AI Safety Summit

Paul Scully Excerpts

Thursday 9th November 2023 Written Statements

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)]

I am providing the House with an update following the UK’s AI safety summit on 1 and 2 November 2023 at Bletchley Park—the birthplace of computer science.



As the Prime Minister set out in his speech on 26 October, the world stands at the crossroads of a technological revolution, and if we are to seize the benefits of AI, we must tackle the risks. AI is developing at an unprecedented speed, driven partly by greater computing power and innovations in model design. The capabilities of powerful AI systems will only increase, with profound economic and societal consequences, bringing unprecedented opportunities and risks. I am proud to share what the UK has achieved at this defining moment.



The summit was a first-of-its-kind event that has firmly established the UK as a global leader on AI safety. We brought the world’s leading powers, and major AI industry, academia and civil society organisations together to build a shared understanding of the risks and opportunities of frontier AI; to acknowledge the need for action; and to agree to work together to address these in the interest of all humanity. These common goals and shared principles were encapsulated in the Bletchley declaration, signed by 28 Governments representing not only the current world leaders in AI development, but also a majority of the world’s population and economy.



Over the two days, an unprecedented range of attendees agreed a raft of measures to support those objectives. These included:



A joint agreement for frontier AI models to be tested for safety both before and after they are rolled out;

A shared ambition to invest in public sector AI capability, to ensure that Governments can both steward industry effectively and directly scrutinise from a technical standpoint;

A “State of the Science” report, led by one of the “Godfathers of AI” Yoshua Bengio, which will collate and distil the latest insight from across the global community help build a shared understanding of the capabilities and risks posed by frontier AI.

The UK also used the leadup to the summit to gather feedback and insights from hundreds of UK stakeholders, and work with and encourage leading frontier AI organisations to publish their safety policies. We also launched the world’s first AI safety institute, which will build public sector capability to conduct safety testing and research into AI safety, in partnership with countries around the world.



I am pleased to share more details of the Bletchley declaration and our work against each of our summit objectives.



The Bletchley declaration by countries attending the AI safety summit



The landmark Bletchley declaration agreed an initial, mutual understanding of frontier AI, and the risks associated with it, and set out that countries will work in an inclusive manner to ensure the deployment of responsible, trustworthy, and human-centric AI that is safe. It committed countries to further collaborate on establishing a shared scientific and evidence-based understanding of the relevant risks.



Objective 1—a shared understanding of the risks posed by frontier AI and the need for action; and



Objective 2—a forward process for international collaboration on frontier AI safety, including how best to support national and international frameworks.



Informed by demonstrations from the UK’s frontier AI taskforce and a discussion paper on the capabilities and risks of frontier AI, summit attendees learned of the impact and urgency of the key risks from frontier AI. They recognised that potential harms from misuse, loss of control, and the potential for leaps in capability were particularly pressing.



Attendees engaged in substantive discussions on the impact of AI on wider societal issues, including potential harms caused by disinformation and the amplification of existing inequalities. Participants expressed a range of views on which risks should be prioritised, noting that addressing risks at the frontier of AI is not mutually exclusive from addressing existing AI risks and harms.



With the speed of technological change, participants affirmed the importance of continued collaboration and agreed on the urgency of establishing a shared international consensus on the capabilities and risks of frontier AI. In order to maintain public trust, attendees agreed that future decisions on AI safety must be underpinned by appropriate evidence, and recognised the necessity of fast, flexible and collaborative action by all actors, in particular Governments and frontier AI developers, to further understand those risks and ensure effective oversight.



All countries in attendance welcomed the UK’s initiative to deliver a first-of-its-kind state of the science report on frontier AI. Building on the commitment for scientific and evidence-based collaboration as set out in the Bletchley declaration, the report will facilitate a shared science based understanding of the risks and capabilities associated with frontier AI. The UK has commissioned Yoshua Bengio, a pioneer and Turing award winning AI academic, to chair the delivery of the report. He will be supported by a group of leading AI academics and advised by an inclusive, international expert advisory panel made up of representatives from participating countries.



Objective 3—appropriate measures that individual organisations should take to increase frontier AI safety; and



Objective 4—areas for potential collaboration on AI safety research, including evaluating model capabilities and the development of new standards to support governance.



As set out in the Bletchley declaration, no single part of society can address the impacts of frontier AI alone; delivering on the potential of AI requires sustained attention of Governments, businesses, academia, and civil society, with a particularly strong responsibility for actors developing frontier AI capabilities.



Ahead of the summit, the UK published an overview of emerging frontier AI safety processes and associated practices to share best practice on how such AI systems can be developed in a safe manner. The UK was, therefore, pleased to see leading frontier AI organisations (Amazon, Anthropic, Google DeepMind, Inflection, Meta, Microsoft, OpenAI) respond to this by publishing their own AI safety policies. This formalises their own position on AI safety to enable public scrutiny of their outputs and encourages all frontier AI developers to consider how they can build trust through the further development and publication of such policies.



Building on this, countries and leading AI companies agreed on the importance of bringing together the responsibilities of Governments and AI developers and agreed to a plan for safety testing at the frontier. Participating countries committed, depending on their circumstances, to the development of appropriate state-led evaluation and safety research, while participating companies agreed that they would support the next iteration of their models to undergo appropriate independent evaluation and testing.



As an initial contribution to this new collaboration, the UK detailed its launch of the world’s first AI safety institute, which will build public sector capability to conduct safety testing and research into AI safety. In exploring all the risks, from social harms including bias and misinformation, through to the most extreme risks of all, including the potential for loss of control, the UK will seek to make the work of the safety institute widely available. The UK welcomed commitments from companies in attendance to work with the institute to allow for pre-deployment testing of their frontier AI models and commitments to work in partnership with other countries’ institutes, including the US.



Objective 5—showcase how ensuring the safe development of AI will enable AI to be used for good globally.



Attendees together recognised a shared ambition to unlock the significant potential of frontier AI, which has the ability to transform economies and societies for the better.



Participants welcomed the exchange of ideas and evidence on current and upcoming initiatives, including individual countries’ efforts to utilise AI in public service delivery and elsewhere to improve human wellbeing.



The UK will continue to be a leader on AI for good, and I welcome the announcements of our new £100 million fund for an AI life sciences accelerator mission to bring cutting edge AI to bear on some of the most pressing health challenges facing society, and a £32 million philanthropic partnership to shape the future of our best-in-class UK biobank. AI also has extraordinary potential to support teachers and students, which is why the Government are investing £118 million into the AI skills base, including postgraduate research centres, a new visa scheme, and postgraduate AI scholarships.



Many participants at the summit set out that for AI to be inclusive, it must also be accessible. I was pleased to announce that the UK, with Canada, the United States of America, the Bill and Melinda Gates Foundation, and other partners, announced £80 million for a new AI for development collaboration, working with innovators and institutions across Africa to support the development of responsible AI.



Keeping up momentum



With the frontier of AI constantly moving, the ambitions of the Bletchley declaration and the summit discussions cannot be rooted in a single moment.



I am pleased that the Republic of Korea has agreed to co-host a mini virtual summit on AI in the next six months, with France to host the next in-person summit a year from now.



The summit would not have had this level of success without the engagements we had in the weeks leading up to it. Ministers and senior officials led an inclusive public dialogue on international safety. These substantive, practical discussions not only informed and enriched our conclusions and conversations at the summit, but also allowed a range of voices to be heard in shaping the key policy decisions.



We will continue these conversations with key stake- holders, to ensure that we build on the conclusions reached at the summit and ensure that international agreements are underpinned by a robust domestic regulatory framework for AI.



We will be publishing the AI regulation White Paper response by the end of this year to further set out our next steps on our approach to this fast-paced and transformative technology.

[HCWS21]

Online Safety Bill

Paul Scully Excerpts

Consideration of Lords amendments
Tuesday 12th September 2023 Commons Chamber

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)]

I beg to move amendment (a) to Lords amendment 182.

[Mr Deputy Speaker (Sir Roger Gale)]

With this it will be convenient to discuss the following:

Lords amendment 349, and Government amendments (a) and (b).

Lords amendment 391, Government amendment (a), and Government consequential amendment (a).

Lords amendment 17, Government motion to disagree, and Government amendments (a) and (b) in lieu.

Amendment (i) to Government amendment (a) in lieu of Lords amendment 17.

Lords amendment 20, and Government motion to disagree.

Lords amendment 22, and Government motion to disagree.

Lords amendment 81, Government motion to disagree, and Government amendments (a) to (c) in lieu.

Lords amendment 148, Government motion to disagree, and Government amendment (a) in lieu.

Lords amendment 1, and amendments (a) and (b).

Lords amendments 2 to 16, 18, 19, 21, 23 to 80, 82 to 147, 149 to 181 and 183 to 188.

Lords amendment 189, and amendment (a) in lieu.

Lords amendments 190 to 216.

Lords amendment 217, and amendment (a).

Lords amendments 218 to 227.

Lords amendment 228, and amendment (a).

Lords amendments 229 and 230.

Lords amendment 231, and amendment (a).

Lords amendments 232 to 319.

Lords amendment 320, and amendment (a).

Lords amendment 321, and amendment (a).

Lords amendments 322 to 348, 350 to 390 and 392 to 424.

[Paul Scully]

As we know from proceedings in this place, the Online Safety Bill is incredibly important. I am delighted that it is returning to the Commons in great shape, having gone through extensive and thorough scrutiny in the Lords. The Bill is world-leading, and the legislative framework established by it will lead to the creation of a profoundly safer online environment in this country. It will kickstart change where that is sorely needed, and ensure that our children are better protected against pornography and other content that is harmful to them. The Bill will also guard children against perpetrators of abhorrent child sexual exploitation and abuse, and ensure that tech companies take responsibility for tackling such content on their platforms, or be held criminally accountable.

[Sir William Cash (Stone) (Con)]

As I am sure my hon. Friend the Member for Penistone and Stocksbridge (Miriam Cates) will agree, may I say how much we appreciate what the Government have done in relation to the matter just referred to? As the Minister knows, we withdrew our amendment in the House of Commons after discussion, and we had amazingly constructive discussions with the Government right the way through, and also in the House of Lords. I shall refer to that if I am called to speak later, but I simply wanted to put on record our thanks, because this will save so many children’s lives.

[Paul Scully]

I thank my hon. Friend and my hon. Friend the Member for Penistone and Stocksbridge (Miriam Cates) for all their work on this. I hope that this debate will show that we have listened and tried to work with everybody, including on this important part of the Bill. We have not been able to capture absolutely everything that everybody wants, but we are all determined to ensure that the Bill gets on the statute book as quickly as possible, to ensure that we start the important work of implementing it.

We have amended the Bill to bolster its provisions. A number of topics have been of particular interest in the other place. Following engagement with colleagues on those issues, we have bolstered the Bill’s protections for children, including a significant package of changes relating to age assurance. We have also enhanced protections for adult users.

[Sajid Javid (Bromsgrove) (Con)]

My hon. Friend will know that Ministers and officials in his Department have worked extensively—I thank them for that—with me, Baroness Kidron, and the Bereaved Families for Online Safety group, on the amendment that will make it easier for coroners to have access to data from online companies in the tragic cases where that might be a cause of a child’s death. He will also know that there will still be gaps in legislation, but such gaps could be closed by further measures in the Data Protection and Digital Information Bill. His ministerial colleague in the other place has committed the Government to that, so may I invite my hon. Friend to set out more about the Government’s plans for doing just that?

[Paul Scully]

I thank my right hon. Friend for his work on this, and Baroness Kidron for her work. I will cover that in more detail in a moment, but we remain committed to exploring measures that would facilitate better access to data for coroners under specific circumstances. We are looking for the best vehicle to do that, which includes those possibilities in the Data Protection and Digital Information Bill. We want to ensure that the protections for adult users afford people greater control over their online experience.

--- Later in debate ---

[Sir John Hayes (South Holland and The Deepings) (Con)]

The Minister is setting out a powerful case for how the Government have listened to the overtures in this place and the other place. Further to the interventions from my hon. Friend the Member for Stone (Sir William Cash) and my right hon. Friend the Member for Bromsgrove (Sajid Javid), the former Culture Secretary, will the Minister be clear that the risk here is under-regulation, not over-regulation? Although the internet may be widely used by perfectly good people, the people who run internet companies are anything but daft and more likely to be dastardly.

[Paul Scully]

This is a difficult path to tread in approaching this issue for the first time. In many ways, these are things that we should have done 10 or 15 years ago, as social media platforms and people’s engagement with them proliferated over that period. Regulation has to be done gently, but it must be done. We must act now and get it right, to ensure that we hold the big technology companies in particular to account, while also understanding the massive benefits that those technology companies and their products provide.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I agree with the Minister that this is a groundbreaking Bill, but we must be clear that there are still gaps. Given what he is saying about the requirements for regulation of online social media companies and other platforms, how will he monitor, over a period of time, whether the measures that we have are as dynamic as they need to be to catch up with social media as it develops?

--- Later in debate ---

[Paul Scully]

The hon. Lady asks an important question, and that is the essence of what we are doing. We have tried to make this Bill flexible and proportionate. It is not technology specific, so that it is as future-proofed as possible. We must obviously lean into Ofcom as it seeks to operationalise the Act once the Bill gains Royal Assent. Ofcom will come back with its reporting, so not only will Government and the Department be a check on this, but Parliament will be able to assess the efficacy of the Bill as the system beds in and as technology and the various platforms move on and develop.

I talked about the offences, and I will just finalise my point about criminal liability. Those offences will be punishable with up to two years in prison.

[John Penrose (Weston-super-Mare) (Con)]

Further to that point about the remaining gaps in the Bill, I appreciate what the Minister says about this area being a moving target. Everybody—not just in this country, but around the world—is having to learn as the internet evolves.

I thank the Minister for Government amendment 241, which deals with provenance and understanding where information posted on the web comes from, and allows people therefore to check whether they want to see it, if it comes from dubious sources. That is an example of a collective harm—of people posting disinformation and misinformation online and attempting to subvert our democratic processes, among other things. I park with him, if I may, the notion that we will have to come back to that area in particular. It is an area where the Bill is particularly weak, notwithstanding all the good stuff it does elsewhere, notably on the areas he has mentioned. I hope that everyone in this House accepts that that area will need to be revisited in due course.

[Paul Scully]

Undoubtedly we will have to come back to that point. Not everything needs to be in the Bill at this point. We have industry initiatives, such as Adobe’s content security policy, which are good initiatives in themselves, but as we better understand misinformation, disinformation, deepfakes and the proliferation and repetition of fake images, fake text and fake news, we will need to keep ensuring we can stay ahead of the game, as my hon. Friend said. That is why we have made the legislation flexible.

[Dame Margaret Hodge (Barking) (Lab)]

I have two things to ask. First, will the Minister spell out more clearly how Parliament will be able to monitor the implementation? What mechanisms do we have to do that? Secondly, on director liability, which I warmly welcome—I am pleased that the Government have listened to Back Benchers on this issue—does he not agree that the example we have set in the Bill should be copied in other Bills, such as the Economic Crime and Corporate Transparency Bill, where a similar proposal exists from Back Benchers across the House?

[Paul Scully]

The right hon. Lady raises some interesting points. We have conversed about harms, so I totally get her point about making sure that we tackle this issue in Parliament and be accountable in Parliament. As I have said, that will be done predominantly by monitoring the Bill through Ofcom’s reporting on what harms it is having to deal with. We have regular engagement with Ofcom, not only here and through the Select Committees, but through the Secretary of State.

On criminal liability, we conversed about that and made sure that we had a liability attached to something specific, rather than the general approach proposed at the beginning. It therefore means that we are not chilling innovation. People can understand, as they set up their approaches and systems, exactly what they are getting into in terms of risk for criminal liability, rather than having the general approach that was suggested at the beginning.

[Kirsty Blackman (Aberdeen North) (SNP)]

The review mechanism strikes me as one of the places where the Bill falls down and is weakest, because there is not a dedicated review mechanism. We have needed this legislation for more than 30 years, and we have now got to the point of legislating. Does the Minister understand why I have no faith that future legislation will happen in a timely fashion, when it has taken us so long even to get to this point? Can he give us some reassurance that a proper review will take place, rather than just having Ofcom reports that may or may not be read?

[Paul Scully]

I have talked about the fact that we have to keep this legislation under review, because the landscape is fast-moving. At every stage that I have been dealing with this Bill, I have said that inevitably we will have to come back. We can make the Bill as flexible, proportionate and tech-unspecific as we can, but things are moving quickly. With all our work on AI, for example, such as the AI summit, the work of the Global Partnership on Artificial Intelligence, the international response, the Hiroshima accord and all the other areas that my hon. Friend the Member for Weston-super-Mare (John Penrose) spoke about earlier, we will have to come back, review it and look at whether the legislation remains world-beating. It is not just about the findings of Ofcom as it reports back to us.

I need to make a bit of progress, because I hope to have time to sum up a little bit at the end. We have listened to concerns about ensuring that the Bill provides the most robust protections for children from pornography and on the use of age assurance mechanisms. We are now explicitly requiring relevant providers to use highly effective age verification or age estimation to protect children from pornography and other primary priority content that is harmful to children. The Bill will also ensure a clear privacy-preserving and future-proofed framework governing the use of age assurance, which will be overseen by Ofcom.

There has been coverage in the media about how the Bill relates to encryption, which has often not been accurate. I take the opportunity to set the record straight. Our stance on challenging sexual abuse online remains the same. Last week in the other place, my noble Friend Lord Parkinson, the Parliamentary Under-Secretary of State for Arts and Heritage, shared recent data from UK police forces that showed that 6,350 offences related to sexual communication with a child were recorded last year alone. Shockingly, 5,500 of those offences took place against primary school-age children. Those appalling statistics illustrate the urgent need for change. The Government are committed to taking action against the perpetrators and stamping out these horrific crimes. The information that social media companies currently give to UK law enforcement contributes to more than 800 arrests or voluntary attendances of suspected child sexual offenders on average every month. That results in an estimated 1,200 children being safeguarded from child sexual abuse.

There is no intention by the Government to weaken the encryption technology used by platforms. As a last resort, on a case-by-case basis, and only when stringent privacy safeguards have been met, Ofcom will have the power to direct companies to make best efforts to develop or source technology to identify and remove illegal child sexual abuse content. We know that this technology can be developed. Before it can be required by Ofcom, such technology must meet minimum standards of accuracy. If appropriate technology does not exist that meets these requirements, Ofcom cannot require its use. That is why the powers include the ability for Ofcom to require companies to make best endeavours to develop or source a new solution.

[Damian Collins (Folkestone and Hythe) (Con)]

Does my hon. Friend agree that the companies already say in their terms of service that they do not allow illegal use of their products, yet they do not say how they will monitor whether there is illegal use and what enforcement they take? What the Bill gives us, for the first time, is the right for Ofcom to know the answers to those questions and to know whether the companies are even enforcing their own terms of service.

[Paul Scully]

My hon. Friend makes an important point, and I thank him for the amazing work he has done in getting the Bill to this point and for his ongoing help and support in making sure that we get it absolutely right. This is not about bashing technology companies; it is about not only holding them to account, but bringing them closer, to make sure that we can work together on these issues to protect the children I was talking about.

Despite the breadth of existing safeguards, we recognise the concerns expressed about privacy and technical feasibility in relation to Ofcom’s power to issue CSE or terrorism notices. That is why we introduced additional safeguards in the Lords. First, Ofcom will be required to obtain a skilled person’s report before issuing any warning notice and exercising its powers under clause 122. Ofcom must also provide a summary of the report to the relevant provider when issuing a warning notice. We are confident that in addition to Ofcom’s existing routes of evidence gathering, this measure will help to provide the regulator with the necessary information to determine whether to issue a notice and the requirements that may be put in place.

We also brought forth amendments requiring Ofcom to consider the impact that the use of technology would have on the availability of journalistic content and the confidentiality of journalistic sources when considering whether to issue a notice. That builds on the existing safeguards in clause 133 regarding freedom of expression and privacy.

We recognise the disproportionate levels of harm that women and girls continue to face online, and that is why the Government have made a number of changes to the Bill to strengthen protections for women and girls. First, the Bill will require Ofcom to produce guidance on online harms that disproportionately affect women and girls and to provide examples of best practice to providers, and it will require providers to bring together in one clear place all the measures that they take to tackle online abuse against women and girls on their platforms. The Bill will also require Ofcom to consult the Victims’ Commissioner and the Domestic Abuse Commissioner, in addition to the Children’s Commissioner, while preparing codes of practice. That change to the Bill will ensure that the voices of victims of abuse are brought into the consultation period.

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[Dame Margaret Hodge]

I am grateful for the amendment, which I think is important. Will the Minister make it clear that he will not accept the amendments tabled by the hon. Member for Yeovil (Mr Fysh).

[Paul Scully]

Indeed, we will not be accepting those amendments, but I will cover more of that later on, after I have listened to the comments that I know my hon. Friend wants to make.

As a result of the amendment, we have also made a small change to clause 98—the emerging category 1 services list—to ensure that it makes operational sense. Prior to Baroness Morgan’s amendment, a service had to meet the functionality threshold for content and 75% of the user number threshold to be on the emerging services list. Under the amended cause, there is now a plausible scenario where a service could meet the category 1 threshold without meeting any condition based on user numbers, so we had to make the change to ensure that the clause worked in that scenario.

We have always been clear that the design of a service, its functionalities and its other features are key drivers of risk that impact on the risk of harm to children. Baroness Kidron’s amendments 17, 20, 22 and 81 seek to treat those aspects as sources of harm in and of themselves. Although we agree with the objective, we are concerned that they do not work within the legislative framework and risk legal confusion and delaying the Bill. We have worked closely with Baroness Kidron and other parliamentarians to identify alternative ways to make the role that design and functionalities play more explicit. I am grateful to colleagues in both Houses for being so generous with their time on this issue. In particular, I thank again my right hon. and learned Friend the Member for Kenilworth and Southam for his tireless work, which was crucial in enabling the creation of an alternative and mutually satisfactory package of amendments. We will disagree to Lords amendments 17, 20, 22 and 81 and replace them with amendments that make it explicit that providers are required to assess the impact that service design, functionalities and other features have on the risk of harm to children.

On Report, my hon. Friend the Member for Crawley (Henry Smith) raised animal abuse on the internet and asked how we might address such harmful content. I am pleased that the changes we have since made to the Bill fully demonstrate the Government’s commitment to tackling criminal activity relating to animal torture online. It is a cause that Baroness Merron has championed passionately. Her amendment in the other place sought to require the Secretary of State to review certain offences and, depending on the review’s outcome, to list them as priority offences in schedule 7. To accelerate measures to tackle such content, the Government will remove clause 63—the review clause—and instead immediately list section 4(1) of the Animal Welfare Act 2006 as a priority offence. Officials at the Department for Environment, Food and Rural Affairs have worked closely with the Royal Society for the Prevention of Cruelty to Animals and are confident that the offence of unnecessary suffering will capture a broad swathe of behaviour. I hope the whole House will recognise our efforts and those of Baroness Merron and support the amendment.

You will be pleased to know, Mr Deputy Speaker, that I will conclude my remarks. I express my gratitude to my esteemed colleagues both here and in the other place for their continued and dedicated engagement with this complicated, complex Bill during the course of its parliamentary passage. I strongly believe that the Bill, in this form, strikes the right balance in providing the strongest possible protections for both adults and children online while protecting freedom of expression. The Government have listened carefully to the views of Members on both sides of the House, stakeholders and members of the public. The amendments we have made during the Bill’s progress through the Lords have further enhanced its robust and world-leading legislative framework. It is groundbreaking and will ensure the safety of generations to come. I ask Members of the House gathered here to support the Government’s position on the issues that I have spoken about today.

