Digital Markets, Competition and Consumers Bill

Viscount Colville of Culross Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[Viscount Colville of Culross (CB)]

My Lords, I declare an interest as a television producer. I too welcome this Bill, which has been a long time coming.

Five and a half years ago, I had the honour to be a member of the Communications and Digital Committee inquiry into digital advertising in the UK. We heard how the two big tech companies, Facebook and Google, used the combination of their massive databases and near-total control of the supply, intermediary and purchase sides of the digital advertising market to take a more than 80% share. Our inquiry recommended that the CMA conduct a market study as quickly as possible into the digital ad market. Two years later, that market study confirmed the tech companies’ near-complete domination of the market. It concluded that the lack of competition harmed consumers by excessive exploitation of their data and lower quality of service to them and to advertisers.

However, the tech companies’ dominant position in the market has also had a deleterious effect on media advertisers. Publishers of news in particular have suffered from the massive reduction in advertising revenue. In the first half of 2020, while tech platforms’ ad revenue grew, digital advertising fell by 8% for national news brands, by 10.5% for online magazines and by 10% for online regional titles. It is expensive to create original news and, especially, to launch investigative journalism, which is essential to holding those in power to account.

It was therefore not surprising that the Communications and Digital Committee launched an inquiry into the future of journalism in the digital age. Journalism deserves special consideration in this Bill. I say this not just because I am a career journalist but because it plays a role of public value and importance to our society and democracy. It helps people stay informed about the world beyond their personal experience—surely a prerequisite for an active citizen in a democratic society—but it is under threat, especially the provision of local news.

In the digital age, people’s consumption of news has moved dramatically online. Ofcom’s 2021 report showed that 45% of UK adults got their news through social media sites. The number must be much greater now. Much of this is posted by users and viewed on platforms without reference or redirection to the publishers’ websites. The tech companies have their own curated news sites, such as Google’s news showcase and Facebook news, which aggregate news from a wide variety of sites. An article from an extreme magazine can sit alongside FT journalism and the reader be none the wiser. All this is damaging for the brands of the legacy media. Most news publishers have moved online, but the combination of falling advertising revenue and the tech companies’ free use of their news—at best giving minimal remuneration for their provision of it—has led to considerable cost-cutting and redundancy.

There are a few glowing exceptions in America. When Mark Thompson was CEO of the New York Times he invested massively in journalism, and the company is managing to make a profit from digital subscriptions. But to compound the exploitation of media companies, artificial intelligence is also using journalistic content as a free database for training its large language models. An academic paper published recently found that the greatest source of data for OpenAI’s LLMs came from the New York Times. The BBC ranked second, with its content providing 1.6% of the total database, and the Guardian closely followed with 1.5%. This content is so valuable for AI training because the data is of high value and original. Most importantly, it is taken from the publishers by the AI firms for free.

It is not surprising that the exploitation of the media publishers by the tech companies is having a devastating effect. In the last 17 years, more than 271 print titles have gone out of business, and goodness knows how many have become freesheets, sacked their journalists, withdrawn from covering local councils and courts, and mainly publish press releases. Reach plc, one of the biggest publishers of local news, recently announced 450 redundancies, including 320 editorial roles. That was its third round of cuts in 2023 alone, bringing the total number of jobs at risk to more than 1,000. The trend is accelerating.

The power imbalance between tech companies and publishers means that the former are not prepared to move much to reduce their dominance of the digital ad market, provide proportionate remuneration for the use of journalistic content or give publishers more control over how their content is used and provenanced. So I greatly welcome the final offer mechanism and the conduct requirement process set up in the Bill. The threat of the final arbitration by the regulator of two offers of remuneration is obviously a backstop, and I know that His Majesty’s Government hope that the CMA will never have to be in a position where it can make this decision.

However, my concern, and that of many people in the media, is that this beautifully thought out and carefully crafted CR process, which gives plenty of opportunity for the designated SMS companies to abide by a code of conduct, could take a year and a half to complete, if not longer, whereas in Australia it takes six months to come to arbitration. Meanwhile, many small publishers, which are already on the edge financially, will not be able to wait that long.

My fear is that the tech companies have so much to gain from the present situation that they will act in bad faith. In Canada, the Government estimated that the value of news content to Google was 300 million Canadian dollars. However, after exhaustive negotiations it ended up paying just 76 million Canadian dollars. I too ask the Minister to consider whether Clause 38(3), when the SMS company has breached an enforcement order, could be a more effective point in the process at which to pressurise the two sides to agree fair terms.

Like the noble Lords on the Front Bench, I am worried about the introduction of the Clause 29 countervailing benefits, which were inserted at the last minute before the Bill went to the other place. I imagine it was done at the instigation of tech company lobbyists, who will use it to delay the CR process yet further. In the other place, the well-established definition of “indispensable benefit”, set out in the Competition Act 1998 and tested through the courts, has been thrown out. The Bill now has a new definition of benefit. Thresholds are set out in the clause, but the courts will still have to decide what “benefit” now means. Can the Minister explain how that will clarify and speed up the effectiveness of this Bill? The Bill is supposed to be dealing with anti-competitive practices set up by the SMS company, but surely Clause 29 creates an opportunity to give extra lobbying power to companies that already have the most effective and well-paid lobbyists in the world.

I am also worried by Clause 114, on the control that the Secretary of State has over guidance to the CMA in setting up the machinery of the CR process, and then also having power over guidance on setting up an individual SMS process. The noble Baroness, Lady Stowell, fought hard, and with some success, during the passage of the Online Safety Act to try to limit Ministers’ control over Ofcom’s work. Political independence must be the mainstay of a successful regulator. However, this clause as drafted gives the Government endless time and power to send guidance back to the regulator for revision. I am convinced that this will cause unnecessary delays and politicisation of the CR process. At the least, I would like to see a time limit introduced for the Minister to accept CMA guidance proposals.

I am also concerned about powers given to tech companies further down in the Bill, in Part 4. Clause 259 sets out the duties of a trader on the cancellation of a contract, and they focus on providing various types of notices and dealing with potential overpayments by the consumer. Although the retrieval of personal data is covered under the GDPR, there is no provision for the retrieval of non-personal data, which might have been provided to the trader during the subscription period. This could be data about household fuel consumption, cloud-based Word documents, comments on social media or videos uploaded to video-sharing platforms.

