Digital Markets, Competition and Consumers Bill (First sitting)

Vicky Ford Excerpts

Committee stage
Tuesday 13th June 2023 Public Bill Committees

[The Chair]

We will have to move on, I am afraid.

[Vicky Ford (Chelmsford) (Con)]

Q I want to ask what success is and what it looks like. Is success giving my consumers greater choice and lower prices, and my businesses ensuring that the UK is an attractive place to invest compared with other markets? If that is the definition of success, how do you measure it both domestically, compared with what has happened in the past, and internationally, compared with other markets?

Sarah Cardell: The brief answer is that in our annual plan we set out our measure of outcomes: benefits for people in terms of great choices and fair deals; benefits for businesses in terms of enabling them to compete, innovate and thrive; and benefits for the economy as a whole in terms of growing productively and sustainably. That applies across the new suite of roles, powers and responsibilities. If you are looking at outcomes for people, what is the impact on prices and choice? Can people access their data? Can they move between services more effectively? What is the impact on businesses? Can they get fair and reasonable terms when they are reliant on the infrastructure of some of these major players in order to innovate and grow? Are we seeing innovation coming from smaller businesses as well as the incumbents? When we look at the benefit for the economy as a whole, do we see the flow-through of greater competition, improving productivity and improving growth? We have our “State of UK competition” report, which reports on that, and that will continue to be an important metric.

We are taking on responsibility for an annual consumer protection study, again looking at areas of consumer concern and the impact of interventions we are taking. You mentioned international benchmarks; I think that is really important. Obviously, a lot of these issues, especially on the digital side, are international in nature. We want to see benefits in terms of changes in international trends—there is a real opportunity here for the UK to set the model for positive regulatory intervention in digital markets, and for that to be adopted by others—and real benefits for UK businesses in terms of their ability to grow and innovate, and the investment that that attracts from overseas.

[Vicky Ford]

Q Really quickly—will you be watching our market compared with what is happening in other markets?

Sarah Cardell: As one of our factors, absolutely.

[Jerome Mayhew (Broadland) (Con)]

Q You say that open, competitive markets are good for growth. I totally agree, but we are one market among a global series of markets. Building on what Vicky Ford just said, where do you see this regulatory innovation sitting? You have referenced the EU and what it is doing, and there are other things going on in the US. Will this draw investment into the UK in this sector, or will it make people say, “Hmm, I’m not sure”?

Sarah Cardell: I firmly believe it will draw investment in. Will, do you have a couple of examples of people you have spoken to?

Will Hayter: You have app developers who are wanting to provide a service through these mobile ecosystems that have pent-up business—I think you are talking to one of them later—waiting to be invested in and to grow. There is also a UK-based search engine looking for opportunities to expand. Those are exactly the kind of businesses that are trying to grow and want this kind of regulatory infrastructure to create the conditions to do that.

--- Later in debate ---

[Alex Davies-Jones]

Yes. What you would like to be in there.

Rocio Concha: As I said, we would like to see fake reviews and drip pricing included, because there is clear evidence on them. There is also this issue of greenwashing. That should also be considered to be put in schedule 18 —we feel that we know enough to include it there. We have not done as much work in that area as we have on drip pricing and fake reviews, but we would be very supportive of including it in schedule 18.

Why do we want these areas in the Bill, versus them being included later under the Secretary of State’s powers? If they are not in the Bill, they will not be criminal offences, and they should be, because that will be a more credible deterrent for stopping these practices.

[Vicky Ford]

Q When the CMA was answering Dean Russell’s question about how consumers will feel the benefits, one of the things it pointed to was its greater powers to fine companies that are misbehaving. Do you not think that the threat of fines on companies will have a trickle-down benefit to the consumers, and that it will mean that companies will think harder about not acting in ways that are to the detriment of consumers?

Rocio Concha: Absolutely. That is one of the powers of that power. Basically, companies will know that they will not be able to drag the system for years, as happened with Viagogo and some anti-virus subscriptions. They will know that the CMA will be able to act directly. Hopefully, that will make businesses that do not want to comply with the law think twice.

Matthew Upton: I really agree. I cannot share a specific example, but we have had a lot of conversations with regulators and competition authorities after we have uncovered bad practice. We have said, “Listen—go after them.” We were met with a frustrated shrug of the shoulders—“There’s no point because they will run rings around us for a huge amount of time and we will end up with nothing. We have to use our powers where we can more clearly have impact.” As you say, that should now end. In a sense, we are more positive about the disincentive for poor behaviour than the fines themselves.

Rocio Concha: There is an opportunity in the Bill to make that deterrent even stronger. At the moment, in part 1 of the Bill there is the opportunity for private redress, which will allow businesses or consumers to apply to the court for compensation from companies that have breached the conduct requirements in part 1. It is very unlikely that consumers like each of us or a small business will use that power in the courts. But if we allowed collective redress—the co-ordination of consumers and businesses to get redress—that would be for those companies a credible additional deterrent against breaking the law. That is in part 1, in relation to competition.

