Digital Markets, Competition and Consumers Bill

Jeremy Wright Excerpts

Consideration of Lords amendments
Tuesday 30th April 2024 Commons Chamber

[Kevin Hollinrake]

We have engaged significantly, throughout the Bill’s passage and before it was introduced, with large tech and challenger tech. Our understanding is that all those cohorts are happy with where the Bill is today. Certainly, during that engagement, concerns were raised about the term “appropriate,” but the clear position that we expressed to those who raised that concern was, “Of course, there is a requirement on the CMA to act proportionately.” Putting that in the Bill does not undermine its basic principles. In fact, we understand from the situation in the European Court of Human Rights, and the property rights emanating from it, that all those things are baked in anyway, so we do not feel that the wording weakens the legislation at all, but it does strike the right balance between those two different courts.

[Sir Jeremy Wright (Kenilworth and Southam) (Con)]

It is clearly important that we understand what “proportionate” means in this context. Is the Government’s position that proportionality implies that there is more for the CMA to think about than just how effectively the imposition of a conduct requirement would fulfil the CMA’s requirements? If so, what can the Government do to make that clear, so that courts and tribunals that consider such cases do not fill in the gaps themselves? The words “appropriate” and “proportionate” could be interpreted quite widely if the Government are not clear about what they mean by them.

[Kevin Hollinrake]

My right hon. and learned Friend will know from his legal background that the term “proportionate” is well established in law. Of course, the courts play an important part here. We do not prescribe everything in our legislation; there is quite rightly the opportunity for people to challenge certain decisions by the CMA. Clearly, we are trying to reduce the ability of large tech to prevent investment from smaller tech. That is the balance that we are striking, but we do not want to discourage investment from big tech, so the requirement for the CMA to act proportionately is reasonable.

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In an attempt to save the Government from themselves, the Lords have tried to return the Bill to its original shape with four sets of amendments, which I will now go through. The first set, Lords amendments 9 and 19, deals with proportionality. The original Government version of the Bill said that the CMA’s conduct in regulating digital markets had to be “appropriate”. The Government then changed that to “proportionate”. Lords amendment 9 would change it back to “appropriate”. I believe that the Government version would, in effect, render any challenge to the CMA’s conduct a test of the merits, rather than a judicial review, and provide big tech firms with limitless legal budgets with even more scope to tie the CMA up in lengthy legal wrangling. Jarndyce v. Jarndyce in the Court of Chancery would have nothing on the CMA in the High Court. The Government seem to be deliberately clipping the wings of the CMA, and Labour agrees with their lordships that in this area, the Bill should be returned to its original form.

[Sir Jeremy Wright]

How would a tribunal consider the appropriateness of a CMA intervention without considering the detail and merit of it?

[Sir Chris Bryant]

The point is that either the change is necessary because a new and different measure is being adopted by the Government, in which case it is a lower threshold and therefore inappropriate, or the change makes no difference whatsoever, in which case it is unnecessary. The normal standards for deciding whether an amendment is appropriate would lead us to ask, “Is it necessary, or does it provide a good remedy?” I do not think that either is the case, which is why Labour does not support the Government’s wording.

The second set of amendments, Lords amendments 12 and 13, deal with countervailing benefits. Just to prove that Labour Members speaking from the Dispatch Box are very consistent with one another, my next sentence was effectively said by my hon. Friend the Member for Pontypridd in a previous debate: the countervailing benefits exemption allows the Competition and Markets Authority to close an investigation of a breach of a conduct requirement if a firm can demonstrate that its anti-competitive conduct produces benefits that outweigh the harm and are therefore indispensable. On Report in the Commons, the Government significantly reduced the threshold for that exemption, removing the word “indispensable” and merely requiring that

“those benefits could not be realised without the conduct”.

It sounds the same, but it is different—subtly but importantly different. The Lords amendments would remove that paragraph and alter the next line so that it reads

“the conduct is indispensable and proportionate to the realisation of those benefits”.

I will make two points in this area. First, as I think everybody accepts, the “indispensable” standard is a well-understood concept in UK competition law: it is used in the Competition Act 1998, which I do not believe to be as outmoded as some Members have suggested. Secondly, the courts would interpret Parliament’s deliberate move away from an existing, well-understood standard as intending to create a new, lower threshold, which again will inevitably allow the big tech firms greater scope to launch complex legal challenges.

