Digital Markets, Competition and Consumers Bill

Lord Kamall Excerpts

Committee stage
Monday 29th January 2024 Grand Committee

[Lord Kamall (Con)]

My Lords, I wish to speak to this group of amendments. Other noble Lords have clearly made the case for the amendments in their names so I will try not to repeat what they have said.

Given that, I have three simple questions for my noble friend the Minister. First, having decided that appeals by firms should be decided not on merits in a court but by JR appeal, why have the Government now decided to allow this merits-based appeal on the size of the fine? I know that noble Lords have their own views on this, but I would like an answer and some clarity from the Government. Secondly, what evidence has come to light to persuade the Government to lay their amendments on this matter in the other place? Thirdly, how confident are the Government that, if a firm wins its merits-based appeal on the size of a financial penalty, this definitely will not give the firm a legal basis for challenging the reasons for the penalty and the conduct required by the CMA in the first place? I look forward to my noble friend the Minister’s responses to these three questions.

[Lord Clement-Jones (LD)]

My Lords, following this superb debate, I am worried about being able to add much to what has been said.

First, I want to pick up what the noble Lord, Lord Tyrie, said. As ever, I agree entirely with half of what he said, but the other half is rather more controversial. This seems to be a growing habit. Exactly as the noble Baroness, Lady Harding, said, if there is a solution to overreach, it must be through greater parliamentary scrutiny. The noble Baroness, Lady Stowell, also referred to this and we have amendments coming down the track on it. Going back to JR-plus for the majority of decisions to be made under the Bill would be a retrograde step.

--- Later in debate ---

It is quite a bumpy road ahead that we are going to try to travel through. I have named only three of a good number of obstacles. I very strongly support the attempt being made and very much hope that it will get an unusual degree of flexibility from the Government when we hear from them.

[Lord Kamall (Con)]

My Lords, I will speak to Amendment 81 in this group. I also wanted to speak to Amendment 77 in the previous group; I apologise that I was not here earlier to speak to it then.

I will refer to three notions from political science that may be relevant here. The first is that of the principal-agent theory and principal-agent problem. That is when a Government—namely, the principal—delegates authority to an agency. There is a huge body of work about delegating power to regulators, including the notion of agency slack, where the regulator does not act as was originally intended for a number of different reasons, raising the question of how you hold it accountable for that. Alternatively, it may perform very badly; for example, in some government departments there are concerns about arm’s-length bodies. How do we make sure that a poorly performing regulator is acting as it should have done in the first place?

The second notion is public choice theory. When people call for government intervention, they usually assume that officials and politicians are benign and will act in the public interest. Public choice theory suggests, however, that we must remember that individuals are also motivated by their own incentives and may act in their own self-interest at certain times—not because they are bad people, but because they are human. There are many cases of that; for example, with the housing market, most people agree that we need to build more houses, but many people just do not want their homes anywhere near those new houses. It is therefore very difficult in parts of the country for a candidate to stand up and campaign for more development because, according to public choice theory, they are acting in their own interest about wanting to get elected, even though they know that there should be more homes in the country. One of the fathers of public choice theory, James Buchanan, called it politics without the romance. It is when officials, who are well intentioned when the organisation starts up, just like politicians, suddenly do not act as was intended in the first place, because there are certain interests that conflict with each other. Therefore, how do we address that problem when it happens?

The third notion is the idea of unintended consequences. Given that we do not have complete knowledge, we should ask ourselves sometimes what happens if we are wrong. Are we absolutely sure that the JR appeals will prove a better way to achieve faster and more accurate decisions? We all support them, because many of the small challenger companies are asking us to do that—I have spoken in favour of them, as have many other noble Lords—but what if we find down the line that the appeals are taking longer, or that large companies are winning their appeals and the CMA has to start all over again? What if we find that it in fact takes longer than if we had gone to a time-limited merits appeal?

