Digital Markets, Competition and Consumers Bill

Lord Clement-Jones Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[Lord Clement-Jones (LD)]

My Lords, it is a great pleasure, as it always seemed to be on the then Online Safety Bill, to follow the noble Baroness, Lady Harding, especially with her great advocacy of the power of competition. That passionate belief in competition is something that unites us all around the House today. First, I declare an interest as a consultant to DLA Piper and as chair of the Trust Alliance Group, which runs the Energy Ombudsman service.

I thank the Minister—the noble Lord, Lord Offord—for what I thought was a comprehensive introduction that really set the scene for the Bill. As my noble friend said, we very much welcome the Bill, broadly. It is an overdue offspring of the Furman review and, along with so many noble Lords around the House, he gave very cogent reasons, given the dominance that big tech has and the inadequate powers that our competition regulators have had to tackle them. It is absolutely clear around the House that there is great appetite for improving the Bill. I have knocked around this House for a few years, and I have never heard such a measure of agreement at Second Reading.

We seem to have repeated ourselves, but I say to the noble Lord, Lord Vaux, that repetition is good. I am sure that in the Minister’s notebook he just has a list saying “agree, agree, agree” as we have gone through the Bill. I very much hope that he will follow the example that both he and the noble Lord, Lord Parkinson, demonstrated on the then Online Safety Bill—as the noble Baronesses, Lady Kidron and Lady Harding, said—and will engage across and around the Chamber with all those intervening today, so that we really can improve the Bill.

It was very important that the noble Baroness, Lady Stowell, reminded us that it is not just size that matters: we must consider behaviour, dominance, market failure and market power. We need to hold on to that. We need new, flexible pro-competition powers and the ability to act ex ante and on an interim basis—those are crucial powers for the CMA. As we have heard from all round the House, the digital landscape, whether it is app stores, cloud services or more, is dominated by the power of certain big tech companies, particularly in AI, with massive expenditure on compute power, advanced semiconductors, large datasets and the scarce technology skills forming a major barrier to entry where the development of generative AI is concerned. As the noble Lord, Lord Knight, indicated, we can already see the future coming towards us.

In that context, I very much welcome Ofcom’s decision to refer the hyperscalers in cloud services for an investigation by the CMA. The CMA and the DMU have the capability to deliver the Bill’s aims. We were reminded by the noble Lords, Lord Tyrie and Lord Lansley, about the importance of the ability to implement the new legislative powers. Unlike some other commentators, we believe, as my noble friend said, that the CMA played a positively useful role in the Activision Blizzard-Microsoft merger. As a number of noble Lords, including the noble Lords, Lord Holmes, Lord Kamall and Lord Tyrie, and the noble Baroness, Lady Stowell, emphasised, it is crucial that the CMA needs to be independent of government. All around the House, there was comment about the new powers of the Secretary of State in terms of guidance. The accountability to Parliament will also be crucial, and that was again a theme that came forward. We heard about the Joint Committee proposals made by both the committee of the noble Baroness, Lady Stowell, and the Joint Committee on the Online Safety Bill.

We need to ensure that that scrutiny is there and, as the Communications and Digital Committee also said, that the CMA’s DMU is well resourced and communicates its priorities, work programmes and decisions regularly to external stakeholders and Parliament.

The common theme across this debate—to mention individual noble Lords, I would have to mention almost every speaker—has been that the Bill must not be watered down. In many ways, that means going back to the original form of the Bill before it hit Report in the Commons. We certainly very much support that approach, whether it is to do with the merits approach to penalties, the explicit introduction of proportionality or the question of deleting the indispensability test in the countervailing benefits provisions. We believe that, quite apart from coming back on the amendments from Report, the Bill could be further strengthened in a number of respects.

In the light of the recent Open Markets Institute report, we should be asking whether we are going far enough in limiting the power of big tech. In particular, as regards the countervailing benefits exemption, as my noble friend said, using the argument of countervailing benefits—even if we went back to the definition from Report—must not be used by big tech as a major loophole to avoid regulatory action. It is clear that many noble Lords believe, especially in the light of those amendments, that the current countervailing benefits exemption provides SMS firms with too much room to evade conduct requirements.

The key thing that unites us is the fact that, even though we must act in consumers’ interests, this is not about short-term consumer welfare but longer-term consumers’ interests; a number of noble Lords from across the House have made that really important distinction.

We believe that there should be pre-notification if a platform intends to rely on this exemption. The scope of the exemption should also be significantly curtailed to prevent its abuse, in particular by providing an exhaustive list of the types of countervailing benefits that SMS firms are able to claim. We would go further in limiting the way in which the exemption operates.

On strategic market status, one of the main strengths of the Bill is its flexible approach. However, the current five-year period does not account for dynamic digital markets that will not have evidence of the position in the market in five years’ time. We believe that the Bill should be amended so that substantial and entrenched market power is mainly based on past data rather than a forward-looking assessment, and that the latter is restricted to a two-year assessment period. The consultation aspect of this was also raised; there should be much greater rights on the consultation of businesses that are not of strategic market status under the Bill.

A number of noble Lords recognised the need for speed. It is not just a question of making sure that the CMA has the necessary powers; it must be able to move quickly. We believe that the CMA should be given the legal power to secure injunctions under the High Court timetable, enabling it to stop anti-competitive activities in days. This would be in addition to the CMA’s current powers.

We have heard from across the House, including from the noble Viscount, Lord Colville, about the final offer mechanism affecting the news media. We believe that a straightforward levy on big tech platforms, redistributed to smaller journalism enterprises, would be a far more equitable approach. However, as a number of noble Lords have mentioned, we need to consider in the context of the Bill the adoption by the CMA of the equivalent to Ofcom’s duty in the Communications Act 2003

“to further the interests of citizens”,

so that it must consider the importance of an informed democracy and a plural media when considering its remedies.

As my noble friend and many other noble Lords said—including the noble Baroness, Lady Bennett, the noble Viscount, Lord Colville, and the noble Lords, Lord Lansley and Lord Black—the Bill needs to make it clear that platforms need to pay properly and fairly for content, on benchmarked terms and with reference to value for end-users. Indeed, we believe that they must seek permission for the content that they use. As we heard from a number of noble Lords, that is becoming particularly important as regards the large language models currently being developed.

We also believe it is crucial that smaller publishers are not frozen out or left with small change while the highly profitable large publishers scoop the pool. I hope that we will deal with the Daily Telegraph ownership question and the mergers regime in the Enterprise Act as we go forward into Committee, to make sure that the accumulation of social media platforms is assessed beyond the purely economic perspective. The Enterprise Act powers should be updated to allow the Secretary of State to issue a public interest notice seeking Ofcom’s advice on digital media mergers, as well as newspapers, and at the lower thresholds proposed by this Bill.

There were a number of questions related to leveraging. We want to make sure that we have the right approach to that. The Bill does not seem to be drafted properly in allowing the CMA to prevent SMS firms using their dominance in designated activities to increase their power in non-designated activities. We want to kick the tyres on that.

Of course, there are a great many consumer protection issues here, which a number of noble Lords raised. They include fake reviews and the need for collective action, as was mentioned by the noble and learned Lord, Lord Etherton, and the noble Lord, Lord Sandhurst. It is important that we allow collective action not just on competition rights but further, through consumer claims, data abuse claims and so on. We should cap the costs for claimants in the Competition Appeal Tribunal. I heard what the noble Lord, Lord Sandhurst, had to say on LFAs, which is highly relevant as well. These issues also include misleading packaging.

Nearly every speaker mentioned subscriptions. I do not think that I need to point out to the Minister the sheer unanimity on this issue. We need to get this right because there is clearly support across the House for making sure that we get the provisions right while protecting the income of charities.

There is a whole host of other issues that we will no doubt discuss in Committee: mid-contract price rises, drip pricing, ticket touting, online scams and reforming ADR. We want to see this Bill and the new competition and consumer powers make a real difference. However, we believe that we can do this only with some key changes being made to the Bill, which are clearly common ground between us all, as we have debated the Bill today. We look forward to the Committee proceedings next year—I can say that now—which will, I hope, be very productive, if both Ministers will it so.

Digital Markets, Competition and Consumers Bill

Lord Clement-Jones Excerpts

Committee stage
Monday 22nd January 2024 Grand Committee

[Baroness Jones of Whitchurch (Lab)]

My Lords, we have also added our names to Amendment 7. At the outset, I should say that we are in broad agreement with all the amendments in this group.

Before I explain the detail of our amendment, and without wishing to rerun the Second Reading debate, I would just like to say that we believe that the essence of the Bill is important and necessary. Our concerns, where we have them, are about some of the details in the Bill and we will give them proper challenge and scrutiny. However, it is not in the interests of consumers or businesses for the Bill to be unduly delayed and we hope to get it on the statute book in an improved form and in a timely manner.

Part 1 of necessity gives the CMA considerable new powers. We support the model that is being proposed, with priority being given to identifying the big tech players that have strategic market status. However, it is important that those new powers are carried out with clarity and with transparency and a number of our amendments in this and other groups address this issue. Our Amendment 1 is a simple but important amendment. It would enable the CMA to draw on its analysis and consultations that have taken place before the passing of the Bill.

Those of us who attended the briefings with the CMA last week will have heard the amount of detailed preparation that it has carried out in anticipation of the Bill being passed. We believe that it is important that it can draw on this wealth of knowledge without starting from scratch and having to do it all again. This will strengthen its effectiveness going forward, as it can reflect on the lessons learned and the outcomes of the various consultations that have already been undertaken.

When this issue came up in the Commons, the Minister, Paul Scully, said:

“I strongly support the point that the CMA should not have to repeat work that it has already done. It is for the DMU to decide what is and is not relevant analysis to its investigations, and it should be able to draw on insight from previous analysis or consultations when carrying out an SMS investigation where it is appropriate and lawful to do so. I am happy to confirm that the Bill does not prevent the DMU from doing that”.—[Official Report, Commons, Digital Markets, Competition and Consumers Bill Committee, 20/6/23; col. 116.]


However, this is our concern. The Bill as it currently stands is silent on the issue. It does not make it clear either way and, specifically, it does not make it clear that this retrospection is within the powers of the CMA. We want to put this clarity in the Bill to avoid the potential for any legal challenges about the way the CMA is going about its investigation. Noble Lords will be familiar with this argument, as it will be a running theme during our scrutiny of the Bill. We want the rules to be watertight and we want to close any legal loopholes from those who stand to lose if the CMA rules against them. Therefore, we believe that this amendment is important in shoring up the CMA’s powers to act and I beg to move.

[Lord Clement-Jones (LD)]

My Lords, at the opening of this Committee stage, I want to repeat, rather in the same way as the noble Baroness, Lady, Jones, what I said on Second Reading: we broadly welcome this Bill. In fact, since the Furman report was set up five years ago, we have been rather impatient for competition law in the digital space to be reformed and for the DMU to be created.

At the outset, I also want to thank a number of organisations—largely because I cannot reference them every time I quote them—for their help in preparing for the digital markets aspects of the Bill: the Coalition for App Fairness, the Public Interest News Foundation, Which?, Preiskel & Co, Foxglove, the Open Markets Institute and the News Media Association. They have all inputted helpfully into the consideration of the Bill.

The ability to impose conduct requirements and pro-competition interventions on undertakings designated as having strategic market status is just about the most powerful feature of the Bill. One of the Bill’s main strengths is its flexible approach, whereby once a platform is designated as having SMS, the CMA is able to tailor regulatory measures to its individual business model in the form of conduct requirements and pro-competition interventions, including through remedies not exhaustively defined in the Bill.

However, a forward-looking assessment of strategic market status makes the process vulnerable to being gamed by dominant platforms. The current five-year period does not account for dynamic digital markets that will not have evidence of the position in the market in five years’ time. It enables challengers to rebut the enforcer’s claim that they enjoy substantial and entrenched market power, even where their dominance has yet to be meaningfully threatened. Clause 5 of the Bill needs to be amended so that substantial and entrenched market power is based on past data rather than a forward-looking assessment. There should also be greater rights to consultation of businesses that are not of SMS under the Bill. As the noble Baroness, Lady Jones, said, this will be discussed later, under another group of amendments.

The provisions of Clause 5, as it is currently worded, risk causing problems for the CMA in practice. Part of the problem is the need for evidence to support a decision by the CMA of a market position over the entire five-year period. The five-year period requires current evidence of the position in the market in five years’ time. In dynamic digital markets such as these, no such evidence is likely to exist today. The CMA needs evidence to underpin its administrative findings. Where no such evidence exists, it cannot designate an SMS firm.

The CMA will have evidence that exists up to the date of the decision—evidence of the current entrenched position, market shares, barriers to entry, intellectual property rights and so on. In that respect, we support the noble Baroness, Lady Jones, with her Amendment 1, because it should of course include earlier investigations by the CMA. All that evidence exists today in 2024, but what the position will be in 2028 will need to be found and it has to be credible evidence to support a CMA decision under Clause 5. Particularly in fast-moving technology markets, the prediction of future trends is not a simple matter, so lack of sufficient evidence of the entrenched nature of a player at year 5 or over the entire period would prevent a rational decision-maker from being able to make a decision that the player will have SMS over the five-year period, as demanded by the Bill. Every designation and subsequent requirement or investigation imposed on the designated undertaking risks being subject to challenge on the basis of insufficient evidence.

As the Open Markets Institute says,

“the inevitably speculative nature of a forward-looking assessment makes the process vulnerable to being gamed by dominant platforms. For example, such firms may use the emergence—and even hypothetical emergence—of potential challengers to rebut the enforcer’s claim that they enjoy substantial and entrenched market power, even where their dominance has yet to be meaningfully threatened by those challengers”.

It gives the example of the rise of TikTok, which Meta has used in arguments to push back against anti-trust scrutiny:

“Yet while experiencing rapid growth in terms of user numbers, TikTok has so far failed to seriously challenge the economic dominance of Meta in online advertising (the basis of Meta’s market power), generating less”


than

“a tenth of the latter’s global revenues. Dominant platforms will also use emerging technologies—such as generative AI—to claim that their dominance is transitory, claims that will be difficult for the CMA to rebut given future uncertainty”.


Our Amendments 3, 4, 5 and 6—here I thank the noble Lord, Lord Vaux, for his support for them, and sympathise with him because I gather that his presence here today has been delayed by Storm Isha—suggest that the number of years should be removed and the provision clarified so that the assessment is made based on current evidence and facts. If the market position changes, the CMA has the power to revoke such designation in any event, on application from the SMS business, as provided for by Clause 16.

That is the argument for Amendments 3, 4, 5 and 6 in Clause 5. I look forward to hearing what the noble Viscount, Lord Colville, has to say on Amendment 7, which we very much support as well.

[Viscount Colville of Culross (CB)]

My Lords, I have put down Amendment 7 to Clause 6 and, in later groups, amendments relating to Clauses 20 and 114. I will come to them later in Committee, but all of them have the aim of limiting the wide powers given to the Secretary of State in the Bill to intervene in the setting up of the processes for dealing with anti-competitive behaviour by the big tech companies. Amendment 7 would prevent the Secretary of State having broad powers in revising the criteria for establishing the designation of the SMS investigative process. My particular concern is about the power that the Minister might have to alter the criteria for the process in order to de-designate a company following heavy lobbying.

As this is my first intervention at this stage of the Bill, I join other noble Lords in saying that I too very much welcome it and the Government’s approach to dealing with anti-competitive behaviour by the big tech companies. In fact, I welcome it so much that I want to ensure that it is implemented as quickly and effectively as possible, to safeguard our digital start-ups and smaller digital companies.

The independence of the CMA is central to the effectiveness of the processes set out in Part 1. However, the huge powers given to the Minister in these chapters should worry noble Lords. They are proposing great powers of oversight and direction for the Secretary of State. I fear that these will undermine the independence of the CMA and dilute its ability to take on the monopolistic behaviour of the big tech companies. I hope that these amendments will go some way to safeguard the independence of the regulator.

I support the collaborative approach set out in the SMS and conduct requirement processes; it seems to be preferable to the EU’s Digital Markets Act, which is so much more broad-brush, with a much wider investigation into designated companies’ business activities. The Bill sets out a greater focus on a company’s particular activity and ensures that the CMA and the DMU work closely with stakeholders, including the tech companies which are going to be under investigation. However, despite this collaboration, it can only be expected that the companies involved in the process will want to give themselves the best possible chance of maintaining their monopolistic position. Clause 6 is central to the start of the process—after all, it sets out when a company can be considered to be under DMU oversight.

Designation as an SMS player means only that the company is subject to the jurisdiction or potential oversight of the DMU; it does not mean that it has done anything wrong. The deliberate aim of the Bill is to ensure that only large players are to be included in the SMS status. These criteria will not dictate how the investigation will go, so the criteria for designation as an SMS player does not need to be changed if the market changes. However, Clause 6(2) and (3) will give Ministers power to take criteria away from this section. This will mean that powerful tech players could fall outside the jurisdiction of the DMU and will not be open to SMS designation as a result. If the clause allowed only new criteria to be added, so that a wider scope of companies could be included, that would not be so bad. However, the ability to reduce the scope of the DMU’s potential designation should alarm noble Lords. These subsections give the tech companies huge powers to lobby the Secretary of State to ensure that there is not the possibility to designate them. Effectively, this would be a de-designation of these companies, which would defeat the purpose of the CR process before it has even got off the ground.

I am also concerned that the Secretary of State’s powers in this clause go against the law’s need to be normative: as a basic principle, it must apply to all the companies, without discrimination. The DMCC Bill is a law that applies only to those who qualify, but it is, in principle, generally applicable. Chapter 2 of Part 1 sets out a set of criteria that apply to all companies, but only a few will satisfy the criteria. The criteria for being an SMS requires enduring market power and a collection of other criteria. It is likely, as a result, that these will cover Microsoft, Amazon, Apple, Google and Facebook; each has enduring market power and qualifies for designation under the criteria in Clause 6. However, if that law can be varied by a Secretary of State to take away criteria, as it currently can, then the law can be made to apply to only a few companies. At the extreme, it could be altered to apply to only one or two. I am advised by lawyers that this is likely to be discriminatory.

Imagine if the law were varied so it applied only to a business that provides both a digital platform and home deliveries. This would mean it would apply only to Amazon, and the company would go to town lobbying against the change in criteria as discriminatory. Noble Lords must continually remind themselves that the Bill is taking aim at the biggest, most powerful companies in the world. I ask them to consider just how far these companies would go to put pressure on politicians and Ministers to safeguard their position, and how effective that pressure can be in changing their minds.

--- Later in debate ---

[Viscount Camrose (Con)]

I would struggle to name a particular one, but if we were to look back over the last five to 10 years we might reflect that there have been a number of developments in markets that have been largely unpredictable and that technology changes might drive further developments. The point is to create a balance between predictable and durable legislation and the ability to adapt to changes in business practice and technology as they emerge. As a thought experiment, if we were to flip it round and say, “No, we have to stick with only these four things for the duration of the eventual Act”, many of us would be concerned about an ongoing inability to adapt to change in what is a fast-moving marketplace that is likely to see an accelerating pace of change, rather than anything else.

That said, I hope my words provide the noble Baroness and noble Lords with sufficient assurance not to press their amendments.

[Lord Clement-Jones (LD)]

My Lords, the Minister rather glossed over the importance of Clause 5. In Clause 2(2), the SMS conditions are that

“the undertaking has—

(a) substantial and entrenched market power (see section 5), and

(b) a position of strategic significance”.

The conditions in Clause 6 are rather formulaic, in the way that the noble Lord, Lord Knight, talked about, but the determination, examination and assessment in Clause 5 as to whether an undertaking has substantial and entrenched market power is really important. The Minister glossed over this and said that it is not necessary to have a determination based on current evidence and that this forward-looking element must be in there.

Can the Minister confirm that he has taken advice within the department from competition lawyers who deal with this kind of potential challenge on a daily basis? He seems extraordinarily complacent about the fact that big tech will look at that assessment and say, “The evidence is not there. It’s all speculation for the next five years. You haven’t based it on the actual conduct in our market currently, or indeed an adjacent market”. No doubt we will come to that later in another group. This is absolutely at the core of the Bill, and all the advice that I get, whether from the Open Markets Institute or others, is that this is a real failing in the Bill that could open up a litigation problem for the CMA in due course.

[Viscount Camrose (Con)]

I certainly do not intend to gloss over any of these issues. I can confirm that the department receives extensive advice on these matters, as have those working on the Bill, not only from competition lawyers but from other stakeholders in the market of all different sizes and types, and indeed from the CMA itself. To turn around the noble Lord’s position, if we make a designation that is designed to last for five years, it is crucial that we take into account existing evidence and what is foreseeable today when determining whether to make that designation. Nobody is being asked to be overly speculative, but it is possible to identify existing trends and available information that can form part of the analysis, and use that to make the determination, particularly as the CMA will then have a duty to explain in detail the rationale behind its decision to designate a firm with SMS, or indeed not to do so.

--- Later in debate ---

Moved by

[Lord Clement-Jones]

2: Clause 4, page 3, line 19, at end insert—
“(d) the digital activity or the way in which the undertaking carries on the digital activity is likely to have a substantial impact on the creation, displacement, quality or conditions of work or work environments in the United Kingdom.”Member's explanatory statement
This amendment would ensure key definitions such as ‘digital activity’ take into account impacts on UK work and workers in determining whether there is a sufficient link to the UK.

[Lord Clement-Jones (LD)]

My Lords, I was looking forward to hearing the noble Lord, Lord Knight, introduce these amendments but, owing to a glitch in timing when tabling the amendments, I am unfortunately in the hot seat this afternoon. As well as moving Amendment 2, I will speak to Amendments 18, 23, 56 and 61.

These amendments, developed by the Institute for the Future of Work, are aimed in particular at highlighting the direct and indirect impacts on job creation, displacement and conditions and on the work environment in the UK, which are important considerations that are relevant to competition and should be kept closely under review. I look forward to hearing what the noble Lord, Lord Knight, says, as co-chair of the All-Party Parliamentary Group on the Future of Work, which helped the Institute for the Future of Work to develop the amendments.

Digital markets and competition are shaping models for work, the distribution of work, access to work and the conditions and quality of work for several different reasons. Digital connected worker and labour platforms are used across the economy, not just for online or gig work. There is concentration in digital markets, with the emergence of a few dominant actors such as Amazon and Uber, which impacts the number and nature of local jobs created or lost. There are specific anti-competitive practices, such as wage and price fixing, which is currently subject to litigation in the US, and there are secondary and spillover impacts from all the above, including the driving of new models of business that may constrain wages, terms and work quality, directly or indirectly.

A good example is cloud-based connected worker platforms, which use behavioural and predictive algorithms to nudge and predict performance, match and allocate work and set standards. There is also increased market dominance in cloud computing, on which a growing number of UK businesses depend. For example, Amazon Web Services leads four companies in control of 67% of world cloud infrastructure and over 30% of the market.

Other examples are algorithmic hiring, job matching and task-allocation systems, which are trained on data that represents past practices and, as a result, can exclude or restrict groups from labour market opportunities. Social, environmental and well-being risks and impacts, including on work conditions and environments, are under increasing scrutiny from both the consumer and the corporate sustainability perspective—seen, for instance, in the World Economic Forum’s Global Risks Report 2024, and the EU’s new corporate sustainability due diligence directive, due to be formally approved this year, which obliges firms to integrate their human rights and environmental impact into their management systems.

This suggests that consumer interests can extend to local and supply-chain impacts, and informed decision-making will need better information on work impacts. For a start, key definitions such as “digital activity” in Clause 4 need to take into account impacts on UK work and workers in determining whether there is a sufficient link to the UK. Amendment 2 is designed to do this. Secondly, the CMA’s power to impose conduct requirements in Chapter 3 of the Bill should make sure that a designated undertaking can be asked to carry out and share an assessment on work impacts. Similarly, the power in Chapter 4, Clause 46, to make pro-competition interventions, which hinges on having an adverse effect, should be amended to include certain adverse impacts on work. Amendments 18, 23 and 56 are designed to do this.

Thirdly, information and understanding about work impacts should be improved and monitored on an ongoing basis. For example, the CMA should also be able to require an organisation to undertake an assessment to ascertain impacts on work and workers as part of a new power to seek information in Clause 69. This would help investigations carried out to ascertain relevant impacts and decide whether to exercise powers and functions in the Bill.

Evidence is emerging of vertical price fixing at a platform level, which might directly impact the pay of UK workers, including payment of the minimum wage and, therefore, compliance with labour law, as well as customer costs. Such anti-competitive practices via digital platforms are not limited to wages, or gig, remote or office work. Ongoing research on the gigification of work includes connected worker platforms, which tend to be based on the cloud. This is indicative of tight and increasing control, and the retention of scale advantages as these platforms capture information from the workplace to set standards, penalise or incentivise certain types of behaviour, and even advise on business models, such as moving to more flexible and less secure contracts. At the more extreme end, wages are driven so low that workers have no choice but to engage in game-like compensation packages that offer premiums for completion of a high number of tasks in short or unsociable periods of time, engage in risk behaviours or limit mobility.

The Institute for the Future of Work has developed a model which could serve as a basis for this assessment: the good work algorithmic impact assessment. The UK Information Commissioner’s Office grants programme supports it and it is published on the DSIT website. The assessment covers the 10 dimensions of the Good Work Charter, which serves as a checklist of workplace impacts in the context of the digitisation of work: work that promotes dignity, autonomy and equality; work that has fair pay and conditions; work where people are properly supported to develop their talents and have a sense of community. The proposed good work AIA is designed to help employers and engineers to involve workers and their representatives in the design, development and deployment of algorithmic systems, with a procedure for ongoing monitoring.

In summary, these amendments would give the CMA an overarching duty to monitor and consider all these impacts as part of monitoring adverse effects on competition and/or a relevant public interest. We should incorporate this important aspect of digital competition into the Bill. I beg to move.

[Lord Knight of Weymouth (Lab)]

My Lords, I congratulate the noble Lord, Lord Clement-Jones, on the way he occupied the hot seat and introduced his amendments. I had hoped to add my name to them but other things prevented me doing so. As he said, I co-chair the All-Party Group on the Future of Work with Matt Warman in the other place. I am grateful to the Institute for the Future of Work, and to Anna Thomas in particular for her help in putting these amendments together.

I start with a reflection on industrialisation, which in its own way created a massive explosion in economic activity and wealth, and the availability of goods and opportunities. There was innovation and it was good for consumers, but it also created considerable harms to the environment and to workers. The trade union movement grew up as a result of that.

In many ways, the technological revolution that we are going through, which this legislation seeks to address and, in part, regulate, is no different. As the Minister said a few moments ago, we see new opportunities with the digital tools and products that are being produced as part of this revolution, more jobs, more small and medium-sized enterprises able to grow, more innovation and more opportunities for consumers. These are all positive benefits that we should celebrate when we think about and support the Bill, as we do on all sides of the Committee.

However, the risks for workers, and the other social and environmental risks, are too often ignored. The risks to workers were totally ignored in the AI summit that was held by the Government last year. That is a mistake. During the Industrial Revolution, it took Parliament quite a while to get to the Factory Acts, and to the legislation needed to provide the protection for society and the environment. We might be making the same mistake again, at a time when people are being hired by algorithm and, as the noble Lord, Lord Clement-Jones, pointed out, managed by algorithm, particularly at the lower end of the labour market and in more insecure employment.

The Institute for the Future of Work’s report, The Amazonian Era, focused on the logistics sector. If you were ever wondering why your Amazon delivery arrives with a knock on the door but there is nobody there when you open it to say hello and check that the parcel has been delivered, it is because the worker does not have time to stop and check that someone is alive on the other side of the door—they have to get on. They are being managed by machine to achieve a certain level of productivity. They are wearing personalised devices that monitor how long their loo breaks are if they are working in the big warehouses. There is a huge amount of technological, algorithmic management of workers that is dehumanising and something which we should all be concerned about.

In turn, having been hired and managed by algorithms, people may well be being fired by algorithm as well. We have seen examples—for example, Amazon resisting trade union recognition in a dispute with the GMB, as the trade union movement also tries to catch up with this and do something about it. Recently, we saw strikes in the creative sector, with writers and artists concerned about the impact on their work of algorithms being used to create and that deskilling them rapidly. I have been contacted by people in the education world who are exam markers—again, they are being managed algorithmically on the throughput of the exams that they have to mark, despite this being an intensive, knowledge-based, reflective activity of looking at people’s scripts.

In this legislation we have a “user”, “consumer”, “worker” problem, in that all of them might be the same person. We are concerned here about users and consumers, but fail to recognise that the same person may also be a worker, now being sold, as part of an integrated service, with the technology, and at the wrong end of an information asymmetry. We have lots of data that is consumer-centric, and lots of understanding about the impacts on consumers, but very little data on the impact of their function as a worker.

In the United States, we have seen the Algorithmic Accountability Act. Last month, the Council of Europe published its recommendations on AI. Both are shifting the responsibility towards the companies, giving them a burden of proof to ensure that they are meeting reasonable standards around worker rights and conditions, environmental protection and so on. These amendments seek to do something similar. They want impacts on work, and on workers in particular, to be taken into account in SMS designation, competition decisions, position of conduct requirements and compliance reports. It may be that, if the Government had delivered on their promise of many years now to deliver an employment Bill, we could have dealt with some of these things in that way. But we do not have that opportunity and will not have it for some time.

As I have said, the collective bargaining option for workers is extremely limited; the digital economy has had very limited penetration of trade union membership. It is incumbent on your Lordships’ House to use the opportunities of digital legislation to see whether we can do something to put in place a floor of minimum standards for the way in which vulnerable workers across the economy, not just in specific digital companies, are subject to algorithmic decision-making that is to their disadvantage. We need to do something about it.

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[Viscount Camrose (Con)]

The CMA does have power and remit to request an algorithmic impact assessment. I will take advice on this, because I believe that the algorithmic assessment that it undertakes must be in the direction of understanding anti-competitive behaviours, rather than a broader purpose. I will happily take advice on that.

As the Bill stands, the CMA will already have sufficient investigatory powers to understand the impact of complex algorithms on competition and consumers. The suggested expansion of this power would fall outside the role and remit of the CMA. Moreover, the CMA would not have appropriate tools to address such issues, if it did identify them. The Government will continue to actively look at whether new regulatory approaches are needed in response to developments in AI, and will provide an update on their approach through the forthcoming AI regulation White Paper response.

I thank the noble Lord once again for raising these important issues and hope that he feels able to withdraw the amendment.

[Lord Clement-Jones (LD)]

I thank the Minister for his considered reply, and thank all those who have taken part in this extremely important and interesting debate, particularly the amplification by a number of noble Lords of some of the issues.

I was very much taken by what the noble Lord, Lord Knight, had to say about the risks for workers—hired, managed, fired. He used the word “dehumanising”, which was very powerful. The noble Baroness, Lady Kidron, referred back to some of the really interesting papers about automation from Osborne and Frey and others over the years, telling us that it is not just Elon Musk but, perhaps I might say, other more serious people who are warning us about the dangers of automation.

At the end of the day, I think the question is how relevant this is to competition. Those of us putting forward and supporting these amendments believe that monopoly, concentration and the power of big tech have the ability to determine working conditions. The Minister talks about this detracting from the CMA’s duties, saying that it is beyond its competition remit and so on. We think it is mainstream; we do not think that it is just an add-on to the CMA’s duties. There is a very strong argument for a wider focus by the CMA.

It feels rather like the Minister is passing the parcel to another regulator. It was instructive that we had to scrabble around at the back end of Clause 107 to see what other regulator might be available to deal with this, but there is nobody to pass this parcel to: this is a direct consequence of concentration and monopoly power. We should include these considerations in what the CMA does. It should have the power to insist on an algorithmic impact assessment.

I think the noble Baroness, Lady Kidron, used the word prescient. We need to be prescient and think forward to the future and the power of the algorithm, artificial intelligence and big tech. Our working population are extremely vulnerable in these circumstances. I do not get the feeling that the Government are really taking their duties to protect them seriously. I am sure that we will have further debates on this. In the meantime, I beg leave to withdraw Amendment 2.

Amendment 2 withdrawn.

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[Baroness Kidron (CB)]

My Lords, I do not actually have much to add to the excellent case that has already been made, but I, too, was at the meeting that the noble Baroness, Lady Jones of Whitchurch, mentioned, and noticed the CMA’s existing relationships.

Quite a lot has been said already, on the first group and just now, about lobbying—not lobbying only in a nasty sense but perhaps about the development of relationships that are simply human. I want to make it very clear that those words do not apply to the CMA specifically—but I have worked with many regulators, both here and abroad, and it starts with a feeling that the regulated, not the regulator, holds the information. It goes on to a feeling that the regulated, not the regulator, has the profound understanding of the limits of what is possible. It then progresses to a working relationship in which the regulator, with its limited resources, starts to weigh up what it can win, rather than what it should demand. That results in communities that have actually won legal protections remaining unprotected. It is a sort of triangulation of purpose, in which the regulator’s primary relationship ends up being geared towards government and industry, rather than towards the community that it is constituted to serve.

In that picture, I feel that the amendments in the name of the noble Baroness, Lady Jones of Whitchurch, make it clear, individually and collectively, that at every stage maximum transparency must be observed, and that the incumbents should be prevented from holding all the cards—including by hiding information from the regulator or from other stakeholders who might benefit from it.

I suggest that the amendments do not solve the problem of lobbying or obfuscation, but they incentivise providing information and they give challengers a little bit more of a chance. I am sure we are going to say again and again in Committee that information is power. It is innovation power, political power and market power. I feel passionately that these are technical, housekeeping amendments rather than ones that require any change of government policy.

[Lord Clement-Jones (LD)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Kidron, whose speech segues straight into my Amendments 14 and 63. This is all about the asymmetry of information. On the one hand, the amendments from the noble Baroness, Lady Jones, which I strongly support and have signed, are about giving information to challengers, whereas my amendments are about extracting information from SMS undertakings.

Failure to respond to a request for information allows SMS players to benefit from the information asymmetry that exists in all technology markets. Frankly, incumbents know much more about how things work than the regulators. They can delay, obfuscate, claim compliance while not fully complying and so on. By contrast, if they cannot proceed unless they have supplied full information, their incentives are changed. They have an incentive to fully inform, if they get a benefit from doing so. That is why merger control works so well and quickly, as the merger is suspended pending provision of full information and competition authority oversight. We saw that with the Activision Blizzard case, where I was extremely supportive of what the CMA did—in many ways, it played a blinder, as was subsequently shown.

We on these Benches consider that a duty to fully inform is needed in the Bill, which is the reason for our Amendments 14 and 63. They insert a new clause in Chapter 2, which provides for a duty to disclose to the CMA

“a relevant digital activity that may give rise to actual or likely detrimental impact on competition in advance of such digital activity’s implementation or effect”

and a related duty in Chapter 6 ensuring that that undertaking

“has an overriding duty to ensure that all information provided to the CMA is full, accurate and complete”.

Under Amendment 14, any SMS undertaking wishing to rely on it must be required to both fully inform and pre-notify the CMA of any conduct that risks breaching one of the Bill’s objectives in Clause 19. This is similar to the tried-and-tested pre-notification process for mergers and avoids the reality that the SMS player may otherwise simply implement changes and ignore the CMA’s requests. A narrow pre-notification system such as this avoids the risks.

We fully support and have signed the amendments tabled by the noble Baroness, Lady Jones. As techUK says, one of the benefits that wider market participants see from the UK’s pro-competition regime is that the CMA will initiate and design remedies based on the evidence it gathers from SMS firms in the wider market. This is one of the main advantages of the UK’s pro-competition regime over the EU DMA. To achieve this, we need to make consultation rights equal for all parties. Under the Bill currently, firms with SMS status, as the noble Baroness, Lady Harding, said, will have far greater consultation rights than those that are detrimentally affected by their anti-competitive behaviour. As she and the noble Lord, Lord Vaizey, said, there are opportunities for SMS firms to comment at the outset but none for challenger firms, which can comment only at a later public consultation stage.

It is very important that there are clear consultation and evidence-gathering requirements for the CMA, which must ensure that it works fairly with SMS firms, challengers, smaller firms and consumers throughout the process, ensuring that the design of conduct requirements applies to SMS firms and pro-competition interventions consider evidence from all sides, allowing interventions to be targeted and capable of delivering effective outcomes. This kind of engagement will be vital to ensuring that the regime can meet its objectives.

We do not believe that addressing this risk requires removing the flexibility given by the Bill. Instead, we believe that it is essential that third parties are given a high degree of transparency and input on deliberation between the CMA and SMS firms. The CMA must also—and I think this touches on something referred to by the noble Baroness, Lady Jones—allow evidence to be submitted in confidence, as well as engage in wider public consultations where appropriate. We very strongly support the amendments.

On the amendments from the noble Lord, Lord Tyrie, it is a bit of a curate’s egg. I support Amendments 12A and 12B because I can see the sense in them. I do not see that we need to have another way of marking the CMA’s homework, however. I am a great believer that we need greater oversight, and we have amendments later in the Bill for proposals to increase parliamentary oversight of what the CMA is doing. However, marking the CMA’s homework at that stage is only going to be an impediment. It will be for the benefit of the SMS undertakings and not necessarily for those who wish to challenge the power of those undertakings. I am only 50% with the noble Lord, rather than the whole hog.

[Viscount Camrose (Con)]

I thank both noble Lords for speaking and for their thoughtful contributions. I will start by considering the amendments tabled by the noble Baroness, Lady Jones of Whitchurch, relating to information and transparency.

It is important to state from the outset that the Government agree it is vital that the Digital Markets Unit’s decisions are transparent and that the right information is available publicly. Currently, the DMU would be required to publish the key information related to its investigations in the summaries of its decisions. The amendments in this group, beginning with Amendment 8 and ending with Amendment 58, tabled by the noble Baroness, would create a new requirement for the DMU to send decision notices to firms that it assesses to be the most affected by decisions.