If the Government really do not see any distinction between the two thresholds, the most obvious compromise would be to reinstate the word “indispensable” alongside the Bill’s new wording and to clarify, today at the Dispatch Box and in the Bill’s explanatory notes, that the “indispensable” standard and the new form of words inserted by the Government have an identical meaning. Otherwise, there is a risk that the courts will seek to explore further whether Parliament has deliberately created a new threshold and standard.

I simply say to the Minister that I remember, when he was on the Back Benches and we had lengthy discussions about the powers of Companies House, that he was very keen on making sure that Companies House had the powers it needed to do proper investigations. He regularly made the point that lots of people have very deep legal pockets, and that does not necessarily mean that the consumer always wins out. I would argue that it is the same in this case.

Lords amendments 26 to 28 to clause 89 and Lords amendments 31 and 32 to clause 103 relate to appeals. The Bill originally had judicial review as the appeal standard for all CMA decisions under part 1, but in the Commons the Government moved to merits appeals for penalty decisions. I accept that this is only about penalty decisions, but I none the less believe that it is dangerous because, while the new regime is intended to be collaborative, it is ultimately the threat of fines that will incentivise big tech firms to comply with the CMA’s decisions. If there is no prospect of a fine, whether large or small, those large tech firms may well decide to be less collaborative.

There is the even greater danger that merits appeals on penalty decisions bleed back across the Bill into regulatory decisions, giving big tech firms greater scope to frustrate and challenge the CMA’s decisions. While it is correct that the courts are generally able to distinguish between judicial review and merits elements of appeals—that point has been made in previous debates by the former Attorney General, the right hon. and learned Member for Kenilworth and Southam (Sir Jeremy Wright)—it does not eliminate the concern about the two bleeding into each other, especially if the two streams take place together in the same case. If the Government are unable to reinstate judicial review appeals across part 1, as we would prefer, a clarificatory amendment should be inserted in the Bill to provide certainty that appeals on penalties cannot impact on other regulatory decisions to eliminate scope for speculative challenges.

It is worth bearing in mind that the chief executive of the CMA has made it clear that the authority wants the judicial review standard to apply. She welcomed effective judicial scrutiny of its decisions, but said:

“We think that the JR standard achieves that.”

She went on to say that her experience of merits appeals was that they result in

“very protracted litigation”,

making it

“a lot harder to reach constructive, collaborative outcomes”,

because

“all eyes are on that litigation process.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 7, 8, Q4.]

Let me come on to the matter of ticket touting, and Lords amendment 104. I start by thanking Lord Moynihan—a Conservative peer, of course—for tabling this amendment and for his significant work across many years. When I have not agreed with every sentence from my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) on this subject, I have sometimes felt the scratches on my back from her very elegant fingernails, but she has also done enormous work, and I think she is much to be praised for it. There are many others in the House of whom that is true as well, including all those sitting next to her on the back row, who I am sure will catch your eye later, Mr Deputy Speaker.

I start from a very simple principle: the value of a ticket—whether for the rugby, the football or a gig at the O2—is created by the artists, the promoters and, above all, the fans. Yes, the secondary ticketing market can help all three, because sometimes people buy more tickets than they need or are unable to attend for whatever reason, but the abuse of the secondary market can lead to artists, promoters and fans all losing out, and abuse is rife.

I will take an example of a case that has already been through the courts. It is that of Lynda Chenery, Mark Woods, Maria Chenery-Woods and Paul Douglas, who bought and resold concert tickets worth £6.5 million. They bought them on primary sites, including Ticketmaster, before reselling them on secondary ticketing platforms, such as Viagogo, at inflated prices. They used endless tricks, including sending customers ripped envelopes to imply that the tickets had been lost in transit or using fraud juice, which involved the use of Tipp-Ex correcting fluid or more sophisticated digital methods, to amend tickets. They held their customers in open derision. Having scammed one person into paying £535 for a ticket for the Harry Potter west end show, they referred to him in an email as “another idiot”. These people are despicable parasites preying on fans, and we need to go far further to address this issue.

This practice prices many fans out of the market and adds no value whatsoever to the creative process, at a time when creators are in desperate need of making a living out of their craft. In 2016, one ticket for Adele at the O2 arena in London was listed on GetMeIn for £24,840, which is 290 times the face value of the ticket. Nobody in the Rhondda would be to afford such a ticket. Incidentally, Wimbledon faces exactly the same set of problems.

Viagogo is today selling two tickets for Pink at the Millennium stadium in Cardiff on 11 June for £498 each. I think the fans could perfectly legitimately start shouting:

“What about us?

