I am very happy to continue to look at that and listen to the arguments of noble Lords, but that is the position. Personally, when I look at the two sentences, I find it very difficult to discern any difference in meaning between them. As I say, I am very happy to receive further arguments on that.

With respect to the participative arrangements by which a decision is reached around, for example, a conduct requirement, during the period of conduct requirement design, and during the decision-making period, it is, as my noble friend Lord Lansley has stated, highly to be expected that firms will make representations about the consumer benefits of their product. During a breach investigation, on the other hand, later on in the process, a consumer benefits exemption can be used as a safeguard or defence against a finding of breach.

Sorry, but there were so many questions that I have completely lost track. Perhaps the noble Baroness, Lady Kidron, will restate her question.

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[Lord Tyrie (Non-Afl)]

My Lords, I will be brief. I strongly support the intentions of this part of the Bill. What the Government are attempting to do must be right. Relative inaction on mergers by leading regulators around the world has contributed to the problems that we are now trying to address with the creation of the DMU. Killer acquisitions are a serious and enduring problem in this market.

My view is that the CMA, among other regulators, probably could and should have acted earlier. It is worth pausing for a moment to consider why it did not. One reason is a lack of boldness; a reluctance to take risks by taking action with its existing powers; a fear of losing. Although we are empowering it a good deal through the DMU, it is important to bear in mind that, unless we secure a change of mindset in the CMA, I am not sure that we will get the benefits that we are hoping for from this Bill—certainly not all of them.

A second reason why a good number of the big regulators did not intervene earlier derives from the intellectual history of the current legislation, which is similar all around the world. Over the last 30 years, in the post-Cold War world, almost all the major jurisdictions, and a lot of minor ones, put on the statute book very similar legislation. About 150 jurisdictions have done so, based on a set of ideas often summarised as the Chicago school, although it is rather a caricature, which believed that there would be no need for such an interventionist approach because it would be difficult for any platform to sustain for long a dominant position, and another technological change would supplant them. That may yet turn out to be the case, with AI and new generations of technology.

However, we now know that it has not been successful with the existing range of platforms; they have been around for a long time, and we have ample evidence of abuse of market position by some of them. That is why we need to qualify the Chicago school approach in our minds. We need the people who run our competition regulators to shed what may be a lifetime of acceptance of some of their reflexes in respect of these big deals. They should start to challenge far more, and be far less accepting of, the tenets of the Chicago school.

Perhaps I could summarise my position overall by saying that I am sympathetic to all the clauses that have been tabled, but Ministers will need to reassure us that their intentions for these clauses really will be delivered by what is in the Bill at the moment. I myself am not sure that it is enough. There may be merit in some or all of the amendments in achieving what the Government themselves say they want to do.

[Baroness Harding of Winscombe (Con)]

My Lords, I associate myself with the remarks just made by the noble Lord, Lord Tyrie, about recognising how important it is that we embolden the CMA to tackle these merger issues. I do not have anything like the expertise in detailed drafting that my noble friend Lord Lansley has just demonstrated, but I encourage the Government to listen carefully to his advice and review the drafting. We should see if we cannot come together with a solution on Report that achieves what I think we are all trying to achieve here.

I would also like to briefly correct the record. On Monday, as the noble Lord, Lord Vaux, said, I said that all the companies had appealed their designation of the DMA. Much to my amusement, Google was very swift to email me on Tuesday morning to tell me no, it was very keen to collaborate, so I would hate that to become a considered fact of this Committee—I owe Google that.

I support the amendment by the noble Lord, Lord Vaux, but I point out to the Committee that it is actually a very small amendment. The CMA told us in one of its briefings last week that it could undertake only two SMS investigations at any one time. We should recognise that it is a very minor amendment meaning that, while the CMA is investigating two entities, those two entities will be required to report. We should accept that that is a very small improvement that we should encourage the Government to accept.

[Lord Bassam of Brighton (Lab)]

My Lords, I am sure the Committee will be relieved to know that we do not have a great deal to say on this, except that we see merit in the amendments from both the noble Lords, Lord Vaux and Lord Lansley.

