Digital Markets, Competition and Consumers Bill

Lord Lansley Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[Lord Lansley (Con)]

My Lords, I am very glad to follow the noble Lord, who made another of the many very valuable contributions we have listened to already in this debate. I will try not to repeat some of the important points that have already been made, which we will have an opportunity to consider in Committee in detail.

From my point of view, it is an illustration of the nature of how competition has changed in our markets. I was on the Standing Committee in another place of the Competition Act 1998, on the Standing Committee of the Enterprise Act 2002, and the Standing Committee of the Communications Act 2003, many of which are aspects of the legislation that we will be amending in this. If we had understood then the extent to which digitisation and digital markets had led to concentration of market power in relatively few hands, we would have thought that the competition regime we were establishing would have intervened to stop it.

Of course, it has not. I will come back to this in a moment, but we look at the Furman review, reporting in I think 2018 that there had previously been 400 acquisitions of nascent tech companies without any effective intervention by competition authorities anywhere. Even today, we are looking back very recently at the Competition and Markets Authority’s intervention in Microsoft’s acquisition of Activision Blizzard, which the noble Lord, Lord Fox, rightly referenced and, I think, praised its actions. But, of course, it affects only a small part of Activision Blizzard’s market penetration. It may be important in the long run—cloud computing may grow significantly—but it is not that significant yet.

It is important for us to recall that we are dealing with very large tech companies that are essentially American. The FTC tried to stop it and failed. My noble friend Lord Tyrie—he is not in his place at the moment, but will no doubt read this—was absolutely right; it is not simply the legal framework we create for our competition authorities but the manner in which the competition authorities deploy those powers that is absolutely vital. Of course, there is the consequential question of whether those competition authorities are properly accountable, and not simply whether they are doing their job well but whether we support them to do their job well—that they feel confident that the political class, as it were, will back them up.

At the time, we would have thought that the ex post interventions would have been sufficient. In the last few years, we have now realised that it will require a combination of ex ante rules and ex post interventions, and the Bill reflects that. With others, I was quite hopeful that we would make faster progress on the introduction of legislation following the Furman review. We are now over four and a half years on from the publication of that, but credit goes to our present Prime Minister for pushing things forward since he came to office. In this respect, he is a contrast to his immediate predecessor, who one might have imagined was pro competition, but who did not actually proceed apace with pro-competition legislation. Be that as it may, the Prime Minister is doing what is right to be done.

From my point of view, there are clearly many benefits that will be derived if this legislation is effective in diminishing the opportunity for self-preferencing by large digital players. I did think—this was a very good point made by, not least, the noble Lord, Lord Fox, and my noble friend Lord Vaizey—that we must ensure fair return to intellectual property. That is linked to making sure there is transparency and choice for consumers; the relationship between those two is really important.

I will be interested to see, as we proceed, the relationship between this legislation and the European Union’s. It is not a direct relationship, but we might do a bit of “compare and contrast”, not least in relation to definitions. The noble Lord, Lord Knight of Weymouth, was talking about that. The approaches are a little different, but some of the definitions, and how they are reached, will be really important. When we look at turnover, the number of consumers and users of digital technologies, the extent to which individual players or undertakings exercise power and control over those users’ access to digital markets, and indeed the extent to which they have control over business users of those markets, the definitions are already out there in the implementing regulations of the Digital Markets Act from the European Commission. So we ourselves should look very carefully at that.

I share, and will not repeat, the points that have been made very well, not least by my noble friend Lady Stowell of Beeston, about ensuring that we maintain the clarity of the appeals standard. As far as I understand it, a JR standard includes a test of proportionality. For it to be further added in the legislation in the way that is currently proposed—I think it is in Clause 46—runs the risk that the courts will say: “Well, it must have been added for a further reason, for an additional and distinct test other than we would have understood to be normal in JR”.

The same applies to the point made about indispensability. I suggest that my noble friend looks very hard at whether the countervailing benefits exemption serves any valuable purpose or opens a very dangerous door to long litigation. We know that some big companies such as Apple have $1 billion available for their legal costs in a year; we know that it is a cost of doing business; we know they have succeeded on several occasions in delaying interventions by other competition authorities for years through legal challenges. We have to be very aware that we do not create exactly that opportunity.

I will finish with a final point on killer acquisitions. The Bill includes a requirement for notification of mergers by undertakings with significant market status. However, the Furman review went on to give a recommendation that there needed to be a specific test of

“whether a merger is expected to be on balance beneficial or harmful, taking into account the scale of impacts as well as their likelihood”.

That test is not included in the merger regime in relation to these markets in the way that the Furman review recommended. I hope that, in the course of our scrutiny of the Bill, we might look at whether we should indeed come to look at that forward-looking review of mergers, taking into account that balance; giving, as a consequence of changing the legislative framework for merger control, an opportunity for competition authorities to intervene more regularly and effectively; and ensuring that there is more opportunity for entry into these competitive markets, because these markets cannot be expected to become as competitive as we wish and need them to be without real opportunities for market entry by new entrants.

Notwithstanding that, I very much support the Bill. I look forward to what I think will be a very non-partisan approach across the House to try to ensure that the Bill achieves the purposes which the Government clearly intend and Parliament intends that it should.

Digital Markets, Competition and Consumers Bill

Lord Lansley Excerpts

Committee stage
Monday 22nd January 2024 Grand Committee

[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.

[Lord Lansley (Con)]

Apologies; I had not intended to intervene on this group, but I am confused and I wonder if my noble friend might be able to help me. We have the word “entrenched”. Obviously, we are talking about “substantial and entrenched”, but “substantial” is not really in debate since, if it has strategic significance, it is likely to be substantial; the issue is with “entrenched”.

A theme that I might develop later on other aspects is to look at our legislation in the context of what has been done by the European Union in its Digital Markets Act. We are doing things differently—and better, I hope—but my point is that the European Union looks at the question of what it describes as an “entrenched and durable position”. That seems to have two aspects to it: the first, “entrenched”, is that it exists and has existed for some time; and the second, “durable”, relates to it being foreseeable that it will continue to exist in future. We have lost the word “durable” and retained “entrenched”, but we are applying it in relation only to what is foreseeable—forward-looking assessment. I am confused about why it is only a forward-looking assessment. The relevant regulation from the European Commission looks back three years to establish whether it is entrenched, and looks forward to see whether it is durable or whether there are foreseeable developments that would give rise to such an entrenched, significant market status. I am looking for both and, at the moment, I cannot see both; I see only the forward-looking part.