We agree it is vital that the DMU's decisions are transparent, and the appropriate information is accessible publicly. That is why the DMU is required to consult publicly before it imposes obligations such as conduct requirements or pro-competition orders. This gives third parties the opportunity to make representations on the design of interventions. While the precise nature of the consultation process is at the DMU’s discretion, we are aware of the imbalances in resources between different firms, as noble Lords have raised.

In its recently published overview, the CMA highlighted that engaging with a wide range of stakeholders will be a core principle of their approach. We therefore expect the DMU to put appropriate mechanisms in place for third parties to feed in. The consultation requirements are minimum requirements. As the CMA set out earlier this month, the DMU will undertake fair, inclusive and transparent engagement with third parties when designing its interventions. The participative approach will ensure that obligations are effective and appropriate, while minimising undue burdens and avoiding unintended consequences for both SMS firms and third parties.

However, requiring the DMU to identify appropriate third parties and send notices for each decision would introduce a significant burden on the DMU for minimal benefit. I think this will be a theme as we go through Committee: the burdens created by some of the proposed amendments are greater than they initially seem. For example, it could mean sending notices to potentially thousands of interested third parties in the case of app developers in the activity of app stores. Given this and the fact that the CMA will publish key information related to its decisions, we feel the burden would outweigh the benefit.

Amendment 14, tabled by the noble Lord, Lord Clement-Jones, would require SMS firms to inform the CMA before launching a digital activity that may give rise to competition issues. The Government agree that it is important that the CMA has access to information on potential competition issues in digital markets as they emerge. However, the CMA already has robust information-gathering powers under Part 1, supported by appropriate penalties for non-compliance. This amendment would create new burdens on the CMA, which could potentially be inundated with information. As a result, rather than focusing on priorities, the regulator would have to expend resources sifting the information provided. Further, it could introduce undue burdens on SMS firms looking to introduce innovative new products and services in areas that have healthy competition. It is important that obligations within the regime do not dissuade firms from developing innovations that are beneficial to consumers. I hope that sets out the position to the noble Lord.

[Lord Vaizey of Didcot (Con)]

I am interested in my noble friend’s point about the idea that allowing challenger firms to put in evidence to the CMA would overwhelm it with too much information that it could not cope with. Two points spring to mind. First, when you bring a case against an SMS the workload is unbelievable anyway—it is enormous—and these cases go on for years, so it strikes me that additional information from challenger firms would not unduly add to the CMA’s burden. Secondly, if my noble friend will forgive me, it seems a relatively casual phrase. I do not know whether there has been any analysis of the kind of information the CMA would expect to receive, but surely information that it received from challenger firms would simply allow it to present a much more robust case, rather than it being overwhelmed by paperwork.

[Lord Clement-Jones (LD)]

My Lords, so that the Minister does not have to stand up a second time, I will just add the other side of the coin to the question from the noble Lord, Lord Vaizey. The Minister seems very concerned about the workload within an SMS, but they are an SMS for a reason.

[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.

[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.

[Lord Clement-Jones (LD)]

My Lords, would the Minister also agree to add the whole question about the overworked SMS in his response?

[Viscount Camrose (Con)]

Yes. The point is that we are very happy for these firms to keep delivering innovative new products in competitive markets; we are less happy about them spending their time frustrating the will of the regulator. It is more difficult for me to comment on SMS workloads but I am very happy to comment on the regulators’ workloads.

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[Lord Clement-Jones (LD)]

My Lords, the foundation of the Minister’s argument is SMS workload. The issue is exactly the point that the noble Baroness, Lady Kidron, made about information being power. The SMS companies will know what they are developing. They have huge teams of developers and marketeers, and they have huge amounts of information. This is a question of the CMA trying to keep abreast of what is happening in markets which are dominated by SMS companies, so it is important that there is a proactive duty on the SMS undertaking to give information to the CMA. Maybe the Minister could, as part of this letter, explain how many people there are whose job it is to gather information from the SMS companies—maybe that is the right way around—so we can judge whether it is right to require an SMS proactively to deliver information to the CMA.

[Viscount Camrose (Con)]

Indeed. I am happy to include such analysis in my letter. However, I observe that were I to put myself in the SMS’s shoes and I had a desire to frustrate the will of the regulator, my approach would be to provide far more information than was necessary and create a significant burden on the regulator to sift that information. Any such request or any such standing order about the information coming from the SMS to the regulator must itself be quite carefully balanced.

[Lord Clement-Jones (LD)]

My Lords, all the SMS has to do is put it through one of its large language models, and hey presto.

[Baroness Kidron (CB)]

I am losing track of the conversation because I thought we were asking for more information for the challenger companies. rather than this debate between the SMS and the regulator. Both of them are, I hope, well resourced, but the challenger companies have somehow been left out of this equation and I feel that we are trying to get them into the equation in an appropriate way.

[Lord Clement-Jones (LD)]

That is not incompatible. These are two sides of the same coin, which is why they are in this group. I suppose we could have degrouped it.

[Viscount Camrose (Con)]

Indeed, and I apologise for getting slightly sidetracked on the issue. I think the outcomes we want are that challenger tech firms should be duly informed about the information they need, whether to rebut claims set out by an SMS or to understand the implications and contribute to the process of determining what interventions the regulator should need to make. In the Bill, we are trying to develop the machinery that balances both sides of that equation most effectively, and I remain concerned that we need to manage the workload requirements of the regulator so that it is optimally focused on delivering the right outcomes based on the right information.

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[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to take part in this first day of Committee on the Bill. As it is my first time speaking in Committee, I declare my technology interests as set out in the register, not least as an adviser to Boston Limited. In moving Amendment 15, I will also speak to Amendment 24, and I am very interested in the other amendments in this group.

Much of the discussions so far rest on the most important point of all when it comes to legislating. It reminds me of many of the discussions that we had in this very Room last year on the Financial Services and Markets Bill, as it was then, about accountability, the role of the Secretary of State and the role of the regulators. Much of this Bill as drafted, if not a pendulum, simultaneously swings significant powers to the regulator, and indeed to the Secretary of State. But the question that needs continually to come up in our deliberations in Committee and beyond is where Parliament is in this process. We hear every day how the physical building itself is crumbling, in need of desperate repair and in need of a decant, but, when it comes to this Bill, Parliament has already disappeared.

There is a massive need for accountability in many of the Bill’s clauses. Clause 19 is just one example, which is why my Amendment 15 seeks to take out a chunk of it to help in this process. Later in Committee, we will hear other amendments on parliamentary accountability. It is not only essential but, as has already been mentioned, goes to the heart of a trend that is happening across legislation, in different spheres, where huge powers are being given to our economic regulators without the right level of accountability.

What we saw as one of the major outputs of FSMA 2023, as it now is, was a new parliamentary committee: the financial services and markets committee. In many ways, you can see this as a process that may happen repetitively, but positively so, across a number of areas if this approach to legislation is perpetuated across those areas when it comes to competition. I look forward to my noble friend the Minister’s response to my Amendment 15 on that issue.

I move on to Amendment 24, which concerns a very different but critical area. It seeks to amend Clause 20, which makes brief mention of the accessibility of the information pertaining to these digital activities but is silent on the accessibility of the digital activities themselves. Does my noble friend the Minister agree that we need more on the face of the Bill when it comes to accessibility? With more services—critical parts of our lives—moving on to these digital platforms, it is essential that they are accessible to all users.

I use the term “user” deliberately because, as we have heard in previous debates, there is a great need for clarity around this legislation. “User” is used—indeed, peppered—throughout the legislation. This is right in that “user” is a term of art that would be understood across the country; however, it does not appear in the title of the Bill, which is at least interesting. We must ensure that all users or consumers are able to access all these digital platforms and services fully. Let us take banking as an example. It is far more difficult to get face-to-face banking services and access to cash, so much more is moved online. However, if those services are not accessible, what use are they to people who have been physically excluded and are now being financially and digitally excluded in the digital space?

When it comes to sporting events, mention has been made of sport in our debates on earlier amendments. I think everyone in the Committee would agree that VAR has not demonstrated technology at its brightest and best in the sporting context. I wonder whether, if we completely turned referees into bots, there would be questions about the visual acuity of the bot on the decisions that it similarly made when it went against our team. If we are to have so many ticketing services for sporting, musical and cultural events available largely, if not exclusively, online—and if, at the front end of that process, there is the all-too-familiar CAPTCHA, which we must go through to prove that we are not yet a bot—what will happen if that is not accessible? We will not get tickets.

I put it to my noble friend the Minister that there needs to be more in Clause 20 and other parts of the Bill around the accessibility of those digital services, activities and platforms. If we could fully embrace the concept of “inclusive by design”, this would evaporate as an issue. I beg to move.

[Lord Clement-Jones (LD)]

My Lords, this is quite a group of amendments. Clearly, it will take a bit of time to work our way through all of them. It is a pleasure to follow the noble Lord, Lord Holmes, who is so knowledgeable about digital aspects—I thought that he would slip stuff about the digital aspects of sport into his introduction.

I am in curate’s egg country, as far as the two amendments in the name of the noble Lord are concerned. I am not quite sure about Amendment 15, but I look forward to the Minister’s response. I think Amendment 24 is absolutely spot on and really important. I hope that the noble Lord succeeds in putting it into the Bill, eventually.

I will start by speaking to Amendments 21, 28 and 55 on interoperability, Amendment 30 on copyright and Amendment 20 in the name of the noble Lord, Lord Lansley. I will refer to Amendment 32 in the name of the noble Viscount, Lord Colville, but I will not speak on it for too long, because I do not want to steal his thunder. If possible, I will also speak to the amendments in the names of the noble Baroness, Lady Jones, and the noble Lord, Lord Vaizey, on leveraging. They are crucial if the Bill is to be truly effective.

Interoperability is the means by which websites interoperate, as part of the fundamental web architecture. Current problems arise when SMS players make browser changers and interfere with open web data, such as header bidding, which is used for interoperability among websites. Quality of service and experience can be misused for the benefit of the platforms; they can degrade the interoperability of different systems or make video or audio quality either higher or lower for the benefit of their own apps and products.

At Second Reading, my noble friend Lord Fox reminded us that Professor Furman, in evidence in Committee in the Commons, said that intervention on interoperability is a vital remedy. My noble friend went on to say that interfering with interoperability in all its forms should be policed by the CMA, which should be

“proactive with respect to promoting international standards and aiming to create that interoperability: for a start, by focusing on open access and operational transparency, working for standards that allow unrestricted participation and favouring the technologies and protocols that prevent a single person or group amending or reversing transactions executed and recorded”.—[Official Report, 5/12/23; col. 1396.]

At my noble friend’s request, the Minister, the noble Viscount, Lord Camrose, followed up with a letter on the subject on 7 December. He said:

“Standards are crucial to building the UK’s economic prosperity, safeguarding the UK’s national security, and protecting the UK’s norms and values. The Government strongly supports a multi-stakeholder approach to the development of technical standards, and it will be important that the CMA engages with this process where appropriate. The UK’s Plan for Digital Regulation, published in 2021, confirms the importance of considering standards as a complement or alternative to traditional regulation”.


It is good to see the Minister’s approach, but it is clear that there should be a stronger and more explicit reference to the promotion of interoperability in digital markets. The Bill introduces an interoperability requirement under Clause 20(3)(e) but, as it stands, this is very vague. Interoperability should be defined and the purpose of the requirement should be outlined; namely, to promote competition and innovation, so that content creators can provide their services across the world without interference and avoid platform dependency.

I move to Amendment 30. Breach of copyright online is a widespread problem. The noble Baroness, Lady Kidron, referred to the whole IP issue, which is increasing in the digital world, but the current conduct requirements are not wide enough. There should be a simple obligation on those using others’ copyright to request the use of that material. As the NMA says, the opacity of large language models is a major stumbling block when it comes to enforcing rights and ensuring consumer safety. AI developers should be compelled to make information about systems more readily available and accessible. Generative outputs should include clear and prominent attributions, which flag the original sources of the output. This is notable in the EU’s proposed AI Act.

This would allow citizens to understand whether the outputs are based on reliable information, apart from anything else.

If publishers are not fairly compensated for the use of the content by generative AI systems in particular—I look towards the noble Lord, Lord Black, at this point—and lose audiences to them, it will harm publisher sustainability and see less money invested in quality journalism. In turn, less trusted content will be available to train and update AI systems, harming innovation and increasing the chance that these systems produce unreliable results.

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[Viscount Camrose (Con)]

I start by thanking all noble Lords who spoke so compellingly. It was a great pleasure to listen. I must say my head is slightly spinning, it is such an eclectic group of amendments, but I will do my best to respond properly to all the points raised.

I start with the discussion on the imposition and use of conduct requirements by the regulator. I thank my noble friend Lord Holmes of Richmond for tabling Amendment 15, which would remove the conduct requirement objectives—fair dealing, open choices and trust and transparency—and instead allow the CMA to impose conduct requirements for any purpose, so long as they fall within the list of permitted types. I intend to cover only the impacts of this amendment on the conduct requirement objectives, not its impacts on the proportionality requirement, as we shall be turning to that in detail later. Both the objectives and the permitted types of conduct requirement reflect extensive and expert evidence and analysis on types of harms in digital markets. These have been set out in legislation to provide clarity up front about the types of rules that designated firms could be subject to. It is right that the powers given to the CMA have clear and defined limits, and the objectives provide an appropriate framework for them to operate within. The Government feel that this clarity of objective is essential to the success of the regime, ensuring that it remains targeted and proportionate.

Amendment 19, tabled by the noble Lord, Lord Clement-Jones, would allow the CMA to gather and publish information relating to commercial deals. I sympathise with the sentiment behind his amendment and believe this regime will provide a crucial means to address the imbalance that exists between the most powerful tech firms and other parties. The CMA will already, as part of investigatory requirements, conduct requirements and the final offer mechanism process, be able to gather relevant information about payment terms and deals, and require SMS firms to share information with third parties. The CMA will also, where appropriate, be able to publish aggregated and anonymised information. As such, we do not believe that this amendment provides the CMA with any necessary additional powers.

Amendment 30 proposes that conduct requirements on unfair use of data be amended to allow the CMA to also prevent SMS firms using copyright material without permission. I absolutely agree, needless to say, with the sentiment that properly functioning, competitive markets that respect intellectual property rights have a vital role to play in stimulating growth and encouraging innovation.

I assure the noble Lord, Lord Clement-Jones, that the CMA is well equipped to address competition issues in a range of contexts, including where these issues intersect with intellectual property rights. When making interventions, the CMA will consider a range of factors, which can include the fairness of terms in issues related to copyright, where they are relevant, on a case-by-case basis. Existing permitted types of conduct requirements already allow the CMA to set requirements for unfair and unreasonable terms, which can include payment terms.

[Lord Clement-Jones (LD)]

I am sorry to interrupt the Minister but that is very general. We have heard around the Room that people are really concerned. As we go forward, so many areas of intellectual property—the ingestion of copyright material, the issues with synthesisation of performances—are being affected by artificial intelligence. The kind of language the Minister is using sounds far too generic. It needs to be much more focused if we are to be convinced that the CMA really has a role in all of this. He is the Minister for both AI and IP, so he is right at the apex of this issue; maybe he is right on the point of the whole thing. He has the ability in his ministerial role to start trying to resolve some of these issues. We have the IPO coming up with a code of conduct—

[Lord Vaizey of Didcot (Con)]

We have a vote soon.

[Lord Clement-Jones (LD)]

This is a long intervention, I agree. I would just ask the Minister to focus on the fact that this is not just any old fairness of terms but something that should be explicitly stated in the Bill.

[Viscount Camrose (Con)]

There is a much broader set of work looking at issues of copyright, intellectual property and artificial intelligence together—a hugely complex piece of work with many stakeholders pulling in a range of different directions. The goal of this Bill is to address that in so far as it affects competitive markets. We may debate this, but the design of the Bill is such that, in so far as competition is affected by the misuse of intellectual property or intellectual property infringements, the CMA is empowered to intervene to drive greater competition or address issues that limit competition. It is targeted only at addressing competitive issues but, in so far as they affect competitive issues, it is empowered to address IP infringement issues, as set out here.

Existing permitted types of conduct requirements already allow the CMA to set requirements for unfair and unreasonable terms, which can include payment terms. The Government are committed to our world-leading IP regime. Copyright legislation already provides a robust framework for rights holders to enforce against copyright infringement. We will take a balanced approach to the use of AI across the press sector and departments across government are working together closely to consider the impact of AI, ensuring that AI innovators and our world-leading creators can continue to flourish.

I turn to Amendments 26, 27 and 25. I thank noble Lords for their thoughtful and considered contributions on these amendments. Amendments 26 and 27 are intended to expand the ability of the CMA to intervene outside the designated digital activity. Amendment 25 also seeks to expand this power specifically in relation to self-preferencing behaviour that takes place outside the designated activity. We agree with noble Lords that it is crucial that the CMA can deal with anti-competitive behaviour outside the designated activity where appropriate. My noble friend Lord Offord and I have had a number of representations giving further examples of this kind of behaviour and we are committed to finding the right means of addressing it.

Our current drafting has sought to balance the need for proportionate intervention with clear regulatory perimeters. The regime is designed to address the issues that result from strategic market status and is therefore designed to address competition issues specifically in activities where competition concerns have already been identified. This recognises that SMS firms are likely to be active in a wide range of activities and will face healthy competition from other firms in many of them.

I assure noble Lords that the power to prevent self-preferencing is already sufficiently broad. It can apply where an SMS firm is using its power in the designated activity inappropriately to treat its own products more favourably, but without a need for those products to be linked to the designated activity. In addition, the existing power outlined in Clause 20(3)(c) to intervene in non-designated activities, which noble Lords are referring to as the whack-a-mole principle, has been carefully calibrated. It is available only where the conduct has a material impact on the strategic market status in respect of the designated activity.

The same conduct in respect of a different activity may not have the same impact on the market. It will not always be anti-competitive and may instead form a part of normal business practice in a more contestable market. The DMU will therefore take a targeted, evidence-based approach when considering intervention. The DMU can intervene via conduct requirements outside the designated activity to prevent leveraging into the designated activity or via PCIs to address an adverse effect on competition in a designated activity. Therefore, the Government’s view is that broadening the CMA’s powers would risk over-intervention, creating uncertainty for businesses and risks to innovation and investment.

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My noble friend Lord Lansley talks about the two types of conduct requirement. To be clear, subsection (2) refers to the requirements for the purpose of “obliging” conduct, and subsection (3) refers to the requirements for the purpose of “preventing” conduct. The specific conduct requirements imposed by the CMA may be framed as either obligations or restrictions, regardless of whether they fall within types of requirements under subsections (2) or (3). This means that the CMA can already promote interoperability in the way that my noble friend rightly wants. PCIs could also include remedies, such as mandated interoperability, data sharing and consumer choice screens.

[Lord Clement-Jones (LD)]

My Lords, we are getting on in the Committee, but I was really interested in the Minister’s interpretation point, because quite a lot hangs on that. The noble Lord, Lord Lansley, illustrated extremely well the difference between promoting and not restricting, so to speak—that is a crucial distinction. The Minister prayed in aid Clause 20(2) versus (3), but could he write on that in due course?

[Viscount Camrose (Con)]

I am very happy to do so. As I say, anything that ensures the clarity of the Bill is valuable and important.

On the reference to international technical standards, these can be an important tool in supporting good regulatory outcomes, and we expect the CMA to pay due regard to these, along with other relevant considerations.

Finally, Amendment 34 would place a duty on the DMU to consider opening a PCI investigation when reviewing the effectiveness of, and an SMS firm’s compliance with, conduct requirements. Conduct requirements are tailored rules to manage the effects of an SMS firm’s market power and prevent harms before they occur. PCIs will tackle the sources of SMS firms’ market power, which can arise from both structural features of a market and SMS firms’ conduct. These are different but complementary tools, and the CMA will need to carefully decide when it is appropriate to use each tool, depending on the specific competition issue at hand. This amendment risks narrowing and reframing PCIs as a tool of last resort for non-compliance with conduct requirements.

I hope noble Lords feel assured that the issues they have raised have been carefully considered and reflected throughout the Bill, and I hope that the noble Lord will be able to withdraw his amendment.

Digital Markets, Competition and Consumers Bill

Lord Clement-Jones Excerpts

Committee stage
Wednesday 24th January 2024 Grand Committee

[Lord Kamall (Con)]

My Lords, I have not put my name to these amendments but I want to speak in favour of Amendments 16, 17 and others in this group. After the first day of Committee, which I sat through without speaking, one noble Baroness came up to me and said I was unusually quiet—“unusually” being the key word there. When another noble Lord asked me why I sat through proceedings without saying a word, I said I had once been told about the principle that I should speak only if it improves the silence. Given the concern for my welfare shown by those two noble Members, I am about to violate that principle by making a few remarks and asking a couple of questions.

As this is the first time for me to speak in Committee, I refer noble Lords to my interests as set out in the register. These include being an unpaid member of the advisory board of Startup Coalition and a non-executive director for the Department for Business and Trade. I have also worked with a couple of think tanks and have written on regulation and competition policy, and I am a professor of politics and international relations at St Mary’s University. I mention that last role because in future interventions I will refer to some political science theories, but I assure noble Lords that I will try not to bore them. I am also a member of the Communications and Digital Committee.

I want to make only a short intervention on the amendments. Previous noble Lords made the point that we want to understand the Government’s intention behind deciding to change the word from “appropriate” to “proportionate”. I am grateful to my noble friend Lord Lansley for seeking to answer that question. I am not a lawyer, so I am very grateful to the noble Lord, Lord Faulks, for his intervention, which explained the legal context for “proportionate”. It has to be said, however, that at Second Reading I and a number of other noble Lords repeatedly asked the Minister to clarify and justify the change in wording. A satisfactory answer was not given, hence we see these amendments in Committee.

We could argue that this is an entirely appropriate response to what my noble friend said in Committee. Maybe the Government could argue that it was a proportionate response. It is a very simple question: can the Minister explain the reasons? Is it, as my noble friend Lord Lansley says, that there is something wider in “proportionate” than “appropriate”? Will the Government consider bringing forward an amendment that explains this—sort of “appropriate-plus”—to make sure that it is legally well understood? Can the Government assure us that it is not a loophole to allow more movement towards a merits appeal, as opposed to judicial review, which many of us have come to support?

I have some support for Amendment 222, in the name of my noble friend Lord Holmes, which seeks clarity on the appeal standards for financial penalties and countervailing benefits, but I know we will discuss these in a later group.

[Lord Clement-Jones (LD)]

My Lords, this has been a really interesting and helpful debate, with a number of noble Lords answering other noble Lords’ questions, which is always pretty useful when you are summing up at the end. One thing absolutely ties every speaker together: agreement with the letter to the Prime Minister from the noble Baroness, Lady Stowell, on behalf of her committee, about the need to retain the JR principle throughout the Bill. That is what we are striving to do.

It was extremely interesting to hear what the noble Lord, Lord Lansley, had to say. He answered the second half of the speech by the noble Lord, Lord Tyrie. I did not agree with the first half but the second was pretty good. The “whiff” that the noble Lord, Lord Tyrie, talked about was answered extremely well by the noble Lord, Lord Lansley. It was a direct hit.

The interesting aspect of all this is that the new better regulation framework that I heard the noble Lord, Lord Johnson, extolling from the heights in the Cholmondeley Room this afternoon includes a number of regulatory principles, including proportionality, but why not throw the whole kitchen sink at the Bill? Why is there proportionality in this respect? It was also really interesting to hear from the noble Lord, Lord Faulks, who unpacked very effectively the use of the proportionality principle. It looks as though there is an attempt to expand the way the principle is prayed in aid during a JR case. That seems fairly fundamental.

I hope that the Minister can give us assurance. We have a pincer movement here: there are a number of different ways of dealing with this, in amendments from the noble Lords, Lord Holmes and Lord Faulks, and the noble Baroness, Lady Stowell, but we are all aiming for the same end result. However we get there, we are all pretty determined to make sure that the word “proportionate” does not appear in the wrong place. In all the outside briefings we have had, from the Open Markets Institute, Foxglove and Which?, the language is all about unintended consequences and widening the scope of big tech firms to challenge. What the noble Lord, Lord Vaizey, had to say about stray words was pretty instructive. We do not want language in here which opens up these doors to further litigation. The debate on penalties is coming, but let us hold fast on this part of the Bill as much as we possibly can.

[Lord Bassam of Brighton (Lab)]

My Lords, I thank the noble Lord, Lord Faulks, for his neat and precise analysis of the position in which we find ourselves in the discussion on this group of amendments. This debate is a prequel to that which will follow on penalties, and we should see it in that light; the two things are very much connected, as the noble Lord, Lord Clement-Jones, made clear. Like him, I completely agreed with the noble Lord, Lord Vaizey, when he warned about using stray words. Proportionality is probably one of the most contested terms in law, and in all the 25 years or so that I have been in this House, I must have heard it in all the legal debates we have come across.

These are the first amendments seeking to restore some of the Bill’s original wording, which, as we have heard, was changed late in the day in the Commons. We are yet to receive a full explanation from the Minister of the reasons for that. The noble Lord, Lord Faulks, asked why, and we on these Benches pose the same question. Were Ministers lobbied into this and, if so, why? We support Amendments 16 and 53 in the name of the noble Lord, Lord Faulks, which, as he outlined, seek to restore the original wording of the Bill, taking out the word “proportionate”, removing proportionality as the determining factor behind a CMA pro-competition intervention and reinserting the word “appropriate”.

We have two, possibly three, sets of solutions to the problem that the Government have set. However, we also have added our names to Amendments 17 and 54, in the names of the noble Baronesses, Lady Stowell and Lady Harding, and the noble Lord, Lord Clement-Jones, with the intent of ensuring that clarifying that the condition for conduct requirements imposed by the CMA to be proportionate does not create that novel legal standard for appeals of decisions and the confusion that will flow from that. In our view, as the noble Baroness, Lady Harding, says, the original wording strikes the right balance, roughly speaking, whereas the Government’s version would weaken the intent of this part of the Bill.

The formulation of the noble Baroness, Lady Stowell, relies on prevailing public law standards—in other words, standards that are commonly understood. We take the view that we all need to know what rules we are working to, and if the Bill introduces or creates a new standard then that certainty is removed. Of course, when it comes to the issue of pre-emption, we will need to resolve the best way forward on this issue at the next stage of the Bill. For my part, I think that reversion might be the best route, but no doubt by negotiating round the Committee we can come up with a workable solution.

The amendments of the noble Lord, Lord Holmes, particularly Amendments 220 and 222, offer another way through it. However, on the face of it, for us they are useful in the context of reminding our Committee that guidance will need to be produced on the operation of this regime as it covers financial penalties and the countervailing benefits exemptions.

We have heard a lot about the new regime being flexible and participatory as a framework for regulation, and we agree with that principle. However, we think that, with this particular change, the Government strike at the heart of that and bring in a measure of uncertainty that is unwise, frankly, in this particular process. The intervention of the noble Lord, Lord Lansley, was very telling. What he told the Committee was extremely important and we should listen very carefully to what was said in that exchange of correspondence. He rather shot the Government’s fox.

In conclusion, the Minister has a bit of a difficult job on his hands here. He may feel the weight of the Committee against him. I rather hope that he can offer us a measure of reassurance and perhaps help us come to a point where the whole Committee can agree a sensible reversion or an amendment that makes the Bill as workable as it seemed when it was first drafted.

--- Later in debate ---

[Viscount Camrose (Con)]

I believe that, in most cases, A1P1 rights would be invoked, but there are cases where A1P1 would not necessarily be invoked, rare as those cases are. The intention of the Government is to treat all those cases in the same way. As I say, it is important that we also consider the safeguards around the new powers. Having an explicit requirement for proportionality, rather than just the implicit link to A1P1, sets a framework for the CMA as to how it must design and implement significant remedies. A proportionate approach to regulation supports a pro-innovation regulatory environment and investor confidence. I am also aware, of course, that later we are due to debate concerns noble Lords may have about the accountability of the CMA. Without pre-empting that debate, it is worth pointing out that setting out the requirement for proportionality explicitly will help ensure that the CMA uses its powers responsibly.

[Lord Clement-Jones (LD)]

This all sounds as though, really, the Minister should come clean and say that what he is trying to do is bring in merits by the back door.

[Viscount Camrose (Con)]

It is not my intention to bring in merits by the back door, nor is it my intention not to come clean, or to conceal from Members of this Committee any intentions of the Government. All this is about producing the clarity that we need to safely deliver the wide-ranging new powers of the CMA.

--- Later in debate ---

[Viscount Camrose (Con)]

In respect of my noble friend Lord Vaizey’s concern that proportionality will affect how the CAT conducts an appeal, the retention of judicial review in Clause 103 will still apply to the CAT, which will still have to conduct an appeal when a firm raises non-ECHR proportionality arguments in a JR style. It will not become a full merits appeal.

Amendments 33 and 52, from my noble friend Lord Holmes of Richmond, also remove the statutory requirement for proportionality but, in doing so, create greater impacts on the regime. Amendment 33 would remove the obligation on the CMA to set out, in its conduct requirement notice, the objective in relation to which it must consider proportionality. However, this is a key feature for setting a conduct requirement and it is important to include it in the notice for both the SMS firm and third parties.

Amendment 52, by removing Clause 46(1)(b), would reduce the Bill’s clarity that the primary objective of PCIs is to address competition problems. It is important that the Bill is clear on the objective that PCIs must pursue. Additionally, proportionality provisions will ensure that the CMA addresses its objectives without placing unnecessary burdens on firms and harming consumers.

I turn to my noble friend Lady Stowell’s Amendments 17 and 54. As she set out in her explanatory statement, these amendments seek to clarify that the use of “proportionate” does not create a novel legal standard. The amendment would state that it is defined in accordance with prevailing public law standards. Of course, I agree with her that it is important to be clear about what we expect from the CMA and concur with the spirit of her amendments. However, I hope my explanation of this provision as currently drafted will satisfy my noble friend’s concerns.

These amendments assume that there is a single public law definition of proportionality, when there is not. However, proportionality is also not a novel concept for either the CMA or the domestic courts to apply. There is domestic case law about how proportionality requirements have been interpreted. We expect that the CMA, the CAT and courts would follow the broad approach set out in the Bank Mellat 2 case, which considered proportionality in relation to the application of ECHR rights, as well as fundamental rights at common law. This is relevant when considering whether an infringement of a qualified ECHR right and/or a fundamental common-law right is justified. Noble Lords with an interest in this area will be familiar with the four-limb test set out by Lords Sumption and Reed. Previously, our domestic courts applied a separate, but broadly similar, test when considering proportionality under EU law.

In the event of an appeal against CMA interventions, it is the role of the courts to provide a definitive interpretation of the legislation, but they will likely give a certain amount of deference to the CMA as the expert regulator. When an intervention has engaged A1P1, there would be a clear link with the approach of the domestic courts to the ECHR proportionality requirements that I have already discussed. In the rare situation when an intervention did not engage A1P1, it seems logical that the courts would take an approach consistent with how they approach digital markets cases which do engage A1P1, although this could involve some modifications on a case-by-case basis.

The basic requirements of proportionality—that it balances private interests adversely affected against the public interests that the measure seeks to achieve—is well understood. As such, I hope my noble friend can appreciate that although I agree with the spirit of her amendments, in practice I do not believe they would provide the clarity they seek.

Amendments 220 and 222 from my noble friend Lord Holmes of Richmond would require the Secretary of State to publish guidance on how the appeals standard for financial penalties, proportionality and countervailing benefits exemption would operate. The amendments set out that the CMA could not impose conduct requirements, pro-competition interventions or financial penalties before this guidance was published.

I thank my noble friend for these amendments. He should be pleased to hear that the CMA will, as part of its approach to implementing the regime, produce guidance outlining its approach to delivering the regime before it is implemented. We expect this guidance to include the CMA’s approach to proportionality and the countervailing benefits exemption. The Secretary of State will have oversight of the CMA’s approach through the approval of that guidance. The Government feel that this approach strikes the right balance between maintaining the independence of the CMA and the CAT, and providing appropriate government oversight and clarity about how the regime will work. Suitable guidance will already be in place before the regime commences; as such, these amendments are not required.

I hope this has helped to address the concerns of the noble Lord, Lord Faulks, and my noble friends Lady Stowell of Beeston and Lord Holmes of Richmond, and that, as a consequence, they feel able to withdraw, or not to press, their amendments.

[Lord Clement-Jones (LD)]

My Lords, what harms does the Minister think the inclusion of “proportionate” is designed to prevent? What does he really think would happen if that word was not included in the Bill?

--- Later in debate ---

Moved by

[Lord Clement-Jones]

18A: Clause 20, page 12, line 8, at end insert—
“(ba) provide a means of payment within the platform in a way that offers consumer protection from goods and services disputes.” Member's explanatory statement
This amendment would allow the CMA to require online marketplaces to provide consumers with a more secure way of paying for goods or services, with a means of recourse in the case that something goes wrong.

[Lord Clement-Jones (LD)]

My Lords, let us go back to the calmer waters of Clause 20. In moving Amendment 18A, I look forward to hearing what the noble Lord, Lord Lansley, has to say about his Amendment 31, which I have signed as well.

It seems that 75% of purchase scams originate from social media platforms. They often occur when consumers go to digital marketplaces, such as Facebook Marketplace, and try to buy goods from their peers which never arrive. Such scams cost consumers over £40 million in the first half of 2023 alone, and they seem to be on the rise. Currently, many consumers purchasing on peer-to-peer marketplaces have no access to secure payment providers that offer protections in the event that their purchase never arrives. Some marketplaces, such as Vinted and eBay, have integrated with secure providers, but despite many experts stating that these integrations will protect consumers and keep money out of the hands of criminals, adoption is still patchy across major marketplaces.

Building on voluntary commitments made in the recent Online Fraud Charter, this amendment would empower the CMA to require these marketplaces to provide consumers with a way to pay on these platforms that offers protection when things go wrong, such as when goods and services do not arrive as described, provided that these marketplaces are identified by the CMA as designated undertakings which have strategic market status. This would also be a good step in protecting consumers transacting online. Some payment services, such as PayPal or Stripe, do offer consumers protection when things go awry.

Such an amendment would also have a secondary impact: marketplaces would be better incentivised to vet sellers to ensure that they are able to meet the risk-management expectations of the commercial partners that offer secure payment services. For the avoidance of doubt, this amendment does not propose that designated marketplaces use any specific provider of secure payment services. Clause 20 sets out an exhaustive list of permitted types of conduct requirements that may be applied to designated undertakings. This amendment would confer power on the CMA to impose conduct requirements that protect consumers buying goods on peer-to-peer marketplaces identified as designated undertakings with strategic market status. I hope very much that the Minister will give this suggestion serious consideration.

[Lord Lansley (Con)]

My Lords, I am grateful to the noble Lord, Lord Clement-Jones, for introducing Amendment 18A. On Monday, in the previous day of Committee, we looked at the list of conduct requirements—both the obligations placed on designated undertakings and the capacity to set conduct requirements preventing designated undertakings doing certain things. The noble Lord is asking whether we have covered the ground sufficiently, and so am I.

In Amendment 31, I come at it from the position that I took in earlier amendments, but I wanted to separate this out because it is in a different case. The train of thought is the same: to look at the detailed obligations included in the EU’s Digital Markets Act and to say that we are approaching it in what I hope is a better way that sets broader, more flexible definitions and looks to see how they will be implemented in detail by the Digital Markets Unit. That is fine; I am okay with that, but we need to be sure that the powers are there. For example, Amendment 18A is about whether the requirement to trade on fair and reasonable terms in Clause 20 comprises this power. It is a simple question: would it be possible for such conduct requirements to be included by the DMU under that heading?

Mine is a different one. In paragraph (6) of Article 5 of the Digital Markets Act, the European Union sets an obligation for gatekeepers—that is, its comparable reference to designated undertaking; in this sense it is dealing with platforms—that:

“The gatekeeper shall not directly or indirectly prevent or restrict business users or end users from raising any issue of non-compliance with the relevant Union or national law by the gatekeeper with any relevant public authority, including national courts, related to any practice of the gatekeeper”.


For our purposes, I have rendered that in the amendment as something slightly simpler in our language—that is to say, that an obligation may be placed on designated undertakings that they shall not seek

“directly or indirectly to prevent or restrict users or potential users of the relevant digital activity from raising issues of non-compliance with any conduct requirements with any relevant public authority”.

It is not just the CMA, of course; there may be others involved, such as the Information Commissioner and other public authorities.

For this purpose, I looked at the conduct requirements laid out in Clause 20 to find where this might be covered. I do not think it is covered by the material about complaints handling processes. This is not about whether you can make a complaint to the designated undertaking; this is about whether one is subject to the provision, as a user or potential user, such as an app seeking to complain about the non-compliance of a designated undertaking to the Digital Markets Unit. That is not the same as having a complaints process in place.

Do we think this could happen? Noble Lords will make their own judgments about that. All I am assuming is based on the fact that, for example, in April 2021, in the Judiciary Committee hearings on competition in app stores in the US Senate, Senator Klobuchar said, to paraphrase, that a lot of providers of apps were afraid to testify. They felt that it was going to hurt their business and they were going to get intimidated. So I am not having to invent the proposition that there may be a degree of intimidation between the providers of apps, for example, and the platforms that they wish to use.

In a sense, we do not actually need to know that it is happening to know that we should give the power to the Competition and Markets Authority to set conduct requirements as and when necessary to prevent such a thing happening. I do not think that it is comprised within the existing text of Clause 20.

I hope that my noble friend will take this one away, with a view to thinking positively about whether it is required to be added to the conduct requirements in Clause 20 at Report.

--- Later in debate ---

[Lord Stevenson of Balmacara (Lab)]

The Minister is very generous.

[Lord Clement-Jones (LD)]

My Lords, I think there is quite a lot of meat in what the Minister said just now, both in respect of the amendment in the name of the noble Lord, Lord Lansley, and my amendment.

