Digital Markets, Competition and Consumers Bill

Jeremy Wright Excerpts

Report stage
Monday 20th November 2023 Commons Chamber

[Saqib Bhatti]

I am honoured to have been appointed as the Minister with responsibility for tech and the digital economy, and as one of the Ministers with responsibility for the Digital Markets, Competition and Consumers Bill. When I was appointed last Tuesday, many helpful colleagues came up to me to say, “You have been thrown in at the deep end,” but it is a blessing to have responsibility for taking this legislation through the House.

In that vein, I thank my hon. Friend the Member for Sutton and Cheam (Paul Scully) for his tireless work to get the Bill to this stage.

I am aware of the importance of this legislation and the sentiment across the House to deliver the Bill quickly. The benefits of the digital market measures in part 1 of the Bill are clear to see. They will bring about a more dynamic digital economy, which prioritises innovation, growth and the delivery of better outcomes for consumers and small businesses. The rise of digital technologies has been transformative, delivering huge value to consumers and businesses. However, a small number of firms exert immense control across strategically critical services online because the unique characteristics of digital markets, such as network effects and data consolidation, make them prone to tip in favour of a few firms. The new digital markets regime will remove obstacles to competition and drive growth in digital markets, by proactively driving more dynamic markets and by preventing harmful practices such as making it difficult to switch between operating systems.

I turn now to the Government amendments. When the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) first stood in the House, he stated that the legislation would unleash the full opportunities of digital markets for the UK. That intention has not changed, and our amendments fully support that. The Government’s amendments to part 1 will provide greater clarity to parties interacting with the regime, enhance the accountability of the regulator and make sure that the legislation is drafted effectively and meets its aims. I will address each of those themes in order.

This new regime is novel. To maximise certainty, it is critical that its parameters—the scopes of the regulator’s functions and the rights and obligations set out in the legislation—are clear. Therefore, the Government have tabled a series of amendments to further clarify how the digital markets regime will work in practice. The amendments relate to how legally binding commitments provided by firms within the scope of the regime will work in practice, the Digital Market Unit’s ability to amend certain decision notices, and how in certain circumstances the DMU may use its investigatory and enforcement powers after a firm is no longer designated.

Two important sets of clarifying amendments are worth covering in more detail. The first relates to conduct requirements. Consumer benefit is a central focus of the digital markets regime. The DMU must consider consumer benefit when shaping the design of its interventions. To reinforce that central focus, we are clarifying how the DMU will consider consumer benefits when imposing and enforcing conduct requirements. Amendment 7 requires the DMU to explain the consumer benefits that it expects to result from a conduct requirement, ensuring transparent, well-evidenced decisions. Amendments 13 and 14 simplify the wording of the countervailing benefits exemption, while critically maintaining the same high threshold.

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

I draw the House’s attention to my entry in the Register of Members’ Financial Interests. Let me take the opportunity to congratulate my hon. Friend the Member for Meriden (Saqib Bhatti) on his appointment. Does he recognise that it is important to be clear—and for the CMA and the DMU to be clear—that there could be a conflict between the interests of current consumers and those of future consumers? Therefore, it is important that the interests of both are balanced in what the CMA and the DMU eventually decide to do.

[Saqib Bhatti]

My right hon. Friend makes an important point. As I make progress, I hope he will be reassured that the regime will take both those things into account.

Together, amendments 13 and 14 will make sure that consumers get the best outcomes. Amendment 14 makes an important clarification on the role of third parties in the final offer mechanism process. New clause 5 and related amendments will clarify when and how third parties may make collective submissions in relation to the final offer mechanism. That is vital, as collective bargaining can help to address power imbalances during negotiations. We expect that third parties, especially smaller organisations, may seek to work together when negotiating payment terms and conditions.

My second theme is the accountability of the regulator. The discretion afforded to the CMA and its accountability to Government and Parliament have formed a large part of the debate—quite rightly—during the passage of the Bill. I will take time to address that.

The digital markets regime is flexible in its design, with the CMA requiring a level of discretion to deliver effective outcomes. While that is common for ex ante regulation, that does not negate the importance of taking steps to maximise the predictability and proportionality of the regulator’s actions. For that reason, the Government are introducing an explicit requirement for the CMA to impose conduct requirements and pro-competition interventions only where it considers that it is proportionate to do so.