[Viscount Camrose (Con)]

Indeed. I am afraid that the use of the word “durable” in this context is new to me. I will very happily take that forward and consider whether it might be a valuable addition to the guidance here. To focus on the outcomes that we want here, we want a reasonably derivable position that the existing entrenched power of the potentially SMS-designated firm is likely to last for the five-year period. We want to ensure that any evidence or analysis supporting that position is presented as part of the report that details why the decision is taken. I will take forward the use of the word “durable”.

[Lord Lansley (Con)]

Would it be fair to say that the contention in this legislation is that the determination that there is a position of strategic significance also satisfies the argument of whether such substantial market power exists? This further assessment is really about whether it is likely to be entrenched and durable over the five-year period, since the designation extends for five years. This is looking forward over those five years. I think it is perhaps not absolutely clear how these two clauses are intended to be considered together for this purpose.

[Viscount Camrose (Con)]

I take note of my noble friend’s point. There may be many areas on which all of us in this Committee end up disagreeing, but one that I doubt we will disagree on is the need for absolute clarity in all these measures. I am very happy to commit to taking that away and seeing whether there is an appropriate form of words that can deliver the clarity that noble Lords are seeking.

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We have heard about the asymmetry potentially within this Bill if we do not get the information sharing right. This would create yet another competitive imbalance in the legislation that is designed to remedy an anti-competitive market. The provisions in this legislation must be available to the smallest player in the market as well as the largest. Amendment 19 would not compromise confidentiality of individual transactions or reveal identifying information about any SMS firms or third parties, because of the requirement that the CMA anonymise and aggregate any data it publishes. The amendment would also allow policymakers, academics, civil society and journalists to monitor the effectiveness of the new regime.

[Lord Lansley (Con)]

My Lords, this is a substantial group of amendments. I have two amendments in the group to which I wish to speak: Amendments 20 and 29. I am grateful to the noble Lord, Lord Clement-Jones, for signing them. I will also discuss a number of other amendments later.

We are dealing with the structure of Clauses 19 and 20. Clause 19 has a set of objectives that conduct requirements are intended to achieve. My noble friend Lord Holmes of Richmond’s Amendment 15 effectively asks us to examine what the purpose of the objectives are. It is quite an interesting question. The objectives are not translated directly into the conduct requirements; the conduct requirements are intended to achieve the objectives. Setting out the broad range of objectives might be regarded as a way of enabling the Competition and Markets Authority to have a broader scope when setting its conduct requirements. Equally, there is a risk that if the scope of the conduct requirements is not specified in Clause 20 and they rely on Clause 19 and the broad-ranging objectives, they will be opened up to challenge as to the meaning of them. We need to be careful.

I come at this from the standpoint that the Digital Markets Act in the European Union does not set objectives in quite that way. It sets not broad objectives but a large number of detailed obligations on what it calls gatekeepers—effectively the same as our designated undertakings for these purposes. We are going down the different route of setting broad objectives and a broader description of conduct requirements. The Competition and Markets Authority will then go on to specify in detail what those conduct requirements look like in relation to any particular designated undertaking to achieve the objectives. That is a better way of doing things.

My two amendments—I will comment on one or two other amendments to the same effect—are asking whether Clause 20 gives the Competition and Markets Authority the necessary scope of powers to achieve what it wants to achieve by setting conduct requirements. Clause 20 is divided into two parts: the things that are positively required to be done by designated undertakings and the things that designated undertakings should be prevented doing. It is important to have those two bits in mind.

I have to confess that I have used the mechanism of looking at our own legislation through the scope of other legislation before, and Amendment 20 to Clause 20 is no different. I looked at the Digital Markets Act and it sets out a lot of detailed obligations. I then asked myself: to what extent do I feel comfortable that what is in Clause 20 gives the CMA the power to do this thing if it wishes to do it?

People are not likely to argue about the fact that data itself is central to this process. When it sets obligations for gatekeepers, Article 5 of the Digital Markets Act starts with a set of obligations related to the ways in which the personal data of users of services can be taken and used. Article 6 talks about the circumstances in which data may be portable and the portability of data between and among gatekeepers and users. Article 6(11) sets out the circumstances under which gatekeepers may or may not access third-party data provided to them as a consequence of users of their undertakings. Article 7 consists entirely of obligations on gatekeepers in relation to the interoperability of number-independent interpersonal communication services.

These are all detailed obligations relating to data access. Whose data can they access and how can they use it? How can they port data between different users and themselves? They are also about the interoperability between and among the users of their services.

I have looked at Clause 20, and the noble Lord, Lord Clement-Jones, was right: there is a provision which restricts interoperability. It is in that bit which prevents undertakings doing things that they should not do. It says that they should not restrict interoperability, but there is no corresponding positive conduct requirement which says that they should be promoting interoperability. This is where the noble Lord and I are coming from, in relation to our Amendments 20 and 21, if I remember correctly.

The point is to secure data access, interoperability and data portability. My amendment is designed to put into that first, positive set of conduct requirements that those should all be things where the CMA has the ability to make what are, effectively, positive conduct requirements upon undertakings to ensure that they enable the market to function more competitively and more efficiently. That is Amendment 20.

Why do I not rely in Amendment 20 or Amendment 21 on the other reference to data, which is in Clause 20(3)(g)? That provision means that requirements may be

“for the purpose of preventing a designated undertaking from … using data unfairly”.

This is very dangerous. We have reached the point where data is a central issue, yet Clause 20 hardly specifies the various ways in which data should be at the core of these conduct requirements. The only reference that we are really relying on for many of these issues is that it should not be used “unfairly”. That is not enough. I am not taking that out, but let us leave in “using data unfairly” and add to it.

Where we add to it is not least in Amendment 29, which, after saying that they should not use data unfairly, would insert

“or using data that is not publicly available which is generated or provided by users of the relevant digital activity in the context of their use of the relevant digital activity”.

I use that language because it is a shorter version of what is in Article 6.2 of the EU regulations, which says that a gatekeeper should not use

“in competition with business users, any data that is not publicly available that is generated or provided by those business users in the context of their use of the relevant core platform services”.

