Digital Markets, Competition and Consumers Bill

Baroness Stowell of Beeston Excerpts

Committee stage
Wednesday 7th February 2024 Grand Committee

Working out the dividing line between personal and non-personal data is very complicated. I hope the Minister will agree that the solution will be to ensure that all the digital content created by the user during the subscription to the digital service should be retrieved and controlled by the user. As we know, digital companies can be ruthless with the way that they deal with consumers’ content. Only last December, Sony, the owner of Discovery, cancelled all the content bought by subscribers to PlayStation. Suddenly those subscribers found that the content that they had paid for had been deleted from their libraries and there was nothing they could do about it. I ask the Minister to take seriously my concerns over non-personal data not being covered at the termination of a contract. The aim of the Bill is to give protection to consumers of digital services. In this area, they are not protected, and that needs to change.

[Baroness Stowell of Beeston (Con)]

I have not been involved in Part 4 of the Bill and the Communications and Digital Select Committee did not include it in the work that we did to study the Bill last year, so I must say from the outset that I am speaking in a personal capacity.

Like other noble Lords who spoke on the previous group, I have received a lot of correspondence from various media and tech firms that rely on subscriptions as part of their business model. I am concerned on their behalf to guard against overly prescriptive measures which could threaten their sustainability, especially in such a competitive arena, which is why I have sought to familiarise myself with the Bill and have listened to what has been put forward. I should also declare that I am a vice-chair of the All-Party Parliamentary Group on Customer Service and take a keen interest in the frustrations people experience at the hands of service providers, especially when they feel that the channels of communication available to them for queries and complaints, or to cancel, are designed for the benefit of businesses, not their fee-paying customers on whom businesses rely for their income and survival.

In his response to the first group, my noble friend the Minister referred as an example to consumers who take out limited-time free or discounted subscriptions online and then get caught in full subscriptions which they cannot cancel unless they telephone a number that they have probably struggled to find online. Then, when they get through, they enter into a battle of wills with a telephone handler who just will not let them go. I have sympathy with that experience, having endured it, but if I do not want to stay, I make sure that I do not continue to subscribe. I also recognise that it is important for consumers to have a place to go to negotiate when they feel that they could get a better deal, as my noble friends Lord Black and Lord Vaizey identified. I will come back to that in a moment.

Having listened and looked at the Bill so far, my conclusion is that, concerned as I am to make sure that we get the right outcomes for consumers, I am not convinced by some of the solutions in the Bill. My noble friend Lord Black’s argument in favour of secondary legislation to address some of these issues has merit, as there appears to be significant and understandable concern from a range of subscription businesses about changes to the cooling-off period. There seem to me to be conflicting shifts in different directions—of both vague and detailed new methods for cancellation at the same time—in the Bill, so I think that more time to get this right could be justified.

I was struggling to follow what my noble friend the Minister said about consultations in response to the last group, but what is proposed does not seem that convincing to me when we are writing things into the Bill before completing the consultations necessary to get it right. What I do not want, as a result of the Bill becoming an Act, is consumers being irritated because of the frequency with which they start receiving computer- generated messages asking if they want to renew a contract or, perhaps worse, because they are no longer able to telephone a firm to threaten to cancel in order to negotiate better terms, if they no longer have that facility because of something else that has been offered to them.

Two basic things seem critical to me. The first is the guaranteed facility that if you subscribe online, you can cancel online. That is one of the most annoying things in what consumers feel at the moment. The second is that phone lines for customer service, whether the issue is a query, a complaint or somebody wanting to cancel something, have numbers that are readily available and that the lines themselves are staffed by people trained and equipped to assist individuals to the customer’s satisfaction—and for their benefit, not the benefit of the firms.

That is what we ought to be trying to achieve through this legislation and, at the moment, I am not convinced that that is where we will end up. I am not a business figure myself, but I know that the best way for any business or public service to succeed is for its customers to get the service they are paying for, to be treated with the respect they deserve and to be satisfied that they have got a fair deal as a result. I just feel that we are losing sight of this.

