United Kingdom Internal Market Bill

Baroness Neville-Rolfe Excerpts

Committee stage & Committee: 4th sitting (Hansard) & Committee: 4th sitting (Hansard): House of Lords
Wednesday 4th November 2020 Lords Chamber

[Baroness Jones of Moulsecoomb (GP) [V]]

My Lords, I will be very brief, as the noble Baronesses, Lady McIntosh and Lady Bowles, have explained this group extremely clearly. As the noble Baroness, Lady Bowles, said, these measures just offend me in principle. The Government seem, time and again, to understand big business, and are happy to give very large amounts of money and all sorts of leeway to such businesses and organisations but, at the same time, quite often miss the point on small businesses, which often struggle to survive—particularly during lockdown.

Small businesses can be the creative heart of our society at times—creating jobs for a lot of local people and, indeed, more widely. Will the Minister listen and understand that such intrusive and burdensome measures really do impact on small businesses that are already struggling to survive? I know it is very difficult for the Minister to commit to anything, but surely he is prepared to discuss this sort of issue with noble Lords and perhaps come to some sort of agreement.

[Baroness Neville-Rolfe (Con)]

My Lords, I was glad to see Amendment 149. It is always good to be clear about legal privilege to avoid needless or inappropriate fishing expeditions by regulatory staff, and it matters for in-house counsel as well as for external lawyers. It would be good to be clear on the Government’s intentions.

I also support the sentiment behind Amendments 150 and 156. We need to look after small business, the economic dynamism of which reflects a UK sector that was the envy of everyone when I was the Competitiveness Minister in Brussels. There is much in this Bill that they might fear: rules of which they are unaware; costs, as the noble Baroness, Lady Bowles, suggested, from burdensome requests; big fines; and quasi borders created between the different nations of the UK. I worked with the Federation of Small Businesses on regulation and getting them paid on time, and I try to promote a positive climate for the scale-up of small businesses, rather than a sale to a Silicon Valley, or other, giant after a short run of success. How will the Bill help small businesses, and are there dangers lurking here?

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[Lord Callanan (Con)]

I would be happy to write to the noble Lord but, as I said, the powers to date have functioned effectively and are based on the CMA’s existing powers.

[Baroness Neville-Rolfe (Con)]

I have another couple of points for clarification by my noble friend. First, does legal privilege apply to in-house counsel, provided that they are properly qualified lawyers? I would be happy for the Minister to write to me about that. Secondly, he referred in the debate about small business to Clause 32(4), and helpfully explained that the CMA will advise on regulatory proposals before laws are made, which provides an opportunity for small business interests to be taken into account. However, my concern was also about enforcement of the law, which would bear particularly harshly on small businesses that do not have the same fancy legal departments as others. I am not sure that the clause deals with that but would be delighted if I was wrong.

[Lord Callanan (Con)]

On my noble friend’s first question, she will notice that Clause 38(8) states:

“A notice under subsection (2) or (3) may not require a person … to produce or provide any document or information which the person could not be compelled to produce, or give in evidence, in civil proceedings before the court”.


I hope that that resolves the matter. I will write to her on her second point.

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[Lord Tyrie (Non-Afl)]

Some very interesting points have just been made that bear serious consideration, and the concerns we have just heard are reasoned, particularly on SMEs. At the very least, the Government may wish to offer a review of the CMA’s use of these powers, after an interval, to give us the assurance that they are being proportionately deployed and to see whether they need some amendment. The argument that they were derived from legislation the purpose of which was very different is well taken and might point to further amendment.

Overall, I support the Government in what they are trying to do here, having decided to create the OIM. It is true that the powers are robust, but they will need to be. If the CMA is to be expected to offer timely and high-quality advice, it will need to secure information quickly, without being given the runaround by devolved Administrations or parts of the private sector.

The penalties proposed are a weakness, though. Crown immunity will be in play for the devolved Administrations. I would be interested to know what thought the Government have given to the penalties that can be imposed for non-compliance in those cases. Public censure might help; on the other hand, a devolved Administration standing up to nasty Westminster might win local plaudits, resulting in the opposite effect. A lot of careful thought needs to be put into this issue if these measures are to be made effective. The proposed fines on the private sector are capped at £30,000. I simply do not see that sum troubling a recalcitrant or determined large third party. Has the Minister considered larger fines in certain circumstances?

It might be helpful to make one more general point. The CMA’s existing arrangements for securing compliance and information gathering across all its other functions are manifestly inadequate, as I saw it during my time there. They should not be used as a benchmark. Incidentally, the £30,000 figure comes from the merger regime. Something has to be done. The European Commission recently fined Facebook £1.6 million for not supplying information, while the CMA recently fined Amazon £30,000 over the merger with Deliveroo for not supplying information. That should give some idea of the disparity.