What about all the plans that ended in disaster?”

It is not obvious what the original price was for those tickets. On Viagogo, people can get one ticket for Peter Kay at the O2 on 4 May for £302, or tickets for “The Book of Mormon”—it has been in the theatre for several years, and is a wonderful, hilarious show—on 4 May at £420 each. In a way, the one that upsets me the most is that tickets for the ballet “The Winter’s Tale” at the Royal Opera House on 3 May—a Friday night—are £1,006 each, but people can buy those tickets from the Royal Opera House for £140, because there is taxpayer involvement in supporting the Royal Opera House.

We could say the same of StubHub, on which two standing tickets for Doja Cat in Glasgow on 11 June with a face value of £162 are selling at £1,002. This is a pernicious industry. It is parasitical, it does nothing for the creative industries in this country and we must tackle it.

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[Damian Collins]

I will speak briefly on the question that I raised earlier in the debate about the change of language from “appropriate” to “proportionate” and follow on from the remarks of my hon. Friend the Member for Weston-super-Mare (John Penrose). On one level, what the Minister is saying now—similar to what the Minister in the House of Lords, Lord Camrose, said in the debates there—is that proportionality is implicit in the law anyway and that the rights an organisation would have under article 1 of the European convention on human rights would apply anyway. Ministers are saying that bringing this language into the Bill is therefore a tidying-up exercise that re-emphasises rights that people already have. On another level, Ministers are also saying that this change creates a better balance, which means that there will be some change in how things work. It is important at this point that the House is clear about what is intended with this change.

There is a concern that the change effectively opens up a full merits appeal basis, which we have been keen to avoid doing in all the debates on this Bill as it has gone through both Houses. The Government have rightly resisted calls from big tech companies to bring that in, because it is a recipe for multiple and lengthy litigations, just as with every single measure of tech regulation that exists as a whole. That is not the intention.

Let us say that a company may be guilty of overcharging in an app store, but the cost to the consumer is relatively low. Would an intervention from the CMA be proportionate? Overcharging in the mobile app market may exist, but ultimately companies are happy to pay it and it is a relatively small charge. Would a big intervention by the CMA be a proportionate response? There are so many competing priorities, and often the individual consumer cost of some of these measures would be low, but there is the business significance of a company self-preferencing a service to the exclusion of other companies from the market. The company might say, “There is no particular consumer detriment to this, because the price is relatively low”, but it drives strategic market status. We have already seen in the European Union with the Digital Markets Act that the companies are challenging the designation of strategic market status, and they are looking for grounds to challenge at every opportunity, and we must expect that they will do the same thing here as well. That is why we should be clear that we are clear about what we mean.

My hon. Friend the Member for Weston-super-Mare invited the Minister to say that effectively, in terms of enforcement and how the courts should interpret it, the change should not make any difference from the original drafting. He invites the Minister to say that we should not be concerned that moving from “appropriate” to “proportionate” is moving from saying that the regulator should do what is within its rights to do—it is appropriate because it has the power to do it and it has made an intervention based on that power—to saying, “Even if it was appropriate for it to do it, it should not have done it, because it was disproportionate.” What would the grounds for that disproportionality be?

It is really important that the guidance to the legislation makes clear what we should expect on how the CMA can determine to find what it believes are proportionate responses, with that not being easy to dismiss on the grounds that the cost to consumers may be relatively low or the impact limited to a certain area of business.

[Sir Jeremy Wright]

My hon. Friend is, as ever, making a good case. As he knows, I agree with him about the need for the Government to be clear about what these terms really mean. One thing that we are not talking about today but which is linked to the question of definitions is what we mean by “consumer benefit”. Does he agree that there may be a difference between benefit to the current consumer and a benefit to the future consumer and that we should be clear in the Bill, should we not, that “consumer benefit” includes future consumers as well as current ones?

[Damian Collins]

My right hon. and learned Friend makes an important point. We could have a digital service provided for free, self-preferenced by a big company, offering a new service to its customers—how could there be a consumer detriment in that? But a consequence of that could be constriction of the market and the driving out of other businesses. The mobile mapping market is a really good example: Google Maps and Apple Maps totally dominate a market that used to have multiple competing companies in it. Now it does not, and there could be future consumer detriment in that.