It seemed to me that there was a particular extension of this question of the unfair use of data, which is where they take data from their platform users and use it for themselves. That is what we are trying to restrict and, broadly speaking, what the Digital Markets Act tries to restrict. These two amendments, from my point of view, are about putting data firmly into the conduct requirements, specifying how data is important and where positive requirements may be put, and being specific about the unfair use of data, when data that other users put on the platform is taken for their own use.

On other amendments, briefly, Amendments 22 and 32 would give the CMA the power to vary the scope of conduct requirements in future, rather than relying on the Secretary of State to do so—but of course with parliamentary approval. There is an argument which says, “At least we have an opportunity to examine any change in the scope of conduct requirements if we leave that in”, so I am afraid I do not support that.

The noble Lord, Lord Clement-Jones, made an interesting set of points about copyright. That is very important and it is quite hard to see where it lies in here, unless it were under trade on fair and reasonable terms. However, it will require the CMA to look and ask, “Do fair and reasonable terms lead us to set conduct requirements for designated undertakings relating to, for example, copyright terms?”. It might perhaps be worth us exploring whether it should.

There are one or two other things. I support Amendment 34, which raises a valuable question about taking account of the impact of conduct requirements before making pro-competitive interventions. Otherwise, I just make the general point that I hope, through Amendments 20 and 29, we might put the importance of data firmly into the structure of conduct requirements for designated undertakings.

Digital Markets, Competition and Consumers Bill

Lord Lansley Excerpts

Committee stage
Wednesday 24th January 2024 Grand Committee

[Lord Tyrie (Non-Afl)]

My Lords, I do not know whether I am the sole dissenting voice—I do not think I am—but I want to make one preliminary point. I never thought I would make a point in defence of lawyers, but not all legal challenge or scrutiny will necessarily be wrong as this Bill proceeds or as the CMA takes its decisions. It is extremely important that we bear in mind, as we will come on to later on in the Bill, that we need to have a sense of balance about all this, so that we do not allow quite reasonable discontent with some of the shocking practices we have seen from platforms to lead us to a place that we might subsequently regret and which could lead to injustices or damage to British interests through loss of innovation or inward investment.

I listened very carefully to what the noble Lord, Lord Faulks, said. It seemed to boil down to very few things. Are convention rights engaged? They probably are, or if they are not then they will be. Even if they are not, the courts will find a way of getting them in eventually. If they are, what have the Government added? That is why I think I might be with the amenders here. I think very little, if anything at all, has been added. Was this a piece of window dressing, supplied by the Government to satisfy the intense lobbying that has taken place, particularly of No. 10? It had a whiff of that about it for me when I first saw it—I see one or two nods of assent. If it is, I am particularly wary of this change, which is what leads me to think that the amenders might be right. If it is more than this—if something very substantive has been added—then I think we would all like to hear from the Minister what exactly it is that, as a result of the adding of “proportionality”, will be considered for legal scrutiny when this Bill is on the statute book.

[Lord Lansley (Con)]

My Lords, I will briefly intervene. I have not signed the amendments but I am rather supportive of what the noble Lord, Lord Faulks, said in support of his amendment.

In thinking about this, among other thing I had the benefit of seeing a letter that the Parliamentary Under-Secretary at the department sent to my friends in another place, Robert Buckland and Damian Collins, after Report in the Commons; other noble Lords may have seen it. In that letter, he set out why he was building proportionality into Clause 19. He said:

“Our intention for this amendment is to allow a firm to appeal a decision by arguing that the DMU made public law errors in its consideration of proportionality under normal JR principles—without establishing that their rights under the European Convention on Human Rights are engaged”,


for example, the right to peaceful enjoyment of possessions. So that would not bring convention rights on board. The letter continues: “For example”— it is always helpful to have an example—

“the firm could argue that the DMU failed to take a relevant consideration into account, made a material error of fact or otherwise acted unreasonably”—

so JR principles—

“when deciding against an intervention that would have been less burdensome on the firm while still achieving the same outcome”.

So the outcome has to be achieved, but is it proportionate to impose this particular conduct requirement or pro-competitive intervention?

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[Lord Lansley (Con)]

Before we move away from this point, there was an interesting use of the word “reinforces”. Am I right in thinking that my noble friend is telling us that, if the original wording in the Bill were used and the word “appropriate” was there, it would none the less be his expectation that, in making decisions about conduct requirements or pro-competitive interventions, the CMA would in fact do so in a manner that was proportionate, because that is the appropriate way in which to make those decisions? Our worry is that by “reinforcing”, my noble friend is actually opening a door.

[Viscount Camrose (Con)]

I will go on to speak more about this. The intention of the Government in “reinforcing” is to bring clarity, particularly since, as I say, A1P1 is not universally applicable to these cases. It brings clarity, and therefore I hope that the effect will be as much closing the door as anything else.

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[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.

[Lord Stevenson of Balmacara (Lab)]

I am grateful to the noble Lords, Lord Clement-Jones and Lord Lansley, for raising this point. Clause 20 is very important, as has been mentioned, as it puts flesh on the bones of what we have been talking about for most of the first and half of the second day in Committee—which is whether we have in place the ability to deal with the important firms likely to be designated as SMS and the challenger firms. We have said before, and I am sure that we will repeat it, that this is a very innovative approach to regulating. We are very much trusting those who are appointed to take this forward with a great deal of power and not a lot of overarching scrutiny —or, if it is, it will be retrospective and not prospective.

Therefore, we have to understand that the CMA must have the ability to do all this and have the range of functions that are important. The noble Lord, Lord Clement- Jones, raised one in particular—a very important one to consumers—around seeing on the internet the goods of your dreams and then finding a payment system that siphons your money away but does not deliver the goods; that is not a palliative one for any Government to propose. I hope that the Minister has some reassuring words about the points raised by the noble Lord.

I had to read the amendment proposed by the noble Lord, Lord Lansley, three or four times to understand what he was getting at, so I am very grateful to him for his brief introduction. It was only on this occasion; normally, he is as a lucid as we would wish—and sometimes as pellucid. He raises a very subtle question about whether the measures that are not sufficiently exposed here will cover the question of those who have innovative lawyers thinking about ways in which they can avoid some of the very broad measures in Clause 20.

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[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.