[Mr Deputy Speaker (Sir Roger Gale)]

I call the Opposition spokesperson.

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[Anna Firth (Southend West) (Con)]

I want to speak briefly about Lords amendments 195 and 153, which would allow Ofcom, coroners and bereaved parents to acquire information and support relating to a child’s use of social media in the event of that child’s tragic death. Specifically, I want to speak about Archie Battersbee, who lived in my constituency but lost his life tragically last year, aged only 12. Archie’s mum, Hollie, was in the Public Gallery at the beginning of the debate, and I hope that she is still present. Hollie found Archie unconscious on the stairs with a ligature around his neck. The brain injury Archie suffered put him into a four-month coma from which, sadly, doctors were unable to save him.

To this day, Hollie believes that Archie may have been taking part in some form of highly dangerous online challenge, but, unable to access Archie’s online data beyond 90 days of his search history, she has been unable to put this devastating question to rest. Like the parents of Molly, Breck, Isaac, Frankie and Sophia, for the last year Hollie has been engaged in a cruel uphill struggle against faceless corporations in her attempt to determine whether her child’s engagement with a digital service contributed to his death. Despite knowing that Archie viewed seven minutes of content and received online messages in the hour and a half prior to his death, she has no way of knowing what may have been said or exactly what he may have viewed, and the question of his online engagement and its potential role in his death remains unsolved.

Lords amendment 195, which will bolster Ofcom’s information-gathering powers, will I hope require a much more humane response from providers in such tragic cases as this. This is vital and much-needed legislation. Had it been in place a year ago, it is highly likely that Hollie could have laid her concerns to rest and perhaps received a pocket of peace in what has been the most traumatic time any parent could possibly imagine.

I also welcome Lords amendment 153, which will mandate the largest providers to put in place a dedicated helpline so that parents who suffer these tragic events will have a direct line and a better way of communicating with social media providers, but the proof of the pudding will obviously be in the eating. I very much hope that social media providers will man that helpline with real people who have the appropriate experience to deal with parents at that tragic time in their lives. I believe that Hollie and the parents of many other children in similar tragic cases will welcome the Government’s amendments that allow Ofcom, coroners and bereaved parents to access their children’s online data via the coroner directing Ofcom.

I pay tribute to the noble Baroness Kidron, to my right hon. Friend the Member for Bromsgrove (Sajid Javid) and to the Bereaved Families for Online Safety group, who have done so much fantastic work in sharing their heartrending stories and opening our eyes to what has been necessary to improve the Online Safety Bill. I also, of course, pay tribute to Ian Russell, to Hollie and to all the other bereaved parents for their dedication to raising awareness of this hugely important issue.

If I could just say one last thing, I have been slipped from the Education Committee to attend this debate today and I would like to give an advert for the Committee’s new inquiry, which was launched on Monday, into the effects of screen time on education and wellbeing. This Bill is not the end of the matter—in many ways it is just the beginning—and I urge all Members please to engage with this incredibly important inquiry by the Education Committee.

[Paul Scully]

I thank all right hon. and hon. Members for their contribution to the debate today and, indeed, right through the passage of this complex Bill.

First, let me turn to the amendments tabled by my hon. Friend the Member for Yeovil (Mr Fysh). I understand that the intention of his amendments is to restrict the reach of the new online safety regulatory regime in a number of ways. I appreciate his concern to avoid unnecessarily burdensome business, and I am sympathetic to his point that the Bill should not inhibit sectors such as the life sciences sector. I reassure him that such sectors are not the target of this regime and that the new regulatory framework is proportionate, risk-based and pro-innovation.

The framework has been designed to capture a range of services where there is a risk of significant harm to users, and the built-in exemptions and categorisations will ensure it is properly targeted. The alternative would be a narrow scope, which would be more likely to inadvertently exempt risky science or to displace harm on to services that are out of scope. The extensive discussion on this point in both Houses has made it clear that such a position is unlikely to be acceptable.

The amendments to the overarching statement that would change the services in scope would introduce unclear and subjective terms, causing issues of interpretation. The Bill is designed so that low-risk services will have to put in place only proportionate measures that reflect the risk of harm to their users and the service provider’s size and capacity, ensuring that small providers will not be overly burdened unless the level of risk requires it.

The amendment that would ensure Ofcom cannot require the use of a proactive technology that introduces weaknesses or vulnerabilities into a provider’s systems duplicates existing safeguards. It also introduces vague terms that could restrict Ofcom’s ability to require platforms to use the most effective measures to address abhorrent illegal activity.

Ofcom must act proportionately, and it must consider whether a less intrusive measure could achieve the same effect before requiring the use of proactive technology. Ofcom also has duties to protect both privacy and private property, including algorithms and code, under the Human Rights Act 1998.

[Ian Paisley]

I thank the Minister for engaging with us on access to private property and for setting up, with his officials, a consultation on the right to access a person’s phone after they are deceased or incapacitated. I thank him for incorporating some of those thoughts in what he and the Government are doing today. I hope this is the start of something and that these big digital companies will no longer be able to bully people. The boot will be on the other foot, and the public will own what they have on their digital devices.

[Paul Scully]

The hon. Gentleman is talking about the access of coroners, families and others to information, following the sad death of Molly Russell. Again, I pay tribute to Ian Russell and all the campaigners. I am glad that we have been able to find an answer to a very complex situation, not only because of its international nature but because of data protection, et cetera.

The measures I have outlined will ensure that risks relating to security vulnerabilities are managed. The Bill is also clear that Ofcom cannot require companies to use proactive technology on privately communicated content, in order to comply with their safety duties, which will provide further safeguards for user privacy and data security.

[Damian Collins]

Will the Minister make it clear that we should expect the companies to use proactive technology, because they already use it to make money by recommending content to people, which is a principal reason for the Bill? If they use proactive technology to make money, they should also use it to keep people safe.

[Paul Scully]

My hon. Friend absolutely nails it. He said earlier that businesses are already collecting this data. Since I was first involved with the Bill, it has primarily been about getting businesses to adhere to their own terms and conditions. The data they use should be used in that way.

The amendment to the definition of “freedom of expression” in part 12 would have no effect as these concepts are already covered by the existing definition. Changing the definition of “automated tool” would introduce untested terms and would have an unclear and confusing impact on the duties.

My hon. Friend the Member for Yeovil also asked for clarification of how Ofcom’s power to view information remotely will be used, and whether the power is sufficiently safeguarded. I assure the House that this power is subject to strict safeguards that mean it cannot be use to undermine a provider’s systems.

On Third Reading in the other place, the Government introduced amendments that defined the regulator’s power to view information remotely, whereas previously the Bill spoke of access. As such, there are no risks to system security, as the power does not enable Ofcom to access the service. Ofcom also has a duty to act proportionately and must abide by its privacy obligations under the Human Rights Act. Ofcom has a stringent restriction on disclosing businesses’ commercially sensitive and other information without consent.

My hon. Friend also asked for clarification on whether Ofcom will be able to view live user data when using this power. Generally, Ofcom would expect to require a service to use a test dataset. However, there may be circumstances where Ofcom asks a service to execute a test using data that it holds, for example, in testing how content moderation systems respond to certain types of content on a service as part of an assessment of the systems and processes. In that scenario, Ofcom may need to use a provider’s own test dataset containing content that has previously violated its own terms of service. However, that would be subject to Ofcom’s privacy obligations and data protection law.

Lords amendment 17 seeks to explicitly exempt low-risk functionality from aspects of user-to-user services’ children’s risk assessment duties. I am happy to reassure my hon. Friend that the current drafting of the Government’s amendment in lieu of Lords amendment 17 places proportionate requirements on providers. It explicitly excludes low-risk functionality from the more stringent duty to identify and assess the impact that higher-risk functionalities have on the level of risk of harm to children. Proportionality is further baked into this duty through Ofcom’s risk assessment guidance. Ofcom is bound by the principle of proportionality as part of its general duties under the Communications Act 2003, as updated by the Bill. As such, it would not be able to recommend that providers should identify and assess low-risk functionality.

The amendment to Lords amendment 217 tabled by my right hon. Friend the Member for Haltemprice and Howden (Mr Davis) would introduce a new safeguard that requires Ofcom to consider whether technology required under a clause 122 notice would circumvent end-to-end encryption. I wish to reassure him and others who have raised the question that the amendment is unnecessary because it is duplicative of existing measures that restrict Ofcom’s use of its powers. Under the Bill’s safeguards, Ofcom cannot require platforms to weaken or remove encryption, and must already consider the risk that specified technology can result in a breach of any statutory provision or the rule of law concerning privacy. We have intentionally designed the Bill so that it is technology neutral and futureproofed, so we cannot accept amendments that risk the legislation quickly becoming out of date. That is why we focused on safeguards that uphold user rights and ensure measures that are proportionate to the specific risks, rather than focusing on specific features such as encryption. For the reasons I have set out, I cannot accept the amendment and hope it will not be pressed to a vote.

The amendment tabled by my hon. Friend the Member for Stroud (Siobhan Baillie) would create an additional reporting requirement on Ofcom to review, as part of its report on the use of the age assurance, whether the visibility of a user’s verification status improves the effectiveness of age assurance, but that duplicates existing review requirements in the Bill. The Bill already provides for a review of user verification; under clause 179, the Secretary of State will be required to review the operation of the online safety regulatory framework as a whole. This review must assess how effective the regulatory framework is at minimising the risk of harm that in scope services pose to users in the UK. That may include a review of the effectiveness of the current user verification and non-verified users duty. I thank my hon. Friend also for raising the issue of user verification and the visibility of verification status. I am pleased to confirm that Ofcom will have the power to set out guidance on user verification status being visible to all users. With regard to online fraud or other illegal activity, mandatory user verification and visibility of verification status is something Ofcom could recommend and require under legal safety duties.

Let me quickly cover some of the other points raised in the debate. I thank my hon. Friend the Member for Gosport (Dame Caroline Dinenage), a former Minister, for all her work. She talked about young people and the Bill contains many measures, for example, on self-harm or suicide content, that reflect them and will still help to protect them. On the comments made by the hon. Member for Aberdeen North (Kirsty Blackman) and indeed the shadow Minister, the hon. Member for Pontypridd (Alex Davies-Jones), whom I am glad to see back in her place, there are a number of review points. Clause 179 requires the Secretary of State to review how the Bill is working in practice, and there will be a report resulting from that, which will be laid before Parliament. We also have the annual Ofcom report that I talked about, and most statutory instruments in the Bill will be subject to the affirmative procedure. The Bill refers to a review after two to five years—Ministers can dictate when it takes place within that period—but that is based on allowing a long enough time for the Bill to bed in and be implemented. It is important that we have the ability to look at that in Parliament. The UN convention on the rights of the child principles are already in the Bill. Although the Bill does not cite the report by name, the EU convention principles are all covered in the Bill.

My hon. Friend the Member for Folkestone and Hythe (Damian Collins) did an amazing job in his time in my role, and before and afterwards as Chair of the Joint Committee responsible for the pre-legislative scrutiny of the Online Safety Bill. When he talked about scrutiny, I had the advantage of seeing the wry smile of the officials in the Box behind him. That scrutiny has been going on since 2021. Sarah Connolly, one of our amazing team of officials, has been involved with the Bill since it was just a concept.

[Damian Collins]

As Carnegie UK Trust observed online, a child born on the day the Government first published their original internet safety strategy would now be in its second year of primary school.

[Paul Scully]

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

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

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

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

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

[Sir Jeremy Wright]

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

[Paul Scully]

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

[Vicky Ford]

Can the Minister confirm whether the letter I received from the Minister of State, Ministry of Justice, my right hon. Friend the Member for Charnwood (Edward Argar) is accurate?

[Paul Scully]

I was just coming to that. I thank my right hon. Friend for the rest of her speech. She always speaks so powerfully on eating disorders—on anorexia in particular—and I can indeed confirm the intent behind the Minister’s letter about the creation and use of algorithms.

Finally, I shall cover two more points. My hon. Friend the Member for Stone (Sir William Cash) always speaks eloquently about this. He talked about Brexit, but I will not get into the politics of that. Suffice to say, it has allowed us—as in other areas of digital and technology—to be flexible and not prescriptive, as we have seen in measures that the EU has introduced.

I also ask my hon. Friend the Member for Southend West (Anna Firth) to pass on my thanks and best wishes to Hollie whom I met to talk about Archie Battersbee.

[Alex Davies-Jones]

On the small high-harm platforms that are now in the scope of the Bill, will the Minister join me in thanking Hope Not Hate, the Antisemitism Policy Trust and CST, which have campaigned heavily on this point? While we have been having this debate, the CST has exposed BitChute, one of those small high-harm platforms, for geoblocking some of the hate to comply with legislation but then advertising loopholes and ways to get around that on the platform. Can the Minister confirm that the regulator will be able to take action against such proceedings?

[Paul Scully]

I will certainly look at that. Our intention is that in all areas, especially relating to children and their protection, that might not fall within the user enforcement duties, we will look to make sure that the work of those organisations is reflected in what we are trying to achieve in the Bill.

We have talked about the various Ministers that have looked after the Bill during its passage, and the Secretary of State was left literally holding the baby in every sense of the word because she continued to work on it while she was on maternity leave. We can see the results of that with the engagement that we have had. I urge all Members on both sides of the House to consider carefully the amendments I have proposed today in lieu of those made in the Lords. I know every Member looks forward eagerly to a future in which parents have surety about the safety of their children online. That future is fast approaching.

I reiterate my thanks to esteemed colleagues who have engaged so passionately with the Bill. It is due to their collaborative spirit that I stand today with amendments that we believe are effective, proportionate and agreeable to all. I hope all Members will feel able to support our position.

Amendment (a) made to Lords amendment 182.

Lords amendment 182, as amended, agreed to.

Amendments (a) and (b) made to Lords amendment 349.

Lords amendment 349, as amended, agreed to.

Amendment (a) made to Lords amendment 391.

Lords amendment 391, as amended, agreed to.

Government consequential amendment (a) made.

Lords amendment 17 disagreed to.

Government amendments (a) and (b) made in lieu of Lords amendment 17.

Lords amendment 20 disagreed to.

Lords amendment 22 disagreed to.

Lords amendment 81 disagreed to.

Government amendments (a) to (c) made in lieu of Lords amendment 81.

Lords amendment 148 disagreed to.

Government amendment (a) made in lieu of Lords amendment 148.

Lords amendments 1 to 16, 18, 19, 21, 23 to 80, 82 to 147, 149 to 181, 183 to 348, 350 to 390, and 392 to 424 agreed to, with Commons financial privileges waived in respect of Lords amendments 171, 180, 181, 317, 390 and 400.

Ordered, That a Committee be appointed to draw up Reasons to be assigned to the Lords for disagreeing to their amendments 20 and 22;

That Paul Scully, Steve Double, Alexander Stafford, Paul Howell, Alex Davies-Jones, Taiwo Owatemi and Kirsty Blackman be members of the Committee;

That Paul Scully be the Chair of the Committee;

That three be the quorum of the Committee.

That the Committee do withdraw immediately.—(Mike Wood.)

Committee to withdraw immediately; reasons to be reported and communicated to the Lords.

Consultation on Powers in Relation to UK-related Domain Name Registries

Paul Scully Excerpts

Thursday 20th July 2023 Written Statements

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)]

The Department for Science, Innovation and Technology (DSIT) will be commencing sections 19-21 of the Digital Economy Act 2010 (DEA 2010).

This legislation sets out the DSIT Secretary of State’s powers of intervention in the event when any UK-related domain name registry fails to address serious, relevant abuses of their domain names, posing significant risk to the UK electronic communications networks and its users.

It is important we undertake this work to ensure that the UK will continue to meet international best practice on governance of country code top-level domains in line with our key global trading partners and our future global trading commitments.

The UK’s internet registries work hard to tackle abuses of their domain names. These powers will provide additional certainty for UK users that appropriate procedures will continue to be in place to help address abuse of UK-related domain names.

DSIT will be setting out in secondary legislation a list of misuses and unfair uses of domain names that registries in scope must take action to mitigate and deal with, and also cover the registry’s arrangements for dealing with complaints in connection with the domain names in scope.

In order to understand the wide landscape of stakeholder views on UK-related domain names, a full public consultation has been published today and will run for six weeks.

A copy of this consultation will be placed in the Libraries of both Houses and published on gov.uk.

[HCWS984]

Electronic Trade Documents Bill [Lords]

Paul Scully Excerpts

3rd reading
Monday 10th July 2023 Commons Chamber

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)]

I beg to move, That the Bill be now read the Third time.

Let me take this opportunity to thank all the Members of this House and in the other place who have spoken in support of this transformational Bill, as well as those who contributed to scrutinising the Bill so deeply and effectively during its passage. The Bill has followed the special parliamentary procedure for Law Commission Bills. That procedure demonstrates that good and much-needed legislation that has already been thoroughly consulted on by the Law Commission can be introduced, debated and amended if required in an efficient and democratic way, but with reduced burdens on an already busy Parliament. Apart from the minor changes made to extend this critical legislation satisfactorily to the whole of the UK, the Bill that is before the House remains the work of the Law Commission. I also thank the officers and Members of the Scottish Parliament for their work in enabling that to happen so smoothly.

The Bill is a fine piece of work. It is informed by experts from academia, the legal profession and, crucially, the industries that stand to benefit most from its introduction and will be the driving force behind its implementation. As English law is the foundation of international trade, the Bill will put the United Kingdom ahead of not only the G7 countries, but almost the whole world. The UK is setting the approach that other jurisdictions will seek to follow, not just on the digitalisation of trade documents but on the future digitalisation of all trade, towards which the Bill is an important first step.

I record my thanks to Professor Sarah Green and her colleagues at the Law Commission, including Laura Burgoyne, Daniella Lupini and Siobhan McKeering, for their diligent work. I also thank Oliver Tones, the Bill manager, and Bobby Lawson, his deputy, along with the committed Government lawyers who have contributed to this, specifically Simon Brandon, Louise Dennison and Chris Callan. Thanks are also due to my private secretary, Jack Collins, who has ably assisted me and the Bill team throughout.

The Bill has global transformational potential. It will place the UK at the forefront of international trade as a thought leader for others to follow, and will save businesses an estimated £1.1 billion over the next 10 years—really tangible benefits, as well as being inspirational thought leaders for global trade. As such, I commend it to the House.

--- Later in debate ---

[Anthony Mangnall (Totnes) (Con)]

I rise fully in support of the Bill, and congratulate the Government and the Minister on the extraordinary work they have done on it. I also congratulate all Members from the House of Lords and the Opposition, and all the individuals and officials, who have done so much to make a Bill that might on its face look very unattractive and unexciting something that I believe to be extremely exciting.

I have made no secret of the fact that, before I got into this place, my background was in trade. I understand well the value of bills of lading and the complexities that come with them, but I also stand here as the representative of one of the largest exporting fishing ports in the United Kingdom, Brixham. There, the concept of documentation and the points that we make about it are absolutely essential to those fishermen’s success, and indeed their profitability.

I will be extremely brief, because time marches on this evening. The Bill will streamline trade—it will allow us to do all the things that we very much need to do in an era outside of the European Union, where signing new trade deals offers us new markets, new opportunities and new horizons. When I speak to my fishermen, one of the biggest and most significant causes of concern is the Electronic Trade Documents Bill and putting forward export health certificates and export documentation, as well as import documentation. The Bill will allow us to streamline those processes to make sure that those goods reach their markets. Whether it is fishing, farming, food, goods or shipping, we must ensure that we take full advantage of opportunities to help small businesses across this country that are exporting, as well as those that are importing.

We must look at how the Bill will relate to the European Union and its implementation of similar policies, and must also consider how the Bill will work with Commonwealth countries. We have made no secret of the fact that we want to work more with the Commonwealth, or that through things like the comprehensive and progressive agreement for trans-pacific partnership, we want to be able to do more in terms of trade. This Bill sets the benchmark—we should be unashamed of talking about the value that it can bring to our economy. The Minister and the Opposition have done very well in producing the Bill and working it through to the stage it has reached, but my final congratulations go to the Minister.

[Paul Scully]

My hon. Friend has spoken eloquently about fishing, and has previously raised the subject of fishing with me. Health certificates are not currently within the scope of the Bill, because they do not relate to possession, but fishermen will definitely benefit from the Bill just as other sectors will.

[Anthony Mangnall]

As ever, the Minister is incredibly gracious. I appreciate his intervention and thank him for that point, because it will send a message of confidence to my markets, and indeed to fishermen across the country.

I do not need to detain the House any longer, other than to say that the Bill is extremely welcome and we must talk it up. Coupled with the Procurement Bill that we passed just a few weeks ago, we are making real progress in the area of trade. We have to be able to get out there and talk about it.

Science, Innovation and Technology

Paul Scully Excerpts

Monday 10th July 2023 Ministerial Corrections

The following is an extract from the fifth sitting of the Digital Markets, Competition and Consumers Public Bill Committee on 20 June 2023.

[Paul Scully]

As the hon. Member for Pontypridd rightly says, and we have said all the way through, technology and digital markets move really quickly. That is why we want to make sure that decisions are out of the door as quickly as possible, so that people can see what is happening as soon as possible. The decisions will go to the appropriate persons as described, which are relevant third parties and the SMS firms themselves.

[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 20 June 2023, Vol. 734, c. 132.]

Letter of correction from the Under-Secretary of State for Science, Innovation and Technology, the hon. Member for Sutton and Cheam (Paul Scully).

An error has been identified in my contribution. The correct information should have been:

[Paul Scully]

As the hon. Member for Pontypridd rightly says, and we have said all the way through, technology and digital markets move really quickly. That is why we want to make sure that decisions are out of the door as quickly as possible, so that people can see what is happening as soon as possible. Consultations on decisions will be brought to the attention of appropriate persons as described, which are relevant third parties and the SMS firms themselves.

The following is an extract from the seventh sitting of the Digital Markets, Competition and Consumers Public Bill Committee on 22 June 2023.

[Paul Scully]

Clearly, we have safeguards in the process there, so the Secretary of State will need to consult the CMA. This is not just an isolated decision-making process; the CMA has expertise in this area, but it will be for the Secretary of State to focus on the decision. The CMA will be able to provide the expert advice, ensuring that amendments can correctly reflect the changing landscape, and Parliament will clearly need to approve any amendment.

[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 22 June 2023, Vol. 734, c. 181.]

Letter of correction from the Under-Secretary of State for Science, Innovation and Technology, the hon. Member for Sutton and Cheam (Paul Scully).

An error has been identified in my contribution. The correct information should have been:

[Paul Scully]

Clearly, we have safeguards in the process there, so the Secretary of State will need to consult the CMA. This is not just an isolated decision-making process; the CMA has expertise in this area, but it will be for the Secretary of State to focus on the decision. The CMA will be able to provide the expert advice, ensuring that amendments can correctly reflect the changing landscape.

The following is an extract from the ninth sitting of the Digital Markets, Competition and Consumers Public Bill Committee on 27 June 2023.

[Paul Scully]

Notices will be made public, and information about the groups will be reported online.

[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 27 June 2023, Vol. 735, c. 220.]

Letter of correction from the Under-Secretary of State for Science, Innovation and Technology, the hon. Member for Sutton and Cheam (Paul Scully).