I appreciate that we have a set of moving parts here, including the response to the consultation on smarter regulation, improving consumer price transparency and product information for consumers, which came out this morning.

The answer to the noble Lord, Lord Stevenson, was quite interesting. However, if what the Minister said about the conduct requirements in Clause 20 is to be put into effect, I suggest that he has to bring forward amendments on Report which reflect the response to the consultation. I do not think this can be done just as a sort of consumer protection at the back end of the Bill; it has to be about corporate conduct, and at the Clause 20 end of the Bill.

Obviously, we will all read the words of the Minister very carefully in Hansard. It is interesting. I have written down: “Why are we kicking the tyres on Clause 20?” As the noble Lord, Lord Stevenson, said, this is absolutely central to the Bill. Basically, it could not be more important; getting this clause right from the outset will be so important. This is why not only we but the CMA will be poring over this, to make sure that this wording absolutely gives it the powers that it needs.

I take the point of the noble Lord, Lord Stevenson. These are very important powers, and we have to make sure that they are used properly, but also, as the noble Lord, Lord Lansley, said, that the powers are there. Otherwise, what are we spending our time here in Committee doing, if we are going to put forward a Bill that is not fit for purpose? We have to make sure that we have those powers. I like what the Minister had to say in reference to the Clause 20(3)(a) provision. Again, when people look at Pepper v Hart and so on, that will be an important statement at the end of the day.

We have certainly managed to elicit quite a useful response from the Minister, but we want more. We want amendments coming down the track on Report which reflect some of the undertakings in the response to the consultation on consumer price transparency and product information for consumers.

The only other thing to say—exactly as the noble Lord, Lord Stevenson, has said—is that comments about the consultation are that it was half a loaf. There is a whole lot more to be said on drip pricing. We have a discussion coming down the track on that, and we will reserve our fire until then.

[Lord Lansley (Con)]

As I understood it, Clause 20(3)(a) is about discrimination between users; it is not about trying to stop any user of a platform going to the CMA to complain about non-compliance or other conduct requirements—or indeed that conduct requirement. I will happily look at what my noble friend said and hope that it meets the test of the kicking of the tyres. If it does not, we may have to return to this.

[Lord Clement-Jones (LD)]

My Lords, that is a useful warning that we need to read Hansard extremely carefully to see what the Minister thinks the scope of that really is and whether it covers the point that the noble Lord, Lord Lansley, has made.

This is a continuing discussion and, in the meantime, I beg leave to withdraw my amendment.

Amendment 18A withdrawn.

Digital Markets, Competition and Consumers Bill

Lord Clement-Jones Excerpts

Committee stage
Monday 29th January 2024 Grand Committee

[Lord Kamall (Con)]

My Lords, I wish to speak to this group of amendments. Other noble Lords have clearly made the case for the amendments in their names so I will try not to repeat what they have said.

Given that, I have three simple questions for my noble friend the Minister. First, having decided that appeals by firms should be decided not on merits in a court but by JR appeal, why have the Government now decided to allow this merits-based appeal on the size of the fine? I know that noble Lords have their own views on this, but I would like an answer and some clarity from the Government. Secondly, what evidence has come to light to persuade the Government to lay their amendments on this matter in the other place? Thirdly, how confident are the Government that, if a firm wins its merits-based appeal on the size of a financial penalty, this definitely will not give the firm a legal basis for challenging the reasons for the penalty and the conduct required by the CMA in the first place? I look forward to my noble friend the Minister’s responses to these three questions.

[Lord Clement-Jones (LD)]

My Lords, following this superb debate, I am worried about being able to add much to what has been said.

First, I want to pick up what the noble Lord, Lord Tyrie, said. As ever, I agree entirely with half of what he said, but the other half is rather more controversial. This seems to be a growing habit. Exactly as the noble Baroness, Lady Harding, said, if there is a solution to overreach, it must be through greater parliamentary scrutiny. The noble Baroness, Lady Stowell, also referred to this and we have amendments coming down the track on it. Going back to JR-plus for the majority of decisions to be made under the Bill would be a retrograde step.

[Lord Tyrie (Non-Afl)]

The noble Lord said that we should not go back to JR-plus, which would bring in a limited form of merits review. However, many decisions in merits appeals have been found to be clearly wrong, once in the appeal, and would have harmed consumers’ interests had they been allowed to stand, under full judicial review. Does the noble Lord agree with that remark? Before he decides whether or not he does, I remind him that I am quoting him in his opposition to the move made in 2017.

[Lord Clement-Jones (LD)]

My Lords, it is lovely to be reminded of previous remarks but, of course, that was then and this is now. We were talking about the standard for Ofcom then; today, we are talking about the CMA standard. The noble Lord would need to produce evidence that that standard did not in fact have a really poor outcome as a result of the power of big tech not being as limited as it could have been. He talked about us needing to recognise the power of big tech, but that is exactly what adopting the JR standard—the Wednesbury “unreasonable” standard that the noble Lord, Lord Faulks, talked about last week, and which all of us are content to stick with—would do.

Of course, what we are trying to do, if possible—if the amendments in the name of the noble Baroness, Lady Jones, are accepted—is to revert back to a JR standard for penalties. I believe that consistency across the board is rather more important than trying to revert to a form of appeals standard that obtains in a different part of the regulatory forest. However, as the noble Lord said, the danger of executive overreach is much more easily cured by increased parliamentary scrutiny than by trying to, in a sense, muddy the waters of the test for appeals.

What the noble Baroness, Lady Harding, said about incentives was entirely right. Litigation has clearly been used and is being used by big tech for strategic business purposes. We are trying to make sure that this does not drag on for ever and that appealing against the penalties does not open up the whole caboodle as a result. The noble Lord, Lord Black, and others who talked about the change of standard for penalties infecting other aspects of a CMA decision, made very strong points.

Ultimately, the Minister has a large number of questions from noble Lords. The noble Baroness, Lady Stowell, asked what would be relevant for an appeal on penalties. What is the motivation for the Government in putting forward this new standard for penalties? What is so special about it and what evidence did they use to come to that view? Is not the danger of using a merits appeal basis that the decisions on which the penalty was based will be unpicked? The practicalities were also raised by a number of noble Lords.

[Lord Vaizey of Didcot (Con)]

I intervene on the point that the noble Lord, Lord Tyrie, made to the noble Lord, Lord Clement-Jones. There is a difference. The noble Lord was absolutely right to raise his concerns about Ofcom moving from a merits-based to JR-based appeal, in 2017. As the noble Baroness, Lady Harding, knows very well, Ofcom often makes decisions on extremely complicated pricing mechanisms. The telecoms companies had a point in saying that a merits-based appeal for Ofcom decisions is worth while, because going through the calculations again could sometimes be worth £50 million, £100 million or £200 million.

Ofcom was right in finally moving to JR for those cases when it took quite important strategic decisions about the marketplace—for example, forcing Sky Sports to offer its content wholesale to competitors. The noble Lord, Lord Clement-Jones, had a point then and he has one today.

[Lord Clement-Jones (LD)]

It is very nice and helpful to be reminded of things that I had forgotten entirely. We need to make sure that we are consistent across the board. A full merits-based standard is not, for example, used to appeal against fines issued by Ofcom under the Online Safety Act. These Benches have serious concerns regarding the insertion of two different appeal standards in the Bill, as it may decrease the deterrent effect and risk lengthier appeals, as we have heard.

If we are not successful in persuading the Government to change back to JR for penalty appeals, and a merits appeal is to be included, a number of amendments—the amendment in the name of the noble Baroness, Lady Stowell, that in the name of the noble Lord, Lord Holmes, and my amendment—are of great relevance to make sure that we do not see that drift that the noble Lord, Lord Black, talked about. A failure to do so could run the same risks as an entirely novel appeals standard. On that basis, we very much support the amendments in the names of the noble Lord, Lord Holmes, and the noble Baroness, Lady Stowell, and my own Amendment 68, which would ensure that there is no further extension of the merits appeal standards into any other part of the Bill. It is intended to have the same impact and draw a clear line in the sand beyond which no court can go.

I am sorry that we do not have the noble Lord, Lord Lansley, here to reveal perhaps another letter from a Minister. We had an interesting discussion last Wednesday, when the noble Lord, Lord Lansley, quoted the letter, sent to Damian Collins and Sir Robert Buckland, about the nature of the intention behind including “proportionate”. It said:

“In practice this means that firms will be able to challenge whether the DMU could have achieved its purpose for intervention through less onerous requirements”.


In a sense, that is a massive invitation to litigation, compared to ordinary JR. If that move is an invitation to litigation, think how much further along the road we are travelling if we go for a merits test for the fine and the penalties. I hope the Minister will therefore reverse course back to the pre-Report situation in the Commons; that would give a great deal of satisfaction around this Committee.

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

I thank the noble Baroness, Lady Jones, for raising the important subject of digital markets appeals through Amendments 64, 65, 67, 71 and 72. I thank noble Lords for their powerful and compelling contributions. I am glad of the opportunity to set out the Government’s position.

These amendments seek to revert the changes made in the other place to the appeal standard of digital markets penalties. This would mean that penalties would be subject to judicial review principles, instead of being heard on their merits. It is important that decisions made by the CMA can be properly reviewed to ensure they are fair, rigorous and based on evidence. As the Bill stands, the key decisions—particularly the regulatory decisions that will drive the benefits from this regime—will be appealable on judicial review principles. Only penalty decisions will be appealable on the merits. This will provide SMS firms subject to penalties with additional reassurance, without compromising the regime’s effectiveness.

Penalty decisions will come at the very end of the regulatory process, if at all. They do not have the same impact on third parties as other decisions in the regime. Conduct requirements and pro-competition interventions will already have been in place to address their intended harm before penalty decisions are considered. Decisions on penalties are different from those about imposing requirements: they are more about making assessments of facts. They will assess what the SMS firm has or has not done. Other decisions that the CMA will take in the regime are forward-looking expert judgment calls. It is appropriate that the latter be given a wider margin of appreciation through a judicial review standard than decisions to impose penalties.

To address the point made by many noble Lords, I make it clear that challenging penalties does not open up the question of whether a breach occurred, or whether a conduct requirement or PCI was right in the first place. I will set this out in more detail in response to the next set of amendments—but perhaps I should say, as I did on the first day of this Committee, that I am happy to listen to and take forward any form of words that strengthens the clarity or intent of the Bill. As I said, the intent of the Bill is that the decision about whether a breach has occurred is made on JR principles.

The digital markets measures, as with other CMA regimes, have always treated penalties differently in the regime. For example, they are automatically suspended upon appeal, unlike other decisions. This would also have been the case under JR. We have aligned penalty appeals with those under the Enterprise Act 2002, as was said, so that parties can challenge these decisions on the merits to ensure that the value of penalties is suitable. The regimes in the Enterprise Act apply to firms from all sectors, rather than just tech firms. In addition, to give two examples, penalties are appealed on the merits in the financial services and markets regime, administered by the Financial Conduct Authority, and, under the Water Industry Act, overseen by Ofwat. In the EU’s Digital Markets Act, penalty appeals are similar to merits reviews in the UK.

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[The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)]

My Lords, I am delighted to speak on the third day in Committee. I reiterate the sentiment articulated in the first session by my noble friend Lord Camrose that the Bill, importantly, will drive growth, innovation and productivity and ensure that businesses and consumers in the UK reap the benefits of competitive markets. I thank noble Lords for their contributions throughout the passage of the Bill and for their continued scrutiny and debate.

I turn to a number of miscellaneous amendments put forward by the Government that affect different parts of the Bill. Amendments 214 and 219 introduce a new clause and schedule into the Bill that make amendments to other pieces of primary legislation, consequential to provisions in Parts 2, 3, 4 and 5 of the Bill. The consequential amendments fall into three groups. The first amends sectoral legislation that applies, with modifications, the information-gathering power given to the CMA for its merger control functions in Section 109 of the Enterprise Act 2002. Where that power is applied for non-merger related purposes, the changes made by Part 2 of the Bill—which make express provision about the extraterritorial reach of the power and strengthen the civil sanctions regime that supports its enforcement—are not to apply. The schedule makes provision accordingly.

The second group of amendments is in consequence of Part 3, and the repeal of Part 8 of the Enterprise Act 2002 and its replacement with Part 3 of this Bill. The third group is in consequence of provision in Chapter 1 of Part 4 and Chapter 2 of Part 5, to amend legislation which otherwise restricts disclosure by regulators and others of information relating to individuals and businesses. This will permit them to disclose information for the purposes of the enforcement of consumer protection law, unfair trading and the provision of investigative assistance to overseas regulators.

Amendment 223 amends the commencement provision in Clause 334, so that the new clause and schedule can be commenced alongside the substantive provisions to which they relate.

Amendment 213 will ensure that information that comes to a UK public authority in connection with its power to provide investigative assistance to an overseas authority in Chapter 2 of Part 5 of the Bill will be covered by the information disclosure restrictions and gateways in Part 9 of the Enterprise Act 2002. This ensures that a public authority can share the information that it has collected on behalf of an overseas authority with that overseas authority. This will be in line with relevant safeguards, including personal data protection and safeguards for commercially sensitive information. To help ensure that the investigative assistance regime operates efficiently, the amendment will also enable UK authorities that hold information to which Part 9 applies to disclose that information to another UK authority to facilitate the provision of investigative assistance by that UK authority.

I turn to data protection override. Amendments 73, 206, 207, 208, 216 and 217 are minor and technical amendments which will make provision in relation to data protection across the Bill. Amendment 217 adds a new clause that clarifies that no provision in the Bill would require or authorise the processing of data that would contravene data protection legislation. Amendments 73, 206, 207, 208 and 216 remove provisions that previously applied only to some specific powers and insert a definition of data protection legislation that applies across the whole Bill.

On pre-commencement consultation, Amendment 218 adds a new clause to clarify that:

“A duty to consult under or by virtue of this Act may be satisfied by consultation that took place wholly or partly before the passing of this Act”.


The provision clarifies that the CMA has the flexibility to begin consulting before Royal Assent to ensure that the full set of reforms in the Bill can be implemented as soon as possible.

I hope that noble Lords will accept these amendments. I look forward to addressing any questions or points that they may have about them. I beg to move.

[Lord Clement-Jones (LD)]

My Lords, this is quite a set of amendments and the Minister rather rattled through his speech, but I have only one question: why are they now being included in the Bill here in Committee? Why were they not in the original version of the Bill? What is the motivation behind these new amendments? I am always a little suspicious. With the data protection Bill coming down the track, we will have hours of endless excitement. The words “data protection” and “government” are sometimes a bit of a red rag, so one always has to kick the tyres quite hard on any provision that appears to be opening a door to disclosure of data and so on. Obviously, in a competition context, it is most likely to be commercial confidential information, but the Minister needs to explain what kind of information we are talking about and why we need to have these provisions included at this stage.

[Lord Leong (Lab)]

My Lords, I thank the Minister for his overview and explanation of the various government amendments. I look forward to his response to the question from the noble Lord, Lord Clement-Jones: why now? These are mainly technical and tidying-up amendments and we are in broad agreement with most of them in this group.

Amendment 217 makes it clear that any imposed or conferred duties to process information do not contravene data protection legislation. That is welcome. Amendment 213 ensures the disclosure of information under Chapter 2 of Part 5 of the Bill, which allows UK regulators to provide investigative assistance to overseas regulators. This is in line with the restrictions on the disclosure of certain kinds of information found in the Enterprise Act 2002, which is fine. I ask the Minister what assessments are in place to safeguard the sharing of such details with autocratic regimes, which may not have robust governance and accountability systems in place and whose values we do not share? On Amendment 218, I ask the Minister whether the intent is similar to that of Amendment 1, as set out so eloquently by my noble friend Lady Jones of Whitchurch on the first day of Committee?

Finally, I refer to Amendment 216, which replaces the definition of data protection legislation for the whole of the Bill, so the definition in Amendments 73 and 208 are removed. Can the Minister confirm that such a definition is consistent with Article 8 of the European Convention on Human Rights and the Enterprise Act 2002? I look forward to the Minister’s response and comments.

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I very much hope that we will hear from the Minister that we will reopen the whistleblowing case and not rest on what was done last June, and that he will reflect a good deal on the scope for improving anti-trust and cartel scrutiny in the UK by making whistleblowing more straightforward.

[Lord Clement-Jones (LD)]

My Lords, I support Amendment 73A in the name of the noble Lord, Lord Knight, and will speak to a number of the other amendments in the group.

The noble Lord, Lord Tyrie, made a very interesting and attractive case for both his amendments. On Amendment 93A, the whistleblower review amendment, I was particularly struck by him saying that the budget for compensation for whistleblowers comes from within the CMA’s budget. That seems to be an extraordinary set of circumstances. In the case of both amendments, he clearly spoke from a huge amount of experience, and he has obviously been thinking about these areas for improvement for some considerable time. I very much look forward to hearing what the Minister has to say in response, because the noble Lord, Lord Tyrie, made an extremely good case from the point of view of someone who has been inside the system and is well informed about the issues.

On the full cost recovery for mergers, one of the perennial issues that we come across when talking about regulators is the question of resources. Anything that assists them in not having to cheese-pare in the way they regulate is extremely welcome, particularly when this kind of solution can be so easily put into effect.

On the amendment tabled by the noble Lord, Lord Knight—and on what the noble Baroness, Lady Harding, and the noble Lord, Lord Ranger, said—I do not think we are very far part. A lot of this is making sure that, where something does not fall within the remit of a particular regular, that regulator can co-operate with other regulators and exchange information to make sure that the other regulators, in whose province a particular issue is located, can then take appropriate account.

What the noble Lord, Lord Ranger, said amounted to almost a generic speech about how you regulate the digital sector or digital services. I do not disagree with him, but I would perhaps be slightly more robust in thinking that regulation is not the enemy of innovation. Sometimes, regulation can be the friend of innovation, because it creates a certainty in the context in which people are developing new technology.

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[Lord Offord of Garvel (Con)]

The noble Lord will know that, on the current pie chart of activity undertaken by the CMA, 80% is for mergers with companies with a turnover north of £100 million, while 20% of it is for companies with turnovers below that. The 80:20 rule always works in life, so there is obviously scope to charge the larger companies more if that is the decision taken. I refer to the reassurance given that this can be amended in secondary legislation if that is deemed appropriate.

Let me move on to media merger public interest interventions. Amendment 93 in the name of the noble Lord, Lord Clement-Jones, would expand the list of public interest grounds for the Secretary of State to intervene in a merger case to include the need for free expression of opinion and plurality of ownership of media enterprises in user-to-user and search services. I am grateful to the noble Lord for raising this issue. Media mergers are particularly sensitive, as they could have an impact on how the UK public access and consume information.

The Government are currently reviewing the recommendations on changes to the media public interest test in Ofcom’s 2021 statement on media plurality. Ofcom did not recommend that online intermediaries or video and audio on-demand services should fall within the scope of the media mergers regime, which this amendment would provide for. We are considering Ofcom’s recommendations carefully and, as we do that, we will look closely at the wider implications on the industry. The Government have not proposed pursuing substantive changes to the grounds for public interest interventions in mergers in this Bill. The changes recommended in Ofcom’s review can be addressed directly via secondary legislation under the made affirmative procedure, if appropriate.

For these reasons, I hope that the noble Lord opposite will not press this amendment.

[Lord Clement-Jones (LD)]

What is the timescale within which all this will be decided?

[Lord Offord of Garvel (Con)]

I do not have a detailed timetable. I understand this is being looked at currently. I am happy to confirm in writing when we have a detailed timetable.

I move now to Amendment 93A and protection for whistleblowers. I again thank the noble Lord, Lord Tyrie, for his informed contribution to the scrutiny of this Bill. I also thank the noble Lords, Lord Clement-Jones and Lord Leong, for their contributions on this topic. Amendment 93A would introduce a new requirement for the CMA to carry out a review of protections and support available for whistleblowers under the UK’s competition and consumer law.

The noble Lord will know that the Government consulted on the important issue of incentives and protections for whistleblowers in the competition regime. However, no clear evidence or support was put forward by respondents that would support making changes to the existing framework. Therefore, the Government do not propose to introduce reforms to whistleblowing protections. In taking this decision, we also considered that the courts can already give due weight to the importance of anonymous whistleblowing in competition law enforcement. This could, for example, justify a court restricting how the identity of a whistleblower is disclosed depending on the circumstances of the case.

As the noble Lord mentioned, in 2023 the CMA increased the compensation cap for informants in cartel cases from £100,000 to £250,000. This will support the CMA to investigate effectively and, where appropriate, enforce against criminal cartels, which can cause serious harm to consumers and businesses within the UK.

Any whistleblower worker who faces victimisation in the UK can also seek additional compensation from their employer in an employment rights tribunal. This compensation can be awarded uncapped and can reflect the costs of some whistleblowers being unable to work in their chosen profession again.

The Government, therefore, have not proposed reforms to the compensation for whistleblowers in the Bill. However, I stress that we recognise the importance of whistleblowing in uncovering wrongdoing and will continue to ensure whistleblowers are not discouraged from coming forward under the current framework.

At this time, we do not think that a review in the form that the noble Lord’s amendment calls for would be merited, nor that it would be appropriate to place a new and binding obligation on the CMA requiring it to conduct such a review within a specific timeframe. For these reasons, I hope that the noble Lord does not push this amendment.

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[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.

[Lord Bassam of Brighton (Lab)]

My Lords, this is the beginning of an important couple of debates about accountability. The breadth and the import of what noble Lords have said so far underlines how much we value that. We on the Labour Benches are co-signatories to both amendments in this group—the first, Amendment 76 in the name of the noble Viscount, Lord Colville, and the second, led by the noble Baroness, Lady Stowell.

Put simply, if the CMA is to be a regulator genuinely independent of government and accountable to Parliament, these amendments should stand. As it is, the legislation seems to suggest that, before the CMA can take any initiative on guidance, it first has to receive the approval of the Secretary of State. This is surely not only a time-consuming process but a wholly inefficient way of conducting business. I can well understand and appreciate why the Government desire to understand how the CMA intends to implement its regulatory policy, but do they really require such a firm and strong hand in the process? As it is, the CMA will be in constant consultation, discussion and interaction with government Ministers, and I do not see why, in the final analysis, approval has to come from the Secretary of State.

Can the Minister tell us how the regulatory regime compares with others? Do regulators like the Charity Commission, Ofcom, Ofwat, the Electoral Commission et cetera all require approval from the Secretary of State before issuing guidance? How does this process contrast with these other regulators? Is there a standard practice, or does it vary across regulatory frameworks? We need something that will work for this particular part of our economy, and it has to be built on trust and understanding and not reliant on the heavy hand of the centre of government coming in and ruling things in or out of guidance which the experts, in the form of the CMA and the DMU, have reflected and consulted on.

We obviously support the amendment of the noble Baroness, Lady Stowell, which, as I said, we co-signed. Consulting the relevant parliamentary committees seems a wholly sensible solution and step. These committees are powerful entities, as we know, full of expertise and insight, and they provide a layer of accountability that Parliament rightly expects. After all, the CMA is a creature of Parliament and of legislation that we will put through this House.

I am sure there are plenty of examples of where legislation, particularly secondary legislation, has benefited from the input and oversight of Select Committees and other committees of both Houses. The points made about lobbying the Secretary of State were important and powerful. We need maximum transparency, and we need openness in this process; otherwise, suspicion will abound, and we will always have cynics who say that Secretaries of State are very much in the pockets of business and commercial interests. We do not want that in this legislation; we want something that works for the market, for the competitive interests in the digital world, and particularly for consumers.

Ministers would do well to listen carefully to what the noble Baroness, Lady Stowell, said. She is an experienced parliamentarian, but, more than that, she was the chair of a regulator, so she understands exactly the import of the pressure that can come from central government and how it can best be managed.

These amendments are important for us in order to secure accountability in this market and in the way in which the various institutions work and operate together. I happily lend my support to both of them.

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The Government will continue to work closely with the CMA, as they have throughout—

[Lord Clement-Jones (LD)]

I am sorry to interrupt the Minister, but, if the logic were being followed for what he said, there would be—at the very least—some form of affirmative resolution for the guidance, as with all the other powers in the Bill.

[Viscount Camrose (Con)]

I am happy to look into that as a mechanism, but, as currently set out in the Bill, the logic is that the Secretary of State can approve the guidance.

The Government will continue to work closely with the CMA, as they have throughout the drafting of the Bill, to ensure that the timely publication of guidance is not disrupted by this measure. Published guidance is required for the regime to be active, and the Government are committed to ensuring that this happens as soon as possible. Guidance will be published in good time before the regime goes live, to allow affected stakeholders to prepare. The Government hope that, subject to parliamentary time and receipt of Royal Assent, the regime will be in force for the common commencement date in October this year.

In response to my noble friend Lord Black’s question about guidance and purdah, the essential business of government can continue during purdah. The CMA’s guidance relates to the CMA’s intentions towards the operation of the regime, rather than to a highly political matter. However, the position would need to be confirmed with the propriety and ethics team in the Cabinet Office at the appropriate time, should the situation arise that we were in a pre-election period.

I thank the noble Viscount, Lord Colville, and my noble friend Lady Stowell for their amendments, and I hope that this will go some way towards reassuring them that the Government’s role in the production of guidance is proportionate and appropriate. As I said, I recognise the grave seriousness of the powerful arguments being raised, and I look forward to continuing to speak with them.

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[Lord Kamall (Con)]

My Lords, I will speak to Amendment 81 in this group. I also wanted to speak to Amendment 77 in the previous group; I apologise that I was not here earlier to speak to it then.

I will refer to three notions from political science that may be relevant here. The first is that of the principal-agent theory and principal-agent problem. That is when a Government—namely, the principal—delegates authority to an agency. There is a huge body of work about delegating power to regulators, including the notion of agency slack, where the regulator does not act as was originally intended for a number of different reasons, raising the question of how you hold it accountable for that. Alternatively, it may perform very badly; for example, in some government departments there are concerns about arm’s-length bodies. How do we make sure that a poorly performing regulator is acting as it should have done in the first place?

The second notion is public choice theory. When people call for government intervention, they usually assume that officials and politicians are benign and will act in the public interest. Public choice theory suggests, however, that we must remember that individuals are also motivated by their own incentives and may act in their own self-interest at certain times—not because they are bad people, but because they are human. There are many cases of that; for example, with the housing market, most people agree that we need to build more houses, but many people just do not want their homes anywhere near those new houses. It is therefore very difficult in parts of the country for a candidate to stand up and campaign for more development because, according to public choice theory, they are acting in their own interest about wanting to get elected, even though they know that there should be more homes in the country. One of the fathers of public choice theory, James Buchanan, called it politics without the romance. It is when officials, who are well intentioned when the organisation starts up, just like politicians, suddenly do not act as was intended in the first place, because there are certain interests that conflict with each other. Therefore, how do we address that problem when it happens?

The third notion is the idea of unintended consequences. Given that we do not have complete knowledge, we should ask ourselves sometimes what happens if we are wrong. Are we absolutely sure that the JR appeals will prove a better way to achieve faster and more accurate decisions? We all support them, because many of the small challenger companies are asking us to do that—I have spoken in favour of them, as have many other noble Lords—but what if we find down the line that the appeals are taking longer, or that large companies are winning their appeals and the CMA has to start all over again? What if we find that it in fact takes longer than if we had gone to a time-limited merits appeal?

I considered laying an amendment asking for a review after three or five years, but I was worried about that, in case it became another loophole that large companies would use to undermine the JR appeals process, so I stood back. Another reason I did not do that was because the noble Lord, Lord Clement-Jones—I thank him for this—said to me, “You may well be right, but surely this should be about the accountability of the CMA to Parliament, and Parliament can question it on the issue of why some of the cases it is bringing are being lost on appeal”.

The other question that many of us politicians across the spectrum are asking is: who regulates the regulators? This comes from people right across the board. How do we make them accountable? I suggest that my noble friend Lady Stowell’s Amendment 81 addresses those three concerns. I hope that I have laid out the reasons why I support her amendment, notwithstanding some of the concerns raised by the noble Lord, Lord Tyrie.

I speak briefly to Amendment 82 in the name of the noble Lord, Lord Fox; he has raised an important issue. When I was in the European Parliament, we looked at digital regulation as well as financial regulation. I was told by many national European regulators, including those in the European Commission, and other global regulators that they had a huge amount of respect for UK regulators. Quite often, they would use what we did previously. For example, early telecoms regulators basically took what we did in the 1980s and replicated it across many countries in Europe.

I teach students about intergovernmental organisations. We can see that even the more technical intergovernmental organisations, some of which are over 100 years old, have now become more political. Companies and Governments are starting to influence soft power, as another noble Lord said. The EU, for example, wants to be the technical standard for regulation; China also wants to get involved in international bodies and to set the standards in its own interests—look at the debate over CDMA a few years ago. This is not just in the tech sector; we see its officials active in many intergovernmental organisations. I am not sure that the amendment tabled by the noble Lord, Lord Fox, is the right way to address these concerns, but he is certainly on to something and it deserves further consideration.

[Lord Clement-Jones (LD)]

My Lords, I am going to be extremely brief as the hour marches on: yes to Amendments 79 and 83. Most of the debate has been around Amendment 81 but I want to mention my noble friend’s Amendment 82 because the concept of lock-in is absolutely crucial. I am a big fan, particularly in the AI field, of trying to get common standards, whether it is NIST, IEEE or a number of them. The CMA’s role could be extremely helpful.

Of course, many other regulators are involved. That brings us into the landscape about which the noble Baroness, Lady Stowell, has—quite rightly—been so persistent over the course of the then Online Safety Bill and this Bill. She is pursuing something that quite a number of Select Committees, particularly her one, have been involved in: espousing the cause of a Joint Committee, as our Joint Committee previously did. It is going to be very interesting. I am a member of the Industry and Regulators Committee, which has been looking at the regulatory landscape.

These accountability, independence, resourcing and skills issues in the digital space are crucial, particularly for those of us in this Committee. For instance, the role of the DRCF and its accountability, which were raised by the noble Baroness, Lady Kidron, are extremely important. I very much liked what the noble Baroness, Lady Harding, said about us having talked about Ofcom before but that we are now talking about the CMA and will talk about the ICO very shortly; for me, AI brings a lot of that together, as it does for her.

So what is not to like about what I think is a rather cunning amendment? The noble Baroness gets more cunning through every Bill we get on to. The amendment is shaped in a way that is more parliamentary and gets through more eyes of needles than previously. I strongly commend it.

[Viscount Camrose (Con)]

My Lords, I shall be as brief as I can possibly be, I promise.

I thank all noble Lords for their brilliant and stimulating contributions. Amendment 79 in the name of the noble Baroness, Lady Jones of Whitchurch, would require the Government to undertake an annual assessment of the operation of the CMA, to include the DMU specifically. The CMA is already required to present and lay its annual report in Parliament. This covers the operation and effectiveness of the CMA, including a review of its performance, governance and finances. The CMA recently published a road map setting out how it will report on the digital markets regime in its annual report. Although I of course appreciate the intent behind the noble Baroness’s amendment, adopting it would run the risk of being duplicative of the CMA’s assessment of its activities, which could lead to concerns regarding its operational independence. The Government set out their priorities for the CMA in their strategic steer and the CMA reports publicly on how it meets these priorities. The Government will also carry out a post-implementation review of the regime to assess how it is delivering on its aims.

Amendment 81 from my noble friend Lady Stowell of Beeston would require additional reporting by the CMA, the Financial Conduct Authority, the Information Commissioner’s Office and Ofcom. It would require these regulators to publish annual reports on the impact of the digital markets regime on their activity and its effectiveness in supporting them in regulating digital markets. The Government agree that it is vital that regulators are held to account for their activities. Each of these regulators already produces annual reports that are laid in Parliament covering their operations and effectiveness. An additional report by each of the sector regulators would again run the risk of being duplicative and creating an unnecessary additional administrative burden. Additionally, the Digital Regulation Cooperation Forum was established in 2020 to support the co-ordinated regulation of digital markets and includes the regulators named in this amendment; the DRCF also publishes an annual report on its activities and priorities.

In response to my noble friend Lady Stowell’s important point regarding a committee on digital regulation, I agree with her that parliamentary accountability is crucial and thank her for engaging so clearly with me and my noble friend Lord Offord earlier on this topic. I absolutely recognise the problem. Perhaps I can offer to continue to engage with her on how to drive this forward. At the risk of disappointing the noble Lord, Lord Tyrie, we have a concern that the formation of parliamentary committees is a matter for Parliament, not the Government, but I welcome ongoing work to determine how best to ensure that committee structures can scrutinise the important issue of digital regulation.

Digital Markets, Competition and Consumers Bill

Lord Clement-Jones Excerpts

Committee stage
Wednesday 31st January 2024 Grand Committee

I too looked at all the other regulators, but with rather less authority, and saw that this is indeed embodied in their regulatory functions. I strongly favour this approach, in which the uncertainties introduced on Report in the other place are replaced with an established approach to regulation by putting into the Bill what we understand to be best regulatory practice, or indeed the better regulation code. He made that point in his speech: this amendment, and the addition of parliamentary scrutiny proposed by the noble Baroness, Lady Stowell, seems an excellent place for the Minister to finally land when we get to the end of this process.

[Lord Clement-Jones (LD)]

My Lords, I strongly support Amendment 80 in the name of the noble Baroness, Lady Jones, which I have signed. She spoke powerfully about the power of big tech and its impact on democracy. My concerns, and those of many news organisations such as the Public Interest News Foundation, the News Media Association and the Professional Publishers Association, are consistent with that: we are all concerned to ensure the plurality of media as far as possible, as the noble Baroness, Lady Kidron, mentioned. She also helpfully reminded us of the duty of Ofcom, in Section 3 of the Communications Act, to

“further the interests of citizens”.

It seems to me that the CMA should be subject to exactly the same duty.

Local, specialist and national publishers are an essential part of the fabric of our society. On these Benches, we may have arguments, post Leveson, with some of the mainstream media about the appropriate legislation that should impact on it, but the media play a key role in promoting democracy, by scrutinising the Government with public interest journalism. Additionally, publishers provide vital support to industries, which often rely on the trade press to inform sectoral decision-making and provide what are described as workflow tools. A duty to further the interests of citizens as well as consumers would allow the CMA much better to prioritise media sustainability and more explicitly target anticompetitive conduct that harms media plurality.

It could be argued—I expect that the Minister is going to marshal his arguments—that the current pure consumer focus still allows the CMA to implement solutions that will help to level the playing field between platforms and publishers, but the concern of many of us is that the absence of an interest-of-citizens duty may mean that the remedies that could support a sustainable and plural media and in turn our democracy will be used less effectively than they could be, or not used at all. The argument is powerfully made that we need to include that duty. We have a precedent and there is absolutely no reason why we should not include that in the duties of the CMA.

Turning to the amendment of the noble Lord, Lord Tyrie, Amendment 83A, I feel that this is perhaps something that he expresses throughout the Bill: he has the scars on his back of being the chair of a regulator. It is a surprising omission that these principles are not included. The noble Baroness, Lady Kidron, like the noble Lord, Lord Tyrie, has done her homework and found that the CMA is exceptional in this respect. They both made an extremely good case.

Beyond those principles, how do the Government impose such things as the Better Regulation Framework on the CMA? After all, that is part of the operational standards, if you like, that are expected of a regulator such as the CMA. Not only do I support what the noble Lord, Lord Tyrie, is putting forward, but I also ask how we make sure that the regulator performs its duties in line with what is a relatively new piece of guidance, the Better Regulation Framework, going forward.

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

As ever, let me start by thanking the noble Baroness, Lady Jones, and the noble Lord, Lord Tyrie, for drawing attention to and initiating this fascinating debate on the objectives of the digital markets regime with these amendments. Most speakers have anticipated many of my arguments in advance, but I hope none the less to persuade noble Lords of their value.

Clear objectives shape the work of the CMA, ensuring that its focus is on promoting competitive markets that drive better services, greater choice and lower prices for individuals and businesses. It is essential, in the Government’s view, that the objectives of the new regime are equally clear and support a coherent and effective regime. Amendment 80 proposes a duty for the CMA to further the interests of citizens, as well as consumers, in its digital markets work. As the UK’s competition regulator, the CMA’s existing statutory duty is to promote competition for the benefit of consumers. Consumer benefits are broad, as has been observed; they can include economic growth, innovation, media plurality and data privacy. An additional citizens’ duty that goes beyond the scope of the tools and the remit of the digital markets regime would reduce the clarity of the CMA’s role, create inconsistency with the CMA’s wider competition and consumer functions and overlap with the remit of other regulators. It is essential that the duties of the regime match the scope of its tools.

Noble Lords can all agree with the noble Baroness, Lady Kidron, and the noble Lord, Lord Clement-Jones, on the absolute, non-negotiable importance of supporting the sustainability of the press in the UK. There can be no doubt about the vital contribution of independent journalism to producing informed citizens and, therefore, democracy in this country. However, it would further confuse the regulatory landscape to require the CMA to consider issues already overseen by other expert regulators, such as online safety and data protection. Instead, the CMA will have a duty to consult other key regulators of digital markets, such as Ofcom and the FCA, where proposed interventions in digital markets impact their regulatory interests. This will ensure that the regime forms part of a coherent regulatory landscape that considers broader policy and societal concerns across digital markets.

I want to reassure noble Lords that the Government considered the advice of the CMA’s Digital Markets Taskforce and its recommendation for a citizens’ objective extensively, before consulting on it in 2021. Those we consulted were generally opposed to a role for the CMA that looks beyond its tried and tested duty to promote competition for the benefit of consumers, since this provides the greatest clarity for the digital markets regime. The CMA has testified in front of the House that it benefits from having a single, clear statutory duty. I again thank the noble Baroness for her amendment and for highlighting these important issues. However, for the reasons that I have set out, I hope that she will feel reassured and comfortable in withdrawing it.