There is also the opportunity to include a provision within the breaches of consumer law. At the moment, collective redress is allowed for breaches of competition law, but not for breaches of consumer law.

[Anna Firth (Southend West) (Con)]

You have given us a simple, practical way to end subscription traps through the opt-out. Do you have any other simple, practical amendments in the locker that would help better protect my consumers in Southend-on-Sea?

Matthew Upton: I have a very simple one, which echoes what Rocio said earlier: to add drip pricing to the list of banned practices.

Rocio Concha: For me, it would be fake reviews. As I said, we will suggest the drafting of amendments, to make that easy to include in the Bill.

Digital Markets, Competition and Consumers Bill (Second sitting)

Vicky Ford Excerpts

Committee stage
Tuesday 13th June 2023 Public Bill Committees

[Seema Malhotra]

Q Thank you for coming to give evidence. Perhaps I could start with you, Ms Chundur, and then others may wish to come in. Do you think that this Bill will adequately address consumer detriment in digital markets? Are there areas where the legislation could go further?

Noyona Chundur: Thank you for the great question. Perhaps I can start with a little bit of context. We believe that confident consumers will drive competitive markets. There is a lot that the Bill does really well. It is great progress, and I commend the work of colleagues in the Department, as well as partners in the CMA and Tracey from Consumer Scotland for their input in getting us to this point. There are eight areas that could be strengthened or clarified. There is building consumer confidence. There is the potential risk of only the CMA having direct enforcement powers. It is around the supervision of enforceable standards, practice and conduct of businesses. It is the ability to add and remove—

[Vicky Ford (Chelmsford) (Con)]

Slow down!

Noyona Chundur: Sorry, would you like me to step through each one? Would that be easier?

[Seema Malhotra]

You are going through them quite well, but could you go you through them slightly more slowly, because colleagues will want to write them down?

Noyona Chundur: The first thing for us is building consumer confidence as a priority, because prioritising consumer protection to build the foundations that create confidence in competitive markets will benefit both the consumer and the economy. We are looking at this through the prism of the cost of living crisis and through the heightened prism of vulnerability. In the packs that we provided, you can see that vulnerability has certainly increased in the last 12 months. The Consumer Council has dealt with over 33,000 consumers, and they are showing increasingly more complex and multifaceted needs. Income in Northern Ireland has—

[Seema Malhotra]

Q Sorry: your list of eight things was quite useful, so would you be able to go through those—as you were before, but just a bit slower?

Noyona Chundur: Understood. Did I get to adding to or removing from the list of banned practices in the Consumer Protection from Unfair Trading Regulations 2008?

[Vicky Ford]

I wrote down the first one.

[Seema Malhotra]

Could you start the list again?

Noyona Chundur: Okay. Building consumer confidence is a key priority for us. The second thing is the potential risk of only the CMA having direct enforcement powers. The third is perhaps expanding the Bill in some way to include the supervision of enforceable, standards, practice and conduct. The fourth is adding to or removing from the CPR list of banned practices.

Next is establishing enforceable minimum standards to alternative dispute resolution schemes. We welcome the mandatory accreditation as part of the Bill, but we would like to take it a step further. Then there is a question around better regulation of firms that exploit behavioural bias or nudge techniques for negative effect. Finally, we recommend going further on subscription traps with opt-in clauses after the trial or end-of-contract period.

--- Later in debate ---

[Neil Coyle]

Q Thank you for your work. Perhaps the Government will pick up on some of that. Noyona, I think you were going to come in.

Noyona Chundur: May I add something? Electrical standards are not my area of expertise, unlike consumer expectations around standards generally, so I will make a comment about that. Consumers expect minimum standards, particularly in new markets. It is worth saying that when we are talking about new digital markets, everyone is vulnerable, so there is no “vulnerable consumer” per se.

An interesting point to make is that we did a joint project with the Utility Regulator for Northern Ireland on what consumer expectations might be of future regulation and decarbonisation. Consumers were very clear that, in addition to trusted accessible information and concerns about costs or financial health, they wanted absolute protection from safety fraud, obsolescence or mis-selling, but they also wanted clear and robust standards on certification, registration and standards for installers, and protection against damage and disruption during installation. That is moving away from something that is perhaps more price-led and economic to where we need to have a minimum enforceable standard that works for everyone, so that we bolster the safety net and create confidence in markets. The more that we do that, the more consumer spending we have in the economy, which is good for everyone.

Peter Eisenegger: May I make a comment about enforcement? A backstop is in action at the moment: the class actions that our law now allows for the consumer world. My colleague Arnold Pindar, the chair of the NCF, is part of an advisory group that is taking on Mastercard at the moment. Another colleague, Julie Hunter, is fronting the case against Amazon about the way it presents its own products unfairly in its online marketplace. These names are in the public domain; I would not mention them otherwise. To a certain extent, the powers being provided to the CMA to be a bit more responsive and active make sense where we have class actions, which really is a major “after the horse has bolted” situation. We hope that the CMA will prevent more horses from escaping. Thank you for the opportunity to comment.