In February 2019, the CMA put proposals to the Government for improvements to information-gathering powers across all its functions. First, it needs to be able to gather information from a much wider range of sources to reflect the increasingly digital nature of the information that it is trying to collect: iCloud, machine-learning algorithms and so on spring to mind. These are not at all easy to capture with existing legislation. Secondly, and even more importantly, subject to safeguards, the CMA needs a general information- gathering power outside the context of a formal investigation. I do not like giving general powers, but I think the CMA now needs this to find out what is really going on in markets and enable it to think through much better than it can at present. It needs to be able to use the full range of tools to best bear down on consumer detriment. It is struggling to do that at present, and increasingly so with the growth of rip-off culture.

When the Minister returns to his department, he will find the proposals, of which I am just touching the surface, have been fully developed by the CMA and are sitting with his officials. Will he agree to take another look at those proposals to see what might usefully be drawn from them? For improving the ones we are discussing today, quite a lot of what is in there is likely to be relevant. Will he agree to report back to the House on what he has found?

I have been following this Bill closely, particularly Part 4, which I have an interest in because of my previous job. Some very important points have been made across the Committee, not least in Monday’s relatively brief debate on Clause 28 about whether the CMA is the appropriate body in the beginning to have responsibly for these functions. Those points are sufficiently important for us to have another look at them on Report. I hope the House will find a way to enable us to do this.

[Baroness Neville-Rolfe (Con)]

My Lords, this Committee is nearing its end, apart from Part 5. I support the noble Baroness, Lady Bowles, in her forensic efforts to probe the purpose of Clauses 38 to 40. I welcome my noble friend Lord Tyrie to today’s debate. Although I do not agree with him on fines or general powers, he makes a very good point about digital information. I am sorry he was not here for the debate on where the OIM sits. As he says, that is something we hope to debate again on Report.

On the plus side, these clauses give a great deal of detail. I usually complain to the Minister that EU exit Bills fail to do just that and leave too much to regulations. On the minus side, these are extremely strong powers of enforcement with very high penalties—for example, fixed fines of up to £30,000 would make many a small company bankrupt. There is no due diligence defence that I can see or provision allowing a reasonable excuse. The CMA can use its own discretion to decide whether a request for information has been complied with and can impose a financial penalty if it thinks there has been obstruction or delay. Such powers are fiercer than those of the police. The Minister will be able to tell us whether the CMA has those powers in relation to competition law and perhaps explain in each case why they are justified in the internal market Bill which, as many have said, is a little different from competition law.

Moreover, we do not know to which regulations these various measures and penalties will apply. Can the Minister kindly take us through some examples of their proposed use? He may have done this elsewhere; if so, I am sorry if I missed that. Perhaps more importantly, could he lay some sample regulations for us to review before Report, as his predecessor did so helpfully on the Bill relating to nuclear issues on EU exit?

I worry that both Houses of Parliament have been distracted by unease with Part 5 of the Bill into agreeing wide-ranging, open-ended and burdensome powers in these clauses and, for the first time, on services, the beating heart of the economies in all four nations of the UK. All this has been relatively lightly scrutinised despite our efforts, and experience shows that some nasty surprises might be in store. I am keen to work with others to minimise those while generally supporting the Bill’s direction of travel.

[Lord Fox (LD)]

My Lords, once again this has been a short but important debate. I congratulate noble Lords on speaking on this. Once again, I find myself in complete agreement with the noble Baroness, Lady Neville-Rolfe, and my noble friend Lady Bowles. It was good to hear from the noble Lord, Lord Tyrie, whose experience is important.

During her speech, my noble friend Lady Bowles sought to characterise the difference between getting information from potential recalcitrants—people who are suspected of or known to have distorted the market—and getting information from people to create a picture of a market. I hope the noble Lord, Lord Tyrie, will not mind me saying that the sort of language used about needing more sanctions and similar issues is coming from the mindset of dealing with recalcitrants. That is where the experience of the CMA has lain to date. There is a real concern that in creating this new role the culture of having to fight to get what you need is transferred into this second activity, and that is not appropriate.

I was interested to hear the point of the noble Lord, Lord Tyrie, about Clause 28 and looking again at the positioning of the OIM and CMA. I would be very keen to hear what he has to say.

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[The Deputy Chairman of Committees (Baroness Henig) (Lab)]

I have had a request to speak from the noble Baroness, Lady Neville-Rolfe.

[Baroness Neville-Rolfe (Con)]

I thank my noble friend for his assurance on commencement. He did not answer my specific questions, but I think that the answer in general terms was that the Government have taken the same powers as the CMA has on competition and applied them pro rata. Perhaps I can pick up something that the noble Lord, Lord Stevenson, said earlier. I wonder whether we could look at this line by line to see whether things are or are not all the same; that would be a helpful Committee-type process.

I really got up to ask a question about examples. The Minister helpfully gave an example of a penalty regulation—he said that he might make regulations with penalties under £30,000, perhaps at a lower level for particular things—but I am confused about what kind of regulations are going to be made here. That may be an impossible question to answer but if my noble friend could give us some more examples, perhaps ones that are in draft or have gone out to consultation, it would be incredibly helpful.