Perhaps I may finish with one small point about the proposed cooling-off measures. My noble friend Lord Vaizey ran through various examples of when a consumer might take out a subscription and take advantage of that subscription in a cooling-off period, without paying any fee at all. One of the examples he gave was of a consumer taking out a newspaper subscription to read just one article, or a day’s edition, for free. Clearly, that would be wrong. Journalism is expensive and the best of it cannot be done for free, but not everybody who wants to read a newspaper or an article wants to take out a subscription. To many consumers, subscriptions are another bill—and they do not want another bill. I urge all newspaper publishers to put in place, as soon as they can, a mechanism for consumers to buy just one day’s edition or 24 hours of access to the website, without them having to take out a monthly subscription.

[Lord Vaizey of Didcot (Con)]

My Lords, I support my noble friend Lord Black on his amendments and will respond to the excellent remarks made by my noble friend Lady Stowell. It is interesting how she ended her remarks, because I read in a free email newsletter this morning that, apparently, a lot of newspapers—led in fact by Will Lewis, who was obviously educated when he was at the Telegraph by my noble friend Lord Black —are looking at a mix of models now. Some people are saying that the freemium model, or free with ads, is dead but also that the subscription model may be dead, and that there will be a mix in how people can, effectively, find a way of paying for what is normally excellent content online from reputable brands. Things are developing, so perhaps my noble friend Lady Stowell is wrong to say that she does not have experience of business; clearly, she has an instinct for it. Anyway, I digress.

I must say that I have thoroughly enjoyed being in this Committee. What has emerged from the six days in Committee is that there are clear areas at which the Committee is asking the Government to look again, but not in a hostile way. This is about an element of detail, an element of getting it right and, funnily enough, an element of both the critique and the Government having exactly the same aims. As my noble friend Lady Stowell pointed out, we want to see a world where the consumer has absolutely clear rights and an easy customer experience in taking out a subscription and in cancelling it. At the same time, we do not want to burden businesses with too much bureaucracy, but to give them a chance to develop the flexibility to grow their business models in what remains a fast-changing environment. So, my noble friend Lord Black’s argument seems clear to me.

There is a paradox in my noble friend’s argument: we are asking the Government not to be prescriptive in one area while asking them to be more prescriptive in another. On the non-prescriptive part of the argument, my noble friend’s point is clear: it seems silly to put in primary legislation exactly how often a subscription business should remind a customer that their contract is coming up for renewal. The essence of customer service is for the business to get right its relationship with the customer, so long as it is under an obligation to remind the customer clearly that their contract is coming up for renewal and they are free not to renew it.

To flip the argument, on the cancellation methods, my noble friend is again right to say that the Bill words far too vaguely the way a consumer can cancel. I previously christened an amendment on appeals against decisions of the regulator the “Whac-A-Mole amendment”; I will now christen this amendment the “carrier pigeon amendment”. It is drafted in such a way that, in theory, I could cancel my subscription to the Times—which I would never do, obviously—by sending a carrier pigeon to News UK at London Bridge and say with a straight face that I had done it authentically.

There is, again, a happy medium. It should be very straightforward to cancel a subscription. Nobody wants the situation my noble friend Lady Stowell described, which does exist: having to find a telephone number—which is hidden—and contact a call centre, and then being given the runaround. I said at Second Reading that I had in fact done exactly that. I took out a subscription to a newspaper to read an article, but I could not cancel it. It was just my luck that I happened to know the chief executive of the newspaper, and I had to ring him and ask him to cancel it for me. That is obviously unacceptable. As a Conservative, I hesitate to suggest the creation of a quango, but there must be some way for a regulator to be aware of complaints and concerns about how an organisation is behaving, and to be able to intervene to make it clear that it is not operating within both the letter and the spirit of the law.

My noble friend’s amendments take account of the business needs of subscription businesses. I understand that people will fall on one side or the other of this argument. It is an interesting point that these businesses would like a way to engage with a departing customer, and they should be able to ask, “Why are you leaving? Can we tempt you to stay?” I spend quite a lot of my time unsubscribing from the endless emails and newsletters I have subscribed to, which tend to be free. Even then, particularly if you use a service such as Mailchimp, you are asked to fill in a little questionnaire on why you have decided to unsubscribe. It is not very onerous, and I understand—even though it is a slightly odd argument —why these businesses would want the opportunity to engage with a departing customer to gather information on what was wrong with their service and how they could improve it, or to provide an improved offer to tempt the customer to stay. Certainly, as we all know from having been lobbied, many of these businesses say that, often, the initial desire to cancel a subscription is based on an irritation with the service, which can be addressed once the customer gets in touch with the provider of the subscription service.