[Vicky Ford]

Q Could you give us examples of where the industry has set standards in the digital space that have helped to address particular holes? You have given us a list of standards for online reviews and alternative dispute resolution, but can you give us a way to explain to our constituents why these industry-led standards help to underline good behaviour in this market, and why it is important that they are set in an international sphere for these players?

Peter Eisenegger: Okay. The industry-led—

[Vicky Ford]

Are they industry-led?

Peter Eisenegger: You only get good standards when you have proper stakeholder engagement—that is a comment that we address in our supporting paper. You need standardisation bodies that actually work hard at getting their stakeholders involved. BSI is good at that, and the European system is pretty good. In the digital area, because there are so few of us with the right background and expertise, you find that the consumer voice is not getting through. I have two consumer colleagues who are on the BSI mirror committee for AI; they feel that the international standard is not reflecting what they are trying to input, because we do not really have anyone effective at the international level on the consumer side.

You need very careful insight into where there is decent stakeholder engagement and where there is not. Where there is, you are quite right: I have worked on a number of committees where the good guys and gals from industry have just been saying the right thing, and you end up just tweaking a little of what they already understand in their industry is good practice. There is no problem with working with the good people in industry, but—particularly in the digital space—you do get the big players coming in and influencing things, whereas the small and medium-sized enterprise stakeholders are not as fully represented. When a standard is put forward, careful understanding is needed of who the people are who are really contributing to it.

[Vicky Ford]

Q I think you said that you sometimes see the standardisation process in the digital world being used by larger players to put barriers in the way of smaller players getting involved.

Peter Eisenegger: Exactly.

[Vicky Ford]

Q Can you give an example where you have seen that?

Peter Eisenegger: Yes, I can. It was a consumer-initiated standard on complaints handling. If you want the number, I can blind you with it: it was ISO 10002. It was initiated by the consumer side of ISO. It is clearly written for the big company: it has lots of good practice where you divide all the responsibilities, the analysis of the complaints and things like that. There is an annex for SMEs. I have been through the main part of the document and counted the number of requirements: there are more than 250. For the SMEs, there are eight.

Where you look at the consumer and it is your small local trader, you go, “That’s fine,” because they know you personally—you know where they live, basically, and that changes the whole local relationship. But you do not really see that many standards where the practicalities for the smaller company are reflected. I am quite pleased that the consumer world did a decent job for the SMEs there, because they are very important to us in terms of local service and providing competition to the big guys.

[Seema Malhotra]

Q I want to come back to some areas that we have picked up on in previous evidence sessions. Schedule 18 to the Bill sets out a list of commercial practices that are to be considered unfair, but a number of arguably unfair commercial practices are not included. Examples might be drip pricing or misleading green advertising, which is an increasing consumer concern. Do you consider those omissions to be something that needs more attention during the passage of the Bill so we do not miss this opportunity?

Peter Eisenegger: Do as much as you feel you can make time for, while getting the Bill implemented as quickly as possible. I come back to the key clauses that relate to the appropriateness of the information provided. Is it complete? Is it misleading? As a charity, we have looked at how heat pumps are being advertised at the moment. About 80% of the online information did not provide the right contextual information for your heat pump decision; some did not even mention it at all, and a few hid it away behind several layers of interaction with the website before you found it out. That would fall under the incompleteness clause, but again, you are going to come back. The CMA would be able to apply an interpretation, which would probably go through some sort of intense dialogue with the industry people concerned, but if you do not have time to cover all those other aspects as explicitly as you would wish in the Bill, I think there is a clause that gives the CMA some capability for addressing it.

Noyona Chundur: Maybe I can add to that. This talks to the point in the earlier session on how quickly or whether fake reviews should be automatically added to the list of bad practices, or should we go through full consultation. In all these things, we need to have appropriate consultation and the appropriate due diligence carried out. It needs to be done as quickly and thoroughly as possible so there is no doubt. I am completely supportive of what was said earlier today that there is a lot of detriment as a result of fake reviews, and the sooner that is resolved, the better. None the less, we need to be careful about setting the right precedents. We need to have consistency in procedural application. For all those things—I believe we are all in agreement that drip pricing is of huge concern, as are misleading green claims—we need to follow the right process and get through it as quickly as possible.

[Seema Malhotra]

Q In relation to support for consumer organisations, how do you think the CMA and the Government can better support consumer organisations that are supporting consumers on the frontline?

Tracey Reilly: Just a couple of quick points. There is a need to produce very clear guidance on the new plans and have very clear referral processes to the CMA for the use of those plans, so that advocacy and advice bodies have almost a direct line, if you like, into the points of contact. Essentially, it is about pathways and signposting, and ensuring that the routes from an individual consumer experiencing detriment to those who are able to take action on it are as quick and flexible as possible.