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[Lord Lansley (Con)]

My Lords, in my short contribution I will look at what Clause 29 adds and whether it is necessary. I suppose I am saying that I want to speak to whether Clause 29 should stand part. We might have to come back to that.

My starting point was Clause 19(10):

“Before imposing a conduct requirement … on a designated undertaking, the CMA must have regard in particular to the benefits for consumers”.


Unless I am missing something, that will include disbenefits, so the countervailing benefits form part of that consideration. I do not understand why it would not be the best drafting, or the best Explanatory Note, to say, “Under Clause 19, when the CMA is considering imposing a conduct requirement, it must have regard to any countervailing benefits of not imposing such a conduct requirement”.

That is the starting point but let us say, for the purpose of the argument, that Clause 29 is not really about the imposition of a conduct requirement in the first place but about what should happen when there is a conduct investigation. But there are more stages for the designated undertaking. When the CMA wants to impose a conduct requirement, it has to give a notice under Clause 21 and say what the benefits are. The undertaking can come along and say, “Well, we have countervailing benefits if you don’t do this”, so it is entirely open at that stage to raise the countervailing benefits clause. I do not know why it is called an exemption. It is not an exemption. There should not be an exemption from the regime; there should just be a balance: how is the consumer benefit to be maximised? Once that notice has been served, it is subject to a public consultation under Clause 24, and the undertaking can come along under Clause 24.

Let us say that all that has happened, and there is a potential breach of the conduct requirement, and the CMA initiates an investigation under Clause 26. When the CMA does that, it has to give the opportunity to make representations within a defined period. Even if the countervailing benefits have not been taken into account in the original activity, when a breach is considered the notice is issued and the undertaking can come along and say, “Well, actually, the consumer benefits are being delivered by this means, and it is necessary and indispensable”, or whatever word you use. We could include it, if necessary, in the guidance.

I do not think that we are quite finished, even then. Clause 27 requires that in the

“undertaking to which a conduct investigation relates … the CMA must consider any representations that the undertaking makes”.

We could have put it in there, because it has a right to make representations at that point.

After all these things, which get us to the point where it has been considered in the first place, considered in whether a notice of a breach should be issued, and considered in the notice for the conduct investigation, and been given the opportunity to make representations, why do we need another clause that says that there is this thing that is called a countervailing benefits exemption as distinct from, at each previous stage—and there are many of them—the benefits or disbenefits and potential consumer benefits from different requirements that are to be considered? Frankly, I do not see it—unless it is, as my noble friend said, that there is a “get out of jail free” card that can be played. If it can be played, it will be played, so I do not think that we should allow it to be played.

[Lord Kamall (Con)]

My Lords, I will speak to Amendments 36, 38, 39, 40 and 41. I have been trying to understand the reason for the current government position. One issue that I have thought about, and which I have written about in the past, is the notion of unintended consequences. Often a well-intended government intervention can make things worse. Many of you will remember the example of the Government of the 1990s introducing the dash to diesel, as it was supposed to be better for the environment—and, in response, we found that actually it made things worse. That is not to criticise the Government of the day, as it was well-intentioned, and many people supported the reduction of greenhouse gases.

One thing that I have thought about with regard to better law-making is how we ensure that there are safeguards in place for when there are negative unintended consequences. For that reason, I have some sympathy for considering whether the unintended consequence of a CMA decision could make things worse for consumers. However, like many noble Lords I am concerned that this is a massive loophole for large tech companies to continue to engage in anti-competitive behaviour or, as other noble Lords have said, slow down the process.

Having looked at the amendments and the Government’s position, I want to ask my noble friend the Minister a direct question. Could he explain what the Government mean by countervailing benefits and give some real examples, or hypothetical examples, of where consumers may be harmed by a pro-competitive intervention by the CMA? If that response convinces noble Lords, perhaps the Government could consider bringing forward an amendment based on Amendment 41 from the noble Lord, Lord Clement-Jones. I look forward to my noble friend the Minister’s response.

--- Later in debate ---

[Lord Vaux of Harrowden (CB)]

I hope that this group of amendments will not be as much of a marathon as the previous group—or indeed that performance from the Deputy Chairman. I start by apologising that I could not attend the first day in Committee, due to a combination of Avanti West Coast and Storm Isha. I would have liked to have spoken in support of amendments in the first group that day, and I entirely agree with what has been said about ensuring that we do not create opportunities for large tech firms to use their immense legal firepower to slow down the process of designating them as having strategic market status, and ensuring that the information and work already done by the CMA can be taken into account. It is fair to say that the same themes have continued today, and Amendment 59 is a continuation of them in a slightly different way.

As a number of noble Lords have already pointed out, we already know who the main strategic players are and that they are already abusing their strategic market positions, as the noble Lord, Lord Tyrie, said so clearly on day one. The noble Baroness, Lady Harding, described how the big tech players know that the regulation is coming, but they are walking backwards as slowly as they can. As she pointed out, we see that very clearly with the EU’s Digital Markets Act, in which so far every potential SMS-equivalent firm has challenged its designation through every stage of the courts that it can. So at best we are unlikely to see any SMS designations until well into 2025, and possibly much later, if they are able to spin out the process.

If I read the Bill correctly, there is actually only one immediate additional obligation that designation imposes on a company: a requirement to report possible mergers on a more enhanced basis than currently applies. But this obligation does not come into force until the SMS designation has been made.

As I said, we already know who the main players are. That is not just speculation—the CMA has already confirmed some of them in its previous work. As an example, in its Mobile Ecosystems market study report of June 2022, just a year and a bit ago, the CMA confirmed that both Apple and Google would meet the test of having strategic market status in the supply of mobile operating systems and the devices on which they are installed, in native app distribution, and in mobile browsers and browser engines. It is not speculation; we know who these people are. Why, then, would we want to wait for another year or more, allowing them to game the system during that period, before applying the enhanced merger reporting requirements on them?

Amendment 59 would apply the enhanced merger reporting requirement to companies that have been given notice that they are under SMS investigation, rather than having been designated. We do not have to wait until the designation has been made. We have heard already the fears that the large tech players will seek to spin the designation process out. Without Amendment 59, the large tech companies would have an additional incentive to game the system by deliberately prolonging the designation process so that they could complete a merger that would be reportable once designated but which is not reportable before the designation is made. I do not think that it is a good idea to give them further incentive to do that.