It is important to probe the Minister on both these issues in order to get clarity on the Government’s position, while also looking at some amendments that could genuinely improve the Bill.

Digital Markets, Competition and Consumers Bill

Baroness Stowell of Beeston Excerpts

Committee stage
Wednesday 31st January 2024 Grand Committee

While I am on my feet, it might help if I address some of the objections that Ministers would have heard to this amendment.

[Baroness Stowell of Beeston (Con)]

I am sorry to interrupt my noble friend—if he will allow me to call him that—who is making some incredibly important points. I know that he is a stickler for these things, but this was just about how much time we have and length of speeches. That is all. I am sure that he does not want to underplay the power of his argument.

[Lord Tyrie (Non-Afl)]

I have to ask the noble Baroness to bear with me for just a short while. I am being asked to speak to two amendments simultaneously, both of which are quite important, particularly the one that we are on now.

I said a moment ago that I would address some of the objections that Ministers may have heard from the department. One will have been that the CMA’s mission statement and underlying purpose implant a focus on consumers into its bloodstream. It is true that the consumer interest forms part of the CMA’s mission statement—it was found on the walls of its offices when I joined—but it is certainly not in its bloodstream. Few organisations with a responsibility to protect consumers have ever been more remote from consumers than the CMA. The intellectual framework behind the statute that it is trying to enforce is similarly abstract and technical. A consumer duty will put the consumers’ interests firmly into the CMA’s bloodstream.

A second argument against the duty that I think the Ministers will have heard will no doubt be that if the CMA takes action on competition, the consumer will always pick up the benefit. In its pure form, this is straight back to the Chicago school justification for competition policy—the approach rolled out across the world 25 years ago. A heap of academic work has now cast doubt on it. In any case, we do not need the academics, as the evidence is all around us that acting on competition alone has not been enough to stop a growth of consumer detriment and a rise in concentration ratios.

A third argument that no doubt will have been put to Ministers is that a consumer duty will get in the way of the Government’s growth objective, but that is based on the mistaken assumption that there is a trade-off between consumer protection and growth—between a healthy, functioning market with caveat emptor and a nanny state. One might characterise this as the free marketeer case against the consumer duty. I am a free marketeer. Many of our markets are not free at the moment; that is the problem. We have a massive and growing asymmetric power in many markets. Nudge, sludge, drip pricing, loyalty penalties and other rip-offs are on the rise everywhere. It is true that we can reduce these abuses by bringing more competition to these markets and that action is overdue, but it has not been strong enough so far to quell the detriment. On the contrary, abuses of market power, both digital and otherwise, have been growing.

The arguments for some form of consumer duty have been set out over the years by those at the sharp end of dealing with detriment for a very long time, not least the consumer groups. I recognise—this will be a relief to the noble Baroness—that the case I have put has touched on only a very small proportion of the arguments that they have developed in great detail over the years. I am strongly tempted, now I have been provoked, to supply her orally with a few of these, but I will resist the temptation. In any case, I have set out a summary of those arguments in numerous forms in writing in 2019-20, and then again just over two years ago. Not much has changed since then, so I will not rehearse those arguments, but I will end by summarising them.

First, a duty will greatly bolster and increase the effectiveness of the duty of expedition and the scope for interim measures that other parts of the Bill will give the CMA. The effect of all three acting together will be much greater than the sum of the parts. Secondly, it will facilitate a change of mindset that is essential for many of our competition regulators, including the CMA. The mindset of the last quarter of a century—that the CMA should restrict itself to acting directly only on competition—was a lot better than nothing, but it has also caused a lot of problems and been partly responsible for the rise in detriment that we can now see around us. Thirdly, a consumer duty will force the courts, particularly the CAT, to give the CMA more scope to act quickly and directly in the consumer interest. Fourthly, unlike most of what we are doing here, it would give us a better prospect of enabling the Government, of whatever political complexion, to have an opportunity to send a clear message to the public that they can expect powerful, independent bodies such as the CMA to act on their behalf.

[Lord Holmes of Richmond (Con)]

My Lord, it is a pleasure to follow the noble Lord, Lord Tyrie. The Committee certainly benefits from his expertise and experience and he is certainly never hypertrophic.