Noyona Chundur: From my perspective, I would ask for two things. The first is greater connectivity across the ecosystem. We all have a lot of data; we all have a lot of intelligence; we all have a lot of on-the-ground insights that should be shared and published in a more connected and co-ordinated way. Ultimately, that is more holistic, but it gives the level of granularity we need on a four nations basis. The other is greater focus on the broader issues of online behavioural bias and the exploitation of behavioural bias—you know, nudge techniques—to negative effect. To my mind, the Bill does not adequately cover that, so I believe this is an area of potential development.

As has been touched on already, vulnerability is not just about personal characteristics or social circumstances; the behaviour of organisations can cause harm and put you in a vulnerable position. That is a key area that we would love to see explored in more detail as the Bill passes through scrutiny.

Peter Eisenegger: In terms of support, having mentioned standards, there is a Government mechanism for providing the consumer arm of BSI with money to support its experts. Keep a careful eye on that, and work with BSI and its consumer arm to ensure that that is suitable for the level of really important issues we need to address.

There is another area of the consumer world, which is about the smaller, really voluntary charities, such as ourselves and the Child Accident Prevention Trust, which have no regular income and live hand to mouth. We have been on the brink of extinction every now and then, and although we have managed to haul ourselves back, it is a very precarious position. When we and others in a similar position contribute to this sort of arena or talk to regulators, our voice is valued and has something to offer, but we are very precarious. If Parliament looks at the people who really represent the grassroots and different perspectives and are without a regular income, and if something can be done, that would be extremely useful. Some of these voices drop out.

[Vicky Ford]

Q I want to come back to schedule 18 and ensure that I absolutely understood what Tracey said. This morning, I think Which? said that they thought fake reviews should now be put in schedule 18. I have had constituents who have suffered from fake reviews for services they have given, and the fake review has been very damaging to their business. We all know about fake reviews on books, which can be very damaging. Are you saying, Tracey, that we need to ensure we get the wording of how it goes into schedule 18 right—have the consultation and get the wording right—but let the Government introduce it through Henry VIII powers later, rather risk delaying the Bill by trying and maybe not getting the exact wording right now?

Tracey Reilly: I think that is a very difficult question. Without remotely passing the buck, I think that ultimately it is a judgment for your Committee to take as to whether it considers there is sufficient clarity in the definitions proposed during the amending stages to allow for those decisions to be made now. If the Committee is confident that there is sufficient clarity, and the soundings you are receiving from stakeholders indicate that they are content, it is a matter for the Committee to decide. Ultimately, our position is that we want to see it as soon as possible, but we also want to see it done correctly, because as we all know it is very difficult to amend primary legislation once that is in place.

[Vicky Ford]

Q So “get it clear” is what you are saying to us.

Tracey Reilly: It is a very complicated area, not just in terms of how you define fake reviews but in terms of the precise powers that regulators need in order to determine where, how and when fake reviews are occurring. AI will make that an even more complicated picture, so it is important to get that right.

[Jerome Mayhew]

Q Ms Chundur, you gave a very interesting stat earlier: £1.6 billion per year is spent on subscriptions that people do not want. One of your eight areas of concern is an opt-in clause for the subscription trap issue. You are in good company, because Citizens Advice came up with the same recommendation in this morning’s evidence session. However, we will hear later today from the News Media Association, which expressed exactly the opposite view in its written evidence: that the current wording of clause 252(1), which is essentially that you should be able to unsubscribe with one click without any unreasonable additional steps to go through,

“may hinder the provision of improved subscription offers that are in the best interest of the consumer”.

Can you comment on that? I will test the NMA if no one else does regarding what exactly it meant by that, and ask for examples of how it might hinder improved consumer engagement, but if the NMA can substantiate that, would you accept that it has a point?

Noyona Chundur: Perhaps, but I agree with what Citizens Advice said this morning: if your product is good enough and consumers want it, they will seek it out. Another point made this morning was that the consumer journey sits across multiple markets and is quite complex. That is where we are coming from. We are looking at the end-to-end consumer journey. In that context, consumers also want minimum standards. If you do not have minimum standards—if the default position is that you are just rolled on to another contract, and there is no opportunity to review whether that contract is the best for you, has the best price, is the best product or suits your particular circumstances—I am afraid that that does not necessarily give the consumer the best deal from a price or quality perspective.

--- Later in debate ---

[Alex Davies-Jones]

Q On the matter of getting it through as quickly as possible, we spoke to previous witnesses regarding the time that this will take to implement—2025 was mooted. It would be helpful to the Committee if you could outline some specific cases and instances of competition in digital markets that have been threatened up to this point, and any specific cases of detriment to the smaller market actors or to consumers.

Max von Thun: Sure. I mainly refer to some examples given by previous witnesses. I am thinking, for example, about issues we have seen with data in the digital economy, where dominant platforms such as marketplaces collect data on the sellers using their platforms and use that to compete against them or produce products that compete against them. The flipside of the coin is restricting data—sometimes generated by the users of the platform —by not allowing those users to use it to improve their business operations. Self-preferencing is another problem. That can be everything from a large dominant firm pre-installing its own app on its operating system and making it hard for competing providers to get their app on to the system. You see interoperability restrictions—for example, where it can be hard for a third party or a competing platform to have access to the fundamental software or hardware it needs to produce a good product.