I thought the noble Lord, Lord Vaux, made a very good point: this is very simple. It is about providing and encouraging greater transparency in the merger process. It is straightforward in ensuring that all parties are aware of the status of the undertaking involved, and it brings clarity where the SMS is concerned.

It has to be regretted that companies might want to use mergers and acquisitions as a way of delaying SMS designation. As the noble Baroness, Lady Harding, has just said, there are delays enough in the process as it is. If the CMA is going to be able to do only two of these a year, there is hardly much reason to encourage more, greater and longer delays in the process.

The noble Lord, Lord Vaux, argued that designations could take until 2025 and delays will occur. With the sheer volume of acquisitions taking place, if companies are going to use that as a means of gaming the system then that cannot be right. It cannot be in consumers’ interests either.

I turn to the elegant amendment by the noble Lord, Lord Lansley. It seeks to ensure, where a designated undertaking is involved, that there is an assessment of the impact on consumers. The Minister has argued from the Dispatch Box that the legislation is designed by the Government to place the interests of consumers at the very front of this piece of working legislation. So, if a merger is likely to lead to a loss of benefit to consumers, it must therefore be right that market intelligence is shared, and we assume from our perspective on the Labour Benches that that must be a public good to be supported.

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[Lord Fox (LD)]

My Lords, the hyperactive pen of my noble friend signed up to this amendment as well. It is a great pleasure to support the noble Lords, and particularly to get cover from the noble Lord, Lord Wolfson—it is not usually like that. I am very happy to support this amendment, or the principle of this amendment: if not these words, some others.

Just to emphasise, when I was speaking to the last group of amendments, I set out a group of the major tech companies and said that in 2022, they had a revenue of nearly £400 billion, which is twice the size of the Ukrainian economy. That is the scale of the opponent that we are asking citizens to take on. To deny them the opportunity to band together, which in itself would still be a formidable challenge, is really to deny them justice. It is unrealistic to expect any individuals bar a few—and they are probably the ones who own the companies in the first place—to have sufficient resources to take on businesses of this scale. I would like the Minister at least to acknowledge that point. Perhaps we can go away and work out the best way to enable the reality of individuals being able to bring cases, because at the moment it is merely an idea; it cannot possibly happen.

[Baroness Harding of Winscombe (Con)]

I will just add a couple of questions to the ones that my noble friend Lady Stowell just posed, and I am sorry that I have not been organised enough to share these with the Bill team in advance. Both relate to the importance of the collaborative nature of this legislation and how important it is that the tech companies are actually incentivised to work with the CMA as they go through this process. I too have had a couple of questions posed to me, in addition to what I would describe as the Ofcom-model question that my noble friend raised.

First, should the legislation require courts to avoid judgments that conflict with the DMU’s existing decisions? Otherwise, I think there is potentially a risk that you get two jurisdictions coming to contradictory conclusions. Secondly, how can we avoid litigation undermining existing DMU resolutions and therefore just extending and delaying any implementation? In both cases, there is a risk—although I defer to the huge expertise in the Committee on the need for the civil proceedings. We have to make sure that we do not undermine the very principle of trying to incentivise the SMS firms to engage in constructive dialogue through the process.

[Lord Tyrie (Non-Afl)]

The CAT’s class action powers have been a success, although probably not an unqualified success—but that is for another day. I just want to pick up on one point.

Nowhere is the asymmetry of power greater than between an ordinary consumer and a platform. We must try to find ways of enabling consumers to have greater self-reliance, to have mechanisms to achieve some redress of that asymmetry. When I was in the CMA, I did quite a lot of work on this subject, not only with respect to platforms but generally with respect to big firms, and that work largely got lost.

I suggest to the Minister that he asks for some work in this field to be done by the CMA, not only with respect to platforms but across the piece, to see whether a much more comprehensive programme—taking into greater consideration the reality of the asymmetries of power that we see have now developed in the marketplace —can be put together and give consumers greater confidence that they are not being ripped off, as so many of them are at the moment, frankly.