An error has been identified in my contribution. The correct information should have been:

[Paul Scully]

Notices will be made public, and information about the groups will be able to be reported online by the CMA.

The following is an extract from the 10th sitting of the Digital Markets, Competition and Consumers Public Bill Committee on 27 June 2023.

[Paul Scully]

On microbusinesses and small business, this is effectively a standard definition that, yes, does exclude microbusinesses, because it replicates provisions in the Enterprise Act. The obvious question then is, “How do microbusinesses and small businesses get any redress in these examples?” but business protection regulations would cover that, and they are not within the scope of this change. However, any of the changes that the hon. Lady requested would largely come under the affirmative procedure.

[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 27 June 2023, Vol. 735, c. 242.]

Letter of correction from the Under-Secretary of State for Science, Innovation and Technology, the hon. Member for Sutton and Cheam (Paul Scully).

An error has been identified in my contribution. The correct information should have been:

[Paul Scully]

On microbusinesses and small business, this is effectively a standard definition that, yes, does exclude microbusinesses, because it replicates provisions in the Enterprise Act. The obvious question then is, “How do microbusinesses and small businesses get any redress in these examples?” but business protection regulations would cover that, and they are not within the scope of this change. However, any of the changes to schedules 13 and 14 as requested by the hon. Lady would be by regulations under the affirmative procedure.

The following is an extract from the 10th sitting of the Digital Markets, Competition and Consumers Public Bill Committee on 27 June 2023.

[Paul Scully]

The hon. Lady asked about the possibility of multiple enforcers in process at the same time. In effect, we are restating the existing arrangements, which have been working. They work with the CMA as the gatekeeper, so the CMA would have to be notified when action has been taken—it can filter anything going on in that regard—and it would have to co-ordinate the approach.

[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 27 June 2023, Vol. 735, c. 249.]

Letter of correction from the Under-Secretary of State for Science, Innovation and Technology, the hon. Member for Sutton and Cheam (Paul Scully).

An error has been identified in my contribution. The correct information should have been:

[Paul Scully]

The hon. Lady asked about the possibility of multiple enforcers in process at the same time. In effect, we are restating the existing arrangements, which have been working. They work with the CMA as the gatekeeper, so the CMA would have to be notified before action has been taken—it can filter anything going on in that regard—and it would have to co-ordinate the approach.

The following is an extract from the 10th sitting of the Digital Markets, Competition and Consumers Public Bill Committee on 27 June 2023.

[Paul Scully]

The hon. Lady also asked about the CMA being able to enforce and why private enforcers did not have the same powers. Only the CMA may impose penalties. Private enforcers may seek a penalty in court, but the CMA is the only body able to issue penalties directly.

[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 27 June 2023, Vol. 735, c. 250.]

Letter of correction from the Under-Secretary of State for Science, Innovation and Technology, the hon. Member for Sutton and Cheam (Paul Scully).

An error has been identified in my contribution. The correct information should have been:

[Paul Scully]

The hon. Lady also asked about the CMA being able to enforce and why private enforcers did not have the same powers. Only the CMA may impose penalties. Public enforcers may seek a penalty in court, but the CMA is the only body able to issue penalties directly.

Human-specific Medical Research Techniques

Paul Scully Excerpts

Tuesday 4th July 2023 Westminster Hall

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)]

It is a pleasure to serve under your chairmanship, Sir Charles. I congratulate the hon. Member for Birmingham, Selly Oak (Steve McCabe) on securing this debate on human-specific medical research techniques. I also thank the hon. Member for Linlithgow and East Falkirk (Martyn Day) for his thoughtful words, and the hon. Member for Glasgow North West (Carol Monaghan) and the shadow Minister, the hon. Member for Newcastle upon Tyne Central (Chi Onwurah). There has been a lot of food for thought and important points raised in some insightful contributions, and I will try to cover those. However, at the heart of today’s discussion has been what it takes to build world-leading science—science that does not just top global rankings in league tables, but changes British people’s lives for the better.

Earlier this year, the Government set out our plan to cement the UK’s place as a science and technology superpower by 2030. Backed by a commitment to increase public expenditure on R&D to £20 billion per annum by 2024-25, we are investing in the areas where we have the infrastructure, experience and insight to lead the world. Indeed, it was interesting to hear the shadow Minister talk about bioengineering, because that is one of the priority emerging technologies that the new Department for Science, Innovation and Technology has identified as something we want to back.

Life sciences is one of the areas that is crucial not just to grow the economy and create high-skilled, well-paid jobs today, but to ensure that British people can live longer, healthier, happier lives tomorrow. Our life sciences vision sets a strategy for the sector to solve some of the biggest healthcare problems of our generation. In May, we announced an ambitious policy package in support of the life sciences sector, backed by more than £650 million in funding, including £121 million to improve commercial clinical trials to bring new medicines to patients faster.

Clinical trials, which were raised in the debate, are not necessarily directly related to animal testing. That said, the UK led the world in trials during covid, providing both the first vaccine and the first treatment. That has wider impacts on the clinical research system, and, as we saw from the recently published review by Lord O’Shaughnessy, that provides the clear path for us to regain our world-leading position.

As the vision makes clear, research is at the heart of that. Research is critical to ensuring that we are providing the best possible care for everyone now and in the future. It is thanks to bold research by brilliant scientists that we can win the battle against life-threatening conditions by equipping our NHS with a new generation of innovative treatments. Extraordinary advances in non-invasive techniques, such as medical imaging, sensors and ex vivo analysis, promise to revolutionise human healthcare. However, to unlock that promise, many of the research questions that those technologies have opened up must be explored directly in humans. It is only by doing so that we can quickly and efficiently translate medical discoveries out of the laboratory and into our hospitals, where they can make a real difference.

UK Research and Innovation, as the UK’s national science, research and innovation funding body, plays a vital role in supporting the development of human-specific research techniques. For a number of years, UKRI has prioritised experimental medicine research, in which studies are undertaken in humans, to identify the mechanisms that drive diseases and provide early evidence for the validity of new discoveries and treatments to fight them. The Medical Research Council’s translational funding strategy pioneers that work, taking the most exciting ideas from discovery science into research using humans, with a clear focus on early clinical application.

The experimental medicine panel is a core part of that strategy, backed by an annual budget of £10 million. Since its establishment in 2020, the panel has invested more than £19 million to support 16 world-leading projects across the UK that could rapidly lead to major benefits for human health. That includes a project from Manchester Metropolitan University that aims to unpick how a region of the brain stem functions and signals to the rest of the brain. The university’s researchers hope that by using the innovative technology of deep brain stimulation, they will gain insight into the neural mechanisms that cause Parkinson’s, a particularly cruel disease, whose devastating impact will be all too familiar to many of us. That project shows just how transformative human-specific research techniques can be.

The hon. Member for Birmingham, Selly Oak talked about animal testing not working, and I think the hon. Member for Linlithgow and East Falkirk said the same. Animal studies are used as the basis for extrapolation, to indicate possible risks to humans. Very few drugs that enter human clinical trials prove to pose an unacceptable risk to humans. There are many reasons why drugs that are assessed as potentially effective and safe in animals do not progress to market, including commercial reasons, but should animal testing not occur, more potential medicines would not progress to market. Resources would be spent on potential medicines that would have been excluded through animal testing, and the risk to humans in clinical trials would be considerably higher. We have heard a lot about the three Rs, and I will come back to that point—we actively support that approach.

Let me just take the opportunity to make clear this Government’s position on animal testing. There was discussion earlier about which Department has responsibility, and, clearly, we work on this across Government. The Home Office regulates existing animal testing, but it does not oversee the ending of it. That sits with the research undertaken under the auspices of the Department for Science, Innovation and Technology. That is why there are dual regimes. Clearly, as we move towards more advanced research and innovation, the responsibility increasingly comes under the auspices of DSIT.

Through UKRI, the Government actively support and fund the development and dissemination of the three Rs, which were set out more than 60 years ago by two English scientists in a programme for a more ethical approach to animal testing. As we have heard, the three Rs are: replacement of the use of animals where they are not necessary for research; the reduction in the number of animals needed to obtain the same amount of information; and the refinement of testing methods to minimise the pain, suffering and distress of the animals involved.

That is achieved primarily through funding for the National Centre for the Replacement, Refinement and Reduction of Animals in Research. World-renowned for its leadership in this space, the NC3Rs works nationally and internationally to drive the uptake of non-animal technologies and ensures that the advances in these technologies are reflected in policy, practice and regulations on animal research.

Since its launch in 2004, the NC3Rs has committed £100 million to its research, innovation and early career awards to identify new and more ethical approaches for scientists in academia and industry. It has set out its strategy to increase the focus on animal replacement technologies, as well as championing high standards in animal research.

UKRI’s Biotechnology and Biological Sciences Research Council also supports research into developing and applying innovative methodologies to study human and animal physiology, including in-silico approaches—organ-on-a-chip, as we have heard—organoid and other advanced cell culture systems. That includes a recent £4 million BBSRC and NC3Rs programme that focuses on supporting the next generation of non-animal technologies that mimic the physiological environment, enabling a whole-system/multi-system approach for discovery and translational science across the life course.

Much research can be done in non-animal models, as we have heard, but there are still purposes for which it is essential to use live animals. The dizzying complexity of whole biological systems means that they cannot always be replicated using validated non-animal methodologies. Therefore, although we very much recognise the need to replace the use of animals in scientific procedures with non-animal alternatives where we can, the carefully regulated use of animals in scientific research remains absolutely necessary at this time if we are to protect humans and the wider environment, whether that means improving our understanding of how biological systems work or accelerating the development of safe and effective medicines, treatments and technologies.

[Steve McCabe]

I appreciate that this is not the Minister’s brief—I am not trying to be difficult, and I am listening with interest to what he is saying—but I and others watching the debate will be curious to know whether it is Government policy and the Government’s intention to move to phasing out animal experiments, or is the Minister telling us that the Government think there will always be a place for animal experimentation?

[Paul Scully]

I have talked to the hon. Gentleman about the three Rs. Essentially, nobody wants to be using animal testing where it is absolutely not needed. If innovation, such as computer models and new research, can find new ways of edging that out, why would any Government not want to do that? It has to be based on the evidence and the best science, and done on what is best for humankind, and that is what we will keep in mind. It is not done for the sake of animal testing in itself; it is very much evidence-based, as I said. That is why the current approach is to actively support and fund the development and dissemination of techniques that replace, reduce and refine the use of animals in research and to ensure that the UK has a robust regulatory system for licensing animal studies and enforcing legal standards.

Our legal framework is absolutely clear: animals are only ever used in science where there are no alternatives, where the number of animals used is the minimum needed to achieve the scientific benefit, and where the potential harm to animals is limited to that needed to achieve that scientific benefit. Under UK law, there are three main purposes for which animals may be used in science: for basic research to understand biological processes and systems; for translational research to understand how biological systems apply to real-world applications, such as the development of medicines; and to test the safety and efficacy of medicines and chemicals.

In each of those instances, the rationale is clear. Without basic research using animals, we would limit our ability to make the kind of scientific discoveries that could transform medicine for the better. Without translational research using animals, we would limit our ability to develop new medicines not just for humans, but for animals. Without testing those medicines using animals, we would not know whether those medicines were safe or effective for use in humans or animals, unnecessarily limiting the availability of medicines to treat life-threatening diseases. Many medicines that prove ineffective in humans are detected earlier through animal testing, too, enabling us to focus valuable research funds on medicines that will be effective.

To be clear, this Government are unapologetically ambitious in our mission to make Britain a science and technology superpower. We understand just how much world-leading research matters if we are to succeed and translate that success into real benefits for our people and our NHS. That means investing in the next generation of tools and technologies that provide alternatives to animal research, and it means, where animal research remains necessary, maintaining those rigorous principles to put ethics at the heart of that research. I thank Members once again for their insightful contributions to the debate, and I look forward to our working together in the months and years to come.

[Sir Charles Walker (in the Chair)]

Mr McCabe, you have two minutes.

Artificial Intelligence

Paul Scully Excerpts

Thursday 29th June 2023 Commons Chamber

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)]

I start by conveying my appreciation to my hon. Friend the Member for Boston and Skegness (Matt Warman) for securing today’s debate and for speaking so powerfully in opening what has been on the whole—until the word soup of the hon. Member for Pontypridd (Alex Davies-Jones), which I will cover in a second—a thoughtful debate about this important and complex topic.

We have had some considered speeches, and I will touch on some of those. We heard from the Chairman of the Business and Trade Committee, the hon. Member for Bristol North West (Darren Jones), about the risk to workers. My right hon. Friend the Member for Tunbridge Wells (Greg Clark) spoke about how we have to choose our words carefully and keep cool heads in regulation, and that goes to the heart of what we are talking about today. The hon. Member for Brent Central (Dawn Butler) talked about how, instead of constraining the technology, the Government are letting it off the leash, and I do not think that is right. When we talk about the AI White Paper, it is the flexibility that keeps it up to date, rather than it being out of date.

We heard from my hon. Friends the Members for Stoke-on-Trent Central (Jo Gideon) and for Aberconwy (Robin Millar), and the hon. Member for Ochil and South Perthshire (John Nicolson) talked about the gigs he gets to go to. In the Department for Science, Innovation and Technology, we have the sharp focus to look at AI and the digital skills that the hon. Member for Pontypridd was talking about. Six months ago, when I was in the Department for Digital, Culture, Media and Sport, I had to leave a digital economy council meeting to go to a dinner with Dell. When I explained that, they said, “You’re going to dinner with Adele?” I said, “No, it isn’t. It is just Dell, unfortunately.” We now have that sharp focus to address the AI White Paper.

First, let me talk about the fact that AI is fast becoming part of our daily lives. It is in our phones, our cars, our offices and our workplaces. The explosion in the use of AI tools such as DALL-E, Midjourney, ChatGPT and Bard shows that we are on the cusp of a new era of artificial intelligence. As my hon. Friend the Member for Boston and Skegness rightly asserted, it has the potential to bring enormous benefits to our society, and we must always remember that. We have to be aware of the risks and manage them carefully on an international basis, which is summed up by the global summit that the Prime Minister is hosting here this autumn, but we must always look to the opportunities, too, and how AI will change the world. That includes in the NHS, where the use of automated lip readers such as Liopa are bringing a voice to the voiceless by improving treatments for patients who cannot speak, and where risk prediction tools, such as the Scottish Patients at Risk of Readmission and Admission tool, or SPARRA, can provide GPs in Scotland with monthly risk scores for patients and predict the likelihood of their being admitted to hospital.

AI can also change our economy, driving greater consumer choice, efficiencies and productivity. One only has to look at AI’s impact through the widespread use of virtual assistants such as Siri, Cortana, Google Assistant and Alexa to see how AI is helping consumers to manage their daily lives more efficiently.

However, there are unique risks, too, so it is right that Governments around the world play their part in ensuring that this technology is developed and applied in a safe, transparent way. In the UK, the Government have long recognised the transformative potential of this technology, and we have sought to be ahead of the curve. With respect, I say to the hon. Member for Pontypridd that since 2014 we have invested £2.5 billion in building a thriving AI ecosystem; we are recognised as having the third biggest AI ecosystem in the world after America and China.

The AI sector deal that we announced back in 2018 was followed by our national AI strategy in 2021. That set out our 10-year vision for ensuring that the UK remains at the forefront of the AI revolution by investing in skills and infrastructure, driving adoption across sectors, and governing AI effectively through regulation, technical standards and assurance. The House will know that my right hon. Friend the Prime Minister laid out his ambitions for the UK on AI at London Tech Week earlier this month. That ambition is for us to lead at home and abroad, and to lead change in our public services.

A theme discussed at some length today is the regulatory environment for artificial intelligence. As hon. Members will know, the Government committed to reviewing the AI regulatory and governance landscape in our national AI strategy. We subsequently published our AI regulation White Paper in March. The approach that the White Paper advocates is proportionate and adaptable. The proposed regulatory framework draws on the expertise of regulators. It supports them in considering AI in their sector by applying a set of high-level principles, which are outcomes-focused and designed to promote responsible AI innovation and adoption. We will work with and through regulators and others in the sector.

On the criticism of the White Paper, I have to say that industry supports our plans. We engaged with over 130 organisations on the proposals last year, and developers, business users and funders praised the flexibility of our approach, which will support innovation and build public trust. The White Paper remains very much in date because of its flexibility. Those who have read it know that its outcomes-focused, adaptable approach is deliberately designed to allow us to manage emerging and unforeseen risks, as well as those risks that we already know about.

The White Paper proposes a number of central support functions, which will be initially provided from within Government, but we will leverage activities and expertise from across the broader economy where possible. That will ensure that the framework effectively addresses AI risks in a way that is proportionate, future-proof and responsive.

Several people raised the issue of international co-operation. There we have shown true leadership. No country can tackle AI on its own, given its global nature. My right hon. Friend the Prime Minister announced earlier this month that we will host the first major global summit on AI safety this autumn. The summit will consider the risks of AI, including frontier systems, and will discuss how those risks can be mitigated through internationally co-ordinated action. The summit will also be a platform where countries can work together on developing a shared approach to mitigating risks.

However, the summit cannot be viewed in isolation. It builds on the extensive work that we have done on strengthening AI safety with the OECD, the Council of Europe, the Global Partnership on Artificial Intelligence, and the UN, and through the G7 Hiroshima AI process. Bilaterally, we have also made great strides in co-ordinating on AI safety with key international partners. In June, the UK signed the Atlantic declaration with the US, in which we agreed to accelerate co-operation on AI, with a focus on ensuring its safe and responsible development. Further, in May, the UK agreed the Hiroshima accord with Japan, in which we committed to focusing UK-Japan AI discussions on promoting human-centric and trustworthy AI, and on interoperability between our AI governance frameworks. We intend to go even further. As per the G7 Hiroshima leaders May 2023 communiqué, we have committed to advancing international discussions on inclusive AI governance and interoperability to achieve our common vision and goal of trustworthy AI that is aligned with shared democratic values.

The hon. Member for Ochil and South Perthshire spoke about AI in the creative industries. Obviously, the advent of AI has sent ripples of transformation across multiple industries, and the creative sphere is no exception. There are plenty of opportunities there, but there are also challenges that we have to address. The ability to automate creative tasks means that, in some cases, work such as copywriting, which could have taken hours if not days, could now take merely a few minutes. Some Members spoke about the risk of homogenising creativity, with the obvious concerns about intellectual property that stem from that. Again, I think it is right that we strike an appropriate balance in the regulation of AI to ensure that we do not stifle innovation, but that we ensure we protect the UK’s thriving creative industries.

In conclusion, the Government remain entirely committed to ensuring that AI develops and is applied safely not just here, but around the world. By effectively addressing the risks that Members have highlighted today, we can also seize the many opportunities that AI has to offer, from transforming our NHS with the discovery of new drugs, new treatments and new ways of supporting patients, to helping us race ahead to net zero and building a greener, fairer, stronger economy. We want to continue engaging with Members across this House, along with our partners in industry and academia, to deliver on those missions. We want to build the broadest possible coalition to ensure that the appropriate guard rails are in place for this technology to develop in a safe, fair and transparent way that will keep the UK right at the forefront of the AI revolution now and in the future. That is our vision and, working with hon. Members across the House, that is what we will deliver.

Digital Markets, Competition and Consumers Bill (Ninth sitting)

Paul Scully Excerpts

Committee stage
Tuesday 27th June 2023 Public Bill Committees

[The Chair]

With this it will be convenient to discuss the following:

Clauses 92 and 93 stand part.

Government amendment 34.

Clauses 94 to 96 stand part.

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)]

Let me cover the criminal offences in the regime, which largely mirror existing powers that the Competition and Markets Authority has in the Competition Act 1998. Criminal liability is important for deterring serious acts of misconduct in the context of information gathering and compliance monitoring, and will help to ensure that the digital markets unit can access relevant information.

Clause 91 makes it a criminal offence for an individual or firm to intentionally or recklessly destroy information, conceal information, provide false information, or cause or permit any of those actions. Those offences apply in relation to any of the powers provided for in chapter 6, which concerns information gathering and compliance reports.

Clause 92 makes it a criminal offence for a person to knowingly or recklessly give false or misleading information to the DMU in connection with any of its digital markets functions. It is also an offence for a person to knowingly or recklessly give false or misleading information to another person, knowing that it will be used by the DMU.

Clause 93 makes it a criminal offence for an individual to intentionally obstruct an officer of the DMU when lawfully entering a premises with or without a warrant.

Government amendment 34 seeks to clarify that named senior managers for information requests and nominated officers cannot be held criminally liable for not fulfilling their duties in those roles. As drafted, clause 94(2) broadens the definition of an officer of a body corporate. That would mean that individuals assigned to those roles could risk facing criminal proceedings on the basis of their assignment to the role. It has always been the policy intention that a named senior manager or nominated officer should face a civil penalty only where a firm with strategic market status has failed to comply with a relevant information request or compliance report and where the named individual failed, without reasonable excuse, to prevent that failure from occurring. The amendment would not prevent a senior manager or a nominated officer from facing criminal proceedings if they happen to also qualify as an officer of a body corporate under clause 94. I therefore hope that the Committee will support the amendment.

Clause 94 sets out that, in certain circumstances, where a body corporate commits a criminal offence, an officer of the body corporate can also be held criminally responsible. An officer of a body corporate can be, but is not limited to, a director, manager or secretary. An officer can be held criminally liable where the body corporate commits a criminal offence and the offence is attributable to that officer’s consent, connivance or neglect on their part. That will help to encourage officers in firms to take personal responsibility for their actions and will ensure that they are held accountable for any serious information offences.

Clause 95 limits the extraterritorial application of certain offences in the Bill, and I will set out our wider approach to extraterritoriality when we debate clause 110. Specifically, clause 95 states that a person cannot commit any of the part 1 criminal offences unless they have a UK connection, which is established when the person is a UK national, is habitually resident in the UK, or is a body incorporated under UK law. We have carefully considered the options and implications of restricting the extraterritorial application of criminal offences in this way. Although it is crucial that the CMA may apply its powers extraterritorially, they must be used only when strictly necessary and when a sufficient connection exists with the UK. In circumstances in which the person does not have a sufficient connection with the UK for the purpose of committing an offence, the CMA will still be able to enforce breaches of information requirements using civil penalties. That approach will ensure that, in exercising its powers, the CMA is respectful of the territorial jurisdiction of other nations.

Finally, clause 96 sets out the punishments that can be imposed by the relevant courts on conviction of a criminal offence under clauses 91 to 93. Any person found guilty of one of those offences is liable on summary conviction to a fine. In England and Wales, that will be of an unlimited amount, and in Scotland or Northern Ireland it will be up to the statutory maximum. On conviction on indictment, a person is liable to imprisonment for up to two years, a fine or both.

[Alex Davies-Jones (Pontypridd) (Lab)]

I welcome the clauses in this grouping that outline the criminal offences, as the Minister has explained. We welcome their inclusion for clarity, and we are also grateful that they broaden the scope of the Bill to include specific provisions, particularly in clause 94.

We support the clarity and intention of Government amendment 34. It is important that the term “officer” has its usual meaning in relation to offences committed by officers as well as bodies corporate. This is an important clarification and we are grateful to the Minister for tabling the amendment.

Question put and agreed to.

Clause 91 accordingly ordered to stand part of the Bill.

Clauses 92 and 93 ordered to stand part of the Bill.

Clause 94

Offences by officers of a body corporate etc

Amendment made: 34, in clause 94, page 56, line 14, leave out subsection (2).—(Paul Scully.)