I shall speak briefly to my Amendment 106, which proposes a new clause entitled: “CMA permission for private enforcement claims”. It is a fairly simple and straightforward amendment and does exactly what the title says. Claimants have to seek permission from the CMA to bring private enforcement claims to the CAT or the High Court. The reason is clear. It is so that when we get to the end of our deliberations the operation of which forum, at what time and by whom is clear and does exactly what Parliament intended. Without this amendment there is potential to bring actions in various fora with different approaches at the same time, potentially muddying the waters and steaming up the windows and not bringing the clarity of procedure which we are seeking to achieve with the Bill.

It is a very clear amendment to have clarity and certainty about which forum at which time and to give the CMA the right to ensure that there is not muddying within the procedure, which is completely avoidable at this stage. I look forward to the Minister’s response.

[Baroness Stowell of Beeston (Con)]

I shall speak to Amendment 106 in the name of my noble friend Lord Holmes. Before I do, I should just reinforce my sincerity in saying that I think the noble Lord, Lord Tyrie, is making some really important points in his amendments. My concern was only to make sure that he did not lose us in his exposition, which was brilliant. I felt that some noble Lords were starting to drift away, and I did not think that was doing him any service. I want him to know that I am very interested and was tuned in the whole way through.

The reason I want to speak on Amendment 106 is that last week I raised the issue of private litigation and asked why the so-called Ofcom model had not been adopted for the Bill. Just to recap, I point out that the Ofcom model is a measure in the Communications Act which requires private litigants to seek Ofcom’s permission before making a claim to the courts or a tribunal. Its purpose is to avoid the regulator and the courts considering the same issues simultaneously and reaching conflicting findings, as my noble friend Lord Holmes has just colourfully described.

Since I raised this last week, I am very grateful for the Minister’s letter, which has been circulated to all Peers and is now in the Library, which outlined the Government’s reasoning for not adopting the measure in this digital markets regime for the CMA. As noble Lords will have seen from that letter, the Government argue that it would risk politicising the CMA because decisions about whether to approve someone taking a case to the tribunal or the courts would be appealable through judicial review, in the Government’s mind reducing certainty and clarity for stakeholders. They also argue that these issues are less prevalent for breaches of requirements imposed by Ofcom, as the primary route for redress is through the Communications Ombudsman and there is no equivalent function in the digital regime.

The Minister may make the same arguments in response to my noble friend Lord Holmes’s Amendment 106. The reason why I want to raise this again and am taking the opportunity today of doing so is because, even after getting his letter and having further conversations, I remain concerned that leaving the Bill as it stands threatens the participatory approach of the firms designated SMS, because it would disincentivise them to co-operate with the CMA. That participatory approach is critical to the success of the new regime and one of the ways in which it is considered better than the European model. It is also worth knowing that the Digital Markets Act—in other words, the European Commission’s version of this regime—includes a provision to avoid conflict between national courts and Commission rulings.

Digital Markets, Competition and Consumers Bill

Baroness Stowell of Beeston Excerpts

Committee stage
Monday 29th January 2024 Grand Committee

[Baroness Stowell of Beeston (Con)]

My Lords, I will speak in particular to my amendment in this group, Amendment 66, which does what it says quite clearly in its explanatory statement. This amendment would make it clear on the face of the Bill that

“the only CMA decisions subject to full merits review in Part 1 of the Bill are the decision to impose a penalty, the level of the penalty, and the timing of the penalty”.

Before I go on, may I please also thank all noble Lords who have added their names to my amendment? They are the noble Baroness, Lady Jones, the noble Lord, Lord Clement-Jones, and my noble friend Lord Black of Brentford—no, Brentwood; sorry, they are quite different, I think. I will say something shortly about the other amendments in this group.

Noble Lords will know that I was very public and vocal in airing not just my own concerns but those of the Communications and Digital Committee that the essential judicial review process for appeals against CMA rulings that is in the Bill might be overturned by the Government in the face of lobbying by big tech. As I said at Second Reading, there was much relief that the Government did not go as far as we feared they might, but the introduction of a merits appeal on penalty still causes alarm, because it is hard to see how such an appeal will not reopen the substantive finding.

