Digital Markets, Competition and Consumers Bill

Lord Tyrie Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[Lord Tyrie (Non-Afl)]

I declare my interest as an adviser to DLA Piper. I too strongly support the Bill. Rather than dwell in any detail on how to improve it further—there will be plenty of time to do that in Committee—I thought it might be helpful first to attempt briefly to explain what I think is the Bill’s place in a wider policy perspective, and why I support it. Secondly, I will explain why the legislation on its own probably will not deliver the benefits that we are hoping for it. The CMA needs to do better, and so will Parliament, in scrutinising it.

On the first point, it is now widely accepted in many western democracies that competition policy has simply not been delivering the goods. I will not dwell on this for long, but concentration ratios are rising everywhere, and consumer detriment with them. The result is an erosion of public confidence in competition and consumer protection and in many regulatory bodies, including the CMA. That is only part of a much bigger picture of vulnerability to obsolescence of the tools and machinery that western Governments have been using over the past 30 years to manage capitalism and secure consent for it.

One of the problems the Bill seeks to address is that the West’s technological inventiveness, while improving economic performance, has also had the effect of challenging the legitimacy of global free enterprise. The platforms were created by global capitalism and they have improved consumer welfare dramatically. But they have also brought corrosive by-products: risks to privacy, fake news, online harm, greater cyber risk. These corrosive effects have been greatly amplified by the tendency of big platforms to monopoly. Western Governments are now struggling to adapt the machinery of regulation—in some cases radically—to cope with this. Consumer protection has also been badly neglected. Millions of people now feel vulnerable to rip-offs and no longer think that free enterprise works for them. As the noble Lord, Lord Vaizey, pointed out, small businesses —which are also consumers—have been at the wrong end of platform power a great deal recently.

Unless we face up to it, the free enterprise, pro-competition settlement, which has brought so many welfare benefits in recent decades, will be put at risk. Like us, all the democracies are groping their way towards addressing these challenges, to which the noble Lord, Lord Fox, also alluded. The Bill is at least a start but, none the less, the improvements to competition and consumer protection policy proposed will make only a small contribution to the much broader intellectual challenge I am trying to set out.

The Bill is at least intended as a reboot of the CMA’s legislative base. It largely provides it, and it has the potential to improve Britain’s economic performance a great deal.

Of course, it is scarcely surprising that I support the Bill. Much of it draws on the detailed proposals that I put to the Secretary of State nearly five years ago in response to his instructions that, as incoming chairman of the CMA—and I am more or less quoting—I try to shake the CMA up, raise its profile, and advise him on what, if any, improvements to the statutory base might be needed. I was told to get on with it and come back to him in six months, which I duly did.

What did I find? In a nutshell, I found highly motivated and high-quality staff—among the very best in public service. I found good, sometimes outstanding, work being done in two of the CMA’s five major areas of statutory responsibility—mergers and anti-trust—but, in varying degrees, a neglect of the other three: markets, advocacy and consumer protection. Internally, they had become the CMA’s poor relations. I also found a lack of boldness at the top and some substandard governance. Frankly, this is no more than we have seen in recent years in many other regulators.

I reported this to the then Secretary of State, but I told him that we needed to get on with the legislative improvements anyway, particularly on consumer protection and digital. I also said that we would need other improvements for it to be effective: a change in mindset at the top, and a much higher profile taken on behalf of the consumer by the CMA, with much better communication to a wider public. I also said that work was needed to develop a deeper understanding of the state of competition in the UK economy as a whole, and that this needed to be used to target the CMA’s workstreams. Virtually none of this work was being undertaken when I arrived at the CMA.

As far as I can tell, the three problems that I outlined still persist to varying degrees, so it is not just the legislation but, to some degree, the CMA’s approach to implementing its statutory remit that needs a reboot. If we do not secure that, the CMA will not deliver what we expect of it and hope for it. Even more concerningly, the growing sentiment of many of the public that they are victims of a rip-off economy, run for the benefit of the few and certainly not for them, will develop further. That is why the later parts of the Bill, particularly those improving consumer protection, are at least as important, although perhaps less glamorous to talk about, as the digital measures in Part 1.

My impression is that the new chairman and the new CEO are on the case. They both recognise the need for an organisational reboot. They will need our support in that. In any case, these problems are not entirely a matter for them. The CMA has only been responding to the signals that Parliament and others have put before it. Faced with those signals, many of us would have done the same. Parliament needs to send much better signals. In particular, we need to develop scrutiny tools that can get deep into what really goes on in the CMA. It needs to be rewarded with praise and support for improvements in its strategic approach when they come. There have been quite a few recently; I will not list them, for the sake of brevity. Of course Parliament should also flag up the CMA’s shortcomings, but it should always do so on the basis of detailed evidence.

To do that, Parliament will need to develop much more technical expertise than is currently available to it. It needs a specialist group—probably answerable to a dedicated Select Committee and with some of the characteristics of the NAO, but much smaller—that can get into the detail of the CMA’s working methods. By doing so, Parliament can help to shape the CMA’s decision-making framework and its wider public engagement, to which I alluded, just as the Treasury Committee has shaped that of the Bank of England and the FCA over the past decade.

One of the reasons that the Bank of England engages in public discourse and explanation of its role is that Parliament makes sure that it does, but that is currently not the case with the CMA. I asked to appear before the BEIS Select Committee when I was chairman and discovered that, when I appeared, it was the first time that any CMA chairman had ever appeared before it. They had simply evaded, avoided or had somehow been the subject of neglect by the BEIS Committee for many years. Of course the committee is extremely busy and has far too much to do, hence my suggestion for a specialist body. I said earlier that not only Parliament but the Government should act as an enabler of better scrutiny, and I have quite a number of suggestions for the Government but, rather than raise them now, I will try to press them in Committee.

I end with just one further remark. I have tried to put the legislation in a wider policy perspective, and I have lingered on the need for an institutional reboot of the CMA and the responsibility that we carry in Parliament and the Government to secure that reboot. But the CMA is becoming a repository for a good number of the Government’s smelly rats. It has been asked to monitor the internal market and has acquired responsibility for the highly politically sensitive topic of state aid, now travelling under the new name of the Subsidy Advice Unit. That is all before this huge Bill and the new big-ticket mergers that are coming its way post Brexit, which have recently been so controversial. With this Bill, we are going to empower the CMA with huge new responsibilities even as it struggles to do a full job with its existing powers. Government offload is risking CMA overload.

Twenty-five years ago, we overloaded a new body, the Financial Services Authority, with new responsibilities. Offload from the Bank of England and from other institutions became overload at the FSA. It failed spectacularly a decade later. When it failed, it was carved up. We need to put in place the support and scrutiny here for the CMA to accompany this Bill that can give the CMA better protection against such an outcome in the years ahead.