Digital Markets, Competition and Consumers Bill

Baroness Jones of Whitchurch Excerpts

Committee stage
Monday 29th January 2024 Grand Committee

Moved by

[Baroness Jones of Whitchurch]

64: Clause 89, page 55, line 18, leave out “, 114 (appeals)”
Member's explanatory statement
This amendment, alongside others in my name to Clauses 89 and 103, would revert the relevant Clauses back to the ones first introduced in the House of Commons. This would reinstate judicial review principles as the means by which appeals against penalty decisions are heard, rather than such decisions being determined on the merits.

[Baroness Jones of Whitchurch (Lab)]

My Lords, in rising to move Amendment 64, I will also speak to Amendments 65, 67, 71 and 72. I thank the noble Lord, Lord Clement-Jones, and the noble Baronesses, Lady Harding and Lady Kidron, for their support. The noble Baroness, Lady Kidron, cannot be here and sends her apologies, but she asked me to stress her absolute support for this amendment. I have added my name to Amendment 66, in the name of the noble Baroness, Lady Stowell, and I look forward to hearing from the noble Lords, Lord Holmes and Lord Tyrie, who, I am sure, will make important contributions shortly in support of their amendments. All our amendments would revert the appeals process back to judicial review principles for resolving appeals against penalty decisions, unlike the late government amendments, which substituted merit reviews.

This debate follows on from last week’s excellent debate on the impact of making CMA decisions proportionate and strengthening the right of SMS firms to argue for countervailing benefits to be taken into account. The issue of judicial review versus merit appeals goes to the heart of the argument about achieving the right balance between the rights of SMS and challenger firms. Of all the many submissions we have received on the Bill, this has received the most attention—from those on both sides of the argument—and we have taken note of all those views.

The Government’s amendments matter, because penalties such as fines are the most significant deterrent in preventing strategic market status companies breaking the conduct requirements established by the CMA. There is real concern that, under the new wording, SMS firms will use the appeals process to delay implementation of the fines and thereby reduce their incentives to comply with the order. Also, as the fines do not have to be paid until any legal challenges are finally resolved, there is an incentive to drag out the final decision through the courts. The fact that they have lobbied for these changes raises real questions about their motivation in pursuing this.

When we met with one of the potential SMS firms recently, it argued that the new regime gave the CMA too much power and that a merit appeal process was the only way to provide a check against misguided or ill-informed decisions. It has also been argued that the Furman review recommended that any loss of the right to merit reviews should be coupled with an enhanced role for independent decision-making to protect against executive overreach. We accept that this new regime does give the CMA significant new powers, and this has already been a theme of our debates, but we would argue that the scrutiny of whether it is carrying out its duties effectively should be through Parliament, not through individual costly legal cases going to merit review.

We are supporting several amendments to the Bill that would enhance Parliament’s oversight of the CMA’s activities. In addition, it is important that the CMA explain its decisions in detailed written reports and disclose its underlying data to interested parties in order to allow them to identify errors. All this would help to shore up scrutiny of its decisions.

As the CMA itself argued in giving evidence to the Commons committee, judicial review is the established system for much of its work, including merger control and market investigations. It also applies to a number of other regulators. The advantage is that it avoids protracted litigation and encourages engagement early on, with constructive and collaborative outcomes. We agree with this approach, which is why we believe that appeals through judicial review will deliver swifter and more effective outcomes. 

In his response at Second Reading, the Minister made the point that appeals on full merit bring the regime into line with the Enterprise Act 2002. So far, this seems to be the only justification the Government have made but, as we have made clear, it is not the only comparator. Many other regulators, including Ofcom’s role under the Online Safety Act, do not use merits reviews on appeal. We do not believe that the case has been made for this change; we believe that both sides benefit from a prompt resolution of the issues which a JR process will deliver.

In the meantime, noble Lords have submitted other amendments in this group that seek to limit the application for any merits review. We would argue that the cleanest way to achieve our objective is to revert to the original wording, but I very much look forward to hearing their views and having this debate. I therefore beg to move Amendment 64.

--- Later in debate ---

[Viscount Camrose (Con)]

I suggest that I set out a comparison in writing and perform the analysis as to the differences, should there be any, between the two.

Noble Lords expressed a concern on the second day in Committee that there should not be ambiguity in how appeals will be conducted. Introducing a requirement in a new domestic regime that requires an analysis of unrelated retained EU law to be able to understand how an appeal should be decided risks creating that kind of ambiguity. Complicating the appeals standard with EU case law would slow down appeals while the boundaries of what is captured by JR-plus are agreed.

