Digital Markets, Competition and Consumers Bill

Lord Tyrie Excerpts

Report stage
Wednesday 13th March 2024 Lords Chamber

Tabled by

[Lord Tyrie]

65: After Clause 141, insert the following new Clause—
“Review of whistleblowing provisions(1) The Secretary of State must commission an independent review, chaired by someone appointed with the consent of the relevant Select Committee of the House of Commons, of the extent to which whistleblowers are adequately protected and supported under the competition and markets regime in the United Kingdom.(2) The review under subsection (1) must consider, but is not limited to assessments of—(a) whether existing protections are sufficient to encourage whistleblowers to act;(b) what protections exist in competition regimes in other jurisdictions;(c) whether further protections should be introduced and what form they should take;(d) any matter related to whistleblowing provisions that the relevant Select Committee of the House of Commons reasonably requests that the review consider.(3) The review under subsection (1) must be published and laid before Parliament within 12 months of the passing of this Act.(4) In this section “relevant Select Committee of the House of Commons” means the Business and Trade Select Committee and any successor.”

[Lord Tyrie (Non-Afl)]

This was all debated on Monday evening, but I am sure that many of us have already forgotten exactly what happened then. The amendment would secure a review for improving the prospects for effective whistleblowing. The case—in my view and, it seems, those of almost everybody who participated—is unanswerable. I was not surprised that the Government did not come forward with any effective answers to it, but I was surprised—

[Lord Evans of Rainow (Con)]

My Lords, does the noble Lord wish to move the amendment or not? He already spoke to it on Monday, so he cannot speak once again.

[Lord Tyrie (Non-Afl)]

I do not wish to move the amendment.

Amendment 65 not moved.

Digital Markets, Competition and Consumers Bill

Lord Tyrie Excerpts

Report stage
Monday 11th March 2024 Lords Chamber

[Viscount Camrose (Con)]

Yes, I believe that is the case and I accept that. But, as I said, I will commit to carrying out a review in the future to understand how best to implement a collective action basis.

Under the digital markets regime, the CMA will be—

[Lord Tyrie (Non-Afl)]

Can the Minister tell us when he intends that review to take place?

--- Later in debate ---

[Lord Tyrie (Non-Afl)]

I have tabled Amendments 65 and 153. I declare my interests, as I did in Committee and as I have set out in the register. I also declare an interest in the Bill, since I had a hand in constructing it. I can never make up my mind whether I should be declaring victory and moving on, or flagging up further improvements. I have decided to take the latter course. Unfortunately, as on a previous occasion, it falls to me to come between a number of colleagues and their dinner, so I will do my best to be brief—although there are a number of things I need to say.

--- Later in debate ---

[Lord Tyrie (Non-Afl)]

Can the Minister say whether “shortly” is the same as “quickly”, and whether it will be a comprehensive examination of the subjects or just picking off a small number of areas? What exactly is it looking at?

[Lord Clement-Jones (LD)]

Before the Minister stands up, I will add to that. The Minister used the word “research”, which I thought was extraordinary. “Research” is a flabby kind of expression in these circumstances. Do the Government intend to review the current state of whistleblowing with a view to ensuring there is a more comprehensive approach to it, or is this just some nice-to-have academic exercise?

Digital Markets, Competition and Consumers Bill

Lord Tyrie Excerpts

Committee stage
Wednesday 31st January 2024 Grand Committee

[Baroness Jones of Whitchurch (Lab)]

My Lords, Amendment 80 raises the particular issue that was raised at Second Reading: whose interest is the CMA defending? Is it just the users of the product or service, or is there a wider citizens’ interest that needs to be taken into account? I am grateful to the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Kidron, for adding their names to this amendment and I look forward to hearing from the noble Lord, Lord Tyrie, on his amendment.

Part 1 has a specific focus on identifying the big tech companies that are so large and powerful that they can be categorised as having “strategic market status”. From the CMA’s operational plan, we know that it aims to identify three or four of these companies, in the first instance, for deep scrutiny about their behaviours and anti-competitive practices. We have a good idea which companies are likely to be in the frame for all this. They are increasingly fundamental to our lives: they help to run our public services, they store our personal data, they shape our purchase choices and social activities, they underpin our research and innovation, and they help to determine the health of our economy. Their wealth is bigger than that of many of the UK’s trading partners and, if they took their business elsewhere, our economy would certainly suffer.

When Part 1 talks about the CMA having regard

“in particular to the benefits for consumers”

that its conduct requirements will bring, you begin to wonder how it will identify the consumer interest, because, in this context, we are all consumers. We argue that this is no longer a transactional process where an individual consumer buys a product or service from one of these companies. Whether we like it or not, the behaviour of these companies influences all our lives, even if, as individuals, we do not engage in the digital world. Of course, this impact will be magnified as the AI applications speed up across our lives and as public services become digitalised.