My amendment seeks to prevent that happening, but we need to look at the practicalities of this, which is where I would also include the other amendments in this group that seek effectively to reverse the Bill back to its original wording. If a firm appeals the penalty, how will a complete rerun of the basis for the CMA intervention be avoided? I have had a conversation with my friend, the noble Lord, Lord Faulks, because he is the legal expert—I am not at all. He made a couple of points to me that are relevant for me to air in my remarks.

I would like my noble friend the Minister to tell us what would be relevant for a firm to appeal on its merits, because once we start to look at the practical differences between an appeal on the penalty and one via the merits process, as opposed to a JR test, what worries me is that it will not simply be an argument that the penalty was excessive, as in when people say, “The prisoner should have got five years when he got seven”. How will the Government, by virtue of the changes they have made to the Bill, avoid a complete rerun of the basis for the CMA’s original intervention? I fear it will be argued, when it brings an appeal on the merits of the penalty, that this is also all relevant to an appeal on the merits of the substantive finding. Basically, we will find that the whole decision starts to get reopened.

As I said to my noble friend the Minister last week, with the amendments I have tabled in Committee, I have tried to avoid repeatedly unpicking what the Government brought forward at Third Reading in the Commons. At the very least, there must be further clarification in the Bill if the merits appeal on fines is to stay. However, to satisfy this Committee—and, ultimately, your Lordships’ House—against reverting the Bill to its original wording, my noble friend the Minister must convince us of the practicalities of how the merits appeal on fines system will work in practice, and that it will not undermine the JR process for substantive CMA rulings.

--- Later in debate ---

The whole point of this legislation is to create a level playing field between big tech and challenger companies. Subsection (4)(b), which was only added on Report in the other place, gives enormous and overmighty power to the Secretary of State to control, and possibly hinder, the whole rollout and updating of the CMA anti-competition process. It exposes the process to being watered down by the very companies it aims to rein in.

[Baroness Stowell of Beeston (Con)]

My Lords, I speak to my Amendment 77 in this group. I thank the noble Lords, Lord Tyrie and Lord Clement-Jones, and the noble Baroness, Lady Jones of Whitchurch, for adding their names to it.

I do not support what the Government did in the Commons, which the noble Viscount, Lord Colville, described and which his amendment seeks to overturn. However, I think that I understand why they did it, and I have some sympathy with their reasoning, if it is, as I assume, about increasing oversight of the CMA. Where I differ is that I do not believe that this is a job for the Secretary of State. In saying that, it is important to add that this is not just about a turf battle, for want of a better expression, between the Executive and Parliament. It is quite dangerous for the Secretary of State to position herself in this way, because she will become the subject of intense lobbying if she has the power to approve the CMA guidance on how Part 1 of the Bill will operate. That lobbying will be done in private—it could go on for weeks, as the noble Viscount said—and any change made as a result of that activity would be subject to massive rows, if not legal challenge. For me, nothing makes sense about the solution to the problem with which I have some sympathy.

As I have said on several occasions, the need for regulators to be independent can sometimes be over-argued. I very much believe that their regulatory decisions should be made independently without fear or favour or any kind of political interference. What I am most concerned about is that they must be accountable, even though they are independent. We are giving the CMA substantial new powers, so we must also ensure that we—Parliament—oversee its use of them properly.

I will come to parliamentary accountability and how we might improve on that in another amendment in my name, which relates to this group but is in another, for the reasons that the noble Viscount set out. But here, my Amendment 77 proposes that, instead of the Secretary of State approving the CMA guidance, the CMA must

“consult the relevant Parliamentary committees … and publish its response to any recommendations”

made by the committee at the same time that it publishes the final version of its guidance. That approach would ensure oversight of the guidance before it is implemented. It would also make sure that there is scrutiny of the CMA, that the CMA is properly accountable to Parliament and that any debate about the guidance happens in the open and not behind closed doors.

I am pleased to say that I have received widespread support for my proposal from many stakeholders and trade bodies, from all angles. I am not exaggerating when I say that what is proposed by way of Amendment 77 serves everyone’s needs and shared objectives, whether that is big tech, challenger tech, Parliament or the Government. I am grateful to my noble friends—both the Ministers—for our meeting to discuss this matter, which we had a couple of weeks ago. When my noble friend comes to respond—having already, I hope, discussed my amendment with colleagues in Whitehall—I hope he is able to express some support for what is proposed here. This is an important amendment to the Bill and I hope very much that he, speaking for the Government, feels able to accept it and make it their own.