That will make it clear to firms in scope of the regime that they will not be subject to undue regulatory burdens. Firms will be able to challenge disproportionate obligations, and the Competition Appeal Tribunal will, in its consideration of any appeals, apply the principle of proportionality in a reasonable way, as it always does. To complement that, and to ensure consistent senior oversight and accountability of the regime, amendments 57 to 60 require enforcement decisions, including the imposition of penalties, to be reserved to the CMA board or its committee.

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[Saqib Bhatti]

My right hon. Friend is always a thoughtful contributor to debates in this House. We believe that the amendments ensure consumer benefit is at the heart of what we are doing and any appeals will be carried out appropriately. Adopting these amendments would bring the digital markets regime into closer alignment with existing CMA mergers and markets regimes, where penalty decisions can be appealed on the merits. As in those regimes, all other decisions are appealable on judicial review principles.

[Sir Jeremy Wright]

I thank my hon. Friend for giving way again. He will appreciate that we are all trying to get clarity, so we understand what the proposals really mean. In relation to the appeal standard that he describes, for cases that are not specifically related to fines, he mentioned the proportionality addition earlier in his remarks. When it comes to an appeal, are we right to understand that the question of proportionality applies when the CMA originally makes its decision to require an intervention and does not apply to the JR standard that is used to determine an appeal?

It is important to be specific about that, because there are those who would argue that proportionality should be a part of the appeal process. I think the Government amendments say that proportionality applies at an earlier stage and that when it comes to considering whether the CMA has behaved in a proportionate way in making its decisions, the assessment will be made by the Competition Appeal Tribunal on JR principles. Am I right about that?

[Saqib Bhatti]

I agree that that is exactly what we are saying. I am happy to provide further clarity in my closing remarks.

Critical to accountability is, of course, transparency. The Government are committed to transparency and bringing forward amendments that will require the CMA to set out its reasons for imposing or varying a conduct requirement. That will improve transparency around CMA decision making and increase consistency with other powers in the Bill where similar justification is required. It also reinforces the CMA’s existing responsibility to consider likely impacts on consumers when deciding whether and how to intervene.

The third theme is to ensure the legislation is drafted effectively. Therefore, we have tabled further technical amendments to ensure that the Bill’s text meets the Government’s original intended aim. They relate to the scope of conduct requirements, specifically the application of the materiality threshold contained in clause 20(3)(c), the maximum penalty limits imposed on individuals, the mergers reporting duty and the service of notices on undertakings overseas in certain circumstances.

It is worth noting that there are a small number of cross-cutting amendments contained in parts 5 and 6 of the Bill that will also impact the digital markets regime. I want to ensure that there is plenty of time for hon. Members to debate the Bill at this important stage in its passage. I appreciate a collaborative approach from across the House. I am sure that there will be many different views on some of the amendments, but I look forward to a constructive and collaborative discussion.

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[Sir Robert Buckland]

The hon. Gentleman is right to make that point. That is why in other jurisdictions we have seen agreement reached between big tech and newspaper titles to ensure that there is that element of fairness. I agree with him; I want to see similar fairness and equity applied across the market. What I and others who agree with me are trying to do is to ensure that, in creating this brave new world of energetic and efficient regulation, we do not as a Parliament upset the balance by giving too much power to a particular regulator. A lot of us in this place have watched with concern the failure of other types of regulation—in our water industry or our energy industry, for example. I do not think anybody would deny that, at times, we have got regulation wrong. That is why it is important that we have this debate.

There are people outside this place who have put pressure on us by saying, “The Bill is in perfect order. There is no need for you to look at it any more; great minds have thought about it.” I say to them that it is for this place to make those decisions. I do not look kindly on comments made by the chief executive of the CMA about the merits of what this place is considering while the Bill is in Parliament. I absolutely accept the independence of the CMA and the important role that it plays, but we should not confuse independence with lack of accountability. That is a point that I will warm to in a little while, when I address the relationship between regulators—in this case, the CMA—and Parliament. At the moment, that relationship is wholly inadequate.