This amendment removes a gloss on the definition of “officer” of a body corporate so that the term has its usual meaning in relation to offences committed by officers as well as bodies corporate.

Clause 94, as amended, ordered to stand part of the Bill.

Clauses 95 and 96 ordered to stand part of the Bill.

Clause 97

Director disqualification

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Government amendments 35 and 36.

Clauses 98 to 101 stand part.

[Paul Scully]

I will now cover the remaining enforcement measures in the regime, and the appeals process. Clause 97 gives power to the DMU to apply to the court to disqualify a director of a UK-registered company that forms part of a firm with strategic market status, where that firm has breached the digital markets regime. That will allow the DMU to use the Company Directors Disqualification Act 1986, as the CMA does currently under the Competition Act 1998, when an SMS firm infringes the regime and the director’s conduct makes them unfit to be involved in the management of a company. That helps to protect UK businesses and the public from individuals who abuse their role and status as directors.

Government amendment 35 clarifies that costs relating to a court order under clause 98 can be made against any person that has breached the relevant requirement, whether or not they are an undertaking. The amendment changes the wording in subsection (3) to reflect the rest of the clause, which applies to persons—in practice, meaning a legal entity forming part of an SMS firm. I hope the Committee supports the amendment.

Government amendment 36 seeks to clarify in clause 98 that where a firm is responsible for the failure to comply with a relevant requirement, a costs order can be made against any officer of the relevant firm.

Clause 98 allows the DMU to apply for a court order where an SMS firm fails to comply with a regulatory requirement and, where relevant, a subsequent order or commitment intended to bring them back into compliance. A breach of a court order is a serious offence that can eventually lead to an unlimited fine and/or imprisonment for officers of the undertaking in question if it is not complied with. The threat of a court order is a key backstop for ensuring SMS firms comply with the regime.

Clause 99 makes explicit provision to allow parties to seek redress privately if they suffer harm or loss when an SMS firm breaches a requirement imposed by the DMU. Redress will be available when an SMS firm breaches a conduct requirement, pro-competition intervention or commitment to the DMU.

Clause 100 sets out that the CMA’s final breach decisions are binding on the courts and the Competition Appeal Tribunal to which redress claims can be made. The court or tribunal will only consider what a suitable remedy would be. That will encourage harmed parties to assist the DMU during investigations into suspected breaches of the regime.

Clauses 99 and 100 strike the right balance of ensuring there is a clear and effective route to redress, while ensuring that the regime’s focus is on public enforcement.

Clause 101 provides that decisions of the DMU, made in connection with its digital markets functions, can be appealed to the Competition Appeal Tribunal. When deciding these challenges, the CAT will apply judicial review principles. Valid grounds for appealing decisions of the DMU could include challenging whether it acted lawfully and within its powers, applied proper reasoning or followed due process, as well as, in some circumstances, whether the DMU’s decision was proportionate. That is with the exception of decisions relating to mergers, which will be brought under the existing process for merger appeals set out in the Enterprise Act 2002. That will ensure that there is a consistent appeals regime for all merger decisions.

Judicial review will allow for appropriate scrutiny of the DMU’s decisions in the digital markets regime, ensuring that the DMU is accountable for those decisions, that they are fairly and lawfully taken, and that the rights of businesses are protected. I am sure we all remember the oral evidence: the majority of people in front of us were clear that this was the right approach, and was proportionate.

[Alex Davies-Jones]

Clause 97 is important in that, as the Minister said, it enables the disqualification of a person from being a director as a consequence of their involvement in an infringement of a requirement relating to conduct requirements or pro-competition interventions. Labour sees that as an important step in ensuring that individuals who have not abided by the terms of this regime are not able to continue in their role. The clause specifically inserts new text into the Company Directors Disqualification Act which allows for these provisions. We welcome that this disqualification can be for up to 15 years—a significant yet fair period—and support the Government’s approach. We therefore support clause 97 in its entirety and think that it should stand part of the Bill. I am pleased to confirm that we also support Government amendments 35 and 36.

I will now move on to clauses 98 to 101. On clause 98, we particularly agree with the logical step set out in subsection (1). Its clarification means that, in the event of any initial breach of a conduct requirement that occurs before an enforcement order has been put in place or a commitment has been accepted, it cannot be enforced with a court order. We also agree with the intentions of subsection (3). Again, these are sensible approaches which we support. On the whole, we believe clause 98 to be an important step in establishing and rooting the CMA’s powers on a statutory footing. For that reason, we are happy to support it standing part of the Bill.

A fair regulatory regime must include provisions around seeking compensation, so we welcome clause 99. We particularly welcome subsection (2). We further welcome the clarity that subsection (4) affords. Again, these are simple clauses that we see as logical and sensible. We are happy to see their inclusion.

I now come to the most important clause in the Bill: clause 101. The Minister will be pleased to know that I have plenty to say on it. Subsections (8) to (10) provide that decisions of the CAT may be appealed to the appellate court for that jurisdiction. That is an incredibly important point and one which the Government must maintain. The DMU will ultimately have the power to make pro-competitive interventions to reduce SMS firms’ market power and to review more of their mergers. That means that they will be able to make significant changes to SMS firms’ business models with the objective of opening up their ecosystems and levelling the playing field for other businesses. The benefits of doing so are significant, and I am sure we will touch on them in sessions to come.

In the current version of this Bill, the standard of review that applies to DMU decisions is the judicial review standard generally used for authorities that make forward-looking assessments, rather than the “merits” standard used for certain competition law enforcement decisions by the CMA. That means that parties will be able to apply to the Competition Appeal Tribunal to review the legality of the DMU’s decisions, focusing on the principles of irrationality, illegality and procedural impropriety. That is an extremely important point and is consistent with other regimes, so the Government must not bow down to pressure here and adopt a “merits” appeals approach. As the Minister quite rightly said, we heard from countless witnesses during our oral evidence sessions who said the same.

We know that judicial review appeals are more streamlined than merits appeals and they can last a matter of days, rather than weeks, years or even decades. Under this Government, our courts are already facing significant backlogs—perhaps the less said about that the better—but there is no reason why we should subject this regime and the appeals principle to even further delay. We recognise the pressure that the Government are under here; clearly, potential SMS firms and their advocates oppose the adoption of the JR standard. It is obvious that a company that may be negatively impacted by this new regime would seek to obstruct or delay it by arguing for an appeals process that incorporates a consideration of the merits of the case.

However, Labour strongly believes that the current drafting is fair and well aligned with other regulatory regimes. For far too long, big tech has had the ear of this Government and has been able to force the hand of many of the Minister’s colleagues when it comes to online safety provisions. The Minister must reassure us that that will not be the case. I look forward to his confirmation.

[Paul Scully]

I appreciate the hon. Lady’s approach to the appeals standard, which she has taken in regard to the measures throughout the Bill. The Government speak to larger companies and smaller challenger companies, because it is really important that we get this right. I can assure the hon. Lady that there is no way we are going to weaken the appeals structure. We will always make sure that we listen and do things fairly. In no way will the structure be watered down such that challenger tech cannot come through. It is important we ensure that the Bill in its final form is the best it can be and is fair and proportionate.

Question put and agreed to.

Clause 97 accordingly ordered to stand part of the Bill.

Clause 98

Enforcement of requirements

Amendments made: 35, in clause 98, page 58, line 23, leave out “undertaking” and insert “person”.

The requirements to which clause 98 relates can apply to persons other than undertakings. This amendment clarifies that a costs order under this clause can be made against any person, whether or not they are an undertaking, who fails to comply with a requirement.

Amendment 36, in clause 98, page 58, line 25, leave out paragraph (b) and insert—

“(b) where the person responsible for the failure is an undertaking, any officer of a body corporate that is or is comprised in that undertaking.”—(Paul Scully.)

This amendment clarifies the circumstances in which a costs order under this clause can be made against an officer of a body corporate.

Clause 98, as amended, ordered to stand part of the Bill.

Clauses 99 to 101 ordered to stand part of the Bill.

Clause 102

Extension etc of periods

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clause 103 stand part.

Government amendment 37.

Clauses 104 to 109 stand part.

Government amendment 38.

Clauses 110 to 114 stand part.

Government amendment 39.

Clause 115 stand part.

New clause 4—Annual report on operation of CMA functions—

“(1) The Secretary of State must, at least once a year, produce a report on the operation of the CMA’s functions under Part 1 of this Act.

(2) Each report must include an assessment of the following matters—

(a) the outcomes of SMS investigations carried out by the CMA, with regard to the number of undertakings found—

(i) to have SMS, and

(ii) not to have SMS;

(b) the extent to which designated undertakings have fulfilled any conduct requirements imposed by the CMA; and

(c) the effectiveness of any pro-competition interventions made by the CMA.

(3) The first report must be published and laid before Parliament within one year of this Act being passed.”

This new clause requires the Secretary of State to produce an annual report on the operation of the CMA’s functions under Part 1. The report will be made publicly available and will be laid in Parliament.

--- Later in debate ---

[Paul Scully]

Clauses 102 to 115 deal with the administration of the regime and some technical matters. Clause 102 provides the DMU with the ability to extend investigations for strategic market status, conduct and pro-competition interventions, including the use of the final offer mechanism, for up to three months for special reasons. If a firm does not comply with information or interview requests, the deadlines can be extended until compliance is achieved. Clause 103 supports that measure by clarifying that special reasons extensions can be used once per investigation and specifying how total extension periods are calculated. Together, that provides clarity for firms on how investigations will be run and ensures that the implementation of extensions by the DMU is consistent.

Clause 104 sets out who will be permitted to take decisions in the new regime. It reserves the launch of strategic market status and pro-competition investigations to the CMA board, and further specified regulatory decisions to the board and one of its committees. The committee’s membership is constrained to provide a balance of independence and expertise.

Government amendment 37 amends clause 104 and requires that the continued application of existing obligations at the point of further designation, or transitional arrangements at the end of designation, are decisions reserved for the CMA board or its committees. That will ensure consistency across the introduction of obligations on firms.

Clause 105 sets out the manner in which a notice may be given to SMS firms or other relevant parties in relation to its functions under the digital markets regime. The provision is necessary to prevent parties frustrating investigations by claiming that they have not received a notice or that it has not been given to them in the proper way.

Clause 106 creates a statutory duty for the DMU to consult key regulators on significant proposed actions that engage their regulatory interests where it is relevant and proportionate to do so. Those regulators are the Information Commissioner, Financial Conduct Authority, Ofcom, Prudential Regulation Authority and the Bank of England. That ensures that the DMU can draw on expertise, avoid negatively impacting the interests of other regulators and prevent conflicting interventions.

Clause 107 creates a formal mechanism for the Financial Conduct Authority or Ofcom to make a recommendation to the CMA for it to exercise a significant digital markets function. That will ensure that the FCA and Ofcom, as concurrent competition regulators, have a clear and transparent process to refer cases to the DMU.

Clause 108 extends existing information-sharing provisions in part 9 of the Enterprise Act 2002. It ensures that information can be shared between the CMA and other relevant regulators to help them to carry out their statutory functions. The CMA will be able to disclose information to SMS firms or third parties to enable them to respond to allegations, seek legal advice or make appeals.

--- Later in debate ---

[Alex Davies-Jones]

Clause 102 is incredibly important if the CMA and, subsequently, the DMU are to be able to be an accountable body that consumers and businesses—and parliamentarians—have confidence in. This clause allows the CMA to extend various deadlines in part 1 of the Bill by up to three months where there are “special reasons” to do so. Those may include, for example, illness in the CMA investigation team. These are important provisions to ensure that the CMA is able to extend relevant investigations by up to three months.

We think it reasonable that the clause does not define the exact parameters of “special reasons”. We support a common-sense approach and therefore anticipate that those would include matters such as the illness or incapacity of members of an investigation team that has seriously impeded their work, and an unexpected event such as a merger of competitors. We further support the need for the CMA to publish a notice to trigger an extension under this clause. However, the Minister knows how important it is that these notices are made public, so I hope that he can clarify that that will be the case here.

It is right and proper that subsection (7) outlines the interaction between SMS investigations and active SMS designations. If the CMA is carrying out a further SMS investigation for a designated undertaking and needs to extend it, that investigation may not conclude until the original designation has expired, meaning the undertaking would fall outside the regime before the need for continued SMS designation is confirmed. The clause enables the SMS designation to be extended to match the length of the SMS investigation period and is a sensible approach that Labour supports.

We also welcome the provisions around clause 103, allowing the CMA to extend an SMS designation by up to three months. That speaks to the nature of an agile and flexible regime, which we ultimately all want and support. Government amendment 37 prevents decisions about whether and how to exercise the power in clause 17 being delegated to a member of the CMA’s board or a member of staff of the CMA. We consider that to be an appropriate response.

Clause 104 is crucial all round because it explains how decisions will be made under the digital markets regime and has practical applications in establishing exactly how the functions within the CMA will be able to operate when implementing the legislation. Notably, subsections (1) to (5) provide the CMA with the ability to create groups. The CMA must state the function for which such a group is established and the group will be required to fulfil that function. Can the Minister confirm where that information will be reported? Again, it will be helpful for us all to understand how that will work in practice.

We also value the clarifications outlined in the clause, which establish that to be eligible to carry out the functions under subsection (2A), a committee must include at least two CMA board members, which can include the chair. Furthermore, a majority of the committee’s membership must be non-staff or CMA panel members. We welcome the clarification that any changes of this nature would need to be laid before and approved by each House of Parliament before being enacted. Can the Minister confirm whether the Secretary of State will be required to be consulted under the provisions? That aside, we support the clause and believe it should stand part of the Bill.

We support clause 105 and welcome the clarification that a notice may be given to the particular individuals specified in subsections (3) to (5). This is an important clause that will allow the CMA to fulfil its obligations as the regulator. We also welcome clause 106, which outlines the requirements that will ensure the CMA has to consult specific named regulators, and welcome the clarity that those five regulators are the Bank of England, the Financial Conduct Authority, the Information Commissioner, the Prudential Regulation Authority and Ofcom. It is positive that they are outlined in the Bill. They are all established and relevant regulators that are subject to their own vast regulatory regimes, so Labour supports their involvement in assisting the CMA to regulate the regime proposed in the Bill. Again, we feel that subsection (6) is fair and reasonable. We particularly approve the fact that it is proportionate and we are happy to support it.

If clause 106 forces the CMA to consult the specific named regulators, it is only right that clause 107 sets out the formal mechanisms to be exercised under their regulatory digital markets function and that they are in the Bill too. We welcome the clarification on the timeframes, particularly around the fact that the CMA must respond to each relevant regulator within 90 days, setting out what action, if any, it has taken or will take and the reasons for that decision. It is important that those time periods are established in the Bill so as not to delay the CMA in taking action on a firm that is not operating in alignment with the regime.

For transparency purposes, we are also pleased to see the summaries of the CMA’s responses and that they must be published online. I am sure the Minister is pleased that that is included. We will come on to that matter as we address further clauses, particularly clause 112.

We welcome clause 108, which we see as a procedural clause that additionally extends current provisions to enable information sharing between the CMA and the Information Commissioner’s Office where that facilitates the exercising of one of their respective statutory functions, and we support the clause’s intentions. Information sharing must be encouraged between the agencies to allow for a regulatory regime to work in practice and be robust. It is right that the clause makes amendments to the Communications Act 2003 and the Enterprise Act 2002, which we see as vital for the regime to work in practice. We therefore support the clauses and believe they should stand part of the Bill as fully drafted.

Labour fully supports the provisions in the Bill to ensure the CMA has sufficient power to collect a levy from designated undertakings to recoup the costs associated with delivering the digital markets regime. We see that as a positive and effective way of encouraging compliance, but also an important way of generating funds to ensure the sustainability of the digital markets regime more widely. The polluter pays model is commonplace in a wide range of policy areas and it can be immensely effective. We therefore welcome the provisions in full. I do not need to address each subsection individually because the overall message is the same. SMS firms should absolutely pay a levy. For far too long they have got away with having considerable power and profit, and the time for them to have a statutory obligation to support measures such as those outlined in the Bill is well overdue.

We support the provisions in Government amendment 38, which we hope will go some way to assist should penalties have to be invoked by the CMA. The amendment permits notices to be served on people outside the UK if the CMA is considering imposing a penalty. Again, that is appropriate, and the Minister can be assured of our support. We feel that the provisions in clause 110 are fair and in alignment with similar regimes already in place, so we are happy to support it too. This is all becoming very collegiate.

Clause 111 protects the CMA against legal action for defamation as a result of its exercise of functions under the digital markets provisions in this part, and we support it entirely.

We welcome the provisions outlined in clause 112, which confirms the CMA’s duties to consult and publish statements online. As the Minister will be aware, any measures around transparency must factor in an element of consultation and transparency, so we welcome the clarifications that clause 112 affords. Colleagues will note that subsection (1) makes provision for when the CMA consults and publishes a statement. We think that it makes perfect sense. We are happy to support it, and wish to see that transparency echoed throughout the Bill.

Clause 113 is again welcome because it sets out the CMA’s obligation to publish guidance. It is important to have confirmation that the CMA will be able to revise or replace any guidance that it publishes, but must publish the revised or replacement guidance. While we recognise that that could include industry associations with a particular interest in the specific guidance in question, I would be grateful if the Minister would clarify whether others may be consulted in the instance of revised guidance being published? That aside, we support the intention behind clause 113 and believe that it should stand part of the Bill.

Clause 114 is particularly important. In the case of a large corporate group whereby a designated undertaking may be part of a wider body, it is important that that is defined within the Bill and interpreted when used throughout the Bill. Turning to Government amendment 39, we of course support the need to ensure that the definition of

“relevant service or digital content”

is consistent with the definition of “digital activity”, so we will support the amendment. We welcome clause 115 and do not disagree with any of the definitions outlined therein. We see them as fairly standard, as long as they are applied with common sense. We therefore fully support the clause.

Lastly, turning to new clause 4, we have already touched on this to some extent in previous debates. The aim of the new clause is clear: we want there to be more transparency over the function of the CMA’s regime. Particularly when it is in its infancy, the information will be extremely useful to businesses, civil society, academics and parliamentarians alike. It will also be important for other jurisdictions to have a meaningful way of understanding the regime, particularly if we want it to be world leading, when considering options for their own legislation.

I hear the Minister’s comments regarding replication of work and the need for the independence of the CMA, but it is right that Parliament has that scrutiny and overview. I would welcome his commitment to ensure that Parliament will have a mechanism by which to review the activity of the CMA via a regular report. If he could commit to me that that will be the case, we will not need to press the new clause to a vote.

[Paul Scully]

I thank the hon. Lady for her approach. Let me answer some of her questions. Notices will be made public, and information about the groups will be reported online. Under clause 104, the Secretary of State would not need to be consulted because, again, it is an independent regulator, so mandatory consultation with the Secretary of State is not necessarily appropriate. On clause 113 and who will be consulted on the revised guidance beyond industry, it will be relevant stakeholders, such as SMS firms themselves, other regulators such as Ofcom and the ICO, businesses likely to be affected by the decisions, and consumer groups. A wide-ranging consultation will be required to ensure that the regime works properly.

I think I can give the hon. Lady the assurance that she is looking for on new clause 4. It is really important that Parliament continues to be able to scrutinise the regime effectively. I do not think that it is appropriate to take the approach that the Secretary of State needs to do another form. It is less to do with duplication; it is more to do with the fact that if the Secretary of State is putting forward his or her own report, that might undermine the report that the CMA is doing. The CMA has an annual report, which it will publish at the end of each financial year. It will include a survey of developments relating to its functions, assessments of its performance against its objectives and enforcement activity, and a summary of key decisions and financial expenditure. That should be enough for Parliament to scrutinise that report and the work of the CMA and the DMU. I am happy to give that assurance that Parliament has that scrutiny and oversight.

--- Later in debate ---

[The Chair]

With this it will be convenient to discuss the following:

Clauses 117 to 121 stand part.

That schedule 3 be the Third schedule to the Bill.

Clauses 122 and 123 stand part.

Clauses 134 and 135 stand part.

[Paul Scully]

I hope my voice will stand up to this level of scrutiny. Part 2 of the Bill focuses on the UK’s existing competition regime. First, I will explain that while the CMA is the principal regulator responsible for the public enforcement of the prohibitions in part 1 of the Competition Act 1998, its functions are also exercisable concurrently by sector regulators, such as Ofgem and Ofcom, among others. The measures in clauses 116 to 120 and clause 135, and when we reach them clauses 136 and 137 and schedules 8, 9 and 11, affect the CMA and sector regulators. For the sake of brevity, I will just refer to the CMA.

Clause 116 extends the territorial reach of the chapter 1 prohibition in the Competition Act 1998. The prohibition relates to anti-competitive agreements, decisions by associations of undertakings or concerted practices, hereafter simply referred to as agreements. The chapter 1 prohibition captures agreements that have as their object or effect the prevention, restriction or distortion of competition within the UK, and which may affect trade within the UK. Currently, it is limited to agreements that are, or are intended to be, implemented within the UK. The extension in reach of the chapter 1 prohibition means that agreements implemented, or intended to be implemented, outside the UK are also captured, but only where they would be likely to have immediate, substantial and foreseeable effects on trade within the UK.

Clause 117 introduces a new duty to preserve documents on persons who know or suspect that an investigation is being, or is likely to be, carried out under the Competition Act 1998. The duty will apply from when a person knows or suspects that an investigation by the CMA is under way or likely to occur. Where a person has a reasonable excuse for not complying with the duty, no liability for a penalty will arise. A reasonable excuse could include something out of an individual’s control, such as an IT failure.

Clause 118 strengthens the CMA’s powers to require the production of electronic information stored remotely—for example, in the cloud—when executing warrants to enter business or domestic premises. Under this reform, the CMA will be able to require the production of information for the purposes of its investigation without needing to demonstrate when making the request the specific relevance of the particular dataset to be produced. It will then be able to take copies or extracts only of information that is relevant to the investigation. The CMA will also be able to operate equipment to produce remotely stored information itself. Clause 134 makes similar amendments to the CMA’s power to require the production of electronic information when executing a warrant during an investigation into a suspected criminal cartel offence under part 6 of the Enterprise Act 2002.

Clause 119 amends part 1 of schedule 1 to the Criminal Justice and Police Act 2001, to include the power of the CMA to undertake an inspection of domestic premises, under section 28A of the Competition Act 1998. That means that when the CMA undertakes an inspection of domestic premises, it will have access to the same seize and sift powers as are already available to it when it inspects business premises under a warrant.

Clause 135 also concerns the CMA’s investigative powers. First, it expands the CMA’s power to require persons to answer questions for the purposes of a Competition Act 1998 investigation, so that it applies regardless of whether the person has a connection to a business under investigation. The CMA will be able to require individuals to answer questions only where they have information that is relevant to an investigation. Secondly, the clause amends the CMA’s powers to require individuals to answer questions across its Enterprise Act 2002 markets and mergers and Competition Act 1998 functions, so that it can specify that interviews for those purposes should take place remotely.

Clause 120 amends the standard of review applied by the Competition Appeal Tribunal in appeals against interim measure decisions from full merits to judicial review. Interim measures are temporary directions that the CMA has the power to give during an investigation under the Competition Act 1998. To be an effective tool in fast-moving modern markets, it is essential that interim measures can be implemented efficiently. Judicial review will provide a flexible and proportionate standard of review, ensuring the CMA is held accountable appropriately for its decisions.