[Lord Black of Brentwood (Con)]

My Lords, I want to support Amendment 76, to which I have added my name, with some brief remarks because the noble Viscount, Lord Colville, has put the case with great power and eloquence. I also support Amendment 77 in the name of my noble friend Lady Stowell, which is a clever solution to the issue of accountability.

I support Amendment 76 in particular, both because I do not believe the requirement is necessary and because—this is a consistent theme in our Committee debates—it builds into the legislation a completely avoidable delay and poses a very real threat to the rapid enforcement of it. Quite apart from the issues of principle, which are significant, this is also intensely practical. The CMA’s guidance on the Bill, published earlier this month, set out the expected timetable for the consultation phase on the Bill’s implementation, running through to October 2024, which could be a very busy month. It is almost certainly when we will have a general election or be in the midst of one.

It seems highly unlikely that the Secretary of State will be able to approve guidance during the purdah of an election campaign and if, after the election—whoever wins it—we have a new Secretary of State, there will inevitably be a further delay while he or she considers the guidance before approving it. The Bill therefore ought to be amended to remove the requirement for the Secretary of State’s approval, or, at the very least, set a strict timetable for it, such as the draft guidance being automatically approved after 30 days unless it is specifically rejected. That would ensure that there is not unnecessary delay, which could run into many months, before the new regime takes effect—especially if there is, as a number of noble Lords have made clear, intense lobbying of the Secretary of State behind the scenes.

--- Later in debate ---

During the passage of the Online Safety Act, the Joint Committee on the draft Bill, chaired by Damian Collins MP, who was for a short time a Minister in the department, felt passionately that we should have a Standing Committee of both Houses to look at digital regulation in the round and keep regulators in its eye. I understand that the noble Baroness, Lady Stowell, is suggesting something much more modest than that on this occasion, but we keep coming back to this need to oversee powerful new regulation. In this case, for the reasons given by my noble friend Lord Colville, the noble Lord, Lord Black, and the noble Baroness, Lady Stowell, we have to find routes for transparency and a role for Parliament in this equation. Fundamentally, the last-minute amendments in the other place through which the Government are seeking a balance have upset the balance. They have upset what was a broadly welcomed Bill to give too much power to the regulated and not enough oversight to the regulator.

[Baroness Stowell of Beeston (Con)]

I urge the noble Baroness to stay for the debate on the next group of amendments, in which we will talk about parliamentary accountability. I think she will find that the committee I am proposing is perhaps not quite as modest as she has just described it.

[Baroness Kidron (CB)]

Indeed.

--- Later in debate ---

[Lord Bassam of Brighton (Lab)]

My Lords, we now move on to the second debate about accountability. We have two amendments in this group—in moving this amendment, I will speak also to the other—relating to the accountability in various forms of the CMA, the Secretary of State and Parliament. With these amendments, we seek to strengthen parliamentary oversight over the CMA by obliging the Secretary of State to bring before Parliament an annual report on the work of the DMU and the CMA. We are grateful to the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Bennett, for their support for this amendment.

This is a common device exercised by parliamentarians to try to improve the quality of accountability to Parliament. I have almost lost count of the number of times I have seen similar amendments moved by Members on either side of the House—from a Labour Government and from a Conservative Government—but they are nevertheless important because they remind us all of the value of Parliament and why we are here. They also oblige the Secretary of State to make it clear in their annual reporting how the work of a particular regulator is progressing and the content of that work.

Additionally, we want Parliament to have an opportunity to debate and discuss the workings of the DMU. We also want to ensure that the DMU has sufficient financial support and staff to do that work—that is, the work that Parliament has ultimately asked it to do in protecting the public interest and promoting competition that is beneficial to consumers. There are already some concerns that both the CMA and the DMU might lack the resource and clout to undertake their work in tackling the giants that dominate the digital marketplace. That is why we have tabled Amendment 83: to focus attention on this concern.

The question of resources is important because, unlike many other regulators, the CMA is funded not by a levy on the firms it regulates but by a grant. We are not seeking to change this with our amendment, but does the Minister have any concerns that the CMA and the DMU may lack the certainty enjoyed by other bodies such as Ofcom? Does he have any worries that the CMA’s funding arrangements could have an impact on its ability to scale up certain operations and ensure that investigations take place as quickly and efficiently as possible?