I was making the point that, unlike the Competition Act 1998, there is a relative lack of worked-out court interpretation of this Bill’s subject matter. That has led to distinguished commentators—no less than Sir Jonathan Jones, former Treasury counsel—making the point in evidence to the Committee that, in effect, the DMU would be able to decide who was going to regulate, set the rules that apply and then enforce those rules. The phrase “legislator, investigator and executioner” was used. While that is colourful language—perhaps too colourful for a dry debate about competition law—it is important that we reflect on the view of that former Treasury solicitor and be very careful that in going down this road, we are not making false comparisons.

A lot has been said about Ofcom and its decisions, and comparisons have been made, but we must not forget that those Ofcom decisions were heavily governed by EU framework directive 2002/21. Article 4 of that directive says that on ex-ante telecom appeals,

“Member States shall ensure that the merits of the case are duly taken into account and that there is an effective appeal mechanism.”

That is a bit different from the provisions in the Bill. A simple JR-type review is precisely that, and no more.

I listened with interest to the intervention made by my right hon. and learned Friend the Member for Kenilworth and Southam (Sir Jeremy Wright), who made a really good point that needs answering. We need to understand where proportionality comes into this. If the principle of proportionality is being used in the first instance, that is all well and good, but we need to understand how that fits with the provisions of the Bill: whether it implies that the courts deem every decision made by the DMU to be proportionate, or whether there is a way to challenge a particular decision by saying that it was not made according to the DMU’s own principles, acting in a proportionate way.

[Sir Jeremy Wright]

It seems to me—I would be interested in my right hon. and learned Friend’s view—that on the basis of the Government’s proposed wording, it is more likely that a firm will be able to challenge whether the CMA has applied its proportionality test appropriately, but the means by which it will do so will be under JR principles on appeal, rather than on a merits basis. It is not that proportionality is not subject to challenge, but that that challenge is limited by JR principles at the appeal stage. Does my right hon. and learned Friend agree?

[Sir Robert Buckland]

That is what we need to bottom out. The primary worry that a lot of us have about the JR principle is that it means that any challenge will probably be vanishingly small, which is not good for ensuring that the regulator is working in the best way. None of us wants to encourage incontinent litigation—or incontinent legislation, bearing in mind the importance that we place on it—but sometimes, challenge is essential to create greater certainty. There will be ambiguities; there will be occasions where there needs to be a test. We should not be frightened of that.

Online Safety Bill

Jeremy Wright Excerpts

Consideration of Lords amendments
Tuesday 12th September 2023 Commons Chamber

[Siobhan Baillie]

Absolutely. Given the fast nature of social media and the tech world, and how quickly they adapt—often for their own benefit, sadly—I think that a committee with that focus could work.

To wrap up, I thank MPs from across the House, and you, Madam Deputy Speaker, for your grace today. I have had help from my right hon. Friend the Member for Haltemprice and Howden (Mr Davis) in particular, for which I am very grateful. In the other place, Lord Clement-Jones, Lord Stevenson, Baroness Morgan, Baroness Fall and Baroness Wyld have all been absolutely excellent in pushing through these matters. I look forward to hearing what the Minister says, and thank everybody for their time.

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

As others have done, I welcome the considerable progress made on the Bill in the other place, both in the detailed scrutiny that it has received from noble Lords, who have taken a consistent and expert interest in it, and in the positive and consensual tone adopted by Opposition Front Benchers and, crucially, by Ministers.

It seems that there are very few Members of this House who have not had ministerial responsibility for the Bill at some point in what has been an extraordinarily extensive relay race as it has moved through its legislative stages. The anchor leg—the hardest bit in such a Bill—has been run with dedication and skill by my right hon. Friend the Secretary of State, who deserves all the praise that she will get for holding the baton as we cross the parliamentary finish line, as I hope we are close to doing.

I have been an advocate of humility in the way in which we all approach this legislation. It is genuinely difficult and novel territory. In general, I think that my right hon. Friend the Secretary of State and her Ministers—the noble Lord Parkinson and, of course, the Under-Secretary of State for Science, Innovation and Technology, my hon. Friend the Member for Sutton and Cheam (Paul Scully)—have been willing to change their minds when it was right to do so, and the Bill is better for it. Like others who have dealt with them, I also thank the officials, some of whom sit in the Box, some of whom do not. They have dedicated—as I suspect they would see it—most of their lives to the generation of the Bill, and we are grateful to them for their commitment.