I considered laying an amendment asking for a review after three or five years, but I was worried about that, in case it became another loophole that large companies would use to undermine the JR appeals process, so I stood back. Another reason I did not do that was because the noble Lord, Lord Clement-Jones—I thank him for this—said to me, “You may well be right, but surely this should be about the accountability of the CMA to Parliament, and Parliament can question it on the issue of why some of the cases it is bringing are being lost on appeal”.

The other question that many of us politicians across the spectrum are asking is: who regulates the regulators? This comes from people right across the board. How do we make them accountable? I suggest that my noble friend Lady Stowell’s Amendment 81 addresses those three concerns. I hope that I have laid out the reasons why I support her amendment, notwithstanding some of the concerns raised by the noble Lord, Lord Tyrie.

I speak briefly to Amendment 82 in the name of the noble Lord, Lord Fox; he has raised an important issue. When I was in the European Parliament, we looked at digital regulation as well as financial regulation. I was told by many national European regulators, including those in the European Commission, and other global regulators that they had a huge amount of respect for UK regulators. Quite often, they would use what we did previously. For example, early telecoms regulators basically took what we did in the 1980s and replicated it across many countries in Europe.

I teach students about intergovernmental organisations. We can see that even the more technical intergovernmental organisations, some of which are over 100 years old, have now become more political. Companies and Governments are starting to influence soft power, as another noble Lord said. The EU, for example, wants to be the technical standard for regulation; China also wants to get involved in international bodies and to set the standards in its own interests—look at the debate over CDMA a few years ago. This is not just in the tech sector; we see its officials active in many intergovernmental organisations. I am not sure that the amendment tabled by the noble Lord, Lord Fox, is the right way to address these concerns, but he is certainly on to something and it deserves further consideration.

[Lord Clement-Jones (LD)]

My Lords, I am going to be extremely brief as the hour marches on: yes to Amendments 79 and 83. Most of the debate has been around Amendment 81 but I want to mention my noble friend’s Amendment 82 because the concept of lock-in is absolutely crucial. I am a big fan, particularly in the AI field, of trying to get common standards, whether it is NIST, IEEE or a number of them. The CMA’s role could be extremely helpful.

Of course, many other regulators are involved. That brings us into the landscape about which the noble Baroness, Lady Stowell, has—quite rightly—been so persistent over the course of the then Online Safety Bill and this Bill. She is pursuing something that quite a number of Select Committees, particularly her one, have been involved in: espousing the cause of a Joint Committee, as our Joint Committee previously did. It is going to be very interesting. I am a member of the Industry and Regulators Committee, which has been looking at the regulatory landscape.

These accountability, independence, resourcing and skills issues in the digital space are crucial, particularly for those of us in this Committee. For instance, the role of the DRCF and its accountability, which were raised by the noble Baroness, Lady Kidron, are extremely important. I very much liked what the noble Baroness, Lady Harding, said about us having talked about Ofcom before but that we are now talking about the CMA and will talk about the ICO very shortly; for me, AI brings a lot of that together, as it does for her.

So what is not to like about what I think is a rather cunning amendment? The noble Baroness gets more cunning through every Bill we get on to. The amendment is shaped in a way that is more parliamentary and gets through more eyes of needles than previously. I strongly commend it.

Digital Markets, Competition and Consumers Bill

Lord Kamall Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[Lord Kamall (Con)]

My Lords, it is a great pleasure to follow my noble friend Lord Lansley. I do not say this because he is next to me and might heckle me, but because of some of the distinctions he made between rules, implementation of those rules and enforcement. I also thank my noble friends the Ministers and their officials, not only for the opening comments but for meeting with noble Lords last week, as well as the House of Lords Library and the various other organisations that have contacted us for their briefings, which have been very informative.

I refer noble Lords to my interests as laid out in the register, especially my roles on the advisory board of the Startup Coalition and as a non-executive director of the Department for Business and Trade, my work with a couple of think tanks that have published on competition issues, and others.