Clause 121 introduces schedule 3 to the Bill, which amends the Competition Act 1998 to empower the Competition Appeal Tribunal to grant declaratory relief in private actions claims under the Competition Act 1998. Declaratory relief is a remedy that involves a court making a legally binding statement on the application of the law to a set of facts.

Clause 122 gives the Competition Appeal Tribunal, the High Court of England and Wales, the Court of Session and sheriff courts in Scotland and the High Court in Northern Ireland the ability to award exemplary damages in private competition claims. This will help deter and punish particularly egregious conduct and ensure that those impacted by the most reckless breaches of competition law can be awarded additional damages.

Clause 123 amends section 71 of the Serious Organised Crime and Police Act 2005 to designate the CMA as a specified prosecutor. This designation will allow the CMA to enter into formal agreements with an offender who has assisted or offered to assist its criminal cartel offence investigations. For example, if it considered it appropriate, the CMA could agree not to use specified information against them in any criminal proceedings. Agreements to provide assistance can also be taken into account by the courts when sentencing an offender, or their sentence could be referred back to the court for review. These measures do not enable the CMA to offer immunity from prosecution.

[Alex Davies-Jones]

Part 2 focuses on the competition elements of the Bill. I am pleased to see clause 116, which expands the territorial reach of parts of the Competition Act 1998. Labour recognises the importance of ensuring that legislation already on the statute book is aligned with the intentions behind the Bill, because we understand that regulation of our digital markets will draw on existing competition law. We therefore welcome the clause, which will expand chapter 1 of the 1998 Act. The chapter 1 of the 1998 Act considers only undertakings and decisions that might affect trade within the UK, and which have as their object or effect the prevention, restriction or distortion of competition. At the moment, those behaviours are prohibited only where they are, or are intended to be, implemented in the United Kingdom, but we need to consider the impact of agreements, decisions and practices that might affect trade within the United Kingdom. Subsection (2) of the clause will replace the existing section of the 1998 Act to ensure that a consideration of the effect on trade will be considered. That is particularly important in the context of digital markets because they operate on a global level.

The clause goes some way to address the lack of futureproofing in the Bill more widely. The Minister knows my thoughts on that, and knows the Bill should go further in that regard. That aside, we welcome subsection (3), which will repeal the existing equivalent in the 1998 Act. The introduction of the qualified test will ensure that UK trade and businesses and consumers based in the United Kingdom, are protected from any detrimental effects of anti-competitive conduct, regardless of where that conduct takes place. That is welcome, and we consider the measure to strike a positive balance.

We welcome the clarity and the changes to the 1998 Act that will bring important provisions of the Bill into line with existing legislation. We have therefore not sought to amend the Bill, and we support those measures being part of it.

Clause 117 is important in that, once again, it will amend part 1 of the 1998 Act. We know that big companies can often be smart in concealing, or even overloading, information relevant to regulatory regimes, and we have seen that happen time and again when it comes to online safety. Labour does not want the same detrimental behaviours to be allowed to continue within this regime. We therefore welcome the provisions in the clause, particularly proposed new section 25B, which sets it out that the duty applies where

“a person knows or suspects that an investigation by the CMA… is… or is likely to be carried out.”

The inclusion of a person “suspecting” is important, and, in theory, it will push companies to abide by their duties. Recently, we have seen those at the heart of Government in the news owing to their failure to produce vital documents in investigations of the covid-19 pandemic, so it is very welcome indeed that the Government appear to have learned their lessons and worked to ensure that designated companies will not be able to circumvent the regime, as a former Prime Minister has attempted to do.

Let me get back to the Bill and the matters at hand. In practice, those duties will arise where a business receives a case initiation letter from the CMA, so it will be perfectly aware that its conduct is under investigation. Such duties might further arise when, for example, an individual working for a business is aware that a customer has reported their suspicions of price fixing, and that the customer has been interviewed by the CMA, or members of an anti-competitive agreement have been “tipped off” that a member of the agreement has blown the whistle to the CMA. Those are important clarifications, which we welcome. We therefore support their inclusion in the Bill.

We support clause 118, which specifically amends sections 28 and 28A of the 1998 Act, and we support the clarity with respect to the execution of such warrants—for example, a named CMA officer has the power to require the production of information that is held electronically and is accessible from the premises. It is a positive step to have these amendments to the 1998 Act, which will expand the powers of the court or the CAT to grant a warrant to the CMA based on the fact that there are reasonable grounds to suspect that there are documents relating to an investigation that are accessible from the premises, when the other criteria set out in the section are met. Those powers will apply to any information stored electronically, and we hope and expect that the provisions of the clause will rarely be used. Despite that, we fully support their inclusion. It is right and appropriate that businesses and other jurisdictions looking closely at the Bill have a sense of the process that will result in the event of the CMA being forced to act on a warrant. The clause and others in this part of the Bill are an important part of ensuring compliance, and we therefore welcome the provisions in full.

Clause 119 is, once again, an important clause that will amend existing legislation. The powers of seizure conferred by section 28 of the 1998 Act are already specified for the purposes of section 50 of the Criminal Justice and Police Act 2001, so the amendment will align the powers available to the CMA whether it is inspecting business or domestic premises under a warrant, and it will make consequential changes in the light of those made by clause 118. These practical clauses will make important changes to legislation to bring other provisions in line with the Bill.

--- Later in debate ---

[The Chair]

With this it will be convenient to discuss the following:

That schedule 4 be the Fourth schedule to the Bill.

Clause 125 stand part.

That schedule 5 be the Fifth schedule to the Bill.

Clauses 126 to 128 stand part.

[Paul Scully]

Chapter 2 of part 2 upgrades and refines UK merger control to ensure it remains the best in class. Clause 124 and schedule 4 amend the thresholds for merger review to focus the UK’s merger regime on reviewing the transactions that have the potential to have the most marked impact on competition in UK markets.

The Bill makes three changes to those thresholds. First, it introduces a new acquirer-focused threshold, which gives the CMA clear jurisdiction over transactions in which a very large business with a UK turnover of more than £350 million, and at least a 33% share of supply, acquires another business. The new threshold will allow the CMA to review potentially harmful transactions—for example, a business with significant market power in one part of a supply chain acquiring a business in another and then being able to leverage its market power across that supply chain.

Secondly, the Bill increases the turnover test level from £70 million to £100 million. That adjustment limits merger review of cases that are less likely to be harmful, maintaining the balance intended when the UK’s merger regime was created. Thirdly, it introduces a safe harbour for transactions where all parties have a UK turnover of no more than £10 million. For the first time, therefore, small and micro enterprises merging with each other can be certain that they will not be captured by UK merger control.

Clause 125 and schedule 5 introduce a fast-track procedure to allow certain mergers to be expedited to an in-depth, or phase 2, investigation. That is intended to increase flexibility and deliver more efficient merger investigations. Now, when the CMA investigates a merger, initially it has to undertake a phase 1 investigation lasting up to 40 working days before it can refer the transaction for an in-depth phase 2 investigation. Merger parties, however, may be aware early in the process that their merger is likely to require an in-depth investigation by the CMA. In such cases, moving quickly to phase 2 will significantly speed up the overall process. Let me be clear: the fast track is not a suitable process for all mergers that the CMA reviews. However, in some cases, it will be a valuable tool to save time and resources for all involved, especially if parties request a fast track early on.

Clause 126 enables merger parties and the CMA to extend existing statutory time limits for merger reviews by mutual agreement where appropriate. The increased flexibility that that provides will ultimately help to resolve cases more effectively and, in some cases, more quickly. Clause 127 enables the CMA and merger parties to extend the time limits of merger review in public interest cases. Unlike in a normal merger review, however, the Secretary of State has an important role in decision making in public interest cases. This clause therefore sets up a key additional requirement for such cases: the CMA can only make or cancel an extension if the Secretary of State also consents. Clause 128 replaces the requirement for the CMA to publish the merger notice in the London Gazette, Edinburgh Gazette and Belfast Gazette with a requirement to do so online.

[Alex Davies-Jones]

Labour welcomes the provisions in the clause which establish that transactions within jurisdiction can be reviewed by the CMA, although no obligations or requirements are imposed on businesses by being in scope. Schedule 4 introduces the new acquirer-focused threshold, as well as introducing a small merger safe harbour that is primarily targeted at reducing the regulatory burden faced by small and micro businesses—the burden that we heard about in our evidence sessions. We support the clause standing part.

Schedule 4 makes several changes to the thresholds, which determine what transactions are within the jurisdiction of UK merger control. As I have noted already, the UK’s merger control regime is voluntary, meaning that there is never on obligation to notify a transaction to the CMA. However, when the existing jurisdictional thresholds in the Enterprise Act 2002 are met, the CMA may review a transaction even if it is not notified. The CMA has such jurisdiction if: the target’s UK turnover in its most recently completed financial year exceeded £70 million; or the parties have a combined share of supply of 25% or more in relation to any product or service in the UK or a substantial part of the UK. This schedule will clarify some significant changes to those thresholds, which Labour welcomes.

Schedule 4 introduces a new threshold that will grant the CMA jurisdiction to review transactions where one party has a UK share supply of at least 33% and UK turnover exceeding £350 million. We see the new threshold as largely capturing killer acquisitions, in which a larger firm acquires a smaller and possibly innovative firm, potentially with a view to eliminating the threat of future competition. The CMA’s existing 25% share-of-supply threshold has already shown itself to be flexible in capturing many such transactions, but it is estimated that the new threshold will lead to an increase of between two and five phase 1 cases per year. That is to be applauded.

The new £350 million threshold is aimed at expanding the CMA’s jurisdiction, but other sections of schedule 4 seek to reduce the burden on merging companies by removing certain transactions from the CMA’s jurisdiction. By increasing the target turnover threshold from £70 million to £100 million, it is estimated that the changes to the turnover test will lead to a reduction of two or three phase 1 cases per year. In addition, the Government have proposed an interesting solution with the introduction of a safe harbour threshold to the existing share-of-supply test where, even if the 25% share of supply threshold is met, the CMA would not have jurisdiction if no party to the transaction had more than £10 million of UK turnover.

Labour recognises that it would be inappropriate to burden the CMA unnecessarily, but we are keen to have an understanding of how schedule 4 will operate in practice. Has the Minister considered introducing an annual reporting mechanism that would allow for more transparency on whether the approach is working? That aside, we certainly and carefully support the intentions of this schedule.

We welcome the provisions of clause 125 and are pleased to see that particular attention has been given to merger situations. Labour recognises that designated companies often buy other companies or merge with them, so it is only right that the CMA is empowered with the appropriate tools to investigate in such circumstances, where necessary. As we know, at present the UK’s merger control regime is voluntary, meaning that there is never an obligation to notify the CMA of a transaction. However, as I have said, when the thresholds in the Enterprise Act are met, the CMA may review a transaction despite not having being notified of it.

Clause 125 is relevant because it amends part 3 of the Enterprise Act to enable the CMA to fast-track a merger to an in-depth phase 2 investigation if it receives a request from the parties involved to do so. That is an important step in streamlining merger review procedures and timelines by removing certain statutory duties on the CMA that currently limit the benefits and use of the existing, non-statutory fast-track procedures. This fast-track process gives the CMA more flexibility to deliver quicker and more efficient merger investigations without prejudicing the quality of the review. We welcome the clarifications in clause 125 and support its standing part of the Bill.

We welcome schedule 5, which amends the Enterprise Act to enable the CMA to fast-track these mergers. In particular, we support the clarification that the CMA may launch a phase 2 investigation only if it believes that a completed or anticipated merger has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom. We also support the clarification of the circumstances in which the CMA can accept a fast-track reference request.

When making these decisions, the CMA must have regard to whether the merger could raise public interest issues or whether a special public interest intervention has been launched under provisions in the Enterprise Act, to ensure that no case is unduly fast-tracked. Schedule 5 is important and will be central to ensuring the CMA can work at pace in the case of any merger requiring investigation. We welcome and support it.

Labour fully supports the intentions of clause 126. The timetable for phase 2 investigations is important for the timely resolution of merger investigations, and we believe the approach outlined to be sensible. As it stands, section 39 of the Enterprise Act, which outlines time limits, requires the CMA to publish its report on a merger reference within 24 weeks of the date of the reference. Clause 126(2) amends that provision to give the CMA the power to extend the period if necessary. We welcome the clarity that the length of an extension has to be agreed between the CMA and parties involved in the potential merger.

We also acknowledge that, while the Bill does not specify circumstances in which the CMA and the parties involved in a merger can agree an extension, an extension is most likely to be helpful in support of early consideration of remedies or in multi-jurisdictional mergers that are being reviewed in other countries in parallel to the UK. We welcome that distinction. Labour has consistently said that for the regime to work in practice it must be flexible. We see clause 126 as an important step towards that aim and are therefore happy to support its inclusion in the Bill.

As I said with respect to clause 126, Labour supports flexibility to extend time limits, and we feel that is particularly important where there is a public interest to do so. That is why we support clause 127. The clause amends chapter 2 of part 3 of the Enterprise Act, which sets out that the Secretary of State may intervene in the consideration of a merger where the Secretary of State believes it raises a public interest consideration that needs to be taken into account. We feel that this is an appropriate and proportionate way of ensuring accountability for public interest interventions, and that the Secretary of State should be empowered to do so. We therefore support the intentions of clause 127 and, again, believe that it should stand part of the Bill.

Finally, clause 128 replaces the obligation on the CMA in section 96(5) of the Enterprise Act to publish the latest form of the merger notice

“in the London, Edinburgh and Belfast Gazettes”

with an obligation to publish it online. We welcome that transparency. The Minister knows my views on transparency with respect to the Bill more widely. I wish that provision about online publication was replicated elsewhere in the Bill, so that information is available to anyone who wishes to see it. We welcome clause 128 and hope to see it replicated.

[Paul Scully]

Indeed, a lot of the publication is done online, as we have discussed, even if that is not stated specifically in the Bill. I hope the hon. Lady takes heart in that.

The hon. Lady asked specifically about schedule 4 and safe harbours. Clearly, we would expect the CMA and the Government to review the merger review thresholds regularly, and there are powers to amend the thresholds if and when it is considered appropriate to reflect economic developments or, indeed, because of the experience of enforcing the thresholds, as she rightly said. The CMA board is accountable to Parliament, as we have described. We expect that, through its annual plan and performance reports, Parliament will be able to scrutinise the decisions that have been taken.

Question put and agreed to.

Clause 124 accordingly ordered to stand part of the Bill.

Schedule 4 agreed to.

Clause 125 ordered to stand part of the Bill.

Schedule 5 agreed to.

Clauses 126 to 128 ordered to stand part of the Bill.

Clause 129

Market studies: removal of time-limit on pre-reference consultation

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clauses 130 and 131 stand part.

That schedule 6 be the Sixth schedule to the Bill.

Clause 132 stand part.

That schedule 7 be the Seventh schedule to the Bill.

Clause 133 stand part.

[Paul Scully]

The UK’s markets regime is the CMA’s most powerful tool for promoting competition in UK markets. Clauses 129 to 133 reform the markets regime, ensuring that it is effective, focused and proportionate.

Clause 129 reforms the market study process. Currently, the CMA or sector regulator must start a consultation on making a market investigation reference, or decide not to make a reference, within six months of the start of a market study. That timeframe is unduly restrictive. The clause removes the six-month time limit, giving flexibility for the consultation to start at the most appropriate point. It allows extra time to gather evidence, ensuring that information that comes to light later on can be considered.

Clause 130 makes amendments so that references can be targeted appropriately, to better define the scope of the investigation required. It further narrows the questions that the CMA group must consider, reflecting the scope set out in the reference. This will allow the CMA to ensure that its work is targeted effectively, which will benefit businesses and investors.

Clause 131 introduces schedule 6, which expands the use of voluntary undertakings that remedy competition harms. The clause allows the CMA to accept such undertakings at any stage in the market inquiries process. This includes the acceptance of partial undertakings that address some features causing concerns in a market, but not all. The flexibility to take issues “off the table” by accepting such undertakings, alongside the amendments made by clause 132 regarding narrowing the scope of investigations, will help to provide greater flexibility in the regime. We recognise that voluntary undertakings will not be appropriate in every case. Where they are appropriate, they will drive efficiencies and enable faster results. They will also help to tackle competition problems and any resulting consumer harm as quickly as possible.

Clause 132 introduces schedule 7, which gives new powers to the CMA to conduct trials of certain types of remedies at the conclusion of a market investigation where an adverse effect on competition has been identified. That will help to ensure that any final remedy is suitable and effective. For now, the power to trial remedies will be limited to solutions that relate to the provision or publication of information to consumers. That is the area where trials are most likely to be useful and enables a proportionate approach to introducing this new power. The Secretary of State will be able to expand the scope of remedies to trial in future, subject to the draft affirmative procedure.

Clause 133 gives the CMA new powers to amend ineffective remedies where less than 10 years has passed since the original market investigation. Where the CMA decides that remedies have been ineffective and should be varied, it will be required to consult with affected businesses before reaching a final decision on whether to vary a remedy, and to conclude the variation within six months. In cases where the Secretary of State has accepted or imposed remedies, the CMA will provide advice to the Secretary of State. This new power will be constrained by a mandatory two-year cooling-off period, beginning at the end of a remedy review.

[Alex Davies-Jones]

I will speak briefly to clause 129 before addressing our thoughts on the rest of the group. Labour supports the intentions of the measures in the group, and we have not sought to amend them at this stage.

The removal of the time restriction outlined in clause 129 gives the CMA flexibility and more time to gather evidence to determine when the consultation process should commence. That is something I think we can all get behind and fully support.

Schedule 6 outlines the process by which the CMA will be able to accept voluntary commitments during all stages of a market study and a market investigation. It allows the CMA to accept partial undertakings, to narrow the issues that require further investigation. We see these features as central to a flexible regime that firms want to easily engage with. That must be at the heart of any fully functioning and appropriate regime.

Clause 132 and schedule 7, which are incredibly welcome, provide that the CMA may be required by the Secretary of State to conduct trials of remedies before setting a final remedy package. We recognise that since this is a new regime, the regulator may benefit from such trial remedies, and it is important that the CMA has the legislative teeth and support to do so.

We therefore support the measures in the group. We have not sought to amend them, and we believe that they should stand part of the Bill.

Question put and agreed to.

Clause 129 accordingly ordered to stand part of the Bill.

Clauses 130 and 131 ordered to stand part of the Bill.

Schedule 6 agreed to.

Clause 132 ordered to stand part of the Bill.

Schedule 7 agreed to.

Clauses 133 to 135 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mike Wood.)

Digital Markets, Competition and Consumers Bill (Tenth sitting)

Paul Scully Excerpts

Committee stage
Tuesday 27th June 2023 Public Bill Committees

[The Chair]

With this it will be convenient to discuss the following:

That schedule 8 be the Eighth schedule to the Bill.

That schedule 9 be the Ninth schedule to the Bill.

That schedule 10 be the Tenth schedule to the Bill.

Clause 137 stand part.

That schedule 11 be the Eleventh schedule to the Bill.

Clause 138 stand part.

Government amendments 40 to 44.

That schedule 12 be the Twelfth schedule to the Bill.

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)]

The final clauses in part 2 concern measures that cut across the Competition and Markets Authority’s competition tools. Clause 136 introduces schedules 8 to 10 to the Bill. The Competition Act 1998 and parts 3 and 4 of the Enterprise Act 2002 already allow the CMA to impose civil penalties for non-compliance with information requirements. The destruction of documents that have been required to be produced, and the provision of false or misleading information, are criminal offences, but schedule 8 introduces powers for that conduct to be subject to civil penalties. It also reforms existing civil penalties to ensure that the maximum penalties are set at an appropriate level.

Schedule 9 introduces powers enabling civil penalties to be imposed for breaches of competition remedies. Competition remedies are interim measures, commitments and directions under the Competition Act 1998 and interim measures, undertakings or orders under parts 3 and 4 of the Enterprise Act 2002. Schedules 8 and 9 also enable the Secretary of State and Ofcom to impose penalties if they are given false or misleading information in relation to their functions under the relevant regimes. They also give the Secretary of State the power to impose penalties to enforce compliance with remedies accepted or imposed in relation to mergers and markets with public interest considerations. Civil penalties will be applicable unless the party has a reasonable excuse, and that will be assessed case by case.

The maximum penalty for an undertaking or person who owns or controls an enterprise that is not complying with information requirements is 1% of the business’s worldwide turnover. Daily penalties of up to 5% of worldwide daily turnover will also be available in some cases while the non-compliance continues. For breach of remedies, the maximum penalty is set at 5% of worldwide turnover and daily penalties of up to 5% of worldwide daily turnover while the breach continues. The penalties imposed on other persons, who will generally be individuals, are capped at £30,000, or up to £15,000 daily while the breach continues. The CMA is required to produce statements of policy regarding the operation of its penalty powers. In doing so, it must consult the sector regulators and receive approval from the Secretary of State. Schedule 10 amends the legislation that gives the sector regulators their concurrent competition powers, so that they need not unnecessarily duplicate the work that they need to do to prepare statements of policy.

Clause 137 introduces schedule 11, which amends the Competition Act 1998 and parts 3 and 4 of the Enterprise Act 2002 to make express provision regarding the giving of information notices outside the United Kingdom. The schedule enables the CMA to give an information notice to a person who is the subject of a Competition Act 1998 investigation, or a person who is or has been a party to a merger review. The schedule also enables the CMA to give information notices to third parties with a defined UK connection. Compliance will be enforceable through the civil penalty regime. The schedule also amends provisions on methods of serving documents to reflect modern business practices; for example, it allows service of documents via email.

Government amendments 40 to 44 are technical drafting amendments to schedule 12. The schedule, which is introduced by clause 138, applies appropriate parliamentary procedures to new regulation-making powers created by the Bill, and makes other consequential and technical amendments. I commend the amendments to the Committee and hope that the clauses will stand part of the Bill.

[Alex Davies-Jones (Pontypridd) (Lab)]

Labour supports the intention behind the provisions in this grouping. Of course there should be provisions about the attendance of witnesses, as outlined in clause 135. The same can be said about ensuring that the Bill has sufficient legal powers on civil penalties, should the need for them arise in the regime. The provisions in clause 136 and schedules 8 to 10 are adequate, and we support them. The same can be said for clause 137 and schedule 11, which make provisions regarding the service of documents and the extraterrestrial—sorry, extraterritorial; I know we are talking about digital markets, but we have not reached that far yet—application of notices under part 1 of the Competition Act 1998 and parts 3 and 4 of the Enterprise Act 2002. Of course those laws must work in alignment with the intentions of the Bill. Clause 138, Government amendments 40 to 44 and schedule 12 are all sensible, and part of a rigorous procedure, so we do not oppose them.

Question put and agreed to.

Clause 136 accordingly ordered to stand part of the Bill.

Schedules 8 to 10 agreed to.

Clause 137 ordered to stand part of the Bill.

Schedule 11 agreed to.

Clause 138 ordered to stand part of the Bill.

Schedule 12

Orders and regulations under CA 1998 and EA 2002

Amendments made: 40, in schedule 12, page 284, line 5, at end insert—

“(1A) In subsection (4) omit ‘, 94A(6)’.”

This amendment removes a reference in section 124(4) of the Enterprise Act 2002 to section 94A(6) of that Act, which is being repealed by paragraph 11 of Schedule 9 to the Bill.

Amendment 41, in schedule 12, page 284, line 7, at end insert—

“(aa) omit ‘, 94A(3) or (6)’;”.

This amendment removes a reference in section 124(5) of the Enterprise Act 2002 to section 94A(3) and (6) of that Act, which are being repealed by paragraph 11 of Schedule 9 to the Bill.