The consumer might want the legal right to retrieve their data from the service before the subscription ends. More importantly, the trader might want to keep non-personal data and make it available to other users without the consent of the consumer. In my view, this is an omission that many people would be pleased to have rectified by an amendment to the Bill.

I too share the frustration of the noble Lord, Lord Vaizey, about the difficulty of ending subscriptions. An even more popular option to the Bill would be the introduction of an end-of-contract button labelled “terminate now” on the front page of digital services websites. Often it is hard to find the unsubscribe button on a website. On occasions it has taken me some time to burrow down through the layers of a site to find the unsubscribe button hidden away in a digital corner. German law provides for a compulsory button, which allows the consumer to enter all the essential information needed to end the contract—that would be a benefit to the customer.

This is a huge and complex Bill, and it has been a long time in its gestation. I am very pleased to see our country finally confronting the anti-competitive behaviour of the big digital players and protecting consumers for the long term.

Digital Markets, Competition and Consumers Bill

Viscount Colville of Culross Excerpts

Committee stage
Monday 22nd January 2024 Grand Committee

[Lord Clement-Jones (LD)]

My Lords, at the opening of this Committee stage, I want to repeat, rather in the same way as the noble Baroness, Lady, Jones, what I said on Second Reading: we broadly welcome this Bill. In fact, since the Furman report was set up five years ago, we have been rather impatient for competition law in the digital space to be reformed and for the DMU to be created.

At the outset, I also want to thank a number of organisations—largely because I cannot reference them every time I quote them—for their help in preparing for the digital markets aspects of the Bill: the Coalition for App Fairness, the Public Interest News Foundation, Which?, Preiskel & Co, Foxglove, the Open Markets Institute and the News Media Association. They have all inputted helpfully into the consideration of the Bill.

The ability to impose conduct requirements and pro-competition interventions on undertakings designated as having strategic market status is just about the most powerful feature of the Bill. One of the Bill’s main strengths is its flexible approach, whereby once a platform is designated as having SMS, the CMA is able to tailor regulatory measures to its individual business model in the form of conduct requirements and pro-competition interventions, including through remedies not exhaustively defined in the Bill.

However, a forward-looking assessment of strategic market status makes the process vulnerable to being gamed by dominant platforms. The current five-year period does not account for dynamic digital markets that will not have evidence of the position in the market in five years’ time. It enables challengers to rebut the enforcer’s claim that they enjoy substantial and entrenched market power, even where their dominance has yet to be meaningfully threatened. Clause 5 of the Bill needs to be amended so that substantial and entrenched market power is based on past data rather than a forward-looking assessment. There should also be greater rights to consultation of businesses that are not of SMS under the Bill. As the noble Baroness, Lady Jones, said, this will be discussed later, under another group of amendments.

The provisions of Clause 5, as it is currently worded, risk causing problems for the CMA in practice. Part of the problem is the need for evidence to support a decision by the CMA of a market position over the entire five-year period. The five-year period requires current evidence of the position in the market in five years’ time. In dynamic digital markets such as these, no such evidence is likely to exist today. The CMA needs evidence to underpin its administrative findings. Where no such evidence exists, it cannot designate an SMS firm.

The CMA will have evidence that exists up to the date of the decision—evidence of the current entrenched position, market shares, barriers to entry, intellectual property rights and so on. In that respect, we support the noble Baroness, Lady Jones, with her Amendment 1, because it should of course include earlier investigations by the CMA. All that evidence exists today in 2024, but what the position will be in 2028 will need to be found and it has to be credible evidence to support a CMA decision under Clause 5. Particularly in fast-moving technology markets, the prediction of future trends is not a simple matter, so lack of sufficient evidence of the entrenched nature of a player at year 5 or over the entire period would prevent a rational decision-maker from being able to make a decision that the player will have SMS over the five-year period, as demanded by the Bill. Every designation and subsequent requirement or investigation imposed on the designated undertaking risks being subject to challenge on the basis of insufficient evidence.

As the Open Markets Institute says,

“the inevitably speculative nature of a forward-looking assessment makes the process vulnerable to being gamed by dominant platforms. For example, such firms may use the emergence—and even hypothetical emergence—of potential challengers to rebut the enforcer’s claim that they enjoy substantial and entrenched market power, even where their dominance has yet to be meaningfully threatened by those challengers”.

It gives the example of the rise of TikTok, which Meta has used in arguments to push back against anti-trust scrutiny:

“Yet while experiencing rapid growth in terms of user numbers, TikTok has so far failed to seriously challenge the economic dominance of Meta in online advertising (the basis of Meta’s market power), generating less”


than

“a tenth of the latter’s global revenues. Dominant platforms will also use emerging technologies—such as generative AI—to claim that their dominance is transitory, claims that will be difficult for the CMA to rebut given future uncertainty”.


Our Amendments 3, 4, 5 and 6—here I thank the noble Lord, Lord Vaux, for his support for them, and sympathise with him because I gather that his presence here today has been delayed by Storm Isha—suggest that the number of years should be removed and the provision clarified so that the assessment is made based on current evidence and facts. If the market position changes, the CMA has the power to revoke such designation in any event, on application from the SMS business, as provided for by Clause 16.

That is the argument for Amendments 3, 4, 5 and 6 in Clause 5. I look forward to hearing what the noble Viscount, Lord Colville, has to say on Amendment 7, which we very much support as well.

[Viscount Colville of Culross (CB)]

My Lords, I have put down Amendment 7 to Clause 6 and, in later groups, amendments relating to Clauses 20 and 114. I will come to them later in Committee, but all of them have the aim of limiting the wide powers given to the Secretary of State in the Bill to intervene in the setting up of the processes for dealing with anti-competitive behaviour by the big tech companies. Amendment 7 would prevent the Secretary of State having broad powers in revising the criteria for establishing the designation of the SMS investigative process. My particular concern is about the power that the Minister might have to alter the criteria for the process in order to de-designate a company following heavy lobbying.