Regarding decision-making, the noble Lord, Lord Tyrie, mentioned the CMA independent panel. Our approach to internal decision-making balances accountability and independence. Launching major market-shaping investigations under the regime will be reserved for the board. A board committee will oversee the regime’s regulatory interventions. At least half the members of the committee will be non-executive directors and members of the CMA’s independent panel. This make-up will ensure an independent perspective and the ability to develop deep expertise over time.

I hope that the reasoning I have put forward provides the necessary reassurances to noble Lords and that they will feel able not to press their amendments.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank all noble Lords who have spoken. Again, in the vast majority of the contributions, we seem to have reached a wide degree of consensus, although not totally, in the light of that from the noble Lord, Lord Tyrie.

Noble Lords have made a number of important points. The noble Baroness, Lady Stowell, was quite right to take us back to the practicality of appeals on a merits basis; I will come back to the Minister’s response on all that because things are still not clear. How can we be sure that such an appeal will not open the whole case up again? That is at the heart of what we are debating here.

The noble Lord, Lord Holmes, said that we do not really understand why this must be different. Why is it such a special case? It has not been explained to us why this exception has been made.

I very much appreciate the point made by noble Lord, Lord Faulks: at the heart of this issue is whether we want regulation by the DMU or by the courts. There is a real danger of us drifting towards the latter with the Government’s amendments.

The noble Baroness, Lady Harding, rightly reminded us that regulators cannot afford to take too many risks. There is a fundamental imbalance, with regulators perhaps being forced to be risk-averse because they do not have the budgets of the big tech companies. We understand the danger of the David and Goliath situation that we are in here. It is all too easy to create a system where big tech companies’ lawyers can rule the roost.

The Minister said that decisions on penalties will address what an SMS firm has or has not done. He said that a decision will address not whether a breach has occurred but what led to the breach. Our concern is that we are going to go back over all the evidence of what led to a breach, whereas the fine at the end of it represents the end of the decision-making and is meant to be the deterrent. Again, I will look at Hansard and the Minister’s subsequent letter, but it seems to me from his explanation that he risks opening the whole case up again.

I listened carefully to the noble Lord, Lord Tyrie. I understand his experience in all this. Importantly, he said that there is not just one model here—that is, we have a number of regulators that do things differently. As he pointed out, the Government have previously supported the JR model; we must be reminded of that. The noble Lord also raised his concern about what happens if mistakes are made. If mistakes are made, they would be made in the process leading up to the decision, not the subsequent fines. A merits appeal on the fine would not really help if the decisions had happened further up the decision-making process.

I agree with the noble Lord, Lord Vaizey, that the regulators are not perfect. However, as we have discussed and will discuss again, we need stronger regulatory oversight. That will come—indeed, it needs to come—from stronger parliamentary oversight, which we will continue to debate in our discussions on this Bill.

I come back to the fundamental point made by the Minister. I listened to him carefully but I am still not clear how he will keep the stages separate. How will he keep the decision-making separate from the decision on the penalty? If SMS firms argue that the penalty is too high, they will have to revisit the evidence leading to the decision.

[Lord Faulks (Non-Afl)]

Can the noble Baroness confirm that, in her understanding, there is nothing in the Bill itself that makes that separation clear?

[Baroness Jones of Whitchurch (Lab)]

I thank the noble Lord, Lord Faulks; he is absolutely right. Again, we look forward to the Minister’s letter that will try to explain how these are two separate processes and that there is a clear cut-off point between one and the other, because I am not sure that that was really what he said in his reply. To be honest, I do not see how they can be separate, as that is not how the systems work. The appeal will be, as I think the Minister said, on what the SMS firm did to lead up to that penalty; therefore, the whole case would have to be revisited.

I do not know that the Minister persuaded many people on this matter. I am sure that we will continue to debate this, and we look forward to reading his letter, which I am sure will explain things in a little more detail. In the meantime, I beg leave to withdraw my amendment.

Regulatory Approval for New Products and Services

Baroness Jones of Whitchurch Excerpts

Monday 22nd January 2024 Lords Chamber

Asked by

[Baroness Jones of Whitchurch]

To ask His Majesty’s Government how they plan to support British innovators by tackling delays in getting regulatory approval for new products and services.