Of course, as others have said, none of this means that the Bill is perfect; frankly, it was never going to be. Nor does it mean that when we pass the Bill, the job is done. We will then pass the baton to Ofcom, which will have a large amount of further work to do. However, we now need to finalise the legislative phase of this work after many years of consideration. For that reason, I welcome in particular what I think are sensible compromises on two significant issues that had yet to be resolved: first, the content of children’s risk assessments, and secondly, the categorisation process. I hope that the House will bear with me while I consider those in detail, which we have not yet done, starting with Lords amendments 17, 20 and 22, and Lords amendment 81 in relation to search, as well as the Government amendments in lieu of them.

Those Lords amendments insert harmful “features, functionalities or behaviours” into the list of matters that should be considered in the children’s risk assessment process and in the meeting of the safety duties, to add to the harms arising from the intrinsic nature of content itself—that is an important change. As others have done, I pay great tribute to the noble Baroness Kidron, who has invariably been the driving force behind so many of the positive enhancements to children’s online safety that the Bill will bring. She has promoted this enhancement, too. As she said, it is right to recognise and reflect in the legislation that a child’s online experience can be harmful not just as a result of the harm an individual piece of content can cause, but in the way that content is selected and presented to that child—in other words, the way in which the service is designed to operate. As she knows, however, I part company with the Lords amendments in the breadth of the language used, particularly the word “behaviours”.

Throughout our consideration of the Bill, I have taken the view that we should be less interested in passing legislation that sounds good and more interested in passing legislation that works. We need the regulator to be able to encourage and enforce improvements in online safety effectively. That means asking the online platforms to address the harms that it is within their power to address, and to relate clearly the design or operation of the systems that they have put in place.

The difficulty with the wording of the Lords amendments is that they bring into the ambit of the legislation behaviours that are not necessarily enabled or created by the design or operation of the service. The language used is

“features, functionalities or behaviours (including those enabled or created by the design or operation of the service) that are harmful to children”—

in other words, not limited to those that are enabled or created by the service. It is a step too far to make platforms accountable for all behaviours that are harmful to children without the clarity of that link to what the platform has itself done. For that reason, I cannot support those Lords amendments.

However, the Government have proposed a sensible alternative approach in their amendments in lieu, particularly in relation to Lords amendments 17 and Lords amendment 81, which relates to search services. The Government amendments in lieu capture the central point that design of a service can lead to harm and require a service to assess that as part of the children’s risk assessment process. That is a significant expansion of a service’s responsibilities in the risk assessment process which reflects not just ongoing concern about types of harm that were not adequately captured in the Bill so far but the positive moves we have all sought to make towards safety by design as an important preventive concept in online safety.

I also think it is important, given the potential scale of this expanded responsibility, to make clear that the concept of proportionality applies to a service’s approach to this element of assessment and mitigation of risk, as it does throughout the Bill, and I hope the Minister will be able to do that when he winds up the debate.

[Sir William Cash]

My right hon. and learned Friend has mentioned Ofcom several times. I would like to ask his opinion as to whether there should be, if there is not already, a special provision for a report by Ofcom on its own involvement in these processes during the course of its annual report every year, to be sure that we know that Ofcom is doing its job. In Parliament, we know what Select Committees are doing. The question is, what is Ofcom doing on a continuous basis?

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[Sir Jeremy Wright]

My hon. Friend makes a fair point. One difficult part of our legislative journey with the Bill is to get right, in so far as we can, the balance between what the regulator should take responsibility for, what Ministers should take responsibility for and what the legislature—this Parliament—should take responsibility for. We may not have got that exactly right yet.

On my hon. Friend’s specific point, my understanding is that because Ofcom must report to Parliament in any event, it will certainly be Ofcom’s intention to report back on this. It will be quite a large slice of what Ofcom does from this point onwards, so it would be remarkable if it did not, but I think we will have to return to the points that my hon. Friend the Member for Folkestone and Hythe (Damian Collins) and others have made about the nature of parliamentary scrutiny that is then required to ensure that we are all on top of this progress as it develops.