Digital Markets, Competition and Consumers Bill

Baroness Harding of Winscombe Excerpts

Committee stage
Monday 29th January 2024 Grand Committee

[Lord Vaizey of Didcot (Con)]

My Lords, as I have been cited by the noble Lord, Lord Faulks, it is incumbent on me to speak on the same principles as him. Everything that I want to say has already been said, but that will not stop me putting in my two pennies’ worth. This is the stuck-record part of the debate, where I repeat what I said at Second Reading and simply put on record my support for all these amendments.

I will pick up on what some noble Lords said in their comments. I wholeheartedly endorse what my noble friend Lady Stowell said. In the real world, if you have an appeal on the merits of a fine, it seems almost impossible to see how you stop leakage into an appeal on the merits of the case. So you are, in effect, back to square one and, as the noble Lord, Lord Faulks, put it, the war of the lever arch file.

The speech by the noble Lord, Lord Tyrie, was fascinating and a master class on the different aspects of judicial review: an appeal on the merits, an appeal on JR-plus, or an appeal on JR. When I was a Minister, I dealt with this debate with Ofcom, when it started the process of wanting to move from appeals on the merits to appeals on JR. To the layman, an appeal on the merits is in effect a full rehearing of the case: you go back to square one and simply have the trial all over again. An appeal on JR means that you at least have to identify a flaw in the reasoning of the regulator when it comes to a judgment. If, in effect—here, I bow to the expertise of the noble Lord, Lord Tyrie—settled law informed by European directives means that some element of the merits of the case are taken into account in a JR appeal of a regulator, so be it. It may be the difference between a passive and an active decision, as it were.

In this Committee, we understand how you can judicially review a decision by a government department. When a regulator is making an active decision to bring a prosecution, and it then finds guilty the company that it is prosecuting, some element of the merits may well be taken into account. It seems to me that how it is drafted may well be important, but the clear intent should be that any appeal, whether on the actual decision or the level of the fine, should be an appeal based on JR, when it comes to how a judicial review is understood when appealing a decision by a regulator.

I finish with the simple point—this is the stuck-record part—that it clearly is the settled will of this Committee, and I suspect it will be the will of the House when this comes to Report, to constantly guard against giving the SMS companies too much opportunity to wriggle out of decisions made by the regulator.

I should add that a lot of the tone of my remarks at Second Reading and in Committee might make it seem that I am in the pocket of the regulator. I am certainly not. I have lots of concerns that, at other times, would make me say that I think the regulator often strays too far and interferes in far too many cases. I am not resiling from the fact that there clearly should be an opportunity to appeal its decisions. Often, it backs away before it gets to a decision, but its interference in mergers and takeovers sometimes leaves me slightly baffled, particularly when it involves companies that have very little presence in the UK market. I am not saying, by any stretch of the imagination, that the regulator is perfect, but I know that any procedure it undertakes, as it will do when this law is passed, will be long and expensive, so we must guard against making it even longer and even more expensive.

[Baroness Harding of Winscombe (Con)]

My Lords, I seem to have found my space in this Committee following my noble friend Lord Vaizey again. I have put my name to Amendments 65, 67, 71 and 72 in the name of the noble Baroness, Lady Jones.

I would like to add a possible new element to the discussion, as I am conscious that otherwise we are all just literally repeating each other’s words. My noble friend Lady Stowell talked about the practicalities of a full merits appeal for fines and her concerns. We should also think about the incentives on the designated firms and on the CMA.

Much of what we are debating in this Committee is about how we balance the inequality of arms between companies with enormous resources, and the concern that independent regulators, given a large amount of power, can occasionally make mistakes. That is the essence of this debate. The noble Lord, Lord Tyrie, spoke eloquently about the risk of regulators making mistakes. I wish to add to the discussion some facts about the sheer scale of the inequality of arms.