Amendment 42, in schedule 12, page 284, line 12, after “section” insert “94AB(9) or”.

This amendment corrects a drafting omission by providing that regulations under section 94AB(9) of the Enterprise Act 2002 (inserted by paragraph 11 of Schedule 9 to the Bill) are subject to annulment in pursuance of a resolution of either House of Parliament.

Amendment 43, in schedule 12, page 285, line 10, after “section” insert “167B(9) or”.

This amendment corrects a drafting omission by providing that regulations under section 167B(9) of the Enterprise Act 2002 (inserted by paragraph 17 of Schedule 9 to the Bill) are subject to annulment in pursuance of a resolution of either House of Parliament.

Amendment 44, in schedule 12, page 285, line 23, at end insert—

“(8A) In subsection (10), for ‘174D’ substitute ‘174A(10)’.”—(Paul Scully.)

Paragraph 26 of Schedule 8 to the Bill inserts a new subsection (10) into section 174A of the Enterprise Act 2002 which replaces the existing provision made by section 174D(10) of that Act (which is being repealed by paragraph 28(12) of that Schedule). This amendment amends the Enterprise Act 2002 to replace a reference in section 181(10) of that Act to the latter provision with a reference to the former.

Schedule 12, as amended, agreed to.

Clause 139

Overview

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Government amendment 59.

Clauses 140 to 142 stand part.

That schedule 13 be the Thirteenth schedule to the Bill.

That schedule 14 be the Fourteenth schedule to the Bill.

Clause 201 stand part.

[Paul Scully]

Part 3 of the Bill provides for two regimes for the civil enforcement of consumer protection law: a court-based regime and a direct enforcement regime for the CMA.

Clause 139 provides an overview of part 3. Clause 140 sets out the scope of the court-based and CMA direct enforcement regimes. First, the regimes are limited broadly to the trader’s acts or omissions that amount to commercial practices—that is, interactions between traders and consumers. Secondly, to be subject to enforcement action, a commercial practice must harm the collective interests of consumers. Thirdly, the scope of the laws that can be enforced remains broadly the same as that which can be enforced under current law. Government amendment 59 ensures that the Bill reflects existing law, namely the Consumer Protection from Unfair Trading Regulations 2008.

Clause 141 provides for an infringing practice to be in scope of enforcement if the trader committing it meets at least one of the following conditions: the trader has a place of business in the UK; the trader carries on business in the UK; or where the infringing commercial practice occurs as part of activities directed to consumers in the UK by any means. Those tests mean that the jurisdictional scope of the current court-based enforcement regime for consumer law is replicated.

Clause 142 limits the application of the enforcement regimes to a commercial practice that breaches an enactment, obligation or rule of law listed in schedules 13 or 14 to the Bill.

Clause 201 gives a delegated power to the Secretary of State to amend schedules 13 and 14—that is, to add, remove or vary the enactments and enforcer authorisations listed in those schedules. The continuing effectiveness of both regimes will depend on their ability to adapt to reflect the evolution of consumer protection law over time. As new consumer protection laws are made and old ones repealed, there must be a mechanism to ensure that they fall into or out of the scope of the enforcement regimes. If the enforcement landscape and the remits of individual enforcers change, there must be a facility to reflect those changes in the statutory framework. The power is subject to the affirmative procedure, so hon. Members will have due opportunity to scrutinise any provisions made under it.

Schedule 13 lists the enactments, obligations and rules of law that may be enforced through the court-based regime, which replaces part 8 of the Enterprise Act 2002 for conduct going forward. The schedule also makes clear which enforcers may enforce each enactment.

Schedule 14 sets out which enactments the CMA may enforce through its new direct enforcement powers. Its scope comprises core consumer protection legislation and a limited number of sector-specific regulations where CMA direct enforcement is desirable. That reflects the CMA’s specific remit and competence to tackle market-level issues that adversely affect consumers or affect their ability to make choices.

--- Later in debate ---

[Paul Scully]

Let me try to cover some of those questions. On microbusinesses and small business, this is effectively a standard definition that, yes, does exclude microbusinesses, because it replicates provisions in the Enterprise Act. The obvious question then is, “How do microbusinesses and small businesses get any redress in these examples?” but the business protection regulations would cover that, and they are not within the scope of this change. However, any of the changes that the hon. Lady requested would largely come under the affirmative procedure.

The hon. Lady also asked whether the Government had consulted widely on these enactments. Although we consulted widely on the Bill when I was a Minister in the Department for Business, Energy and Industrial Strategy, these provisions just restate existing law, so we just wrote that into the Bill, instead of spreading the provisions across statutory instruments. It would therefore not necessarily have been particularly informative to have consulted on them.

The hon. Lady asked about private designated enforcers and how an enforcer might be added to the list. The Secretary of State can by regulations add applicants as private designated enforcers that are able to use the court-based enforcement regime. Again, those regulations would be subject to the affirmative procedure, to ensure appropriate parliamentary scrutiny. Any organisation applying for that status would need to provide evidence to the Secretary of State that it meets the designation criteria in clause 144(1), which would likely include evidence as to its legal status and constitution, a list of directors, examples of where it has protected the collective interests of consumers, and so on.

The Secretary of State will in due course set out more detailed guidance on the evidence and information that applicant organisations should provide when seeking designation. The Government clearly want to guarantee that those designated are able to protect the collective interests of consumers but are prevented from using that privileged position to seek any commercial gain or competitive advantage. They therefore intend that any private designated enforcer that fails to meet the criteria would have its designation altered or withdrawn by the Secretary of State.

Question put and agreed to.

Clause 139 accordingly ordered to stand part of the Bill.

Clause 140

Relevant infringements

Amendment made: 59, in clause 140, page 88, line 18, leave out “trader” and insert “person”.—(Paul Scully.)

This amendment ensures that the definition of “commercial practice” for the purposes of Part 3 of the Bill includes an act or omission by a trader relating to the promotion or supply of a consumer’s product to another consumer.

Clause 140, as amended, ordered to stand part of the Bill.

Clauses 141 and 142 ordered to stand part of the Bill.

Schedules 13 and 14 agreed to.

Clause 143

Enforcers

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clause 144 stand part.

[Paul Scully]

Clauses 143 and 144 set out the public and private bodies that have enforcement powers under the court-based enforcement regime, which we have touched on, and restate and update part 8 of the Enterprise Act 2002.

Clause 143 sets out two categories of enforcer: public designated enforcers and private designated enforcers. The clause also gives the Secretary of State powers to add or remove a public designated enforcer or to amend its entry, and to add, remove or vary the entry of a person as private designated enforcer. These powers are subject to criteria set out in clause 144.

[Neil Coyle (Bermondsey and Old Southwark) (Lab)]

Is there a reason why trading standards is not on this list? It would be the go-to for a consumer or business under existing law, so why is it absent from this list?

[Paul Scully]

As I say, we are essentially bringing across the existing law, but there is no reason why the Secretary of State cannot look at that in time. In clause 144, we are setting out the detail and criteria that must be met when a person who is not a public body is added by the Secretary of State as a private designated enforcer.

[Neil Coyle]

If a consumer believes that they have been sold something that is counterfeit or damaging, which might meet the “detrimental effects” test, where would they go to find out how to address that issue? If a British company has a licence and a trademark, and it sees someone selling fake goods online, thereby undermining the company’s work and trademark in the UK, how does it go about addressing that? In the evidence session, a question was asked about raising awareness of changes to legislation. Could the Minister take a brief moment to explain those two routes to getting change?

[Paul Scully]

If I have got this right, that goes back to the hon. Gentleman’s previous example. Let me correct my earlier comments. I talked about the fact that we are bringing existing legislation across into the Bill. The local trading standards enforcement regime comes under weights and measures, which is specified in the Bill. It is an old term for a modern-day service, and it is encapsulated in the regime. Clearly, businesses will go through the traditional routes to get consumer redress, which can include going through the trading standards regime.

[Neil Coyle]

When witnesses from trading standards sat here two weeks ago, John Herriman and David MacKenzie told us that there needed to be an awareness-raising campaign about the changes. Has the Minister done that, or is that intended to come after the enactment of the Bill? How will that come about?

--- Later in debate ---

[Paul Scully]

A lot of that will be done through our relationship with Citizens Advice and trading standards. When I covered this brief a year ago and held the position currently held by the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), we continually did work for consumers, whether that was on this kind of redress, work through the CMA or work through Citizens Advice and trading standards. Clearly, given that we are changing the regime to make things faster and more effective, we will want to shout about it, because people need to be aware of it, and that will be part of a wider awareness scheme. I cannot give the hon. Gentleman chapter and verse on the campaign, because I am not running it.

[Neil Coyle]

Perhaps rather than chapter and verse, just one sentence would be fine. Will the Government resource Citizens Advice to provide the new information on a whole new legislative change in consumer rights?

[Paul Scully]

As I say, the Government do a lot of work jointly with Citizens Advice to market, campaign on, and raise awareness of these regimes.

[Neil Coyle]

Apologies for coming back on this, but that is not an answer. Citizens Advice came to the Work and Pensions Committee just a few weeks ago to say that its advisers, many of whom are volunteers, face the most dire circumstances of their 80-year history; the circumstances are worse than they were during the second world war. That is its assessment of the financial situation that its bureaux face in trying to help people. Is the Minister saying that Citizens Advice will be resourced to provide the additional information?

[Paul Scully]

I will not conflate this issue with the matter of the resources for Citizens Advice’s broader work, but we already work with Citizens Advice to raise awareness of its work, and will continue to do that together. On any additional duties, clearly we want to make sure that Citizens Advice is as well resourced as it can be. A lot of its work is essentially similar to what is proposed, but we are trying to make it faster for it to offer remediation. That is the whole purpose of this work. We are simplifying and consolidating the criteria that apply under the current court-based regime. That guarantees that those designated as private enforcers will have the independence, competence and expertise required to protect consumers and their independence.

Question put and agreed to.

Clause 143 accordingly ordered to stand part of the Bill.

Clause 144 ordered to stand part of the Bill.

Clause 145

Applications

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clauses 146 to 154 stand part.

Clause 169 stand part.

--- Later in debate ---

[Paul Scully]

Clauses 145 to 154 restate and update provisions in part 8 of the Enterprise Act 2002. They empower consumer enforcers to apply for, and the civil courts to make, court orders to prevent or stop infringing practices.

Clause 145 provides enforcers with the power to apply to court for an enforcement order or an interim enforcement order. An application may be made where a person has engaged in, is engaging in or is likely to engage in an infringing practice, or is an accessory to such a practice. The clause also gives public designated enforcers a new power to apply for the imposition of a monetary penalty for past or continuing infringing practices.

Clause 146 maintains the CMA’s leadership and co-ordination role by empowering it to give directions to other enforcers regarding who can make an application to court.

To ensure applications to court are made only when necessary, clause 147 requires enforcers to engage in appropriate consultation with the suspected infringing party or accessory before making an application for an enforcement order or interim enforcement order.

Clause 148 empowers the court, in response to an application under clause 145, to make an enforcement order against a person it finds has engaged, is engaging or is likely to engage in an infringing practice or is an accessory to such. As an alternative to making an order, the court may accept an undertaking from the infringer or accessory. Orders or undertakings must direct the subject to achieve compliance with the law.

Clause 149 gives the court a discretionary power to include enhanced consumer measures that it considers to be just, reasonable and proportionate in an enforcement order or an undertaking. Enhanced consumer measures, which are defined in clause 213, are steps an infringer or accessory may be required to take to provide redress to affected consumers, ensure compliance with the law, or offer consumers more effective choice. They are vital to ensuring that consumers are compensated and that infringements are remedied.

Clause 150 gives the court a new power to impose a monetary penalty of up to £300,000 or 10% of the recipient’s global turnover—whichever is higher—for past or continuing infringing practices. This provision is at the heart of the Bill’s reforms to consumer protection. It is imperative that there are consequences for breaking UK consumer law to signal that illegal practices will not be tolerated. Recognising that these penalties may be significant, the clause gives the recipient the right to appeal the decision to impose the penalty, its nature or the amount on the merits, in addition to their existing appeal rights.

Clause 151 empowers the court to make an interim enforcement order or accept an undertaking against a suspected infringer or accessory. To exercise the power, the court must consider it expedient that the infringing practice is prohibited or prevented immediately, and a final order must be likely to be granted.

Clause 152 gives the CMA the power to apply to court for an online interface order, or an interim online interface order. It can do that where it considers a person has engaged in, is engaging in, or is likely to engage in, an infringing practice. The reach of online traders and the complexity of the online marketplace has increased. That makes it more critical than ever that the CMA has the power to apply to the court to address infringing content online.

Clause 153 provides for courts to make online interface orders to require changes to online content and interfaces. This could include content removal, displaying warnings, restricting access or deleting a domain name. These powers are available only when the order is necessary to avoid the risk of serious harm to the collective interests of consumers and when there are no other available means within this chapter that would be wholly effective in stopping the infringement.

Clause 154 empowers the court to make interim online interface orders where it is expedient that the infringing practice is stopped or prohibited immediately and a final online interface order would be likely to be granted.

Clause 169 sets out two conditions that must be met before enhanced consumer measures can be included: in an undertaking given to a private designated enforcer, or in an undertaking given to the court or an order made by the court following an application by a private designated enforcer. The clause provides the framework to ensure that where enhanced consumer measures are used by private designated enforcers, it is done appropriately and with the end goal of solely benefiting consumers.

--- Later in debate ---

[Paul Scully]

Let me try to cover as many of those questions as I can. The hon. Lady asked about the possibility of multiple enforcers in process at the same time. In effect, we are restating the existing arrangements, which have been working. They work with the CMA as the gatekeeper, so the CMA would have to be notified when action has been taken—it can filter anything going on in that regard—and it would have to co-ordinate the approach.

On clause 148, and court powers to make orders and penalties, the hon. Lady talked about subsection (9) on whether an undertaking may include a trader publishing it in a corrective statement and whether I, as a Minister, would always expect that to happen. It is discretionary. The enforcer may require that as appropriate.

On the penalties, the £300,000 basically sits in the middle of the pack internationally. If we look at the regimes around the world, where penalties are imposed on individuals, New Zealand’s consumer protection system has £100,000 and Canada’s consumer regime has £450,000. We sit within that, looking at the international comparators.

[Seema Malhotra]

Is the Minister saying that the decision to go with the £300,000 was just because it was in the middle of the pack?

[Paul Scully]

It was a fair balance after looking at international regimes—a fair comparison with similar regimes around the world. Similarly, the 10% penalty is reflected in penalties across other regimes.

The hon. Lady also asked about the CMA being able to enforce and why private enforcers did not have the same powers. Only the CMA may impose penalties. Private enforcers may seek a penalty in court, but the CMA is the only body able to issue penalties directly.

Finally—I have probably missed a couple of questions, but I will review them later just in case—on the interim notes, the hon. Lady made a fair point about stopping the immediate harm. I talked about domain names, as well as removing adverts and such things. It is about being able to act quickly. The whole point about the changes to the regime is to ensure that we make it not only as effective as possible in the modern world, but as fast as possible.

Question put and agreed to.

Clause 145 accordingly ordered to stand part of the Bill.

Clauses 146 to 154 ordered to stand part of the Bill.



Clause 155

Acceptance of undertakings by enforcers

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to debate clauses 156 to 160 stand part of the Bill.

[Paul Scully]

Clauses 155 to 160 restate and enhance provisions in part 8 of the Enterprise Act 2002 that govern the acceptance and enforcement of undertakings by enforcers and the courts.

Clause 155 provides a power for enforcers to accept, vary and release an undertaking from an infringer or accessory. Undertakings may be accepted only where they include provisions that will stop or prevent the allegedly infringing practices. The clause will allow enforcers to continue using co-operative enforcement means, which can lead to faster resolution of consumer harms and reduce the volume of applications for court orders.

Clause 156 enables enforcers to include enhanced consumer measures in undertakings accepted under clause 155. Enforcers must consider those measures to be just, reasonable and proportionate. Clause 157 sets out requirements for enforcers when varying or releasing undertakings that ensure procedural fairness for enforcement subjects. Clause 158 allows for further court proceedings for breaches of undertakings and orders made by the court, giving the court a new power to impose a civil monetary penalty for the breach of an undertaking given to the court.

Clause 159 allows a public designated enforcer to make an application to the court for a consumer protection order if it considers that an undertaking given to it has been breached. If the court is satisfied that that is the case, it may make the requested order, impose a monetary penalty or both. A penalty may be imposed only in cases where the breach was without reasonable excuse.

Clause 160 sets out the types of penalties and the maximum penalty amounts that can be imposed by the court for failure to comply with undertakings given to it or to public designated enforcers. The court has the discretion to impose a fixed amount penalty of up to £150,000 or 5% of global turnover, or a daily rate penalty of up to £15,000 or 5% of global turnover accruing over the days when non-compliance continues, or a combination of both.

[Seema Malhotra]

Clause 155 provides that where an enforcer could make an application to the court for an enforcement order or an interim enforcement order, it may accept an undertaking from the enforcement subject. Subsection (2) sets out the scope of such an undertaking, which is the infringer or the accessory agreeing not to continue or repeat the infringing practice. The Opposition strongly support the clause as it provides necessary flexibility in the consumer protection regime.

We heard during evidence, particularly from the CMA, that the ability for companies to work co-operatively with enforcers to comply with the new regime is an important part of having the fairest and best possible enforcement regime. Where possible, we should ensure that enforcement is done through co-operation. In evidence to the Committee, the CMA said:

“This is not a regime where we want to operate behind closed doors. The whole design of the regime is a participative approach where we will engage with a broad range of stakeholders, businesses and consumers as we consult on designation, design the conduct requirements, and then enforce against them.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 6, Q2.]

As a result, we welcome the clause.

Clause 156 enables an enforcer to include enhanced consumer measures as part of an undertaking from a company, if the enforcer considers them just and reasonable. The enforcer will be obliged to consider the likely benefits and costs of the measures as part of its assessment of their proportionality. In particular, it will consider the costs of the measures themselves to the enforcement subject, as well as the administrative costs. As with clause 149, we welcome clause 156 as a further necessary element of the new consumer protection regime.

Clause 157 sets out the process to be followed when an enforcer proposes to materially vary or release an undertaking that it has previously accepted. Specifically, the process requires the enforcer to give notice to the respondent of its intention to vary or release an undertaking, and to consider any representations made in accordance with the notice. The notice must include the time by which representations may be made to the enforcer. We welcome this clause, which provides clarity for the enforcement regime, the enforcement subject and the consumer in the event of a necessary change. What timescale does the Minister expect the process to work to in most cases, or will it be entirely up to the enforcer? It would help both Parliament and the enforcement bodies to understand the timings envisaged in this process, to be sure that they strike the right balance between being flexible and proportionate and are fair to both the enforcement subject and consumers.

Clause 158 would apply in circumstances where the court makes a consumer protection order against an enforcement subject or a member of its corporate group, or where it has accepted an undertaking. In the event of a failure to comply with the order or undertaking, the clause enables the enforcer that made the original application or any other enforcer to make a further application to the same court. In effect, the court will be able to act in respect of not only non-compliance with an undertaking, but the infringing practice and any related consent or connivance with it by an accessory. The court will be empowered to impose a monetary penalty, regardless of whether the enforcement subject has a reasonable excuse for non-compliance, reflecting the serious nature of breaching an undertaking given to the court. We welcome the clause as a way of providing robust enforcement and punishment mechanisms for failure to comply with the regime, but I would welcome clarification from the Minister on subsection (8). Like clause 150, that subsection provides an enforcement subject who is required to pay a monetary penalty the right to appeal the decision to impose a penalty, its nature or amount on the merits, in relation to their existing appeal rights. I am not sure I completely grasped his previous argument on whether there is a lower appeals standard for those elements of the Bill?

Clause 159, similar to clause 158, sets out the process for when a company fails to comply with an undertaking accepted by the enforcer or the courts. The powers granted to the courts and the process by which the enforcer must apply reflect the provisions in clause 158 and, in the same way, we welcome them. However, the same question is raised about what looks like a lower threshold for appeals than in other parts of the Bill.

Finally, clause 160 sets out further details around the monetary penalties the courts may impose for failures to comply under clauses 158 and 159. We welcome any steps to improve enforcement action through the imposition of monetary penalties and therefore support the clause in principle. Despite that welcome, I must ask the Minister why, when it comes to failure to comply with undertakings, the monetary penalty in the clause, which is £150,000, is less than that in clause 150, where the court can issue penalties of up to £300,000? Similarly, clause 160 refers to 5% of the company’s turnover versus 10% in clause 150. I may not understand some of the Government’s rationale behind those different amounts. What are the reasons for the differences in the thresholds and those lower amounts?

[Paul Scully]

I picked up three questions. The reason the hon. Lady could not follow my argument about appeals from the first bit was because that was the bit I forgot to answer. I will cover that because they relate to the same thing.

Timescales will be up to the enforcer. None is set, but there is a general duty of expedition on the CMA set by the Bill overall. On appeals as they relate to both sections—

[Seema Malhotra]

Is the timescale deliberate, or has the question simply not been fully addressed? It is important to ensure clear expectations of the timing of some of these processes.

[Paul Scully]

I think the reason is the wide range of remediation events that may come before the enforcer to tackle, so they are being given that flexibility, but with an understanding that there is a general rule of expedition on the CMA. That is why we have approached this as we have.

The appeals regime is very different from the bits of the digital markets regime that we talked about earlier. In that case we were talking about a small number of firms with strategic market status, whereas any trader can be subject to this regime. The new monetary penalties that we are introducing are significant. A merits-based appeal is therefore important, because of the range of different-sized companies involved, to ensure fairness and to make sure that the issues involved relate to settled law rather than novel regulations covering digital conduct. Appeals are less likely to be disproportionately lengthy, because the digital market involves a more novel approach, which is why we were worried about extended appeal processes.

As for why thresholds are lower in this part of the Bill than for infringements, infringements, at £300,000, are clearly more serious. What we are talking about here—a breach of undertaking to a court—is still serious, but if someone is stepping down, we believe it is more proportionate to set the threshold at the slightly lower amount of £150,000.

Question put and agreed to.

Clause 155 accordingly ordered to stand part of the Bill.

Clauses 156 to 160 ordered to stand part of the Bill.

Clause 161

Notification requirements: applications

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to consider clauses 162 to 164 stand part.

[Paul Scully]

Clauses 161 to 164 restate and update provisions in part 8 of the Enterprise Act 2002 that enable the CMA to perform co-ordination functions across the consumer enforcement landscape. This will help to prevent duplication of enforcement, which imposes an unnecessary burden on traders and wastes public money.

Clause 161 requires enforcers to notify the CMA of their intention to apply for certain court orders. Clause 162 imposes a requirement on enforcers to inform the CMA of any undertakings given to them. Clause 163 imposes a requirement on trading standards departments in England and Wales to notify the CMA if they intend to start proceedings for an offence under an enactment listed in part 1 of schedule 13 to the Bill. Clause 164 empowers UK courts to notify the CMA of relevant convictions and judgments. Bringing convictions and judgments to the attention of the CMA that it might not otherwise be aware of will allow the CMA to consider exercising its enforcement power under this part of the Bill.