As this is my first intervention at this stage of the Bill, I join other noble Lords in saying that I too very much welcome it and the Government’s approach to dealing with anti-competitive behaviour by the big tech companies. In fact, I welcome it so much that I want to ensure that it is implemented as quickly and effectively as possible, to safeguard our digital start-ups and smaller digital companies.

The independence of the CMA is central to the effectiveness of the processes set out in Part 1. However, the huge powers given to the Minister in these chapters should worry noble Lords. They are proposing great powers of oversight and direction for the Secretary of State. I fear that these will undermine the independence of the CMA and dilute its ability to take on the monopolistic behaviour of the big tech companies. I hope that these amendments will go some way to safeguard the independence of the regulator.

I support the collaborative approach set out in the SMS and conduct requirement processes; it seems to be preferable to the EU’s Digital Markets Act, which is so much more broad-brush, with a much wider investigation into designated companies’ business activities. The Bill sets out a greater focus on a company’s particular activity and ensures that the CMA and the DMU work closely with stakeholders, including the tech companies which are going to be under investigation. However, despite this collaboration, it can only be expected that the companies involved in the process will want to give themselves the best possible chance of maintaining their monopolistic position. Clause 6 is central to the start of the process—after all, it sets out when a company can be considered to be under DMU oversight.

Designation as an SMS player means only that the company is subject to the jurisdiction or potential oversight of the DMU; it does not mean that it has done anything wrong. The deliberate aim of the Bill is to ensure that only large players are to be included in the SMS status. These criteria will not dictate how the investigation will go, so the criteria for designation as an SMS player does not need to be changed if the market changes. However, Clause 6(2) and (3) will give Ministers power to take criteria away from this section. This will mean that powerful tech players could fall outside the jurisdiction of the DMU and will not be open to SMS designation as a result. If the clause allowed only new criteria to be added, so that a wider scope of companies could be included, that would not be so bad. However, the ability to reduce the scope of the DMU’s potential designation should alarm noble Lords. These subsections give the tech companies huge powers to lobby the Secretary of State to ensure that there is not the possibility to designate them. Effectively, this would be a de-designation of these companies, which would defeat the purpose of the CR process before it has even got off the ground.

I am also concerned that the Secretary of State’s powers in this clause go against the law’s need to be normative: as a basic principle, it must apply to all the companies, without discrimination. The DMCC Bill is a law that applies only to those who qualify, but it is, in principle, generally applicable. Chapter 2 of Part 1 sets out a set of criteria that apply to all companies, but only a few will satisfy the criteria. The criteria for being an SMS requires enduring market power and a collection of other criteria. It is likely, as a result, that these will cover Microsoft, Amazon, Apple, Google and Facebook; each has enduring market power and qualifies for designation under the criteria in Clause 6. However, if that law can be varied by a Secretary of State to take away criteria, as it currently can, then the law can be made to apply to only a few companies. At the extreme, it could be altered to apply to only one or two. I am advised by lawyers that this is likely to be discriminatory.

Imagine if the law were varied so it applied only to a business that provides both a digital platform and home deliveries. This would mean it would apply only to Amazon, and the company would go to town lobbying against the change in criteria as discriminatory. Noble Lords must continually remind themselves that the Bill is taking aim at the biggest, most powerful companies in the world. I ask them to consider just how far these companies would go to put pressure on politicians and Ministers to safeguard their position, and how effective that pressure can be in changing their minds.

--- Later in debate ---

[Viscount Colville of Culross (CB)]

My Lords, I tabled Amendment 32 in my name, and I thank the noble Baroness, Lady Jones, and the noble Lord, Lord Clement-Jones, for adding their names. I also thank the organisations that helped me work on these amendments. Amendment 32 to Clause 20 would stop the Secretary of State from revising the criteria for the conduct requirement process. These criteria are already very broad, but subsections (4) and (5) give the Minister huge scope to alter the types of behaviour expected from the SMS as part of the CR process.

Amendment 22, in my name and that of the noble Lord, Lord Clement-Jones, aims to respond to government concerns about removing Clause 20(4) and (5), which are that it will prevent the Minister future-proofing the CR criteria by allowing the CMA leeway to alter criteria in Clause 19, which will open the way for the imposition of conduct requirements.

I also support attempts to encourage interoperability between user and digital activity in any way possible, so I support Amendment 20, in the name of the noble Lord, Lord Lansley, and Amendment 21, in the name of the noble Lord, Lord Clement-Jones.

On my Amendment 32 in Clause 20, the conduct requirements for the process will be hard-fought by the tech companies. The collaborative nature of the Bill will mean that the SMS will be very involved in setting up the regime, but it will also be following every possible avenue to ensure that the requirements are not burdensome to its businesses. However, subsection (4) gives the Secretary of State broad and unlimited time to be subject to lobbying and to change the nature of the contact requirements.

I have already given an example in my speech on Amendment 7 to show the lengths to which tech companies will go to affect the decisions of politicians in establishing an SMS designation. This amendment will have a similar effect of thwarting their attempts to interfere in the CR process. Over the last decade, a number of cases have been brought against the big tech companies by the EU anti-competitive regimes. As part of that process to rectify the anti-competitive behaviour, the regulators have laid out behaviour for the companies under investigation. These are sets of rules aimed to force the companies to change their conduct and reduce their dominance in the market.

The process is very complicated, and small tweaks can make the difference between success and failure of the rules and their ability to control anti-competitive behaviour. Implementation takes time. Consultation on the rules between the DMU, the SMS and other stakeholders can mean it takes up to six months to put into action, then it takes another several months before the market study on how the new conduct regime criteria are working can be assessed. In the meantime, the SMS continues to make huge profits, while the smaller competitors continue to suffer the loss of market activity.

My concern about the clause is that, even if the CMA comes across a new type of harm and can see clearly what remedy would apply, it cannot create its own remedy under the clause. This is most unusual for a regulatory body. Usually, the breach of law is investigated, and the remedy tailored by that body to proportionately fit the harm identified. The regulator is usually granted the power to craft the remedy itself.