I now turn to Amendment 83A from the noble Lord, Lord Tyrie. It would create a new requirement for the CMA to have regard to the principles of best regulatory practice when carrying out its digital markets functions under Part 1 of the Bill. Let me say at the outset that the Government agree with the spirit of the noble Lord’s amendment. Our 2021 consultation on this regime set out the Government’s principles for the pro-competition regulation of digital markets: that it should be transparent, accountable, targeted and coherent. These principles have informed how the regime is designed in legislation, from the high thresholds that we establish for SMS designation to the targeted and iterative nature of conduct requirements and pro-competition measures. Indeed, we have discussed previously in Committee the wide range of accountability mechanisms for the regime.

Earlier this month, the CMA set out its provisional approach to implementing the new digital markets regime, which aligns with our policy intent. The publication committed to the new regime being targeted, proportionate and transparent. It also included a set of operating principles that reflect the noble Lord’s concerns.

The Government’s strategic steer to the CMA sets out our expectation that the CMA should take a proportionate approach to interventions and minimise burden through transparent engagement with businesses. The CMA explains how it has taken the steer into account in its reporting to Parliament. The CMA’s prioritisation principles and annual plan set out that the CMA will target its work to that which provides the most impact for business and consumers. The proportionality amendments that the Government introduced at Commons Report stage are statutory duties narrowly targeted at conduct requirements and PCIs as the decisions that have the greatest impact on SMS firms. This amendment would introduce a very broad duty for the CMA to have regard to the principles of regulatory best practice for all its digital markets functions. An explicit requirement for the CMA to follow best regulatory practice when carrying out its digital market functions is not necessary.

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Moved by

[Lord Clement-Jones]

85: Clause 125, page 78, line 14, leave out subsection (1)
Member's explanatory statement
This amendment would restore exemplary damages for collective proceedings, which subsection (1) seeks to remove.

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[Lord Clement-Jones (LD)]

My Lords, I feel that the first cracks in government certainty are beginning to appear. We live in hope that they will increase as time goes on, with the strength of the amendments being put forward today. I will move Amendment 85 and speak to Amendments 86 and 87. I thank the noble Baroness, Lady Jones, for her support for my Amendment 85.

Clause 125 provides for exemplary damages, but explicitly states that they are not to be available for collective proceedings. The usual category of damages for competition law is breach of statutory duty and compensation for harm done and loss incurred. Where, for instance, a platform illegally harms 1,000 businesses, it harms competition but pays out only to those that plead, prove that their harm was caused by the action of the platform and prove their losses in each case. Abuse of dominance by digital platforms affects thousands of businesses; while platforms make multiple billions in profits, abuse may be identified and fines imposed, but competitive markets are damaged and those harmed are often not compensated. This makes the incentive to breach very high and the incentive for compliance very low.

The purpose of exemplary damages, which strip the wrongdoer of their gains, is to incentivise compliance with the law. They are available only where deliberate breach of the law can be proved. This is more likely where breaking the law makes economic sense for the defendants, such as where it has a major impact on a lot of small players that cannot each afford to take a case. Where many are harmed by deliberate illegal action, there is in fact an even greater case for exemplary damages being available. Government recognition that they should be available should be extended to all cases, including collective proceedings.

Exemplary damages are awarded where the defendant will have known in advance that their actions are likely to break the law but decides to go ahead anyway, as they will make more money from breach of the law than from compliance. This is often the case where a calculation is made about the income generated from many and the risk of claim from only a few. The famous Ford Pinto case, where exemplary damages were awarded, was such a case. Ford’s Pinto had a petrol tank that was prone to catching fire when in a crash. Ford calculated the personal injury costs and claims and, rather than recalling the cars and fixing the problem—which would have cost a lot—decided to leave the car in circulation. The risk of claims and payout was calculated to be less than the cost of fixing it. Ford did a cost-benefit analysis and carried on with production. The US courts awarded exemplary damages to ensure that the law was observed. The idea of the right of a court to award exemplary damages is to prevent the defendant profiting from its own wrongdoing. As such, it strips the wrongdoer of the profits gained from the breach and incentivises the defendant to comply and uphold the rule of law.

Failure to be available in collective proceedings looks to be inconsistent with the principle of incentivising defendants to comply and promote the rule of law. Where exemplary damages are claimed in the case, the claimant can seek disclosure of relevant documents from the defendant. As such, the availability of the prospect of exemplary damages will help to uncover deliberate breach. Any proceeding—including collective proceedings—is equally likely to uncover deliberate breaches. The only difference between collective and other proceedings is that collective proceedings affect a category of claimants.

These amendments would ensure that these damages are available in collective proceedings, which are much more likely to uncover deliberate breaches affecting many people. I look forward to hearing what the Minister has to say, but it seems extraordinary that they have been excluded by Clause 125.

I will not steal any of the thunder of the noble Lord, Lord Tyrie, as regards Amendment 128ZA, but I have a terrible feeling that this is another of his Trojan horses being wheeled into proceedings. I very much look forward to what he has to say and thank him in advance for the copy of his letter to the Prime Minister, which rather gives the game away as regards the consumer duty. I beg to move.

[The Deputy Chairman of Committees (Lord Ashton of Hyde) (Con)]

My Lords, I must inform the Committee that if Amendment 85 is agreed to, I will not be able to call Amendments 86 and 87 by reason of pre-emption.

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For these reasons, I hope the noble Lord will agree to withdraw his amendment.

[Lord Clement-Jones (LD)]

My Lords, I thank the Minister for his comprehensive reply. Nevertheless, I found it extremely disappointing in respect of my Amendments 85, 86 and 87. There was clearly a period between 2015 and 2017 when exemplary damages were available in collective proceedings. He did not adduce any evidence that an undue litigation culture, as he described it, suddenly arose in that two-year period. His use of pejorative language about an undue litigation culture is pretty unhelpful when we are talking about groups of consumers. Other than saying that this would all lead to an undue litigation culture, he really did not deal with the substance of the reasons for having exemplary damages in these cases: to disincentivise the big tech companies simply carrying on, knowing that they were in breach, with impunity. He did not address that at all.

I do not need to tackle the other amendments as we probably need to move on fairly swiftly, but the Minister was more on point when he talked about Amendment 106, because there is a difficulty with it. We should be more sympathetic to Amendment 107A from the noble Lord, Lord Tyrie, but I agree with him that it concerns a big issue. It would be extremely helpful not just to read Hansard but to bring together some of the information about the reviews of the CAT that have been conducted. I am afraid that one of the phrases we have to take away from today is “the CAT has strayed” —any innocent observer passing by would not know what the hell we were talking about; indeed, I think the other phrase was “hypertrophic”. Anyway, we live and learn throughout this but we need reassurance about the fact that the CAT is under review, that its rules are being changed and that it is fit for purpose. The noble Lord brought that up exactly.

I was also not entirely convinced about where the accountabilities are between the Lord Chancellor, the Ministry of Justice and the Department for Business and Trade. There is more to be discussed there.

Finally, I know that the noble Lord, Lord Tyrie, is a big fan of consistency, but I am in favour of the status quo here: I do not agree with his amendment. I liked the Minister’s “unintended consequences” phrase because, if we took this seriously, in terms of paramount interests of consumers, we could be talking about short-term interests of consumers; that could be used by those who want to predatory price—to offer low prices for a while and eliminate competition, only to raise the prices later. We have seen behaviour like that. It is a favourite game of, especially, the big players, to exclude competitors only to re-emerge and raise prices. There are dangers in this “paramount” language, but the Minister has answered that question. In the meantime, I beg leave to withdraw my amendment.

Amendment 85 withdrawn.

Digital Markets, Competition and Consumers Bill

Lord Clement-Jones Excerpts

Committee stage
Monday 5th February 2024 Grand Committee

[Lord Lucas (Con)]

My Lords, I have one amendment in this group, Amendment 110A, which will be echoed in subsequent groups as part of a general concern about making sure that trading standards are an effective body in the UK and are able to do what they are supposed to do to look after consumers.

As the Minister will know, because we were part of the same conversation, the CMA is concerned that trading standards may have been reduced to the point where they are not as effective as they ought to be. Looking at some of the local cuts—in Enfield, for instance, four officers have been cut down to one—and listening to various people involved in trading standards, there is a general concern that, as they are set up and funded at the moment, they are not able to perform the role that they should be. Given the importance that enforcers have in the structure that the Government are putting together, I am asking in this amendment that the Government review that effectiveness, take a serious look at the structures that they have created and their capability of performing as they would wish under the Bill and report within a reasonable period.

[Lord Clement-Jones (LD)]

My Lords, I entirely support what the noble Baroness, Lady Morgan, had to say in her probing amendment. It takes us back to the Online Safety Bill debate. The final question that she asked is crucial: if not here, where? We must have a means of being able to prevent the sale of these products. She has highlighted it and I hope that the Minister has a satisfactory reply, so that, in short order, we can make sure that these products are not for sale in these online marketplaces.

I also entirely support the amendment tabled by the noble Lord, Lord Lucas. It will become clearer and clearer as we move through the groups that adequate resources are required for trading standards. We impose a large number of duties on them, yet we appear not to give them the resources. In fact, their resources have dwindled over the years, as I know that the noble Earl, Lord Lindsay, and my noble friend Lady Bakewell would have outlined if they had been present. In respect of their amendments, which I will come on to later, I am the understudy’s understudy, because the noble Earl, Lord Lindsay, cannot be here today, I gather, nor can my noble friend Lady Bakewell. It falls to me to make a fist of talking to Amendments 112 all the way through to 127, which I will attempt. The noble Lord, Lord Bassam, will be making an even better attempt in the name of the noble Baroness, Lady Crawley, as I understand. Hopefully, the Minister will take on board what we have to say when the time comes.

Very briefly, I want to speak to Amendments 111 and 122, which relate to increasing the scope of the monetary penalties under the Bill. Amendment 111 applies this to Clause 157 for court enforcement orders when the public designated enforcer, such as the CMA, considers that a person is engaged or is likely to engage in a commercial practice that constitutes a relevant infringement and the court makes such an enforcement order on the public designated enforcer’s application. Amendment 222 applies this to CMA final infringement notices under Clause 181, for when the CMA imposes an infringement notice after an investigation into suspected infringements.

Current drafting limits the penalties to

“£300,000 or, if higher, 10% of the total value of the turnover (if any) of the respondent”.

However, a respondent may have made a huge profit as a result of infringements. Fines of a mere £300,000 are unlikely to incentivise good behaviour. In circumstances where 10% of the total value of the turnover is higher, our legal advice is that the UK would typically follow current EU practice, unless something in UK legislation specifically allowed it not to do so, such as we propose in these amendments. In the EU, the fine has to relate to the turnover of the activity in issue and its duration, which, in practice, makes it a much smaller number. To get to group worldwide turnover requires evidence of head office involvement. It should be made clear that to calculate the penalty amount the CMA and the court are able to take into account the profit made by the respondent.

Penalties are supposed to provide an incentive not to break the law, which raises the real question: why are fines related to turnover at all? To ensure good behaviour, they should strip the lawbreaker of the profits gained from lawbreaking. Where a platform can harm millions and only a few take it to task if it pays off the fee, breaking the law pays back handsomely. Authorities could be given the power to directly award exemplary damages of this type in these circumstances. In practice, fines are a fraction of turnover and profits. The largest fine to date was the €4.3 billion imposed on Google in respect of its Android device restriction, which is a long way ahead of other recent fines, but Google makes something of the order of $70 billion a quarter in turnover.

This amendment would also focus on the abusive practice, not the abuse only in relation to effects in one market. For example, Google changed its algorithm in 2007 to promote its own products at the top of its search results. It does so for news, maps, images, shopping and things such as flight booking. That pushes more relevant and better businesses down the rankings so that they get less business and competition is distorted. The practice is governed by an algorithm called universal search. The EU Commission had the resource only to investigate shopping; the fine was €204 billion. Google carries on discriminating in all areas but shopping. A fine could and should be calculated in relation to the abusive practice, of which shopping is an example; otherwise, breaking the law pays and behaviour does not change. Seeing the fine in relation to the profit gained from the practice would be fair. It would deprive the wrongdoer of the gains from breaking the law and is likely to change behaviour. An account of profits could easily be done.

I turn to Amendments 112 to 120 in the names of the noble Earl, Lord Lindsay, my noble friend Lady Bakewell and the noble Baroness, Lady Crawley. As I said, unfortunately none of those proposers is able to be present today, but all their amendments relate to widening the scope of how appropriate court action can take place and they all come under the banner of consumer protection and enforcement, especially for a level playing field to operate in the current marketplace.

Amendments 112, 113 and 114 are about consumer protection orders and undertakings under Clause 159 and cover applications to the appropriate court for an online interface order or an interim online interface order. Clause 159 extends the court’s online interface powers to the enactments, obligations and rules of law categorised as domestic infringements and it is to be welcomed. The Explanatory Notes to the Bill give examples of where online interface orders could be useful, especially in the area of underage sales products. This has been thrown into sharp relief by the Government’s proposals on banning the selling of vapes to underage children and young people. In relation to weights and measures, it is possible that, in order to avoid local inspection systems in the UK, an online supply of short-weight goods would need urgent follow-up with an application for an online interface order against the third-party overseas website where rogue traders are mis-selling to UK consumers.

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I therefore once again thank my noble friend for highlighting the importance of keeping the consumer enforcement regime under review and I hope that my remarks have reassured him.

[Lord Clement-Jones (LD)]

Before the Minister moves on, would he be so kind as to point out which bit of the Long Title prevents the amendment of the noble Baroness, Lady Morgan, from being incorporated into the Bill? This is an important issue and he gave us no real comfort about what other powers might be available to remedy the kind of situation that the noble Baroness talked about. Secondly—I sound like a taxi driver—Amendment 110A talks about resources for trading standards but, as the Minister well knows, local authorities are in dire straits. It is not just a question of saying that their funding is not ring-fenced; it is also about the Government making sure that trading standards are adequately resourced for consumer protection. How are they going to ensure that?

[Lord Offord of Garvel (Con)]

I thank the noble Lord for his intervention. As I said on my noble friend Lady Morgan’s Amendment 110, we are dealing with a serious issue. I took great pains to run through the various layers of protection currently on the statute book and outlined why the Government believe that this is covered elsewhere and is not within the scope of the Bill. I have also said that I will meet my noble friend and look at this in more detail to see whether we need to look further at the Long Title, to which the noble Lord referred.

[Lord Offord of Garvel (Con)]

We are saying that there is extensive protection built up around this sensitive issue and that there should not be further legislation made within the scope of the Bill, but that, if we need to look at it further, we can do so before Report.

Every local authority always wants more money. It is a feature of UK public life and it is up to local authorities to decide how to spend their money appropriately. As we all know, some are better run than others. Funding is not ring-fenced and it is up to local authorities to make sure that standards are maintained in their area.

Amendments 111 and 122, tabled by the noble Lord, Lord Clement-Jones, pertain to profits from infringements and the calculation of penalties. They would ensure that profits made from engaging in an infringing commercial practice can be expressly reflected in the calculation of a monetary penalty imposed through an enforcement order made by the court or a final infringement notice given by the CMA. I thank the noble Lord for his amendments and I absolutely agree with the intent behind them. In fact, work is under way to produce a comprehensive set of regulations, which could be made under Clause 203, to set out the amounts that are to be treated as comprising a person’s turnover when calculating the maximum penalty that can be levied.

Our intention is that any profits accruing from the relevant infringement will be captured by this methodology, but we consider that this maximum penalty calculation will be a technical exercise that needs to be supported by robust and detailed methodology, which is therefore better suited to secondary legislation. I hope that the noble Lord is sufficiently reassured that this important issue will be addressed.

[Lord Clement-Jones (LD)]

My Lords, I am sorry to keep interrupting the Minister, but this is quite an important factor. Is he saying that secondary legislation can expand the way that the primary legislation is interpreted? I was talking in my amendment about trying to get hold of the profits of abuse, so that the penalties should include a profit-based penalty, but the Minister seems to be saying, “Yes, we can do that with secondary legislation”. Is that really what he is saying?

[Lord Offord of Garvel (Con)]

Yes, that is exactly what I am saying. In order to get a profit, one has to start with turnover. A detailed mechanism is required to look at how these P&Ls work and, rather than being in the Bill, this needs to be examined as a technical exercise. There needs to be a methodology put together for it; we will therefore do that in secondary legislation.

Amendments 112 to 120 relate to online content take-down powers and were tabled by my noble friend Lord Lindsay but presented by the noble Lord, Lord Clement-Jones. These amendments would give trading standards departments in Great Britain the power to apply to a court for online interface orders and interim online interface orders to modify, restrict or take down illegal content displayed online.

We welcome the spirit of my noble friend’s amendments. Indeed, the Government have published their consultation response on proposals to empower additional enforcers, besides the CMA, to apply to a court for online interface orders. We have committed to give this additional power to public designated enforcers. These enforcers include, but go beyond, trading standards departments—for example, sector regulators such as Ofcom, which already have consumer enforcement powers under Part 3 of the Bill. We would be pleased to discuss with noble Lords how best to enact these important changes to ensure that the use of this power is governed by adequate procedures.

[Lord Bassam of Brighton (Lab)]

Is it therefore envisaged that the Government will give extra support to local trading standards officers, so that they will have these take-down powers? That seems to be the implication of what the Minister is saying—that it is not just Ofcom or the CMA but that there will be local enforcement as well, so there will be that combination.

[Lord Clement-Jones (LD)]

Just to add to that question, is the Minister saying, “It’s going to happen but we just need to get the procedures right and add them”? Is that really all we are waiting for?

[Lord Offord of Garvel (Con)]

I thank the noble Lords. That is indeed the spirit of what we are saying. We are, in the Bill, giving a power to the courts that will contain the online interface orders. The Government have published a consultation to enable additional enforcers, including the CMA, to apply to a court for these online orders. We are saying that, within the current architecture, we believe that we have the power to do what is required, but that we can make changes after the fact to ensure that the power is governed by adequate procedures.

[Lord Clement-Jones (LD)]

My Lords, that is slightly eliding the situation. The Minister was talking about the CMA but, earlier, I understood him to be talking about trading standards. Are trading standards going to get those powers and is it just a question of ensuring that we get the procedures sorted out?

[Lord Offord of Garvel (Con)]

I thank the noble Lord. There is obviously a little confusion about this, so we will need to set it out, which we will do between Committee and Report, to ensure that we know precisely the order of events here.

[Lord Offord of Garvel (Con)]

I am happy to do that. We will look at that in a bit more detail and write accordingly.

We come to some minor technical government amendments, Amendments 121, 123, 124 and 128, which in the main are minor and consequential. They are intended to provide clarity on how the relevant provisions function and on continuity between the current consumer enforcement regime and the reformed regime under Part 3. I hope these government amendments will be supported. I thank noble Lords once again for their amendments and for their considered remarks on this group.

[Lord Clement-Jones (LD)]

My Lords, before the Minister sits down, I wonder if he will take another look at Clause 157(5) regarding the amount of monetary penalty that can be imposed. The limitations seem to be there in black and white, yet the Minister is saying that secondary legislation can change that subsection in due course. If he cannot give me an answer now, would he be able to write to all of us? This is an important point.

[Lord Offord of Garvel (Con)]

I am happy to clarify that in writing.

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[Lord Lucas (Con)]

My Lords, I beg to move Amendment 124A and to speak to Amendments 124B and 124C. These are all small amendments aimed at making trading standards a bit more effective in practice. Amendment 124A would allow trading standards to seize, as well as the suspected counterfeit goods, articles—for instance, clothing used by the trader that puts them at the scene of the crime. At the moment, trading standards do not have the right to seize such articles of evidential value and they would very much like to have it, since it would make it easier to convict rogues.

As for Amendment 124B, at the moment, trading standards are not allowed to open a vehicle if that is where the goods are being stored, because it does not fall within the definition currently used in the Bill—or at least they believe that is the case. They would like, should all the goods concerned be in a van, to be able to open the van.

As for Amendment 124C, sometimes these can be big crimes of hundreds of thousands of pounds. Level 3 just does not meet the case; it is just a bit off the profit. They would like to see the judge able to set the level of the fine to accord to the crime—Gilbert and Sullivan would have approved.

[Lord Clement-Jones (LD)]

My Lords, once again, with the indulgence of the Committee, I will speak on behalf of my noble friend Lady Bakewell to Amendments 125, 126 and 127.

Before doing so, I say that I support the amendments of the noble Lord, Lord Lucas, which strike me as extremely practical. It must be extremely frustrating when faced with some of the restrictions. This point about vehicles seems to me a particular irritant for trading standards officers—a vehicle being defined as premises. What era are we living in?

We need to bring the powers of trading standards officers up to the 21st century, which is very much the spirit in which Amendments 125, 126 and 127 have been tabled by the noble Earl, Lord Lindsay, my noble friend Lady Bakewell and the noble Baroness, Lady Crawley. Amendment 125 would delete paragraph 17 of Schedule 5 to the Consumer Rights Act, which at present requires trading standards officers to exercise physical powers of entry to premises—this is in the digital age—before accessing information and the seizing of documents that may be needed in criminal proceedings. Accepting this amendment would be an opportunity to finally update the powers of trading standards in this respect. It would have the effect of changing their information-gathering powers to enable documents requested in writing without the need for physical entry to be used in criminal proceedings. This means also relieving the undue burdens placed on businesses and trading standards officers.

For legitimate businesses there is presently the burden of having to interrupt their normal business to provide the requested documents there and then, whereas, under what is proposed in this amendment, if the request is made in writing rather than physically, they will have more time to source the required documents and even seek legal advice should they wish to. For the small band of trading standards officers, the requirement to exercise physical powers of entry across the country to seize documents they may need to use in criminal proceedings is not cost-effective for their cash-strapped local authorities. If a local authority in, say, my noble friend’s Somerset had to deal with a case in Cumbria, it would simply not be viable for this to happen. The criminal activity could go unpunished and the public and consumer would still be at risk from rogue-trader activity.

In the impact assessment for the Bill, it is accepted that:

“Consumer rights must keep pace with market innovations, so that consumers remain confident engaging with businesses offering new products and services”.


That is a good statement, but for this sort of consumer confidence to become more robust, the enforcement powers of trading standards need to be seriously updated and not inhibited by the present inflexibility.

Amendments 126 and 127 propose to substitute the words “England or Wales” and “Scotland” for the words “United Kingdom” in paragraph 44(3) and 44(2) of Schedule 5 to the Consumer Rights Act. The effect of these amendments would be to add a new paragraph to Schedule 16 to the Bill, which would give new powers to trading standards officers to operate across UK national borders where necessary. Cross-border activities should be included in the Bill; current legislation does not make it clear that trading standards officers in England and Wales can exercise their powers across the border with Scotland, or vice versa, even though consumer protection is a reserved power. In fact, the current legislation implies that this cross-border enforcement activity is not permitted, and we are told that, currently, trading standards officers err on the side of caution. Who can blame them in the circumstances? For the success of these new powers and the Bill to take root, trading standards officers should be able to pursue and enforce across the whole of the United Kingdom.

[Lord Leong (Lab)]

My Lords, I thank all noble Lords who have spoken. We are grateful to the noble Lord, Lord Lucas, the noble Earl, Lord Lindsay, the noble Baroness, Lady Bakewell, and my noble friend Lady Crawley for bringing forward this group of amendments relating to Schedule 16, which is introduced by Chapter 6, Clause 207. They seek to amend Schedule 5 to the Consumer Rights Act 2015.

Amendments 124A and 124B appear to add clarity without altering the intention of the Bill as written. Having said that, we would be interested to hear from the Minister whether there is any reason these changes should not be enacted.

Amendment 124C would make a more substantial change to financial penalties. The current level 3 is no deterrent or obstruction. A mere £1,000 is just petty cash for most businesses, whereas level 5, which is an unlimited fine, would serve as a deterrent and perhaps support some co-operation in investigation. We would like to hear from the Minister whether there has been any assessment of the suitability of obstruction being a level 3 fine since the Consumer Rights Act came into law in 2015. We also seek clarification on whether this is the right place to make such a change, given that its impact would be much wider.

Amendments 125, 126 and 127, tabled by the noble Earl, Lord Lindsay, with the support of my noble friend Lady Crawley and the noble Baroness, Lady Bakewell, make a lot of sense in pursuing investigations in all parts of the United Kingdom, not just England and Wales. That was succinctly explained by the noble Lord, Lord Clement-Jones, so I shall not repeat the point. This would obviously be a matter for the Scottish Government. If the Government agree on the merits, is this something they have discussed with their Scottish counterparts?

The amendments in this group are sensible and designed to be helpful. They should be supported. We look forward to the Minister’s response.

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[Lord Clement-Jones (LD)]

My Lords, the Minister seems to have said two directly conflicting things—that you cannot do something, but that he hopes that his noble friend is convinced that the powers are wide enough. Did we mishear him?

[Lord Offord of Garvel (Con)]

I hope that the noble Lord did not misunderstand me. I think we said that this is already covered in legislation. The definition is capable of including a vehicle that is or may be being used to store goods that may disclose a breach of legislation. We are being clear that the definition of “goods” is sufficiently broad to include goods or vehicles. I was coming on to say that an enforcer may inspect products under paragraph 25 of Schedule 5 for the purposes of checking the compliance of those products with relevant legislation, so we are tying this back to the relevant legislation. We believe that the definitions are already sufficiently wide and therefore there is no need to further legislate.

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[Lord Clement-Jones (LD)]

Are the Government really saying, more or less, that they do not recognise that the world has gone digital? Will the Minister spell out the principles of common law that prohibit them from allowing trading standards officers to do what we set out in the amendments?

[Lord Offord of Garvel (Con)]

This says that the Government have the overarching legislative position, but the trading standards departments operate locally, and it is important that central government listens to local government. That consultation listened carefully to the trading standards departments and has come back saying that they believe that removing this prohibition would enable them to gather evidence better and more easily for consumer protection. We follow the local authorities in their requirements.

I turn to the use of investigatory powers across the UK. Amendments 126 and 127, again tabled by my noble friend Lord Lindsay and presented by the noble Lord, Lord Clement-Jones, would permit any trading standards department based anywhere in Great Britain to carry out investigations anywhere in the UK. Current law already allows English and Welsh trading standards departments to use their investigatory powers in parts of England and Wales outside that department’s local area. The same is true for trading standards departments in Scotland, which can already use their investigatory powers anywhere in Scotland.

Extending the powers to investigate across the UK fails to recognise that Scotland has its own legal jurisdiction separate from the single legal jurisdiction of England and Wales. I draw noble Lords’ attention to the fact that consumer protection is a transferred matter in Northern Ireland, where trading standards are a central government function, in contrast to Great Britain’s local authority model. These differences across the UK’s nations provide examples that I hope will persuade the noble Lord not to move Amendments 126 and 127.

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Moved by

[Lord Clement-Jones]

130: Schedule 19, page 360, line 41, at end insert “or in a manner that is likely to mislead the consumer into believing that the product has the same specifications or has characteristics that are the equivalent of a product made by a particular manufacturer when it does not.”
Member’s explanatory statement
This amendment seeks to prevent confusion amongst consumers about packaging that is designed to mimic a well-known brand.

[Lord Clement-Jones (LD)]

My Lords, in moving Amendment 130 I will speak also to Amendment 135, which is another amendment in the names of the noble Earl, Lord Lindsay, my noble friend Lady Bakewell and the noble Baroness, Lady Crawley. This is an opportunity to remedy the long-standing, unaddressed market practice of misleadingly similar packaging of consumer products—that is, packaging which mimics that of familiar branded products. Amendment 130 would introduce a strengthened brand practice in Schedule 19.

Misleadingly similar parasitic packaging, otherwise known as copycats or lookalikes, adopts the distinctive features of familiar branded products to dupe shoppers into believing that it has the same qualities, reputation and/or origin as the brand when it does not. Shoppers buy the copy based on these mistaken assumptions and can pay more than they would were the product distinctively packaged. Such packaging is extremely prevalent in the grocery market. It inflates consumer prices and prevent shoppers making informed, accurate decisions.

The evidence I have seen is convincing that packaging mimicry misleads consumers in substantial numbers and distorts buying decisions. The similar packaging plays on shoppers, exploiting the fact that they self-select products from the shelf. Stores stock so many products that decision-making must be, and is, fast—typically around two seconds per choice. Labels are not studied closely. Colour and shape are more powerful stimuli than words and prompt shoppers to buy a product that they did not intend to buy, to pay more and to believe that products have similarities. I have a whole string of assessments here from research such as a UK IPO study, neuroscience research and a 2023 study called The Psychology of Lookalikes.

In 2008, the Competition Commission considered such packaging an issue for consumer protection. During consultations and the debate on the Consumer Protection from Unfair Trading Regulations 2008, the then Government stressed that public enforcement would be effective. This has not proved to be the case. There has been only one successful enforcement action by trading standards in the past 15 years—in 2008 itself—and no enforcement by the CMA.

IP rights are insufficient. Copiers tend to design around registered IP rights, such as trademarks, designs and copyright, to avoid infringement. A passing-off action is impractical, as proving consumer confusion to a court’s satisfaction is complex, particularly when a copier argues that the use of a different product name avoids misrepresentation. The evidence that IP rights are ineffective can be seen in the persistent prevalence of such copies on the market, with two large retailers adopting it as a business strategy largely unchallenged. Affected branded businesses are unprotected, as there is a gap in IP protection. The original copied brand is no longer distinctive; it is devalued, sales are lost and costs increase. Overall, return on investment in innovation, reputation and quality is reduced. Other products in the same category may lose sales if shoppers switch to the copy, assuming leading brand quality at a lower price, potentially leading to delisting.

For the unlawful copier, sales are boosted as shoppers buy their products by mistake or trust them unduly. They can also charge higher prices; the evidence shows that this could be by as much as 10%. The ultimate solution, of course, is not for offending products to be removed from the market, just that they be repackaged distinctively. This would preserve shopper choice, strengthen competition and reduce prices. Amendment 130, as proposed, would benefit many thousands of shoppers and branded companies of all sizes, particularly SMEs, wherever in the UK they are based.

I now turn to Amendment 135 and should say that the next group contains an amendment, Amendment 137, that is also on fake reviews, so this is a bit of a foretaste of what is coming down the track in the next group. Amendment 135 would add two more practices to the list in Schedule 19 of 31 commercial practices that are in all circumstances considered unfair and bad practice. The two additions are, first, a new paragraph 32:

“Stating or otherwise creating the impression that reviews of a product are submitted by consumers who have actually used or purchased the product without taking reasonable and proportionate steps to check that they originate from such consumers”;


and, secondly, a new paragraph 33:

“Submitting, or commissioning another legal or natural person to submit, false consumer reviews or endorsements, or misrepresenting consumer reviews or social endorsements, in order to promote products”.


How often do we all look to see what people have said about a product or service or, indeed, a bed and breakfast before we commit to buying? I suspect that young people are particularly vulnerable to wanting to participate in something that has a good review and appears to be popular.

The Government propose adding fake reviews to the list of practices in the future, but there is no logical reason why they should not be included now. Adding fake reviews to this important list would make them both criminal and civil breaches, as we understand it. Trading standards see the widespread practice of giving fake reviews as clearly fraudulent in nature, and therefore it should be a criminal offence. Fake reviews appear to be particularly prevalent for health supplements, where a single course of some miracle ingredient will cure your arthritis for ever—that resonates with me. Large sums of money can be invested by those suffering constant pain in an effort to get some relief, only to find that they have wasted their money.

I understand that there is a proposal. The Smarter Regulation response was quite clear that there is considerable demand for this. That response contains a great deal of other material as well and is very useful. I think the latest version is dated 24 January this year, so it is hot off the press, essentially. There is this proposal to add fake reviews in the future via a separate statutory instrument, but why should they not be included in the Bill at this stage? The language has been proposed by the Government. This is a growing distortion of the online marketplace. It is unfair to legitimate businesses and completely deceives consumers who may rely on accurate information to validate their choices. I very much hope that the Minister will say that on Report it will be perfectly viable to include language on fake reviews in the Bill. I beg to move.

[Lord Lucas (Con)]

My Lords, I have Amendment 131 in this group. It is my understanding, and of course the Minister may correct me, that the investment that a student makes in their university course comes under the Bill—that the relationship is one between consumer and provider. Indeed, since this is the largest purchase that a student will make before they buy a house, it seems entirely appropriate that the sort of safeguards in this Bill should apply to university courses. If that is the case, then paragraph 29 on page 362 forbids universities marketing their courses to children, and that does not seem quite right. I would like to understand how the Government see the confluence of those two factors.

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[Lord Clement-Jones (LD)]

My Lords, I thank the Minister for that almost totally positive response. There is quite a lot to take away from it. I thank the noble Lord, Lord Bassam, for his supportive remarks on Amendment 130 and the noble Baroness, Lady Jones, for signing it.

That was a useful walkthrough of the Government’s response on smarter regulation. What we all want to see is it translated into the Bill at the earliest possible opportunity. Earlier in our discussion, we talked about the need for speed, but we have here the ideal opportunity to enshrine in Schedule 19 the provisions on both drip pricing and fake reviews in the way we have talked about. Indeed, I am pleased that the Minister talked about further discussions between Committee and Report on some of the other aspects in amendments put forward here by the noble Baroness, Lady Jones. The Ministers seem to be beckoning us through an open door; I hope that that is the case and that we do not find it slammed suddenly when we come to Report. Honing the wording between Committee and Report could produce a good result. I am pleased that the Minister was so positive in almost all respects. In one case, he said that it could already be covered, but this Bill is the ideal vehicle to get these things, which were promised in the consultation response, absolutely enshrined.

The one really interesting area—it struck me immediately when I saw the Government’s response—concerns the difference between “obligatory” and “optional” in terms of the drip pricing arguments. We need to get to grips with this because we do not want to see, by a technicality, companies such as airlines—we have talked about airlines before in Committee—escape liability because we have not got the wording quite right. The noble Baroness was absolutely right to raise this issue because the language that the Government used in their response was a bit ominous in that respect.

I look forward to those discussions. In the meantime, I beg leave to withdraw the amendment.

Amendment 130 withdrawn.

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Moved by

[Lord Clement-Jones]

137: Schedule 19, page 362, line 18, at end insert—
“32 Submitting a fake review, or commissioning or incentivising any person to write or submit a fake review of products or traders.33 Offering or advertising to submit, commission or facilitate a fake review, or hosting offers or advertisements for fake reviews without taking reasonable and proportionate steps to remove them.34 Publishing or providing access to reviews of products or traders without taking reasonable and proportionate steps to prevent consumers from encountering fake reviews.35 Presenting reviews or information about reviews in ways which will mislead average consumers about the reviews that a product or trader has received.”Member’s explanatory statement
This amendment would introduce measures to protect consumers from fake reviews.

[Lord Clement-Jones (LD)]

My Lords, the Committee may get a slight feeling of déjà vu when it comes to my Amendment 137 but we were assured that it covers a different topic and it is therefore perfectly legitimate to have it in a different group. However, there are other aspects—in particular Amendment 143, which I want to speak to in moving Amendment 137. I will be brief.

As we have heard, the Minister is positive about discussions on how we will enshrine fake reviews. As we know, the Government’s response was designed to improve consumer price transparency and product information for consumers. We very much share that intent. They have highlighted how legislation will tackle fake reviews. Any lack of criminal enforcement would be a major concern so I hope that that will be part of the subject we will discuss.

Of course, we know the impact of fake reviews. Amendment 137 is a different way of dealing with the issues. Fake reviews have been identified by the Federation of Small Businesses as one of the three primary problems experienced by smaller firms when trading on digital marketplaces, so preventing the proliferation of fake reviews will support both consumers and businesses; that is a point we should make. This should be added to the Bill.

The one question I have is this: have the Government had discussions with Trustpilot? It would like to see the Government’s proposed wording extended, particularly to the hosting issue. I do not know whether the Minister has a brief on that. I was quite impressed by the Trustpilot briefing and the evidence it gave. It has concerns about other parts of the wording but, for me, the most powerful aspect is making sure that those who host fake reviews are penalised. I hope that the Minister has an answer to that.

Amendment 143 is where I am again the sorcerer’s apprentice. This is an amendment to Clause 288. It seeks further to protect consumers from rogue traders and their unfair practices. It is something that I know the Chartered Trading Standards Institute is keen to see put into practice. It is a breach of Clause 225 of the Bill for a trader to engage in a commercial practice that is a misleading omission, meaning the practice omits material information. That is defined as

“information that the average consumer needs in order to take an informed transactional decision”.

There is much discussion in the consumer field about what information is needed by a consumer and what is merely desired. For instance, there is no specific requirement for a trader to give his or her name and address. Clause 228 adds an additional breach of omitting material information from an invitation to purchase; it states that there are a number of specific matters that are considered to be material and where it could be an offence if the information is not provided to the consumer, so surely things can only get better. However, an invitation to purchase is currently defined in the Bill as

“a commercial practice involving the provision of information to a consumer … which indicates the characteristics of a product and its price, and … which enables, or purports to enable, the consumer to decide whether to purchase the product or take another transactional decision in relation to the product”.

The point that the Chartered Trading Standards Institute and trading standards officers are making in this context is that, in their day-to-day experience, many rogue traders targeting vulnerable consumers, often in their own homes, do not give a price when offering to do work. If they do not give a price, they will not come under this new obligation in the legislation and will get away with their shoddy work or criminal activity, hence the opportunity in this amendment to remove price from the definition of an invitation to purchase. It would automatically mean that the practice is not an invitation to purchase and, therefore, that the information listed in Clause 228 is not considered material information.

To sum up, removal of price in the definition of invitation to purchase would increase consumer protection, as it would automatically make such things as price, the identity of the trader and his or her address become material information. It would therefore be a breach to provide this information to the consumer. I look forward to what the Minister has to say in respect of those two amendments.