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

In the Autumn Statement, we set out proposals to improve the performance and accountability of regulators through reforms to the growth duty. These include asking regulators to set targets on regulatory approvals and monitoring their performance against those targets, alongside offering a fast-track service for regulatory approvals in certain circumstances. Through this, we are committed to working with regulators to ensure that we offer a world-class service to British businesses to support economic growth and innovation.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank the Minister for that reply, but does he accept that British innovators often face a mountain of red tape just to get started? In some cases, it can mean getting approval from up to 11 different regulators. For example, the British Healthcare Trades Association reports that medical equipment suppliers face a complex array of interrelated laws and regulations to get their products to market in the UK, with 95% of them calling for greater regulatory certainty. Those costs and delays are dissuading many from creating new products, which in turn is reflected in patient care and outcomes. So what are the Government doing to address these complexities? Does the Minister support our proposal for a new regulatory innovation office to hold the regulators to account for any delays? What action is being taken to speed up decisions in granting university research funding so that innovators can play their full part in driving up economic growth?

Digital Markets, Competition and Consumers Bill

Baroness Jones of Whitchurch Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[Baroness Jones of Whitchurch (Lab)]

My Lords, we have had an excellent debate, with enormous expertise and some powerful themes emerging from around the Chamber. I look forward to exploring them in more detail when we roll up our sleeves and focus on the specifics in Committee. However, it is already clear that we start from a common belief that the essence of the Bill is important and necessary.

I will not repeat the points well made by my noble friend Lord Bassam about the history of delays and distraction. We could have had this Bill on the statute book much sooner, but we have to deal with the reality of where we are now. As noble Lords have said, the digital world is developing and expanding at an incredible pace and the dominance of the major players continues to rise. As a result, consumers and businesses feel increasingly powerless in the online market. The Bill has an important role to play in resetting the balance, so that we can concentrate on the undoubted benefits that can accrue from greater innovation, access and competition in the sector.

Of course, we still have an important role to play in scrutinising the Bill, but our job has been made so much more difficult by the last-minute amendments tabled by the Government. I share the concerns that many noble Lords have raised during the debate; the warm glow of agreement identified by the noble Baroness, Lady Kidron, has united us, but not in quite the way that the ministerial team hoped. There are considerable concerns about the latest amendments tabled.

Evidence was given during Committee in the Commons from a wide range of stakeholders. They seemed broadly happy with the basic architecture of the procedures, conduct requirements and appeals systems set out in the original Bill. The main concern raised, if there was one, was the length of time it would take to complete the designation of strategic market status, including appeals. I listened carefully to the attempt of the noble Lord, Lord Offord, to provide reassurance on the changes but, like many noble Lords, I was not convinced as to why the Government felt they were really necessary.

For example, we share the concern of a number of noble Lords about the late amendment to switch appeals against CMA penalty decisions from a judicial review to a merits-based system. This is widely perceived as an attempt to water down the Bill, which opens the door to lengthy wrangling and long delays in finally resolving issues. This goes against the overriding desire for these cases to be heard and resolved in a timely manner.

When asked about this issue in the Commons Committee hearing back in June, the CEO of the CMA made it clear that the authority wanted the JR standard to be applied to its decisions at appeal. She said:

“It is critical that the CMA faces effective judicial scrutiny for our work. That should go on the record. We think that the JR standard achieves that”.


She went on to say that her experience of merits appeals was that they result “in very protracted litigation”, making it

“a lot harder to reach constructive, collaborative outcomes”

because

“all eyes are on that litigation process”.—[Official Report, Commons, Digital Markets, Competition and Consumers Bill Committee, 13/06/23; cols. 7-8.]

We agree with this analysis and, like many noble Lords, I will want to explore further in Committee why the Government felt that this change was necessary.

We also share noble Lords’ concerns about the watering down of the powers of the CMA through the countervailing benefits exemption, which would allow SMS-designated firms to argue that the benefits of their market domination outweigh the damage. This has been further weakened by the deliberate fudging of the definitions of consumer benefit. Similarly, the Government’s late amendment requiring the CMA to apply a proportionality test on conduct requirements gives a whole new raft of legal loopholes, which will no doubt, as we have heard in the debate, be exploited mercilessly by the vast legal companies employed to protect the big tech firms.

We do not believe that these new amendments are necessary. They will drag down the work of the CMA, undermine its independence and tie it up in endless court battles. We want to return to all these issues in Committee.

In the Commons, our Front Bench also tabled an important amendment to improve the consultation rights of challenger firms when the CMA is investigating the strategic market status of big tech firms. As we know, challenger firms are those that are being squeezed out of the market by the anti-competitive actions of those that currently dominate the market. We have heard numerous examples of these behaviours, such as restrictions on booksellers’ access to Amazon listings, the prohibitively high charges for apps developers to appear on Apple products and the domination of Google searches by those prepared to pay for the space. The challenger firms deserve the right to be formally consulted when a CMA investigation is taking place and to give evidence in any subsequent hearings. I hope we can work with the Government to be assured that these protections will be in place.