Our amendment poses the challenge of why the CMA is acting only for consumers when it should be acting in the interests of all our citizens to ensure protection of the greater good. We raised this issue with Ministers when we met them recently and they helpfully sent a follow-up letter, conceding that the DMU taskforce had recommended that the DMU’s overarching statutory duty should be

“to further the interests of consumers and citizens in digital markets”.

It was recognised that competition in digital markets had deep interactions with a range of other issues, such as data privacy and media plurality.

However, the Government rejected the citizens’ interest proposal on the basis that it created some unhelpful overlaps with other regulators. We accept that there is some overlap with the other regulators, particularly Ofcom, but we argue that there are also large swathes of digital competition that do not easily fit under the remits of other regulators. As such, in many digital activities, no one is protecting the interests of citizens as a whole. Also, there is already a requirement for the DMU to consult key regulators before it makes an intervention, which would enable any overlap to be addressed at that point. While the Government are concerned not to make the remit of the DMU too broad, we counterargue that they risk making it too narrow if they do not add in a citizens’ interest provision.

This is clearly a probing amendment and we may well not have found the right wording, but I would be interested to hear the views of other noble Lords about whether these definitions should be broadened to encompass the interests of all citizens in the deliberation of the CMA. I beg to move.

[Lord Tyrie (Non-Afl)]

My Lords, as well as speaking to Amendment 80, I will say a few words about Amendment 83A in my name, which is in some ways related.

The point just made was extremely important and correct: in whose interests are these bodies acting? The answer should always be people—all of us. Commissioner Vestager, responsible for competition in Brussels, made exactly this point in evidence on several occasions and in a couple of major speeches. She is a far-sighted and bold competition Commissioner. In practice, we are all consumers, so the word “consumer” should probably catch it, but it may not convey quite as much to the public as we would like.

My amendment was triggered by an exchange that I had with the noble Lord, Lord Vaizey, earlier in the scrutiny of the Bill. In response to a question of his to the Minister, I suggested that the CMA always operates under a duty to be proportionate. When I said that, I had in mind not so much the implications of the Human Rights Act for its effect on proportionality but a more general duty to respect best regulatory practice, under which specialist regulators operate, as far as I know. Usually, this is understood to mean transparency, accountability, proportionality, consistency and, where relevant, action targeted only at cases that really require it. Some people talk about efficiency and economy in the same breath. Although I have not found that in any statute, I expect that it is to be found in various statutes.

I have subsequently checked some of this out with the House of Commons Library and others. First, a duty such as I describe is written into the Water Act, the Gas Act, the Electricity Act and the Communications Act, among others, with very similar wording to that which I have just cited. In other words, Ofwat, Ofgem and Ofcom are all subject to such a duty. I have also checked that these duties are justiciable.

Secondly, I made another, unexpected, discovery. As a result of this legislation, the CMA will become an outlier among these specialist regulators. By this legislation, we are giving the CMA specific specialist responsibilities for the digital sector. In other words, it becomes a sector regulator. But, unlike with the other specialist regulators that I have just listed, no such statutory duty to adhere to the principles of best regulatory practice will be required of it. My amendment would correct that omission.

Late last week I discovered that the City of London Law Society had made roughly the same point in its submission on the Bill. The wording in my amendment is pretty much taken from that submission. At the time I tabled it, I had not discussed it with the City of London Law Society and, since then, I have had time only for a couple of minutes with it on the phone. I cannot think of a good reason for not applying this duty to the CMA, but I can think of plenty of reasons why it should be applied.

These duties on public bodies can appear to be little more than motherhood and apple pie but, as I have discovered over the years, they can influence behaviour in powerful public bodies in quite a big way, and usually for the better. I will illustrate that. Take an accounting officer who comes under pressure to do something that he or she considers inappropriate. That happens not infrequently, as those of us who have been on the inside, or on both sides, of the public body fence will know. With a statutory duty in place, the accounting officer is much better protected and placed to be able to say, “I’m not going to go ahead with that”. That is no doubt one of several reasons why these specialist regulators have these duties imposed on them: they serve as a reminder, a backstop, for securing good conduct from those at the top of organisations, particularly those with a high degree of statutory independence.

Now, the Government—on advice, no doubt—will point in response, probably in just a moment, to codes of conduct, guidelines and other documents that already require good regulatory practice. I can see the Minister smiling. I know most of these documents quite well—as a matter of fact, I contemplated reading them out myself, but I will spare the Committee that pain and leave it to him to take the flak. The department’s impact assessments should work, in principle, to provide some of the heavy lifting as well, and they are audited by the NAO. I have seen that scrutiny in action, and it does far less to improve behaviour than a statutory obligation. It is the latter that really concentrates the mind.

More and more as we examine the Bill, the absence of a general duty on the CMA seems to be of a piece with the approach taken right across the draft legislation. We are creating a body with unprecedented powers and unprecedentedly feeble avenues for the securing of accountability. We are creating ideal conditions for executive overreach. All the necessary ingredients are being put in place as we legislate here.