According to a number of different sources, the best public assessment we can get of Apple’s legal budget is that it is north of $100 billion a year. Bruce Sewell, who stepped down in 2017 after eight years as Apple’s general counsel, gave an interview to a student at Columbia Law School in 2019 in which he set out how he thinks about the legal department and the legal budget in a technology company. He said that, rather than take clearly safe actions, the job of the general counsel is to

“steer the ship as close to that line as you can, because that’s where the competitive advantage lies … you want to get to the point where you can use risk as a competitive advantage”.

So, when you have a $1 billion legal budget, you can afford to play the risk card on every review. You can afford to fully resource every full merits review, whereas when you are the regulator, with a substantially smaller legal budget, you cannot risk every single one of your decisions going to a full merits review.

The incentives are equally divergent. The incentive on the regulator is to be really risk-averse; to not risk being challenged. That means that you will not bring the case in the first place. As the noble Lord, Lord Tyrie, said last week, we know that we need to embolden our competition regulator. One of the big opportunities on leaving the EU is to have a much stronger competition regime because we know that that will drive stronger economic growth. But a full merits regime, in any part of the process, will make the regulator more risk-averse and will drive the incentive to sail closer to the wind, as Bruce Sewell said. Sailing closer to the wind means less collaboration with the regulator, because you are much better off playing your legal cards in the courts. In both those cases, that is not the regime that we are trying to design. We need to recognise that it is not just about practicalities; incentives are really hard to avoid if you have a full merits appeal process at any stage.

I am therefore left asking why the Government are proposing to do this for fines. The argument we have heard up to now is that the reason for doing so is to align with the Enterprise Act. However, as the noble Lord, Lord Tyrie, beautifully set out, they are not really aligning with anything in this regime, so that argument does not wash. It is not the same as the regulatory regime for appeals in the sector I come from, telecoms. As I said at Second Reading—I apologise for repeating it—I do not really understand why small telecoms companies, tiny in comparison with these tech giants, are fine to cope with a JR on fines decisions, but the large tech giants need the extra protection of a full merits review, in case they are fined too much money. It sounds like the worst form of tech exceptionalism. Looking at digital regulation in this House in the last couple of years, we have learned that the era of tech exceptionalism should be over and that technology companies are just the same as other companies. They are not wicked and evil but driven by incentives to do a good job for their stakeholders, and if we define the rules of the game to encourage them to use their legal budgets to challenge the regulator, that is what they will do.

Therefore, I am left to believe, as the noble Lord, Lord Tyrie, said, that the only reason for the change made on Report in the House of Commons was that it was part of some form of explicit or implicit deal to open a back door that will weaken the Bill, which will therefore not achieve what we want. I strongly support the amendments in the name of the noble Baroness, Lady Jones. Later we will come to how, if we accept them, we will ensure strong parliamentary scrutiny. I hope very much that we do not think we trade one for the other.

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[Baroness Kidron (CB)]

The noble Lord, Lord Knight, has said so much of my speech that I will be very rapid. There are two points to make here. One is that regulatory co-operation is a theme in every digital Bill. We spent a long time on it during the passage of the Online Safety Act, we will do it again in the Data Protection and Digital Information Bill, and here it is again. As the noble Lord, Lord Knight, said, if the wording or the approach is not right, that does not matter, but any move to bring regulators together is a good thing.

The second point, which may come up again in amendments in a later group that looks at citizens, is that it is increasingly hard to understand what a user, a worker or a citizen is in this complicated digital system. As digital companies have both responsibilities and powers across these different themes, it is important, as I argued last week, to ensure that workers are not forgotten in this picture.

[Baroness Harding of Winscombe (Con)]

My Lords, it is with great trepidation that I rise to speak to these amendments because, I think for the first time in my brief parliamentary career, I am not complete ad idem with the noble Lord, Lord Knight, and the noble Baroness, Lady Kidron, on digital issues where normally we work together. I hope they will forgive me for not having shared some of my concerns with them in advance.