We argue that this must be a primary concern from the outset. The history of regulators is littered with examples of underpowered institutions lacking the ability to tackle the big issues of the day. The water industry is a critical example of what can go badly wrong when an infrastructure regulator cannot cope. Digital infrastructure is key to the nation’s future economic success and prosperity, so this is every bit as important. For those reasons, I beg to move Amendment 79.

While I am on my feet, I would like to address Amendment 81 in the name of the noble Baroness, Lady Stowell. It goes to the heart of the issue in requiring the regulator or regulators to report to the relevant parliamentary committees; this is consistent with the noble Baroness’s Amendment 77 in the previous group. For the reasons argued in our debate on that group, we support Amendment 81.

Amendment 82 in the name of the noble Lord, Lord Fox, seeks to inquire whether the CMA will be able

“to play a proactive role in promoting international standards of digital market regulation”.

It would be most odd if it were prevented doing so. Although this amendment is of interest for good trade reasons, I would also be interested to hear from the Minister how the Government view the international regulatory field and the CMA’s role, part and place in it.

I look forward to the Minister answering some of those questions and points.

[Baroness Stowell of Beeston (Con)]

My Lords, I speak to my Amendment 81 in this group. I am very grateful to the noble Lords, Lord Tyrie and Lord Clement-Jones, and the noble Baroness, Lady Jones of Whitchurch, for adding their names. My amendment reflects the increasing power of some of our most important regulators in the context of digital markets and online activity; and the need for greater parliamentary oversight as a result.

Digital Markets, Competition and Consumers Bill

Baroness Stowell of Beeston Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[Baroness Stowell of Beeston (Con)]

My Lords, it is a pleasure to follow the noble Lord, Lord Tyrie, and I will come to his theme of accountability later in my remarks, but I am very grateful to my noble friend the Minister for setting out in his introductory speech just how successful the UK’s tech sector is to date, because it really is a huge success. I was delighted to learn that Nottingham, my home city, is one of only a small number with two unicorns—billion-dollar tech start-ups. I did not know that, so that was good to hear.

Although we have been successful so far in the tech sector in this country, we have the talent and the potential to do so much more. But we have a problem, as we have already heard, which is that our digital markets are not working properly. The financial clout and sheer computing power of the US tech giants are creating significant, often insurmountable barriers to entry for alternative providers. I want to be clear that the Bill should not be about bashing big tech. We should not penalise these businesses because of their size. Their success and innovation also create other business opportunities, providing products and services that millions of people use and love. But that does not mean they should control the way markets develop and who else gets the chance to succeed. Like most, if not all, of my noble friends on the Conservative Benches and my erstwhile noble friend Lord Tyrie, I believe that free markets drive growth when they allow for effective competition. When markets are not creating that competitive landscape on their own, Governments should step in—hence the Bill before us.

Noble Lords have already heard that the Communications and Digital Select Committee, which I am privileged to chair, has started to call for legislation to empower the CMA with a new ex ante regime under the chairmanship of my predecessor and noble friend Lord Gilbert of Panteg. Through several committee inquiries, we have heard evidence of many things— we have heard about some of them today—including: unfair dominance and control of the immensely powerful and increasingly important digital advertising market; non-negotiable fees and terms applied by Apple and Google on thousands of businesses that rely on app stores, even though the terms of trade prevent some of those businesses providing a more streamlined experience and cheaper prices for their customers; and big players using their dominance in one part of the digital market, such as search, to damage the prospects of a potential competitor in another, such as online shopping or travel bookings. In our committee, we also continue to learn more about the failing of our digital markets as more firms, previously reluctant, are now willing to speak publicly about their experiences. So, as much as I would rather that the Bill was not necessary, the case for it is clear.

Once the Bill had been published and introduced to the Commons in the summer, my committee held hearings on Parts 1 and 2. I shall speak on only those parts today, but I have been interested to hear noble Lords cover other issues, to which we will no doubt return in Committee. I am grateful for all the briefings that I have received on all parts of the Bill.

I come back to the focus of my remarks. Overall, we as a committee found the Bill’s objectives and principles to be sound and a good basis for regulation. In our subsequent formal letter to the Secretary of State, we highlighted three important measures that we considered proportionate. My noble friend the Minister acknowledged that that is what we said, but he has not acknowledged something else we said: that these measures should not be diluted during the passage of the Bill. The three measures that we highlighted were the appeals process, the countervailing benefits exemption and the leveraging principle.