First, there is the long history of patchy to poor scrutiny by Parliament, particularly by the Commons, of the CMA. As I may have pointed out on more than one occasion, I was its very first chairman ever to appear before the BEIS Select Committee, and I secured my audience by request—I said that I really would like to come along—which gives you an idea of the distance between the committee and the activities of the CMA. Of course—and I do not mean this disparagingly to anybody in this House—it is the Commons Select Committee that really counts when it comes to delivering punchy cross-examination and accountability, or at least counts most.

Parliament could do a better job, which I think was the point that the noble Baroness, Lady Stowell, made on Monday, but it would be a profound mistake, even if we got the improvements that she is proposing, to rely exclusively on Parliament to do the heavy lifting.

The first reason why we need this amendment is that we do not have much parliamentary scrutiny. Secondly, we have a body with a historically weak board, with most of the important decisions already delegated to the most senior executives, mixed-quality governance at best and a history of patchy to poor non-executive challenge of executive decisions. I realise that it is concerning that an ex-chairman should feel the need to put that on record, but it is necessary. Thirdly, as things stand, we are protecting the CMA from any substantive review at all of decisions on digital, which is a discussion we had earlier with respect to JR.

A fourth reason why this amendment is needed is that it now seems that the body is to be exempted from the core duties to conform to best regulatory practice which have been considered essential for all other sector regulators that I have checked out. My amendment would rectify that problem at least. I hope that the Minister will look favourably on the suggestion.

[Baroness Kidron (CB)]

My Lords, I support Amendment 80, to which I added my name. I will also say a few words about Amendment 83A in the name of the noble Lord, Lord Tyrie.

I fear that the word “citizens” might meet the same fate as the word “workers”. The argument will be made that it extends the CMA’s remit in ways that might overburden, create a lack of focus or overlap. However, the digital world has several characteristics that support the amendment in the name of the noble Baroness, Lady Jones, which would add “citizens” to “consumers”.

--- Later in debate ---

[Lord Tyrie (Non-Afl)]

Will the Minister explain why what has been considered necessary for, as far as we know, all the other major sector regulators is not considered necessary for the CMA?

[Viscount Camrose (Con)]

Indeed. While the noble Lord was speaking, I was trying to look for a counter- example but I have yet to find one. I will look for examples of regimes where this does not apply and communicate that to the noble Lord.

[Lord Tyrie (Non-Afl)]

I am sorry to intervene a second time. When the Minister is looking for counter- examples, I would be grateful if he kept to the major sector regulators, which are the direct comparator. There are more than 500 significant quangos, and I am sure I would be able to find a few quite quickly.

[Baroness Kidron (CB)]

Before the Minister stands up, may I ask him whether, if he cannot find a counterexample, this amendment may find some favour with the Government?

--- Later in debate ---

[The Deputy Chairman of Committees (Lord Ashton of Hyde) (Con)]

My Lords, I must inform the Committee that if Amendment 85 is agreed to, I will not be able to call Amendments 86 and 87 by reason of pre-emption.

[Lord Tyrie (Non-Afl)]

My Lords, I have a couple of amendments in the group on which I would like to speak. They are only dimly related, although I have started to think about ways of connecting them for the purposes of making things vaguely interesting and coherent to the Committee. It is a fairly hotchpotch grouping on that account.

The first amendment I will speak to is on the review of the CAT that I propose. The Competition Appeal Tribunal is a crucial part of the UK’s competition machinery. Its legal work is highly respected and adds credibility to the framework of law in the area as a whole. High-quality legal scrutiny gives firms confidence that they will be treated fairly. From an international perspective, fairness before the law is arguably the UK’s biggest single asset, well ahead of several others often discussed, such as the nexus of high-quality consultancies, top-flight accounting, the attraction of London as a location, time zones, language and even golf courses, which sometimes get a mention.

--- Later in debate ---

[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.

Digital Markets, Competition and Consumers Bill

Lord Tyrie Excerpts

Committee stage
Monday 29th January 2024 Grand Committee

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to follow my noble friend Lady Stowell in speaking to my Amendment 69. As has already been mentioned, a common theme runs through all the amendments in this group: limiting full merits appeals and ensuring that in practice they apply only to the imposition of financial penalties and the quantum of those penalties, as set out in Clauses 85 to 92.

As has already been stated, when he sums up, my noble friend the Minister needs to explain how this will operate in practice and why this situation is so special that a different approach is needed from that of any other regulatory environment, such as Ofcom.

There is nothing more to be said. Following on from the noble Baroness, Lady Jones, I am tempted to ask whether the amendments were government late amendments or late government amendments, but I will leave that hanging with the Committee. Ultimately, we need to ensure that we have clarity on how this approach will work when the Bill becomes law and that there is a watertight limit on the deployment, and potential misuse, of full merits appeals.

