Digital Markets, Competition and Consumers Bill

Lord Kamall Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[Lord Kamall (Con)]

My Lords, it is a great pleasure to follow my noble friend Lord Lansley. I do not say this because he is next to me and might heckle me, but because of some of the distinctions he made between rules, implementation of those rules and enforcement. I also thank my noble friends the Ministers and their officials, not only for the opening comments but for meeting with noble Lords last week, as well as the House of Lords Library and the various other organisations that have contacted us for their briefings, which have been very informative.

I refer noble Lords to my interests as laid out in the register, especially my roles on the advisory board of the Startup Coalition and as a non-executive director of the Department for Business and Trade, my work with a couple of think tanks that have published on competition issues, and others.

In some ways, I am not one of these people who is into instant gratification, but I remember being a member of the European Parliament in about the mid-2000s, when the EU Commission was considering the case of Microsoft. I remember being visited by lobbyists, including from Google, who were lobbying against Microsoft because they wanted to see a more competitive market. I remember telling them, “Just be careful what you wish for, because one day you might find other companies lobbying against you”. It has taken a long time, but it just shows how markets move. The other observation is how quickly these markets move—even definitions change. I am old enough to know when SMS actually meant text messaging; now it has a new meaning of “significant market status”.

At this stage I have only a series of questions, but before I raise them I would like to think about the matter at the heart of this debate, which is: how do markets really work? There are lots of debates about it. How do we react to markets where there are one or a few dominant firms? What do we do about dominant firms that compete not by seeking to offer the best product or service at the best price possible but by using their significant market power to block competitors?

I have to admit that, when learning economics in the past, I was fairly dissatisfied with some of the models that we were presented with. We were presented with a fairy tale of a perfect markets with perfect information—“If everyone had all this information, this is the way markets should work”. Then we were given a few variations—the oligopolistic market, the monopolistic market, the monosoponistic market, but they are not real markets—and then we were told by our economics tutor that actually markets do not work like that at all. There are market failures, and we need government intervention.

When I look at this from first principles, one of the views that I find attractive is the one that made me consider the hundreds, thousands, millions or billions of transactions that occur every day between willing buyers and willing sellers. It is the aggregate of these transactions that creates the spontaneous order of markets. Markets are not perfect, and there is imperfect and asymmetric information. Not everyone has the same information. Entrepreneurs are the key to these markets because they spot opportunities that others may not have spotted and they are prepared to take risks to take advantage of those opportunities and asymmetries, which the economist Israel Kirzner referred to as entrepreneurial alertness.

What happens is that, soon after, other firms enter the market and try to compete on quality of product, service or price. Governments from first principles can either get in the way or get out of the way. While I would prefer Governments to get out of the way as much as possible to allow thriving markets, there will be occasions where some of these new companies will become so large that they dominate the market. In these cases, we need to consider if and how regulations can provide a framework for competition and prevent abuse by dominant players.

I was very much taken by the comments of the noble Lord, Lord Knight, who eloquently gave examples of how companies that were once seen as entrepreneurial, exciting, new and whizzy are now abusing their significant market status. However, in considering the Bill we also have to consider how digital markets may be different from other markets, such as those for physical products, even though many physical products are sold online today. While a firm may be dominant in one part of the market—for example, on search or devices—it may not be dominant in another.

I have weighed up the advantages of judicial review versus merits-based decisions, and especially of getting the balance right between not punishing the big firms for being successful and innovative and their significant market status allowing them to become gatekeepers promoting their own products over rivals’ products or, as has been alleged, search engines and app stores imposing unreasonable charges. Like many noble Lords, I have come down on the side of judicial review, mainly to speed things up but also to avoid larger firms with their armies of lawyers delaying the process, which may lead to smaller competitors going out of business before the end of the case. However, we now see that firms can appeal this penalty of the judicial review process so, like other noble Lords, I ask the Minister to say how long the Government expect the appeal process to take. If a firm lodges an appeal, is there a danger that it may delay the main decision further? If a large firm wins a penalty, will it then have grounds to challenge the original decision delaying the remedy further? The Minister may well say that will not happen, and it would be reassuring to hear that from him at the Dispatch Box so we understand it.

Like other noble Lords, I am interested in the counter- vailing benefit exemption. What is the thinking behind the use of “countervailing” rather than “indispensable”? As many other noble Lords have said, it is legally defined. What extra does “countervailing duties” or “countervailing exemption” give to the Bill and what is the justification? Can the Minister assure noble Lords that “countervailing” will not act as a loophole for dominant firms to escape their responsibilities?

One of my other concerns more generally—I know it is shared by noble Lords from other parties across the House—is that over time Governments delegate responsibilities to agencies or regulators, as well as to international organisations. I teach politics, and one of the things we teach is principal agent theory, where a Government delegates authority to an agency or a regulator, but that regulator may pursue an agenda different from the one expected of it. There is real concern about accountability, but also about who regulates the regulator. That is why I welcome the comments by the noble Lord, Lord Tyrie, and my noble friend Lady Stowell about accountability to Parliament. Perhaps across the House noble Lords should pursue the solution of a committee.

I suspect that the proposed power in Part 1 for the Secretary of State to review CMA guidance may be a way to tackle this issue. I would like to hear the Minister’s justification for granting this power to the Secretary of State and whether this may slow down decisions, especially in a fast-moving market. Does the Secretary of State really need these powers? Will noble Lords have to propose a timeframe for these decisions to be made if there is no timeframe for quick decisions? I should add that I have met people who work for the CMA and have been impressed by their knowledge and their understanding of some of these deeper philosophical questions of markets and some of the trade-offs they have to consider. It is not an easy job to balance innovation, markets and concentration.

There are a couple of other things. I welcome the action on subscription traps. There is probably consensus across the House. It recently took me more than two hours and disconnected calls to leave the broadband company that I was with. When I went online to read customer forums, thinking I had been hard done by, I realised I was lucky. It was like the Monty Python sketch: “Two hours! That's absolutely nothing! You don't know hardship!” I saw one comment where someone said they tried so often that they gave up for one year and tried again the year later because it just was not worth it; they just were not getting through. We also read of dirty tricks by companies disconnecting calls or leaving customers to hang on for ages.

I understand that companies are desperate to hold on to their customers. I understand why customers looking to leave companies or end their subscription are redirected to customer retention teams. When I was a consultant to telecom firms, the figure we used was that the estimated cost of new customer acquisition was seven times that of customer retention—but you keep customers by offering a service that they are happy with and they are happy to pay the price for. You do not keep them by engaging in these dirty tricks. In 2021, the Government promised to make it easier to switch broadband provider—as easy as it is to switch mobile operator—with a so-called one-touch switching system, but broadband companies failed to meet the target April 2023 deadline. Will the Minister say when one-touch switching will come into effect? Perhaps noble Lords have to ask what more pressure we can put on the industry and the CMA to look into this delayed implementation. As my noble friend Lord Lansley said, we have the rules but how do we make sure they are enforced? Why are companies dragging their feet on one-touch switching?

A number of noble Lords have talked about the last issue I will talk about, which is the fact that we have all been contacted by charities. I will not go into details because they have already been laid out by others, but I think we would like a response from the Minister on charity subscriptions. I add one word of caution. Charities may also behave in a way to try to keep their subscribers or donors. Let us not give them a blanket exemption, but let us understand the issue that they are lobbying on.

Overall, like other noble Lords, I welcome the Bill. I look forward to hearing the Minister’s comments and answers to my questions. I look forward to working with my noble friends the Ministers and other noble Lords in creating the appropriate framework so that the UK continues to be a leading digital market for local and international firms.