A great many noble Lords have eloquently expressed the need for greater protection for intellectual property and content creators, which needs to be at the heart of the Bill. It is crucial that we use the Bill to defend our news media, whose content is routinely absorbed by digital platforms without compensation.

Noble Lords made a powerful case for tackling platforms that take advertising revenue without investing in the original content. Similarly, artists, publishers and broadcasters need to be paid properly and fairly. We believe that an interest of citizens duty could widen the remedies available in the arbitration process and open the door to collective actions on cases such as this. We also want to ensure that the total value of repeat visits to online sites is properly captured. This is hugely important for the health of our creative economy and our access to informed journalism. We want to work with the Government and colleagues to get this regime right, and we want to explore my noble friend Lord Knight’s point about who owns our personal data and whether we can get it back once it has been published. We very much support the argument of the noble Lord, Lord Holmes, and the noble Baroness, Lady Uddin, that it is essential that accessibility is designed into all online platforms.

I am pleased that the noble and learned Lord, Lord Etherton, raised the need to reform alternative dispute resolution and the right of redress. We welcome the strengthening of ADR provisions, but we believe that it could have gone further. ADR has the capacity to be a simple, low-cost way of consumers raising complaints, and having an independent ruling by an ombudsman and a speedy form of redress. Unfortunately, the ADR landscape continues to be muddled and confused, with multiple providers, lack of clear signposting and refusenik companies that will not participate in the schemes. We believe that there is a strong case for single, mandatory ADR providers to operate in each sector, and we want to explore how this can be achieved in Committee.

The noble Baroness, Lady Hayman, will be pleased to hear that we also wish to explore whether the right to redress should include the right to repair for electronic equipment, with spare parts easily available, as happens in many other jurisdictions.

A number of specific consumer rights issues were tabled in the Commons to which we will want to return. First, subscription traps have been raised by many noble Lords and we do not feel that the current wording in the Bill goes far enough. This is a widespread problem, with Citizens Advice estimating that some £300 million a year is spent on unwanted subscriptions, often by those who can least afford them and with limited digital skills. While we were all tempted by the suggestion of the noble Viscount, Lord Colville, of a “terminate now” button, having listened to the debate, I have realised how much more complicated this is. Until now, we have argued for the provision to opt into, rather than opt out of, renewals. There is still a lot to be said for that principle, but we also need to recognise, as we heard today, that this cannot be a one-size-fits-all regime. Charity subscriptions and Gift Aid are some examples and noble Lords have made powerful cases for others.

Secondly, one of the most pernicious anti-competitive activities in the digital marketplace is fake reviews. They are damaging to huge numbers of legitimate businesses in the UK, big and small. The Government have made the commitment to deal with hosting fake reviews at a later date, via Schedule 18. We do not believe that it is necessary to wait for action on this issue and we will be tabling amendments to go into the Bill.

Thirdly and similarly, the Government have recognised that drip pricing is an issue but have not explicitly included it as a banned practice in the Bill. Drip pricing is where consumers are tempted into an online purchase by low advertised prices, only to find that the final price they have to pay is hugely inflated. We have all fallen victim to this, with some notable sinners such as the airline industry, which daily seems to find new and novel ways to increase total ticket prices. The CMA reported that enforcement against drip pricing is restricted by a lack of an explicit ban, so we want to address this in the Bill.

Fourthly, I pay tribute to the work of my Commons colleague, Sharon Hodgson, on ticket touting in the primary and secondary online markets. It is proving more and more difficult to pay the standard advertised price for sport, concert and festival tickets. The current legislation on this is not proving fit for purpose. We need stronger laws to tackle illegal ticket resale. The CMA gave evidence that, when it tried to take Viagogo to court, it came up with inherent weaknesses in the existing consumer protection toolkit. We will want to address this in Committee.

Finally, the noble Baroness, Lady Bennett, and my noble friend Lady Ritchie will be pleased to hear that we want to address the increasing propensity of firms to make extravagant claims about their environmental credentials through greenwashing. We will want to explore a specific prohibition in Schedule 19 on claims about environmental benefits or sustainable products which are not based on evidence. We will also want to explore whether consumers misled on this basis could have the right of redress for goods and services which knowingly do not meet the suppliers’ claims.

I am aware that I have not been able to cover all the issues, and I do not want to test the patience of the House any further. As we have heard, many of these issues have cross-party support, and we hope the Government might favour our proposals, as we believe they will improve the Bill. We want to get the Bill on to the statute book as soon as practical, as it is long overdue. With this in mind, I underscore to the Government that any further attempts to water down the Bill will be met with huge resistance, so I hope the Minister can confirm that the Government have no further plans to do this. I look forward to his response.