[Lord Tyrie (Non-Afl)]

I have put a couple of amendments down which I suspect will not fully accord with the mood of the majority of the Committee on JR. I also support the removal of full merits appeals on fines, and I would like to explain why I have taken that position.

The Government took a number of important decisions on appeals in the other place. One was an amendment conceding that the scale of fines will be subject to a full merits review. Another stuck with the narrow definition of JR, or pure JR. Those two decisions are directly linked—politically, economically and legally—and there is a trade-off between them. They are best considered together.

My view on the fines issue is straightforward. There are two main reasons why the Government have got this decision wrong. First, a key point that we must bear in mind is that fines in the UK for all forms of breach of competition, anti-trust and consumer protection law are, on average, far lower than those in any comparable jurisdiction. As a result, both in the competition field and with many financial regulatory issues, fines are treated as a business cost by large firms. This has been a major weakness of our regulatory framework for decades and is still there now. If fines are to serve as a deterrent to platforms, they need to be large—perhaps very large, even unprecedentedly so for the UK. I fear that a full merits review will drag fines in only one direction, and we have the history of fines review by the CAT in other areas in support of that view.

Incidentally, I am amazed that the Treasury has not taken a closer interest in all this, because fines score against the consolidated fund, but it seems quite sleepy on this issue. It should be very wary of a full merits review of fines.

--- Later in debate ---

[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.

[Lord Tyrie (Non-Afl)]

The noble Lord said that we should not go back to JR-plus, which would bring in a limited form of merits review. However, many decisions in merits appeals have been found to be clearly wrong, once in the appeal, and would have harmed consumers’ interests had they been allowed to stand, under full judicial review. Does the noble Lord agree with that remark? Before he decides whether or not he does, I remind him that I am quoting him in his opposition to the move made in 2017.

[Lord Clement-Jones (LD)]

My Lords, it is lovely to be reminded of previous remarks but, of course, that was then and this is now. We were talking about the standard for Ofcom then; today, we are talking about the CMA standard. The noble Lord would need to produce evidence that that standard did not in fact have a really poor outcome as a result of the power of big tech not being as limited as it could have been. He talked about us needing to recognise the power of big tech, but that is exactly what adopting the JR standard—the Wednesbury “unreasonable” standard that the noble Lord, Lord Faulks, talked about last week, and which all of us are content to stick with—would do.

Of course, what we are trying to do, if possible—if the amendments in the name of the noble Baroness, Lady Jones, are accepted—is to revert back to a JR standard for penalties. I believe that consistency across the board is rather more important than trying to revert to a form of appeals standard that obtains in a different part of the regulatory forest. However, as the noble Lord said, the danger of executive overreach is much more easily cured by increased parliamentary scrutiny than by trying to, in a sense, muddy the waters of the test for appeals.

What the noble Baroness, Lady Harding, said about incentives was entirely right. Litigation has clearly been used and is being used by big tech for strategic business purposes. We are trying to make sure that this does not drag on for ever and that appealing against the penalties does not open up the whole caboodle as a result. The noble Lord, Lord Black, and others who talked about the change of standard for penalties infecting other aspects of a CMA decision, made very strong points.

Ultimately, the Minister has a large number of questions from noble Lords. The noble Baroness, Lady Stowell, asked what would be relevant for an appeal on penalties. What is the motivation for the Government in putting forward this new standard for penalties? What is so special about it and what evidence did they use to come to that view? Is not the danger of using a merits appeal basis that the decisions on which the penalty was based will be unpicked? The practicalities were also raised by a number of noble Lords.

--- Later in debate ---

[Viscount Camrose (Con)]

As the noble Lord says, the intent is to keep those two separate. During and on the merits appeal for the penalty, the penalised firm could argue that the value of the penalty exceeded the crime, or that the breach took place inadvertently or by accident. It could not argue, however, that no breach took place; the fact that a breach took place is the premise against which the rest of the penalty appeal takes place. If the firm then wants to appeal that no breach took place, that would be done under JR, not on the merits.

The boundaries of the merits appeal process are explained in the Explanatory Notes for Clause 89. If those can be made any clearer, I am happy to engage on that. We will continue to listen to any concerns that noble Lords have on this important point.

I turn now to Amendments 72A and 72B from the noble Lord, Lord Tyrie. I thank him for his amendments, which raise an important question about the appeal standard across the wider digital markets regime. These amendments would align the appeal standard of all regulatory decisions in the regime with appeals carried out against Ofcom’s decisions taken under the Communications Act 2003. I am sure that many noble Lords are aware that the appeal standard in the Communications Act regime is often referred to as judicial review-plus. Although Parliament amended the Act in 2017 so that these appeals are to be decided on judicial review principles, the CAT has ruled that, due to retained EU law, it must also

“ensure that the merits of the case are duly taken into account”.