[Lord Lucas (Con)]

My Lords, I have a clutch of amendments in this group. Amendment 138A continues the series of improvements to trading standards regulations. Before we came under EU regulation, we had considerable freedom to deal with pricing abuses. As one of the many advantages from Brexit, I do not see why we should not go back to the situation we used to have.

Amendment 138B looks at the rights that consumers have and what happens when a business ignores them. At the moment, if a business is denying or ignoring rights, trading standards has to take action under the Enterprise Act 2002 by way of a court injunction. It is slow and expensive, so I cannot see why that should not be dealt with under the scope of this Bill.

I hope that Amendment 140 will draw out from the Government an understanding of what information ought not to be omitted. If, for instance, a trader knows that a particular product has a series of adverse and well-informed reviews or has resulted in poor consumer experience, do they have to share that information? If they have it, they will probably be disinclined to be open with it, but do they have to provide it? How far should a trader go to share information of which they are aware and which they know exists but which they would not normally include in marketing their product? Some elucidation of the limits of this would be much appreciated.

Amendment 145B comes back to trading standards. At the moment, the time limit in the Bill is one year. Trading standards operates an intelligence-led approach: it lets information build up for a while before it takes action to make sure that it is acting in cases of consistent abuse rather than one-off problems. Time is then taken to investigate and it takes more time to get to court, so it is very easy to exceed that one-year time limit—particularly in relation to the earlier offences in a group of offences. Two years would be a better expression of the practical length of time that it takes trading standards to bring cases to court.

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[Lord Lucas (Con)]

I shall be clearer after reading my noble friend’s remarks.

[Lord Clement-Jones (LD)]

I thank the Minister for his reply to this disparate group of amendments. I thought the discussion about information raised by the noble Lord, Lord Lucas, was crucial because this is so important to the consumer, particularly the vulnerable consumer. I look forward to seeing the Minister’s letter of clarification, or whatever it is that he will come up with, in due course.

I thank the Minister for his response to Amendment 137, which was, in a sense, rehearsed in the previous group. I thank the noble Baroness, Lady Jones, for her support. She raised some important aspects about timescale and criminal offences. I am assuming that how the whole fake review aspect is dealt with predicates whether we can also have criminal liability. If it is added to Schedule 19, it gets criminal liability, but if it is dealt with in another way, it may not. Clarification of this is important because only two areas, I think, in Schedule 19 are excluded from criminal liability. All the rest get criminal liability. Therefore, it is important that the Minister can give that assurance when we have these discussions that that will be the case.

On the guidance that the noble Lord, Lord Lucas, talked about, I hope the Minister’s reply was that that will be part of what we deliver. The unfair practices guidance will be really important. Just today, the Minister clarified, for example, the brands issue, saying that it is covered by paragraph 14, or whatever it was, of Schedule 19, and that it is not necessary to add that wording. This is all part of important guidance, I suspect, in the end. Expecting people to read the Minister’s words in Committee in the House of Lords might be slightly unreasonable, so I hope that the guidance will nail down the interpretation of some of these aspects of Schedule 19, which will clearly be important legislation.

I think there will be great disappointment about the response to Amendment 143. There was a kind of circular argument that it is going too far—but going too far in what respect? The classic “unintended consequences” were raised as well. There is a set of buzz phrases that one can produce in these circumstances, and “unintended consequences” is one of them, but I did not hear a convincing reason why pricing should not be excluded from an offer to purchase. It strikes me that trading standards officers are correct that this could be a potential loophole. There was perhaps a bit of “not invented here” as well, particularly regarding the amendments tabled by the noble Lord, Lord Lucas, on “properly inform”, which I thought were rather good compared to the existing wording. However, we will, no doubt, continue these discussions. In the meantime, I beg leave to withdraw the amendment.

Amendment 137 withdrawn.

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[Lord Mott (Con)]

My Lords, it is a pleasure to take part in this fifth day of Committee. I will speak to Amendments 148A and 148B, which pertain to an exclusion to the subscriptions chapter. Subscription contracts are becoming increasingly popular in our society. I support the Government’s ambition to ensure that consumers are given strengthened protections in these contracts. However, I wish to ensure that we target the right kinds of contracts and businesses with the new subscription requirements.

Schedule 20 has an exclusion for foodstuffs delivered by an unincorporated trader; to my reading, this appears to target certain micro-businesses. To qualify for this exclusion, a trader must deliver foodstuffs on its own behalf and must not be a body corporate. I support the need for a narrow, targeted exclusion for micro-businesses providing local goods and services, but I worry that the requirement not to be a body corporate will unfairly impact on incorporated micro-businesses that have similar characteristics to unincorporated ones.

For example, businesses such as a farm shop or corner shop providing local food subscriptions, or a vineyard providing locally produced wine on subscription, will be caught by the subscriptions chapter if they are incorporated, but not if they are unincorporated. To me, this appears to be an unfair technicality impacting these businesses; many small micro-businesses may fall through the cracks of the exclusion. That is why Amendments 148A and 148B in my name would change the requirement for a business not to be a body corporate to a requirement for a business to be a micro-business, as defined by Section 33 of the Small Business, Enterprise and Employment Act 2015.

These amendments would ensure that micro-businesses delivering foodstuffs locally benefit from the exclusion even if they are incorporated. They would retain all the other requirements so that the exclusion rightly remains targeted on only the smallest businesses. I hope that the Government understand the need for tweaks to this exclusion and are therefore minded to support these amendments.

[Lord Clement-Jones (LD)]

My Lords, I will speak to Amendments 150 and 151 and Amendments 153 to 167. This is a rather voluminous set of amendments, but they are all designed to try to bring the pre-contract information requirement for subscription contracts back to some of the language of the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. The theme for these provisions is: if it ain’t broke, why fix it?

These amendments seek to maintain the flexibility for traders currently provided by those regulations by taking account of the limited time and space available for providing pre-contract information for certain formats and connected devices, and by recognising that certain key pre-contract information may be apparent from the context. The new clauses—Clauses 254 and 255—together with Schedule 21 are designed to replace the pre-contract information requirements for subscription contracts set out in the regulations. The clauses establish two sets of pre-contract information: a long set of full pre-contract information that must be given or made available to consumers before they sign a contract and a shorter set of key pre-contract information that must be given to the consumer all together, separately to any other information. The latter set must be displayed in such a way that it does not require the consumer to take any steps, such as clicking a link, and it must be displayed prior to the consumer entering into the contract.

But the Bill does not provide for the limited time and space allowances established by Regulation 13(4) of the CCR, which are necessary for certain formats and connected devices. In addition, the Bill does not reflect the flexibility provided by the CCR in terms of recognising key pre-contract information that is apparent from the context. This one-size-fits-all approach is not appropriate, given the many different types of subscription contract and consumer journey that the Bill is intended to cover, and given the varying screen sizes that consumers may use to enter into a contract, particularly on mobile devices.

These amendments are designed to amend Clauses 254 and 255 and Schedule 21 to provide more flexibility for the presentation of pre-contract information. They would import a standard of reasonableness to a trader’s assessment of whether information is apparent from the context. They would distinguish between the timing of pre-contract information and full pre-contract information, in line with the current approach of the CCR. They would enable traders to choose the most appropriate techniques to bring the pre-contract information to the attention of the consumer. They would add a new clause to reflect the limited time and space allowances provided by Regulation 13(4) of the CCR—this is necessary for certain screen formats and connected devices. They would enable traders to choose how best to present pre-contract information in a clear and comprehensible manner, on the basis that providing information all at once will not always be the most effective or transparent approach. They would simplify information about cancellation and avoid duplication. They would remove the pro-rated monthly price from the key information about a subscription, as this may confuse consumers, and they would make clear that certain information should be presented only if applicable.

In summary, it is not clear why we are going so much further than the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations, which, in the view of many, have worked quite well. Of course, we will deal with the difference in the cooling-off requirements—also covered by the CCR—when we debate the amendments of the noble Lord, Lord Black, in a few groups’ time. In the meantime, I very much hope that the Government will adopt a rather more flexible approach than they seem to have in the Bill as it stands.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I will speak briefly on this group because I am very aware that we will have a more substantive debate on subscriptions in the coming groups, so forgive me if I am very brief on some of the issues raised.

I am very grateful to the noble Lord, Lord Lucas, for his amendment. We have consistently argued for clarity, and he is right to hold our feet to the fire over the meaning of the consumer bringing the contract to the end. I am grateful for him probing a little more on what that actually means, and I look forward to hearing the Minister’s clarification on this.

I was concerned when I first read the amendments of the noble Lord, Lord Clement-Jones, that they seemed to be an unnecessary watering down of the rights of consumers under the consumer contracts regulations and introduced some ambiguity where there had previously been clarity. He has gone some way to clarifying what he meant by this. It is very unusual for me to be at odds with him. He might know far more about the subject than I did, because I was just going on what I was reading. I would be happy to talk to him more about it.

I of course understand that some mobile devices are too small to display complex pre-contract information. I am sure that we have all been guilty of ticking the box to say that we accept the terms and conditions when we have not actually read them. However, there should be a responsibility on traders to publish the pre-contract details in a simpler form, using better digital design, rather than being given more legal flexibility about how that information is communicated, which rather lets them off the hook. Maybe this is a discussion that we could carry on outside this debate.

Meanwhile, I am grateful to the noble Lord, Lord Mott, for raising the question of microbusinesses and what conditions should apply before the subscription contract regime kicks in. He raised a very interesting question which I have some sympathy with, about very local traders in a locality such as a farmer’s vineyard. I would be interested to hear what the Minister has to say on this, because we need to protect against the unintended consequences of what he is saying. We need to double check that we are not encouraging rogue businesses to re-describe themselves to get through the loophole, but I am sure that he will address that point when he replies.

As noble Lords can see, I am sitting on the fence on most of these amendments, and I am happy to stay there for the time being. I look forward to hearing what the Minister says, which might persuade me either way.

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On Amendment 160, I share the noble Lord’s ambition to ensure that these new requirements are practicable for traders, especially given modern purchasing habits, where things are often facilitated through ever-smaller devices and screens. However, Clause 275 already grants the Secretary of State powers to dictate how pre-contract information must be given. We will work with businesses to develop regulations that suitably reflect the practical considerations of implementing these requirements. We will also set out best practice examples in government guidance. I thank the noble Lord again for his considered amendments, and I hope he is reassured by my remarks.

[Lord Clement-Jones (LD)]

I thank the Minister for the way he has set that out. Will he explain how much consultation there was and the nature of it over the introduction of Schedule 21?

[Lord Offord of Garvel (Con)]

I think I should write to the noble Lord to give that in detail.

I turn to the exclusion for microbusinesses. Amendments 148A and 148B, tabled by my noble friend Lord Mott, would replace the requirement for a business to be unincorporated in order to benefit from the delivery of foodstuffs exclusion, with the requirement to be a microbusiness as per Section 33 of the Small Business, Enterprise and Employment Act 2015. The purpose of the unincorporated aspect of the exclusion is to safeguard against larger businesses restructuring in such a way as to benefit from the exclusion, ensuring that only microbusinesses benefit and that there is greater consumer protection in the food subscriptions market.

My noble friend has raised an interesting point about the application of this chapter to certain incorporated microbusinesses, such as local farm shops, that I am keen to explore. However, the amendment as drafted may not work as intended. That is because Section 33 of the Small Business, Enterprise and Employment Act sets out only broad criteria by which microbusinesses should be defined and defers much of the detail to regulations that have yet to be made. With that said, I am happy to work with my noble friend further to understand his concerns and to ensure that the exclusion captures the right businesses. I therefore hope he is suitably reassured.

In her remarks, the noble Baroness, Lady Jones, raised the important point about ensuring that the exclusion for microbusinesses remains narrow and well-targeted to ensure maximum consumer protection. I wholeheartedly agree with her on this matter, and I assure her that that is the Government’s intention. I thank noble Lords once again for their amendments and for their valuable contributions to this debate.

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[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.

[Lord Bassam of Brighton (Lab)]

My Lords, I congratulate the noble Lord, Lord Mendoza, for scripting such a simple and clear amendment. We are acting as co-signatories, and it seeks, very simply, to exempt third sector charities from the effective limitations on subscription contracts in the Bill.

I appreciate that there have already been several attempts to find a solution to this conundrum, including amendments in the Commons. I understood that Ministers were not particularly attracted to this solution, which seeks to list charity membership subscriptions which qualify for gift aid as an excluded contract pursuant to Clause 253. We were a bit reassured by the letter that Kevin Hollinrake, the Minister in another place, wrote to the National Trust, setting out the Government’s position. He said that it was not their intention to create uncertainty about how different legislation might apply. His letter, dated 23 November, also said that cross-departmental work was being undertaken to consider whether clarification would be beneficial. Having listened to everybody this evening, it is pretty clear that it would be beneficial.

If this approach does not meet the happiness threshold for Ministers, this debate is the opportunity for the Minister to explain where the Government’s internal departmental thinking has got to and what other solutions might be available. The Minister argued in his letter to the National Trust that Chapter 3 of Part 4 is unlikely to apply because there is no contract to be deemed a subscription contract. Given the net value of gift aid to charities—for the National Trust it is £47 million, English Heritage is £100 million et cetera—we think there needs to be clarity. We cannot leave a degree of uncertainty. It certainly does not appeal to us to do that at this stage, given the law of unintended consequences. We cannot rely on an assurance that it is deemed unlikely that the legislation would have the effect that many of the charities that we have been talking to have said it would. The charities need certainty and clarity as well.

If it is not this amendment, what amendment will be brought forward? As the noble Lord, Lord Clement-Jones, said, carnage could definitely occur on Report if we do not get a ready-made solution. It needs to be put right and put right now.

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I will provide a further update on Report on any legislative or other policy changes that we propose. In the meantime, I would be happy to meet my noble friend should he wish to discuss this issue further ahead of Report, as I know it is of keen interest to him.

[Lord Clement-Jones (LD)]

I want to clarify what the Minister just said. Does he plan to come back with a solution on Report? Otherwise there is going to be jeopardy. If the Bill goes through and the Government anticipate doing something after that, charities are going to be in a really difficult position. Presumably the Minister is pledging to come back with a full solution on Report.

[Lord Bassam of Brighton (Lab)]

Before the Minister replies to that point, what is it about the amendment moved by the noble Lord, Lord Mendoza, that is so objectionable? I heard the Minister say that charities are not usually excluded from the effects of legislation in the way that the amendment suggests, but I do not see why they could not be made exempt for this particular purpose.

Digital Markets, Competition and Consumers Bill

Lord Clement-Jones Excerpts

Committee stage
Wednesday 7th February 2024 Grand Committee

[Lord Bassam of Brighton (Lab)]

My Lords, this is the starter before the main course on subscription contracts, but it is important none the less. I can reveal to the Committee that our Amendments 169 and 193 are mere probing amendments designed to test whether the Government have confidence in the Bill’s subscription provisions providing sufficient protection for digital platforms that host copyrighted content, mainly on-demand videos. A number of companies have raised this issue with us, arguing that they will be seriously out of pocket if they have fully to reimburse those who have accessed paid-for content during a cooling-off period. It is our feeling, and a view widely shared, that, although the Bill restates a lot of current consumer law on subscriptions, it does not restate many of the obvious and probably necessary exemptions that the noble Lord, Lord Black, clearly identified. We need to cover those.

At present, if I sign up to a streaming service, it is made apparent that, the moment I consume content, my statutory rights change. The Bill appears to restate some principles but not others, and it creates a lack of certainty for both sides. Some of the companies argue that they will have to pay out refunds in cases where they would not under current law. This runs the risk of creating unrealistic expectations for consumers.

The amendments in the name of the noble Lord, Lord Lucas, ask similar questions of the Minister and seek to explore how the subscription contract is paid for if it is used during the cooling-off period and then cancelled. They also seek to understand what information a trader must publish in those circumstances. The noble Lord made a good point about charging.

Turning to the amendments in the name of the noble Lord, Lord Black, he skilfully highlighted for the Committee the problems that will be caused by the way the legislation is phrased. Having heard the noble Lord, I am more on his side than I was at the outset. I am not a regular Daily Telegraph reader, nor a great fan, and this is the second time in a week I have had to plead on its behalf—this is becoming rather strange politically. I am a Guardian person, and I can see the problem replicated across the whole news world. I do not think the onerousness of the burden is justified in this case. It could be an endemic problem.

I want to hear what the Minister has to say because we need some light and dark, some nuanced thinking, about the way subscriptions work. This is not the way to bear down on the subscription trap, which I think we are all keen to deal with. This does not help us at all in that regard.

I was originally going to say of the last two amendments in the name of the noble Lord, Lord Black, which seek to create a two-year implementation period, that I was not particularly convinced, but having heard the argument, I have reversed my view. If we do not have a solution, I suspect those two amendments could be very helpful in trying to resolve some of the problems this is creating. There is merit in those amendments.

We need to approach this issue in more forensic detail. I want to hear what the Minister has to say, because I do not want us to further undermine the news market. We live in a time when there is less ability and facility to report than we are used to. Moving from broadsheets to online content is changing the way in which the news world operates. My son works in the news world, and he understands these things far better than I do. We need solutions, and the way the legislation is currently phrased does not provide us with one that protects the value and importance of news in an open democracy such as ours.

[Lord Clement-Jones (LD)]

My Lords, this has been very interesting debate. There is a common theme—that these clauses are a very blunt instrument. At one end of the spectrum, we have the amendments in the name of the noble Baroness, Lady Jones, which attempt to get to grips with what this is all about and whether these clauses are fit for purpose; and at the other end we have had clear demonstrations that they are not. I am very grateful to the noble Lord, Lord Black, in particular, for his comprehensive and persuasive introduction. I started off fairly convinced of the case—I did not sign all his amendments, but I signed two clause stand part notices—but, like the noble Lord, Lord Bassam, I am now pretty convinced that the clauses are not quite fit for purpose. For the digital economy, we need to be much more wary about how the prescribed cooling- off period works.

I started off thinking that this is an issue that only the subscription and video-on-demand side should be concerned about, but having listened to the noble Lord, Lord Black, I realised that there is a much wider set of interests. The noble Lords, Lord Lucas, Lord Vaizey and Lord Bassam, described a much wider landscape that should be concerned.

I started by considering the disruption to subscription video-on-demand services—the so-called streamers. That is why I signed the notice from the noble Lord, Lord Black, opposing Clause 262 standing part. All the representations I received pointed out that this is really business-critical for UK operators such as Netflix and Disney+. I think the noble Lord, Lord Vaizey, used the expression binge-watch; if you can do that and get a refund, why bother keeping your subscription? We need to make sure that those services are safeguarded.

A number of noble Lords pointed out that Ministers in both the Commons and this place have expressed concern, saying that they understand the issue and are going to consult; but in the meantime, there is a huge amount of uncertainty. We potentially have it in black-letter law that the cooling-off periods are as set out in the Bill. We do not know what kind of consultation will take place, what kind of flexibility might be operated, and so on. In the meantime, we have a perfectly workable set of consumer contract regulations, which the parties would be happy to apply. That was very much the case the noble Lord, Lord Black, rightly made.

Important principles are set out in the CCRs, such as that consumers can request that the supply of digital content begins before the end of the 14-day cancellation period. So it is perfectly possible to have a provision that safeguards both the service provider and the consumer in these circumstances, but that principle is not imported into the Bill. I do not know why. On Monday, I asked the Minister what consultation had taken place. I have used the expression “blunt instrument”, but these are really important new provisions. The noble Lord, Lord Bassam, was absolutely right: they are based on the best of intentions, but they are so blunt that they will be a real problem for some of our digital services.

I hope the Minister will not regard our proposals as “not invented here”, and that the Government will not motor on with these provisions without taking a long, hard look at them. This is one of those circumstances where we would all be a lot happier if we reverted to a regulation-making power, got rid of some of these clauses and had a proper super-affirmative provision in the Bill, for example, enabling a discussion about all these aspects of subscription contracts. We heard about the absolute unhappiness with the impact on charities and gift aid when discussing the previous group; that demonstrates the total bluntness of these provisions. I do not think anybody will be very happy with them —the charities, the streaming businesses, the subscription media services or the dating services. There is a huge amount of unhappiness, which I hope the Minister will respond to.

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)]

I thank noble Lords and noble Baronesses for their amendments and their interesting and informed contributions to the debate on this first group of amendments, on subscription contracts.

I will first address the amendments tabled by my noble friend Lord Lucas, which relate to the cooling-off period. Amendments 168 and 191 would create an additional requirement for businesses to inform consumers of the charges they may incur if they use a subscription but later cancel their contract during a cooling-off period. I agree that it is important for consumers to know what charges they could incur when they exercise a right to cancel during a cooling-off period. However, I assure my noble friend that the Bill already makes sufficient provision for this. The full pre-contract information listed in Schedule 21 provides information on the consequences of a consumer exercising their right to cancel during a cooling-off period. This includes information on any refund the consumer may be entitled to and any reason why that refund might be diminished. That information must be given or made available to consumers as close in time as is practicable to a consumer entering into the contract. Therefore, although I appreciate the intent behind my noble friend’s amendments, I hope he is reassured that sufficient provision is already made in the Bill.

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While Amendment 192 would help to ensure that consumers know about this important right, having the renewal cooling-off period end only after a consumer acknowledges that their contract is up for renewal would make it difficult for businesses to plan and automate their operations. For example, what happens if a consumer does not acknowledge that their contract is due for renewal? The implication is that they could retain the right to cancel the contract and secure a refund indefinitely. That cannot be right. We believe that our approach strikes the right balance between ensuring that consumers have the information that they need to exercise their renewal cooling-off rights while also respecting the legitimate interests of businesses.

[Lord Clement-Jones (LD)]

My Lords, I am sorry to interrupt the Minister, but it might give the Box a chance to answer the question before the end of his response. Do the current provisions in the Bill contain the principle that I mentioned, which was set out in Regulation 37 of the consumer contracts regulations, where consumers can request that the supply of digital content begins before the end of the 14-day cancellation period, acknowledging that they would then cease to have the right to cancel from that point of supply? If not, why not, as that would be the ultimate protector of these digital services?

[Lord Offord of Garvel (Con)]

I will come to that once I have some input from behind me. This is obviously a key part of the group.

Amendments 169 and 193, tabled by the noble Baroness, Lady Jones of Whitchurch, address the provision of information in relation to the consumption of digital content during the renewal cooling-off period. I understand that the noble Baroness wishes to ensure that the Bill provides sufficient protection for digital streaming platforms if a consumer has accessed digital content and then cancels their contract during the renewal cooling-off period. The Government will consult on the relevant return and refund rules that apply in this situation and other similar circumstances. This will ensure that rules are fair and practical for businesses and consumers. It will also enable consideration of any specific issues for particular industries or circumstances if needed—for example, digital content, perishable goods or bespoke products.

As part of that consultation, we will include a policy proposal of introducing an explicit waiver from refund rules for digital content, recognising the circumstances that the noble Baroness set out. We aim to consult before the end of the year. This is directly to avoid the scenario that these digital steaming firms fear. It is also important that those rules can be reviewed—

[Lord Clement-Jones (LD)]

My Lords, I apologise. If the Minister is undertaking this consultation and looking at a provision of that description, can he also describe which power, in the part of the Bill we are dealing with, will give the Secretary of State the ability to do that, as well as the process by which it would be introduced and the timing?

[Lord Bassam of Brighton (Lab)]

The noble Lord, Lord Clement-Jones, partly covered the point that I was going to ask about. I want some more detail about how this waiver will operate. That is where the noble Lord and I are coming from. Perhaps the Minister can flesh that out a bit more, because it is important. I am delighted that the notion of a waiver will be consulted on, but the question of how it works will be important, too.

[Lord Clement-Jones (LD)]

My Lords, it could answer the Regulation 37 question.

[Lord Offord of Garvel (Con)]

The point is that we have to consult on this. The matter has been raised by all sides of the Committee and there are specific reasons for it. The consultation is as it says. Rather than trying to go through this line-by-line at the Dispatch Box, I will try to set it out in writing for everyone, so that we can see exactly what we mean by it. If I have any input in the meantime from behind me, I will share it with noble Lords.

I turn now to the clause stand part notices tabled by my noble friend Lord Black—that Clauses 262, 263 and 264 should not stand part of the Bill—and his consequential Amendment 194. The net effect of these changes would be to reverse the cooling-off period in the Bill to the status quo established by the 2013 consumer contracts regulations. In particular, the cooling-off period for consumers after a free trial or year-long subscription automatically renews, introduced by this Bill, would be removed. The Government’s objective is to protect consumers from the specific harms associated with subscription contracts, while also considering the needs of businesses. We believe that the Bill correctly finds that balance. The Government expect that the protections provided through the Bill will have £400 million- worth of consumer benefit per year.

This measure protects consumers who have signed up to a trial period that then rolls into a higher-cost term. It also applies when contracts automatically renew on to a period of 12 months or longer, which usually, by definition, incurs a substantial financial outlay. Indeed, our consultation showed that many people forget to end their subscriptions before they automatically renew, especially after a trial, so we view this as an important provision that must remain in the Bill.

We understand that some businesses, particularly digital streaming services, are concerned about how the cooling-off periods will work in practice. As I mentioned, noble Lords should be assured that we will publicly consult on the cancellation return and refund rules to make sure that we get this right and—to be clear—to avoid refunds being payable to consumers exploiting the cooling-off period. The Bill allows for the Secretary of State to make the necessary regulations by affirmative procedure. That will be done before the subscription rules come into operation, following the consultation. I hope that this reassures the noble Lords on these points.

I turn now to the final amendments in this group, Amendments 221 and 224, also tabled by my noble friend Lord Black. The amendments would mean that the subscription contract provisions in the Bill come into force two years after the day on which the Act receives Royal Assent. The Government fully understand that businesses need clarity about when the new rules will come into effect and that they need sufficient time to make appropriate preparations. I am pleased to assure noble Lords that the subscription regulations will commence no earlier than October 2025. In the meantime, we will continue to engage with stakeholders to understand the impact of implementing the new rules and to ensure that businesses have enough time to adapt their operations accordingly.

The detail on return and refund rules will be set out in secondary legislation and the Government have committed to consult publicly on those rules. Clause 265 gives the Secretary of State the power by regulations to make further provision in connection with the consumer’s cooling-off right. Those regulations are subject to affirmative procedure, which I hope will assure my noble friend. I am grateful for my noble friend’s amendments and I hope that he feels reassured by my remarks.

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[Lord Lucas (Con)]

My Lords, I wanted to wait until the noble Baroness, Lady Jones, had spoken, because I wanted the chance to agree with her amendment, which raises the same question that I was raising in Amendment 192. Why do you have to be locked into these subs? Why can you not be asked to resubscribe, if that is what you want to do? Why can we not give consumers a right to approach things that way and get to know a product before they know that they want it every year?

I echo what my noble friend Lady Stowell of Beeston said on newspapers. I would want to get to know the Daily Telegraph well enough to know that I want to pay for it every day. To be able to buy it once a week would be nice, but that is not an offer at the moment. Allowing consumers to get used to a product benefits business. As the noble Baroness demonstrates in her amendment, it also benefits the consumer. It should not just be a year’s subscription or nothing. We should encourage businesses to provide something in between. We certainly should not make renewal the only option that businesses look for. We should make them earn that renewal by providing a good product for a year so that customers do not want to have to be bothered with renewing it every year. That is a situation that one happily gets into with a number of charities. You know that you want to support them. They provide a good service and you just let it tick over. I do not think that anyone should be entitled to that position. They have to earn it; they have to prove it. To have a system where you do not have to tie yourself in at the beginning is estimable.

That said, I have a great deal of sympathy for what my noble friend Lord Black said. I would prefer to see a lot of this in secondary legislation. I understand that when someone cancels a subscription, the business wants a chance to correspond with them and have an argument, although I find it a huge irritant in my relationship with a business when I suddenly discover that it would do business with me on much better terms but only if I threaten to withdraw. I wish it would value me as a continuing customer and offer me good terms, rather than only benefiting discontented customers.

I think that there is a lot of good in all the amendments in this group. I echo what the noble Baroness, Lady Jones, said about the amendment tabled by the noble Viscount, Lord Colville. I look forward to seeing that in the next Bill. I just draw his attention to the likes of Ancestry.com. Its business is the accumulation of everything that everyone has added to it. You subscribe to it, but all the time you are adding information that is then available to other people. Businesses should be allowed to retain the information that you have added, if that is appropriate. I can quite see that you might want your photographs returned from Flickr, but something like Ancestry or an app about building up information about history, ecology or whatever else it might be properly retains information that individuals have contributed and it ought to be possible for an app to have that in its terms.

[Lord Clement-Jones (LD)]

My Lords, I am glad to follow the noble Lord, Lord Lucas, because having supported a number of amendments in this group I saw harmony rather than discord. The noble Baroness, Lady Stowell, had it absolutely right: the provisions here are both too vague and too detailed. Where the Bill should be detailed, it is vague; where it is vague, it should be—and so on. That is the essence of it.

Between us, we have a pretty good idea—I hope that it does not involve sitting in a locked room thrashing this out—of what good looks like. That is the important thing. The problem is that in this group we are debating the beginning of a contract, the reminder and the termination in one fell swoop, so it is easy to misunderstand exactly what we are talking about. The amendments tabled by the noble Baroness, Lady Jones, are extremely good, because this is all about having information at the beginning of the contract. What you do not want is too much elaboration. As long as you know up front what to expect and the kind of contract that you going to enter into, that seems to me to a sensible way forward. It is about getting the basics right and I do not think that the Government have got the basics right.

Many people think that the process by which the original consumer regulations were put together was perfectly sensible, so I disagree with the noble Baroness about whether secondary legislation would be appropriate after consultation. I think that that would be a perfectly proper way forward, rather than this rather clunky way of doing it with secondary legislation and schedules setting out so much detail. That seems a rather extraordinary way of going forward. It also seems to clash somewhat with the Government’s reluctance in other areas. No doubt the noble Lord, Lord Holmes, will speak in the next group about a lack of regulation in certain quarters—which way is a matter of mutual interest. That seems a bit paradoxical. We have to get the basics right.

The noble Lord, Lord Vaizey, made an interesting speech. He was almost suggesting that there needs to be friction at the end of a contract so that there is an excuse to engage. I am not entirely convinced by that. Luckly, he did not put an amendment down, so I do not have to disagree with that at the end of the day.

The amendments tabled by the noble Lord, Lord Black, are sensible. There is an issue about how many communications a consumer sees, but the important amendment is the one regarding qualification of “by any means”. Clause 258 is pretty extraordinary. What if a trader gets a Twitter message but they are not on Twitter? How are we expected to accept a notice given “by any means”? The qualification suggested by the noble Lord seems entirely sensible.

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[Lord Offord of Garvel (Con)]

My Lords, we come to the second group of amendments, on subscription contracts and reminder notices. Again, I thank all noble Lords for their amendments and interventions. I appreciate that there is a lot of interest in this area of the Bill and I look forward to continuing this discussion with noble Lords between now and Report.

I will first address the amendments tabled by my noble friend Lord Black of Brentwood, for which I am most grateful. Amendments 170 and 175 to 184 relate to reminder notices. The requirement to send reminder notices is one of the targeted duties that we are placing on traders to ensure that consumers pay only for subscription contracts that they want or need. Of course, we recognise that there is a balance to be struck and we have listened to views from a range of stake- holders to ensure that we get this right. Indeed, the Government made changes to the reminder notice provisions in the other place following further consultation with industry. The Bill reflects the Government’s commitment to delivering proportionate regulation, ensuring that consumers are suitably protected from the harms of subscription traps without overburdening businesses.

I wish to reassure my noble friend that for an average monthly subscription contract, a trader will have to send only one reminder notice within a six-month period. We believe that this strikes the right balance between informing consumers about their subscriptions and not overburdening businesses.

Reducing the frequency of reminder notices, as my noble friend’s amendment seeks to do, would increase the risk that consumers end up paying for unwanted subscriptions for longer periods. To be clear, the Bill already allows for the Secretary of State to make regulations to update or modify these provisions in a number of ways, including the frequency, content and timing of reminder notices. This ensures that the Government can adapt the reminder notice requirements in future if evidence about consumer behaviour or operational practice indicates that adjustments are necessary.

Amendment 189 relates to end-of-contract notices, which a trader must send when a consumer has ended or cancelled their contract. In a similar way to my noble friend’s other amendments, Amendment 189 seeks to remove detail from the Bill. However, as with reminder notices, we think that the requirements for end-of-contract notices strike the right balance between informing consumers and not overburdening businesses.

Amendments 185 to 188, which relate to contract cancellations, were also tabled by my noble friend Lord Black. The Government are committed to the principle that consumers should be able to easily exit their subscriptions if they wish and businesses should not place undue barriers to doing so. Consumers should not, for example, be hindered when trying to leave a subscription contract or when stopping its renewal. Those are the principles behind these provisions.

However, I can assure my noble friend that we are continuing to listen to businesses and other stakeholders. We are absolutely committed to ensuring that this legislation gets the balance right between protecting consumers and supporting businesses. We of course appreciate that any communication to end a contract must be clear to a business. That is why, in the event of a dispute, the onus is on a consumer to prove that their method of ending the contract or cancelling it is sufficiently clear to the business for these purposes.

I hope that this lays to rest any concerns that your Lordships might have that a single tweet into the ether or a message via carrier pigeon, as suggested by my noble friend Lord Vaizey, could be an acceptable means of a consumer leaving a contract. We will also provide clarification through guidance for these kinds of scenarios and engage with stakeholders as we develop it. Furthermore, the Government are clear that nothing in the easy-exiting principle should prevent a trader from requesting voluntary feedback from a consumer who wants to end their subscription or from offering to give the consumer information on other products. However, these must not unduly hinder the consumer from ending their contract.

For the reasons that I have set out, including our commitment to continue to get feedback from all stakeholders on these issues, I hope that my noble friend will feel able not to press his amendments and that noble Lords who spoke to the amendments feel suitably reassured.

Amendments 173 and 174 were tabled by noble Baroness, Lady Jones of Whitchurch. Amendment 173 would impose a requirement on traders to ask their customers to agree, before entering the contract, that their subscription will renew automatically every six months or, if the period between renewal payments is longer than six months, agree each time payment is due. Amendment 174 would apply equivalent requirements but would also accommodate contracts that renew automatically after a free or low-cost trial.

I agree wholeheartedly that consumers must be protected from getting trapped in unwanted subscriptions. However, as I mentioned, the Government’s position is that the Bill currently strikes the right balance of protecting consumers without overburdening businesses and potentially reducing consumer choice. Requiring opt-ins would burden businesses and consumers with emails requiring them to confirm that the subscription can continue. Consumers who forget could inadvertently see their favourite subscriptions lapse.

I turn now to Amendment 190 in the name of the noble Viscount, Lord Colville of Culross, which would ensure that consumers can have their non-personal data returned to them after they cancel their subscription contract and would stop traders continuing to use this data. I thank the noble Baroness, Lady Jones, the noble Lord, Lord Clement-Jones, and my noble friend Lord Lucas for their contributions on this issue. I assure the noble Viscount that, where data can be used to identify a living individual, this information is already protected by the UK GDPR regime; statutory provisions therefore exist for it to be returned to a consumer. This includes data that is directly identifiable to an individual, or indirectly identifiable from that data in combination with other information.

For information that may be considered non-personal or anonymised, the Data Protection and Digital Information Bill will create a test in legislation to help organisations understand whether information is personal or anonymous. This will help bring clarity to businesses as to how to process the type of information the noble Viscount discussed. I am grateful to the noble Viscount for his amendment and hope he feels satisfied with my explanation.

Finally, I turn to the points made by my noble friend Lady Stowell. I assure her that the Government consulted on the principles of the Bill in 2021 and will publicly consult on the details of the return and refund rules. The purpose of consulting on those rules is to take account of a wide range of products, including perishable and bespoke products and services, that have been used during the cooling-off period; that is why we think it appropriate to set out this detail in secondary legislation following the consultation. I am grateful to my noble friend for her remarks and hope she feels satisfied with my explanation.

[Lord Clement-Jones (LD)]

Can the Minister reassure me that he will write to say how these provisions were consulted on? There is further work to be done, clearly, but it would be good to know what baseline consultation was carried out for all these extremely new, comprehensive, detailed—and sometimes vague—provisions. That is an important part of the knowledge we need to have going forward.

[Lord Offord of Garvel (Con)]

I thank the noble Lord and agree that it would be helpful for all of us if this were written down so we could examine it in more detail.

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[Lord Lucas (Con)]

My Lords, we move from a very new problem to a very old problem. My Amendment 215B asks that the Government restore to us the protection we used to have from double-glazing salesmen. There used to be a cooling-off period. That got swept away by EU regulations. Now that we have Brexit, we have the opportunity to give consumers back the protection that they once had. At the moment, double-glazing can claim to be made to the consumer’s specification but, actually, it is not. It is a standard product, and you just tweak it a bit. There is plenty of room when you are providing double glazing, fitted kitchens or anything like that to allow consumers proper time to step back and ask themselves whether they want to go in for such an expense and whether it is something they really want to do. We ought to restore that to consumers, there being no good reason not to.

[Lord Clement-Jones (LD)]

My Lords, I will speak first to Amendment 215C and then come to Amendment 202. I am very much indebted to the Fair Standards Alliance for raising the issue of standard-essential patents. I thought I knew a fair bit about intellectual property and the digital world, but I was in a state of relative ignorance when the world of standard-essential patents came to me. I have had quite an extensive briefing from the Fair Standards Alliance, which has revealed the importance of standard-essential patents, particularly in the context of competition and licensing.

These patents are necessary to implement an industry standard, such as for wifi or 5G. As the market is locked into a standard, to prevent abuse of the market power, SEP owners are required to license their SEPs on fair terms. Unfortunately, there is widespread abuse of this monopoly power by SEP holders that often, I am told, do not abide by their voluntary commitments and instead seek to abuse their market dominance to force product manufacturers to sign up to unfair terms. SEP holders are regularly seeking and securing excessive licence fees from technological innovators by leveraging the threat of injunctions, which forces firms in the UK either to accept high licence fees or to exit the market. This is to the detriment of those businesses and to the wider UK economy.