The Government are keen to build a system which is speedy and effective, and so there is the list of tools that can be used as remedies in Clause 20, which is useful, but, instead of a speedy, sensible mechanism which would be in the hands of the expert regulator of digital markets, an additional step has been put in place. That additional step—going back to the Secretary of State to create regulations—is a slower and more complicated way to craft this remedy. The DMU must be left to use its professional expertise to set these rules.

At a later stage, we will be talking about the suggestion of the noble Baroness, Lady Stowell, to have some parliamentary committee involvement. I wonder why on earth we cannot have parliamentary committee involvement when looking at these particular Secretary of State powers and the way that the DMU would use them.

To deal with the concerns that the Minister might have about the lack of future-proofing, I also tabled Amendment 22. Its aim is to respond to claims by the Government that the removal of Secretary of State powers in Clause 20 will stop the future-proofing. Noble Lords know that, in the fast-changing digital world, even the most comprehensive list of criteria might not include all possible eventualities; my amendment deals with those concerns. It stems from the powers of the CMA to look at the objectives of the conduct requirements in Clause 19(5), which are comprehensive: they cover “fair dealing”, “open choices” and “trust and transparency”. Only conduct requirements of the permitted type in Clause 19(5) can be imposed under Clause 20 on the CR regime.

Clause 20 is currently a permitted list for the regime; in future, the CMA may want to change the criteria needed to achieve the objectives of Clause 19(5) as markets inevitably change. I suggest to noble Lords that Amendment 22 will achieve that. I have argued that the fear of the Secretary of State succumbing to the lobbying powers of the big tech companies is something to worry about. This small amendment will solve that problem and give flexibility to the CR process, without the danger of political interference.

[Baroness Stowell of Beeston (Con)]

My Lords, as this is the first time I have spoken in Committee, I declare that I chair the Communications and Digital Select Committee—but I am speaking in a personal capacity. This is quite an eclectic group of topics; it makes me wonder what will be in the group labelled “miscellaneous”.

I will talk about the leveraging principle, but before doing so, I acknowledge what has already been said about parliamentary accountability and the fact that I have an amendment in a later group. To pick up a point that the noble Viscount, Lord Colville, just made about his amendment to Clause 20, if we were to have a new Select Committee, there is no reason why, in the course of its business, it would not look at regulations being brought forward. I would expect there to be that sort of role for a Select Committee, but it would not replace the role of the Secretary of State in this context. We will come back to that when we get to the specific amendment.

The amendment on copyright is very interesting to me, not least because the Communications and Digital Committee is currently carrying out an inquiry on large language models. We are in the final stages of that inquiry and will publish our report very soon. We will have, I hope, some interesting things to say about copyright at that time.

I turn to my point on the leveraging principle; in particular, I will pick up on Amendments 26 and 27 in the name of the noble Baroness, Lady Jones. When the Communications and Digital Committee carried out our scrutiny of the Bill and held hearings in the summer, we looked at the leveraging principle and concluded that what was in the Bill was adequate; we did not propose any further changes being necessary. Noble Lords may remember that, at Second Reading, I raised concerns about how the Government had diluted various bits of the Bill that we, as a committee, had said, “Do not do that”. As I understand it, they have not diluted the leveraging principle. However, I am a great believer in judging people by their actions rather than by what they say. Over the last few weeks, I have been very interested in the various representations that have been made to me and others from the different challenger firms and industry bodies in this area. I see and am sympathetic to their concerns on this topic.

Only today, I was interested to read the Bloomberg daily newsletter on tech matters, which refers to the recent case in the US in which Apple has been forced to make some changes to its 30% fee policy. It has already started introducing things that make that almost meaningless to those who might benefit from it. The newsletter explains what people have to do to use a different payment system from Apple’s and avoid the 30% fee. It says:

“In order for developers to include a website link in their apps to an outside payment system, they’ll first need to submit a request form to Apple. If approved, the link can only be displayed once within the app. It must look like a text URL—meaning it can’t be a candy-colored button that says ‘Use PayPal’—and the text itself must match one of seven templates”.


It continues:

“When clicked, the link will surface a warning from Apple about the risks of transacting with third-party websites, with ‘continue’ or ‘cancel’ buttons. The website has to open in the device browser, rather than from a pop-up within the app, where, depending on the type of service, a user can sign in or register for a new account”;


in other words, you will not bother by the time you have got through all that.

That was a long-winded way to say that I am minded to support what the noble Baroness, Lady Jones, is seeking to do with the leveraging principle here. A safeguard is necessary, but, as I said at the beginning, I am speaking in my own personal capacity.

Digital Markets, Competition and Consumers Bill

Viscount Colville of Culross Excerpts

Committee stage
Wednesday 24th January 2024 Grand Committee

I look forward to noble Lords’ contributions to this debate. There is not one answer to the questions we are posing, but I beg to move the amendment.

[Viscount Colville of Culross (CB)]

My Lords, I have put my name to Amendment 48 in the name of the noble Baroness, Lady Jones of Whitchurch, and I support dropping Clause 29 from the Bill.

These amendments are also about speeding up the process of stopping anti-competitive behaviour by the tech companies. It is essential that no hostages to fortune are given for tech company lawyers to drag out the process, as many noble Lords said, particularly in the first group.

I want noble Lords to bear in mind that, for every big tech company, every week they succeed in delaying a decision against their anti-competitive practices is one in which they earn millions of pounds, while their competitors are left struggling in so many areas. Speed is of the essence.

As a former newspaper journalist, my most immediate field of concern is local and regional media, which are suffering from the anti-competitive behaviour of the tech companies. There has been a collapse in local newspapers over the past decade and in the next three years this will turn in to a major exodus, with huge areas of the country becoming local news deserts with nobody reporting on local councils, courts and other important civic activities.

The Digital Markets Taskforce study on digital advertising found that the tech companies had used network effects and economies of scale to dominate the market. It concluded that the “more vibrant competition” in the market would improve

“the bargaining power of online news publishers”,

which would

“improve the health and sustainability of journalism in the UK”.

In turn, this would

“contribute positively to the effectiveness and integrity of our democracy”.

On top of this, much of the news content generated by these media companies is used by tech platforms either for free or for little remuneration.