To turn back to this Bill, the Government heard the strong views expressed by your Lordships on the Select Committee, among others, on the importance of retaining judicial review. The changes made by the Government in the other place sought to uphold the use of the well-known judicial review principles for appeals in the new regime, except for those about penalties, as I have already discussed. Judicial review principles balance robust scrutiny of the CMA’s decisions with the need for the CMA to use its expertise to act quickly and iteratively to resolve issues.

As we discussed on the second day in Committee, the Government have made an explicit requirement for the CMA to consider proportionality when imposing conduct requirements and PCIs. As I set out during that discussion, it is right that interventions should be proportionate, but we are clear that any appeals of these matters should be heard under standard judicial review principles.

[Lord Tyrie (Non-Afl)]

In which case, it is clearly not the Ofcom standard, is it? The Ofcom standard imports a measure of appeal on the merits. Why are the Government continuing to assert that this is the Ofcom standard? It is nothing of the sort.

[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.

--- Later in debate ---

[Lord Ranger of Northwood (Con)]

My Lords, I rise with an equal amount of trepidation to the noble Baroness, Lady Harding. I am a new Peer in the House with a background in the technology industry and the delivery of digital services. Although we are talking about market competition, we are straying into a complex conversation around labour markets and digital skills—the fundamental, No. 1 topic that drives a lot of thinking in digital organisations. I refer noble Lords to my register of interests.

The complex nature of a global digital skills market is the one thing that is challenging all digital businesses at this point in their ability to deliver and drive innovation. It is so competitive; in fact, the hyper-competitiveness is driving the inability to deliver. People are cannibalising other organisations. The agility and speed at which the market is moving, the hyperinflation in pricing, the investments that people are trying to make—indeed, that international businesses are trying to make globally—and the length and longevity of those investments’ value are becoming increasingly challenging. Therefore, the CMA intervening and having some influence will be challenging. We will have to think hard about how to enable understanding; about the speed at which the market is moving; about where this kind of activity would take place; and about how it would operate, understanding the global size and scale of this challenge.

I view this market with some concern but also with some excitement because of its ongoing development. One thing that I have seen is the move from triage, where outsourcing and moving to international markets for labour skills in digital was a trend, to the emerging nearshore and onshore trend of looking at bringing more skills into local geographies. Why do I say that? I say it because of the speed of the change in the market. If we try to regulate and legislate for that speed, it will be extremely challenging.

Humbly, that is the point I wanted to make at this stage of the debate.

[Lord Tyrie (Non-Afl)]

I have tabled a couple of amendments in this group. One concerns cost recovery for mergers while the other is about the need to review whistleblowing. This group is a proper mixed bag; it has all sorts of things in it.

Let me just say that I agree with what the noble Baroness, Lady Harding, said. We are at risk of “take note” and “have regard” confetti with respect to a number of our regulators. The problem is that they deflect attention away from their central function and make it much more difficult to hold regulators to account adequately; in fact, they make it virtually impossible for Select Committees to do their already difficult job. We will come on to discuss this later, but those two issues are more closely related than they might initially appear.

On cost recovery for mergers, it is important that we all know what is going on at the moment. When the CMA examines a merger, for example the Microsoft-Activision deal or the Sainsbury’s-Asda merger, the taxpayer subsidises a considerable part of the costs incurred by the regulator for that investigation. I cannot think of a good reason why the scrutiny and approval of big-ticket mergers should be subsidised. However, there is—it is important for me to say this—a wide divergence of view and practice on this, both domestically and internationally. I discussed this issue over many years with a number of my counterparts when I was the chairman of the CMA, as well as internally within the CMA and with what I suppose one might call the competition community of lawyers, which is pretty large.

Some jurisdictions argue that merger control is an imposition on firms by government and that, therefore, the public sector should pay for all of it—at least, that is their starting position. Germany takes this position; it has something to do with its long history in the treatment of cartels and the creation of the Bundeskartellamt, but we do not need to go into that. The fact is that it is in its bloodstream to pay for this from general taxation. Others argue, like me—it varies from regime to regime—that this public service is a perfectly reasonable, chargeable event. After all, anti-competitive practices, which many mergers might facilitate, are a cost to the economy and welfare.

In 2011, the Government looked at all this in the White Paper that led to the creation of the CMA, when they put together the Competition Commission and OFT. As a result of that White Paper, the Government compromised between the wide variety of views and increased cost recovery for mergers as a whole—that is, the whole task of scrutinising mergers—from 50% to 60%. It is important to bear in mind that, in deciding what to do on merger fees, firms seeking approval for their mergers pay consultants huge sums and that the cost of the CMA scrutinising it is a residual in their calculations. Indeed, it would be a residual of a residual, because these numbers are so very large.

--- Later in debate ---

I understand the noble Lord’s aims with this amendment, so I assure him that the Government stand ready to use the flexibility to bring forward changes to merger fees in secondary legislation, should it be needed.