I was talking about what I would like my hon. Friend the Minister to say when he winds up the debate. I know he will not have a huge amount of time to do so, but he might also confirm that the balancing duties in relation to freedom of speech and privacy, for example, continue to apply to the fulfilment of the safety duties in this context as well. That would be helpful.

The Government amendments in lieu do not replicate the reference to design in the safety duties themselves, but I do not see that as problematic because, as I understand it, the risks identified in the risk assessment process, which will now include design risks, feed through to and give rise to the safety duties, so that if a design risk is identified in the risk assessment, a service is required to mitigate and address it. Again, I would be grateful if the Minister confirmed that.

We should also recognise that Government amendment (b) in lieu of Lords amendment 17 and Government amendments (b) and (c) in lieu of Lords amendment 81 specifically require consideration of

“functionalities or other features of the service that affect how much children use the service”

As far as I can tell, that introduces consideration of design-related addiction—recognisable to many parents; it cannot just be me—into the assessment process. These changes reflect the reality of how online harm to children manifests itself, and the Government are to be congratulated on including them, although, as I say, the Government and, subsequently, Ofcom will need to be clear about what these new expectations mean in practical terms for a platform considering its risk assessment process and seeking to comply with its safety duties.

I now turn to the amendments dealing with the categorisation process, which are Lords amendment 391 and the Government amendments arising from it. Lords amendment 391 would allow Ofcom to designate a service as a category 1 service, with the additional expectations and responsibility that brings, if it is of a certain scale or if it has certain functionalities, rather than both being required as was the case in the original Bill. The effect of the original drafting was, in essence, that only big platforms could be category 1 platforms and that big platforms were bound to be category 1 platforms. That gave rise to two problems that, as my hon. Friend the Minister knows, we have discussed before.

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[Paul Scully]

I do not think I need to respond to that, but it goes to show does it not?

My hon. Friend talked about post-legislative scrutiny. Now that we have the new Department of Science, Innovation and Technology, we have extra capacity within Committees to look at various aspects, and not just online safety as important as that is. It also gives us the ability to have sub-Committees. Clearly, we want to make sure that this and all the decisions that we make are scrutinised well. We are always open to looking at what is happening. My hon. Friend talked about Ofcom being able to appoint skilled persons for research—I totally agree and he absolutely made the right point.

My right hon. Friend the Member for Basingstoke (Dame Maria Miller) and the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) talked about cyber- flashing. As I have said, that has come within the scope of the Bill, but we will also be implementing a broader package of offences that will cover the taking of intimate images without consent. To answer my right hon. Friend’s point, yes, we will still look further at that matter.

The hon. Member for Leeds East (Richard Burgon) talked about Joe Nihill. Will he please send my best wishes and thanks to Catherine and Melanie for their ongoing work in this area? It is always difficult, but it is admirable that people can turn a tragedy into such a positive cause. My right hon. and learned Friend the Member for Kenilworth and Southam (Sir Jeremy Wright) made two points with which I absolutely agree. They are very much covered in the Bill and in our thinking as well, so I say yes to both.

My right hon. Friend the Member for Chelmsford (Vicky Ford) and my hon. Friend the Member for Penistone and Stocksbridge (Miriam Cates) talked about pornography. Clearly, we must build on the Online Safety Bill. We have the pornography review as well, which explores regulation, legislation and enforcement. We very much want to make sure that this is the first stage, but we will look at pornography and the enforcement around that in a deeper way over the next 12 months.

[Sir Jeremy Wright]

It has just crossed my mind that the Minister might be saying that he agreed with everything that I said, which cannot be right. Let me be clear about the two points. One was in relation to whether, when we look at design harms, both proportionality and balancing duties are relevant—I think that he is saying yes to both. The other point that I raised with him was around encryption, and whether I put it in the right way in terms of the Government’s position on encryption. If he cannot deal with that now, and I would understand if he cannot, will he write to me and set out whether that is the correct way to see it?

[Paul Scully]

I thank my right hon. Friend for that intervention. Indeed, end-to-end encrypted services are in the scope of the Bill. Companies must assess the level of risk and meet their duties no matter what their design is.