I have long campaigned for the final offer mechanism to be available to the CMA as a powerful deterrent against anti-competitive behaviour by the tech companies, but surely all deterrents are more effective if there is a realistic chance that they will be deployed, and in a short time. Once the CR requirements on an SMS have been imposed, breached and reported, the CMA should be in a good position to know whether the designated SMS company will take the long or short road to a solution. Amendment 48 would allow the CMA to issue an enforcement order, decide whether that has been breached and investigate the breach, if it feels that it will lead to a satisfactory resolution to the company’s behaviour. However, if, earlier in the process, the solution is not going to be possible, the regulator needs the power to bring forward its ultimate deterrent. No SMS will want to have the final offer mechanism imposed on it, and I understand that the CMA is equally reluctant to deploy it, but the more pressing the threat the more likely it is that the DMU investigation will be brought to a quick and effective resolution.

I know that these companies will fight tooth and nail to preserve their massive profits resulting from the anti-competitive behaviours. It might be useful for the Committee if I give just one really shocking example of how effective these delaying actions can be. The salutary lesson is the story of a nascent shopping comparison site, Foundem, based in London and founded in 2005, which was doing very well until 2008, when it was massively deprioritised on Google Search, at about the same time that Google Shopping, the search engine’s own shopping comparison site, was set up. Foundem issued a complaint to the EU Commission in 2009 about anti-competitive behaviour by Google. The Commission set up an investigation and, three years later, after many legal arguments, Google was given a preliminary assessment—similar, I imagine, to an SMS designation. Rules were then laid down for the company to follow, but within six months market tests revealed that it was not tackling the anti-competitive behaviour. The response was dragged out by Google until 2016, when it was given a supplementary statement of objectives, which were also heavily fought by the search engine.

Finally, on 27 June 2017, the EU imposed a record €2.4 billion fine on Google for violating EU competition law. However, the company appealed, first to the EU General Court and then to the Court of Justice of the European Union. Final judgment on the case has yet to be issued. Meanwhile, Foundem exists in order to fight the case, but it suspended all its services eight years ago. This is a 15-year David-versus-Goliath battle with a company, some of whose activities CMA might have to designate. This legislation must be drafted to ensure that the process brings results, and fast, if small digital competitors are to have a chance of surviving.

Already the CMA estimates that the designation process will not become operational until June 2025. I know that the hope is to set up a designation process at the same time as negotiating the conduct requirements, but that could still take up to nine months to implement on the SMSs. Meanwhile, many of the smaller media outlets I talked about earlier will have gone under.

The same arguments for legal delay by tech companies must apply to Clause 29, which introduces the concept of countervailing benefits. I do not understand the need for Clause 29. Clearly, the balance between consumer benefit and anti-competitive behaviour will have been looked at as part of the SMS designation process, which is clearly set out in the Bill. Does the Minister think that our world-class regulator will ignore these considerations in the initial process? If they will be considered then, why introduce this clause for consideration all over again? I have already explained the need for speed in the CMA’s process. This exemption can only play into the hands of the tech companies to draw out the processes and hold up the prospect of many more companies like the start-up shopping search website Foundem being littered by the digital wayside. I ask the Government to seriously consider taking Clause 29 out of the Bill.

However, I support the fallback in Amendment 40, to have the word “indispensable” inserted into the clause. Your Lordships’ Committee has heard that “indispensable” was taken out on Report in the other place. The Minister has said that the simple threshold of “benefit” is already established in Section 9 of the Competition Act 1998 and Section 134(7) of the Enterprise Act. However, the former talks of an “indispensable benefit” and the latter just of a “benefit”. The Minister says that the two thresholds are the same; clearly, they are not.

The new definition of the grounds on which anti-competitive conduct can be permitted states that

“those benefits could not be realised without the conduct”.

It requires only that anti-competitive conduct be necessary, rather than indispensable, which means that anti-competitive behaviour is the only way to achieve the benefit. Surely, if that is the case, it would be better for the consumer, in whose name the Bill is being enacted, to have the highest possible threshold of benefit.

The Explanatory Notes open up avenues for further legal wrangling by lawyers, as they say the definition of benefit will be similar to that in the Competition Act and the Enterprise Act. As the two Acts use “benefit” in different ways, that will surely lead to confusion. Is the use of the word “similar” because it is not possible to say “same”, in the light of the divergent terms that appear in these two Acts? Without it, there seems to be room for legal ambiguity. At the very least, there should be an explanation in the Bill that establishes “benefits” as having the same definition as in the Competition Act.

I know that all noble Lords want the Bill to be implemented and effective with all possible speed, to make this country a world leader in digital start-ups. However, it needs to be amended to avoid legal confusion and unnecessary delay by world players that have everything to gain from protecting their dominant position in markets.

[Lord Fox (LD)]

My Lords, on the pretext that he would not be here, my noble friend passed responsibility for this group on to me. As noble Lords can see, he is “not” here. This is a long group and my noble friend managed to attach his name to every amendment in it, with the exception of the two proposed by the Minister, so I apologise if I give a slightly long speech on his behalf.

I spoke at Second Reading, but I was not here for the first day in Committee, as I was in the Chamber speaking to the main business there. My noble friend has tabled Amendments 38 and 41, on countervailing benefits; Amendment 43, on goods and services; Amendments 49, 50 and 51, on final offers; and Amendment 107, on injunctions. He also supports Amendments 36, 39 and 40 from the noble Baroness, Lady Jones, which seek to restore the status quo of Clause 29.

In Clause 29, as we know, there is an overarching provision that enables SMS designated firms to push back on regulatory decisions through a countervailing benefits exemption. This is, in our opinion, a potential legal loophole for big tech to challenge conduct requirements through lengthy, tactical legal challenges. We just heard an example of how similar measures can be employed. This is a significant loophole, not a small one, and it would require the CMA to close a conduct investigation into a breach of conduct requirement when an SMS firm is able to prove that the anti-competitive conduct in question produces benefits which supposedly outweigh the harms, and that the conduct is “proportionate”—that word again—to the realisation of those benefits. It has the potential to tie up CMA resources and frustrate the intent of the legislation. It is critical that these provisions do not inadvertently give designated firms immunity from CMA decisions. We heard from other speakers that the scale of resources at the command of these companies far outweighs the resources that the CMA would be capable of summoning. That inevitably leads to the ability to clog things up.