[Lord Tyrie (Non-Afl)]

On this point, can the Minister say whether he supports the cross-subsidy that currently exists? Given the fact that a lot of mergers of a very large size will be coming through, as he has pointed out, does he think that a logical way of dealing with the problem to which he has alluded—that of the small dynamic mergers that do not want to be discouraged by excusive scrutiny costs—would be to extend that cross-subsidy?

[Lord Offord of Garvel (Con)]

The noble Lord will know that, on the current pie chart of activity undertaken by the CMA, 80% is for mergers with companies with a turnover north of £100 million, while 20% of it is for companies with turnovers below that. The 80:20 rule always works in life, so there is obviously scope to charge the larger companies more if that is the decision taken. I refer to the reassurance given that this can be amended in secondary legislation if that is deemed appropriate.

Let me move on to media merger public interest interventions. Amendment 93 in the name of the noble Lord, Lord Clement-Jones, would expand the list of public interest grounds for the Secretary of State to intervene in a merger case to include the need for free expression of opinion and plurality of ownership of media enterprises in user-to-user and search services. I am grateful to the noble Lord for raising this issue. Media mergers are particularly sensitive, as they could have an impact on how the UK public access and consume information.

The Government are currently reviewing the recommendations on changes to the media public interest test in Ofcom’s 2021 statement on media plurality. Ofcom did not recommend that online intermediaries or video and audio on-demand services should fall within the scope of the media mergers regime, which this amendment would provide for. We are considering Ofcom’s recommendations carefully and, as we do that, we will look closely at the wider implications on the industry. The Government have not proposed pursuing substantive changes to the grounds for public interest interventions in mergers in this Bill. The changes recommended in Ofcom’s review can be addressed directly via secondary legislation under the made affirmative procedure, if appropriate.

For these reasons, I hope that the noble Lord opposite will not press this amendment.

--- Later in debate ---

[Baroness Kidron (CB)]

My Lords, I rise mainly to correct the record that I called the amendment in the name of the noble Baroness modest and also to celebrate the fact that I am once again back on the side of the noble Baroness, Lady Harding; it was very uncomfortable there for a moment.

I was on both committees that the noble Baroness, Lady Stowell, referred to. We took evidence, and it was clear from all sorts of stakeholders that they would like to see more parliamentary engagement in the new powers we are giving to regulators. They are very broad and sometimes novel powers. However, the point I want to make at this moment is about the sheer volume of what is coming out of regulators. I spent a great deal of my Christmas holiday reading the 1,500 pages of consultation material on illegal harms for the Online Safety Act, and that was only one of three open consultations. We need to understand that we cannot have sufficient oversight unless someone is properly given that job. I challenge the department and Secretary of State to have that level of oversight and interest in things that are already passed. So, the points that the noble Baroness made about resource and capacity are essential.

My other, very particular, point is on the DRCF. I went to a meeting—it was a private meeting, so I do not want to say too much, but fundamentally people were getting together and those attending were very happy with their arrangements. They were going to publish all sorts of things to let the world know how they, in their combination, saw various matters. I asked, “Is there an inbox?” They looked a little quizzical and said, “What do you mean?” I said, “Well, are you taking information in, as a group, as well as giving it out?” The answer was no, of course, because it is not a described space or something that has rules but is a collection of very right-minded people. But here in Committee, we make the point that we need good processes, not good people. So I passionately support this group of amendments.

I briefly turn to the amendment tabled by the noble Lord, Lord Fox, in which there is an unexpected interest in that I work with the IEEE, America’s largest standards organisation, and with CEN-CENELEC, which does standards for the European Union. I also have a seat on the Broadband Commission, which is the ITU’s institute that looks after the SDGs. Creating standards is, as a representative of Google once said to me, soft power. It is truly global, and as we create and move towards standards, there are often people in their pyjamas on the other side of the world contributing because people literally work in all time zones to the same effect. It is a truly consensual, global and important way forward. Everyone who has used the wifi today has used an IEEE standard.

[Lord Tyrie (Non-Afl)]

Just a short while ago, I decided that there was so much to say that I would say very little indeed. I completely agree with everything that the noble Baroness, Lady Stowell, said. As politicians, we should all be worried about a serious and growing problem that we are handing over huge powers to regulators on a monthly basis, and they will appear to the public to be accountable to nobody. If there is one book that is worth a good read, it is Unelected Power by Paul Tucker, who addresses exactly this set of issues with respect to finance and central banking. Come to think about it, it is a rather fat book, so, although I have read a large part of it myself, I suggest that the introduction and the conclusion will give noble Lords a good feel.

I will briefly join up a number of the debates we have just heard. On the one hand, we have been saying to ourselves, “We’ve got to empower David because David’s up against Goliath”, and on the other hand, it was said a moment ago that we have these huge overmighty regulators that must be held to account. There is an answer to that apparent clash of thoughts which s that while regulators have the capacity to wield huge power, many of them retreat into a comfort zone in which they do not do all the things they should. Rather, they do what they feel they can do relatively straightforwardly. Specifically, they do not wield the huge soft power they often have available to them.