In some ways, I am not one of these people who is into instant gratification, but I remember being a member of the European Parliament in about the mid-2000s, when the EU Commission was considering the case of Microsoft. I remember being visited by lobbyists, including from Google, who were lobbying against Microsoft because they wanted to see a more competitive market. I remember telling them, “Just be careful what you wish for, because one day you might find other companies lobbying against you”. It has taken a long time, but it just shows how markets move. The other observation is how quickly these markets move—even definitions change. I am old enough to know when SMS actually meant text messaging; now it has a new meaning of “significant market status”.

At this stage I have only a series of questions, but before I raise them I would like to think about the matter at the heart of this debate, which is: how do markets really work? There are lots of debates about it. How do we react to markets where there are one or a few dominant firms? What do we do about dominant firms that compete not by seeking to offer the best product or service at the best price possible but by using their significant market power to block competitors?

I have to admit that, when learning economics in the past, I was fairly dissatisfied with some of the models that we were presented with. We were presented with a fairy tale of a perfect markets with perfect information—“If everyone had all this information, this is the way markets should work”. Then we were given a few variations—the oligopolistic market, the monopolistic market, the monosoponistic market, but they are not real markets—and then we were told by our economics tutor that actually markets do not work like that at all. There are market failures, and we need government intervention.

When I look at this from first principles, one of the views that I find attractive is the one that made me consider the hundreds, thousands, millions or billions of transactions that occur every day between willing buyers and willing sellers. It is the aggregate of these transactions that creates the spontaneous order of markets. Markets are not perfect, and there is imperfect and asymmetric information. Not everyone has the same information. Entrepreneurs are the key to these markets because they spot opportunities that others may not have spotted and they are prepared to take risks to take advantage of those opportunities and asymmetries, which the economist Israel Kirzner referred to as entrepreneurial alertness.

What happens is that, soon after, other firms enter the market and try to compete on quality of product, service or price. Governments from first principles can either get in the way or get out of the way. While I would prefer Governments to get out of the way as much as possible to allow thriving markets, there will be occasions where some of these new companies will become so large that they dominate the market. In these cases, we need to consider if and how regulations can provide a framework for competition and prevent abuse by dominant players.

I was very much taken by the comments of the noble Lord, Lord Knight, who eloquently gave examples of how companies that were once seen as entrepreneurial, exciting, new and whizzy are now abusing their significant market status. However, in considering the Bill we also have to consider how digital markets may be different from other markets, such as those for physical products, even though many physical products are sold online today. While a firm may be dominant in one part of the market—for example, on search or devices—it may not be dominant in another.

I have weighed up the advantages of judicial review versus merits-based decisions, and especially of getting the balance right between not punishing the big firms for being successful and innovative and their significant market status allowing them to become gatekeepers promoting their own products over rivals’ products or, as has been alleged, search engines and app stores imposing unreasonable charges. Like many noble Lords, I have come down on the side of judicial review, mainly to speed things up but also to avoid larger firms with their armies of lawyers delaying the process, which may lead to smaller competitors going out of business before the end of the case. However, we now see that firms can appeal this penalty of the judicial review process so, like other noble Lords, I ask the Minister to say how long the Government expect the appeal process to take. If a firm lodges an appeal, is there a danger that it may delay the main decision further? If a large firm wins a penalty, will it then have grounds to challenge the original decision delaying the remedy further? The Minister may well say that will not happen, and it would be reassuring to hear that from him at the Dispatch Box so we understand it.

Like other noble Lords, I am interested in the counter- vailing benefit exemption. What is the thinking behind the use of “countervailing” rather than “indispensable”? As many other noble Lords have said, it is legally defined. What extra does “countervailing duties” or “countervailing exemption” give to the Bill and what is the justification? Can the Minister assure noble Lords that “countervailing” will not act as a loophole for dominant firms to escape their responsibilities?