I kicked myself for not saying this last week, so I am extremely grateful that they have brought the issue back this week for a second run round. My slight concern is that history is littered with countries trying to stop innovation, whether we go back to the Elizabethans trying to stop looms for hand knitters or to German boatmen sinking the first steamboat as it went down the Rhine. We must be very careful that in the Bill we do not encourage the CMA to act in such a way that it stops the rude competition that will drive the innovation that will lead to growth and technology. I do not for a moment think that the noble Lord or the noble Baroness think that, but we have to be very cautious about it.

We also learn from history that innovation does not affect or benefit everybody equally. As we go through this enormous technology transformation, it is important that as a society we support people who do not necessarily immediately benefit or who might be considerably worse off, but I do not think that responsibility should lie with the CMA. Last week, the noble Lord, Lord Knight, challenged with, “If not in this Bill, where?” and I feel similarly about this amendment. It is right that we want regulators to co-operate more, but it is important that our regulators have very clear accountabilities. Having been a member of the Court of the Bank of England for eight years in my past life, I hate the fact that there are so many that the Bank of England must take note of in its responsibilities. We have to be very careful that we do not create a regime for the CMA whereby it has to take note of a whole set of issues that are really the broad responsibility of government. Where I come back into alignment with the noble Lord, Lord Knight, is that I think it is important that the Government address those issues, just probably not in this Bill.

[Lord Ranger of Northwood (Con)]

My Lords, I rise with an equal amount of trepidation to the noble Baroness, Lady Harding. I am a new Peer in the House with a background in the technology industry and the delivery of digital services. Although we are talking about market competition, we are straying into a complex conversation around labour markets and digital skills—the fundamental, No. 1 topic that drives a lot of thinking in digital organisations. I refer noble Lords to my register of interests.

The complex nature of a global digital skills market is the one thing that is challenging all digital businesses at this point in their ability to deliver and drive innovation. It is so competitive; in fact, the hyper-competitiveness is driving the inability to deliver. People are cannibalising other organisations. The agility and speed at which the market is moving, the hyperinflation in pricing, the investments that people are trying to make—indeed, that international businesses are trying to make globally—and the length and longevity of those investments’ value are becoming increasingly challenging. Therefore, the CMA intervening and having some influence will be challenging. We will have to think hard about how to enable understanding; about the speed at which the market is moving; about where this kind of activity would take place; and about how it would operate, understanding the global size and scale of this challenge.

I view this market with some concern but also with some excitement because of its ongoing development. One thing that I have seen is the move from triage, where outsourcing and moving to international markets for labour skills in digital was a trend, to the emerging nearshore and onshore trend of looking at bringing more skills into local geographies. Why do I say that? I say it because of the speed of the change in the market. If we try to regulate and legislate for that speed, it will be extremely challenging.

Humbly, that is the point I wanted to make at this stage of the debate.

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[Baroness Kidron (CB)]

Indeed.

[Baroness Harding of Winscombe (Con)]

My Lords, I promise I will speak briefly to associate myself with the remarks of my noble friend Lady Stowell and support her Amendment 77 and Amendment 76 in the name of the noble Viscount, Lord Colville.

Despite the fact that there are fewer of us here than there have been in the debates on some of the other quite contentious issues, this is an extremely important amendment and a really important principle that we need to change in the Bill. To be honest, I thought that the power granted to the Secretary of State here was so egregious that it had to have been inserted as part of a cunning concession strategy to distract us from some of the other more subtle increases in powers that were included in the other place. It is extremely dangerous, both politically and technocratically, to put an individual Secretary of State in this position. I challenge any serious parliamentarian or politician to want to put themselves in that place, as my noble friend Lady Stowell said.

On its own, granting the Secretary of State this power will expose them to an enormous amount of lobbying; it is absolutely a lobbyist’s charter. This is about transparency, as the noble Baroness, Lady Kidron, said, and parliamentary scrutiny, which we will come to properly in our debate on the next group of amendments. However, it is also about reducing the risk of lobbying from the world’s most powerful institutions that are not Governments.

For those reasons, I have a slight concern. In supporting Amendment 77, I do not want the Government or my noble friend the Minister to think that establishing parliamentary scrutiny while maintaining the Secretary of State’s powers would be a happy compromise. It would be absolutely the wrong place for us to be. We need to remove the Secretary of State’s powers over guidance and establish better parliamentary scrutiny.