Most prospective licensees cannot afford the cost of litigation or exclusion from the UK market. The recent High Court decisions in InterDigital v Lenovo and Optis v Apple demonstrate how SEP owners exploit SMEs and make excessive royalty demands that only large, well-resourced litigants can afford to challenge. Apparently, the costs of the recent SEP licensing trial in the InterDigital case were over £31 million. That is pretty breathtaking, even to one with my background as a commercial lawyer.

The costs can be ruinous to many businesses. This tactic not only threatens innovation by UK businesses but represents a strategic risk for UK priorities, such as 5G infrastructure, diversification and smart energy network security, by limiting the competing players. The availability of injunctions for SEPs gives foreign SEP holders the ability to prevent others in the UK entering, succeeding and innovating in those markets.

The Government have been considering SEP reform— I noticed the Minister nodding vigorously, earlier—for several years and have received evidence showing the abuse that businesses in the UK face. The Intellectual Property Office’s SME survey suggests that UK businesses face excessive licence fees for SEPs. SMEs are concerned by the threat of market exclusion by court-ordered injunctions and a lack of transparency about the cost of and need for the SEPs being offered.

British companies are predominantly SEP licensees. The majority of SEPs are held by companies from China, the EU and the US, with no major SEP licensors based in the UK. This means that, when SEP holders hold up innovative UK manufacturers during licence negotiations and extract excessive licensing fees, they are taking value that would otherwise be available to fund further innovative developments in the UK and are increasing costs to UK consumers.

The UK’s innovative SMEs are especially affected across all sectors, as they cannot afford expensive legal battles against large, international SEP holders. As I said, the costs were over £31 million in the InterDigital case. The problem is widespread and the Government themselves have already accepted that SEPs are an issue; for instance, in their 5G Supply Chain Diversification Strategy of 2020 and in DSIT’s wireless infrastructure strategy last year. Recent High Court decisions have independently confirmed that position. A court determined that licence rates have been significantly lower than those demanded by the SEP holders. Our judges have concluded that SEP holders are able to exert significant unfair pressure to get the deal they want.

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[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank all noble Lords who have spoken. This truly is a miscellaneous group of amendments and I will add to the miscellany of all this, because my Amendment 215A addresses the ambiguity that arises from the current laws on marketing infant formula.

Perhaps I may briefly explain the background as to why this is before us today. The Infant Formula and Follow-on Formula (England) Regulations 2007 were designed to prevent supermarkets promoting infant formula over breastfeeding. They arose because, prior to that, aggressive marketing and advertising techniques had been used by the milk formula industry to mislead parents over the best way in which to feed their babies. The current rules state that infant formula should not be advertised or promoted in a shop. They also say that no coupons, special sales offers, discounts or gifts should be offered to mothers or their families.

Meanwhile, noble Lords will be aware that the cost of infant formula has risen recently and is a huge extra burden on families, who are particularly suffering in the cost of living crisis. It is estimated that the cost increased by 22% in the past year alone. But because of the current regulations, supermarkets still cannot accept vouchers, even those provided by food banks and local authorities to purchase that infant formula. There have therefore been calls for the marketing rules to be reviewed to allow, for example, retailers to accept loyalty points, grocery vouchers and store gift cards, as well as free vouchers, for infant formula.

Our amendment addresses the current ambiguity in the regulations and calls for a review to clarify the marketing rules and their impact on the pricing and affordability of infant formula. This Bill is seen as the best mechanism to get this review under way. I should stress that our aims are to clarify the law and to tackle the unfair pricing currently taking place. However, we want to ensure that parents remain protected from the aggressive advertising that has misled them in the past. I hope that noble Lords and the Minister will see the sense of this amendment.

On a completely different issue, I listened carefully to the noble Lord, Lord Lucas, about double- glazing. I agree that he made an important point. I did not know that there were still double-glazing salesmen, but he raised them so I am sure there must be. I agree with him that, if they still exist, they should be regulated.

I turn to a completely different issue again. I am grateful to the noble Lords, Lord Holmes and Lord Clement-Jones, for their amendments on AI. We look forward to debating the Private Member’s Bill of the noble Lord, Lord Holmes, on AI regulation in the coming weeks. These Benches take this issue hugely seriously. We recognise that AI has the potential to deliver life-changing benefits for working people, from early cancer diagnosis to relieving traffic congestion, but these benefits must be set firmly in new standards and new regulation to keep people safe and their data protected. The EU and the US are speeding ahead on this while the UK is dragging its heels, so we believe that new regulations on the control of AI are essential.

I listened carefully to the noble Lords. I do not disagree with what they are trying to achieve but I query whether this is the right place to pursue these amendments. The data protection Bill will come before the House shortly; that will give us a much greater opportunity to address the impact of AI on the lives of consumers and citizens. I hope that we will have a really detailed exploration of the protections needed in that Bill at that time. However, having listened to the noble Lord, Lord Clement-Jones, on music labelling just now, I realise that I cannot just pass this issue on to the data protection Bill in the way I wanted to, because he made an important point about the consumer issues arising. Again, I have some sympathy with the noble Lord, Lord Lucas, who challenged this and asked, “How can we know? What percentage of music is AI?”

[Lord Clement-Jones (LD)]

I entirely agree that it is a question to be asked. Of course, there is the general principle of transparency. If you look at the amendment, you will see that it talks about content “whether assisted or generated” by AI. It could be partly or wholly generated by AI but, in transparency terms, just the knowledge that at least some of the elements were created by AI is important. The consumer can then take it or leave it, basically. If they like the sound of AI music—believe me, some of it is pretty dreadful—that is fine, but it is an acquired taste.

[Lord Lucas (Con)]

Will we have musicians confessing on stage that the electronics under the stage are adjusting the sound of their voice?

[Lord Clement-Jones (LD)]

It all depends on how sober the audience is, I suspect.

[Baroness Jones of Whitchurch (Lab)]

Gosh—I cannot help feeling that this is the beginning of a much longer conversation. We may not want to have that conversation now, but this is an important issue; I absolutely understand why the noble Lord, Lord Clement-Jones, is raising it. We need to find a way to ensure that consumers are properly informed.

On standard-essential patents, I am grateful to the noble Lord, Lord Clement-Jones, for explaining the background to his amendment. Again, this is an issue with which I was not familiar, but the noble Lord spoke persuasively. I hope that the Minister will agree to follow up on the Intellectual Property Office’s review and provide some reassurance that the issue is in hand.

The Minister will be pleased to hear that we support his Amendment 195. With that, I look forward to hearing his response to the various issues that we raised in this group.

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The IPO has been actively working over the past two years better to understand how the SEPs framework is functioning to support innovation and establish where intervention is needed. Governments around the globe are also considering the effectiveness of their own SEPs frameworks. It is important that government and regulators consider the issues carefully to ensure that the balance between innovation and competition is effectively struck. I confirm that the IPO has presented its recommendations to Ministers, who will provide an update on these issues in due course.

[Lord Clement-Jones (LD)]

Can the Minister do any better than “in due course”? Perhaps he can say “shortly”.

[Lord Offord of Garvel (Con)]

In a matter of time. Why do we not get the Box to define “in due course”?

I therefore assure the noble Lord that the Government’s position on what interventions may be appropriate in respect of standard-essential patents, including specifically on injunctions, will be set out more clearly in the very near future. As the Government are already addressing this issue and are due to make their policy position public soon and separately, I hope the noble Lord feels able not to move his amendment.

For the reasons set out, I hope noble Lords will not move their amendments.

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The live events market makes a significant contribution to our economy and cultural life. As legislators, we have the responsibility to ensure that genuine fans get tickets rather than those who want to turn a profit. The CMA has been clear that further action is needed. Performers want further action. We believe that if the Secretary of State were to commission a consultation it would come to the same conclusion. We believe that the cleanest way to achieve our objective would be to give the CMA the legislation it requires to do the job in this area. Of course we cannot resolve all ticketing issues with this Bill, but we believe that our amendment will get things heading in the right direction. I very much look forward to hearing noble Lords’ views on this debate. I beg to move.

[Lord Clement-Jones (LD)]

It is a pleasure to follow the noble Lord, Lord Leong, who gave an excellent introduction to Amendment 196, which I signed and very much support. All the amendments in this group are of a piece; we are very much on the same page. This arises from the fact that, despite a series of very long-running investigations—we had the Waterson report, which ran to 225 pages, back in 2016 and the Secondary Ticketing report, which the noble Lord, Lord Leong, mentioned—it is widely recognised that these platforms continue to benefit from large-scale ticket touts, many of whom acquire tickets through unlawful means.

I have not buried my head in the sand. I have had conversations with some of the secondary ticket sellers, but I am unconvinced by the story they tell. I am very grateful to FanFair Alliance, which has campaigned on this issue for many years, and I pay tribute to the noble Lord, Lord Moynihan, and Sharon Hodgson MP, who has been a tower of strength in her all-party group on this subject over many years. It is clear, as FanFair Alliance has uncovered, that there is substantial evidence of speculative listings on secondary websites, where sellers list hundreds and even thousands of tickets they do not possess. You have only to look at one or two headlines, such as:

“Viagogo accused of listing non-existent tickets on behalf of seller linked to firm”.


A 2022 report by ITV detailed how the vast majority of UK festival tickets listed on the same site were fraudulently advertised by just three people. We have some egregious behaviour there. These three sellers are still actively trading on that website.

Meanwhile, in March 2023, reporters for BBC Radio 4’s “You and Yours” highlighted how a new generation of touts are exploiting ticket systems with increasingly sophisticated software and bots. I am sure that the noble Lord, Lord Moynihan, is conscious of all this. It is one of the issues that we have failed to tackle over the years.

As the noble Lord, Lord Leong, mentioned, the CMA published a series of recommendations in August 2021 that aimed to strengthen existing laws around ticket resale in order to protect consumers, including a ban on platforms allowing resellers to sell more tickets for an event than they can legally buy from the primary market and ensuring that platforms are fully responsible for incorrect information about tickets that are listed for sale on their websites. Regrettably, BEIS—actually, in May 2023 it was probably the Department for Business and Trade; it is hard to keep up with these changes in department names—opted to prioritise the

“power of competitive markets to give consumers choice and flexibility”.

That is not the same as consumer protection. As the noble Lord, Lord Leong, said, it is out of tune with public opinion in that respect.

Compounding this decision, it remains a source of immense frustration that Google and YouTube continue to permit ticket touting websites to buy themselves to the top of search results, signposting fans away from official sources of tickets. As a result, FanFair Alliance believes that it is now imperative for the UK to adopt legislation similar to that of many other countries—France, Italy, Belgium, Japan and Australia—outlawing the resale of tickets for profit while ensuring that customers who can no longer attend an event are provided with viable services to resell at the price that they paid or less. We agree.

The prime example of this is on our doorstep. In Ireland, a comprehensive piece of legislation to ban ticket-touting was introduced in 2021. Dublin shows for artists including Taylor Swift, Coldplay and Arctic Monkeys appear to be delisted by US-owned websites such as viagogo and StubHub as a result of this legislation.

A powerful and compelling case is being made for Amendment 196. I hope for this amendment. The third amendment, Amendment 198, ties some of this together. Given the situation that I have outlined and the situation that the Competition and Markets Authority has been in—its recommendations still have not been taken on board—we need a clause that would mandate the Secretary of State to submit an annual report to Parliament on the secondary ticketing market, specifically evaluating the adequacy of consumer protection against exploitative prices and other practices. As well as Amendments 196 and 197, we need to have that information and give the CMA the teeth to do this and report to the Secretary of State, who would then report to Parliament. That would allow Parliament to evaluate the functionality of the market and determine the most effective solutions to address issues related to secondary ticketing.

I very much hope that the Government will agree that they need to make a great deal more progress. Their views were expressed in May 2023, but the abuse continues. We need to do something about it.

[Lord Moynihan (Con)]

My Lords, I will speak to Amendments 196 and 197 in the names of the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Jones, so ably moved by the noble Lord, Lord Leong, whose speech was exemplary in this context, well researched and absolutely right. I declare an interest as co-chair, with Sharon Hodgson MP, of the All-Party Group on Ticket Abuse. I echo what the noble Lord, Lord Clement-Jones, said on the tireless work that Sharon Hodgson has undertaken over the years on this. She shares my deep disappointment that the Government have failed to act on this.

It is such an obvious and sensible legislative move to stamp out the abuse that takes place in the secondary market, which does not benefit any of the sports men and women who entertain us or any of the artists. It simply puts money in the pockets of those modern-day touts who, particularly in this day and age, use bots. I will move on to explain how they do that to our disadvantage and that of the true fans of sport and music.

Those who were in the House when we last had a major competition and consumers Bill will recall that we made significant changes. There was good all-party support at that point to see significant changes to ticket sales in the secondary market in what became the 2015 Act, but nothing has happened since then, and it is high time that we take action. In fact, since then we have seen a tsunami of rip-offs by the modern-day online ticket touts, at the expense of genuine music and sports fans.

The number of professional ticket touts who have migrated from the dirty mac brigade on street corners to the use of computer bots has moved from some hundreds to 3,000 to 3,500 in the UK at the moment. When Sharon Hodgson and I started work on this, the numbers were, as I say, just in three figures. As she said in another place when speaking to the Bill, professional touts

“are attacking everywhere, from stadium gigs to local venues and, increasingly, football games”.

Touting tickets for professional football fixtures is the one area of sport where that is illegal—yet it carries on. She went on:

“Yet according to Home Office figures, the yearly arrests of football ticket touts have been decreasing, dropping from 107 in 2011-12 to only 28 in the 2019-20 season”.—[Official Report, Commons, 20/11/23; col. 122.]


That is despite a rapid rise in the number of touts. There is simply not the resource available to track down these people. Criminalisation in the law is the only way that we are going to tackle this problem.

It is not as if we have not looked at it and said, “This works”. We introduced legislation for the 2012 Olympic and Paralympic Games to ban the use of secondary markets for the sale of tickets. If that was brought before all politicians of all party persuasions and agreed, as an important measure, to make sure that we had a fair ticketing policy at those Games, why is it not appropriate for all sports and arts activities?

These amendments propose the further action that is necessary to restrict secondary ticket sites from listing tickets for sale where the seller has not provided proof that they are able to sell them, which happens quite frequently. There is many an occasion when tickets go on sale before the formal tickets are launched in the market, because the ticket touts are confident that they will be able to get them and then, as preferred buyers, sell them on to the secondary market sites.

These amendments in themselves will be welcome and are very important measures for consumer protection. Think of the family that gets a forged ticket because a preferred buyer cannot get the tickets that he has promised, maybe to viagogo, but who then goes out and has the money to forge those tickets and sell them. The family comes down from the north of England or potentially from abroad and is not let in, because the ticket is fraudulent. The family might eventually get only some of its money back from the credit card company—but after much fighting and difficulty, while trying to rescue something from the sadness and tragedy that are the non-financial aspects of the effects of this secondary market.

These measures would go some way to implementing the recommendations made by the CMA to tighten up the measures focused on restricting abuse in the secondary ticket market—measures that the Government pushed deep into the long grass. The noble Lord, Lord Leong, quoted from the letter of 10 May from the Minister, in response to the CMA. Paragraph after paragraph were just kicking this into the long grass, despite the fact that, as we have heard, Professor Waterson’s independent report was absolutely significant in advising the Government on a whole series of measures to take action against the abuses in this market.

We have the work of Sharon Hodgson, which I have spoken of, and the CMA has called for legislative action in this area. We have heard from UK Music, top sportsmen and music industry leaders—yet it was all too easy to say

“it is too soon to conclude that the only way forward is further legislation focused on this market”.

What will it take? I know that the Minister will be in agreement, because he knows about this economically from his days at Lazard. He knows from his young days, when he was up in Greenock, about the power of sport in that wonderful town—how much people love it and how they hate being fleeced by the secondary market abuses that go on.

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[Lord Offord of Garvel (Con)]

My Lords, I thank the noble Baroness, Lady Jones of Whitchurch, for her amendment, which the noble Lord, Lord Leong, spoke to so eloquently. I also thank the noble Lord, Lord Clement-Jones, for his amendment and my noble friend Lord Moynihan for adding his contribution on a subject he speaks about with great passion. I recognise that many noble Lords have a great interest in ticketing an on a personal level, as an avid sports fan, I share a lot of their frustration.

Buying on the secondary market is a matter of consumer choice. So long as consumer rights are complied with, the Government do not wish to prevent consumers having that choice. In recent years, the Government have further strengthened those rights with respect to secondary ticketing. In 2015, we legislated to ensure that consumers received fuller information on tickets they were buying on the secondary market. In 2016, we commissioned an independent study of consumer protection in the secondary ticketing market under an economist, Professor Waterson. He concluded that, providing they were enforced, the measures in the Consumer Rights Act 2015 should be sufficient to protect consumers. He also noted that there was more the primary market could do to help consumers get tickets there.

Since then, enforcement work undertaken by the CMA and trading standards has resulted in better information being provided by platforms, and the successful prosecution and fining of a number of ticket touts. We have also added further clarifications to the CRA and introduced legislation outlawing the use of bots to buy tickets for profit, on which I know my noble friend Lord Moynihan was very influential. I thank him for his work in this area. The current legislative framework is producing successful enforcement action. It will be strengthened further by the provisions in Part 3 of the Bill.

I turn to the amendment in the name of the noble Lord, Lord Clement-Jones, on ticket limits. In the last year, the Government have consulted further with the industry on applying limits on ticket purchases in the primary market to sales in the secondary market, in line with the commitments in the response to the CMA recommendations. However, we continue to believe that this will be difficult in practice. The Government’s approach—

[Lord Clement-Jones (LD)]

My Lords, I am sorry to interrupt the Minister. How often do the Government turn down very firm recommendations from a regulator that knows the market, such as those made in the secondary ticketing report? It is quite unusual and rather like they are second-guessing the regulator. The Minister said that it is impractical, but is the regulator not in the best position to decide whether that is the case and whether it can be enforced?

[Lord Offord of Garvel (Con)]

I thank the noble Lord. Yes, the Government absolutely expect the CMA to do its job but in the consultation which comes from that, there are other voices to be heard and other stakeholders to be listened to. As I said, in 2016 we had an independent study on the secondary ticketing market and we went to an economist, Professor Waterson, to give us his opinion on these matters. There is a balance to be struck.

[Lord Clement-Jones (LD)]

I am sorry, but Professor Waterson could not have been clearer in his 225 pages—and that was in 2016, so we have had quite a long time to chew over his recommendations.

[Lord Offord of Garvel (Con)]

I thank the noble Lord. The Government’s approach is definitely always to protect consumers, where necessary, and to ensure that business regulation is proportionate. We do not believe that the evidence to date justifies new and onerous secondary ticketing measures. Indeed, it may drive sellers to try to avoid compliance by selling on social media or platforms beyond the reach of UK enforcers, making buying riskier. Banning resales or resale for profit altogether risks reducing consumer protection. For example, Ireland has banned resales, yet Taylor Swift tickets for Dublin are on offer for similar prices to those at Wembley.

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[Baroness Jones of Whitchurch (Lab)]

My Lords, it gives me great pleasure to speak to this group, partly because, for many years, I was on the board of a very good ombudsman scheme. I suppose I should own up to it being very ably chaired, at the time, by the noble Lord, Lord Clement-Jones. But that was some time ago, so I should not have to declare it as a current conflict of interest.

As a result, I have seen how the best models of ADR can work and provide quick, free, independent consumer redress without having to go anywhere near a court, which was exactly the point made by the noble and learned Lord, Lord Etherton. But, sadly, not all ADR schemes are so responsive, which is why we have tabled Amendments 208A, 209A and 209B, and why I was pleased to add my name to Amendment 209, in the name of the noble and learned Lord, Lord Etherton. He provided a very good introduction and analysis of why a review of ADR provision in the UK needs urgently to be carried out. As he rightly pointed out, this is business-friendly; it actually reduces the cost for consumers and businesses, in many ways, so what is not to like about it?

First, I should say that we welcome the measures in the Bill as far as they go. We need an improved verification system for ADR schemes. I hope that this measure will help root out misleading company schemes that masquerade as ombudsmen but, in truth, are a different branch of the same business; they lack independence and have no real incentive either to resolve consumers’ complaints or to provide appropriate redress. They have been giving ombudsman schemes a bad name. We hope that a review will tackle the more fundamental faults in the current landscape. In some sectors, there are multiple ombudsman schemes; in others, the majority of traders refuse to participate in such schemes.

Even knowledgeable consumers find it difficult to navigate the variety of schemes on offer. The information and signposting are often notoriously poor. Why would a trader notify a consumer that they have the right to go to an ombudsman when that trader may incur the cost or inconvenience of a judgment that goes against them? The bad actors—there are many of them—do not have any incentive to provide this important information. Yet the best ombudsman schemes help to improve overall service standards and breed customer loyalty for the longer term by dealing with complaints efficiently and, as I say, free of cost.

Our Amendment 209B is a case in point. The aviation sector has been plagued by stories of poor service and a lack of refunds. There is no compulsion for airlines to be part of an ombudsman scheme. The aviation ADR scheme, which exists, is not recognised by the Ombudsman Association because it did not meet its criteria for independence, fairness and transparency. It provides consumer redress for easyJet and Ryanair, among others. It once took me about 18 months of doggedness and perseverance to get a refund for a cancelled flight from Ryanair; this is not how ombudsman schemes are meant to work.

Our amendment calls for a detailed, time-limited review of ADR in the aviation sector, consulting consumers and passenger organisations in the sector as well as looking at what further regulatory measures are necessary to bring the aviation sector in line with the standards expected in the best ombudsman schemes elsewhere. I hope that noble Lords and the Minister will feel able to support our amendment, which will help bring well-overdue reform to consumer rights in this sector.

Our Amendment 208A addresses another concern around ADR schemes: how do consumers find out about them in the first place? It is crucial that details of an ADR provider are prominently displayed to consumers who have a complaint. It is not clear why the requirement to display a name and website has been taken out of the regulations; I look forward to the Minister’s explanation for this.

Our Amendment 209A addresses the issue of traders refusing to pay money awards made against them by an ADR provider. It is hugely frustrating for consumers who fight and win a case then to find that they have limited powers to enforce the compensation. This amendment would give them greater powers to have a payment enforced by a court, as would have been the case had the judgment been made in a court in the first place. Again, I hope that noble Lords see the sense of this amendment.

All these amendments complement the proposal of the noble and learned Lord, Lord Etherton, that there should be a review. I hope the Minister confirms that the Government are prepared to carry out this long-overdue ADR review; I therefore look forward to his response.

[Lord Clement-Jones (LD)]

My Lords, I rise to speak briefly in support of all the amendments in this group. I say “briefly” because I have a strong interest to declare as chair of the board of the Trust Alliance Group, which runs the energy and telecoms ombudsman schemes. The noble Baroness, Lady Jones, is entirely right: she was a valued and knowledgeable member of the board of what was then called Ombudsman Services. In everything she says, she speaks with a great deal of experience of the delivery of ombudsman services.

I will be extremely brief because it would not be right for me to extol the virtues of ombudsman services overly. In many ways, they speak for themselves in terms of the alternative dispute resolution process described by the noble and learned Lord, Lord Etherton. However, they are an extremely effective way for consumers to resolve complaints that they have been unable to address directly with the businesses involved.

In this context, I commend a very good House of Commons Library briefing, Consumer Disputes: Alternative Dispute Resolution (ADR), of May 2022. It describes the pros of ADR, but it also fairly describes the cons and what the dispute resolver is able to do. I regret that the ADR directive, which came into force in 2014 or 2015, was not more comprehensively adopted; otherwise, we would not be in this position. The noble and learned Lord, Lord Etherton, is entirely right: it needs extension across a much greater variety of sectors.

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I view this amendment as an important element in restoring health to capitalism, using artificial intelligence. We need the flow of data. It is a really empowering amendment and I very much recommend it to the Government.

[Lord Clement-Jones (LD)]

My Lords, it is a pleasure to follow the noble Lord, Lord Lucas, with all his experience as a fund manager, and particularly to hear what he forecast for the future: the ability of AI to deliver information in a new format that is of much greater interest and use to a consumer. I must admit, I had not really thought about that.

It is also a pleasure to follow my noble friend Lady Sheehan, and in particular to support the noble Baroness, Lady Wheatcroft, on her amendment. We are obviously saving the best for last in contributing to our final group in Committee. As a former company secretary, I well remember the noble Baroness as a financial journalist and an absolute champion of corporate governance. This appears to be an absolutely crucial part of it. In a sense, it is the other side of the coin from what you expect of the corporate; it is what you expect of those who invest in the corporate, in terms of exercising their voting rights. The noble Baroness illustrated the sorry history of the voluntary approach put forward by the FCA. I could loosely describe her amendment as trying to put some lead in the FCA’s pencil, which seems wholly needed.

The noble Baroness asked a number of further questions. A really interesting and important question is: how on earth can the US, with its relatively unregulated systems compared to ours and its culture of not regulating on a federal basis, do it on a compulsory basis when we have not? Particularly from what the noble Lord, Lord Lucas, said, it sounds as though it will be eminently possible to do this, as the technology improves, without overly imposing costs on investment managers. Indeed, it is already being done for those operating in the states. There seems absolutely no reason why the Government should not move forward in the way that the noble Baroness suggests.

[Lord Leong (Lab)]

My Lords, I thank the noble Baroness, Lady Wheatcroft, for tabling Amendment 212, and I thank all noble Lords who have spoken. I will be brief.

In 2019, the European Union introduced the second shareholder rights directive, which sets out stipulations regarding the utilisation of specific shareholder privileges linked to voting shares during general meetings of companies that are headquartered in a member state and have their shares traded on a regulated market located or functioning within a member state. It was brought into UK law by secondary legislation, amending the occupational pension schemes regulations of 2005, and it has now been assimilated into UK law. As per the Explanatory Notes to the regulations, they encourage investors to be transparent about how they invest and approach their engagement as shareholders. It was a negative statutory instrument, so no debates were tabled.

The amendment of the noble Baroness, Lady Wheatcroft, carries greater weight than the shareholder rights directive. It would mandate the FCA to establish regulations necessitating investment managers and life insurers to furnish standardised reports concerning company voting activities upon request. Furthermore, it would instruct the FCA to offer guidance to firms on the specific format for such reporting.

We agree in principle with the amendment that it is right for shareholders to be more transparent. The noble Baroness, Lady Sheehan, mentioned being transparent about where investments are made, which we need to know if we are to achieve net zero. This was fully supported by the noble Lord, Lord Lucas. Fund managers need to be more transparent about informing where their funds are invested.

I ask the Minister: what impact has there been on investor transparency in the four and a half years that the SRD has been in UK law? I look forward to his response.

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It is lazy thinking to decide that high streets no longer have a function and that the future is destined to be online retail. This is not what consumers want. They want a mixture of online convenience and retail shop personal service and social interaction. Our amendment would be the first step towards balancing tax burdens and delivering that model. I hope that noble Lords will support it. I beg to move.

[Lord Clement-Jones (LD)]

My Lords, I will speak very briefly in support of the amendment in the name of the noble Baroness, Lady Jones.

It is unfortunate that this comes at the end of our debate rather than the beginning, as it is a really important aspect of it. We have been talking about the digital world throughout our six sessions, but it is increasingly apparent that the digital world cannot meet all the emotional needs of society. It is not the perfect substitute for everything that we do in person in the physical world—for our social, shopping and other needs. If we try to make it so, it will have considerable impact on mental health.

We must strive to keep a lively, prosperous physical world in front of us on the high street, as the noble Baroness outlined. Much of this talk about taxation is above my pay grade—you always get wrapped on the knuckles by your spokesperson if you start proposing tax reform or whatever it may be—but there is no doubt that my party certainly supports business rates reforms in a variety of different ways. It also believes that the settlement on the digital taxation side through the OECD agreements has been far too modest in its impact on the major digital players. The imbalance between physical and digital traders has been far too great and has advantaged the digital players far too much. I am in total sympathy with what the noble Baroness said.

[Lord Lucas (Con)]

My Lords, I entirely agree with the noble Lord, Lord Clement-Jones, on that last point. It is really important that we keep at the question of how we tax digital businesses. One can no longer rely on the Irish national statistics because they are so distorted by profit shifting, a lot of it from this country—profit going abroad and being taxed at a very low rate in Ireland when it should be taxed here.

I know that this is an international matter, but we absolutely must keep the pressure up. We are getting more and more digital, so we need to have an international tax system where profits are taxed where they arise and not where Governments wish to shift them to. I know that this is hard, but I am unimpressed by the progress that the world has made in this direction. I really hope that the Government will get behind the continued efforts on this. We suffer a great deal from it.

At the other end of the scale, the Government could also do a lot better. I am sure that my noble friends will remember that HMRC made a horrendous mess of VAT in the Channel Islands in the early 2000s. Whole businesses grew up in the Channel Islands on the idea that you could ship records out to them, then they would come back VAT-free to the person in the UK who bought them because the consignment was under a certain value.

HMRC eventually dealt with that, but now there is monstrous and recurring fraud through the likes of Amazon and eBay, involving “Chinese” sellers—there is no reason to think that they are of that nationality in particular, but they are certainly Far Eastern—who HMRC does not pursue. HMRC does not effectively collect the tax that is due. It says, “Oh, it’s too hard. Oh, it’s in lots of little bits. Oh, these people move around with great velocity”. Yes, they do, but by not collecting it, HMRC not only does not get the tax but damages the UK businesses that should be able to compete on a level playing field with those overseas sellers. It is delinquent; it is an issue at the root of HMCR that we have never managed to deal with effectively, but we really must.

It is so important that HMRC realises that it should focus not only on operational efficiency in terms of how much it costs to do things and whether it gets the money back that it is investing in this, or a sufficient multiplier of it, but on whether it is doing its bit for the structure of the UK economy and the ability of businesses to start and flourish here. I pay great credit to Retailers Against VAT Abuse Schemes, which has been active these last 20 years. I hope that it will eventually be successful, but golly, it could do with more help.

Digital Markets, Competition and Consumers Bill

Lord Clement-Jones Excerpts

Report stage
Monday 11th March 2024 Lords Chamber

[Lord Wolfson of Tredegar (Con)]

My Lords, I added my name to Amendment 49, which was opened in detail by the noble and learned Lord, Lord Etherton. Therefore, and also because we are on Report, I can be extremely brief. I declare my interest as a barrister. I practise, among other places, in the Competition Appeal Tribunal, for both applicants and respondents. I will make two short points, although they are linked.

First, Clause 101, particularly subsection (1), provides individual rights to consumers. Having done so, we must find an effective method to enable those consumers to vindicate those legal rights. There is no point Parliament passing laws that provide people with individual rights if there is no effective real-world mechanism for those people to vindicate and enforce those rights. Not only is that a basic proposition of the rule of law, as the noble learned Lord, Lord Etherton, said, but this otherwise risks us engaging in a legislative form of Tantalus, where we place rights just in front of people: they can see the rights, but they cannot grasp and actually use them. I submit that that would be wrong in principle. If we are going to enable people to vindicate their rights, the obvious place—in fact, the only place in our current legal system—is the Competition Appeal Tribunal, where, as the House has heard, there is already experience in both opt-in and opt-out collective proceedings.

Secondly, in Committee, it was suggested that perhaps all these rights should be exercised through the regulator, and there is therefore no need for the collective proceedings. Sometimes the law does that: sometimes we pass laws that mean that people have to go through a regulator, or sometimes an officeholder, in order to vindicate their individual positions. But we have taken that decision of principle in Clause 101(1): we have given rights to individuals and consumers in the Bill. Given that, it seems to me that the only sensible course is to provide an effective mechanism for people to vindicate their rights.

Finally, while I am on my feet, I add my voice to Amendment 13, proposed by the noble Lord, Lord Faulks. I certainly agree with what he said about proportionality. I add only this, as the sort of person who might be making this argument in future. It would be all the more easy and attractive for counsel if “proportionate” was left in the legislation, having had this debate, and for them then to say, “Oh well, Parliament must have meant a merits review, because it went into it with its eyes open”. The noble Lord, Lord Faulks, and my noble friend Lord Lansley eloquently set out the consequences of leaving the word in. Therefore, if we now leave the word in, it will be even easier for counsel—I declare again the obvious interest—to make the ingenious argument. Having had that amendment explained, it seems to me all the more important that we take the right decision in relation to it.

[Lord Clement-Jones (LD)]

My Lords, it is a pleasure to follow that piece of logic. I do not need to speak for very long in support of the many important amendments that have been spoken to in this group. The Minister, in Committee and in his welcome letters and meetings, has attempted to rebut the need for them—but I am afraid that, in all cases, their proponents have been rather more persuasive in wishing to see the CMA unambiguously able to exercise its powers.

In a different context, the Communications and Digital Committee, chaired by the noble Baroness, Lady Stowell of Beeston, in its report on large language models, said that there was a considerable “risk of regulatory capture”. Mindful of that, we need to make sure that the CMA has those powers.

I turn to the amendment proposed by the noble Lord, Lord Faulks, and his argument about the dangers of introducing proportionality, also spoken to by the noble Lord, Lord Wolfson. On these Benches, we fully support having that provision in the Bill, as in the noble Lord’s Amendment 13. Human rights for big tech is not really a slogan that I am prepared to campaign on.

The noble Baroness, Lady Jones, will no doubt introduce her Amendments 43, 46, 51 and 52 on appeal mechanisms for penalties, which differ from all the other decisions of the CMA. We very much support her in those amendments, and we have signed them. I also support the noble Baroness’s Amendment 59. The Minister took the trouble to write, explaining why the Government did not consider including a duty to citizens, but sometimes such clarification, as in this case, makes us only more enthusiastic for change. I am afraid that citing overlap and the creation and operation of the DRCF is not enough; nor is citing the risk of regulatory overreach, given its inclusion 20 years ago in the Communications Act. We agree with the conclusions of the original task force.

We also support the noble Lord, Lord Lansley, on the importance of placing time limits on the Secretary of State in approving the CMA guidance under the digital markets provisions of the Bill, in Amendment 56. Although I believe that the noble Baroness, Lady Stowell of Beeston, will not be pressing it to a vote, we very much support her in her relentless campaign for improved parliamentary scrutiny. This has been identified by so many parliamentary committees, not least by the Industry and Regulators Committee on which I sit. It seems extraordinary that we are still waiting to implement the kind of solution that she is putting forward, and I hope very much that the House will take forward her suggestion.

We also very much support in principle the amendment proposed by the noble and learned Lord, Lord Etherton, on collective proceedings. He may not press the amendment to a Division today, but this is a vital change that we should make to ensure that rights in this area can be properly exercised and enforced. If the noble Lord, Lord Faulks, seeks the opinion of the House on his Amendment 13, the noble Baroness, Lady Jones, on her Amendment 43, and the noble Lord, Lord Lansley, on his Amendment 56, we will support them.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank all noble Lords who have contributed this afternoon to what is a very important group of amendments. I add my thanks to the Ministers and officials for their time in the run-up to this debate in trying to resolve the many issues that we have tabled today.

I thank the Minister for tabling Amendment 1 and for listening to our concerns about the Secretary of State’s power to amend the conditions that would determine whether a tech company has a position of strategic significance. I am glad that the Minister has listened to our concerns, and we are happy to say that we accept the new proposals.

Our Amendments 43, 44, 46, 51, and 52 would reinstate judicial review principles as the means by which penalty decisions are heard, rather than being determined on the merits. I thank all noble Lords who have spoken this afternoon, and indeed those who have added their names to these amendments, for their support. As we debated in Committee and again today, these amendments are among the several we are debating in which the original balance between big tech companies and challenger firms was distorted by late government amendments on Report in the Commons. The Minister has already admitted that the changes came about as a result of lobbying by the big tech companies to No. 10. They clearly would not have done this unless they were expecting to benefit from those changes.

The debate around the appeals mechanism goes to the heart of those concerns. We know that penalties such as fines are the most significant deterrent in preventing SMS companies breaking the conduct requirements established by the CMA. There is a real concern that a merits appeals process would allow the SMS firms to deliberately delay implementation of the fines and open up the judgment of the CMA right back to square one. This is why the CMA has itself argued that it prefers the judicial review process, which is widely used elsewhere and avoids protracted litigation. We agree with the CMA and believe that appeals through judicial review will deliver swifter and more effective outcomes. We want to close down the opportunities for unnecessary litigation from huge corporate lawyers with time on their side and deep pockets to fund their activities.

As the noble Lord, Lord Black, and the noble Baroness, Lady Kidron, have said, the worrying news from Europe as to the responses so far from Apple and the other tech companies to their fines for anti-competitive behaviour underlines why it is so important to have robust and legally watertight regulation in place in the UK.

I do not think that the Minister, in Committee or in subsequent discussions, has been able to persuade us that a merits review process will not open the door to lengthy litigation designed to frustrate the whole process. If we remain unpersuaded by his arguments this afternoon, I give notice that I will wish to test the opinion of the House on Amendment 43.

These concerns also apply to Amendments 13 and 35 in the name of the noble Lord, Lord Faulks. In this case, replacing the word “appropriate” with “proportionate” has particular legal implications, which the noble Lord, Lord Faulks, has described extremely eloquently. We know that the CMA already has a duty to act proportionality, so repeating it in the Bill takes on a new legal emphasis that might lead a court to widen the scope of a judicial review challenge. In our view, “appropriate” has a much more common-sense meaning of rationality, whereas “proportionate” is a matter of judgment and is more easily disputed.

The Minister has argued that there is a need for extra clarity to reassure the tech companies on the intent of the clause. The amendment from the noble Lord, Lord Faulks, would require the CMA to act proportionately, as its current duty requires, and also appropriately. This is a win-win, which should provide the clarity that tech companies are seeking. I look forward to hearing the Minister’s further clarification on these issues, but, unless there is any new, compelling justification for the changes, we would support the noble Lord, Lord Faulks, if he chooses to test the opinion of the House.