With those sorts of practices, which we have seen over the past decade or so, there have been lots of competition investigations, particularly in Brussels, to try to solve them, but we have not really seen much success or the introduction of much competition in the market. With the conduct requirements and especially the pro-competition interventions, hopefully the Bill will be able to address that and help smaller players to really compete in the market.

[Vicky Ford]

Q I did some market research with my 23-year-old son, who is much more of a digital consumer than I am, especially when it comes to online games. I want to ask you about where the dividing line is with in-game purchases. I, being very pro-market, would say that anybody should be able to sell these products once you are in the game, but my son was saying, “But wouldn’t that put off the person who invested all the money in inventing that game in the first place and is getting some of his money back because of my in-game purchase? It’s up to me whether or not I make that purchase.” Where is the line, Max?

Max von Thun: Obviously if someone has produced a particular product or service that you can buy in a game, they should be entitled to profit from it. The main issue that we have seen with purchases from app stores, which are increasingly what people use to access these games through their phone, is that a small number of companies—basically Apple and Google—are using their control of the app stores to take a very big cut. They take up to 30%, which is not what you would be seeing in a competitive market. Sure, it is fair that they get a share of the proceeds, because they are putting in the time to maintain these app stores, but 30% seems quite steep.

Another issue is that it is hard for alternative payment providers to offer their services on these systems, because you will be forced to use Apple or Google’s payment solution, for example. That also makes it easier to charge high commission rates. I think it is about allowing the large platforms to play their role, but making sure that they are not using that power to exclude people.

[Vicky Ford]

Q I get that, but let’s say that an online game is like a shop. If I own the shop, I am not going to let anybody else walk in, put their products on my shelves and sell them, because I am paying the set-up costs and running the shop. If I have invented a game, should I let other people sell their products inside it?

Max von Thun: I would say yes.

[Vicky Ford]

Interesting.

Max von Thun: But you do have games where one company will provide the fundamental game—the world that you play in—but allow third parties to interact with it and sell you an outfit to wear in the game, a weapon or something like that. That kind of interoperability is very feasible, and you can have different companies co-existing.

[Vicky Ford]

Thank you—and sorry, colleagues, for the family discussions.

Max von Thun: I am not a huge gamer, but that is my take.

[Andy Carter]

Q Can I ask about the whole area of innovation, particularly for smaller start-up tech firms? What is your feeling towards the Bill with regard to the attitude that they might take to operating in the UK?

Max von Thun: Overall, I think it would be very positive for those types of firm. As others have said, this Bill is very targeted: the actual regulatory obligations apply to only a very small handful of dominant firms. It is not legislation like the Online Safety Bill or privacy regulation, where you are creating a compliance burden for the whole tech sector; it is very targeted at dominant firms.

As I mentioned earlier, if you look at what the Bill is trying to do, it is very pro-innovation. It is really about introducing contestability into the market. The combination of the conduct requirements, which are more about stamping out some of the problematic anti-competitive practices that we have seen over a long period, and the PCIs, which we think are a more significant tool because they allow you to inject competition into the market through interoperability and opening up data, will be very good for start-ups. I think it will give them more confidence to launch businesses that directly take on the dominant tech platforms.

At the moment, if you are a smaller firm, your strategy will often be to grow to a certain point and then get bought up. That is how firms design their business model, and investors will often look at it that way, but if through legislation you change the picture, you will change the incentives and create more opportunities for companies in the UK to scale up to a global level.

Digital Markets, Competition and Consumers Bill (Third sitting)

Vicky Ford Excerpts

Committee stage
Thursday 15th June 2023 Public Bill Committees

[Andy Carter]

Q Do you think five years is the right length? Should it be a shorter period?

Neil Ross: It is as much as five years; it could be longer. It is really how the digital markets unit looks at that. Companies in the broader sector would be given a lot of certainty if the DMU came out fairly early on and set up a priority list of where it is likely to look first. There is quite a good precedent in the Communications Act 2003 of the reporting powers conferred on Ofcom. I know the CMA has some reporting capabilities, but given the wide-reaching powers of the Bill, it might make sense to also think about applying the same standards to the digital markets unit.

[Vicky Ford (Chelmsford) (Con)]

Q You have mentioned a few times the importance of accountability to Parliament. I guess that needs transparency so you can get scrutiny. Do you think there is adequate accountability and scrutiny in this Parliament? How does it compare with other Parliaments?