That is why it is important that this is an ex-ante regime, which anticipates not just the detriment that may exist now, but future consequences. That is such an important principle for digital markets, which have tended to see the consolidation of market power in the hands of a relatively small number of players, who often do not compete against each other directly but dominate certain sections of the market, be it through the mobile ad market, search and retail.

There are only in effect two app stores, and given the lack of interoperability, they are virtually monopolies. We see those things already, and the development of large language model systems and the massive acquisition of data required for AI to run them is consolidating that market largely into the hands of the five or six companies that have enough data to be effective operators within it. That means that, in the future digital market world, any challenger tech developer will have to access its market and customers through the services provided by a relatively small number of companies. That is important.

I would be grateful if the Minister said in winding up whether he believes that the Bill offers a better balance. Has that balance changed, or has it not, and it is just a question of language and interpretation of meaning? What does it mean? I hope we all agree that, through making this change, we are not seeking to open up the legislation to wider judicial challenge, with more ruling through the courts, more lengthy delays and costs to try to bring forward the CMA’s interventions.

Post Office (Horizon System) Offences Bill

Jeremy Wright Excerpts

2nd reading
Wednesday 20th March 2024 Commons Chamber

[Kemi Badenoch]

We are working closely with the Northern Ireland Executive. We have carefully considered the territorial extent of each piece of legislation, and we are rigorous in our commitment to devolution. The hon. Gentleman should be assured of the amount of work that is taking place to ensure that we get the Bill done properly in a way that will not have unintended consequences. I thank him for that point.

This new legislation will quash all convictions that meet the clear and objective conditions laid out in it. We recognise that postmasters have suffered too much for far too long, which is why convictions will be quashed automatically when the Bill receives Royal Assent, removing the need for people to apply to have their conviction overturned.

[Sir Jeremy Wright (Kenilworth and Southam) (Con)]

I am extremely grateful to my right hon. Friend for giving way. I understand entirely why the Bill is necessary. She will agree that it is important that we do not, through the Bill, set any precedent for the interference of this House in individual convictions, unless there are exceptional circumstances such as these. That means that the Bill must be tightly drafted. At the moment, condition E—the last of the conditions that she has mentioned—is that

“at the time of the alleged offence, the Horizon system was being used for the purposes of the post office business.”

Why is that not phrased differently to say that Horizon-based evidence was presented in the case against the person convicted? There is a material difference between those two things. I just seek to understand why she has chosen that formulation rather than the alternative.

[Kemi Badenoch]

My right hon. and learned Friend makes a good point about the final condition in the Bill. That is something that we considered, but it would likely have required a case-by-case, file-by-file assessment of each prosecution. That would have added significant time and complexity, which is what our solution avoids. One thing that I have been keen to emphasise is that speed and pace are critical. This has taken far longer than I would have wanted, and I would not have gone for a solution that would have impeded this and created complications.

Economic Crime and Corporate Transparency Bill

Jeremy Wright Excerpts

Consideration of Lords amendments
Monday 4th September 2023 Commons Chamber

[Kevin Hollinrake]

I thank the hon. Gentleman for his work and his intervention. It is clear that fraud and money laundering are already criminal acts; what the Bill principally does is help to prevent fraud by requiring organisations to make sure that fraud is not happening within them in the first place. I think he has spoken to that in the past, as have I as a Back Bencher. I fully support it as the Minister concerned, and I absolutely believe that the Bill will have a major impact in clamping down on economic crime.

We must do more to tackle crime, but we must also ensure that the UK remains a great place to start and grow a business. As such, the Government strongly oppose putting additional burdens on legitimate business, unless there is a clear rationale for doing so. Any amendments made to strengthen the Bill have been carefully weighed up, and the Government are confident that we have struck the right balance in tackling economic crime and preserving the UK’s welcoming business environment.

[Sir Jeremy Wright (Kenilworth and Southam) (Con)]

I know that my hon. Friend will come on to make points about failure to prevent offences in relation to burdens on small businesses. May I tell him first that I welcome wholeheartedly the arrival of failure to prevent offences? Like my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland), I have argued for that when I was Attorney General and since, and I am glad to see it. In relation to failure to prevent and Lords amendment 151 in particular, the Minister will wish to argue that he is seeking to prevent excessive burdens on smaller organisations by limiting that offence to large organisations, but can he explain why subsection (4) of the new clause introduced by Lords amendment 151 does not do that job? It states:

“It is a defence for the relevant body to prove that, at the time the fraud offence was committed…the body had in place such prevention procedures as it was reasonable in all the circumstances to expect the body to have”.

