Draft Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Conferral of Functions) Regulations 2026
Draft Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Consequential Amendments) Regulations 2026
(1 day, 8 hours ago)
General CommitteesRead Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Business and Trade (Kate Dearden)
I beg to move,
That the Committee has considered the draft Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Conferral of Functions) Regulations 2026.
The Chair
With this it will be convenient to consider the draft Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Consequential Amendments) Regulations 2026.
Kate Dearden
It is a pleasure to serve under your chairship, Ms Lewell. The instruments were laid before the House on 26 January and relate to the alternative dispute resolution chapter in the Digital Markets, Competition and Consumers Act 2024, which received Royal Assent in May 2024. The Act repeals the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 and replaces them with a strengthened framework in chapter 4 of part 4 of the Act.
In most instances, disputes between businesses and consumers can be resolved without the need for any formal action, but when consumers and the trader cannot come to a solution, ADR is an effective means of securing redress for the consumer without resorting to litigation. All ADR providers are independent third parties, offering dispute resolution that is usually less confrontational for the consumers and businesses involved, but not all ADR providers have the same accreditations and standards, so consumers can experience inconsistent quality.
For ADR to be effective, it must be of high quality and meet certain standards. The Act aims to strengthen the quality of ADR available to consumers by introducing a mandatory accreditation framework for ADR providers for consumer contract disputes. That will provide a robust set of accreditation criteria to assess an ADR provider’s expertise, transparency, independence and accessibility before being accredited, and ongoing monitoring and review to ensure that accredited ADR providers continue to meet those high standards.
The Act includes the power to revoke, suspend or limit accreditation, or impose further conditions if a provider is found to be non-compliant. The intention of mandating accreditation of ADR providers is to strengthen the ADR framework in the UK. The Government believe that the changes will help to deliver a trustworthy, timely and fair service that consumers and businesses can trust to resolve consumer disputes, with improved oversight to monitor standards and ensure consistency.
Section 307 of the Act allows certain ADR functions to be conferred on another person. The regulations confer on the Chartered Trading Standards Institute responsibility for managing the provision of ADR in consumer contract disputes in non-regulated sectors, including the functions of accreditation, monitoring and reporting on the operation and effectiveness of ADR provision. That includes upholding the standards of ADR providers in the UK through powers to compel or sanction ADR providers to improve performance in the event that they do not meet their obligations.
The regulations also require the CTSI to prepare quarterly and annual reports for the Secretary of State for Business and Trade. The reports will contain information and metrics on the performance of the CTSI, ADR providers and the ADR landscape in the UK to ensure accountability and transparency, and to enable the Secretary of State to maintain oversight of the operation of the system of accreditation and the provision and quality of ADR carried out in the UK. The decision to confer these functions on the CTSI has been taken in recognition of its authority, track record and expertise in that area, including its long-standing and constructive relationships with ADR providers.
Separately, the regulations make amendments to primary and secondary legislation in consequence of chapter four of part 4 of the Act coming into force and the 2015 regulations. Those consequential changes deal with redundant references to the 2015 ADR regulations and, in some cases, replace them with a reference to chapter 4 of part 4 of the Act. They do not materially change the policy or the effect of the underlying law, but simply keep the statute book up to date in the usual way.
The intention of both sets of regulations, as I hope I have made clear, is to support and strengthen the ADR framework in the UK, putting it on a stronger footing that provides a consistent, trustworthy, timely and fair service that consumers and businesses can trust to resolve disputes amicably, with improved oversight to monitor service standards. I invite hon. Members to support the instruments, and I commend the regulations to the Committee.
Gareth Davies (Grantham and Bourne) (Con)
It is always a great pleasure to see you in the Chair, Ms Lewell. It is also a pleasure to see the Minister in her place. Alternative dispute resolution is intended to provide a low-cost, efficient alternative for resolving disputes between consumers and businesses. I thank the Minister for setting out what these regulations seek to achieve.
The regulations follow various pieces of work that were carried out by both Conservative and Labour Governments over many years, with the overall goal of securing a fair deal for consumers and a fair operating environment for businesses. Although the Opposition of course remain supportive of the goals of the Digital Markets, Competition and Consumers Act 2024, we in this place should always be mindful of the adverse impacts of introducing any kind of red tape on British businesses, no matter how well-intentioned it might be.
As the Committee would expect from the official Opposition, we have a few questions to probe some of the elements in these measures. First, will the Minister set out the current status of the ADR provider sector, and how the Government see the sector changing as a direct result of the regulations? More specifically, how many ADR providers are there in the UK, and how many of those are currently unaccredited and would therefore be impacted by these measures? Do the Government expect the number of ADR providers to reduce as a result of the requirements? If so, what impact does the Minister believe that that reduction will have on consumers and businesses that use those services?
Finally, what is the Government’s view of the impact the regulations will have on those who operate ADR businesses? The explanatory memorandum to the regulations states that the Government expect there to be no impact on businesses, and that
“the instrument does not impose regulatory obligations”.
However, that is exactly what is being done today, so that looks like an error. I would be grateful if the Minister clarified whether that is an error, and explained the language in the explanatory memorandum for the benefit of the Committee.
Kate Dearden
I thank the shadow Minister for his comments and his support for the Act and the regulations we are considering. The regulations place the CTSI on a statutory footing. I alluded in my introductory remarks to the role of the Secretary of State and the accreditation determinations, monitoring, enforcement and information sharing under the Act, as well as the mandatory and accreditation requirements.
In terms of exempt ADR providers, to avoid duplicated regulatory provision, the Act exempts ADR provision under several ombudsmen and equivalent schemes, which are already regulated under other legislation. Those are either statutory bodies performing statutory functions or redress schemes regulated by other bodies under other legislation. If a sector already has its own dispute resolution system, these new ADR rules will not apply and that avoids doubling up regulations and ensures that businesses follow only one set of rules, with no confusion about who is responsible.
There are also some statutory bodies that, to an extent, carry out ADR and it is not considered appropriate to regulate them as their remit does not cover consumer contracts as defined in chapter 4 of part 4 of the 2024 Act.
I am happy to follow up the hon. Member’s point about the specifics on the statistics afterwards if he requires any further information. On the effect of schedule 25 listing exempt ADR providers, that is quite clear, but again, if he would like further information on how we are avoiding duplication, I am happy to provide it as there is a power to add further exemptions in future, which might be used where it is more appropriate to regulate ADR elsewhere.
The important point about the legislation is that it will ensure that ADR is much easier for consumers and businesses. That is really important to reflect on. What ADR can provide in terms of support and streamlining for businesses and consumers is significant, and will offer a cheaper and faster alternative for consumers and businesses seeking to resolve disputes, compared with making a claim to the courts. This framework gives the flexibility to update those standards over time. That is important and provides a foundation for considering further reforms if required.
Gareth Davies
I totally understand that the Minister might not have the information to hand right now, so will she commit to writing to me?
Kate Dearden
Yes, I am happy to provide that follow-up information.
Question put and agreed to.
DRAFT DIGITAL MARKETS, COMPETITION AND CONSUMERS ACT 2024 (ALTERNATIVE DISPUTE RESOLUTION) (CONSEQUENTIAL AMENDMENTS) REGULATIONS 2026
Resolved,
That the Committee has considered the draft Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Consequential Amendments) Regulations 2026—(Kate Dearden.)