As the noble Baroness, Lady Jones, explained, the Government added amendments to the Bill on Report in the Commons that could further weaken the ability of the DMU to push back against spurious claims of consumer benefit. The removal of the term “indispensable” may weaken the regulator’s ability to rebuff these claims as, by analogy with competition law, the use of the term “indispensable” is likely to require a high standard for firms to meet; therefore, the standard is now lower.

--- Later in debate ---

[Baroness Stowell of Beeston (Con)]

My Lords, one of the arguments that has been advanced—I did not make it in my remarks because I forgot—is that part of the problem with changing the word from “indispensable” to what is now in the Bill is that the current phrase has not been tested in the courts, whereas “indispensable” has. The argument that changing from “indispensable” to what we have now provides clarity is one that is really hard for people to accept, because the clarity it is providing is not, seemingly, in everyone’s interests. That is part of the problem here.

[Viscount Colville of Culross (CB)]

If “indispensable” and purely “benefit” are the same, why was the change made on Report in the Commons?

[Baroness Kidron (CB)]

I was really interested in the introduction of the word “unknown”. The noble Lord, Lord Lansley, set out all the different stages and interactions. Does it not incentivise the companies to call back information to this very last stage, and the whole need-for-speed issue then comes into play?

[Viscount Camrose (Con)]

I will revert first to the questions about the word “indispensable”. As I have said, the Government consulted very widely, and one of the findings of the consultation was that, for a variety of stakeholders, the word “indispensable” reduced the clarity of the legislation.

[Viscount Colville of Culross (CB)]

So it is not the same?

[Baroness Harding of Winscombe (Con)]

Before my noble friend answers that, can he shed some light on which stakeholders feel that this is unclear?

Digital Markets, Competition and Consumers Bill

Viscount Colville of Culross Excerpts

Committee stage
Monday 29th January 2024 Grand Committee

Moved by

[Viscount Colville of Culross]

76: Clause 114, page 70, line 37, leave out paragraph (b)
Member's explanatory statement
This amendment removes the requirement for the CMA to obtain approval from the Secretary of State before publishing its guidance outlining how it will exercise its functions.

[Viscount Colville of Culross (CB)]

My Lords, I have asked for my Amendment 76 to Clause 114 to be decoupled, because I think it goes to the centre of the operation of Part 1 and I want noble Lords to focus on debating the issues raised by this clause as it stands. I also thank the noble Baroness, Lady Jones of Whitchurch, and the noble Lords, Lord Black and Lord Holmes, for putting their names to this amendment. I am glad that Amendment 77 in the name of the noble Baroness, Lady Stowell, is also in this group; I support its aims. Clause 114 seems to be a small section hidden away on page 70 of the Bill, yet the guidance process that it outlines is fundamental to the operation of the regime set out in Part 1 of the Bill.

This is a high-level Bill, which leaves a lot of fine-tuning and detail to the CMA. It will be the first part of the process to become operational after Royal Assent has been granted. Without these guidelines, the CMA will not be able to start its urgently needed investigations into the activities of large tech companies and their domination of many digital markets.

--- Later in debate ---

[Viscount Camrose (Con)]

I am happy to look into that as a mechanism, but, as currently set out in the Bill, the logic is that the Secretary of State can approve the guidance.

The Government will continue to work closely with the CMA, as they have throughout the drafting of the Bill, to ensure that the timely publication of guidance is not disrupted by this measure. Published guidance is required for the regime to be active, and the Government are committed to ensuring that this happens as soon as possible. Guidance will be published in good time before the regime goes live, to allow affected stakeholders to prepare. The Government hope that, subject to parliamentary time and receipt of Royal Assent, the regime will be in force for the common commencement date in October this year.

In response to my noble friend Lord Black’s question about guidance and purdah, the essential business of government can continue during purdah. The CMA’s guidance relates to the CMA’s intentions towards the operation of the regime, rather than to a highly political matter. However, the position would need to be confirmed with the propriety and ethics team in the Cabinet Office at the appropriate time, should the situation arise that we were in a pre-election period.

I thank the noble Viscount, Lord Colville, and my noble friend Lady Stowell for their amendments, and I hope that this will go some way towards reassuring them that the Government’s role in the production of guidance is proportionate and appropriate. As I said, I recognise the grave seriousness of the powerful arguments being raised, and I look forward to continuing to speak with them.

[Viscount Colville of Culross (CB)]

I thank noble Lords for their contributions and ask the Minister to listen to the concerns Members have expressed today. The clause gives extraordinary power to the Secretary of State, and I ask the Minister to listen to his noble friends, the noble Baronesses, Lady Stowell and Lady Harding, who called the power dangerous. In particular, the noble Baroness, Lady Harding, said that it was so dangerous and such a big power that it must be a distraction.

The noble Lord, Lord Black, said that the concern about having this power is that it would create a delay, and that that would especially be a concern over the period of the election, both before and after. He called for draft guidance to be approved within 31 days, which is certainly something that could be considered; after all, no one wants ping-pong to go back and forth do they? They want the CMA’s guidance to be put into action and this process to start as soon as possible.

The noble Baroness, Lady Kidron, said that the asymmetric power between the regulators and the tech companies means that there will be a drum beat of what she called “participative arrangements”. That is quite a complex thought, but the idea behind it—that the CMA must not be stopped from using its power to deal with some of the most powerful companies in the world—is very important.

The noble Baroness, Lady Stowell, is a former regulator and called for Parliament to have a role in overseeing this. We were reminded by both the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Kidron, that we had a discussion on Secretary of State powers in the debate on the Online Safety Act, much of which was about whether a joint digital committee could oversee digital regulation. I suspect that that will be discussed in the next group. We have given enormous powers to Ofcom with the Online Safety Act, we are giving big powers to the CMA and I imagine that we are giving big powers to the ICO in the Data Protection Act, so Parliament should have a powerful standing role in dealing with that.