Throughout our deliberations, the noble Baroness, Lady Stowell, has raised important questions about the need to strengthen parliamentary oversight of the CMA’s activities. Her Amendments 55 and 57 provide an excellent route to addressing these concerns. Like other noble Lords, I am sorry that they have not yet found favour with the Government and I very much hope that she will continue to pursue them.

Meanwhile, Amendment 49 from the noble and learned Lord, Lord Etherton, raises the right of consumers to bring collective proceedings where they have suffered the same harm or loss from a breach of conduct requirements. As he has argued, this is a vital lifeline for individuals or small businesses that cannot afford to finance legal proceedings alone. His amendment would create a means of effective enforcement of existing rights once a breach has occurred. We agree that we ought to find a mechanism to allow these class actions to occur in specific circumstances.

However, we also agree with the amendment of the noble Baroness, Lady Harding, that the courts need to avoid proceedings which conflict with or overlap the CMA’s ongoing investigations. We hope the Minister can provide some reassurance that the Government recognise the importance of these issues and will carry out a review. I hope this will provide sufficient reassurance to the noble Lord, Lord Etherton, that a vote on his amendment is not necessary.

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[Lord Bassam of Brighton (Lab)]

My Lords, as the Minister described, this group has government amendments, from Amendment 2 to Amendment 38, which add greater transparency to the process adopted by the CMA in disclosing information about cases involving SMS status firms where the challenger companies have an interest. We are pleased with the Minister’s amendments and, broadly speaking, happy to give them our support, as they respond to points that a number of noble Lords made at earlier stages of the Bill about the need for greater transparency and openness.

The SMS companies are in a position of significant market strength vis-à-vis the challenger firms and have a clear interest in seeing the bigger picture when disclosure is made of information that is of material interest. By obliging the publication of the notices and orders, rather than summaries of the documents, we feel that challenger companies will have greater access to key information that may impact on their market performance. Our amendments, from Amendment 4 to Amendment 39, attempt to achieve a similar result; I suspect that Ministers will argue that their amendments have greater elegance and a similar effect.

I turn to government Amendment 54 and our own Amendment 5. We are clearly of a similar mind and share concerns about commercial confidentiality so that, where reasonable, the redaction of documents can take place. We differ in our approach simply by suggesting that there should be a system for registering the documents that are relevant; the Minister might like to think about that at a later date. In essence, this is an operational issue so, to satisfy our concerns, perhaps he can put on record that there will be an effective system for the registration of documents and a notification process that enables the challenger firms to understand better what information has been disclosed to the CMA in the course of its inquiries. On that basis, we will be content not to move our amendments, and we thank the Government for responding to the concerns behind them.

[Lord Clement-Jones (LD)]

My Lords, this is a very straightforward group, and I congratulate the noble Baroness, Lady Jones, and the noble Lord, Lord Bassam, on having persuaded the Government to move further on the transparency agenda. I like the description given by the noble Lord, Lord Bassam, of the government amendment being more elegant. It is nice to think of amendments being elegant; it is not often that we think in those terms. We very much support the new amendments with some of the caveats that he made.

[Viscount Camrose (Con)]

I thank both noble Lords for speaking so eloquently—indeed, so briefly and elegantly—and the noble Baroness, Lady Jones, for tabling her amendments, which would require the DMU to establish a process for non-SMS firms to register themselves with the DMU as an interested party. The DMU would then be required to send certain notices to these challenger firms.

The Government agree that it is important that affected parties should have access to appropriate information related to DMU investigations. That is why the Government amendments go further, we feel. They will ensure that, subject to confidentiality, the DMU is required to publish all its SMS conduct requirements and PCI notices online, where they are accessible to everyone and not just specific firms that have registered their interest, or those who might not be considered challenger firms. The noble Lord, Lord Bassam, made a point about being informed of these things: while we would prefer not to put any such mechanism in the Bill, it is straightforward to imagine mechanisms that the DMU could employ to automate that.

The CMA has already been updating its approach to identifying and seeking input from third parties, including outside of formal consultations—making calls for evidence when launching investigations, web submission portals, and information requests for businesses, among others It will be able to use these approaches to inform decisions under the new regime.

I agree very much with the spirit of the noble Baroness’s amendments, which is why these government amendments will go further, to promote transparency across the regime. I therefore welcome the statement of the noble Lord, Lord Bassam, that he feels sufficiently reassured to not press the opposition amendments at this time.

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Moved by

[Lord Clement-Jones]

12: Clause 19, page 10, line 36, after “activity” insert “or another digital activity under its control that is affected by the relevant digital activity”
Member's explanatory statement
This amendment would widen the conduct requirements for designated undertakings to include an undertaking’s conduct with respect to any other digital activity that is impacted by its designated activity.

[Lord Clement-Jones (LD)]

My Lords, I rise to speak to Amendment 12 and support Amendments 14, 23, 34 and 60, which will no doubt be spoken to in more detail by their proponents.

Last week, several things took place. First, the European Commission issued Apple with a fine of €1.8 billion. The fine was increased due to Apple providing the Commission with misinformation during the investigation. Secondly, as many noble Lords have noted, the Digital Markets Act came into force in the EU. Thirdly, Apple took the decision last week to terminate Epic Games’s developer account, in retaliation for previous comments criticising Apple’s approach to managing the App Store.

Fourthly, Apple introduced a new core technology fee, which it announced in January. It proposes to charge any developer who takes advantage of the DMA’s benefits. In practice, it means that any developer wishing to list their app on an alternative store, or offer consumers an alternative payment method, is confronted with a new fee, despite not using any Apple service. This does not send a signal that Apple is ready to comply with new competition regulations. Such anti-competitive behaviour and the efforts of big tech to avoid meaningful regulation is exactly why the UK needs a strong digital markets regime, and a very good illustration of the tactics that some big tech operators are using.

The amendments being put forward today as regards digital markets are crucial to ensuring that the UK’s regulatory regime is fully equipped to meaningfully tackle big tech’s anti-competitive practices and prevent its circumvention and delaying tactics, and that, wittingly or unwittingly, we have not given it the ability to drive several coaches and horses through the CMA’s powers in the Bill. Equipping the CMA with a strong leveraging principle—which, thanks to the noble Lord, Lord Vaizey, we must now call the whack-a-mole principle—is therefore critical to ensure that it keeps up with such attempts to move illegal practices and fees around its ecosystems. I am not quite sure whether my Amendment 12 is belt or braces to the amendment being put forward by the noble Baroness, Lady Jones, but it is designed to ensure that what is called the leveraging principle has full play in the CMA’s powers.

The noble Viscount, Lord Camrose, said in Committee:

“We agree with noble Lords that it is crucial that the CMA can deal with anti-competitive behaviour outside the designated activity where appropriate”—


note the “where appropriate”. He went on:

“Our current drafting has sought to balance the need for proportionate intervention with clear regulatory perimeters. The regime is designed to address the issues that result from strategic market status and is therefore designed to address competition issues specifically in activities where competition concerns have already been identified. This recognises that SMS firms are likely to be active in a wide range of activities and will face healthy competition from other firms in many of them”.—[Official Report, 22/1/24; col. GC 164.]


However, the Government’s subsequent note on leveraging lays bare their limited approach to leveraging.

We need a much more comprehensive approach to the use of market power in non-designated activities, especially where activities are those such as operated by Google and Apple. For instance, Google runs Search, YouTube, its ad network, Ad Exchange and products such as Google Maps, Images, News and Shopping. All share operating systems and a browser, and fixed and common costs, and all operating system and browser costs are recovered from advertising. All search and browser and operating systems are integrated. All benefit from economies of scale, scope and network externalities. Apple, Amazon and Meta are all the same. They can account for everything as stand-alone businesses, but it is entirely their choice whether they do so; they can move costs around at will. Amendments are consequently needed to tighten up the provisions of Clauses 19 and 20—as particularly set out in Amendment 14 from the noble Baroness, Lady Jones—and ideally in Clause 29 as well.

I have signed amendments relating to countervailing benefits. Since the introduction of the Bill, we have been strongly of the view that Clause 29 could be a major loophole and that the long-term interests of the consumer could be ignored in favour of the short-term interests. On this basis, we strongly support returning to the form of the clauses as they were before Report in the Commons, as proposed by the noble Baroness, Lady Jones, in her amendments. I have sympathy with the amendment in the name of the noble Lord, Lord Lansley, too, and would support it if we felt there was sufficient support across the House.

Finally, I turn to Amendment 34 and the final offer mechanism, which is due to be spoken to by the noble Lord, Lord Black. The aim must surely be to ensure that the final offer mechanism is a credible incentive to negotiate, so that designated undertakings are not able to frustrate the enforcement process over many months or even years. The final offer mechanism would remain a last resort, used only when good faith negotiations had completely broken down but made a more credible incentive.

In closing, I should say that, if the noble Baroness, Lady Jones, wishes to test the opinion of the House on her Amendments 14 and 23, we will support her.

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[Viscount Camrose (Con)]

To address the concerns of the noble Lord, Lord Leong, that the current wording deviates from legal precedent, I note that, since this is a new regime, existing exemptions in different competition regimes would not be directly applicable. It is highly likely that the application of the exemption will be tested, no matter the wording.

Finally, Amendment 34, tabled by my noble friend Lord Black of Brentwood, would allow the final offer mechanism to be used after the breach of a conduct requirement, rather than after a breach of an enforcement order. This novel tool has been designed as a backstop to normal enforcement processes. It is a last resort to incentivise sincere negotiations concerning fair and reasonable payment terms between the SMS firm and third parties. I wholeheartedly agree with my noble friend that these incentives must be both compelling and credible. It is clearly preferable for parties to reach a privately agreed settlement rather than one chosen by the regulator. That is why we must ensure due consideration of less interventionist options before turning to the final offer mechanism.

However, if SMS firms try to frustrate the process or drag it out to the detriment of third parties, I agree that the DMU should be able to accelerate stages before the final offer mechanism is invoked. That is why we have ensured that the DMU will be able to set urgent deadlines for compliance with enforcement orders, supported by significant penalties where appropriate, in cases of non-compliance.

I can robustly reassure my noble friend that the CMA can, via conduct requirements and enforcement orders as well as the final offer mechanism, gather and share key information with third parties.

Finally, to his comment on the forced withdrawal of content, the Bill is able where appropriate to tackle this issue. A conduct requirement could, for example, prevent an SMS firm withdrawing a service in a discriminatory way or treating users more favourably if they purchase the SMS firm’s other products.

The Government have worked hard to strike a balanced approach to intervention. This includes ensuring that firms cannot undermine regulation, and prioritising benefits to consumers at the heart of the regime. I believe the tools, as drafted, achieve these goals, so I hope that noble Lords will not press their amendments.

[Lord Clement-Jones (LD)]

My Lords, I thank the Minister for his response to the various amendments. I will be extremely brief; there will probably be quite a few votes now. I thank him for a full reassurance on Amendment 60, tabled by my noble friend, on standards and interoperability. I was looking closely at the noble Lord, Lord Black, when the Minister talked about Amendment 34, and I think there was a half-reassurance there—so that is one and a half so far.

It is clear to me, having discussed countervailing benefits further on Report, that this is, if anything, more dangerous than it appeared in Committee. I am sure that the noble Baroness, Lady Jones, will have noted the mood of the House as we discussed that.

On leveraging, the Minister made a valiant attempt to go through some points where the CMA might take more into account in terms of non-designated activities and so on. But the Minister sent through the technical note, and I am afraid that, if you look at it with care, it makes quite clear the circumscribed nature of the CMA’s powers under the Bill as currently drafted. It will be very important that we take a view on that. I am sure the noble Baroness, Lady Jones, has been alert to that as well. I withdraw my Amendment 12.

Amendment 12 withdrawn.

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Moved by

[Lord Clement-Jones]

61: Clause 126, page 80, leave out lines 4 and 5 and insert—
““(1) The Tribunal may award exemplary damages in any collective proceedings.””Member's explanatory statement
This amendment would allow exemplary damages in collective proceedings, which the bill as drafted seeks to prevent.

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[Lord Clement-Jones (LD)]

My Lords, the Minister gave a disappointing response in Committee to my amendment on exemplary damages in collective proceedings. In explaining the Government’s decision, he said:

“The bar on the availability of exemplary damages in collective actions was one of the many safeguards put in place when the Consumer Rights Act 2015 was enacted, to ensure a balanced system of collective actions before the CAT which will not lead to a culture of undue litigation and US-style class actions”.—[Official Report, 31/1/24; col. GC 371.]


That is not a particularly helpful way of describing a legitimate assertion of consumer rights in a collective fashion, given the imbalance of power that is there so often in these proceedings. We have heard about asymmetry, and this is precisely that kind of area. Why should they be denied exemplary damages when in an individual case they would have been awarded, for instance where the illegal action has been deliberate?

I thank the Minister for his letter of 27 February. In it, he says:

“These safeguards were put in place when the Consumer Rights Act 2015 was taken through the House to ensure a balanced system of collective actions before the CAT. These safeguards ensure that defendants are protected by avoiding vexatious and unmeritorious claims—or fishing expeditions—while allowing legitimate claims for redress to proceed”—


this is the point where I took a deep breath—

“without defendants feeling pressured to settle despite the likelihood of a strong defence”.

Let us consider who we are thinking of as defendants: quite often in these circumstances, they will be extremely large companies. Is it not time that we reviewed the Consumer Rights Act 2015 in that respect? Surely, in these circumstances, we are talking about big tech, which has all the market power and the ability to finance litigation till kingdom come. Have the Government engaged in any recent consultation on that? As far as I can see, the last consultation they conducted was 10 years ago. I hope that the Minister has some slightly better answers this time around than both those in his letter and in Committee.

I look forward to hearing from the noble Lord, Lord Tyrie, and I encourage him to retable his Amendment 65 on whistleblowing. The government response in Committee and in their letter of 27 February—in contrast to what I have just said—demonstrated a real interest in expanding the regime set out in the Public Interest Disclosure Act 1998. The Government now say that they are currently reviewing the effectiveness of the whistleblowing framework in meeting its original objectives. I very much hope that the Minister can give us a foretaste of the conclusions of that review. I also look forward to hearing from my noble friend Lady Kramer, who has been a champion of whistleblowing rights.

Without anticipating what the noble and learned Lord, Lord Thomas, may say, I welcome government Amendment 62, but the timescale is crucial. We on these Benches will help to facilitate a Bill putting those rights on the statute book in any way that we can. We have received a letter from the Association of Litigation Funders. Without putting too fine a point on it, it says: “This vital role of litigation funding has been highlighted recently following the increased and long-overdue coverage of the Horizon scandal. Alan Bates, the lead claimant against the Post Office, has said that the backing of litigation funders helped him and his colleagues secure justice, expose the truth and clear their names and reputations”. I cannot think of a better reason to make sure that we get the Bill on the statute book as soon as possible. I beg to move.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I have Amendment 63 in this group, which is an updated and slightly amended version of Amendment 89A that I tabled in Committee. As the title of the proposed new clause says, the amendment calls for the Government to undertake a review of the third-party litigation funding industry. We discussed my earlier amendment on 31 January, and a lot has happened since. I have been blowing the trumpet since March 2017, and suddenly it appears that the walls of Jericho have fallen down.

I thank the noble and learned Lord, Lord Thomas of Cwmgiedd, who has been kind enough to send me a copy of the draft report by the European Law Institute on the principles that should govern third-party funding. The draft report contained a great deal of intellectual heavy lifting, from which I have benefited greatly.

Most importantly and significantly, I thank my noble friend the Minister and, through him, the Lord Chancellor and the Ministry of Justice for the announcement on 4 March that a review of third-party litigation funding would be undertaken. I am also grateful to my noble friend and his officials for giving me the chance to see some early draft terms of reference and for the opportunity to discuss them with him. I have a handful of points about them that I would like to put on record tonight, and I hope he will be good enough to pass them on to the MoJ, so that they may be taken into consideration as the terms of reference are firmed up.

First, in Committee I explained that I was a very strong supporter of the concept of access to justice, but that we needed to know what sort of justice was being accessed. The noble Lord, Lord Fox—I am sad that he is not in his place, but I did say I was going to mention him this evening—got after me, not entirely unfairly, saying that all my remarks were, as he put it, of second-rate importance and that, without third-party litigation funding, there was no justice at all, to which I reply: up to a point, Lord Copper.

We—and I hope the review—must not forget that the funders are profit-making entities. This in itself is entirely understandable, but a profit-making entity marches to the beat of a different drum. All I am saying is that the plaintiffs—whose interests, after all, the funders are supposed to represent—are entitled to know about the beat of that drum, the waterfall of the distribution of the proceeds, who pays costs, and all those sorts of issues. If obfuscation takes place, there should be a body—the courts, perhaps—that can step in. Equality of arms demands no less.

My second point is that I hope the review will be prepared to get down into the real practical detail of what is happening in the industry today. High-flown legal principles are really important to provide the right structure but, to be effective and worth while, the review will need people with experience of the third-party litigation funding industry and those with a preparedness to get into the detail and turn over all the stones.

Thirdly, I hope the review will examine the consequences of grouping claims together, in the way that they are put together for funding via a single investment pot. In particular, the review will need to consider the position where firms of solicitors are undertaking the grouping. As I explained in Committee, where several cases are included in a single pot, there is a danger of too early a close-out, from a plaintiff’s point of view, of the remaining case or so, when the funder would like to round up the pot and return the money to its investors. By contrast, when matters are not going so well, it may be in the funder’s interest to prolong the proceedings—not in the interests of the plaintiffs—in the hope that a greater result will come from the last few cases, and the result will be a much more satisfactory outcome. The key differentiation is that the plaintiffs have an interest in the outcome of a single case, whereas the funders have an interest in the outcome of a group of cases.

Fourth is any unwitting exposure to costs. Under the opt-in regime, individuals took their chances when they signed in—not so under the opt-out regime. I think I am right in saying that there is nothing to stop my noble friend the Minister, me, or Members of your Lordships’ House suddenly getting communications saying, “Please send us £100 for your share of unfunded costs of bringing this case”. That seems to be not a likely but a possible situation, and not a very satisfactory one.

Fifthly, for those Members of your Lordships’ House who sat through Committee and other stages of the National Security and Investment Act, when we were seeking to achieve a reasonable balance among interested parties, there is a read-across to this review. It is surely not in our national interest to have unknown funders—perhaps backed by foreign Governments—able to press for litigation claims against high-tech UK companies. Such actions can disrupt the management and development of the company or damage its reputation, and could in some cases give access to its technology. An ability for the Government and/or the courts to require disclosure of beneficial ownership could be of great advantage in the future.

Finally, we are promised a preliminary report this summer and a final report in summer 2025. This will presumably mean that the earliest we can accept draft legislation, if there is any, will be in the 2026-27 legislative programme, leading to stuff on the statute book in 2028. That is quite a long way away, and I hope we are not going to see any slippage in that timetable. I hope that I have been over-pessimistic about what might be achieved, and that my noble friend can reassure us on that.

I end as I began, by thanking my noble friend and the Government for this important development. I hope they will feel able to pass these remarks on to the MoJ and I ask whether those of us who have taken a long-standing interest in TPLF can be kept informed as matters develop, and that we shall have the opportunity to give evidence to the review in due course.

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[The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)]

I thank all noble Lords who have contributed to the final group this evening, group 4.

Amendment 61 tabled by the noble Lord, Lord Clement-Jones, would enable the Competition Appeal Tribunal to award exemplary damages in collective proceedings. He is familiar with the Government’s position on this matter. I have been pleased to have the opportunity to discuss it with him further since Committee, and have written.

The Government consulted before introducing the collective action regime in 2015. The great majority of respondents said that exemplary damages should not be available in collective actions to ensure that firms were not unduly pressured to settle claims due to just the risk of punitive damages. Introducing exemplary damages in collective actions could also act as a disincentive to leniency applications—these are critical to the detection and enforcement of infringements by public regulatory authorities. Without effective leniency programmes and public enforcement, it could be far more difficult for private parties to pursue redress.

This view was shared by both businesses and consumer groups, including the consumer group Which?, which did not consider extending exemplary damages to collective actions to be necessary. I am sure that this will be of particular interest to the noble Lord, Lord Clement-Jones, given his commendable focus on ensuring consumers are at the centre of our thinking. The Government believe the current provisions in the Bill reflect the right approach on this matter.

Government Amendments 62 and 157 relate to litigation funding. The Government have recognised the challenge posed by the PACCAR judgment and the impact on access to justice. Furthermore, it has always been the Government’s intention to address the impact of the PACCAR judgment in full at the earliest opportunity. Since Committee, the Government have announced that it will quickly bring forward a separate Bill to enable this. I am sure that noble Lords across the House will welcome this news.

Clause 127 was introduced previously to mitigate the impact of PACCAR by enabling PACCAR-compliant funding agreements to be applied to opt-out collective actions. This clause will no longer be required, and these amendments effect its removal. I hope that noble Lords will support these amendments, along with government Amendment 66, which is a tidying-up amendment to remove a redundant cross-reference in Schedule 13.

[Lord Clement-Jones (LD)]

My Lords, I am sorry to interrupt the Minister but the noble Lord, Lord Bassam, and I would be keen—despite the dinner hour approaching—to know a bit more about the Minister’s plans as regards the short Bill. We want a bit more specific information about timing and what is happening. Is there a period of consultation, or can we go straight to legislation. What is the plan? With the best will in the world, we are delighted to hear what the Minister has to say, but can we have some specifics?

[Lord Offord of Garvel (Con)]

Yes, this will be happening quickly.

[Lord Clement-Jones (LD)]

My Lords, that is rather better than the ministerial “in due course”. That is all I can say.

[Lord Offord of Garvel (Con)]

I thought the noble Lord would appreciate that clarity.

Amendment 63 was tabled by my noble friend Lord Hodgson and I thank him and the noble and learned Lord, Lord Thomas, for their contributions to the debate. While the Government recognise the important role that litigation funding can play in facilitating access to justice, we are not blind to some of the challenges and opportunities to reform and improve the funding system. That is why, in recent days, the Lord Chancellor has written to the Civil Justice Council, inviting it to undertake a review of the sector. This work will ensure that claimants can get the best deal and it will expressly consider the need for further regulation or safeguards. Its terms of reference will be announced in the coming days.

[Lord Clement-Jones (LD)]

I am sorry my Lords; I regret to keep interrogating the Minister, but there is a clear separation, I assume, between a review as to whether or not regulation is required, in the form that the noble Lord, Lord Hodgson, talked about, and re-establishing the basis for litigation funding following the PACCAR case. I assume there is a clear distinction between the two activities.

[Lord Offord of Garvel (Con)]

That is correct.

Colleagues from the Ministry of Justice will be following this debate closely and will have heard the points made by my noble friend Lord Hodgson regarding the need for momentum for this review. Therefore, it would not be right to have a statutory review that would duplicate this work.

Amendment 65, tabled by the noble Lord, Lord Tyrie, is about whistleblowing. I thank the noble Lord and the noble Baroness, Lady Kramer, for their passionate contributions on this topic this evening. As I made clear in Committee, the Government recognise how important it is that whistleblowers are supported to shine a light on wrongdoing and believe that they should be able to do so without fear of recriminations. In 2023, the CMA increased the cap on rewards for illegal cartel whistleblowers from £100,000 to £250,000 to strengthen its enforcement work. Additionally, the Government are undertaking a wider review of the effectiveness of the whistleblowing framework in meeting its original objectives to facilitate whistleblowing, protect whistleblowers against detriment and dismissal, and to facilitate wider cultural change around whistleblowing.

My colleague the Minister for Enterprise, Markets and Small Business has recently mentioned in the other place that the research for the review is near completion. The Government intend to provide an update on this shortly.

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[Lord Tyrie (Non-Afl)]

Can the Minister say whether “shortly” is the same as “quickly”, and whether it will be a comprehensive examination of the subjects or just picking off a small number of areas? What exactly is it looking at?

[Lord Clement-Jones (LD)]

Before the Minister stands up, I will add to that. The Minister used the word “research”, which I thought was extraordinary. “Research” is a flabby kind of expression in these circumstances. Do the Government intend to review the current state of whistleblowing with a view to ensuring there is a more comprehensive approach to it, or is this just some nice-to-have academic exercise?

[Lord Offord of Garvel (Con)]

I thank both noble Lords for that. The update will be provided shortly. I agree with the noble Lord, Lord Clement-Jones, on the beauty of the wording that the “research” for the review is near completion. It does perhaps need some clarification, so let us get the timetable and I will provide that as soon as possible.

The noble Lord’s continued engagement is greatly welcomed as we undertake this important work. However, we do not think it appropriate to place a new and binding obligation for a further review to be conducted within a specific timeframe. I will come back to him with exactly what the timeframe is.

Amendment 153 from the noble Lord, Lord Tyrie, would require the measures in the Bill to be reviewed at five-year intervals by an individual appointed with the consent of the relevant parliamentary Select Committee. I thank the noble Lords, Lord Tyrie and Lord Kamall, and the noble Baroness, Lady Kramer, for their contributions to the debate on this amendment. I commend its intent. However, the Government have already committed to carrying out an evidence-led post-implementation review to assess how the Bill is delivering on its aims. The CMA has also engaged constructively with parliamentary committees to support their scrutiny of its activities. This will continue in the future. Noble Lords will be aware that the CMA is also required to present and lay its annual report in Parliament, covering its operation and effectiveness.

I thank the noble Lords, Lord Clement-Jones and Lord Tyrie, and my noble friend Lord Hodgson for their amendments. I hope that they are sufficiently reassured by what I have said and do not feel the need to press them.

[Lord Clement-Jones (LD)]

My Lords, I thank the Minister for that response. Even on an empty stomach, there are things to be taken away from what the Minister said. I score him two and a half out of four as far as this is concerned. What he said on exemplary damages was disappointing. I cannot see why the Government do not understand that using a review that took place in 2013 as a stick to beat us with by saying that we cannot have exemplary damages for collective proceedings seems a bit perverse. Time has moved on. The whistleblowing side is the half—so nul points for exemplary damages and half a point for whistleblowing, but if there had been more than just research it might have been full marks. As regards the other two points, the fact that there will be a post-implementation review is sensible. The Minister did not say much more about the post-PACCAR pledge, but we take a little bit on trust, particularly at this time of day. In the meantime, I beg leave to withdraw Amendment 61.

Amendment 61 withdrawn.

Digital Markets, Competition and Consumers Bill

Lord Clement-Jones Excerpts

Report stage
Wednesday 13th March 2024 Lords Chamber

Moved by

[Lord Clement-Jones]

64: After Clause 141, insert the following new Clause—
“Amendment of section 58 of the Enterprise Act 2002After section 58(2A) of the Enterprise Act 2002 insert—“(2AA) The need for free expression of opinion and plurality of ownership of media enterprises in user-to -user and search services.(2AB) Media enterprises include—(a) newspapers,(b) broadcasters, and(c) providers of video on demand and audio on demand.(2AC) For the purposes of this section “user-to-user service” and “search service” are defined in Part 2 of the Online Safety Act 2023.””Member’s explanatory statement
This amendment updates the specified considerations that the Secretary of State can use to issue a public interest notice that reflect modern market conditions where new media may give rise to such concerns.

[Lord Clement-Jones (LD)]

My Lords, with only one amendment in this group, I have the mixed blessing of having the Minister’s undivided attention. I will be very brief as I want to give way to heavier oncoming traffic, in the form of Amendments 67 and 158. My intention in retabling this amendment on Report is to probe further the Government’s intentions as regards amending the Enterprise Act 2002, in respect of mergers of digital media.

In Committee, I pointed out that the Online Safety Bill—now Act—sets great store by the importance of freedom of expression on digital media and, in the context of competition in the media, we believe that the protection of the public interest needs bringing up to date, alongside the collective consumer interest. This was on the basis that digital media now play a significant role in the national discourse, and public interest considerations could emerge from permutations of takeovers or mergers.

In Committee, I described how Section 58 of the Enterprise Act is limited in scope, and that we should add the need for free expression of opinion and plurality of ownership of media enterprises in user-to-user and search services to the existing public interest considerations that the Secretary of State can take into account. The reply of the Minister—the noble Lord, Lord Offord—was sufficiently encouraging for me to bring the amendment back for further and better particulars. He said:

“The Government are currently reviewing the recommendations on changes to the media public interest test in Ofcom’s 2021 statement on media plurality. Ofcom did not recommend that online intermediaries or video and audio on-demand services should fall within the scope of the media mergers regime, which this amendment would provide for”.


There is always hope. The Minister went on:

“We are considering Ofcom’s recommendations carefully and, as we do that, we will look closely at the wider implications on the industry. The Government have not proposed pursuing substantive changes to the grounds for public interest interventions in mergers in this Bill. The changes recommended in Ofcom’s review can be addressed directly via secondary legislation under the made affirmative procedure, if appropriate”.—[Official Report, 29/1/24; col. GC 291.]


The Minister did not offer any detailed timetable, so this is a brazen attempt to push the Minister further in telling us what the Government really have in mind, even if it is going to be included in secondary legislation. It is quite clear, in general, that changes to the Enterprise Act are needed and should be in contemplation. I very much hope the Minister can go rather further than he did in Committee. Indeed, it may be that there is a vehicle available, in the form of the Media Bill, which could take the position further. I beg to move.

[Lord Lansley (Con)]

My Lords, I intervene very briefly to support the noble Lord, Lord Clement-Jones, in the intentions of his amendment. A number of noble Lords will recall that, about eight years ago, we sought that the Government would use secondary legislation to extend the definition of media enterprises under the Enterprise Act.

The point that the noble Lord, Lord Clement-Jones, is making is in this territory. Clearly, if media enterprises for these purposes were defined more widely, it would capture some of the providers that the noble Lord, Lord Clement-Jones, was talking about. At the moment, media enterprises basically consist of print newspapers or broadcasters—and broadcasters are only those that are licensed under the Broadcasting Acts.

I hope it will be evident to noble Lords that there are now many more news creators and aggregators, and sources of news, that make up the news landscape and are not comprised within the definition of print newspapers or of broadcasters under the Broadcasting Act. So we need to make sure that the specified considerations under Section 58, about free expression, accurate presentation and plurality, are applied in relation to this wider definition of media enterprises.

This was something that Ofcom said to Ministers in pursuance of the consultation about the media public interest test, I think as far back as 2021, or maybe at the end of 2022. So I suppose what I am asking is to share in the urging of the noble Lord, Lord Clement-Jones, that Ministers might take this on, and to give advance notice that—from my point of view—we should address this in the Media Bill quite soon, in order to give them further encouragement for this purpose.

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[Lord Clement-Jones (LD)]

My Lords, I can barely contain my excitement. It is very good to see the noble Lord, Lord Parkinson, in his place, and I very much look forward to hearing what he has to say in the debate on the next group. There is a difference in principle, though, between the amendments in the next group tabled by the noble Baroness, Lady Stowell, on ownership by foreign Governments and the future-proofing that my amendment seeks for digital media.

I very much appreciate what the noble Lords, Lord Lansley and Lord Bassam, said about the need to encompass this type of media. Whatever the content of the Minister’s response, I believe that if we do not deal with digital media in this Bill, we will need to deal with it in the Media Bill. It is a current issue; the Minister used the phrase “current market conditions”, which was a slightly odd way of describing the fact that we now have an incredibly lively digital media. After all, why do we have the final offer mechanism in the digital markets Bill? It recognises the issues related to news media and the need to make sure that there is a proper negotiation on the use of, and links to, news media. We need to make progress on this, but I will give way to the oncoming traffic of the next group. I beg leave to withdraw my amendment.

Amendment 64 withdrawn.

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[Lord Kamall (Con)]

My Lords, a number of principles have been spoken about. I believe firmly in the principle that no Government, British or foreign, should be allowed to own a UK media outlet. When my noble friend Lady Stowell asked me whether I would support her amendment I initially declined, because I told her it did not go far enough. I apologise for that, because, as my noble friend said, the UK Government do not own any media outlet; why, therefore, should any foreign Government be allowed to do so?

We should also be absolutely clear that this is not anti-foreigner sentiment. I and, I am sure, many other noble Lords have no objection to foreign private companies owning UK news media outlets. Indeed, in my years in the European Parliament we used to refer to the Financial Times as the in-house paper of the European Commission, only to find that it was owned by a Japanese company.

There are clearly some tricky issues here in drafting the relevant law that the clever lawyers will have to navigate. For example, it is well known that Chinese non-state-owned enterprises often have strong links to the leadership of the Chinese Communist Party. Indeed, some China analysts claim that there is little difference between the Chinese Government’s influence over state-owned and non-state-owned companies, so were a non-state-owned Chinese company to bid for a UK media outlet there would also be a number of questions. That is possibly a debate for another day.

In short, like many noble Lords, I am against any government ownership of UK media organisations, whether it be the UK Government or a foreign Government. For these reasons, I support Amendments 67 and 158 in the name of my noble friend Lady Stowell.

[Lord Clement-Jones (LD)]

My Lords, despite the shortness of this debate, we have had some very fine and inspiring speeches. We on these Benches wholly support the amendment moved by the noble Baroness, Lady Stowell. Indeed, like the noble Lord, Lord Robertson, I find it extraordinary that we do not have this already on the statute book. Given the importance of pluralism and freedom of speech in our media, the thought of foreign Governments impacting on our media in the way that is currently threatened seems quite extraordinary.

My main purpose is to associate myself with the remarks of the noble Lord, Lord Forsyth. When he moved his regret amendment, he talked about the ownership by the UAE of a UK quality newspaper. I have spent the last 10 years campaigning for the release of Ryan Cornelius from a Dubai jail. He was unjustly imprisoned on trumped-up fraud charges, and his sentence was arbitrarily extended by 20 years in 2018, just as he was due to be released. He now faces the prospect of many more years in jail. I am all too aware of the reality that lies behind the pleasant-looking tourist Dubai. Parliament should definitely have its say before a UK newspaper falls into the hands of such a Government. All this is a result of the activities of a member of the royal court of Dubai, so it very close to home in the UAE. Not only do we as a party on these Benches wholly support this amendment, but I personally feel very strongly about the need for it.

[Lord Bassam of Brighton (Lab)]

My Lords, I think the whole House is grateful to the noble Baroness, Lady Stowell, for the way in which she set out the arguments behind her amendment, and for the clarity, force and power of her voice in putting those arguments forward. We are also grateful to the noble Lord, Lord Forsyth, for the way in which he has argued his case—not once, but twice, and several other times too, when he has been given the opportunity; I always enjoy his interventions. I am enormously grateful to the noble Lord, Lord Robertson, for bringing breaking news to your Lordships’ House.

It might seem slightly ironic to some that we on the Labour Benches are trying to come to the rescue of the Daily Telegraph, but there is a much more important principle at stake here. It is an obvious place to start but let me begin with first principles: Labour believes in a free and fair press without state interference. We also believe in the accurate presentation of news and in freedom of expression, which is particularly important in the context of RedBird’s attempted takeover. Our view on this matter is not shaped just by the Telegraph Media Group takeover proposal currently being considered by the Secretary of State; we would have similar concerns if other titles were subject to bids from other states. When the Minister explains to the House the Government’s intention, can he clarify the position, too, of not just newspapers but other publications? That is not to say that we do not have real concerns about the proposed sale of the Telegraph Media Group. We very much welcomed the Secretary of State initiating the investigations by the regulators. Now that their reports have been submitted, we hope that a decision will be taken in a timely way and as soon as possible, and in a way that is consistent with the quasi-judicial nature of the process.

For the avoidance of doubt, this is not to say that we oppose foreign investment in this country; we believe that inward investment in our economy is vital. The noble Baroness, Lady Stowell, spoke eloquently on that point, as did the noble Lord, Lord Kamall. However, foreign ownership of UK media organisations raises broader questions around the accurate presentation of news and, in certain cases, the free expression of opinion. Both of these, as many noble Lords have said, are vital to the long-term health of the print media sector and, more importantly, to our democracy.

I listened very carefully to the noble Baroness’s introduction and the other speeches. We have to give them all credit for the way in which they addressed the issue. I listened particularly to the noble Lord, Lord Robertson, because of his expertise, and his former role and continuing interest in security matters. While I am giving out thanks, I also thank the Minister, who helpfully found the time to meet me and my noble friend Lady Jones of Whitchurch this afternoon to discuss this important issue.

As we have seen with other legislation, most progress is often made when groups from across your Lordships’ House have open, frank discussions and then work together to agree solutions. I understand that for various reasons the text of Amendment 67 is not necessarily what all its supporters would have wanted. For that reason, and for a number of others that I will set out, we are not convinced that it presents the right response to this serious matter. Our view is that a free and fair press should be without state interference, which means without undue influence from our own state as well as others.

It is correct that the Secretary of State should take an interest in cases which raise concern on competition and plurality grounds, but her responsibilities are rightly constrained by legislation, and her ability to comment is limited by the quasi-judicial role she is playing. Where security concerns may arise, the Secretary of State will no doubt receive confidential briefings on the potential implications of different outcomes. In our view, that process must be allowed to play out. That the CMA and Ofcom have reported to the Secretary of State this week points to the well-established merger regime that has been in place in this country for some time. As part of their investigations, those independent regulators draw on expert advice and are able to obtain appropriately handled confidential information, including material that may be highly commercially sensitive. On the basis of all that information, they may then come to a judgment regarding the suitability of a takeover proposal and advise the Secretary of State accordingly. Parliament has empowered the Secretary of State and those regulators. In our view, that is an appropriate level of state interest in sensitive matters.

Amendment 67 proposes that once the regulators have carried out their work and the Secretary of State has come to a decision, it should be for Parliament to approve that decision. While we generally support parliamentary scrutiny of the Executive and their decisions, we are not convinced that the mechanism envisaged by the amendment is suitable in the light of the sensitive security and commercial information that would have to be shared to inform debate and determine the outcome of votes in both Houses.