Since I am going to give a long speech, I will digress momentarily to illustrate that point. When Covid struck, I was the chairman of the CMA. The hand sanitiser market started to be cornered at great speed by a small number of players, who then jacked up the price so that Mrs Wiggins, who wanted to go down to the corner shop to buy some at the only moment she dared go out, found that, instead of paying the correct price, which was probably £1.80, she was going to pay £12, £9 or something like that. I argued vigorously that we should do something about this, using consumer protection powers. I was told, “We don’t have a chance. We’ll be ignored. In any case, we might well lose the case. It’s all very complicated in terms of whether we have the power to intervene in a case like this. We certainly can’t assemble the evidence in time”, and so on. After a fortnight of persistence—I am pleased to say that the current head of the CMA was on the right side of this argument—I persuaded the top of the CMA to send a warning letter out. The practice ended immediately; that is why that big issue for the public agenda, which was leading newspaper coverage for several days, was taken away and a major problem for the Government was removed. Soft power is available to regulators in many ways but they often fail to address it.

The case for better scrutiny of regulators, digital or otherwise, has something to do with the need to hold regulators to account for the way in which they wield—or fail to wield—their power. That case has been made extensively elsewhere. In fact, I have written it down in places and published it, so I will not rehearse any of those arguments now.

I want to touch on two further points. If we are to do this job meaningfully, we need to have in place a number of things that, for example, the banking commission—I chaired it some time ago—found essential when assembling a technically competent team at pace to deal with the Libor scandal. A new body must have significantly greater resources and expertise than we currently provide to Select Committees. That will cost money. It is worth pointing out that the total cost of the work of the top eight regulators, which are meant to scrutinise the businesses on which they keep an eye, is in excess of £2 billion at the moment; that is the bill just to pay for the regulators. A few million pounds spent by Parliament to improve its oversight of those who are meant to be doing that scrutiny work would be money well spent.

The second thing that we must develop in Parliament is institutional memory, which is largely missing at the moment. There is very little institutional memory in our scrutiny bodies. It requires a group of officials who will stay the course for a significant time and are certainly not dispersed every time there is an election, which is what happens to a large number of Select Committee teams in both the Lords and the Commons, including the clerks and deputy clerks.

The third thing that we must do, which may seem obvious but is not always done—indeed, it is often not done—is keep good records. The body must have high-quality record-keeping. It has been a major bugbear of mine that, on the whole, records are not kept by Select Committees across Parliaments—that is, after an election, they start again as if everything is fresh. Incidentally, one of the reasons why the Treasury Committee has done better than other Select Committees in scrutinising across Parliaments is that it has one specialist adviser—I will not embarrass him by naming him—who works on monetary policy and the Bank of England and has been there for about 15 years. He loves his job and does only that job. He used to work in the Bank of England and knows a huge amount about it. That tiny fragment of institutional memory has dramatically improved the performance of the Treasury Committee over the years and does so today.

Digital Markets, Competition and Consumers Bill

Lord Tyrie Excerpts

2nd reading
Tuesday 5th December 2023 Lords Chamber

[Lord Tyrie (Non-Afl)]

I declare my interest as an adviser to DLA Piper. I too strongly support the Bill. Rather than dwell in any detail on how to improve it further—there will be plenty of time to do that in Committee—I thought it might be helpful first to attempt briefly to explain what I think is the Bill’s place in a wider policy perspective, and why I support it. Secondly, I will explain why the legislation on its own probably will not deliver the benefits that we are hoping for it. The CMA needs to do better, and so will Parliament, in scrutinising it.

On the first point, it is now widely accepted in many western democracies that competition policy has simply not been delivering the goods. I will not dwell on this for long, but concentration ratios are rising everywhere, and consumer detriment with them. The result is an erosion of public confidence in competition and consumer protection and in many regulatory bodies, including the CMA. That is only part of a much bigger picture of vulnerability to obsolescence of the tools and machinery that western Governments have been using over the past 30 years to manage capitalism and secure consent for it.

One of the problems the Bill seeks to address is that the West’s technological inventiveness, while improving economic performance, has also had the effect of challenging the legitimacy of global free enterprise. The platforms were created by global capitalism and they have improved consumer welfare dramatically. But they have also brought corrosive by-products: risks to privacy, fake news, online harm, greater cyber risk. These corrosive effects have been greatly amplified by the tendency of big platforms to monopoly. Western Governments are now struggling to adapt the machinery of regulation—in some cases radically—to cope with this. Consumer protection has also been badly neglected. Millions of people now feel vulnerable to rip-offs and no longer think that free enterprise works for them. As the noble Lord, Lord Vaizey, pointed out, small businesses —which are also consumers—have been at the wrong end of platform power a great deal recently.