We knew from our evidence sessions that the big tech firms would lobby hard for changes in these areas. When all is said and done, they are successful businesses that will understandably fight hard to retain their positions. So, in the face of considerable pressure from them over the past few months, there was some relief when the government amendments tabled on Report in the Commons were less extensive than many had feared—but they are changes none the less.

Not only would any further dilution to these measures be unacceptable; the government amendments that have been made deserve proper scrutiny and debate to resolve the uncertainty that they have created. What I mean by that is that, in two or three years’ time, when the Competition Appeal Tribunal is considering an appeal, we need to be sure that judges will be in no doubt as to what the Government and Parliament intended by this legislation. We must avoid delays and outcomes that undermine the purpose of this Bill.

In his opening remarks, my noble friend the Minister anticipated some of my remarks. As he said today, and as the Government have shown in other ways, the Government have been at pains to stress that none of these changes affect the substance of the legislation. I am grateful for the reassurances that my noble friend has been able to offer. However, the fear is that these changes create loopholes for those with the deepest pockets to protract and extend a legal claim. We may require the publication of some new Explanatory Notes to provide that clarity and certainty. From noble Lords’ comments in today’s debate, I feel that we may need to table some amendments to at least probe and get firmly on the record the clarity that we need.

I will explain what I am talking about, which has already been highlighted by others. It is good that judicial review remains the procedure for any appeals against CMA decisions. But can we be sure that the new merits procedure for large firms to appeal against financial penalties will not lead to the CMA’s findings on conduct being reopened? My noble friend Lord Vaizey raised that question.

Indeed, why has the requirement for the CMA to ensure that its decisions are “proportionate” been spelled out in the Bill, when it is already a fundamental requirement of it as a regulator? Why has the decision been made to swap the word “indispensable” for a new form of words in the context of countervailing benefits? As we have heard, “indispensable” has precedent in case law and is well understood by the courts.

The Government have also added a new requirement that any guidance produced by the CMA in relation to Part 1 of the Bill should be subject to Secretary of State approval. I understand why the Government want to ensure sufficient oversight of the CMA, given the very substantial additional powers provided by this legislation, but my main concern with this change is that it will give the big tech firms another chance to lobby and delay. If this new requirement is to stay, we should at the very least include a short deadline in the Bill for the Secretary of State to grant her approval.

There are two other important principles for us to keep in mind here. First, the UK’s new digital competition regime is considered better than Europe’s because it is more flexible, but it will work only if the most dominant players participate in the process from the start to help the CMA decide best how strategic markets should work so that, in the end, all players get fair terms. The word “participatory” has been coined to describe this approach; “co-operative” would have done just as well. The point is that we must avoid deterring the kind of behaviour from big tech that is critical to the regime’s success.

The second principle—this is where I come to some of the comments that were made by my erstwhile noble friend Lord Tyrie—is accountability to Parliament. When it comes to the strategic oversight of the CMA and the work of its Digital Markets Unit, parliamentarians have an important role. Some noble Lords may recall that I raised the importance of accountability and parliamentary oversight during the passage of the Online Safety Bill. My committee, and the Online Safety Bill’s pre-legislative committee, both recommended a Joint Committee of both Houses be established to oversee digital regulation, because of the increasing power and remit we are giving to regulators. The Government, though, did not respond with any enthusiasm. We must return to this, and I thought that other speakers today might raise similar points.

This House passed a Motion only yesterday to establish a new committee of your Lordships’ House to oversee financial regulators. This was news to me yesterday, but I understand that it came about because of a government amendment to the Financial Services and Markets Bill. My noble friend Lord Tyrie suggested something different from what I have in mind, but the creation of this new committee sets a precedent, which is worth further consideration and study.

I support the Bill. It allows the big firms to continue to operate and innovate while ensuring that they do not use unfair tactics to suppress competition and stifle new challengers before they have had a chance to get going. In other words, it creates the level playing field that is critical to effective and fair competition. Ultimately, that is good for the UK economy, businesses of all kinds and sizes, and British consumers. I hope the Bill will pass swiftly because, as others have said, it is long overdue.