Neil Ross: With this Parliament, the CMA is here quite a lot and so are the other regulators, so there is regular scrutiny of the regulators themselves. As the various different Bills go forward, whether that is the Online Safety Bill, the Digital Markets, Competition and Consumers Bill or the Data Protection and Digital Information (No. 2) Bill, we might have to think again about exactly how we are scrutinising those interrelated bits of digital regulation. That is a decision for this House and how you want a change of structures. It would be important to make sure—

[Vicky Ford]

Q Have you looked at how other Parliaments scrutinise their regulators in this space? Is there best practice that we should be looking at? I recall my time in Europe, when we had much bigger Committees that held regulators to account, often much more regularly and with bigger Committees.

Neil Ross: That is certainly one example to look at. I know a number of people in this House are actively thinking about that, given the loss of those Committees following the referendum.

[Vicky Ford]

Q But you have not given your thoughts as an industry as to how we could approve it?

Neil Ross: Not really. I do not think we would necessarily go so far as to advise Parliament on how to set up a Committee structure.

[Vicky Ford]

Q I am not asking that. I am asking whether your members have experience of other places where they think it works better or worse.

Neil Ross: They certainly do, and we can get back to you on that if that is something you wanted in more detail.

[The Chair]

Mr Ross, you have been a complete star. Thank you very much indeed for your time.

Examination of Witnesses

Gene Burrus and Tom Smith gave evidence

--- Later in debate ---

[Andy Carter]

Q Thank you. I have one question for you, Mr Smith, if I may. We are taking action to legislate; the EU has taken action to legislate. Many other countries are not yet in that place. Are we not just going to drive innovation outside of the UK?

Tom Smith: I think a lot of major economies are in the same place and moving forward in the same direction anyway. There are rulings against Google in India. There is app store legislation already in force in Korea. The Netherlands has a ruling against Apple’s app store. Australia is proposing a very similar regime to this one. There are lots of proposals, obviously, in America. Germany already has its regime in place and in force, as does the EU. There is a major benefit to all the major economies moving forward together because these are global issues.

As for deterring investment, I would say that monopolies do not stimulate innovation, competition does. That is the whole point of the Bill—to open up competition and get rid of artificial restrictions. When Apple bans alternative app stores on its devices, it is just holding the market to itself. If the DMU removes that ban, new app stores can come in and innovate. Maybe they will offer a better service than Apple; maybe they will not, and people can stick with Apple and Apple can make lots of money. That is great if it has a better product, but currently it is not being challenged.

[Vicky Ford]

Q Can you give us an example of the rent inflation you mentioned? For the app, how much would they have been paying five years ago and what are they being charged now, just to contextualise this?

Gene Burrus: The problem bothering a great number of our members is the forcing of the use of an in-app payment system that comes along with a 30% tax on any apps that sell what are called “digital goods” from within their app. If it is a digital subscription for a gaming app, for a news app or for music streaming, that comes along with a 30% charge. Those digital platforms did not contribute anything to those products; they simply take it off the top.

Ten years ago, the game was the opposite. People were actually paying those developers to come on to the platforms. To some degree, it has been a bit of a bait and switch for these platforms. When they were facing competition, they had one business model and, once they achieved dominance, they altered their business model to try to extract those rents. Making the bet with that 30% is probably one of the best examples of that.

[Vicky Ford]

Q How quickly have we gone from zero to 30%?

Gene Burrus: In 2008, it was zero, and the 30% probably came in about 2012. Once the markets settled down and it was clear that there were two phone platforms to be had, that is when Apple began to try to extract that.

Tom Smith: We focus on the app store stuff, but there is potential at other SMS firms. There are a lot of allegations about Amazon’s fees going up over time for small sellers, for example, and them being pushed into buying Amazon’s logistics operations, which are said to be expensive. The DMU can go and investigate whether they are expensive and whether they should be freed up to competition more. The CMA published a very good market study report on Google’s advertising businesses. It was 2,000 pages long and detailed the excessive profits made. Google charges 30% to 40% more than Bing to reach the exact same eyeballs. Those prices are going up.

[Jerome Mayhew]

Q You are buying a service to reach the same number of eyeballs. The process does not have greater reach. You said that, to achieve the same outcome as a facilitating business, they charge 30% to 40% more. Why doesn’t everyone use Bing?

Tom Smith: You may have seen yesterday that the European Commission is threatening to break up Google in the ad-tech business. The European Commission is formally alleging that Google is abusing its dominant position in ad tech. That is on the display side of the business. On the search side, Google has a 90%-plus market share in this country. It is a must-have product, and people are buying that product. There are lots of allegations about why it should be able to sustain such prices, but I do not want to make an unfounded allegation.

Digital Markets, Competition and Consumers Bill (Fourth sitting)

Vicky Ford Excerpts

Committee stage
Thursday 15th June 2023 Public Bill Committees

[The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)]

I have no further questions.

[Vicky Ford (Chelmsford) (Con)]

Q Do you see Google and Apple acting in collusion and taking similar moves, or are they different moves? Do you see examples where they are putting similar blocks against businesses?