[Lord Callanan (Con)]

I referred in my earlier speech to the need to make regulations setting the maximum penalty, which the Secretary of State will do, but I will write to my noble friend if there are any other examples of regulations that we feel we may need to make.

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[Lord Naseby (Con)]

My Lords, the idea behind this new clause has validity, and particularly will after the pandemic, whenever it is over. There is little doubt that some companies will be strong after the pandemic because they happen to be in a particular market, and others will be extremely weak and looking to be rescued somehow. The only problem I have is that the new clause refers to the

“duty to consider the internal market”

when in fact, that is the only market that will apply from 1 January onwards as far as the UK is concerned. So, it is not as though it is one of several markets; it is the only market in my judgment.

The noble Baroness is quite right that in some of the markets, there are already signs that things are happening. In the fintech market, things are undoubtedly moving quickly—for example, in sections such as payments and operations. You only have to read the Financial Times regularly, as I am sure a lot of noble Lords do, to see that things are moving all the time there. Equally, a fair number of our universities have what you might call cradle operations or primary operations, whereby they are looking to develop research that they believe might be marketable. Many are quoted companies; others are not. There is a lot of activity happening.

Although it is undoubtedly true that we want to see both paragraphs (a) and (b) happen, given the original role of the CMA, which emerged from the Monopolies and Mergers Commission, I think it pretty inconceivable that it would not look at these aspects. My noble friend on the Front Bench will be able to clarify that more than I am able to.

If there is not sufficient cover within the current Bill and other parts of the law, I hope my noble friend will look upon the amendment seriously. If that degree of cover already exists, I can understand why, although the issue is worth looking at and talking about, it may not be appropriate to deal with it in a new clause.

[Baroness Neville-Rolfe (Con)]

I rise to speak to Amendment 153 in the name of the noble Baroness, Lady Hayter. This is a new clause relating to mergers that might affect the internal market. She may have a reasonable point that this is a matter of public policy about which we should be concerned. It is odd the way mergers involving an overseas player without a UK business cannot be stopped under merger law—think Cadbury, think ARM, as well as GKN Melrose, which the noble Baroness, Lady Hayter, explained was a particularly heinous example—because there is not the necessary lessening of competition. Although she did not say so, perhaps there is a parallel concern about takeovers important to one of the devolved nations or to a particular R&D base.

However, I do not think this is a big risk, as representations would be made to the CMA and taken into account in consultation and decision-making by the CMA, which is domestically focused and operates across the UK. My concern is that the new clause would be a major change to the way merger law works; I do not think it right to try to change one aspect in this Bill. Therefore, I cannot support this amendment.

[Baroness Ritchie of Downpatrick (Non-Afl) [V]]

My Lords, I support the new clause in the name of the noble Baroness, Lady Hayter of Kentish Town. As she said, it would insert into the CMA’s powers a clear and specific reference to the need, in the new internal market and the regulation of takeovers, to promote research, development and innovation in new and existing industries and enterprises, and to act in the interests of UK public policy.

We already know that the CMA has a number of responsibilities, including protecting consumers from unfair trading practices, investigating mergers between organisations to prevent a reduction in competition and taking enforcement action in relation to anti-competitive practices by businesses and individuals. It will have more burdens as a result of the Internal Market Bill. Put simply, it will be responsible for strengthening business competition and preventing and reducing anti-competitive practices. 

The new clause seeks to nail down the role by referring to promoting research, development and innovation in new and existing enterprises. It would also assist with business development and innovation and in so doing, help to encourage overseas investment with job creation and sustainability—central facets of UK economic policy. It could also help to steady the market.

The Institute for Government has already stated that there is a clear gap in the Government’s plans for how governance of the internal market will function at a political level, and it is not clear how disputes concerning the functioning of the internal market will be managed. It is therefore important that this power be inserted to ensure greater protections where there may be hostile takeovers.

In devolved Northern Ireland, companies are generally small. However, the agri-food sector would sit under the new dispensation via the Northern Ireland protocol. There have been takeovers by companies based in the Republic of Ireland, so how would that fare if there were problems with the competition elements in the internal market Bill? The new clause in the name of the noble Baroness might assist in this regard.

The Institute for Government also notes that the office for the internal market within the CMA has very limited powers and, in many cases, can choose not to exercise them. It is worth noting that it can also request specific documents from any individual, business or public body to support its functions. Although it will be able to impose certain financial penalties, it will not be able to request any information that a business, individual or public authority would not be compelled to reveal in court, hence this new clause, on the need to promote the better operation and improvement of the UK internal market.

I therefore have no hesitation in supporting the new clause. It would promote much-needed research, development and innovation in new and existing industries and enterprises, and pump-prime UK public policy on the economy and finance in particular.