This is important. For much too long, the large tech companies have been able to entrench their market power through acquisitions with relative impunity. Very few have been passed to the CMA for investigation. In the 10 years to June 2023, according to Wikipedia—admittedly not the best source, but the only one I could find easily—Alphabet, the owner of Google, has completed at least 129 acquisitions, Apple 81 and Microsoft 110. In each case, that has happened across an extraordinarily wide area of activities. These big companies can afford to gamble on acquisitions, even if all they do is succeed in taking out a competitor, or potential competitor.

The enhanced merger reporting regime that this Bill will introduce is a really important step, and I very much welcome it, but we should ensure that it cannot be side-stepped by making it applicable as soon as a company has been informed that it is under SMS investigation. This does not prejudge the merits of any merger; it would simply allow the CMA to take a look while the SMS investigation is under way, rather than it going through under the radar.

I am sure that the Minister will argue that it would be unfair to apply the more stringent merger reporting rules to companies that have not yet been designated, but I do not believe that that is right. First, under Clause 9, the CMA is able to investigate an SMS firm only when it has reasonable grounds to consider that it may be able to designate an undertaking as having SMS. As previously pointed out, we know who those companies are, and we know that there are reasonable grounds for a lot of them that exist at the moment, as the CMA has already pointed out. More importantly, would not it be extraordinary if a merger that would meet the new threshold, and that therefore might impact the strategic status investigation itself, was not reported to the CMA during the investigation? That cannot make sense.

This is very simple: we know who the strategic players are, we know that they abuse their market power, including through mergers and acquisitions, and we know that they are likely to seek to challenge and prolong designation to avoid regulation—we have seen them do it. So let us at least put them under the enhanced merger reporting rules at the earliest opportunity, rather than leaving it for another couple of years.

[Lord Lansley (Con)]

My Lords, I am very glad to follow the noble Lord, Lord Vaux of Harrowden, who presented very well the context to both of these amendments and made a very good point about the desirability of extending the scope of Clause 57 in the way proposed in Amendment 59.

Amendment 60 stands in my name and that of the noble Lord, Lord Clement-Jones—who may be able to say something in his absence through the medium of the noble Lord, Lord Fox.

From my point of view, Amendment 60 goes back to the Furman review of 2019, which noble Lords will recall, which reflected a similar point to one that was made by the noble Lord, Lord Vaux of Harrowden. Paragraph 3.44 of the review referred to the preceding decade and said that in that preceding decade

“Amazon, Apple, Facebook, Google, and Microsoft … have made over 400 acquisitions globally”.

Under the Competition and Markets Authority in this country, in that decade none was blocked, none was notified voluntarily and none was called in for phase 1 or phase 2 investigation. There were European Commission investigations—and that might be regarded as the more appropriate umbrella as a competition authority—but it cleared Google and DoubleClick, Apple and Shazam, and Microsoft and LinkedIn. They were not blocked.

The world has moved on since Furman, and you might say that we have learned more and know more about some of the benefits that are obtained by some of those acquisitions. But the Furman review looked very carefully at whether we should regard mergers involving digital companies differently. That is, I suppose, my point.

I refer to paragraph 3.81 and subsequent paragraphs of the Furman review, which said:

“In mergers involving digital companies, the harms”—


the balance of benefits and disbenefits in relation to future competition—

“will often centre around the loss of potential competition”.

It goes on to say:

“Although potentially harmful to consumers, these outcomes are likely to be relatively uncertain at the time of the merger. This may make it hard to demonstrate that a substantial lessening of competition is more likely than not”.


I will come back to “substantial lessening of competition”, which will be a term familiar to many noble Lords. It gave the example, at this point, of the 2012 Facebook acquisition of Instagram, which at the time was a small photo-sharing platform. It said that even if the OFT had gone on from its phase 1 to a more thorough phase 2 investigation—which of course is more than a decade prior to the period it was looking at—it may have been limited in its ability to block the merger by the balance of probabilities standard: looking at a substantial lessening of competition, would it be more likely than not that there would be a substantial lessening of competition? We do not need to debate Facebook and Instagram and how it all turned out.

The Furman review said:

“The CMA should take more frequent and firmer action to challenge mergers that could be detrimental to consumer welfare through reducing future levels of innovation and competition, supported by changes to legislation where necessary”.


That was its strategic recommendation B. It went on to say, in a recommended action:

“Digital companies that have been designated with a strategic market status should be required to make the CMA aware of all intended acquisitions”.


That is indeed exactly what Clause 57 achieves. To that extent, the recommendations of the Furman review were carried through.

Interestingly, the Furman review went on to discuss the question of whether the balance of probabilities standard could be replaced by a balance of harms standard. I am not going to pursue that, because I can see that it was very difficult to vary a standard which is, in effect, not in the statute but is in the substance of the practice. What I have done instead, in Amendment 60, is to ask what it is that is lacking, or may be lacking, and should we, through the mechanism of the Bill, examine very carefully whether we can do more to strengthen the powers of the Competition and Markets Authority in relation to digital competition in particular.

Once there is a notification in relation to a potential merger, Clause 57(9) refers to the steps that the CMA may take in relation to a merger. It refers to Section 33 of the Enterprise Act 2002. It does not change it; it just refers to those steps. I have the benefit—I may not be the only one here, I am not quite sure—of having been on the Standing Committee in the other place on the Competition Act 1998 and the Enterprise Act 2002. I see that my noble friend was on the Standing Committee on the Enterprise Act—and maybe both.

We will come back to the issue, but I say to my noble friend the Minister, in parenthesis, referring to the previous debate, that trying to compare a block exemption under the Competition Act, which is ex post regulation, with an exemption applied in relation to an ex ante imposition of a conduct requirement by the regulator is, I am afraid, a false analogy. I will not go back to that, but I think it does not really apply.

What I have done in Amendment 60 is to seek to vary Section 33 of the Enterprise Act 2002—quite a big thing to do—but only in relation to designated undertakings. The amendment says that if one is a designated undertaking, not only does one have to notify but there is a difference in the structure of Section 33, so that where it says that a reference can be made in relation to

“(a) arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and (b) the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services”,

I am seeking adding an “or”. So (a) would apply in all cases; (b) might apply; or (c ) would apply, which the amendment makes clear would say

“or, (c) if the relevant merger situation involves a designated undertaking under section 2 of the Digital Markets, Competition and Consumers Act 2024 the creation of that situation may be expected to result in the loss of future benefit to consumers in the provision of digital activities as a consequence of the forestalling of prospective competition”.