Kelli Fairbrother: Yes. It is interesting, because there are differences between the two ecosystems. Whereas I do get transaction-level data from Google, for example, I do not get it from Apple. Apple moved first to lower the price points from 30% to 15%, and Google took at least another six or 12 months after Apple moved to create that small business tier. Generally, they seem to be both on this path of using their dominant market positions to extract as much value from me. The question I would love to hear Google answer when they come in later is that these are our customers; my customers are also your customers. I just do not really understand why, if you can see that there is actual consumer harm happening, you are not working yourselves to address it.

[Vicky Ford]

Q Christian, do you see them acting—do you think they are in collusion?

Christian Owens: I would not want to say that that is definitely happening. I think it is rather coincidental that within six to eight weeks of any price change happening in one ecosystem, it tends to happen in the other, as mentioned with the small business tier of 15%, with the subscription tier after one year also reducing to 15%. It does seem that way.

[Vicky Ford]

Q You have been very brave, Kelli, in coming and talking about your experiences, because there will be some companies that say, “I don’t dare say that, because these guys have got so much power over me.” There are other issues where women sometimes do not speak out when they say that people have got power over them, so you are obviously being very brave. Do you think there is enough protection for people’s confidentiality in this Bill that others will feel that they can talk about what is happening?

Kelli Fairbrother: I am afraid that I am not a lawyer on the depth of confidentiality. From our side, we would love to see a little bit more transparency in the consultation process, so if there is action being taken by the DMU, we would love to make sure that we are being consulted if it affects our area. I am not sure I have a strong opinion on the confidentiality piece itself.

[Vicky Ford]

Q Christian, do you have any further—?

Christian Owens: No, not any specific details on this.

[Seema Malhotra]

Q On a slightly different area, there were some concerns raised by some Members in the debate on the Bill about the Government changing the appeals process to one based on judicial review, as opposed to a merits-based review. How important, in your view, is that, and what would you want to see if the Bill progresses through Parliament?

Kelli Fairbrother: It is absolutely critical that judicial review is the standard that is used, because I think we have seen time and time again, in markets all around the world, that when Governments act, Apple and Google do their best to try to get around the work that is being done. They lawyer up—they have millions to spend on appeals slowing things down—and there really is a sense of urgency. This is existential for a lot of small app developers, so we would really urge that the Bill passes, it is not watered down and it passes without delay and without dilution, I think we would say.

Christian Owens: I agree.

[Andy Carter (Warrington South) (Con)]

Q I have just downloaded your app, so you have got another customer there.

[Vicky Ford]

He is such a charmer.

--- Later in debate ---

[Anna Firth]

Q So you agree that it needs reform.

Tom Morrison-Bell: It is being reformed. The developers will have those choices, and those choices are being scrutinised by the CMA to make sure that they are good for consumers, that they are good for companies like the ones you mentioned, and that they are appropriate in the ecosystem.

[Vicky Ford]

Q If you are so keen at Google to work with the CMA and other competition authorities to get issues resolved quickly, why did Kelkoo tell us this morning that its issue is unresolved and has been going on since 2009, and why did the EU Commission need to make the announcement today about the investigation into ad tech procedures that it started two years ago, minus a handful of days? It seems to me that Google does not actually get these differences resolved in anything like a timely way.

Tom Morrison-Bell: I think there are a few things to unpack there. With respect, the Kelkoo case refers to the Google Shopping case with the European Commission. The remedy that was agreed by the European Commission as the competition authority was rolled out by Google in 2017, around 60 days after the finding was heard. The appeals are still going on, because there are different points of law that are being considered, but the remedy—

[Vicky Ford]

Q So it is six years of appeals.

Tom Morrison-Bell: But, importantly, the remedy that was agreed by the Commission has been in place for six years. That is not necessarily going to change if the points of law change. The remedy has been in place for that time, and the courts considered the opinions of various different complainants and Google as part of that appeal process.

[Vicky Ford]

Q What about this latest one, on ad tech, which has been going on for two years?

Tom Morrison-Bell: The Commission’s inquiry process has been going on for two years, rather than a legal process.

[Vicky Ford]

Q But I thought that you were trying to say to us that, where there was an issue, you would work to get that resolved really quickly with the competition authorities.

Tom Morrison-Bell: The proposed participative approach in the UK is different from how the competition system works in Europe.

[The Chair]

Order. I am afraid that that brings us to the end of the time allocated for this session. On behalf of the Committee, may I thank our witness for giving evidence today?

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

Digital Markets, Competition and Consumers Bill (Fifth sitting)

Vicky Ford Excerpts

Committee stage
Tuesday 20th June 2023 Public Bill Committees

[Alex Davies-Jones]

Clause 19, which outlines the CMA’s power to impose conduct requirements on a designated firm, is very welcome indeed. It is an important clause that aims to prevent harm that may result from the market position of undertakings with strategic market status.