[Seema Malhotra]

It is a pleasure to speak to clause 161 and the other clauses in this group. Under clause 161, as the Minister outlined, enforcers would be able to notify the CMA before applying for an enforcement order, and could only apply for an order 14 days later, or seven days later when applying for an interim order. The powers also allow the CMA to agree to shorten these wait times. The Bill’s explanatory notes explain:

“The policy intent underlying the notification requirement in this clause is for the CMA to be able to perform a coordinating role in relation to enforcement under this Part. The notification requirement will enable the CMA to facilitate the sharing of information between enforcers”,

and that is outlined as mitigating

“the risk of traders facing multiple actions in relation to the same infringing practice”

—a point that we have raised before. We are supportive of the clause and the principle of enabling the enforcement regime and ensuring that it is joined up and efficient in practice. I seek the Minister’s clarification on whether the Government have had discussions with other public enforcers on the provisions in the clause. Is it the case, as he has said before, that the CMA broadly has a co-ordinating role and other powers, and is that carrying on an existing practice and pattern of engagement between those enforcing bodies?

Clause 162 requires enforcers to notify the CMA of the terms of any undertaking given to it under clause 155 and of the identity of the persons giving it. Again, that is important to enable the CMA to fulfil its co-ordination role. As with clause 161, we support the provisions in the clause. Clause 163 introduces provisions requiring local weights and measures authorities, such as local trading standards bodies, to give the CMA notice of its intention to start proceedings for an offence under schedule 13, which we have debated. The authority must also notify the CMA of the outcome of those proceedings.

The policy intent, as explained by the explanatory notes, is to enable the CMA to play its co-ordinated role granted to it in previous clauses. The notes provide a potential example whereby the CMA could inform one authority that another is prosecuting, or that an enforcement order has been granted in respect of the same infringing practice. That is an important part of the co-ordinating role because it demonstrates that it is not just about the CMA being informed, but the CMA ensuring that other relevant enforcers are informed of what other enforcers are doing. That is then a streamlined and efficient process that does not hit the enforcement subject more than once on the same matter.

Clause 164 confers a power on the courts to notify the CMA of convictions and judgments it makes that may not have been bought to its attention. That is a common-sense provision. However, I would welcome further clarification from the Minister specifically on subsection (2). It states that the court

“may make arrangements to bring the… judgment to the attention of the CMA”.

We know the strain and pressures that our court system is under. I ask the Minister why the provision introduces a power as opposed to a duty. If the CMA is to have, as is intended, a co-ordinating role where it is in the picture on all the relevant information related to those enforcement subjects, are there any circumstances in which the Government believe the courts may not need to inform the CMA? In that case, could the Government clarify what those circumstances might be, or where they might consider it not necessary for the CMA to have this information if it considers it to not be relevant to the function it carries out?

We need to remember that this is not just a function being carried out for today; this is where the CMA will be able to have a record of enforcement measures, any breaches and any other information that would be relevant to any considerations in the future. I would be grateful to understand from the Minister why that important and common-sense provision is a power as opposed to a duty.

[Paul Scully]

The CMA being able to issue permission to bring enforcement procedures is consistent with the position under part 8 of the Enterprise Act 2002. We respect and understand the expertise of all enforcers, including sector regulators, so the CMA is playing a co-ordination role to effectively share information between enforcers, and guarantee that enforcement actions are not duplicated. That will mitigate the risk of a trader facing multiple actions for the same infringement practices. The Government have discussed the provisions with other enforcers, and the CMA already has memorandums of understanding with other enforcers.

On the question of why there is a new reporting requirement in clause 164, actually it is not new. It was already established under part 8 of the Enterprise Act. Again, it ensures that the CMA can consider exercising its enforcement powers where appropriate. It only gives the court the power to notify judgments and convictions to the CMA. It is already there under the Enterprise Act, and that is why we have brought it in here.

[Seema Malhotra]

Perhaps I could put the point about power versus duty to the Minister again? I understand that many aspects of the Bill have been brought together from other areas of legislation. We have to ask the question within the context of the new regime, which is different to how the situation was prior to the legislation coming in, whether that is worth reviewing. We are talking about a regime in which the CMA is now a co-ordinating body, in which there may be different ways action can be taken and where information from the court could be material. There is not as much of a duty to pass that information on under clause 164, but that could be relevant information that is not there for a matter in the future.

I again draw the Minister’s attention to the massive backlog we have in the courts, and the administrative challenges with some of those procedures. The best intentions may not be a reality, and that may then have consequences for the regime we are trying to set up to be as robust, predictable and efficient as possible.

[Paul Scully]

I take the hon. Lady’s point, but I would say that it has been directly transposed. It is a power not a duty in the Enterprise Act, and that is where we have worked from.

[Neil Coyle]

There is an alternative. There was a suggestion from trading standards representatives of a take-down power, which would bypass the longer route that adds an administrative burden and places the onus on businesses and individuals. Can the Minister explain or furnish us in writing as to the rationale for not seeking the take-down power and a more immediate means of addressing a problem?

[Paul Scully]

I or the relevant Minister will certainly write to the hon. Gentleman on that basis.

Question put and agreed to.

Clause 161 accordingly ordered to stand part of the Bill.

Clauses 162 to 164 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mike Wood.)

Digital Markets, Competition and Consumers Bill (Seventh sitting)

Paul Scully Excerpts

Committee stage
Thursday 22nd June 2023 Public Bill Committees

[The Chair]

With this it will be convenient to discuss the following:

Government amendment 12.

Clauses 45 to 54 stand part.

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)]

To create self-sustaining and dynamic competition in UK digital markets, we must address the sources of SMS—strategic market status— firms’ substantial and entrenched power in digital markets. Clause 44 gives the digital markets unit the power to address competition problems in digital markets through pro-competition interventions, which the DMU can make where factors relating to a digital activity undertaken by a SMS firm prevent, restrict or distort competition in that digital activity. That is known as an adverse effect on competition. The concept is already used for market investigations under the Competition and Markets Authority’s existing markets regime. Government amendment 12 is a technical amendment relating to PCI investigations.

Turning to clauses 45 to 54, PCIs are fundamental to the new digital markets regime. They will address the root causes of market power that can lead to one or two large firms dominating, to the detriment of consumers and businesses in the UK. Clause 45 empowers the DMU to open a PCI investigation into suspected competition problems related to designated digital activities.

Clause 46 describes the process relating to PCI investigations. Under clause 47, the DMU will be required to carry out a public consultation on a proposed PCI decision before concluding its investigation and giving notice of final PCI decisions. Clause 48 provides the procedure for the DMU to give notice of its decision when concluding a PCI investigation. When the DMU decides to make a PCI, it must do so within four months of the PCI decision.

Pro-competition orders, set out in clause 49, are the means by which the DMU can require a firm to take, or refrain from taking, specific actions. That includes orders on a trial basis. They are vital in converting the DMU’s PCI decision, from clause 48, into an operationable remedy.

To effectively address the sources of competition problems in digital markets, PCIs should be iterative and targeted, so the DMU will be able to replace pro-competition orders. That is provided for in clause 50, which will allow the DMU to initially apply lighter touch remedies and then assess their effectiveness before introducing stronger measures if necessary.

Clause 51 gives the DMU the power to revoke a pro-competition order where it deems it inappropriate to vary the order through replacement, or where the order has addressed the competition problem and is no longer required. That ensures that PCIs remain effective and proportionate and can respond to changes in the market.

Clause 52 provides that before making or revoking a pro-competition order, the DMU must carry out a public consultation. The DMU will be under both a general and specific duty to monitor and review pro-competition orders provided for in clause 53.

Finally, SMS firms should be able to offer commitments to the DMU to propose a solution to a competition problem. That supports a participative approach to regulation, which is set out in clause 54.

[Alex Davies-Jones (Pontypridd) (Lab)]

We will of course look properly at the issue of consumer protections later in the Bill, and my hon. Friend the Member for Feltham and Heston has a number of contributions to add on that topic.

Clause 44 is important in putting consumer rights at the heart of the Bill, as it enables the CMA to remedy competition problems by making direct interventions. In contrast to conduct requirements, PCIs are interventions by the CMA to remedy an adverse effect on competition by addressing the root causes of an undertaking’s entrenched market power. The CMA will need to take into account the benefits that UK users may get from the factors having an adverse effect on competition.

We note that there is no defined list of PCI remedies, but that they may include behavioural and structural remedies. Will the Minister update us on his assessment of the value of adding a list of potential remedies to the Bill? Some companies we have spoken to feel that that would be helpful to understand just how these interventions will work in practice. However, we believe that the PCI is an exceptionally useful tool and a big advantage over the EU Digital Markets Act, as it will be able to go further than the conduct requirements and address the root causes of entrenched market power.

As it stands, the Bill outlines that the CMA may make a PCI where it considers that a factor or combination of factors relating to a relevant digital activity is having an adverse effect on competition, also known as the AEC test. The AEC test is in line with the legal test in the existing market investigation regime; by contrast, the digital markets taskforce recommended an AECC test—an adverse effect on competition or consumers test—enabling the CMA to address consumer harm without always needing to show that competition has been undermined. Similar to a supplementary duty to have regard for the interests of citizens, that would give the DMU broader scope to intervene beyond its traditional focus on competition. Can the Minister outline exactly why the AEC test was chosen over the AECC test?

Labour supports the intention behind Government amendment 12, which confirms that the CMA will be able to begin a PCI investigation into a designated firm, even when it has previously made a decision not to do so. We see that as integral to the CMA’s powers, and we will support the amendment.

We see clause 45 as fleshing out the legal powers that the CMA will need to draw on in the event of a formal investigation. We welcome clarification that the CMA will form its initial view of the competition problem on the basis of available evidence, such as that arising from complaints submitted by third parties, from the CMA’s market studies or from referrals of information from other regulators. Labour has heard from some tech companies that although pro-competition interventions are viewed as a major advantage of the UK’s regime, companies are concerned about the broader effects they could have on markets, and urge for thorough consultation and for a graduated approach to the potential severity of the intervention. I am therefore keen to hear the Minister’s thoughts about this issue, as it is important for all concerned that we get some clarity.

Clause 46 is an important clause for designated undertakings that may find themselves subject to a PCI investigation. We welcome provisions that ensure the CMA will be under a duty to publish a summary of the PCI notice as soon as it is able to do so. The Minister will not be surprised that we are keen to understand more about that and what it will look like in practice. Where exactly will the summary be published? Will it be made available to others who wish to view it? We welcome subsection (2), because it is important that the CMA has the power to update a PCI investigation notice when it needs to do so. That is outlined in subsection (3), which is an important point to note.

Lastly, clause 46(4) places a duty on the CMA to publish a notice of investigation as soon as practicable. Again, can the Minister confirm whether that will be public? There is a theme in my questions to the Minister about the public transparency of such documents. Naturally, we understand that some information will obviously need to be redacted, but there is plenty of value in improving transparency.

We welcome the principles in clause 47, which we have long called for, because the regime will be effective only if consultation is truly at its heart. However, we have concerns about how the conduct requirements and PCIs will run alongside one another. In the Bill’s current drafting, it is unclear by what metrics the CMA will determine whether a CR or PCI is appropriate, and it will have discretion to choose. We could very well find ourselves in a position whereby the CMA will generally implement a CR first and see whether it is having an impact, before beginning a PCI investigation. If the CMA chooses to focus on CRs initially, it could allow SMS firms to maintain much of their entrenched market power before taking action. To improve the effectiveness of the regime, one potential option that has been raised with us is for the CMA to be required to consider whether a PCI investigation and PCI remedy may be more effective early on, or complementary to a CR, when constructing a CR. I would be grateful if the Minister could give us some thoughts on that and explain whether he will be able to instruct the CMA on which one would be best to carry out first.

Other issues that have been raised with us relate to clarity on a number of points, and I hope the Minister can provide that clarity. First, can PCIs be introduced only after conduct requirements have been imposed, rather than the alternative that is alongside them? Secondly, what is the exact purpose of the revocation process? Does it mean that PCIs cannot be adapted while they are in effect, as indicated in the Government’s consultation process, and that the CMA would have to restart the process—meaning there would be an investigation, a consultation, a decision and then an order—before introducing a new PCI? It feels like that could cause delay and uncertainty in the regime, which could ultimately impact its effectiveness. I look forward to hearing the Minister’s thoughts on those specific points.

Labour sees clause 48 as fairly standard in outlining the procedure for concluding a PCI investigation. It is important that the process is outlined on the face of the Bill, and we welcome confirmation of the length and period of investigation, and of the period in which the CMA has to consult and issue a pro-competition order where required. Those are important timeframes, which Labour supports.

We note clause 48(7), which states:

“As soon as reasonably practicable after giving a notice under subsection (1) or (6), the CMA must publish a copy of the notice.”

Again, that is a key point that I want to prod the Minister on. What is his assessment of

“as soon as reasonably practicable”?

What will that be and who will the CMA be publishing the statement for?

We welcome clause 49, which outlines the way in which pro-competition orders will work in practice. In relation to clause 50, I would be grateful if the Minister could confirm whether the replacement of a PCI as outlined in the clause will require revocation, as set out in clause 51, and a fresh process involving an investigation, consultation, decision and order? Alternatively, will the process be to revise an existing PCI and will that be sped up? We do not want any delay in that happening. That is the point I am trying to make, so will the Minister elaborate on what evidence is needed to justify a revocation of that kind?

I hope the Minister will respond to my points. We support the broad intentions of the remaining clauses in this group and are therefore happy to support their full inclusion in the Bill.

[Paul Scully]

rose—

[The Chair]

Order. I am a bear of little brain. If somebody does not stand, I do not know that they want to speak.

--- Later in debate ---

[Seema Malhotra]

I just wanted to make a general point in relation to the DMU’s powers, because they are wider and there is a question about mechanisms to address the scrutiny and accountability of DMU decisions. We support the PCI framework and the flexibility, but on the way in which decisions can be made about PCI notices, the changes to allow greater flexibility and changes to orders made, there is the potential for a lot more flexibility, but there is the balance of certainty and scrutiny. Can the Minister address how there will be greater opportunity for scrutiny, transparency and accountability over the DMU’s use of the greater powers?

[Paul Scully]

I will try to cover as many of those points as I can. On the difference between AEC and AECC and adverse effects on consumers and competition, that is effectively built into the regime, anyway. The DMU’s objective is to promote competition for the benefit of consumers, and that must shape the design of all its regulatory interventions, including for PCIs. Under the current drafting, the DMU is able to address the detrimental effects of a competition problem on consumers. The issue is terminology rather than anything else.

The hon. Lady asked about how PCIs will be published. They can be introduced after CR and can be published alongside them, because speed is important, which it is important to highlight. She also asked about where PCIs will be published, which I can summarise. A PCI notice launches an investigation and a summary of that will be published, with the firm having had the full notice.

[Seema Malhotra]

Will the Minister confirm how soon that will happen? There is a four-month timeline after that full consultation and then the pro-competition orders or alternatives. In terms of the public—

[Paul Scully]

That is a fair point. The best I can say is as soon as is practicable. I talked about the fact that speed is important, but it really depends on the complexity of the case and what needs to be in the summary, how quickly it will take to summarise and so on. There is a drive to get on with this as quickly as possible. The theme throughout the entire framework of the Bill is that detriment happens at speed in digital markets and we have to crack on and get those PCIs in place should they be required.

The decision notices for PCIs will go to the firm first. The full document will be published and an order will be introduced. A summary will be published. Should the PCI be replaced, an order revoked or should there be an acceptance of varying commitments on a PCI, the full document will be published.

The CMA can consult on an order as part of the earlier PCI decision, so the four months may not be necessary. Those timetables are there as a maximum, depending on the complexities.

[Seema Malhotra]

I would like to pick up on the point about pro-competition orders and the consultation. Clause 49(4) states:

“The provision that may be made in reliance on subsection (3) includes provision requiring an undertaking to act differently in respect of different users or customers (and such provision may be by reference to a description of users or customers, to absolute numbers of users or customers, or to a proportion of the undertaking’s total number of users or customers).”

That appears both broad and specific. Interested parties may want clarity, so is it expected that that detail will be discussed and consulted on?

[Paul Scully]

The way that consultation is done depends. If there is something starkly obvious to everyone, it may be that only minimal consultation is needed. If it is more technical, it will need to be more in depth, which is why we are not being prescriptive from the centre. It is up to the DMU to consider this.

The hon. Lady also asked about a list of PCIs and potential PCIs. It is very much for the DMU to address the recourse to a designated firm’s market dominance. Examples of PCIs that could be introduced include choice remedies that will allow users to make an active choice in the digital services that they use. PCIs could, for example, compel a designated firm to present users with different options for their preferred web browser, and we heard evidence on that from Gener8. Instead of defaulting to a particular browser, PCIs could include interoperability remedies that will enable users to use goods and services from different providers as opposed to being locked into one provider. For example, the DMU might require users of different instant messaging services to be able to communicate with one another.

The DMU could introduce data portability remedies, which would make it easier for users to switch providers. Such remedies could, for example, require a designated firm to make it possible for its users to download and export data to a new phone with a different operating system. PCIs could include data access remedies, which would level the playing field by requiring designated firms to share their data with competitors, which could include the data that large search engines have on users’ search history. Separation remedies would require designated firms to run different aspects of their businesses independently, so that dominant firms cannot use market power in one part of the business to gain power in another, which might involve requiring data stores for different services to be separated. It could require the firm to sell off a part of its business altogether.

Those are examples, but that was not a prescriptive or exhaustive list of PCIs. They are very much up to the DMU to frame depending on the technology and the market dominance that they are trying to remedy.

[The Chair]

The hon. Lady is looking at me in a funny way.

--- Later in debate ---

[Paul Scully]

Yes, that is the case.

Question put and agreed to.

Clause 44 accordingly ordered to stand part of the Bill.

Clause 45

Power to begin a PCI investigation etc

Amendment made: 12, in clause 45, page 25, line 18, at end insert—

“(3) The CMA may begin a PCI investigation in relation to a designated undertaking even if it has previously made a decision not to make a PCI in respect of that undertaking.”—(Paul Scully.)

This amendment confirms that the CMA can begin a PCI investigation in relation to a designated undertaking even if it has previously made a decision not to make a PCI in respect of that undertaking.

Clause 45, as amended, ordered to stand part of the Bill.

Clauses 46 to 54 ordered to stand part of the Bill.

Clause 55

Duty to report possible mergers etc

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clauses 56 to 59 stand part.

That schedule 2 be the Second schedule to the Bill.

Clauses 60 to 66 stand part.

[Paul Scully]

These clauses comprise chapter 5, “Mergers”, and schedule 2 provides further detail needed for chapter 5 to function smoothly.

Clause 55 establishes a requirement for SMS firms to report possible mergers involving them that have the potential to harm competition in the UK to the CMA before they can be completed. Unlike most merger regimes, at the moment there is no obligation in the UK to notify mergers to the CMA, but firms may choose to voluntarily notify the CMA of a merger in order to receive a binding decision from the CMA on it. In digital markets, this is a very different thing, because of the speed with which it can happen and the entrenchment of power, which we have discussed at length. That is why it is important that the CMA has the opportunity to review potentially harmful mergers involving SMS firms before it is too late. This light-touch reporting requirement is designed to focus on only those possible SMS firm mergers with the potential to give rise to competition concerns.

The mergers will need to be reported only if three conditions are met, such as when the SMS firms will obtain qualifying status through holding shares or voting rights in a target firm that is a UK-connected body corporate. I will set out further detail on the former when I explain clause 56. The latter means any body corporate that carries on activities in the UK or supplies goods or services to the UK, or which has a subsidiary that does so. The consideration provided by the SMS firm for the holding of shares or voting rights must also be at least £25 million. Similar conditions will also apply for the reporting of possible mergers involving an SMS firm participating in a joint venture. When an SMS firm is part of a larger corporate group, the requirement to report will instead apply to all the bodies corporate that make up the group. In those situations, the question will generally be whether the group as a whole will meet the conditions I have set out. When I say “an SMS firm” in debates on this chapter in part 1 of the Bill, it means an SMS firm or any larger corporate group it is part of.

The reporting process should take a maximum of 10 working days. Once a report has been submitted, the CMA will have up to five working days to determine whether the report is sufficient and must therefore be accepted. Following acceptance, the CMA will have a further five working days to review the information in the report before the possible merger can be completed. If the CMA identifies a reported merger as potentially problematic, it can use its powers under the general merger regime to investigate the merger as it would any other type of merger.

Clause 56 defines qualifying status. Under the merger regime, control over a target firm or joint venture vehicle must be acquired or increased for a merger to take place. That is for the CMA to determine on a case-by-case basis. One of the ways control can be exercised is through a shareholding or through voting rights. In order to capture acquisitions of control over target firms based on shares or voting rights, clause 56 provides that SMS firms will acquire qualifying status in a target firm when the percentage of the shares or voting rights they hold in the firm crosses any of the thresholds in subsection (1)—that is, when the percentage moves from less than 15% to 15% or more; from 25% or less to more than 25%; or from 50% or less to more than 50%. These thresholds have been chosen specifically to capture circumstances in which different levels of control recognised under the merger regime are likely to be acquired by an SMS firm.

Clause 57 sets out what is meant by the “value of consideration”, which is necessary to determine whether a possible merger meets the £25 million threshold for reporting set out in clause 55. Clause 58 places several requirements on the CMA with regard to the notice it is required to make, setting out the parameters of the report that SMS firms will be required to provide to the CMA about a possible merger. The clause requires the CMA—to pre-empt a possible question—to publish online a notice setting out what information must be included in a report and what form a report must take. We decided, in subsection (2), to limit what the CMA may require in the report to only that information considered necessary to decide whether to initiate a merger investigation or make a hold separate order under the general merger regime while an investigation is ongoing.

Clause 59 sets out further detail of when and how reporting requirements will apply. Schedule 2 provides further detail as to when interests like shareholdings and rights, such as voting rights, are treated as held in a target firm or joint venture vehicle for the purposes of the duty to report a possible merger in clause 55. Clause 60 places time limits and procedural requirements on the CMA once it has received a report. Clause 61 makes it clear that a reportable event must not take place until the reporting requirements set out in the chapter are met. Clause 62 clarifies when a possible merger is considered as taking place for the purposes of the reporting requirements. Clause 63 permits SMS firms to authorise third parties to act on their behalf—specifically, to give a report to the CMA about a possible merger and to receive the notice of acceptance or rejection from the CMA. In general, those third parties are likely to be legal representatives.

Clause 64 sets out the review process for non-penalty decisions made by the CMA in connection with the chapter. We will talk about appeals and the wider area later on, but if a person is aggrieved by the decision made by the CMA in connection with a reporting requirement that is not a penalty decision, they can apply to the Competition Appeal Tribunal for a review of that decision. The Competition Appeal Tribunal will apply the same principles as would be applied by a court on an application for judicial review. A full merits appeal process will apply to penalty decisions made by the CMA in connection with this chapter, as it does to penalty decisions under the wider merger regime.

Clause 65 provides the Secretary of State with powers to make regulations in relation to the duty to report. It also sets out which procedure-specific regulations are subject to that. It is appropriate that the Secretary of State has the power to make regulations on the duty to report. Operational experience may reveal that the criteria needs to be changed for the reporting process to continue to function effectively. Clause 66 places a duty on the CMA to monitor and enforce the merger reporting requirements. It goes no further than requiring the CMA to consider exercising its investigative and enforcement powers where it is aware of a basis for doing so.

[Alex Davies-Jones]

I am grateful to the Minister for outlining chapter 5 and we welcome the provisions. None of us want to see potential loopholes or designated undertakings being able to avoid their responsibilities thanks to a merger, so we see clause 55 and many of the clauses that follow in this chapter as being eminently important. More specifically, the clause sets out the circumstances in which designated undertakings or, where designated undertakings are part of a group, group members—see clause 114—will have a duty to report a possible merger involving a reportable event to the CMA before it takes place.