The Minister called for robust oversight of the CMA and said that it must be accountable before Parliament. Already, Parliament looks at its review and annual reporting. I come back to the concern that the Secretary of State still has powers that are far too great over the implementation of this guidance, and that the CMA’s independence will be impinged on. I repeat what I and other noble Lords said on the concern about Clause 114: it stands to reduce the CMA’s independence. I ask the Minister to consider very seriously what we have been saying.

The Minister’s suggestion that he will look at the affirmative resolution for Secretary of State approval of guidance is something that we should certainly push further—at least that is some step towards reducing Secretary of State powers. With that, I beg leave to withdraw my amendment.

Amendment 76 withdrawn.

Digital Markets, Competition and Consumers Bill

Viscount Colville of Culross Excerpts

Committee stage
Wednesday 7th February 2024 Grand Committee

None of the amendments that I have put forward would in any way dilute the protection for customers that we all want to see but they would protect British businesses, particularly in the vital creative economy, which we all want to see grow and prosper. If the issues that I have raised are not to be remedied here in Committee, I encourage the Government to commit to looking further into this issue as we approach Report. I beg to move.

[Viscount Colville of Culross (CB)]

My Lords, I tabled Amendment 190, and I thank the noble Baroness, Lady Jones of Whitchurch, and the noble Lord, Lord Clement-Jones, for adding their names to it. I also thank Professor Christian Twigg-Flesner from the University of Warwick for his help in creating this amendment.

Clause 259 sets out the obligations of a trader when a consumer is entitled to cancel or bring a subscription contract to an end. They are limited to providing various types of notice and dealing with potential overpayments by the consumer. Many subscription contracts relate to all digital content. These will involve the provision of both personal and non-personal data under the contract. On ending the contract for a digital service, there needs to be clarity about what should happen to all the subscriber’s data.

The whole point of this amendment is that it lays duties on a trader, on the cancellation or end of a subscription contract, to ensure that the consumer gets all their data back, not just that narrowly defined as personal data. At the moment, only personal data is covered under the UK GDPR. This is defined very narrowly in Article 4. “Personal data” is defined as only

“information relating to an identified or identifiable natural person … an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier”.

Under Article 20, which covers the right of portability of data, the user can end a contract, which is tantamount to withdrawing their consent for the continuing processing of personal data. It ensures that the trader cannot use this personal data any more. Article 17 provides the consumer with the right to have the personal data erased after exercising the Article 20 portability right to download their personal data. Personal data, therefore, as narrowly defined, is well protected under the law at the end of a subscription.

However, the consumer might have a lot of other data that is not within the narrow definition of “personal data”. This is non-personal data. There is no provision under UK consumer law that deals with non-personal data following the end of a contract. This would have been covered by the 2019 EU directive on digital content and digital services, in Article 16, but that came into force only on 1 January 2022, long after the UK had left the EU.

Amendment 190 will deal with the absence of protection for non-personal data in English law. It will give the user control over all their data, both personal and non-personal. Proposed new subsection (7) protects all the consumer’s data created under the contract. This covers both personal and non-personal data. Proposed new subsection (8) allows for all this data to be returned to a user within a “reasonable period” after the end of the contract. Proposed new subsection (9) gives a balance to these consumer rights by creating exemptions for the trader to have to return the data, especially if it is part of a bigger dataset that cannot be easily separated out. Proposed new subsection (10) is particularly important, because it prevents the trader continuing to use the consumer’s non-personal data at the end of the contract.

As I have explained, “personal data” is very narrowly defined. This leaves a mass of data created by the consumer during the contract that will need to be protected at the end of the contract. It will be if this amendment is adopted. Surely, the Minister would want the trader to return all the digital data that the consumer created on the platform, and to prevent the trader continuing to exploit it for financial gain.

To give noble Lords an example of the dangers to consumers if this amendment is not adopted, a consumer might want to end their subscription to their account at Flickr, the photo-sharing platform. At the moment, the clause will ensure that all the photos that identify the user will be regarded as personal data and returned to them. However, it might well not cover all the other photos that do not directly identify them. They could be holiday pictures of beaches in Greece, historic buildings or wildlife that they placed on the Flickr platform during their contract.

Once the contract is finished, Flickr can currently keep all the other photographs that the consumer has taken and refuse to return them. Furthermore, it can use them for financial gain. Likewise, a user’s comments placed against somebody else’s photos can be retained on the site by the trader after the end of the contract. On Flickr, the original author’s name is changed to a randomly chosen two-word alternative. However, the comments can be detailed and the consumer might well want to retrieve them, but they currently will not be able to.

Digital Markets, Competition and Consumers Bill

Viscount Colville of Culross Excerpts

Report stage
Monday 11th March 2024 Lords Chamber

Finally, the amendment also requires the Secretary of State to conduct a review in order to ascertain whether there are any other types of claim that might be appropriate for collective proceedings. No response has been given to that proposal, which I suggest is also eminently reasonable.

[Viscount Colville of Culross (CB)]

I have added my name to the Minister’s Amendment 1 with great pleasure, because the Government agree that the power in Clause 6 is one the Secretary of State does not need. I have also added my name to Amendment 56 as it aims to curtail an even greater Secretary of State power. In Committee, I tabled a series of amendments to limit the Secretary of State’s powers over various stages of the Part 1 conduct requirement process. At the time, we were told that these powers were needed to ensure that the regime could respond to the fast evolution and unpredictability of digital markets. I grateful to the Minister for changing his mind on one of these powers in Clause 6 and for tabling the amendment to leave out subsections (2) and (3), which, even with the affirmative procedure, were going to give the Secretary of State unnecessary powers. It is a sensible move, as the criteria for deciding whether a digital activity should be deemed of strategic significance are, as he said, broad and well set out in subsection (1).

My concern was that the powerful tech companies, whose market dominance will be investigated in the Part 1 process, might put pressure on Ministers to amend the four criteria in Clause 6 to dilute the range of company activities under consideration for SMS positions. I am satisfied that this amendment will stop that happening. I hope that the Minister will now listen favourably to other amendments, which will be debated today, to ensure that the conduct requirement process is as swift as possible and that the Secretary of State does not have overmighty powers to intervene in the process.