[Lord Clement-Jones (LD)]

My Lords, it has been very interesting to listen to noble Lords on this amendment. I am getting a strong sense of déjà vu from our debates on the then Online Safety Bill.

The noble Viscount, Lord Colville, made a devastating case for the deletion of the Secretary of State’s power, and the noble Baroness, Lady Stowell, made a superb case for the inclusion of parliamentary oversight over the guidance. The fact is that, just as we argued in our debates on the then Online Safety Bill, there is far too much power for the Secretary of State in this Bill. This example is the most egregious, but there are so many other aspects that one could argue with, and have argued with—the noble Viscount reminded us of his earlier amendments—such as the conditions for an undertaking to have an SMS designation; the turnover condition; the permitted types of conduct requirements; the period during which the DMU must decide which terms to include in the final transaction under the final offer mechanism; the amount of penalties imposed by the DMU on individual undertakings; and the DMU’s statement of policy on penalties. That is a heck of a lot of different powers for the Secretary of State and, as I say, power over guidance is the most egregious of them.

The way in which the noble Baroness, Lady Stowell, expressed this was exactly right. We will come on to parliamentary scrutiny in our debate on the next group, but the word “accountability” is crucial. Of course the regulator should be independent but, at the same time, it should be accountable. This is not just a licence to roam beyond the bounds; it is the right and duty of Parliament to have oversight of the regulator, which is exactly what this amendment would provide for. You have only to look at the draft that was put together of the Overview of the CMA’s Provisional Approach to Implement the New Digital Markets Competition Regime to see just how broad the Secretary of State’s powers over the way in which the CMA carries out its functions will be. That is why this is such an important amendment.

I very much hope that the Minister will hear our voices. This is a really important area of the Bill. As the Minister can see, it is something about which, having had the experience of the then Online Safety Bill, we feel very exercised.

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[Baroness Harding of Winscombe (Con)]

My Lords, I will be brief. It is an honour to follow the noble Lord, Lord Fox, and his passionate exposé about the importance of interoperability while reminding us that we should be thinking globally, not just nationally. I did not come expecting to support his amendment but, as a result of that passion, I do.

I rise to support my noble friend Lady Stowell. She set out extremely clearly why stronger parliamentary oversight of the digital regulators is so important. I speak having observed this from all possible angles. I have been the chief executive of a regulated company, I have chaired a regulator, in the form of NHS Improvement, I have been on the board of a regulator, in the form of the Bank of England and I am a member of my noble friend’s committee. I have genuinely seen this from all angles, and it is clear that we need to form a different approach in Parliament to recognise the enormous amounts of power we are passing to the different regulators. Almost all of us in Committee today talked about this when the Online Safety Bill was passing through our House, and it was clear then that we needed to look at this. We have given enormous power to Ofcom in the Online Safety Act; this Bill looks at the CMA and very soon, in this same Room, we will be looking at changing and increasing the powers of the ICO, and if we think that that is it, we have not even begun on what AI is going to do to touch a whole host of regulators. I add my voice to my noble friend’s and congratulate her on the process that she seems to be well advanced in in gathering support not just in this House but in the other place.

I also express some support for Amendment 83. I am concerned that if we are not careful, the easiest way to ensure that the CMA is not bold enough is to not resource it properly. Unlike the passage of the Online Safety Act, where we got to see how far advanced Ofcom was in bringing in genuine experts from the technology and digital sector, it has not yet been so obvious as this Bill has progressed. That may be just because of the stage we are at, but I suspect it is also because the resourcing is not yet done in the CMA. Therefore, I ask the Minister for not so much an annual update as a current update on where the CMA is in resourcing and what support the Government are giving it to ensure it is able to meet a timetable that still looks painfully slow for this Bill.

[Baroness Kidron (CB)]

My Lords, I rise mainly to correct the record that I called the amendment in the name of the noble Baroness modest and also to celebrate the fact that I am once again back on the side of the noble Baroness, Lady Harding; it was very uncomfortable there for a moment.