My impression from earlier discussions with the Minister and his colleagues in other departments is that a better approach would be for the Government to acknowledge the strength of feeling in this House and commit to bringing back their own text at Third Reading. If the Minister is able to make that commitment, I hope that colleagues on all Benches will be minded to accept that offer and work with Ministers, as we will offer to do, in the coming weeks to find a satisfactory outcome.

We have enormous sympathy with the noble Baroness, Lady Stowell, on this issue. We do not feel able to support her proposition in the form it is with us today. We know it has been brought forward with the very best of intentions, intentions we support, and because we share those, we urge the Minister to respond positively to finding a way forward over the next few weeks.

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[Lord Parkinson of Whitley Bay (Con)]

The provisions we will bring forward at Third Reading will relate to newspapers and periodical news magazines, as I have set out. It will not cover television and radio broadcasters at this time, but that is something we will continue to consider. We have already been considering it as part of our broader work on the media mergers regime. That work will continue. I am happy to speak with my noble friend Lord Lansley and others about it.

[Lord Clement-Jones (LD)]

Could the noble Lord go through again what will happen to an existing merger, which is subject to existing procedure? He seemed to be saying that, as soon the new provision comes in when the Bill passes, it will be subject to the new procedure as well as the old. Is that what he was saying, and how will that work?

[Lord Parkinson of Whitley Bay (Con)]

That is what I was saying, but it depends on when the Bill gets Royal Assent. That is in the hands of noble Lords and not just the Government. If any live case is still ongoing at the time of Royal Assent—we intend for the new provisions to come into effect at Royal Assent—then the Secretary of State will obviously follow the provisions as set out in other Acts of Parliament as decided by Parliament previously, and follow the law as enacted after Royal Assent.

[Lord Clement-Jones (LD)]

I have a second question. I am assuming that internet digital news media—not a newspaper—will not be covered by these provisions.

[Lord Parkinson of Whitley Bay (Con)]

No. I am grateful that we have separated the debate on the noble Lord’s previous amendment from this so that I can respond directly to the amendment brought by my noble friend Lady Stowell. I am grateful for his understanding of that.

The Government are focused on the reforms to media ownership rules, which were suggested in Ofcom’s 2021 review. It did not recommend that online inter- mediaries, including social media platforms, search and video/audio-on-demand services should fall in scope of that. I heard what the noble Lord said about having this debate in the Media Bill, and I look forward to doing so.

The secondary legislation provisions that I have outlined will be subject to the affirmative procedure in Parliament. Until such time as those regulations are laid and approved by Parliament, the whole regime applies to everybody caught by the general foreign state prohibition.

We have always believed that the trustworthiness of our news and the lack of government interference in it, whether domestic or foreign, is of paramount importance, which is why we are setting out today our plan to make that more explicit in the regulatory regime that exists. As my noble friend Lady Stowell is aware, work is already under way to update the media mergers regime more broadly, and I touched on that in my responses to noble Lords. We will continue to take that work forward. I hope that, on that basis, my noble friend is able to withdraw her amendment today. With renewed thanks to her and a renewed commitment to work with those who have supported her, I am grateful for the opportunity to speak today.

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[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I wish to speak briefly to support Amendments 99 to 101 in this group, to which I have added my name. The noble Earl, Lord Lindsay, and the noble Baroness, Lady Crawley, have very clearly set out the arguments and the rationale for our amendments, so I will not go into the same detail.

I thank the Minister for his time and that of his officials in meeting with those of us who have signed these amendments, and for his letters clarifying the position. We are grateful for the Government’s movement on several of the issues we raised in Committee. They were not actually raised by us—because of other circumstances, none of us was able to be here—but they were ably covered by the noble Lord, Lord Bassam, and my colleague, the noble Lord, Lord Clement-Jones.

Amendments 99 and 100 raise the issue of how trading standards operate across borders throughout the country. This is causing them considerable concern, and I will not repeat what has already been said, except to say that trading standards are a vital local authority service, but not one that attracts the same level of support as children’s services or disability services. I declare my interest as a vice-president of the LGA.

Local authority budgets are stretched beyond what is needed to make many vital services safe for the consumer. On Amendment 101, trading standards needs support in order to operate as effectively and efficiently as it can to protect the public. Requesting documents by post is more cost effective than going to the trouble of crossing the country to fetch documents. Trading standards needs to be able to operate effectively across the whole UK, and I support this amendment.

[Lord Clement-Jones (LD)]

My Lords, it is very good to see the full team back on the trading standards amendments. I congratulate all three noble Lords on their championing of trading standards. They need the powers that are being argued for in these amendments; they are the unsung champions of the consumer, and we should support them.

My main purpose in rising is to speak to Amendments 69, 91, 92 and 152. As regards Amendment 69, on misleadingly similar parasitic packaging, it was encouraging to hear the Minister confirm in Committee that the prohibition of misleading actions in Clause 224 and the banned practice in paragraph 14 of Schedule 19 will address the long-standing unaddressed practice of misleadingly similar packaging.

However, those provisions matter little if they are not enforced. During consultations and the debate on the Consumer Protection from Unfair Trading Regulations 2008, the then Government stressed that public enforcement would be effective and efficient. This has not proved to be the case, with just one enforcement action by trading standards in 2008—albeit a successful one. If shoppers are to be protected from this misleading practice, there must be a realistic expectation that the Bill’s provisions will be enforced.

Historically, the Government have placed the duty on public enforcers. That is unrealistic, as trading standards face diminishing resources. The CMA stated clearly that misleadingly similar packaging is a consumer protection, not an IP, issue, following its investigation of the groceries market in 2008. Yet is has undertaken no hard or soft enforcement and did not include it in its recent scrutiny of the grocery sector; there is no sign that it will take a different approach in the future. There are no other realistic public enforcement options available. For the Bill to make a difference, it is essential that affected branded companies are granted powers to bring civil cases using the Bill’s provisions on the specific practice of misleadingly similar packaging alone. It has been ignored by public enforcers for the last 15 years, despite the many examples that appear year on year. Granting affected brand owners such powers would mean that shoppers would have the protection envisaged by the Bill, and affected brand owners would have more effective redress at no cost to the taxpayer.

Amendments 91 and 92 concern an area of concern for the retail industry, expressed by its representative body, the British Retail Consortium, in which I was an active participant more years ago than I care to remember. The well-established and well-used primary authority system enables a business to request assured advice from a primary authority that it has appointed. Provided that the business follows the advice, it cannot be prosecuted by any local authority for its actions. Under the Bill, the CMA will receive additional powers on consumer protection, whereby it will move to administrative fines that are potentially very high. I am informed that the CMA currently refuses either to provide assured advice of its own or to accept primary authority advice. It says that it may not agree with the advice and that it would be too costly, ignoring the fact that it is at a cost to the business. That undermines the primary authority system and will do so even further when the CMA receives its new fining powers because businesses will feel unable to rely totally on primary authority advice for what they are doing in the overlapping areas.

The amendments attempt to deal with that, either by requiring the CMA to provide assured advice itself, as set out in Amendment 91, or, perhaps more practically, by accepting primary authority advice as binding up to the point that it may be repealed if it is shown to be inaccurate, as set out in Amendment 92. That would mean that a business could rely on it for anything it does up to any repeal. It should also be remembered that the CMA can, if it wishes, act as a supporting regulator, whereby it can be called on to provide its view to a primary authority when that authority is looking at providing advice in an area of relevance and overlap to the CMA.

Finally, it should be noted that the CMA has decided to provide what is, in effect, assured advice on competition matters in the sustainability area; namely, it has agreed not to prosecute a business that seeks its advice and follows it in a small area on the competition side. This means that, in principle, the CMA does not seem to be opposed to such an approach. Green claims on the consumer side are a key area of uncertainty for business, an area where assured advice would in fact be most useful.

I turn to my final amendment, Amendment 152. As I explained in Committee, standard essential patents are patents that are necessary to implement an industry standard, such as wifi or 5G. Because the market is locked into a standard, and to prevent abuse of the market power that this situation conveys, SEP owners are required to license their SEPs on fair terms. Unfortunately, there is widespread abuse of this monopoly power by SEP holders. The principal issue raised with me by the Fair Standards Alliance is the threat of injunctions; the costs to many businesses can be ruinous. This tactic not only threatens innovation by UK businesses but represents a strategic risk for UK priorities, such as 5G infrastructure diversification and smart energy network security, by limiting the competing players. The availability of injunctions for SEPs gives foreign SEP holders the ability to prevent others in the UK from entering, succeeding and innovating in those markets.

The Minister, the noble Lord, Lord Offord, gave a somewhat encouraging response in Committee—I keep using the word “encouraging” about his responses, although I keep hoping for better—to the effect that the Government would set out their thinking in the very near future, and that that would include the question of injunctions.

After many months of consultation, the IPO has published its 2024 forward look on this issue. It has reported its findings to Ministers and has agreed key objectives concerning SEPs. Those are

“helping implementers, especially SMEs, navigate and better understand the SEPs ecosystem and Fair Reasonable and Non-Discriminatory (FRAND) licensing … improving transparency in the ecosystem, both pricing and essentiality; and … achieving greater efficiency in respect of dispute resolution, including arbitration and mediation”.

Although the IPO has confirmed that SMEs are especially disadvantaged by the current SEP regulations, it states, disappointingly, on injunctions that

“we have concluded that we will not be consulting on making legislative changes to narrow the use of injunctions in SEPs disputes”,

with very limited justification for the decision, saying simply that it was taken after

“careful consideration of the evidence, operation of relevant legal frameworks and international obligations”.

The Coalition for App Fairness has pointed out to me that a day after the IPO announcement, the European Parliament voted by a large majority to approve its own SEP regulation. The EU framework will include the creation of an SEP register, database and essentiality checks; a defined maximum total royalty for an SEP; and an independent, expert-led conciliation process to establish the fair price for SEPs, which, crucially, will block the use of injunctions while the process is taking place. That seems entirely appropriate. The EU has proved that such a regulatory regime can be delivered; why cannot the UK Government, with all the freedom of Brexit? What is the basis for the IPO decision? What evidence, legal frameworks and international obligations prevent it from dealing with and legislating on injunctions? Why cannot the IPO likewise establish a truly fair SEP licensing ecosystem?

The least the Government can do is give more detail to the many SMEs affected by this decision. The forward look states, rather lamely:

“The IPO will continue engagement with relevant industry and institutions to continue to inform our ongoing policy development and implementation of those actions set out above”.


What on earth does that entail? That is pretty mealy-mouthed. What benefit will there be from that?

[Lord Stevenson of Balmacara (Lab)]

My Lords, this is a wide-ranging group; there is good news hidden in the middle of it, and bad news—we will have to wait for the Minister to respond to get a full picture. Others have spoken in some depth and so I will not try to repeat what has been said. I certainly will not try to follow the noble Lord, Lord Clement-Jones, whose expertise exceeds the combination of everybody’s in the Chamber at present. On SEPs, I can only stand back in amazement that he has been able to understand what is being recommended by the IPO, let alone to have come forward with a plan that might take us a bit further down the track that we clearly ought to have gone down.

I turn first to the questions the noble Baroness, Lady Bennett, raised, which cut to the heart of what, is in some senses, the purpose of the Bill. I am afraid that she rather weakened her case at the end by saying that it was a much broader basis for debate and discussion than could be encompassed within this Bill; I think she saw it primarily as a way of continuing a much larger battle, and I wish her well with that. In that sense, we do not need to take this forward. However, I hope that the Government are taking note of the impacts that some of the provisions in the Bill are having, in the sense that it is not achieving the aims and objectives, which I think we all share, of making sure that we reduce carbon and try to meet targets which have been set for us in the long term on this. Therefore, greenwashing will continue, but we hope that it will be better in scope and that the focus will be more across the range of government activity.

On imitation packaging, as the noble Lord, Lord Clement- Jones, said, we have also been discussing this for a number of years in various Bills as they have come forward, and it is good that the assertion now is that in Clause 224 and Schedule 19, there will be help. However, the question is, of course, enforcement. I would be grateful if, when the Minister comes to respond, he could give us a bit more information about how that might happen in practice.

The questions raised by the noble Earl, Lord Lindsay, and supported by “the team”, as it was described, are a continuation of debates and discussions we have been having in this House for as long as I have been here—and I certainly have participated in them. It is good to see the government amendments in as far as they go, but the three remaining questions, as raised in Amendments 99, 100 and 101, need answers. I hope the Minister will expand on where the Government have taken us so far and give us some assurances.

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[Lord Clement-Jones (LD)]

My Lords, that is a bit terse, even by the Minister’s standards. I think we need to hear a little more about the form of enforcement, because the amendment is about the unsatisfactory nature of current enforcement. I referred to there having been only one enforcement since 2008, despite the fact that it was successful. What guarantee do the welcome recipients of the provisions in paragraph 14 of Schedule 19 have that there will be an effective enforcement regime?

[Lord Offord of Garvel (Con)]

The view of the Government in this legislation is that the banned commercial practice is banned already, as set out in Schedule 19, and that a strict civil enforcement regime is already in place, strengthened by Part 3. It is down to enforcers to tackle these misleading replica goods; our view is that it is up to the enforcement regimes to enforce under the current law.

[Lord Clement-Jones (LD)]

My Lords, I am not sure that the Minister has a full brief about the nature of the available enforcement. Will he write to me to provide a few more particulars and give more assurance in this respect?

[Lord Stevenson of Balmacara (Lab)]

My Lords, it is important that we unpick the point made by the noble Lord, Lord Clement-Jones, which I think was touched on but not addressed by the Minister. If we rely on civil remedies, we are not really addressing the problem that there is, in effect, an opportunity, for those who wish to, to exercise criminality; this surely cannot be left to the civil courts.

[Lord Offord of Garvel (Con)]

As some clarification is required, I am happy to write further on the matter.

Amendments 70, 71 and 93 to 98 are technical government amendments. The Bill empowers the courts to impose monetary penalties for a breach of consumer law and procedures. To accommodate the different processes by which court orders are served or enforced in Scotland and Northern Ireland, the amendments provide that prescribed penalty information may accompany an order in a separate notice, as well as being contained within it.

On government Amendments 72 to 90, on online interface and the powers of consumer law enforcers to tackle illegal content, I thank noble Lords who have contributed on this important issue. I am pleased to bring forward government Amendments 72 to 90 to give all public designated enforcers take-down powers to tackle infringing online content. The amendments enact the commitment made by the Government in their recent consultation response.

I thank the noble Lord, Lord Clement-Jones, for Amendments 91 and 92. Amendment 91 would require the CMA to provide advice on a business’s compliance with consumer law on request. It would also prevent enforcement action by any enforcer if the advice were complied with. The CMA already provides general guidance and advice on compliance. It is businesses’ responsibility to comply with the law, referring to guidance and seeking independent legal advice where necessary. It would not be appropriate to transform the CMA into a bespoke legal advice service. The amendment would also drain CMA resources from much-needed enforcement activity. Moreover, Amendment 92 compels the CMA to accept primary authority advice received by a business where that advice has been complied with. It is common practice for the CMA to consult the primary authority before taking action; this strikes the right balance and avoids binding the CMA to such advice, thus inappropriately neutering its discretion. I hope the noble Lord will agree that the purpose of a direct enforcement regime is for the CMA to enforce faster and more frequently; these amendments would diminish this objective and remove the deterrent effects of the regime.

[Lord Clement-Jones (LD)]

My Lords, does the noble Lord understand the need for certainty of advice when it is given by a primary authority and that the primary authority must feel, when it gives that advice, that it has the full backing of the CMA? There seems to be no assurance that this is under consideration or even a matter of concern.

[Lord Offord of Garvel (Con)]

We are clear that the CMA provides general guidance and advice, but it is the responsibility of businesses to comply with the law. If the CMA is transformed into a bespoke legal advice service, it will not be doing the work it is meant to do, which is focusing on enforcement. Therefore, we believe the balance is right in the mechanism put forward.

Turning to trading standards and Amendments 99, 100 and 101, I am grateful to my noble friend Lord Lindsay and the noble Baronesses, Lady Bakewell and Lady Crawley, for their continued advocacy for trading standards departments and for meeting with me on these issues. I very much enjoyed meeting the case officers in this place. Amendment 101 would end the prohibition on enforcers using information that a person has been compelled to provide under broad information notice powers in criminal proceedings against that person. This prohibition safeguards a person’s right not to self-incriminate—a long-established right protected by the common law and the Human Rights Act. The courts have held that material which exists independently of the will of the suspect, such as pre-existing data obtained during a search of the suspect’s premises, may be admissible in a criminal trial against them. By contrast, to comply with an information notice, a person will likely be required to generate documents. Legislation already permits trading standards departments to exercise their investigatory powers outside their local authority boundaries, including by carrying out in-person inspections of business premises. We have been informed that trading standards departments have used these on-site powers to secure documents from traders suspected of an offence and then relied successfully upon such documents in prosecutions against them.

Amendments 99 and 100 would permit any trading standards department based in Great Britain to carry out investigations across national borders. As I committed to my noble friends in writing, I have asked government officials to work further with trading standards to identify practical measures supporting greater cross-border co-ordination. To clarify, if an infringer is based in Scotland and the offence has caused harm in England, the English enforcer can pursue a prosecution through the English courts and vice versa—the procurator fiscal can prosecute a case where a trader is based in England but the infringement was committed in Scotland. All court orders in respect of consumer protection breaches have effect in all parts of the United Kingdom, regardless of where they have been made. We are open to exploring a variety of options, for example, exploring how best to facilitate local authorities across the country to exercise investigatory powers on behalf of each other. I have asked them to consult with trading standards when developing guidance on this legislation to ensure clarity on what it provides for. Once again, I thank my noble friend and the noble Baronesses for their engagement on this issue.

Government Amendments 102 and 103 make further consequential amendments to the Estate Agents Act 1979. They achieve consistency in how the Act applies to non-compliance with obligations under the court-based and the CMA direct enforcement regime.

Turning to standard essential patents, raised by the noble Lord, Lord Clement-Jones, through Amendment 152, I can confirm that the Government have now published their key objectives on SEPs and a forward look at work to be conducted in 2024. This follows input received in 2023 from key stakeholders from industry. The Government will first take forward non-regulatory interventions where action can be taken now. Later in 2024, the Government will launch a technical consultation on other potential interventions. On the question of injunctions, the Government believe that other measures, such as guidance, information on SEP licensing and how to respond to SEP disputes, is a proportionate government response at this stage. A resource hub will provide guidance that will enable businesses to better understand the SEP licensing system and the UK courts’ approach to the remedies available for patent infringement and existing services available for dispute resolution. The IPO will also continue engagement with relevant industry and institutions to continue to inform our ongoing policy development and interventions. My noble friend Lord Camrose has confirmed that his department will be making steps in what the noble Lord, Lord Stevenson, has described as a very complicated area.

I hope that this will—

[Lord Clement-Jones (LD)]

I am sorry to intervene again. The Minister is really confirming what the IPO has advised in its forward look. The Minister is saying, “Yes, this is important, but we are not going to do anything about injunctions”. Does he recognise the asymmetry in all this? This is why SMEs need enforcement to be looked at much more carefully in terms of the amendment that I have tabled. What is the essential objection to going forward with some kind of change, given that the rest of the proposals from the IPO seem to be pretty satisfactory?

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[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise very briefly. I spoke on these important subjects in Committee, and I am not going to repeat everything I said. I want to speak specifically on Amendment 104 on the right to repair, which the noble Baroness, Lady Hayman, so powerfully introduced, just to make a couple of additional points. She said that we are per capita the second-highest producer of e-waste in the world. It is interesting that we were talking about the security implications of this Bill in an earlier group on media ownership. With the incredible amount of e-waste in the world—53 million tonnes in 2022—and the need for rare earth minerals and the other minerals that go into these replacement products, it is worth saying there is a security implication to this that people may well not have thought of.

The noble Baroness, Lady Hayman, said that the Minister said that things were heading in the right direction. It is worth noting that there are a couple of areas where it very clearly is not. Increasingly, producers of devices, particularly phones, are hard-coding error messages into their product, so that if a third party tries to repair it, there is an error message and the device will not work any more. That has very clearly got worse, not better. There is also an increased amount of parts pairing, in which individual parts are tied to the device they are shipped with using a unique serial number, so you cannot get a replacement part put in. Again, the device will stop working. I think that was a really important point to make.

I have two points to make about how much further other parts of the world have gone. First, it was EU regulations that forced the latest iPhone to include a USB-C charging point rather than a proprietary one. That has both saved resources and saved people money, because the cost is about 1/10th of the proprietary charger, so this is also a cost of living issue. Secondly, I note that Germany and Austria have subsidies for repairs to allow low-income people to get electronic devices repaired when they would not be able to afford to do so otherwise. Please let us get some progress here.

[Lord Clement-Jones (LD)]

My Lords, my noble friend Lady Bakewell has clearly set out our support for Amendment 104 by the noble Baroness, Lady Hayman, and Amendments 109 and 115 by the noble Earl, Lord Lindsay, so I will not repeat what she has said. I shall speak to Amendments 107A and 107B relating to fake reviews, Amendments 105, 106, 110 and 111 regarding electrical safety and Amendment 108 on package travel.

The issue of electronic safety is a relatively new entrant in our discussions on the Bill, for which I apologise, but charities such as Electrical Safety First and Which? as well as the Government’s own Office for Product Safety and Standards have repeatedly found unsafe goods listed on online marketplaces. For instance, one investigation undertaken by Electrical Safety First found that 93% of products bought from online marketplaces were unsafe.

The Government have made a series of commitments on both online safety and product safety, included committing to ensuring that only safe products could be placed on the market now and in future, ensuring that the product safety framework was fit for purpose and making the UK the safest place in the world to be online. In my view, failing to address the sale of unsafe goods within the Bill means that they will fail to achieve their objectives in protecting consumers and promoting competition, and in addition will continue to fail in achieving their objective of ensuring that the UK is the safest place in the world to be online and that only safe products are placed on the market. By not including the sale of unsafe products within the scope of the Bill, it seems that the Government are allowing the UK to become what has been described as a Wild West for unsafe products.

There is a clear interrelationship between scams and unsafe products. For instance, Electrical Safety First found unsafe devices claiming to save consumers energy being sold on the online marketplace eBay. Not only were these devices ineffective at saving consumers energy, but they were also unsafe, placing consumers and their homes at the risk of electrical shock and fire. By not including unsafe products in the Bill, the Government therefore continue to place consumers at risk on a daily basis.

Consumers shopping on online marketplaces in other jurisdictions are better protected than UK consumers —in the EU, Australia and the USA, to name but three. The UK is clearly not moving at the same pace as comparable countries when it comes to regulating online marketplaces. The Bill is an opportunity to address that, but in its current form it is a missed opportunity to protect consumers.

I turn to Amendments 107A and 107B. In September 2023, as we know, the Government consulted on adding fake reviews to the unfair commercial practices list via Schedule 19 to the digital markets Bill, and now we have the government amendments to the Bill to reflect that. They are welcome so far as they go, but it is perplexing—informed organisations such as Trustpilot are perplexed—as to why the Government are not placing a stronger duty on social media firms and ISPs that host the sale of fake reviews. The wording does not expressly bring social media and internet service provider sites within scope where these are used by review sellers and brokers to offer their services. That seems extremely unsatisfactory, given that the Bill is so far through its scrutiny, and it is only on Report here in the Lords that we are seeing the wording that the Government intend to use to ensure that fake reviews are included in Schedule 19 on commercial practices.

Amendment 107A seeks to ensure that there is no loophole in the application of new paragraph 12A(4) inserted by Amendment 107. The inclusion of the words “for the facilitating of” in paragraph 12A(4)(b) could be read narrowly to suggest that the purpose of the service is relevant. In our view, providers of certain services such as social media sites that host the sale of fake reviews could potentially use that as a technicality through which to avoid liability by claiming that the purpose of the service they offer is not for doing anything covered by sub-paragraphs (1) and (2), and therefore this provision is not applicable in the event of abuse.

Is the Minister of the view that the facilitation of the sale of fake reviews by social media and internet service providers will be in the scope of this legislation under paragraph 12A(4), given the integral role that such services can play in enabling fake reviews to find customers? If not, why is such a gap being left in the legislation? Apparently, the Government are citing the legal scope constraints that act to limit their ability to tackle activity that happens upstream. I do not know what discussions have taken place between Trustpilot and the Government, but that sounds rather extraordinary.

I turn to Amendment 108. Since our discussions in Committee, it seems that Ryanair has started to work with some online travel agents. That definitely sounds like a win for our debates if we can take it as such, but other low-cost airlines are still resisting booking through agents, causing various harms to consumer protection, as we have discussed. The Minister’s statement about the package travel restrictions call for evidence is welcome, but the matter under discussion has always been a wider point regarding the use of third-party agents. Hence I have come back with one of the amendments that I tabled in Committee.

The Minister made one or two points in Committee that are worth picking up. He said that

“the contract is between the trader and the consumer, and therefore the consumer benefits from the relevant consumer rights”.

He also said that whether the transactional decision

“is carried out by the consumer themselves or a third party is not relevant. The consumer that the contract is with will receive the relevant consumer rights”.

Yes, the consumer is entitled to protection, but where an agent is involved this requires either the trader to pay the agent or the agent to stump up the refund themselves. That position also does not reflect the regrettable truth that consumers are being discriminated against because they choose to book through third parties.

The Minister brought up the question of the consumer-to-trader relationship and whether or not traders would

“become consumers in the eyes of the law”.

However, the issue is not that the agent becomes the consumer but that consumers who book directly through a third party are equally protected.

The Minister said that

“the Government have ensured that the CMA has significant powers to investigate and act if it finds that businesses are behaving anti- competitively in a market”.

It is not the CMA’s market powers that are in dispute; the problem is that the CMA is not acting to use those powers to investigate key consumer markets, despite clear evidence that competition is not working well.

The Minister also said:

“The operation of airlines and travel agents is governed by PTRs and ATOL. Those are being reviewed. That is the appropriate way to consider these issues”.—[Official Report, 31/1/24; cols. GC 394-95.]


Although important, neither of those addresses the misuse of market power and the damage that this is causing to consumer protection and to the viability of the market. Neither the PTR or ATOL regimes protect consumer choice or promote competition. The loss of that is the real threat, which can be addressed only through a CMA market review.

Finally, as regards ticketing, I very strongly support the amendment in the name of the noble Lord, Lord Moynihan. I salute him and Sharon Hodgson MP for their work through the all-party ticketing group throughout the years. In Committee, the noble Lord, Lord Offord, said that the Government do not wish to prevent consumers having choice in respect to secondary ticketing, but surely it should be an informed choice, in the way that the noble Lord outlined in his amendment. The Minister talked about the fact that the Government have legislated to give consumers fuller information on tickets that they are buying on the secondary market, but that is still not full information.

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[Lord Black of Brentwood (Con)]

My Lords, I refer to my earlier declarations of interest.

I raised a significant number of issues relating to subscription contracts in Committee. I am very grateful to both my noble friends on the Front Bench for listening to those arguments, and for bringing forward amendments to deal with them, and I strongly support them. They help fulfil the Government’s aims without placing unacceptable burdens on business.

There is only one remaining issue that we dealt with in Committee, and that is why I am supporting the amendment in the name of my noble friend Lord Lucas. His amendment would remove the prescriptive wording that is currently in the Bill and allow for traders to provide notices

“in a clear and prominent manner:”

His wording simply recognises that the prescribed renewal information is at the heart of the notice and must not be skewed out of view, while allowing for other beneficial information to be included, if desired. I am sure all noble Lords will be very happy that it ensures notices do not become a GDPR-style irritant, but something which is actually helpful to consumers. It would certainly be counterproductive if consumers experienced information fatigue and stopped opening communications from traders or simply opted out of them all together.

Equally, it will alleviate the burdens on traders, who may feel obliged to send emails around the time of renewal notices, to provide information on alternative deals, packages and so on, which could otherwise be dealt with in one communication. As my noble friend said, there may be other ways of dealing with it, or other wording, and I look forward to hearing what the Minister has to say about this amendment, which I support.

[Lord Clement-Jones (LD)]

My Lords, I am going to be extremely brief as I think we are all anxious to move towards seeing whether the noble Lord, Lord Moynihan, will move his previous amendment to a vote.

There is a common factor here; all these amendments were designed to flush out the Minister to give more assurance and information, and in large part that has been successful. There are still some outliers in terms of reminder notices; the Minister is well aware that there are some players, like Adobe, who will find, when they work it out, that they are going to have to give five notices for an annual contract. I do not know whether the Minister has looked at that and has answers to it.

Digital Markets, Competition and Consumers Bill

Lord Clement-Jones Excerpts

3rd reading
Tuesday 26th March 2024 Lords Chamber

[Lord Lansley (Con)]

My Lords, I intervene just briefly. I am very pleased to take the opportunity to follow what the noble Lord, Lord Faulks, was just saying because it touches directly on the points I was going to make.

First, I am very grateful for the conversations I have had with the noble Lord and Minister Lopez in his department. I look forward to further debate about the extension to online news services. It will certainly be my intention to table amendments to the Media Bill to enable us to consider how the media public interest test is to be applied in relation to this wider definition of news providers, since the definitions are clearly now out of date—I can say that, having been part of the Puttnam committee on the 2003 legislation.

My noble friend has done an amazing piece of legislative work. I just have to ask, as I did on Report, why it would not have sufficed to have added a new specified consideration to Section 58 of the Enterprise Act 2002, in effect on the need to prevent the acquisition, control of, or influence over newspapers or newspaper periodicals by any defined foreign power. As my noble friend says, we have 16 pages; frankly, we could have done it in about three lines, but clearly there are differences in terms of the bar that has to be crossed and the requirement on the Secretary of State. As the noble Lord, Lord Faulks, said, the Secretary of State must do these things, as opposed to the discretion under the current merger regime, but it seems to me that, with a new specified consideration, the current merger regime would provide the necessary powers. For example, it was sufficient for the purpose of meeting the capability to deal with a public health emergency in Section 58 as a specified consideration, or to maintain the stability of our financial system, as specified after the financial crisis, in Section 58. I am not at all clear why we have departed from the same approach in this case. There is a risk that we end up with overlapping and very complex provisions relating to one type of merger situation as opposed to other merger situations, but we will come on to discuss that.

On Report, I raised with my noble friend the question of broadcasting. We can return to that in the Media Bill, but, of course, where broadcasters are concerned, we have the benefit of the relationship to the Ofcom standards code, which does not apply in relation to newspapers. I hope we can revisit that when we come to the Media Bill.

[Lord Clement-Jones (LD)]

My Lords, I want to revert very briefly, and thank the noble Lord, Lord Offord, for his statement about the status of the Bill in Northern Ireland, before commenting on Amendment 1. I very much hope that those discussions go as quickly as possible in the circumstances. I also welcome the noble Lord, Lord Leong, back to the Opposition Front Benches, and hope that he is in much better form.

I start by congratulating the noble Baroness, Lady Stowell, and the noble Lords, Lord Forsyth, Lord Robertson, and Lord Anderson, on what is really a triumph. I thank the Minister, in particular, the noble Lord, Lord Parkinson, for producing something so comprehensive, and perhaps complicated. As someone who is rather used to replies such as “in due course” or “we’re going to produce guidance”, it just shows what government can do swiftly and decisively when it really gets the bit between its teeth. It means that we are not going to take many more excuses in future.

I very much hope that, as the noble Lords, Lord Faulks and Lord Lansley, said, we will not lose sight of the digital news media agenda as well, because it just demonstrates what is possible through this change to the Enterprise Act. There is a broader agenda, and that needs addressing. I very much hope that, as other noble Lords have said, the secondary legislation really is consistent with the intent demonstrated today, both in what the Minister had to say and in the intent of the proposers of the original amendment. It is very good that the Minister has, in a sense, confirmed that it will impact on the RedBird proposal, if that proposal is still current on the effective date, given the circumstances. I entirely agree with the noble Baroness, Lady Stowell, that this is a matter of principle; it is not about the particular country. However, I do feel strongly about the particular country, so in these circumstances, we are entitled to be pleased that this is going to be the case in terms of this particular transaction.

The noble Baroness raised questions about the threshold, and I very much hope that the Minister can answer them. I thank him, and I think there is general satisfaction across the House. This demonstrates what the Government can do when they get the bit between their teeth.

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[Lord Clement-Jones (LD)]

My Lords, I am delighted that the Minister has come back at Third Reading as he undertook to and that he has produced this amendment. I am only sorry that the noble Lord, Lord Lucas, is not present to be able to take the credit for it.

[Baroness Jones of Whitchurch (Lab)]

My Lords, we welcome the Government’s amendment on subscription reminder notices. As has been said, the noble Lord, Lord Lucas, made a very sensible intervention when we debated this in Committee and on Report, and it provides a helpful clarification to service providers. I hope that this amendment and the other changes that we made on Report have now struck a much better balance between businesses’ needs and consumer interests.

We look forward to hearing details of the department’s further work on implementing the gift aid protections and other work on cancellation methods, but, for now, we are pleased with the progress that has been made on the Bill and we wish it a speedy onward passage.

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[Baroness Stowell of Beeston (Con)]

I hesitate to rise, because I realise I am probably testing the patience of the House, having already spoken in Third Reading. I just wanted to say a couple of things.

I thank my noble friends Lord Camrose and Lord Offord on the Front Bench for their work on this Bill. As they will know, this is legislation for which the Communications and Digital Committee has been calling for several years—it started under the chairmanship of my predecessor, my noble friend Lord Gilbert. It is something that I have been pleased to take a very active involvement in, and I am very pleased to support it passing.

As we think about what this Bill is trying to achieve and why, it is worth also remembering why we in the UK are forging a different path from the ones that Europe and the US are on. In the last few days, we have seen the US DoJ launch a major anti-trust lawsuit against Apple. In the EU, the Commission is taking serious measures against some of the big tech firms to make them comply with the spirit and letter of its new Digital Markets Act. Both situations have an ominous sense of being exactly the kind of lengthy legal battles that favour big tech, which we are trying to avoid.

The House has rightly voted on a number of measures to try to ensure that our regulation can work as it is meant to, in a timely, proportionate and less confrontational manner. That is what the Government are seeking to do with this legislation.

As the Bill leaves here and enters its final stage, I emphasise two measures from among the amendments passed by this House. First, the deadline for the Secretary of State to approve CMA guidance is key in keeping things on track and avoiding concerning delays. Secondly, if the Government and the Commons cannot accept the amendments to revert the appeals process on fines back to JR standard, I hope that my noble friends within government will consider putting a clarification in the Bill that the appeals process on fines cannot be changed in ways that undermine the JR standard or open up avenues for more expansive and protracted legal challenge.

That aside, I am grateful to the Government for bringing forward this important legislation. It will mark out our regulatory regime as different from those in other parts of the world that are having such a big impact—and not necessarily in good ways.

[Lord Clement-Jones (LD)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Stowell. I agree with a huge amount of what she said.

I reiterate the welcome that we on these Benches gave to the Bill at Second Reading. We believe it is vital to tackle the dominance of big tech and to enhance the powers of our competition regulators to tackle it, in particular through the new flexible pro-competition powers and the ability to act ex ante and on an interim basis.

We were of the view, and still are, that the Bill needs strengthening in a number of respects. We have been particularly concerned about the countervailing benefits exemption under Clause 29. This must not be used by big tech as a major loophole to avoid regulatory action. A number of other aspects were inserted into the Bill on Report in the Commons about appeals standards and proportionality. During the passage of the Bill, we added a fourth amendment to ensure that the Secretary of State’s power to approve CMA guidance will not unduly delay the regime coming into effect.

As the noble Baroness, Lady Stowell, said, we are already seeing big tech take an aggressive approach to the EU Digital Markets Act. We therefore believe the Bill needs to be more robust in this respect. In this light, it is essential to retain the four key amendments passed on Report and that they are not reversed through ping-pong when the Bill returns to the Commons.

I thank both Ministers and the Bill team. They have shown great flexibility in a number of other areas, such as online trading standards powers, fake reviews, drip pricing, litigation, funding, cooling-off periods, subscriptions and, above all, press ownership, as we have seen today. They have been assiduous in their correspondence throughout the passage of the Bill, and I thank them very much for that, but in the crucial area of digital markets we have seen no signs of movement. This is regrettable and gives the impression that the Government are unwilling to move because of pressure from big tech. If the Government want to dispel that impression, they should agree with these amendments, which passed with such strong cross-party support on Report.

In closing, I thank a number of outside organisations that have been so helpful during the passage of the Bill—in particular, the Coalition for App Fairness, the Public Interest News Foundation, Which?, Preiskel & Co, Foxglove, the Open Markets Institute and the News Media Association. I also thank Sarah Pughe and Mohamed-Ali Souidi in our own Whips’ Office. Last, but certainly not least, I thank my noble friend Lord Fox for his support and—how shall I put it?—his interoperability.

Given the coalition of interest that has been steadily building across the House during the debates on the Online Safety Bill and now this Bill, I thank all noble Lords on other Benches who have made common cause and, consequently, had such a positive impact on the passage of this Bill. As with the Online Safety Act, this has been a real collaborative effort in a very complex area.

[Baroness Jones of Whitchurch (Lab)]

My Lords, before the Bill passes, I put on record my thanks to the Ministers—the noble Viscount, Lord Camrose, and the noble Lord, Lord Offord—as well as the noble Lord, Lord Parkinson, who made a guest appearance. I also put on record my huge appreciation for the Bill team for their timely letters and briefings, and their immense good humour when we asked for even more information.

The whole experience has been a good illustration that, when we fully engage in discussion on a Bill, we can deliver genuine improvements that have broad support. I hope that our colleagues in the Commons appreciate the careful thought and hard work that is behind these changes. I hope that we do not have to be here again on this Bill, but I reiterate that our door is always open if further discussions would help. For now, I hope that the Bill will soon be on the statute book and I look forward to its progress.