We welcome the clarification that there will be two categories. The first is concerned with designated undertakings or groups reaching certain percentage thresholds of the shares or voting rights held in certain bodies corporate with links to the United Kingdom. The second is concerned with designated undertakings or group members forming certain joint venture vehicles that are intended or expected to have links to the United Kingdom. We recognise the role of a minimum value requirement, which will also apply in relation to the consideration provided for the relevant shares or voting rights, or in relation to the formation of the joint venture vehicle.

We see the clause as important in clarifying where the line will be drawn for possible mergers in relation to this regime, and agree with the drafting, which sets the value of the merger as being at least £25 million. We feel that is a fair value, so we support the clause and have not sought to amend it at this stage. The same can be said for clauses 56 to 59. As we know, one of the strategic recommendations of the Digital Competition Expert Panel’s Furman report suggested that legislation adapting the merger control rules—so that the CMA could more effectively challenge mergers that could be detrimental to consumer welfare—was required. So we see clause 56, which sets out the circumstances in which a designated undertaking or group will have qualifying status in relation to a UK-connected body corporate or joint venture vehicle, as being vital to ensuring that mergers are covered by this legislation more widely.

--- Later in debate ---

Turning to clause 59 and schedule 2, we see these as reasonable and sensible, so we have not sought to amend them. Similarly, we support clauses 60 to 66, which broadly relate to the duties around report timings. We have not sought to amend them at this stage and they should stand part of the Bill.

[Paul Scully]

Regarding the hon. Member’s questions about the Secretary of State having the powers to amend things, I cannot give her an example but it very much goes back to what I was saying in a previous debate, namely that digital markets change really quickly and it is just so that the Secretary of State has the power to amend things quickly and so that the reporting criteria may develop and evolve over a period of time, so that they can remain relevant in the long term.

Clearly, we have safeguards in the process there, so the Secretary of State will need to consult the CMA. This is not just an isolated decision-making process; the CMA has expertise in this area, but it will be for the Secretary of State to focus on the decision. The CMA will be able to provide the expert advice, ensuring that amendments can correctly reflect the changing landscape, and Parliament will clearly need to approve any amendment.

Regarding the notice that the hon. Member was talking about, again it is appropriate for the CMA to set out by notice what a report must contain. The CMA has considerable expertise in the assessment of mergers, so it is well-placed to decide what information it needs to make an assessment. So, the approach that we are suggesting here is consistent with the wider merger regime, whereby the CMA sets out what information should be included in a voluntary merger notification.

Question put and agreed to.

Clause 55 accordingly ordered to stand part of the Bill.

Clauses 56 to 59 ordered to stand part of the Bill.

Schedule 2 agreed to.

Clauses 60 to 66 ordered to stand part of the Bill.

Clause 67

Power to require information

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clause 68 stand part.

[Paul Scully]

Clearly the DMU needs to have access to the correct information to ensure its work is evidence-based. Clause 67 allows the DMU to request information it needs to either exercise, or decide whether to exercise, any of its digital markets functions. That includes information in any form, such as data, internal documents and forecasts. The clause also includes new powers to investigate the outputs of algorithms by requiring SMS firms to generate information and to carry out tests and demonstrations of technical processes.

Clause 68 allows the DMU to require that an SMS firm names a senior manager to be responsible for ensuring that the firm complies with a specific information request. The DMU will be able to impose a penalty on the named senior manager where they have failed, without reasonable excuse, to prevent the SMS firm from failing to comply with the request for information. Personal liability will help to embed a culture of compliance within strategic market status firms.

[Alex Davies-Jones]

Clause 67 is an important starting point as it gives the CMA powers to require the provision of information from designated undertakings and any other person believed to hold material needed for it to operate the regime. That includes any information in any form, which might include data, correspondence, forecasts and estimates.

We welcome the clarity that the CMA will be able to specify the format in which the information must be provided. That is a very important point that we feel will be critical to ensuring timely responses from designated undertakings. We have seen the dangers of what can happen when we allow these big firms to overwhelm with the provision of data in complex formats and in incredible quantities in legal proceedings around online safety, and we do not want to see the same negative consequences here.

We welcome subsection (4), which, importantly, includes provisions that will enable the CMA to compel evidence collection by requiring a person to collect and retain information that it may not otherwise collect and retain. In addition, subsection (7) specifies that the CMA can require the recipient of an information notice to give the CMA information, either in physical or electronic form, which is located outside the UK. That is an important point worth touching on.

We know that these SMS firms have a global reach. We do not want to be in a position whereby the CMA cannot access information just because it is held overseas. This is a sensible and crucial clause to ensure the CMA has the appropriate teeth and power to act when it needs to.

We are also pleased to see clause 68 included in the Bill, which references a point that Labour have repeatedly called for in other legislation. Without these provisions and the ability to name an individual, big companies will typically not take their responsibilities seriously. We therefore welcome confirmation that a penalty may be imposed on a named senior manager of a designated undertaking that fails to comply with an information notice—a point we will address later, when we discuss clause 85.

Ultimately, we feel that the provisions are in line with other regulated sectors, principally financial services, where regulation imposes specific duties on directors and senior management of financial institutions, and those responsible individuals face repercussions if they do not comply.

I feel we have lots to learn here from looking to other regulated industries. For example, in financial services regulation, the Financial Conduct Authority uses a range of personal accountability regimes, including the senior managers and certification regime, which is an overarching framework for all staff in financial services industries. The regime aims to

“encourage a culture of staff at all levels taking personal responsibility for their actions and make sure firms and staff clearly understand and can demonstrate where responsibility lies”.

If only we could have that approach to other legislation on online safety. We therefore support clause 68—we see it as standard—and have not sought to amend it at this stage.

Question put and agreed to.

Clause 67 accordingly ordered to stand part of the Bill.

Clause 68 ordered to stand part of the Bill.

Clause 69

Power of access

[Paul Scully]

I beg to move amendment 13, in clause 69, page 39, line 18, after “access” insert “business”.

This amendment limits the power of the CMA to require access to premises so that it may be used only in relation to business premises.

[The Chair]

With this it will be convenient to discuss Government amendments 14 to 24.

[Paul Scully]

Government amendments 13 to 24 remove possible ambiguities about the scope of the power of access, and of a firm’s duty to co-operate with a skilled person, so that they are aligned with similar Digital Markets Unit information-gathering tools. Clause 69 allows the DMU to require firm-led tests or demonstrations under the DMU’s supervision. That backstop power of access will be available when a strategic market status firm fails to comply with an information notice or with the duty to assist a skilled person. Clause 77 introduces a power for the DMU to appoint a skilled person to produce a report on an aspect of an SMS firm, or a firm subject to an SMS assessment. There will be a duty on the firm to co-operate with the skilled person, including by giving them access to their premises.

These essential clauses ensure that the DMU has the right powers, but it is important to ensure that those powers are proportionate and appropriately constrained. Government amendments 13 and 16 limit the DMU’s power of access to business premises, rather than allowing access to all premises. That ensures that the power cannot be interpreted as allowing access to domestic premises and maintains consistency with the restrictions on the DMU’s powers of entry. Government amendments 17 to 20 and 22 are consequential.

[Neil Coyle (Bermondsey and Old Southwark) (Lab)]

The Minister will have heard the witnesses last week, including witnesses from trading standards. Will the amendments in this grouping be replicated to address the concerns of trading standards and ensure equivalence across the regulatory powers?

[Paul Scully]

We listened to the evidence and considered that, and we will reflect on that in our further consideration of the Bill. It was interesting to hear the evidence last week.

[Neil Coyle]

Is the Minister suggesting that the equivalent powers to access information, which were specifically addressed last week by trading standards representatives, will be covered by this legislation?

[Paul Scully]

I am saying that the amendments that we are discussing in this grouping are specifically about domestic and business premises. I am just keeping to the narrow scope of the amendments. As for the wider evidence that we heard last week, we will clearly reflect on that and work out any other parts of the legislation; I was being really specific about what these amendments do.

Government amendment 21 limits a firm’s duty to give access to a skilled person, so that it is access to business premises only, to ensure consistency with other DMU and wider CMA investigatory powers. Government amendment 14 to clause 69 limits the power of the DMU to access persons to a power to access individuals, and Government amendment 23 limits the firm’s duty to assist a skilled person to a duty to assist a skilled individual. Those changes clarify the scope of the power and the duty, as a person includes a legal person, such as a company. The clauses already specify that the DMU or skilled person can require access to a designated firm’s premises, equipment, services and information. Limiting access to individuals—or natural persons—is a more accurate reflection of the policy intention of the clauses.

Finally, Government amendments 15 and 24 clarify that the DMU may access individuals or business premises only in the UK, and similarly that a firm’s duty to assist a skilled person by giving them access applies only to individuals and business premises in the UK. The DMU’s powers of entry allow entry to domestic premises only under a warrant, under clause 73. Its interview and entry powers may also be exercised only in respect of individuals and premises in the UK. Government amendments 13 to 24 will preserve those important limits on the DMU’s powers and ensure consistency across the DMU’s information-gathering toolkit.

[Neil Coyle]

I am hoping for clarity. I think there were attempts to get information to the Minister when I intervened before. Last week, trading standards specifically asked for the powers that are being discussed in these amendments. I appreciate that this grouping is for a different regulatory body, but does the Minister aim to set up equivalence for regulatory bodies, or is the new body to have greater powers than an existing body with a similar purpose?

[Paul Scully]

I am trying to remain specific, rather than widening the discussion to other regulatory issues, because the provisions must be specific to the matter that we are discussing; I think I am correct in saying that. Effectively, this grouping tries to narrow down the enforcement powers; it clarifies that they relate to business premises, and apply within the UK, rather than extraterritorially. That is why I hope that hon. Members will support these Government amendments.

--- Later in debate ---

[The Chair]

We will wait for that treat.

[Paul Scully]

To answer the one easier question that the hon. Lady asked, I can assure her that we will not weaken the provisions.

Amendment 13 agreed to.

Amendments made: 14, in clause 69, page 39, line 18, leave out “persons” and insert “individuals”.

This amendment limits the power of the CMA to require access to persons so that it may be used only in relation to persons who are individuals.

Amendment 15, in clause 69, page 39, line 33, at end insert—

“(5) The powers conferred by this section are not exercisable in relation to premises, equipment or individuals outside the United Kingdom.

(6) But the powers conferred by this section are exercisable in relation to information and services whether stored or provided within or outside the United Kingdom.”

This amendment limits the power of the CMA to require access to premises, equipment or individuals so that it may not be used to require access to premises, equipment or individuals outside the United Kingdom.

Amendment 16, in clause 69, page 39, line 33, at end insert—

“(7) In this Chapter, ‘business premises’ means premises (or any part of premises) not used as a dwelling.”—(Paul Scully.)

This amendment is consequential on Amendment 13 and moves the definition of “business premises” from clause 72 to clause 69.

Question proposed, That the clause, as amended, stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 70 to 76 stand part.

[Paul Scully]

Clause 69 is a backstop power enabling the Digital Markets Unit to supervise firm-led tests and demonstrations, either at a firm’s premises or remotely. It will be available only in limited cases in which an SMS firm has not complied with an information notice or a duty to assist a skilled person. It provides an efficient way for the DMU to get the information that it needs without placing an undue burden on firms.

Clause 70 allows the DMU to require an interview with any individual in the UK with information relevant to a digital markets investigation. That will enable the DMU to gather vital evidence that is held by individuals with relevant knowledge, rather than in digital or physical forms. Clause 71 protects individuals who are compelled to give testimony under clause 70 from self-incrimination. It limits the circumstances in which the DMU can use an individual’s interview statement as evidence against them in a criminal prosecution. Clause 72 allows the DMU to enter business premises without a warrant for the purposes of a breach investigation. It ensures that the DMU can collect information that is being withheld by an SMS firm that is accessible only on the premises. Without that power, there would be greater risk that a firm could destroy or interfere with material relevant to an investigation.

Clause 73 allows the DMU to enter business and domestic premises for the purposes of a breach investigation, after obtaining a warrant from the High Court, Court of Session or Competition Appeal Tribunal. The DMU must also establish that a firm has failed to comply with previous information requests, or that no other powers would secure the necessary evidence, and establish reasonable suspicion that the information is relevant to the investigation. Clause 74 contains supplementary requirements for how the DMU must exercise its power to enter premises under a warrant. It also clarifies the extraterritorial scope of that power. The DMU will not be able to enter premises outside the United Kingdom under clause 73, but it can access information regardless of where it is physically stored.

Clause 75 allows the DMU to take copies of, or extracts from, information and sift it off site when exercising its power to enter either business or domestic premises under a warrant, if it is unsure whether the information falls within the scope of the investigation. Clause 76 ensures that the DMU follows established judicial procedures when applying for a warrant to enter premises. It requires the DMU to follow the rules of the High Court, Court of Session or Competition Appeal Tribunal; that provides vital checks and balances.

These clauses are largely modelled on the CMA’s existing information-gathering powers, and they will be subject to the same robust safeguards. They also give the DMU new powers to scrutinise the output of algorithms in clause 69, and enhanced powers in clause 73 to access information that is stored on remote servers but accessible over the internet. It is important to recognise that without those powers, the DMU’s interventions would not be well evidenced or enforceable.

[Alex Davies-Jones]

I was champing at the bit to talk about these clauses. However, I will keep my comments brief because much of Labour’s thoughts align with our thoughts on previous clauses.

Clause 70 gives the CMA the power to require any individual to attend an interview and answer questions for the purposes of a digital markets investigation. That is consistent with the amendments to section 26A of the Competition Act 1998. We welcome those, so it is only right that the powers appear in this legislation, too. These are basic powers and the clause is fairly procedural. The CMA must have the power to give notice to any individual with information relevant to a digital markets investigation, requiring them to answer relevant questions at a place or in a manner specified in the notice. That is fundamental for an empowered regulator. We support the approach, so we have not sought to amend the clause at this stage. We also support the intentions of clause 71, and we believe that the approach is fair and reasonable. The clause is important for clarity. We welcome its inclusion in the Bill and we have not sought to amend it at this stage.

Turning to clause 72, it is right and proper that the CMA must have reasonable grounds to suspect that information relevant to the breach investigation can be accessed from or on the premises. We support that common- sense approach. The provisions are in line with those for other regimes, and will be important in ensuring that if the CMA is required take action for the purposes of a breach investigation, it can do so in a timely and effective manner. We support the clause and have not sought to amend it.

We also support the intentions of clause 73, which gives the CMA the power to enter business and domestic premises under a warrant, without notice and using reasonable force, for the purposes of a breach investigation. Again, the CMA has powers of entry under a warrant through sections 28 and 28A of the Competition Act 1998. It will come as no surprise, given that we support provisions for the CMA to act without a warrant, that we agree that it should be able to act with one. We value the clarification that the CMA must prove that there are reasonable grounds to act. If it has to, it can call on individuals who have expertise that is not available in the CMA but is required if the terms of the warrant are to be fully carried out. That will allow the CMA to act rapidly, which, given the level of these breaches, is vital. We therefore support this clause standing part of the Bill.

Clause 74 sets out the supplementary requirements to the CMA’s power to enter premises under a warrant. We welcome the transparency afforded by subsection (1), and the clarification that although the CMA cannot enter premises outside the United Kingdom, as outlined in subsection (6), it can access information regardless of where it is physically stored. That is an important point, given the nature of SMS firms and their global holdings. For those reasons, Labour is happy to support the clause standing part of the Bill.

Clause 75 makes necessary amendments to a range of sections of the Criminal and Justice and Police Act 2001 to enable the CMA to seize information and take copies of, or extracts from, information when exercising its power under clause 73 to enter business and domestic premises with a warrant. It is a practical clause that aligns with the CMA’s power to seize documents from business premises under section 28 of the Competition Act 1998. We therefore believe that the clause should stand part of the Bill.

Clause 76 requires the CMA to follow the rules of the High Court, the Court of Session or the CAT when making an application. We see it as a natural consequential clause and will therefore support it.

--- Later in debate ---

[Paul Scully]

I note that if there were a word cloud of comments from the hon. Member for Pontypridd, “We are not amending at this stage” would be quite high up. Duly noted.

On the matter raised by the hon. Member for Feltham and Heston, I will write to her with more detail, because I think we are talking about two different regimes across two different Departments. I do not want to pre-empt what my hon. Friend the Member for Thirsk and Malton may do with trading standards. These provisions relate specifically to CMA powers, which is why I am remaining in that narrow tramline. I will write to the hon. Member for Feltham and Heston about the wider trading standards regime.

Question put and agreed to.

Clause 69, as amended, accordingly ordered to stand part of the Bill.

Clauses 70 and 71 ordered to stand part of the Bill.

Clause 72

Power to enter business premises without a warrant

Amendments made: 17, in clause 72, page 40, line 31, after “premises” insert “(see section 69(7))”.

This amendment is consequential on Amendment 16.

Amendment 18, in clause 72, page 41, leave out lines 40 and 41.—(Paul Scully.)

This amendment is consequential on Amendment 16.

Clause 72, as amended, ordered to stand part of the Bill.

Clause 73

Power to enter premises under a warrant

Amendments made: 19, in clause 73, page 43, leave out line 22.

This amendment is consequential on Amendment 16.

Amendment 20, in clause 73, page 43, line 33, after “business premises” insert “(see section 69(7))”.—(Paul Scully.)

This amendment is consequential on Amendment 16.

Clause 73, as amended, ordered to stand part of the Bill.

Clauses 74 to 76 ordered to stand part of the Bill.

Clause 77

Reports by skilled persons

Amendments made: 21, in clause 77, page 47, line 3, after “such” insert “business”.

This amendment limits the duty to assist a skilled person by giving access to premises so that it applies only in relation to business premises.

Amendment 22, in clause 77, page 47, line 3, after “premises” insert “(see section 69(7))”.

This amendment is consequential on Amendment 16.

Amendment 23, in clause 77, page 47, line 4, leave out “persons” and insert “individuals”.

This amendment limits the duty to assist a skilled person by giving access to persons so that it applies only in relation to persons who are individuals.

Amendment 24, in clause 77, page 47, line 5, at end insert—

“(13) The duty in section 77(12) does not include a duty to give access to premises, equipment or individuals outside the United Kingdom.

(14) But the duty in section 77(12) does include a duty to give access to information and services whether stored or provided within or outside the United Kingdom.”—(Paul Scully.)

This amendment limits the duty to assist a skilled person by giving access to premises, equipment or individuals so that it does not include a duty to give access to premises, equipment or individuals outside the United Kingdom.

Question proposed, That the clause, as amended, stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clauses 78 to 80 stand part.

[Paul Scully]

Clauses 77 to 80 introduce the final elements to support the DMU’s investigatory powers.

Clause 77 will give the DMU the power to authorise a skilled person to provide a report to it in relation to an SMS firm, or firm subject to an SMS investigation, on a matter relevant to the operation of the regime. That is needed to give the DMU access to expert reports to enable it to interpret technical information gathered when carrying out its digital markets functions.

Clause 78 will impose a legal duty on certain people to preserve evidence that is relevant to a digital markets investigation or to a compliance report in relation to an SMS firm. That duty will also apply when the DMU is providing investigative assistance to an overseas regulator. That will ensure that no party may destroy, conceal or falsify any relevant evidence without reasonable excuse.

--- Later in debate ---

[Seema Malhotra]

It is a pleasure to speak to this group of clauses on behalf of my hon. Friend the Member for Pontypridd, who is speaking in another debate.

We support clause 77, which will give the CMA the power to require a skilled person, which could be a legal or other person, to provide a report to it on a matter relevant to the operation of the regime. That is in line with other regimes of that nature, and we therefore support its inclusion.

The clarity afforded by subsection (1), which sets out that the CMA can use this power in

“exercising, or deciding whether to exercise, any of its digital markets functions”,

is welcome. It is also right that the CMA can exercise the power only in relation to a designated undertaking or an undertaking subject to an SMS investigation.

In order to ensure no unnecessary delay, subsections (2) and (3), which will give the CMA the power to appoint a skilled person to provide a report and give notice of the appointment and other relevant matters to the undertaking in question, while also specifying the form of a report, are an important inclusion. That aligns well with subsection (12), which imposes a duty on the designated undertaking or undertaking subject to an SMS investigation, and any person connected to those undertakings, to assist the skilled person in any way reasonably required to prepare the report.

One hopes that designated undertakings would co-operate in such instances, but it is welcome and helpful to have their obligations outlined as they are in clause 77. Clarity on the consequences of failing to comply, in the form of penalties or other enforcement provisions, is also an important and positive step. Labour has therefore not sought to amend the clause at this stage; we believe it should stand part of the Bill, as drafted.

As with any regulatory regime, the CMA should of course preserve relevant evidence. Clause 78 is integral, because it places a legal duty to preserve evidence that is relevant to a digital markets investigation, a compliance report by a designated undertaking, and evidence where the CMA is providing investigative assistance to an overseas regulator. The Bill also confirms that where the CMA has made a formal request for information, there are penalties for non-compliance, or for falsifying, concealing or destroying information.

Labour supports the purpose of clause 78, which is to preserve evidence before and after the CMA has made a formal request. We believe that it is consistent with the existing duty to preserve evidence under section 201(4) of the Enterprise Act 2002 on cartel offence investigations. We note, however, that the duties within this clause do not apply

“where the person has a reasonable excuse to do so.”

I—and, I am sure, others—would welcome clarification from the Minister on that point. We support the intentions of the clause and have therefore not sought to amend it at this stage, but I would appreciate further clarity on the definition and how it will work in practice.

Clause 79 is helpful because it specifies that the CMA cannot require any information subject to legal and professional privilege, or, in Scotland, confidentiality of communications. That is an important point to make and is in line with similar regimes. We support the clarity outlined in subsection (2), which specifies that the limitation applies to producing, taking possession of, and taking copies of or extracts from a privileged communication. I do not need to elaborate much further here. Labour considers this to be a fairly standard procedure and we therefore support clause 79 stand part.

Finally, clause 80 gives the CMA the power to publish a notice of any decision to use its investigatory powers under the digital markets regime to assist an investigation by the regulator in another jurisdiction. The notice may include the regulator that the CMA is assisting, the undertaking that is the subject of investigation, and the matter for which the undertaking is under investigation. Labour welcomes the transparency measures here.

My question is about why that approach has not been afforded to the CMA’s domestic work on digital markets. If the CMA is able to support overseas regulators in ways that might identify the undertaking, I am unclear as to why the CMA is not compelled in the same way for issues that might arise in the UK. I am interested to hear the Minister’s thoughts on that point, because it is an important one for companies likely to be captured in the SMS definition and for challenger firms that might one day find themselves subject to these regulations, too.

[Paul Scully]

I thank the hon. Lady. I will probably write to her with examples of where that measure might come in. As I have said, it does not come in if there is an exemption for people with a reasonable excuse. I am not fleet enough of foot to come up with a good example for her at the moment, but I will certainly write to her.

On the domestic situation for the DMU, I will, again, probably write to the hon. Lady, but my interpretation is that it is easier to deal with the potential for defamation and so on when someone has full control of the case in one jurisdiction. If we are working across jurisdictions internationally it is more complex, so the protections need to be there.

Question put and agreed to.

Clause 77, as amended, ordered to stand part of the Bill.

Clauses 78 to 80 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mike Wood.)