Unless we face up to it, the free enterprise, pro-competition settlement, which has brought so many welfare benefits in recent decades, will be put at risk. Like us, all the democracies are groping their way towards addressing these challenges, to which the noble Lord, Lord Fox, also alluded. The Bill is at least a start but, none the less, the improvements to competition and consumer protection policy proposed will make only a small contribution to the much broader intellectual challenge I am trying to set out.

The Bill is at least intended as a reboot of the CMA’s legislative base. It largely provides it, and it has the potential to improve Britain’s economic performance a great deal.

Of course, it is scarcely surprising that I support the Bill. Much of it draws on the detailed proposals that I put to the Secretary of State nearly five years ago in response to his instructions that, as incoming chairman of the CMA—and I am more or less quoting—I try to shake the CMA up, raise its profile, and advise him on what, if any, improvements to the statutory base might be needed. I was told to get on with it and come back to him in six months, which I duly did.

What did I find? In a nutshell, I found highly motivated and high-quality staff—among the very best in public service. I found good, sometimes outstanding, work being done in two of the CMA’s five major areas of statutory responsibility—mergers and anti-trust—but, in varying degrees, a neglect of the other three: markets, advocacy and consumer protection. Internally, they had become the CMA’s poor relations. I also found a lack of boldness at the top and some substandard governance. Frankly, this is no more than we have seen in recent years in many other regulators.

I reported this to the then Secretary of State, but I told him that we needed to get on with the legislative improvements anyway, particularly on consumer protection and digital. I also said that we would need other improvements for it to be effective: a change in mindset at the top, and a much higher profile taken on behalf of the consumer by the CMA, with much better communication to a wider public. I also said that work was needed to develop a deeper understanding of the state of competition in the UK economy as a whole, and that this needed to be used to target the CMA’s workstreams. Virtually none of this work was being undertaken when I arrived at the CMA.

As far as I can tell, the three problems that I outlined still persist to varying degrees, so it is not just the legislation but, to some degree, the CMA’s approach to implementing its statutory remit that needs a reboot. If we do not secure that, the CMA will not deliver what we expect of it and hope for it. Even more concerningly, the growing sentiment of many of the public that they are victims of a rip-off economy, run for the benefit of the few and certainly not for them, will develop further. That is why the later parts of the Bill, particularly those improving consumer protection, are at least as important, although perhaps less glamorous to talk about, as the digital measures in Part 1.

My impression is that the new chairman and the new CEO are on the case. They both recognise the need for an organisational reboot. They will need our support in that. In any case, these problems are not entirely a matter for them. The CMA has only been responding to the signals that Parliament and others have put before it. Faced with those signals, many of us would have done the same. Parliament needs to send much better signals. In particular, we need to develop scrutiny tools that can get deep into what really goes on in the CMA. It needs to be rewarded with praise and support for improvements in its strategic approach when they come. There have been quite a few recently; I will not list them, for the sake of brevity. Of course Parliament should also flag up the CMA’s shortcomings, but it should always do so on the basis of detailed evidence.

To do that, Parliament will need to develop much more technical expertise than is currently available to it. It needs a specialist group—probably answerable to a dedicated Select Committee and with some of the characteristics of the NAO, but much smaller—that can get into the detail of the CMA’s working methods. By doing so, Parliament can help to shape the CMA’s decision-making framework and its wider public engagement, to which I alluded, just as the Treasury Committee has shaped that of the Bank of England and the FCA over the past decade.

One of the reasons that the Bank of England engages in public discourse and explanation of its role is that Parliament makes sure that it does, but that is currently not the case with the CMA. I asked to appear before the BEIS Select Committee when I was chairman and discovered that, when I appeared, it was the first time that any CMA chairman had ever appeared before it. They had simply evaded, avoided or had somehow been the subject of neglect by the BEIS Committee for many years. Of course the committee is extremely busy and has far too much to do, hence my suggestion for a specialist body. I said earlier that not only Parliament but the Government should act as an enabler of better scrutiny, and I have quite a number of suggestions for the Government but, rather than raise them now, I will try to press them in Committee.

I end with just one further remark. I have tried to put the legislation in a wider policy perspective, and I have lingered on the need for an institutional reboot of the CMA and the responsibility that we carry in Parliament and the Government to secure that reboot. But the CMA is becoming a repository for a good number of the Government’s smelly rats. It has been asked to monitor the internal market and has acquired responsibility for the highly politically sensitive topic of state aid, now travelling under the new name of the Subsidy Advice Unit. That is all before this huge Bill and the new big-ticket mergers that are coming its way post Brexit, which have recently been so controversial. With this Bill, we are going to empower the CMA with huge new responsibilities even as it struggles to do a full job with its existing powers. Government offload is risking CMA overload.

Twenty-five years ago, we overloaded a new body, the Financial Services Authority, with new responsibilities. Offload from the Bank of England and from other institutions became overload at the FSA. It failed spectacularly a decade later. When it failed, it was carved up. We need to put in place the support and scrutiny here for the CMA to accompany this Bill that can give the CMA better protection against such an outcome in the years ahead.