Why would one of those circumstances not be the size and capacity of the organisation in question?

[Kevin Hollinrake]

I thank my right hon. and learned Friend for his point and his work in this area. I will come on to that amendment, if I may, later in my remarks. He makes a valid point, and we want to ensure there are no loopholes while at the same time maintaining the position that the Bill does not put new burdens on businesses that are not likely to have a systemic effect on economic crime.

--- Later in debate ---

[Sir Robert Buckland]

They will have in place reasonable procedures to prevent people from acting on their behalf and unjustly benefiting their own companies and entities. Let us not forget it is a partnership offence as well. I do not see that as some sort of general exhortation to small and medium-sized businesses to suddenly put in place measures to prevent fraud in general—that is not what the offence says.

[Sir Jeremy Wright]

Does my right hon. and learned Friend agree that part of the answer to the point made by our hon. Friend the Member for North East Bedfordshire (Richard Fuller) is that the vast majority of businesses will not need to do anything differently, because what they do now is perfectly reasonable. If what they are doing is reasonable, they will be perfectly safe from this legislation. This legislation is intended to catch those who do not behave reasonably and those who behave dishonestly, which will be a tiny minority. We accept that the legislation will not lead to a huge number of prosecutions or convictions; it is supposed to lead to a change in behaviour where that is needed.

--- Later in debate ---

[Kevin Hollinrake]

I thank all Members for their contributions. I will not reiterate all the points I made in my opening speech, which addressed many of the points raised in the debate but shall talk to a few of the points made.

My right hon. and learned Friend the Member for Kenilworth and Southam (Sir Jeremy Wright) made some points that were also reflected by my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland). My right hon. and learned Friend the Member for Kenilworth and Southam challenged me to explain why subsection (4)(a) of the proposed new clause in Lords amendment 151 does not prevent excessive burdens on SMEs. That measure says we must have in place “such prevention procedures” and there is a concern that many millions of SMEs across the country would have to put in place prevention procedures despite there probably being no chance of any fraud at that organisation. So there would be burdens that otherwise would not exist on those businesses.

[Sir Jeremy Wright]

The Minister is right, but subsection (4)(a) refers to

“such prevention procedures” as are

“reasonable in all the circumstances”,

so in very many cases that would be a very minimal requirement and probably only what companies that are behaving responsibly are doing already. Secondly, as I am sure the Minister is about to point out, subsection (4)(b) states that it might not be

“reasonable in all the circumstances to expect the body to have any prevention procedures in place.”

So if it was not considered reasonable to have any, it would be possible to rely on that defence if they did not.

[Kevin Hollinrake]

I think my right hon. and learned Friend will accept there will also be a requirement to analyse actuarily the business to see what risks there are, and any perceived risk would of course require those prevention procedures to be put in place. We have analysed this and tried to get some context around the costs to businesses and think it would be in the order of £4 billion, so there would be significant burdens. For that reason, we are not persuaded to change our threshold.

Let me correct myself to the hon. Member for Rhondda (Sir Chris Bryant). I was only out by a factor of 100 when I talked about the number of warning notices sent to overseas entities; 1,000 warning notices have been sent.

The hon. Member for Feltham and Heston (Seema Malhotra) talked about the introduction of SLAPPs, and we are clearly keen to do that at the earliest possible time. We have to work with the Civil Procedure Rule Committee to implement a new cost protection scheme for SLAPPs defendants and the early dismissal mechanism via secondary legislation as soon as possible. We cannot give a definite date, however.

I thank my hon. Friend the Member for Cheadle (Mary Robinson) for all the work she does with the all-party group on whistleblowing, which I was heavily engaged with as a Back Bencher. We have a review of whistleblowing that should conclude by the end of 2023. On extending SLAPPs to areas of our economy outside the economic sector, we are considering further legislative options. Clearly, in this proposed legislation it could only pertain to economic crime due to the extent of the Bill.

The hon. Member for Glasgow Central (Alison Thewliss) rightly talked about enforcement resources and also some of the limitations in the current regime, and that is exactly why we are legislating. The provisions we will make will increase the incorporation fee for Companies House. In addition to the £63 million we have put in to pump-prime this work—the extra people at Companies House will therefore be resourced, and there are already 400 people there to enforce the provisions of this legislation—we expect to increase incorporation fees to around £50 and also to extend the costs of annual returns to raise the money as necessary to make sure that the requirements of the Bill are fully implemented.