I am grateful to the noble Lord, Lord Lansley, for tabling Amendment 56, to which I have added my name, to Clause 114. Subsection (4)(a) as it stands gives too much power to the Secretary of State to approve these guidelines. As I said in Committee, it was pointed out that the guidelines are the most important part of the SMS process. They set out the framework for the conduct requirement process and allow implementation of the new powers the Bill gives to the CMA to examine market-dominant activities by big tech companies.

One of the reasons for my fear of the Minister’s powers is that she might be subject to lobbying by tech companies, as the noble Baroness, Lady Stowell, pointed out, either to change the guidelines or to slow down implementation. At the moment, the Secretary of State has the power to delay approval indefinitely, and, looking to the future, when the guidelines need to be updated or revised, she or her successor could do the same thing. I am grateful to the Minister and his officials for meeting me twice to talk about this issue. I appreciate his time and attention, but I am disappointed that he and the Bill team felt unable to do anything to fetter the Secretary of State’s powers with a time limit on delay for approval. The Minister feels that a time limit would make the process brittle, and fears that an election or some big political event could cause the process to time out. I ask noble Lords to bear in mind that the amendment deals with the Secretary of State’s powers of approval of the guidelines only, not the entire procedure for setting up the guidelines. If there were an election, ministerial work would stop. However, once the new Government were in place, the time limit could kick in and start again. The Secretary of State could then approve the guidelines in 40 days or send them back to the CMA with reasons.

In my meeting with the Minister, he kindly offered to publish letters exchanged between the Secretary of State and the CMA as the guidelines were created. This seemed a wonderful offer that would go far towards ensuring transparency in the process and allay fears of backstage lobbying, and go some way towards assuaging Members’ concerns about the process of creating guidelines. Unfortunately, the Minister rescinded that offer. I ask him in the name of the openness and transparency of the Part 1 process to reinstate it.

Such a move would complement the second part of Amendment 56, whereby if the Minister does not approve of the guidelines—which would surely be the only reason for delay—an open statement of reasons as to why the guidelines could not be approved would be published. Surely noble Lords agree that transparency in the guidelines process would go far in calming any fears of it being influenced by the big tech companies.

I want very much to see this Bill on the statue book, but the Secretary of State’s powers in Clause 114 are detrimental to the Part 1 process and need to be looked at again. I hope the Minister will accept Amendment 56. If not, I will support the noble Lord, Lord Lansley, should he decide to test the opinion of the House.

[Lord Black of Brentwood (Con)]

My Lords, I declare my interest as deputy chair of the Telegraph Media Group and my other interests as set out in the register. I will focus briefly on three crucial amendments in this group—on proportionality, the appeals standard, and the Secretary of State’s powers—echoing points that have already been made strongly in this debate.

I fully support Amendments 13 and 35 in the name of the noble Lord, Lord Faulks. The amendment made to the Bill in the Commons replacing “appropriate” with “proportionate” will significantly expand the scope for SMS firms to appeal the CMA’s decision to create conduct requirements and initiate pro-competitive interventions.

As we have already heard, the Government have sought to argue that, even absent the “proportionality” wording, in most cases the SMS firms will be able to argue that their ECHR rights will be engaged, therefore allowing them to appeal on the basis of proportionality. The question arises: why then introduce the “proportionality” standard for intervention at all, particularly when the CMA has never had the scope to act disproportionately at law?

In this context, it is clear that the main potential impact of the Bill as it now stands is that a court may believe that Parliament was seeking to create a new, heightened standard of judicial review. As the Government have rightly chosen to retain judicial review as the standard of appeals for regulatory decisions in Part 1, they should ensure that this decision is not undermined by giving big tech the scope to launch expensive, lengthy legal cases. All experience suggests that that is exactly what would happen by it arguing that the Government have sought to create a new, expansive iteration of JR. I fear that, if the amendments from the noble Lord, Lord Faulks, are not adopted, we may find in a few years’ time that we introduced full merits reviews by the back door, totally undermining the purpose of this Act.

Amendments 43, 44, 46, 51 and 52 in the name of the noble Baroness, Lady Jones, are also concerned with ensuring that we do not allow full merits appeals to undermine the CMA’s ability to regulate fast-moving digital markets. Even though full merits are confined to penalty decisions, financial penalties are, after all, as we have heard, the ultimate incentive to comply with the CMA’s requirements. We know that the Government want this to be a collaborative regime but, without there being a real prospect of meaningful financial penalties, an SMS firm will have little reason to engage with the CMA. Therefore, there seems little logic in making it easier for SMS firms to delay and frustrate the imposition of penalties.

There is also a danger that full merits appeals of penalty decisions will bleed back into regulatory decisions. The giant tech platforms will undoubtedly seek to argue that a finding of a breach of a conduct requirement, and the CMA’s consideration that an undertaking has failed to comply with a conduct requirement when issuing a penalty, are both fundamentally concerned with the same decision: “the imposition” of a penalty, with the common factor being a finding that a conduct requirement has been breached. The cleanest way to deal with this is to reinstate the merits appeals for all digital markets decisions. That is why, if the noble Baroness, Lady Jones, presses her amendments, I will support them.

Finally, I strongly support Amendment 56 in the name of my noble friend Lord Lansley, which would ensure that the Secretary of State must approve CMA guidance within a 40-day deadline. This would allow the Government to retain oversight of the pro-competition regime’s operations, while also ensuring that the operationalisation of the regime is not unduly delayed. It will also be important in ensuring that updates to the guidance are made promptly; such updates are bound to be necessary to iron out unforeseen snags or to react to rapidly developing digital markets. Absent a deadline for approval, there is a possibility that the regulation of big tech firms will grind to a halt mid-stream. That would be a disaster for a sector in which new technologies and business models are developed almost daily. I strongly support my noble friend and will back him if he presses his amendment to a vote.

With the deadline to comply with the Digital Markets Act in Europe passing only last week, big tech’s machinations in the EU have provided us with a window into our future if we do not make this legislation watertight. As one noble Lord said in Committee—I think it was the noble Lord, Lord Tyrie—we do not need a crystal ball when we can read the book. We have the book, and we do not like what we see in it. We must ensure that firms with an incredibly valuable monopoly to defend and limitless legal budgets with which to do so are not able to evade compliance in our own pro-competition regime.