The drafting may be deficient, but I make the point that we need to put in the drafting what we are trying to do. That is to give the CMA explicit statutory cover to look forward—as it does in its five-year forward designation—identify a merger situation and ask, in the context of its forward-looking assessment, which it must do for designation purposes, whether there is an expectation that that merger situation would result in the loss of future benefit to consumers if it were brought into effect. That is a reasonable alignment between the nature of the designation process and its forward-looking character and the desirability of the assessment of any potential merger situation having the same characteristic.

Digital Markets, Competition and Consumers Bill

Lord Lansley Excerpts

Report stage
Monday 11th March 2024 Lords Chamber

Both Secretaries of State who are currently involved in this legislation, for DSIT and the Department for Business and Trade, are very strong individuals. I am not concerned about them being anything other than resolute in the face of great pressure. However, unfortunately we are legislating for a situation that goes way beyond the current personalities in these different posts. It is important, regardless of who is in the post, that there is a deadline. Therefore, if my noble friend Lord Lansley pushes his Amendment 56 to a Division, I will support him.

[Lord Lansley (Con)]

My Lords, with that lead-in I will say a few words about Amendment 56 and Amendments 13 and 35 in the name of my noble friend Lord Faulks, which were discussed very intensively in Committee. We are all very grateful to my noble friend Lord Offord for the extent of his response to that debate as Minister, but I fear that it gave us information on which to work but not sufficient reassurance to hold back, as my noble friend Lord Faulks has continued to press the argument.

Let me make a point about that. In the course of that debate, as the noble Lord, Lord Faulks, said, the Government’s intention seemed to be that either Article 1, Protocol 1, of the ECHR is engaged in relation to an appeal, using the arguments for the peaceful enjoyment of possessions and therefore, as the noble Lord, Lord Faulks, said, proportionality would be engaged as a consequence of that, or the ECHR is not engaged but it is the Government’s intention, by introducing this provision in the Bill, that the same test would apply. However, I fear that we need to say, as the Minister quite reasonably said in response in Committee, that there are expectations that proportionality would form part of the decision-making process of the Competition and Markets Authority as a responsible regulator. It would be expected, as the Minister said, to apply that principle in the terms on which it was done in the Bank Mellat v Her Majesty’s Treasury (No. 2) case.

The Minister referred to the “four limbs” of Lord Reed and Lord Sumption. I spent a bit of my life which I will not get back now reading some of these judgments, though it was quite interesting. It led me to go a little beyond the cases that were cited by my noble friend to the case of Pham v Secretary of State for the Home Department, where there was a really interesting discussion demonstrating that, although there was some development of the use of proportionality alongside reasonableness in determining administrative law cases, in the decisions that were being handed down there was a clear distinction between that proportionality which is linked to the reasonableness test—that is, that this was something so disproportionate that no reasonable regulator would have made this decision—and what they described as an intense review of the merits of the decision on proportionality.

--- Later in debate ---

[Lord Lansley (Con)]

My Lords, I have four amendments in this group. Amendments 16 and 17 relate to the conduct requirements that the CMA can impose on designated undertakings, and Amendments 20 and 25 relate to countervailing benefits in relation to that conduct. I will come to that in a minute. Let me stick for a moment with Amendments 16 and 17.

Amendment 16 was helpfully introduced, to some extent, by what the noble Lord, Lord Clement-Jones, said about the activities in the run-up to the introduction of the Digital Markets Act in the European Union. There was a deadline of 7 March for that, and considerable attention has been paid to what Apple in particular has done in relation to that. The noble Lord made Apple’s position clear. It is saying, essentially, that we can either stay with our existing system, and it will charge 30% by way of fees for apps on the App Store, or we can go to this alternative which enables us to comply with the DMA, and Apple will offer an alternative but with a 17% fee for apps plus a 3% core technology fee, and, if you go beyond a million downloads, you will get a 50 cents processing charge per download. Those who fear that their app may go viral, with millions of downloads, are potentially facing enormous costs for processing them through the App Store. As far as all the potential users of the Apple App Store are concerned, this potentially restricts their opportunity for competition rather than enabling it.

My first point is to further reinforce that we have come together to design legislation in support of the Government that is more flexible than the Digital Markets Act. The DMA, in effect, puts the obligations into the originating Act. To change them will be considerably more difficult than would be the case for the Competition and Markets Authority in our regime to change the structure and the content of conduct requirements. Potentially, we have really good flexibility.

Amendment 16 is linked to whether the powers to impose conduct requirements enable the CMA to act in relation to the leveraging of market power in digital activities into other activities—the wider system of its business. Amendment 16 is absolutely about whether the conduct requirements that can be imposed under Clause 20 are sufficiently wide to enable the Competition and Markets Authority to structure them to limit activity which restricts competition in the way that these efforts are being pursued in relation to the Digital Markets Act. To that extent, Amendment 16 asks the Minister, if he would be kind enough to respond in this light, whether, if a designated undertaking were to behave in that sort of way, the CMA would have the power under the conduct requirements to respond and act, and to do so rapidly, to frustrate that kind of anti-competitive result.

Amendment 17 is slightly different, in that we discussed it in Committee. One of the European Union Digital Markets Act obligations is termed expressly to prevent others seeking to stop someone making a complaint to any public authority about non-compliance with the relevant obligations. I looked to see whether our conduct requirements, specified in Clause 20, cover a similar circumstance. In discussion in Committee, the Minister directed me to the “fair and reasonable terms” provision, which is very wide ranging but does not cover this, because these are not the terms of a contractual relationship between a designated undertaking and its users or potential users. It may not relate to that at all.

The Minister also directed me to the question of discrimination, but I do not think this is about discrimination between users; it is about preventing someone, who may be a user, a potential user or a potential competitor, from going to a public authority and saying, “This undertaking does not comply with its conduct requirements”. We know—I will not repeat the evidence that I gave in Committee—that there have, unhappily, been circumstances of intimidation of those who would complain to regulators about the conduct of organisations with significant market power. I return to this simply to say to the Minister that I am not yet convinced. Can he convince us that this kind of activity is covered by the conduct requirements? If it is not, will he undertake to ensure that the necessary changes are made to Clause 20, which the legislation would permit?

