Digital Markets, Competition and Consumers Bill

Baroness Stowell of Beeston Excerpts

Committee stage
Monday 22nd January 2024 Grand Committee

[Viscount Colville of Culross (CB)]

My Lords, I tabled Amendment 32 in my name, and I thank the noble Baroness, Lady Jones, and the noble Lord, Lord Clement-Jones, for adding their names. I also thank the organisations that helped me work on these amendments. Amendment 32 to Clause 20 would stop the Secretary of State from revising the criteria for the conduct requirement process. These criteria are already very broad, but subsections (4) and (5) give the Minister huge scope to alter the types of behaviour expected from the SMS as part of the CR process.

Amendment 22, in my name and that of the noble Lord, Lord Clement-Jones, aims to respond to government concerns about removing Clause 20(4) and (5), which are that it will prevent the Minister future-proofing the CR criteria by allowing the CMA leeway to alter criteria in Clause 19, which will open the way for the imposition of conduct requirements.

I also support attempts to encourage interoperability between user and digital activity in any way possible, so I support Amendment 20, in the name of the noble Lord, Lord Lansley, and Amendment 21, in the name of the noble Lord, Lord Clement-Jones.

On my Amendment 32 in Clause 20, the conduct requirements for the process will be hard-fought by the tech companies. The collaborative nature of the Bill will mean that the SMS will be very involved in setting up the regime, but it will also be following every possible avenue to ensure that the requirements are not burdensome to its businesses. However, subsection (4) gives the Secretary of State broad and unlimited time to be subject to lobbying and to change the nature of the contact requirements.

I have already given an example in my speech on Amendment 7 to show the lengths to which tech companies will go to affect the decisions of politicians in establishing an SMS designation. This amendment will have a similar effect of thwarting their attempts to interfere in the CR process. Over the last decade, a number of cases have been brought against the big tech companies by the EU anti-competitive regimes. As part of that process to rectify the anti-competitive behaviour, the regulators have laid out behaviour for the companies under investigation. These are sets of rules aimed to force the companies to change their conduct and reduce their dominance in the market.

The process is very complicated, and small tweaks can make the difference between success and failure of the rules and their ability to control anti-competitive behaviour. Implementation takes time. Consultation on the rules between the DMU, the SMS and other stakeholders can mean it takes up to six months to put into action, then it takes another several months before the market study on how the new conduct regime criteria are working can be assessed. In the meantime, the SMS continues to make huge profits, while the smaller competitors continue to suffer the loss of market activity.

My concern about the clause is that, even if the CMA comes across a new type of harm and can see clearly what remedy would apply, it cannot create its own remedy under the clause. This is most unusual for a regulatory body. Usually, the breach of law is investigated, and the remedy tailored by that body to proportionately fit the harm identified. The regulator is usually granted the power to craft the remedy itself.

The Government are keen to build a system which is speedy and effective, and so there is the list of tools that can be used as remedies in Clause 20, which is useful, but, instead of a speedy, sensible mechanism which would be in the hands of the expert regulator of digital markets, an additional step has been put in place. That additional step—going back to the Secretary of State to create regulations—is a slower and more complicated way to craft this remedy. The DMU must be left to use its professional expertise to set these rules.

At a later stage, we will be talking about the suggestion of the noble Baroness, Lady Stowell, to have some parliamentary committee involvement. I wonder why on earth we cannot have parliamentary committee involvement when looking at these particular Secretary of State powers and the way that the DMU would use them.

To deal with the concerns that the Minister might have about the lack of future-proofing, I also tabled Amendment 22. Its aim is to respond to claims by the Government that the removal of Secretary of State powers in Clause 20 will stop the future-proofing. Noble Lords know that, in the fast-changing digital world, even the most comprehensive list of criteria might not include all possible eventualities; my amendment deals with those concerns. It stems from the powers of the CMA to look at the objectives of the conduct requirements in Clause 19(5), which are comprehensive: they cover “fair dealing”, “open choices” and “trust and transparency”. Only conduct requirements of the permitted type in Clause 19(5) can be imposed under Clause 20 on the CR regime.

Clause 20 is currently a permitted list for the regime; in future, the CMA may want to change the criteria needed to achieve the objectives of Clause 19(5) as markets inevitably change. I suggest to noble Lords that Amendment 22 will achieve that. I have argued that the fear of the Secretary of State succumbing to the lobbying powers of the big tech companies is something to worry about. This small amendment will solve that problem and give flexibility to the CR process, without the danger of political interference.

[Baroness Stowell of Beeston (Con)]

My Lords, as this is the first time I have spoken in Committee, I declare that I chair the Communications and Digital Select Committee—but I am speaking in a personal capacity. This is quite an eclectic group of topics; it makes me wonder what will be in the group labelled “miscellaneous”.