One of my other concerns more generally—I know it is shared by noble Lords from other parties across the House—is that over time Governments delegate responsibilities to agencies or regulators, as well as to international organisations. I teach politics, and one of the things we teach is principal agent theory, where a Government delegates authority to an agency or a regulator, but that regulator may pursue an agenda different from the one expected of it. There is real concern about accountability, but also about who regulates the regulator. That is why I welcome the comments by the noble Lord, Lord Tyrie, and my noble friend Lady Stowell about accountability to Parliament. Perhaps across the House noble Lords should pursue the solution of a committee.

I suspect that the proposed power in Part 1 for the Secretary of State to review CMA guidance may be a way to tackle this issue. I would like to hear the Minister’s justification for granting this power to the Secretary of State and whether this may slow down decisions, especially in a fast-moving market. Does the Secretary of State really need these powers? Will noble Lords have to propose a timeframe for these decisions to be made if there is no timeframe for quick decisions? I should add that I have met people who work for the CMA and have been impressed by their knowledge and their understanding of some of these deeper philosophical questions of markets and some of the trade-offs they have to consider. It is not an easy job to balance innovation, markets and concentration.

There are a couple of other things. I welcome the action on subscription traps. There is probably consensus across the House. It recently took me more than two hours and disconnected calls to leave the broadband company that I was with. When I went online to read customer forums, thinking I had been hard done by, I realised I was lucky. It was like the Monty Python sketch: “Two hours! That's absolutely nothing! You don't know hardship!” I saw one comment where someone said they tried so often that they gave up for one year and tried again the year later because it just was not worth it; they just were not getting through. We also read of dirty tricks by companies disconnecting calls or leaving customers to hang on for ages.

I understand that companies are desperate to hold on to their customers. I understand why customers looking to leave companies or end their subscription are redirected to customer retention teams. When I was a consultant to telecom firms, the figure we used was that the estimated cost of new customer acquisition was seven times that of customer retention—but you keep customers by offering a service that they are happy with and they are happy to pay the price for. You do not keep them by engaging in these dirty tricks. In 2021, the Government promised to make it easier to switch broadband provider—as easy as it is to switch mobile operator—with a so-called one-touch switching system, but broadband companies failed to meet the target April 2023 deadline. Will the Minister say when one-touch switching will come into effect? Perhaps noble Lords have to ask what more pressure we can put on the industry and the CMA to look into this delayed implementation. As my noble friend Lord Lansley said, we have the rules but how do we make sure they are enforced? Why are companies dragging their feet on one-touch switching?

A number of noble Lords have talked about the last issue I will talk about, which is the fact that we have all been contacted by charities. I will not go into details because they have already been laid out by others, but I think we would like a response from the Minister on charity subscriptions. I add one word of caution. Charities may also behave in a way to try to keep their subscribers or donors. Let us not give them a blanket exemption, but let us understand the issue that they are lobbying on.

Overall, like other noble Lords, I welcome the Bill. I look forward to hearing the Minister’s comments and answers to my questions. I look forward to working with my noble friends the Ministers and other noble Lords in creating the appropriate framework so that the UK continues to be a leading digital market for local and international firms.

Employers: Fire and Rehire Tactics

Lord Kamall Excerpts

Thursday 14th September 2023 Lords Chamber

[Lord Offord of Garvel (Con)]

I thank the noble Lord for raising that rather infamous case. What P&O did was illegal. It was not fire and rehire but dismiss and replace. It would remain illegal whether or not the code had been in place, and P&O has received considerable censure as a result. The code, which will come through in the spring, will give real guidance and protection to both employers and workers.

[Lord Kamall (Con)]

My Lords, we know that companies quite often have to close down or change their practices, either because of a competitive market or because they have been managed badly. In one-factory towns, for example, where one company is a major employer, when it has to close, are there any forums for the Government to work together with trade unions to retrain those workers who have lost their jobs to compete in the new global economy?

[Lord Offord of Garvel (Con)]

This is exactly why flexibility is required, because certain changes of circumstances require the workers and managers of a company to get together with the trade unions and the directors to solve the problem through consultation and consensus, and that is generally what happens in the UK. Indeed, as my noble friend will know, we have a number of measures to help employees back into work.