I will also speak to the amendments about counter-vailing benefits exemptions. Amendments 23 and 24 revert the Bill to its original wording, which would be better than where we are now. I have looked at Clause 29 from my point of view and I cannot find a good reason for it, so I thought it better to leave it out. If there is a conduct investigation and there are countervailing benefits, they should be presented to the CMA when it makes representations to a conduct investigation. Why would they be left to any other time or specified separately in the legislation?

I thought it better to amend Clause 27 such that, when making representations, the designated undertaking may give details of the benefits associated with its conduct to form part of that investigation. At that point, it should come forward if it is prepared to make commitments that the CMA could accept, without necessarily making a finding, to close that investigation.

All this should take place in Clause 27 on representations, because that is where the sequence lies. I do not understand why Clause 29 has been added at what appears to be a later stage in the sequence of the legislation. As it is a separate clause, it appears as though the benefits can be presented at an entirely separate point.

As I have also discussed with the Minister, there is an analogy with the exempt anti-competitive agreements under the Competition Act 1998. I was on the stand when that Bill was in Committee and this is a very different kettle of fish. The 1998 Act set out broad descriptions of agreements that would be deemed anti-competitive and therefore void, except if undertakings came to the Competition and Markets Authority; then the burden is on it to demonstrate that they have, in effect, countervailing benefits, such as to innovation, the consumer and the like, without an adverse effect on competition.

That is ex post regulation. That is agreements and obligations that are broad-ranging and apply across industry. Here, we are talking about conduct requirements that are optimised and designed in relation to that undertaking in the first place. This is ex ante regulation. You cannot compare ex post provisions in the Competition Act with ex ante regulation under this legislation. They are not the same kind of thing.

Therefore, again, I come back to the argument: let us not have exemptions. The use of “exemption” seems wholly inappropriate. We have here a very straightforward process. Conduct requirements require, in themselves, under Clause 24, for there to be a consultation. The undertaking should tell the CMA what the benefits associated with its conduct are at that stage.

There is a forward-looking process; the conduct requirement is supposed to look forward five years, but none the less, circumstances change. The CMA can review a conduct requirement, and the designated undertaking should come to the CMA if circumstances change and there are countervailing benefits and ask for the conduct requirement to be reviewed. Even if, under all these circumstances, a conduct investigation notice is issued, the undertaking should come forward and express what the benefits are at that point. Under none of these circumstances is there a requirement for the use of “exemption” or for an additional clause that offers countervailing benefits as such.

I dare say I will not press this, because there is probably more to be said for Amendment 23 and going back to the original wording, but it afforded me the opportunity, I hope, to explain why I think the whole proposition in Clause 29 seems misplaced.

[Baroness Kidron (CB)]

My Lords, I find myself in a slightly awkward position because my name is listed in support of Amendments 23 and 24, but I find the argument of the noble Lord, Lord Lansley, incontrovertible, and maybe he should press his amendment.

On the wording, I want to put on the record the view of Which?:

“This is a legal loophole for big tech to challenge conduct requirements through lengthy, tactical, legal challenges. It would tie up CMA (i.e., taxpayer) resources and frustrate the intent of the legislation. Whilst we agree with the intent of this provision, which is to encourage innovation that will benefit consumers, it is critical that these provisions do not inadvertently give designated firms a get out of jail free card from DMU decisions”


by presenting opaque consumer benefits.

I put that on the record because it is so measured in comparison with many of the emails and representations I have had, and still is absolutely categoric that this is a get out of jail card. Like the noble Lord, Lord Lansley, I do not understand why the regulator duty to be

“proportionate, accountable, consistent, transparent and targeted”,

within the context of coming to the conduct requirements and taking up any countervailing benefits at that point, is not adequate. So I will support the noble Baroness, Lady Jones, and, indeed, the noble Lord, Lord Lansley, should he change his mind in the next few minutes.

I also add my support to Amendment 60, tabled by the noble Lord, Lord Fox. I am an enthusiastic supporter of international standards. They provide for soft law and, having worked with the IEEE on a number of standards over the last few years, I see how brilliantly they work to bring disparate people together and provide practical steps for those tasked with implementation. I declare an interest in relation to the IEEE, which gives some funding to 5Rights Foundation, of which I am chair.

The point I leave with the House is that, toward the end of 2022, I had two conversations with companies that will certainly be SMS about why they were now recruiting for employees to work on standards full-time. I believe the CMA should be in the standards-writing game.

--- Later in debate ---

I turn next to Amendments 23 and 24 from the noble Baroness, Lady Jones of Whitchurch, which would revert the wording of the countervailing benefits exemption to the text as introduced in the Commons. I stress that the current wording maintains the same high threshold. However, I will not repeat the arguments, given the extensive debate we shared on this in Committee.

[Lord Lansley (Con)]

I am very grateful to my noble friend. Could he say therefore whether a designated undertaking that feels it can demonstrate countervailing benefits must have presented those to the CMA before the CMA concludes its findings under Clause 30—or can it do so afterwards?

[Viscount Camrose (Con)]

It can make a representation to the effect of countervailing benefits as part of a breach investigation, which can of course happen at any time during the life of a conduct requirement. We would expect it to make those representations at the start of or during the initial investigation. When these representations are made as part of a breach requirement, the Bill sets out the high standards required in order to accept that argument.

--- Later in debate ---

[Lord Lansley (Con)]

Sorry, may I just press my noble friend? Can he therefore say that the presentation of a countervailing benefits exemption after the CMA has made findings under Clause 30 would be void?

[Viscount Camrose (Con)]

A representation to the effect that there are countervailing benefits would take place as part of a breach investigation. Of course, once the investigation is complete, there is no further opportunity to do so. Have I answered the question?

[Lord Lansley (Con)]

Yes.

[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.

--- Later in debate ---

Moved by

[Lord Lansley]

56: Clause 114, page 71, line 17, at end insert—
“(5) When the CMA seek the approval of the Secretary of State for guidance, the Secretary of State must within 40 days either—(a) approve the guidance; or(b) refer the proposed guidance back to the CMA with a statement of reasons why the guidance should not be published in that form.”