I will talk about the leveraging principle, but before doing so, I acknowledge what has already been said about parliamentary accountability and the fact that I have an amendment in a later group. To pick up a point that the noble Viscount, Lord Colville, just made about his amendment to Clause 20, if we were to have a new Select Committee, there is no reason why, in the course of its business, it would not look at regulations being brought forward. I would expect there to be that sort of role for a Select Committee, but it would not replace the role of the Secretary of State in this context. We will come back to that when we get to the specific amendment.

The amendment on copyright is very interesting to me, not least because the Communications and Digital Committee is currently carrying out an inquiry on large language models. We are in the final stages of that inquiry and will publish our report very soon. We will have, I hope, some interesting things to say about copyright at that time.

I turn to my point on the leveraging principle; in particular, I will pick up on Amendments 26 and 27 in the name of the noble Baroness, Lady Jones. When the Communications and Digital Committee carried out our scrutiny of the Bill and held hearings in the summer, we looked at the leveraging principle and concluded that what was in the Bill was adequate; we did not propose any further changes being necessary. Noble Lords may remember that, at Second Reading, I raised concerns about how the Government had diluted various bits of the Bill that we, as a committee, had said, “Do not do that”. As I understand it, they have not diluted the leveraging principle. However, I am a great believer in judging people by their actions rather than by what they say. Over the last few weeks, I have been very interested in the various representations that have been made to me and others from the different challenger firms and industry bodies in this area. I see and am sympathetic to their concerns on this topic.

Only today, I was interested to read the Bloomberg daily newsletter on tech matters, which refers to the recent case in the US in which Apple has been forced to make some changes to its 30% fee policy. It has already started introducing things that make that almost meaningless to those who might benefit from it. The newsletter explains what people have to do to use a different payment system from Apple’s and avoid the 30% fee. It says:

“In order for developers to include a website link in their apps to an outside payment system, they’ll first need to submit a request form to Apple. If approved, the link can only be displayed once within the app. It must look like a text URL—meaning it can’t be a candy-colored button that says ‘Use PayPal’—and the text itself must match one of seven templates”.


It continues:

“When clicked, the link will surface a warning from Apple about the risks of transacting with third-party websites, with ‘continue’ or ‘cancel’ buttons. The website has to open in the device browser, rather than from a pop-up within the app, where, depending on the type of service, a user can sign in or register for a new account”;


in other words, you will not bother by the time you have got through all that.

That was a long-winded way to say that I am minded to support what the noble Baroness, Lady Jones, is seeking to do with the leveraging principle here. A safeguard is necessary, but, as I said at the beginning, I am speaking in my own personal capacity.

[Lord Vaizey of Didcot (Con)]

My Lords, I will slip in here quickly, since I have Amendment 25 in this group. I follow my noble friend Lady Stowell in supporting tightening up the leveraging principle as much as possible. We would have a lot more fun in this Committee if we stopped referring to the leveraging principle and started referring to the whack-a-mole principle, which is the same thing. From now on, that is what I will do.

As my noble friend said, it is absolutely critical to the success of the pro-competition regime. We all know how it works and may have used it in our own commercial lives. After years of litigation, you concede a point to the competition authority and reduce the headline prices you are charging for the app to appear on your platform, and then you slip in a new way of charging, as was so ably set out by my noble friend Lady Stowell. You find a different way to charge in order to generate exactly the same revenue.

I tabled Amendment 25 simply to strengthen the anti-whack-a-mole conduct requirement so that designated undertakings cannot shift their anti-competitive behaviour to non-designated activities, even if their ability to do so is directly linked to their strategic market status in a designated activity. Without this change, there is a danger in the current drafting of the CMA having to constantly designate new activities and play catch-up with the SMSs—or it may not be able to combat anti-competitive behaviour in any way at all.

The key point here is that Clause 20 allows the CMA to intervene only when an SMS firm’s conduct

“is likely to materially increase the undertaking’s market power”.

It is too narrow, and it gives these SMS firms broad opportunities to avoid compliance. For example, if Apple News was not designated, as things currently stand, Apple could impose unfair terms on news publishers via contracts, circumventing the terms where it holds the market power, where the action has been taken which would be in the App Store. To appear in Apple News, you would go one step behind, in terms of the contracts with the news publishers, and therefore avoid any remedy.

My amendment seeks simply to close potential loopholes. As I said, my noble friend Lady Stowell has ably set out what the whack-a-mole principle is all about: generating exactly the same revenues but being very creative in how you do so as you play this game with the competition regulator.