In practice, these conduct requirements are essentially instructions given to a designated undertaking to conduct digital activities in a manner that promotes competition. The requirements can be prescriptive or prohibitive in nature; they are essentially the dos and don’ts, except that the requirements do not apply automatically to every undertaking having SMS and instead apply on a case-by-case basis. The DMU therefore has wide discretion to impose conduct requirements on specific SMS firms, as long as they fit within a list of purposes that are listed in clause 20.

[Vicky Ford (Chelmsford) (Con)]

I am very fond of the hon. Member and she has a beautiful voice, but she did complain earlier about how long it had taken this Bill to get to market. I urge her to remember that we want to get through the Bill as quickly as possible, for consumers. Repeating every single thing that we can already read in the explanatory notes and in the Bill does not seem to me to be the most efficient use of all of our time.

[Alex Davies-Jones]

I am grateful for that intervention. The hon. Member will know I am also fond of her and her voice. I think it is important to clarify exactly what we are debating, and why we are reasoning as we are. I will happily refer to certain clauses if that would please the hon. Member, but it is important that we outline exactly why we have come to the rationale that we have on the Bill as it stands before us.

Potential examples of prescriptive conduct requirements include having effective processes for handling complaints, trading on fair and reasonable terms, or giving users options or default settings. Conversely, some examples of prohibitive conduct requirements may be preventing abuse of dominance practices, such as treating its own products more favourably, using data unfairly, tying practices, restricting interoperability, refusal to grant access and so on.

We particularly welcome subsection (5), which provides that the CMA may impose conduct requirements only for certain objectives. However, we have concerns about subsection (10), which says that a conduct requirement

“(a) comes into force at a time determined by the CMA, and

(b) ceases to have effect—

(i) in accordance with a decision of the CMA”—

as Members can read in the Bill.

For swift implementation, it is right that the Bill’s approach allows for conduct requirements to be written alongside an SMS designation investigation, but we need a statutory time limit for the initial set of conduct requirements to be implemented. As it is likely that the DMU will have considered the three conduct objectives before the SMS designation decision is made, the DMU should be required to impose the initial set of conduct requirements either at the same time as the SMS designation or within three months of its date.

A central feature of the new regime is to enable the DMU to revise its rules as time goes on, so the deadline should apply only to the initial set of conduct requirements, so as not to hinder the DMU in revising or adding to them subsequently. Amendment 54 would introduce a timeline for the enforcement of conduct requirements set out in the Bill and in CMA guidance.

--- Later in debate ---

[Paul Scully]

The hon. Gentleman is absolutely right that we have to keep all these things in our purview, because if we get this wrong, that just embeds the entrenched power that we are talking about. It is absolutely the case that we have to ensure that the CMA, as an important body—I am thinking of not just the digital markets unit, which we are discussing here, but the entirety of its operation—has the capacity to do its work. As I said, we will clearly continue to look at the resources, capacity and expertise of the digital markets unit.

Amendment 54 would introduce a duty on the DMU to impose conduct requirements within three months of a decision notice being given, as we have heard. I absolutely share hon. Members’ interest in ensuring that conduct requirements are imposed quickly so that businesses and consumers can be protected. Indeed, we anticipate that conduct requirements will be in place from the day a firm is designated—or if not, much sooner than the three months proposed in the amendment. That is because the DMU can develop tailored conduct requirements informed by, and alongside, the designation investigation. That is facilitated by clauses 13(2) and 24(3), which enable the DMU to carry out the public consultation on strategic market status designation alongside the public consultation on any proposed conduct requirements.

Although we expect conduct requirements to be imposed as soon as a firm is designated, the Government have not included a statutory deadline. That is because the DMU needs the flexibility to deal with the complexities of developing targeted obligations. That includes taking the time necessary to consult and consider all the views shared by interested stakeholders.

[Vicky Ford]

I want to be quick. I really care about this Bill, because it is incredibly important for our constituents, who are consumers, to ensure that they are offered fair choices and fair prices. The clause is important, because it means that when a company acts inappropriately, the CMA, through the digital markets unit, can tell it what to do. Can the Minister give an example of a case where it might need more than three months for that telling it what to do to be done?

[Paul Scully]

That is a very good point. I do not think that I can give my right hon. Friend a specific example. If particular technicalities are involved, we do not want to put an arbitrary time limit such as three months, because we want the decision to be right. The Government absolutely expect the decision to be taken either on the day of designation or very shortly afterwards, but by binding ourselves there may be examples—I am afraid I am not nimble enough to think of a specific example, but I am sure one will come down the line. The whole point of this Bill is that it is flexible, proportionate and gets things right. At the end of the day, that is what we are trying to do, rather than putting in a timescale.

[Vicky Ford]

For the record, when the DMU tells a company what to do, does the Minister agree that that should always be done as quickly as possible, given that there may be technical changes to get things done as well? This is not a suggestion that decisions or actions should be delayed.

[Paul Scully]

I totally agree. That is exactly the point. Let us make it quickly, but we do not want an arbitrary timescale so that we rush and get the decision wrong. It is more important to get the answer right. For those reasons, I hope that the hon. Member for Pontypridd will withdraw her amendment.