I was on both committees that the noble Baroness, Lady Stowell, referred to. We took evidence, and it was clear from all sorts of stakeholders that they would like to see more parliamentary engagement in the new powers we are giving to regulators. They are very broad and sometimes novel powers. However, the point I want to make at this moment is about the sheer volume of what is coming out of regulators. I spent a great deal of my Christmas holiday reading the 1,500 pages of consultation material on illegal harms for the Online Safety Act, and that was only one of three open consultations. We need to understand that we cannot have sufficient oversight unless someone is properly given that job. I challenge the department and Secretary of State to have that level of oversight and interest in things that are already passed. So, the points that the noble Baroness made about resource and capacity are essential.

My other, very particular, point is on the DRCF. I went to a meeting—it was a private meeting, so I do not want to say too much, but fundamentally people were getting together and those attending were very happy with their arrangements. They were going to publish all sorts of things to let the world know how they, in their combination, saw various matters. I asked, “Is there an inbox?” They looked a little quizzical and said, “What do you mean?” I said, “Well, are you taking information in, as a group, as well as giving it out?” The answer was no, of course, because it is not a described space or something that has rules but is a collection of very right-minded people. But here in Committee, we make the point that we need good processes, not good people. So I passionately support this group of amendments.

I briefly turn to the amendment tabled by the noble Lord, Lord Fox, in which there is an unexpected interest in that I work with the IEEE, America’s largest standards organisation, and with CEN-CENELEC, which does standards for the European Union. I also have a seat on the Broadband Commission, which is the ITU’s institute that looks after the SDGs. Creating standards is, as a representative of Google once said to me, soft power. It is truly global, and as we create and move towards standards, there are often people in their pyjamas on the other side of the world contributing because people literally work in all time zones to the same effect. It is a truly consensual, global and important way forward. Everyone who has used the wifi today has used an IEEE standard.

Digital Markets, Competition and Consumers Bill

Baroness Harding of Winscombe Excerpts

Committee stage
Monday 5th February 2024 Grand Committee

[Baroness Harding of Winscombe (Con)]

My Lords, I fear that sometimes it is not enough that everything on an issue has been said; we have to make sure that everyone has said everything that needs to be said. I will be extremely brief but, as I raised this at Second Reading, I lend my voice in support of my noble friend Lord Mendoza’s amendment.

Can the Minister straightforwardly assure us that it is not the Government’s intention to prevent charities being able to access gift aid on membership subscriptions? If he can make that assurance, I expect him, as does the noble Lord, Lord Harris, either to accept this amendment or explain to us the Government’s alternative cunning plan to achieve the goal that I hope everyone in the Committee has.

[Lord Clement-Jones (LD)]

My Lords, I cannot think of a better introduction to an amendment than the different speeches we have heard. I belong to many of the organisations that have been mentioned. We all have a personal interest in so many of the organisations that depend on subscriptions.

The noble Lord, Lord Mendoza, talked about the impact of the possible loss of gift aid; the noble Lord, Lord Harris, on the issue of why gift aid could be lost; the noble Lord, Lord Vaizey, about the importance of subscriptions going forward; and the noble Baroness, Lady Young, about the different kinds of relationship this represents. To round it off, the noble Baroness, Lady Harding, started to hold the Minister’s feet to the fire with the questions that need asking. This amendment has been comprehensively and extremely well spoken to.

We have all had the NCVO briefing, which has a galaxy of different organisations all making the point that the Government really need to create an exemption. This is a very elegant solution that I hope the Government will adopt but, as the noble Baroness, Lady Harding, said, the Government need to reassure us that this was not intended as part of the new subscription regime. I very much hope that, at this moment, the Minister and the department are cooking up a solution as good as the one that the noble Lord, Lord Mendoza, has put forward, or that they are simply going to accept this. In terms of the arguments made, this has been a slam dunk. I would have thought that accepting the amendment of the noble Lord, Lord Mendoza, is a total no-brainer, otherwise I can see Report stage being carnage.