[Lord Lansley (Con)]

My Lords, in the debate on the first group, on Amendment 56 there was a strong view that when the Competition and Markets Authority presents guidance to the Secretary of State, the Secretary of State should either approve it or refer it back with a statement of reasons within a reasonable time, specified as 40 days, and not, as the Bill presently says, that the Secretary of State can choose not to approve it without any time limit. I am afraid, and I say it with regret to my noble friend, that we did not hear persuasive reasons to the contrary. I seek the opinion of the House on Amendment 56.

Digital Markets, Competition and Consumers Bill

Lord Lansley Excerpts

Report stage
Wednesday 13th March 2024 Lords Chamber

[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.

[Lord Bassam of Brighton (Lab)]

My Lords, we are very grateful—we are always very grateful, actually—to the noble Lord, Lord Clement-Jones, for tabling this amendment, which raises a valid concern around the suitability of the current provisions in Section 58 of the Enterprise Act.

We take the view that the world has changed significantly since that legislation was put on the statute book. It was changed as a result of the passage of the National Security and Investment Act, but not in a way that addressed the points that have been properly raised by the noble Lord. Some aspects of this debate featured during the passage of the Online Safety Bill, and I strongly suspect we will revisit this on other occasions in the future, as the noble Lord, Lord Lansley, has invited us to with the Media Bill.

The noble Lord, Lord Clement-Jones, described this as a “brazen attempt” on his part. Well, I hope the Government will be open-minded about looking at whether and how the public interest notice regime could be revised in the future, to take account of different types of media provider. However, because I know that noble Lords would like to progress on to another interesting group on a similar topic, I will hand the Floor to the Minister.

--- Later in debate ---

[Lord Parkinson of Whitley Bay (Con)]

The noble Lords have intervened at a helpful point, because I was about to outline that we want to ensure that the new measures do not have undesired effects on wider foreign business investment in the UK media, or on purely passive investments made by established investment funds.

In the amendment we will bring forward at Third Reading, it will be necessary to take a power to make secondary legislation to set out two points clearly: first, what limited types of established investment funds we mean, which could be split out of the general prohibition on foreign state ownership provided for by this regime; secondly, the very low threshold up to which they may be permitted to invest, which we intend to be considerably lower than the current thresholds for material influence in the Enterprise Act.

As we bring this forward ahead of Third Reading, we would be very happy to discuss the drafting with noble Lords before it is tabled so that we can discuss the detail. We will set that out in the provisions at Third Reading.

[Lord Lansley (Con)]

I am sorry to interrupt my noble friend but, as he knows, I am interested in the question of media enterprises more generally. Is he intending that the amendment to be brought forward will relate only to newspapers, and therefore will not touch upon broadcasters, as they will be excluded? I am not sure I understand why the presentation of news by broadcasters is to be treated differently from the presentation of news by newspapers.

Digital Markets, Competition and Consumers Bill

Lord Lansley Excerpts

3rd reading
Tuesday 26th March 2024 Lords Chamber

[Lord Faulks (Non-Afl)]

My Lords, I also pay tribute to the Government, Ministers, officials and lawyers for their speedy response to the amendment put down on Report by the noble Baroness, Lady Stowell, and others. I declare an interest as the chair of the Independent Press Standards Organisation, which regulates 95% of the printed press and its online manifestations.

I shared with many other noble Lords concern about the prospective acquisition of the Daily Telegraph and the Spectator by the United Arab Emirates—or at least the acquisition of a substantial part of those important titles. It seems to me that this amendment will make this sort of acquisition much more difficult, if not impossible, as soon as the Bill becomes law.

I agree with other noble Lords that it is most important in framing the necessary secondary legislation that the driving principle behind the amendment, which is to prevent foreign state ownership of newspapers, is reflected appropriately. There is a risk that too tightly drawn definitions might catch wholly benign investors who might have a very modest and non-active interest in newspaper organisations. Sovereign wealth funds have already been mentioned, and the noble Lord has given assurances in this area. I do not entirely agree with the noble Lord, Lord Forsyth, in his citation of Pepper v Hart and its importance, but none the less we will be much reassured by anything the Minister might say. I also ask him to consider the position of banks which may provide a newspaper organisation’s finance. Banks are often part of a consortium, and one part of a consortium may well be a bank with a connection to a foreign state. It is important that that is not captured.

There has been a deliberate choice by those drafting these amendments to change the language of the Enterprise Act 2002, which speaks of “material influence” to provide in the amendment that a relevant merger situation arises where one party acquires “influence” over another. That is plainly a much lower bar. I imagine that the change is designed to protect against somewhat unconvincing assertions by prospective acquirers of an interest in newspapers that editorial independence is protected by some form of editorial board or other Chinese wall. I welcome the Minister’s clarification on this.

The definition of a newspaper in the amendment is,

“a news publication circulating wholly or mainly in the United Kingdom or in a part of the United Kingdom on any periodic basis”.

That seems to exclude news websites or broadcasters. News websites are increasingly a source of news for consumers, many whom have deserted conventional newspaper models. It may be that more power and influence can in fact be obtained there than in the traditional format. I hope that the Minister can continue to reassure the House that these websites are in the Government’s sights, simply on the basis of consistency. I venture to suggest that the Media Bill might provide an appropriate parent for relevant provisions to bring websites into the same category as newspapers. I welcome clarification on that.

The provisions make it clear that the Secretary of State must—I emphasise the word “must”—

“make an order … reversing or preventing … the foreign state newspaper merger situation”.

There is no discretion here. That makes it all the more important that any exemptions should provide that remote or benign interest in newspapers by various emanations of foreign states will not necessarily fall foul of these provisions.

I would like to make it clear that I am entirely in favour of the thinking which animates this amendment, but it is inevitable that when an amendment is drafted, at considerable pace, at a late stage in the progress of a Bill, there may be gaps or ambiguities. Freedom from state interference is of fundamental importance. Our newspaper industry is not in anything like the healthy state it once was, and its vulnerability is what makes newspapers potentially prey to outside investment from foreign states which seek influence. However, important though it is to keep our newspapers free of such influence, we want them to survive and, indeed, to prosper. I hope that the amendment entirely comprehends that aim.

Finally, I simply ask for clarity—the drafting is impressive, but sometimes the meaning is a little hard to tease out—on how the Minister envisages parliamentary involvement in the case of a contentious merger situation.

[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.